<PAGE> 1
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.
April 15, 1997
Dear Shareholder:
We are pleased to bring you the semi-annual report of the Templeton World Fund
for the six months ended February 28, 1997, a period during which global markets
performed at varying levels. The U.S. market continued its steady march upward
and most European markets produced substantial gains. Stock markets in Hong
Kong, China, Malaysia and Indonesia recorded solid gains, and those in South
Korea, Thailand and Japan posted declines. Within this environment, the Fund's
Class I shares produced a cumulative total return of 16.57%, as discussed in the
Performance Summary on page 6, significantly outperforming the unmanaged Morgan
Stanley Capital International (MSCI) World Index, which delivered a return of
11.43% for the same period.(1)
1. The MSCIWorld Index includes approximately 1,500 companies representing the
stock markets of 22 countries including the U.S., Europe, Canada, Australia, New
Zealand, and Asia. The average company in the index has a market capitalization
of about $3.5 billion. Total return includes reinvested dividends. 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). Past performance is not
predictive of future results.
1
<PAGE> 2
Templeton World Fund-Class I
Total Return Index Comparison
Six Month Performance (8/31/96-2/28/97)
Templeton World Fund(1) 16.57%
Morgan Stanley Capital
International World Index(2) 11.43%
1. Fund performance does not include the initial sales charge and represents the
change in value of an investment during the period shown. Total return assumes
reinvestment of dividends and capital gains at net asset value. Past performance
is not predictive of future results.
2. Indices are unmanaged and include reinvested dividends.
In the U.S., a combination of moderate economic growth, low inflation, and
increasing corporate profits provided a favorable environment for stocks as the
unmanaged Standard & Poor's 500(R) Stock Index reached record high levels. Two
of the strongest sectors in the U.S. market were Financial Services and Banking.
Industry consolidation resulted in a number of banks with stronger capital
bases, greater marketing power and economies of scale; many investment and
commercial banks became more profitable as relatively stable interest rates made
it easier for their clients to raise capital for expansion. The Fund's holdings
in Dean Witter Discover, which recently announced a merger with Morgan Stanley,
and Citicorp and BankAmerica Corp., two of the nation's largest banks, benefited
from these developments.
During the reporting period, the economies of many European countries were
restrained by fiscal policies designed to help them meet European Monetary Union
(EMU) criteria. Encouraged by the lower interest rates resulting from these
requirements, investors bid many stock prices higher, and Italy and Spain were
rewarded for their fiscal responsibility by increased liquidity in their
markets. As a result, our holdings of Fiat, the Italian auto maker, and
Iberdrola, the Spanish utility, both rose in value. Having rejected the rigid
requirements of the
2
<PAGE> 3
EMU, the United Kingdom enjoyed strong economic growth under its current fiscal
policies. Low unemployment and strong consumer demand increased the share prices
of many British companies, benefiting the Fund's holdings of shares in
restructured companies such as British Energy and British Gas.
Most Latin American countries recovered from the 1994 Mexican peso crisis and
their governments continued long-term fiscal restructuring plans in an effort to
prevent the occurrence of another such debacle. Real gross domestic product
growth for the region increased from 0.9% in 1995, to an estimated 3.5% at the
end of 1996, and inflation fell sharply in both Mexico and Brazil. (2) The
Brazilian government's plan to privatize companies in major industries like oil,
telecommunications and utilities buoyed Brazilian stocks such as Telebras, one
of our largest holdings, and we realized profits on our sale of Aracruz
Celulose, the Brazilian paper company.
2. Source: Goldman Sachs, Latin America Research, January 1997.
Templeton World Fund
Geographic Distribution on 2/28/97
Based on Total Net Assets
[PIE CHART]
European Stocks............................... 31.0%
United States Stocks.......................... 25.3%
Asian Stocks.................................. 11.1%
Latin American Stocks......................... 10.0%
Short-term Obligations & Other net Assets..... 9.3%
Australian & New Zealand Stocks............... 4.9%
Other Stocks.................................. 2.3%
Fixed-Income Securities....................... 0.1%
In Asia, we took advantage of depressed Thai and South Korean securities markets
to buy stocks of companies that we believe may have better access to capital and
face less-restrictive labor policies if their governments complete economic and
labor reform programs. These new positions included Korean Air and Robinson
Department Stores of Thailand.
Australia, where corporate profits were hard hit by a depressed economy, also
provided unique opportunities to buy stocks we considered to be
3
<PAGE> 4
Templeton World Fund
Top 10 Countries Represented in the Fund on 2/28/97
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Country Net Assets
------- ----------
<S> <C>
United States 25.3%
France 6.1%
Hong Kong 5.8%
United Kingdom 5.0%
Spain 4.6%
Australia 4.0%
Sweden 3.8%
Brazil 3.7%
Argentina 3.4%
Mexico 2.6%
</TABLE>
bargains. We took advantage of this situation by purchasing shares of companies
we believed were fundamentally sound, such as major retailer David Jones Ltd.,
at what we considered to be deep discounts. When Australia moves into recovery,
these could prove to be important holdings for the Fund.
This discussion reflects the strategies we employed for the Fund during the
six-month period 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. Emerging
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 857% in the last 15 years, but
4
<PAGE> 5
Templeton World Fund
Top 10 Holdings on 2/28/97
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Company, Industry, Country Net Assets
- -------------------------- ----------
<S> <C>
Telebras-Telecomunicacoes Brasileiras SA 1.9%
Telecommunications, Brazil
U.S. Treasury Note, 6.125%, 3/31/98 1.7%
Government Bond, United States
Merrill Lynch & Co. Inc. 1.6%
Financial Services, United States
HSBC Holdings PLC 1.5%
Banking, Hong Kong
Dean Witter Discover & Co. 1.4%
Financial Services, United States
General Motors Corp. 1.4%
Automobiles, United States
Telefonica de Espana SA 1.3%
Telecommunications, Spain
Ford Motor Co. 1.3%
Automobiles, United States
Sony Corp. 1.3%
Appliances & Household Durables, Japan
International Business Machines Corp. 1.1%
Data Processing & Reproduction
</TABLE>
For a complete list of portfolio holdings, see page 13 of this report.
has suffered five declines of more than 20% during that time.(3) These risks and
other considerations are discussed in the Fund's prospectus.
Thank you for your continued support of the Templeton World Fund. We welcome
your comments and look forward to serving you in the future.
Sincerely,
/s/ Jeffrey A. Everett
- ------------------------------
Jeffrey A. Everett, CFA
Portfolio Manager
Templeton World Fund
3. Source: Bloomberg. Based on quarterly percentage change over 15 years ended
December 31, 1996.
Celebrating 50 Years
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
In addition, we want to stress that all securities markets move both up and
down. Mixed in with the good years can be some bad years. Accordingly, mutual
fund share prices also move up and down. Every investor should expect such
fluctuations, which can be wide. When markets are going down, as well as up, we
encourage investors to maintain a long-term perspective. We thank you for your
past support and look forward to serving your investment needs in the years
ahead.
5
<PAGE> 6
PERFORMANCE SUMMARY
CLASS I
Templeton World Fund - Class I produced a cumulative total return of 16.57% for
the six-month period ended February 28, 1997. Cumulative total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include the 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 214% for the
10-year period ended February 28, 1997.
The Fund's share price, as measured by net asset value, increased by $1.06, from
$16.21 on August 31, 1996 to $17.27 on February 28, 1997. During this time,
shareholders received distributions of 43.0 cents ($0.43) per share in dividend
income, and $1.04 per share in capital gains, of which $1.005 represented
long-term capital gains, and 3.5 cents ($0.035) represented short-term capital
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 I
Periods Ended 2/28/97
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year Ten-Year (1/17/78)
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Cumulative
Total Return(1) 21.60% 110.39% 214.14% 1,735.61%
Average Annual(l)
Total Return(2) 14.59% 14.67% 11.46% 16.08%
Value of $10,000
Investment(3) $11,459 $19,825 $29,602 $ 173,004
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
2/28/93 2/28/94 2/28/95 2/29/96 2/28/97
<S> <C> <C> <C> <C> <C>
One-Year
Total Return(4) 4.98% 33.23% -0.15% 23.89% 21.60%
- ---------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the indicated periods and does not include the initial sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods, and includes the maximum 5.75% 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 maximum 5.75% initial sales
charge.
4. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates and does not include the
initial sales charge.
All calculations assume reinvestment of dividends and capital gains at net asset
value. 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 lower than noted above. On January 1, 1993, the Fund implemented
a Rule 12b-1 plan, which affects subsequent performance. Investment return and
principal value will fluctuate with market conditions, currencies and the
economic and political climates of countries where investments are made.
Emerging markets involve heightened risks related to the same factors, in
addition to those associated with the relatively small size and lesser liquidity
of these markets. You may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
6
<PAGE> 7
PERFORMANCE SUMMARY
CLASS II
Templeton World Fund - Class II produced a cumulative total return of 16.14% for
the six-month period ended February 28, 1997. Cumulative total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include sales charges.
The Fund's share price, as measured by net asset value, increased by $1.07, from
$16.04 on August 31, 1996 to $17.11 on February 28, 1997. During this time,
shareholders received distributions of 33.51 cents ($0.3351) per share in
dividend income, and $1.04 per share in capital gains, of which $1.005
represented long-term capital gains, and 3.5 cents ($0.035) represented
short-term capital 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
Periods Ended 2/28/97
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
-------- --------
<S> <C> <C>
Cumulative
Total Return(1) 20.65% 40.09%
Average Annual
Total Return(2) 18.42% 19.53%
Value of $10,000
Investment(3) $11,842 $13,865
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods, and includes 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.
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 at net asset
value. Investment return and principal value will fluctuate with market
conditions, currencies and the economic and political climates of countries
where investments are made. Emerging markets involve heightened risks related to
the same factors, in addition to those associated with the relatively small size
and lesser liquidity of these markets. You may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
7
<PAGE> 8
TEMPLETON WORLD FUND - CLASS I
If you had invested $10,000 in the Templeton World Fund -- Class I at inception,
your investment would be worth more than $173,000 today. The chart below
illustrates the cumulative total return of a hypothetical $10,000 investment in
the Fund on January 17, 1978 (inception), with income dividends and capital
gains distributions reinvested through February 28, 1997.1
Templeton World Fund - Class I*
Growth of $10,000 Investment from Inception (1/17/78 - 2/28/97)
<TABLE>
<CAPTION>
Date Initial Investment Income Initial + Dividends Cap Gains Initial + Cap Gains Total Value
<S> <C> <C> <C> <C> <C> <C>
1/17/78 $9,425 0 $9,425 0 $9,425 $9,425
12/29/78 $11,348 $47 $11,395 $57 $11,405 $11,452
12/31/79 $14,119 $287 $14,406 $269 $14,388 $14,675
12/31/80 $16,588 $761 $17,349 $385 $16,973 $17,734
12/31/81 $16,352 $1,432 $17,785 $1,052 $17,405 $18,837
12/31/82 $18,615 $2,466 $21,080 $1,407 $20,021 $22,487
12/30/83 $23,223 $3,897 $27,121 $3,009 $26,233 $30,130
12/31/84 $21,697 $4,544 $26,241 $5,320 $27,017 $31,561
12/31/85 $26,503 $6,879 $33,383 $8,136 $34,640 $41,519
12/31/86 $27,785 $8,542 $36,327 $12,399 $40,184 $48,726
12/31/87 $23,864 $9,372 $33,237 $17,157 $41,021 $50,394
12/30/88 $26,692 $12,020 $38,712 $21,605 $48,297 $60,317
12/29/89 $30,688 $16,195 $46,883 $27,067 $57,755 $73,950
12/31/90 $23,393 $14,755 $38,148 $24,042 $47,435 $62,190
12/31/91 $26,899 $19,268 $46,167 $34,539 $61,438 $80,706
12/31/92 $24,618 $20,041 $44,660 $38,670 $63,289 $83,330
12/31/93 $29,614 $25,942 $55,556 $55,777 $85,391 $111,333
12/30/94 $26,711 $25,330 $52,040 $60,267 $86,978 $112,307
12/29/95 $28,106 $29,662 $57,767 $78,743 $106,848 $136,510
12/31/96 $31,197 $37,097 $68,294 $97,500 $128,697 $165,794
2/28/97 $32,554 $38,711 $71,265 $101,742 $134,296 $173,007
</TABLE>
1. The amount of capital gains distributions accepted in shares was $101,742.
The amount of dividends reinvested was $38,711.
The performance information shown represents past performance and is not
predictive 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.
8
<PAGE> 9
Many investors have asked us about the activities of Sir John Templeton, since
his retirement from the funds. We asked Professor Robert Herrmann to update us
on Sir John's current activities and his comments follow.
THE NEW CAREER OF
SIR JOHN TEMPLETON
[PHOTO OF ROBERT HERRMANN]
By Professor
Robert Herrmann
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently, he devotes all of his time and efforts to the
John Templeton Foundation. A major portion of his assets remain invested in
Templeton funds, managed by many of the investment professionals he selected and
trained. For sentimental reasons, he allows his name to be associated with the
funds, although he knows no more about their management and holdings than any
other investor.
Sir John Templeton established the Templeton Foundation in 1987, to foster the
acquisition of spiritual information through scientific research. Working with
scientists, theologians and others, he strives toward a new science that uses
empirical and statistical scientific methods to discover and test spiritual
knowledge. A crucial ingredient in his research is what Sir John calls "humility
theology," an attitude of humility toward the Creator, combined with
receptiveness to the theological significance of current scientific discoveries.
Universal spiritual laws, or "laws of life," are among the areas of
investigation. In his recent book, Worldwide Laws of Life, Sir John compiles 200
laws and proverbs from nearly all religions, and deeply embedded in human
history. For example, the Golden Rule taught by Jesus in the Sermon on the
Mount, states "Do unto others as you would have others do unto you," and is
affirmed by all major religions as an acceptable, universal law of life. Other
books which Sir John has authored or co-authored during the past few years
include: The Humble Approach, Is God the Only Reality, Evidence of Purpose,
Who's Who in Theology and Science and The God Who Would Be Known.
With an annual budget of more than $30 million, the Templeton Foundation
sponsors 60 programs focusing on spiritual progress and the benefits of freedom.
Sir John's first sizable investment in the programs was the Templeton Prize for
Progress in Religion. A panel of nine judges gives the annual award which now
exceeds $1.2 million to individuals who have shown extraordinary originality in
furthering the world's understanding of God or spirituality.
Recipients of the prize include Professor Paul Davies, author of The Mind of
God; the Right Honorable Lord Jacobovits, former Chief Rabbi of Great Britain
and The Commonwealth; the Reverend Dr. Billy Graham, world-renowned preacher and
presidential inauguration speaker; Mr. Nikkyo Nimano, founder of the World
Conference on Religion and Peace; and Sir Sarepalli Radhakrishnan, former
President of India, and Oxford professor of Eastern Religions and Ethics.
To encourage young people's and their parents' appreciation of spiritual laws of
life, Sir John established an essay contest for teenagers in his home county of
Franklin, Tennessee. Students submit essays about the spiritual life principles
they plan to follow, and prizes are offered semiannually. In 1996, more than 800
youth participated. Twenty-six similar programs
9
<PAGE> 10
have been launched in various locations, with the support of generous local
donors.
The Foundation also sponsors a worldwide program that awards college-level
faculty who teach courses integrating science and religion. During the program's
first two years, more than 200 courses were created. The Foundation maintains an
extensive program of research and education on the health benefits of
spirituality, including prizes for medical schools providing courses on
spirituality in medicine. Lastly, the Foundation publishes a newsletter with
over 2,000 subscribers. Free subscriptions are available to Templeton
shareholders by writing to the Foundation.
To contact Sir John Templeton or receive the free newsletter subscription,
please write to:
The John Templeton Foundation
2 Radnor Corporate Center #320
100 Matsonford Road
Radnor, PA 19087
10
<PAGE> 11
TEMPLETON WORLD FUND
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS I
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31
FEBRUARY 28, 1997 --------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.21 $ 16.76 $ 17.06 $ 15.94 $ 14.42 $ 15.05
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income .12 .41 .33 .26 .30 .41
Net realized and unrealized gain 2.41 1.29 1.11 2.50 2.81 .67
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.53 1.70 1.44 2.76 3.11 1.08
---------- ---------- ---------- ---------- ---------- ----------
Distributions:
Dividends from net investment income (.43) (.37) (.28) (.26) (.38) (.42)
Distributions from net realized gains (1.04) (1.88) (1.46) (1.38) (1.21) (1.29)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (1.47) (2.25) (1.74) (1.64) (1.59) (1.71)
---------- ---------- ---------- ---------- ---------- ----------
Change in net asset value 1.06 (.55) (.30) 1.12 1.52 (.63)
---------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period $ 17.27 $ 16.21 $ 16.76 $ 17.06 $ 15.94 $ 14.42
========== ========== ========== ========== ========== ==========
TOTAL RETURN* 16.57% 11.73% 9.87% 18.87% 24.71% 8.13%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $7,475,533 $6,483,146 $5,868,967 $5,421,691 $4,621,124 $4,046,706
Ratio of expenses to average net assets 1.03%** 1.03% 1.05% 1.04% 1.02% .86%
Ratio of net investment income to
average net assets 1.49%** 2.66% 2.18% 1.67% 2.13% 2.76%
Portfolio turnover rate 16.30% 22.05% 34.05% 30.77% 23.86% 26.60%
Average commission rate paid (per
share) $ .0020 $ .0130
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
** ANNUALIZED.
11
<PAGE> 12
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 28, 1997 YEAR ENDED THROUGH
(UNAUDITED) AUGUST 31, 1996 AUGUST 31, 1995
----------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 16.04 $ 16.71 $ 15.36
-------- ------- -------
Income from investment operations:
Net investment income .11 .45 .03
Net realized and unrealized gain 2.34 1.11 1.32
-------- ------- -------
Total from investment operations 2.45 1.56 1.35
-------- ------- -------
Distributions:
Dividends from net investment income (.34) (.35) --
Distributions from net realized gains (1.04) (1.88) --
-------- ------- -------
Total distributions (1.38) (2.23) --
-------- ------- -------
Change in net asset value 1.07 (.67) 1.35
-------- ------- -------
Net asset value, end of period $ 17.11 $ 16.04 $ 16.71
======== ======= =======
TOTAL RETURN* 16.14% 10.88% 8.79%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of period (000) $101,846 $58,619 $ 7,623
Ratio of expenses to average net assets 1.83%** 1.84% 1.82%**
Ratio of net investment income to average net assets .69%** 2.14% 1.37%**
Portfolio turnover rate 16.30% 22.05% 34.05%
Average commission rate paid (per share) $ .0020 $ .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.
12
<PAGE> 13
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 78.9%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AEROSPACE & MILITARY TECHNICAL SYSTEMS: 0.5%
General Motors Corp., H U.S. 616,400 $ 36,367,600
- --------------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 1.4%
Electrolux AB, B Swe. 569,600 35,640,609
Sony Corp. Jpn. 1,049,100 75,749,490
--------------
111,390,099
- --------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES: 5.8%
Bayerische Motorenwerke (BMW) Ger. 43,500 29,275,994
*Ciadea SA Arg. 1,647,063 8,486,106
Ford Motor Co. U.S. 3,063,400 100,709,275
General Motors Corp. U.S. 1,800,000 104,175,000
Peugeot SA Fr. 256,625 28,388,718
*Regie Nationale des Usines Renault SA Fr. 884,107 22,805,148
Volkswagen AG Ger. 117,000 56,958,107
*Volkswagen AG, wts. Ger. 27,000 5,923,686
Volvo AB, B Swe. 3,241,000 81,290,383
--------------
438,012,417
- --------------------------------------------------------------------------------------------------------------------------
BANKING: 8.7%
*ABN AMRO NV Neth. 539,258 38,727,470
Argentaria Corporacion Bancaria de
Espana SA Sp. 800,000 32,034,602
Australia & New Zealand Banking Group Ltd. Aus. 173,178 1,081,505
Banco Bilbao Vizcaya Sp. 288,432 17,002,689
Banco Central Hispano Sp. 1,100,000 29,160,417
Banco Popular Espanol SA Sp. 131,844 23,959,930
Bank of Ireland Irl. 1,234,506 12,586,947
BankAmerica Corp. U.S. 300,000 34,125,000
*Banque Nationale de Paris Fr. 1,215,488 55,171,843
Citicorp U.S. 188,032 21,952,736
Credit Suisse Group, reg. Swtz. 11,530 1,229,966
Den Norske Bank Nor. 4,087,900 18,240,325
*HSBC Holdings PLC H.K. 4,549,903 111,049,197
National Australia Bank Ltd. Aus. 6,784,488 85,476,686
National Bank of Canada Can. 2,982,000 34,467,684
*National Westminster Bank PLC U.K. 4,001,124 49,429,981
PT Bank Bali, fgn. Indo. 465,500 1,242,628
PT Lippo Bank, fgn. Indo. 1,380,500 1,612,263
Shinhan Bank Co. Ltd. Kor. 769,207 11,579,837
</TABLE>
13
<PAGE> 14
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKING (cont.)
Svenska Handelsbanken, A Swe. 1,250,000 $ 35,021,246
Westpac Banking Corp. Aus. 7,549,582 42,808,057
--------------
657,961,009
- --------------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING: 1.2%
Marieberg Tidnings AB, A Swe. 301,700 8,372,226
News Corp. Ltd. Aus. 14,426,180 65,215,988
South China Morning Post (Holdings) Ltd. H.K. 19,038,700 17,210,235
--------------
90,798,449
- --------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 0.1%
Pioneer International Ltd. Aus. 3,020,756 8,986,574
- --------------------------------------------------------------------------------------------------------------------------
BUSINESS & PUBLIC SERVICES: 1.2%
*Healthsource Inc. U.S. 2,945,493 61,487,166
*Humana Inc. U.S. 739,600 14,514,650
Wheelabrator Technologies Inc. U.S. 63,100 899,175
WMX Technologies Inc. U.S. 500,000 15,812,500
--------------
92,713,491
- --------------------------------------------------------------------------------------------------------------------------
CHEMICALS: 1.9%
DSM NV Neth. 470,000 47,052,005
European Vinyls Corp. EVC International NV Neth. 410,000 11,557,511
Kemira OY, 144A Fin. 421,000 4,772,246
Lyondell Petrochemical Co. U.S. 824,600 19,481,175
*Rhone-Poulenc SA, A Fr. 998,920 35,080,597
Shanghai Pechemical Co. Ltd., H Ch. 86,212,000 24,492,994
--------------
142,436,528
- --------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 0.5%
Dragados y Construcciones SA Sp. 800,000 12,110,642
Fletcher Challenge Building Ltd. N.Z. 4,594,788 13,814,412
Kaufman & Broad Home Corp. U.S. 736,500 10,403,063
--------------
36,328,117
- --------------------------------------------------------------------------------------------------------------------------
DATA PROCESSING & REPRODUCTION: 1.9%
*Bay Networks Inc U.S. 837,163 15,906,097
International Business Machines Corp. U.S. 600,000 86,250,000
*Quantum Corp. U.S. 1,000,000 39,750,000
--------------
141,906,097
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRICAL & ELECTRONICS: 2.6%
*Alcatel Alsthom SA Fr. 549,055 $ 56,399,855
Asea AB, A Swe. 204,800 23,088,140
Hitachi Ltd. Jpn. 2,672,000 23,036,392
Motorola Inc. U.S. 836,500 46,739,438
Philips Electronics NV Neth. 1,125,460 50,820,339
--------------
200,084,164
- --------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES: 0.6%
Sun Co. Inc. U.S. 1,650,000 44,550,000
- --------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 5.5%
Fletcher Challenge Energy Ltd. N.Z. 4,594,788 11,809,094
Gazprom, ADR, Reg S Russ. 689,251 11,958,505
Norsk Hydro AS Nor. 345,333 17,334,963
Repsol SA Sp. 900,000 34,218,145
*Societe Elf Aquitane SA Fr. 809,000 77,419,666
*Total SA, B Fr. 858,540 68,517,371
Transportadora de Gas del Sur SA, ADR B Arg. 1,400,000 17,675,000
USX-Marathon Group Inc. U.S. 1,150,900 30,642,713
Valero Energy Corp. U.S. 1,899,550 59,835,825
YPF Sociedad Anonima Arg. 1,400,000 37,466,485
YPF Sociedad Anonima, ADR Arg. 1,822,100 48,741,175
--------------
415,618,942
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 5.0%
A.G. Edwards Inc. U.S. 125,700 4,462,350
*Axa-UAP SA Fr. 920,663 61,318,257
Dean Witter Discover & Co. U.S. 2,750,972 105,568,551
Federal National Mortgage Assn. U.S. 1,729,600 69,184,000
Merrill Lynch & Co. Inc. U.S. 1,224,000 117,504,000
Metro Pacific Capital U.S. 2,435,000 2,848,950
Peregrine Investments Holdings Ltd. H.K. 8,967,750 16,386,697
--------------
377,272,805
- --------------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS: 2.0%
Archer Daniels Midland Co. U.S. 1,603,245 29,660,032
Burns Philp & Co. Ltd. Aus. 8,472,814 13,162,471
C.P. Pokphand Co. Ltd. H.K. 6,641,000 2,401,281
Cafe de Coral Holdings Ltd. H.K. 762,000 206,645
Goodman Fielder Ltd. Aus. 2,414,816 2,926,095
*Grupo Embotellador de Mexico SA de CV,
GDR Mex. 1,684,000 16,840,000
*Grupo Embotellador de Mexico SA, B Mex. 562,500 951,738
Hillsdown Holdings PLC U.K. 15,923,076 49,405,443
</TABLE>
15
<PAGE> 16
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOOD & HOUSEHOLD PRODUCTS (cont.)
IBP Inc. U.S. 500,000 $ 11,625,000
McBride PLC U.K. 2,561,600 5,861,928
Panamerican Beverages Inc., A Mex. 320,200 18,051,275
--------------
151,091,908
- --------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 5.4%
*Assidomaen AB Swe. 800,000 20,759,261
Boise Cascade Corp. U.S. 399,800 13,143,425
Bowater Inc. U.S. 375,000 15,890,625
Carter Holt Harvey Ltd. N.Z. 2,686,400 6,085,491
Enso OY, R Fin. 2,554,000 22,094,085
Fletcher Challenge Ltd. Forestry Division, Aus. N.Z. 307,231 427,167
Fletcher Challenge Ltd. Forestry Division, N.Z. N.Z. 11,512,067 16,428,493
Fletcher Challenge Paper Ltd. N.Z. 9,189,576 18,143,352
Georgia-Pacific Corp. U.S. 1,050,000 81,900,000
International Paper Co. U.S. 453,800 18,946,150
Metsa Serla OY, B Fin. 2,452,500 20,484,444
Mo Och Domsjoe AB, B Swe. 600,000 19,051,558
Norske Skogindustrier AS, A Nor. 430,170 13,244,071
PT Pabrik Kertas Tjiwi Kimia, fgn. Indo. 22,081,065 24,867,101
St. Joe Paper Corp. U.S. 375,400 29,140,425
Stora Kopparbergs Bergslags AB, A Swe. 248,000 3,391,391
Stora Kopparbergs Bergslags AB, B Swe. 1,652,000 22,370,638
Svenska Cellulosa AB, B Swe. 719,600 15,984,817
UPM-Kymmene Corp. Fin. 2,242,290 46,687,898
--------------
409,040,392
- --------------------------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE: 0.5%
Novartis AG Swtz. 34,832 39,839,056
*Novartis AG, rts. Swtz. 34,832 2,205,798
--------------
42,044,854
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 1.2%
Goodyear Tire & Rubber Co. U.S. 1,202,600 63,437,150
Sandvik AB, A Swe. 121,000 2,946,121
Sandvik AB, B Swe. 879,000 21,519,255
Yamato Kogyo Co. Ltd. Jpn. 160,000 1,445,743
--------------
89,348,269
- --------------------------------------------------------------------------------------------------------------------------
INSURANCE: 4.5%
Ace Ltd. Bmu. 670,800 43,602,000
American Bankers Insurance Group Inc. U.S. 530,000 29,216,250
American International Group Inc. U.S. 375,000 45,375,000
</TABLE>
16
<PAGE> 17
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURANCE (cont.)
*Ing Groep NV Neth. 1,040,769 $ 40,305,876
*Istituto Nazionale Delle Assicurazioni
SPA, INA Itl. 18,908,000 24,714,367
London Insurance Group Inc. Can. 600,000 8,668,934
National Mutual Asia Ltd. H.K. 8,818,000 9,622,287
Partnerre Ltd. Bmu. 875,800 28,901,400
Travelers Inc. U.S. 1,185,168 63,554,634
UNUM Corp. U.S. 4,900 376,687
W.R. Berkley Corp. U.S. 719,000 36,938,625
*Zuerich Versicherung, new Swtz. 29,340 8,737,711
-------------
340,013,771
- --------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.0%
Cifra SA, B Mex. 16,470,000 25,427,513
Coles Myer Ltd., A Aus. 6,969,068 30,692,871
Dairy Farm International Holdings Ltd. H.K. 32,382,096 25,096,124
David Jones Ltd. Aus. 3,989,585 5,175,162
Kwik Save Group PLC U.K. 1,751,906 8,745,691
Robinson Department Store Public Co.
Ltd., fgn. Thai. 135,900 120,707
Safeway PLC U.K. 4,360,133 25,778,593
W.H. Smith Group U.K. 4,207,600 31,284,418
-------------
152,321,079
- --------------------------------------------------------------------------------------------------------------------------
METALS & MINING: 3.1%
Alcan Aluminum Ltd. Can. 1,105,628 39,632,592
Arbed SA Bel. 131,200 14,322,321
*Asturiana del Zinc SA Sp. 1,200,000 15,570,826
British Steel PLC U.K. 2,869,000 7,032,664
Companhia Siderurgica Nacional ADR Braz. 691,280 25,453,153
Elkem AS Nor. 281,400 4,520,213
Maanshan Iron & Steel Co. Ltd., H Chn. 11,701,000 2,750,083
*Pechiney SA, A Fr. 587,123 24,835,458
Pohang Iron & Steel Co. Ltd. Kor. 404,795 26,668,330
Reynolds Metals Co. U.S. 740,752 46,482,188
RGC Ltd. Aus. 1,227,361 4,881,149
*Rustenburg Platinum Holdings Ltd Ord. S.AF. 15,200 257,828
*Union Miniere NPV Bel. 350,000 25,890,549
-------------
238,297,354
- --------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES: 0.3%
De Beers Consolidated Mines Ltd. S.AF. 578,800 20,087,803
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MULTI-INDUSTRY: 2.8%
Alfa SA de CV, A Mex. 1,100,200 $ 6,241,878
*Alfa SA de CV, A 144A Mex. 871,000 4,941,534
BTR PLC U.K. 3,912,600 15,198,708
Cheung Kong Holdings Ltd. H.K. 6,798,000 64,962,744
Harrisons & Crosfield PLC U.K. 4,177,400 8,913,129
Inversiones y Representacion Arg. 3,981,475 14,498,948
Jardine Matheson Holdings Ltd. H.K. 2,154,834 13,036,746
Jardine Strategic Holdings Ltd. H.K. 11,461,094 37,592,388
Metro Pacific Corp. MDI Phil. 1,172,000 347,174
Pacific Dunlop Ltd. Aus. 14,107,442 33,969,544
Swire Pacific Ltd., A H.K. 1,358,100 11,662,855
Swire Pacific Ltd., B H.K. 3,614,500 4,924,387
-------------
216,290,035
- --------------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 4.1%
American Health Properties Inc. U.S. 443,400 11,362,125
Beacon Properties Corp U.S. 750,000 26,718,750
Carramerica Realty Corp. U.S. 201,900 6,132,713
Crescent Real Estate Equities Company U.S. 240,000 13,140,000
*Fastighets Naeckebro AB, A Swe. 125,000 1,767,739
Federal Realty Investment Trust U.S. 300,000 8,062,500
General Growth Properties U.S. 900,000 27,562,500
Hang Lung Development Co. Ltd. H.K. 15,150,000 30,520,294
Highwood Properties Inc., REIT U.S. 548,700 18,930,150
Hong Kong Land H.K. 7,172,000 20,440,200
Inversiones y Representacion, GDR Arg. 372,092 13,441,824
IRT Property Co. U.S. 537,600 6,048,000
Meditrust Inc. U.S. 656,300 25,267,550
National Health Investors Inc. U.S. 580,000 22,982,500
Nationwide Health Properties Inc. U.S. 400,000 8,800,000
Post Properties Inc. U.S. 6,600 249,975
Rouse Co. U.S. 1,120,000 32,760,000
Summit Properties Inc., REIT U.S. 419,400 8,492,850
Tai Cheung Holdings Ltd. H.K. 618 559
*Union du Credit Bail Immobilier Unibail Fr. 300,436 28,856,627
-------------
311,536,856
- --------------------------------------------------------------------------------------------------------------------------
RECREATION & OTHER CONSUMER GOODS: 0.5%
Nintendo Co. Ltd. Jpn. 533,800 37,613,363
- --------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 7.5%
A T & T Corp. U.S. 550,000 21,931,250
Bell Atlantic Corp. U.S. 230,100 15,905,662
</TABLE>
18
<PAGE> 19
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TELECOMMUNICATIONS (cont.)
British Telecommunications PLC U.K. 4,812,610 $ 33,352,860
Cpt-Telefonica del Peru SA, ADR B Per. 330,900 7,279,800
Cpt-Telefonica del Peru SA, B Per. 3,395,194 7,546,302
*Digital Telecommunications Philippines
Inc. Phil. 5,390,000 491,275
*Nokia AB, A Fin. 1,133,900 68,100,071
*Seat SPA Itl. 7,278,650 2,628,670
*Seat SPA, di Risp Itl. 6,682,000 1,539,797
*SPT Telecom AS Csk. 57,268 7,434,082
STET (Sta Finanziaria Telefonica Torino)
SPA Itl. 7,278,650 30,847,827
STET (Sta Finanziaria Telefonica Torino)
SPA, di Risp Itl. 6,682,000 23,563,081
Telecom Argentina Stet France SA, ADR Arg. 1,119,400 53,871,125
*Telecom Italia Mobile, di Risp Itl. 1,761,480 2,672,080
*Telecom Italia Spa, di Risp Itl. 26,503,930 53,350,999
Teledanmark AS, B Den. 492,540 25,649,536
Telefonica de Espana SA Sp. 4,411,500 101,558,827
Telmex-Telefonos de Mexico SA, L Mex. 13,007,000 25,240,143
Telmex-Telefonos de Mexico SA, L, ADR Mex. 1,318,551 51,258,670
U.S. West Communications Group U.S. 1,000,000 36,000,000
-------------
570,222,057
- --------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 0.5%
Daehan Synthetic Fiber Co. Ltd. Kor. 15,580 1,244,236
*Fruit of the Loom Inc., A U.S. 842,600 34,441,275
-------------
35,685,511
- --------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 2.1%
APL Ltd. U.S. 911,400 20,962,200
Cathay Pacific Airways Ltd. H.K. 24,875,000 38,708,079
IMC Holdings Ltd. H.K. 7,277,400 3,383,220
Inner Mongolia Erdos Cashmere Products, B Ch. 1,041,000 841,128
*Korean Air Kor. 127,912 2,325,363
Malaysian International Shipping Corp.
Bhd., fgn. Mal. 5,502,700 14,282,701
*OMI Corp. U.S. 358,800 3,229,200
Peninsular & Oriental Steam Navigation Co. U.K. 1,800,000 19,554,701
Qantas Airways Ltd., ADR, 144A Aus. 484,200 8,866,913
Shun Tak Holdings H.K. 16,706,000 11,757,648
Singapore Airlines Ltd., fgn. Sing. 2,345,000 20,727,464
Singapore Bus Service (1978) Ltd., fgn. Sing. 414,300 2,223,357
</TABLE>
19
<PAGE> 20
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION (cont.)
Stolt Nielsen SA Nor. 521,500 $ 10,038,875
Stolt Nielsen SA, ADR Nor. 260,750 4,986,844
-------------
161,887,693
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES ELECTRICAL & GAS: 5.4%
BG PLC U.K. 12,352,000 34,301,611
British Energy Ltd. U.K. 6,105,300 14,120,439
British Energy Ltd., 144A U.K. 12,451,700 28,798,498
British Gas PLC
*Centrica PLC U.K. 12,352,000 13,227,747
Compania Sevillana de Electricidad Sp. 1,531,584 13,889,980
*Electricidad de Caracas Venz. 2,755,117 2,982,941
Entergy Corp. U.S. 2,247,300 59,272,538
Evn Energie-Versorgung Niederoesterreich AG Aust. 3,000 441,908
Iberdrola SA Sp. 4,961,317 54,166,250
Korea Electric Power Corp. Kor. 2,446,200 70,215,000
Mosenergo, ADR, 144A Russ. 306,100 12,779,675
Mosenergo, ADR, Reg. S Russ. 501,011 20,917,209
National Grid Holdings PLC U.K. 2,940,800 9,938,857
New York State Electric & Gas Corp. U.S. 400,000 9,300,000
Shandong Huaneng Power Chn. 1,000,000 10,375,000
Thames Water Group PLC U.K. 2,551,048 28,586,430
VEBA AG Ger. 400,000 23,078,063
-------------
406,392,146
- --------------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 0.1%
Sime Darby Hongkong Ltd. H.K. 5,405,400 6,247,444
-------------
TOTAL COMMON STOCKS (cost $4,274,949,492) 5,982,546,827
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 5.7%
- --------------------------------------------------------------------------------------------------------------------------
American Health Properties Inc., pfd. U.S. 44,340 798,120
Aracruz Celulose SA, ADR, pfd. Braz. 3,280,000 30,340,000
Bayerische Motorenwerke (BMW), pfd. Ger. 20,000 9,285,778
Banco Bradesco SA, pfd. Braz. 1,288,240,000 10,785,892
*Cemig-Cia Energetica de Minas Gerais, pfd. Braz. 411,765,636 16,591,289
Cia Energetica de Minas Gerais, ADR, pfd. Braz. 7,000 290,500
Cia de Inversiones en Telecomunicaciones
SA, 7.00%, 3/3/98 Arg. 1,010,619 62,153,069
Cia Inversiones Telecomunicaciones SA,
conv., pfd., 144A U.S. 8,200 504,300
Coteminas Cia Tecidos Norte de Minas, pfd. Braz. 600,000 256,886
*Fiat Spa, pfd. Itl. 16,137,000 26,844,916
</TABLE>
20
<PAGE> 21
TEMPLETON WORLD FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (CONT.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jardine Strategic Holdings Ltd., 7.50%,
conv., pfd. H.K. 15,263,000 $ 16,865,615
Lojas Americanas SA, pfd. Braz. 1,178,372,351 16,929,187
Nacional Financiera SA, 11.25%, conv., pfd. Mex. 1,240,000 49,910,000
Petrobras-Petroleo Brasileiro SA, pfd. Braz. 94,633,000 19,357,875
Telebras-Telecomunicacoes Brasileiras SA, pfd. Braz. 545,400,000 53,240,131
*Telebras-Telecomunicacoes Brasileiras SA,
pfd., ADR U.S. 900,000 87,300,000
*Telesp-Telecomunicacoes de Sao Paulo SA, pfd. Braz. 80,000,000 21,997,051
Volkswagen AG, pfd. Ger. 22,000 8,446,737
--------------
TOTAL PREFERRED STOCKS (cost $300,481,650) 431,897,346
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL IN
LOCAL CURRENCY**
- --------------------------------------------------------------------------------------------------------------------------
BONDS: 6.1%
- --------------------------------------------------------------------------------------------------------------------------
Arbed SA, 2.50%, conv., 7/15/03 Ger. 2,250,000 1,174,064
Bilboa Vizcaya Investment BV, 3.50%,
7/12/06, 144A Sp. 8,765,000 11,065,813
Government of Australia:
7.00%, 8/15/98 Aus. 20,000,000 15,669,945
6.25%, 3/15/99 Aus. 20,000,000 15,438,785
7.00%, 4/15/00 Aus. 20,000,000 15,580,463
Government of Italy 5.00%, 6/28/01 Itl. 72,845,000 72,662,888
Metro Pacific Capital, 2.50%, 4/11/03 U.S. 16,500,000 19,263,750
Sony Corp., 0.15%, 3/30/01, #5 Jpn. 2,062,000,000 22,905,413
U.S. Treasury Note:
6.125%, 3/31/98 U.S. 130,000,000 130,446,810
6.375%, 1/15/99 U.S. 78,000,000 78,390,000
5.875%, 11/15/99 U.S. 78,000,000 77,439,336
-------------
TOTAL BONDS (cost $469,484,200) 460,037,267
- --------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 9.0% (cost $679,236,252)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.78% to 5.01% with
maturities to 5/22/97 U.S. 682,926,000 679,545,466
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.7% (cost $5,724,151,594) 7,554,026,906
OTHER ASSETS, LESS LIABILITIES: 0.3% 23,352,162
--------------
TOTAL NET ASSETS: 100.0% $7,577,379,068
==============
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 22
TEMPLETON WORLD FUND
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $5,724,151,594) $7,554,026,906
Cash 1,546,448
Receivables:
Investment securities sold 27,447,657
Fund shares sold 7,788,756
Dividends and interest 19,873,106
--------------
Total assets 7,610,682,873
--------------
Liabilities:
Payables:
Investment securities purchased 22,727,918
Fund shares redeemed 3,288,008
Accrued expenses 7,287,879
--------------
Total liabilities 33,303,805
--------------
Net assets, at value $7,577,379,068
==============
Net assets consist of:
Undistributed net investment income $ 14,898,050
Net unrealized appreciation 1,829,875,312
Accumulated net realized gain 264,613,117
Net capital paid in on shares of
capital stock 5,467,992,589
--------------
Net assets, at value $7,577,379,068
==============
Class I
Net asset value per share
($7,475,532,988 / 432,785,122
shares outstanding) $ 17.27
==============
Maximum offering price
($17.27 / 94.25%) $ 18.32
==============
Class II
Net asset value per share
($101,846,080 / 5,953,661
shares outstanding) $ 17.11
==============
Maximum offering price
($17.11 / 99.00%) $ 17.28
==============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 28, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Investment income:
(net of $3,255,089 foreign
taxes withheld)
Dividends $ 62,151,685
Interest 25,887,285
------------
Total income $ 88,038,970
Expenses:
Management fees (Note 3) 21,553,555
Administrative fees
(Note 3) 2,733,644
Distribution Fees
(Note 3)
Class I 6,886,853
Class II 380,828
Transfer agent fees
(Note 3) 2,425,000
Custodian fees 1,253,063
Reports to shareholders 632,000
Audit fees 27,000
Legal fees 3,500
Registration and filing
fees 210,000
Directors' fees and
expenses 30,000
Other 99,412
------------
Total expenses 36,234,855
--------------
Net investment
income 51,804,115
Realized and unrealized gain:
Net realized gain on:
Investments 358,681,249
Foreign currency
transactions 416,366
------------
359,097,615
Net unrealized
appreciation on
investments 666,150,033
------------
Net realized and
unrealized gain 1,025,247,648
--------------
Net increase in net assets
resulting from operations $1,077,051,763
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 23
TEMPLETON WORLD FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31,
(UNAUDITED) 1996
------------------ -------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income $ 51,804,115 $ 165,563,495
Net realized gain on investment and foreign currency transactions 359,097,615 418,044,093
Net unrealized appreciation 666,150,033 103,441,815
-------------- --------------
Net increase in net assets resulting from operations 1,077,051,763 687,049,403
Distributions to shareholders:
From net investment income
Class I (173,712,494) (130,871,491)
Class II (1,366,380) (283,110)
From net realized gain
Class I (420,474,583) (667,509,078)
Class II (4,340,189) (1,422,754)
Capital share transactions (Note 2)
Class I 520,772,491 728,142,909
Class II 37,683,719 50,068,384
-------------- --------------
Net increase in net assets 1,035,614,327 665,174,263
Net assets:
Beginning of period 6,541,764,741 5,876,590,478
-------------- --------------
End of period $7,577,379,068 $6,541,764,741
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 24
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
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 in good faith by
management and approved 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.
24
<PAGE> 25
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
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At February 28, 1997, there
were 3.2 billion shares of capital stock authorized ($1.00 par value) of which
1.2 billion have been classified as Fund shares as follows: 800 million Class I
shares and 400 million Class II shares. Transactions in the Fund's shares were
as follows:
<TABLE>
<CAPTION>
CLASS I
---------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 19,018,272 $ 315,750,153 34,417,668 $ 540,260,882
Shares issued on reinvestment of
distributions 33,921,703 537,532,632 49,118,786 722,606,074
Shares redeemed (19,999,449) (332,510,294) (33,886,588) (534,724,047)
------------ -------------- ------------ -------------
Net increase 32,940,526 $ 520,772,491 49,649,866 $ 728,142,909
============ ============== ============ =============
</TABLE>
<TABLE>
<CAPTION>
CLASS II
---------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 2,175,133 $ 35,885,426 3,291,659 $ 51,600,312
Shares issued on reinvestment of
distributions 301,042 4,729,817 96,166 1,407,255
Shares redeemed (177,917) (2,931,524) (188,649) (2,939,183)
------------ -------------- ------------ -------------
Net increase 2,298,258 $ 37,683,719 3,199,176 $ 50,068,384
============ ============== ============ =============
</TABLE>
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), Franklin Templeton Services, Inc. (FTSI), 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 FTSI 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 28, 1997, FTD received net commissions of $767,185
from the sale of the Fund's shares and FTIS received fees of $2,425,000.
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 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 28, 1997, there were no
25
<PAGE> 26
TEMPLETON WORLD FUND
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
unreimbursed expenses. Class II shares redeemed within 18 months are subject to
a contingent deferred sales charge. Contingent deferred sales charges of $17,757
were paid to FTD for the six months ended February 28, 1997.
An officer of the Company is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees for the six months ended February 28,
1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1997 aggregated $1,080,090,341 and $1,626,435,669,
respectively. The cost of securities for federal income tax purposes is the same
as that shown in the investment portfolio. Realized gains and losses are
reported on an identified cost basis.
At February 28, 1997, 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 $1,927,652,495
Unrealized depreciation (97,777,183)
--------------
Net unrealized appreciation $1,829,875,312
==============
</TABLE>
26
<PAGE> 27
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST - Call 1-800/DIAL BEN (1-800/342-5236) 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.
<TABLE>
<CAPTION>
<S> <C>
GLOBAL GROWTH GROWTH
Franklin Global Health Care Fund Franklin Blue Chip Fund
Franklin Templeton Japan Fund Franklin California Growth Fund
Templeton Developing Markets Trust Franklin DynaTech Fund
Templeton Foreign Fund Franklin Equity Fund
Templeton Foreign Smaller Franklin Gold Fund
Companies Fund
Franklin Growth Fund
Templeton Global Infrastructure Fund
Franklin MidCap Growth Fund
Templeton Global
Opportunities Trust Franklin Small Cap Growth Fund
Templeton Global Real Estate Fund Mutual Discovery Fund
Templeton Global Smaller
Companies Fund
GROWTH AND INCOME
Templeton Greater European Fund
Franklin Asset Allocation Fund
Templeton Growth Fund
Franklin Balance Sheet
Templeton Latin America Fund Investment Fund
Templeton Pacific Growth Fund Franklin Convertible Securities Fund
Templeton World Fund Franklin Equity Income Fund
Franklin Income Fund
GLOBAL GROWTH AND INCOME
Franklin MicroCap Value Fund
Franklin Global Utilities Fund
Franklin Natural Resources Fund
Franklin Templeton German
Government Bond Fund Franklin Real Estate Securities Fund
Franklin Templeton Franklin Rising Dividends Fund
Global Currency Fund
Franklin Strategic Income Fund
Mutual European Fund
Franklin Utilities Fund
Templeton Global Bond Fund
Franklin Value Fund
Templeton Growth and Income Fund
Mutual Beacon Fund
Mutual Qualified Fund
GLOBAL INCOME Mutual Shares Fund
Franklin Global Government Templeton American Trust, Inc.
Income Fund
FUND ALLOCATOR SERIES:
Franklin Templeton Hard
Currency Fund Franklin Templeton
Conservative Target Fund
Franklin Templeton High
Income Currency Fund Franklin Templeton
Moderate Target Fund
Templeton Americas
Government Securities Fund Franklin Templeton
Growth Target Fund
INCOME FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
Franklin Adjustable Rate TAX-FREE INCOME
Securities Fund
Alabama
Franklin Adjustable U.S.
Government Securities Fund Arizona*
Franklin's AGE High Income Fund Arkansas**
Franklin Investment California*
Grade Income Fund
Colorado
Franklin Short-Intermediate U.S.
Government Securities Fund Connecticut
Franklin U.S. Government Florida*
Securities Fund
Georgia
Franklin Money Fund
Hawaii**
Franklin Federal Money Fund
Indiana
FOR NON-U.S. INVESTORS: Kentucky
Franklin Tax-Advantaged Louisiana
High Yield Securities Fund
Maryland
Franklin Tax-Advantaged
International Bond Fund Massachusetts***
Franklin Tax-Advantaged U.S. Michigan*
Government Securities Fund
Minnesota***
FOR CORPORATIONS: Missouri
Franklin Corporate Qualified New Jersey
Dividend Fund
New York*
North Carolina
FRANKLIN FUNDS SEEKING Ohio***
TAX-FREE INCOME
Oregon
Federal Intermediate-Term
Tax-Free Income Fund Pennsylvania
Federal Tax-Free Income Fund Tennessee**
High Yield Tax-Free Income Fund Texas
Insured Tax-Free Income Fund Virginia
Puerto Rico Tax-Free Income Fund Washington**
Tax-Exempt Money Fund VARIABLE ANNUITIES+
Franklin Valuemark*
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
</TABLE>
*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.
+FRANKLIN VALUEMARK AND FRANKLIN TEMPLETON VALUEMARK INCOME PLUS ARE ISSUED BY
ALLIANS LIFE INSURANCE COMPANY OF NORTH AMERICA OR BY ITS WHOLLY OWNED
SUBSIDIARY, PREFERRED LIFE INSURANCE COMPANY OF NEW YORK, AND DISTRIBUTED BY
NALAC FINANCIAL PLANS, LLC.
FGF 02/97
<PAGE> 28
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 a current prospectus of the
Templeton World Fund, which contains more complete information including charges
and expenses. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political, and other factors, as well as investment decisions by the investment
manager which will not always be profitable or wise. The Fund and Fund investors
are not protected from such losses by the Investment Manager. Therefore,
investors who cannot accept the risk of such losses should not invest in shares
of the Fund.
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.
[GRAPHIC]
TEMPLETON
WORLD
FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1997
[FRANKLIN TEMPLETON LOGO]
