SEMI ANNUAL REPORT
FEBRUARY 28, 1998
TEMPLETON WORLD FUND
[LOGO] FRANKLIN TEMPLETON
PAGE
[FRANKLIN TEMPLETON LOGO]
CELEBRATING OVER FIFTY YEARS
[PHOTOGRAPH OF JEFFREY A. EVERETT, CFA]
JEFFERY A. EVERETT, CFA
Portfolio Manager
Templeton World Fund
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and to expect that mixed in with the good
years can be some bad years. It's important to remember that all securities
markets move both up and down, as do mutual fund share prices. We appreciate
your past support and look forward to serving your investment needs in the years
ahead.
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 the
Templeton funds, which are managed by many of the investment professionals he
selected and trained.
PAGE
SHAREHOLDER LETTER
Your Fund's Objective: Templeton World Fund seeks long-term capital growth
through a flexible policy of investing in the equity and debt securities of
companies and governments of any nation.
Dear Shareholder:
We are pleased to bring you the semi-annual report of Templeton World Fund,
which covers the period ended February 28, 1998.
With major market indices plummeting virtually overnight in August and October,
the latter half of 1997 provided investors with a definition of volatility.
Fearing that the Asian currency crises could spread to other countries in the
same way that growth and economic expansion had proliferated throughout the
world in the months leading to the crises, many investors sold equity holdings,
sending global markets into a tailspin. Despite the uncertainty about potential
long-term effects of the crises and warnings that it may cause what Alan
Greenspan called "significant turbulence" in global economies, investor
confidence rebounded, and many world equity markets eclipsed
You may find a complete listing of the Fund's portfolio holdings beginning on
page 13 of this report.
CONTENTS
Shareholder Letter ................ 1
Performance Summary
Class I ........................ 6
Class II ....................... 8
Financial Highlights &
Statement of Investments .......... 11
Financial Statements .............. 21
Notes to Financial Statements ..... 24
[GRAPH] PYRAMID
PAGE
[BAR GRAPH] GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
2/28/98
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
European Stocks 28.8%
North American Stocks 24.7%
Asian Stocks 10.0%
Latin American Stocks 9.4%
Australian &
New Zealand Stocks 3.0%
Middle Eastern &
African Stocks 1.7%
Fixed-Income Securities 8.1%
Short-Term Investments &
Other Net Assets 14.3%
</TABLE>
TOP 10 INDUSTRIES
2/28/98
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
-------- ----------
<S> <C>
Telecommunications 7.6%
Utilities Electrical & Gas 7.0%
Multi-Industry 6.3%
Banking 6.2%
Insurance 5.9%
Automobiles 5.5%
Metals & Mining 4.8%
Energy Sources 4.5%
Real Estate 4.3%
Forest Products & Paper 3.8%
</TABLE>
previous highs by the end of the reporting period. Within this difficult
environment, the Fund's Class I shares provided a 6.82% cumulative total return
for the six months ended February 28, 1998.
Interestingly, the Asian crises developed at a time when we were having
increasing difficulty finding undervalued stocks in both developed and emerging
markets. In the U.S., a seven-year economic expansion had stretched valuations
to levels that we believed were unsustainable. And in Europe, although stock
valuations had not been stretched quite as high as those of the U.S., few
bargains were available there because the anticipated growth associated with the
formation of the European Monetary Union had contributed to rising prices of
many securities. At the same time, investor pessimism about Asia created
potential investment opportunities, demonstrating the importance of
diversification as an investment strategy.
In Europe, deregulation, the dismantling of complex conglomerate structures, and
the creation of cost-saving consolidations (particularly in the banking,
insurance, and pharmaceutical sectors) continued to lock in value for
shareholders and improve share prices during the reporting period. We were
enthusiastic about corporate restructurings, as companies instituted
cost-cutting programs and increased shareholder value in a variety of ways, and
Europe continued to be our most significant geographic weighting.
The U.S. stock market stumbled only briefly due to the Asian crisis, which
seemed to have eliminated investors' concerns about inflation. Inflows of cash
into equity mutual funds, which had slowed in the final months of 1997,
rebounded in early 1998, pushing equity
2
PAGE
markets to new highs. As a result, overvalued companies outnumbered undervalued
ones; however, we did find a few blue chip companies, like Eastman Kodak, whose
stock prices had lagged and which were beginning to restructure themselves in
order to fuel future earnings growth.
During the six months under review, we found an increasing number of undervalued
Asian stocks. As a result, stocks from Asian countries represented 10.0% of
total net assets by the end of the period, up from 8.3% at the beginning. We
took advantage of market declines to purchase additional shares of existing
holdings, such as Cheung Kong Holdings Ltd. and Hong Kong Telecommunications
Ltd., at what we believed to be bargain prices. We also initiated positions in
other companies whose stock prices, in many cases, were more than 50% below
their peaks prior to the financial crises.
During the reporting period, improving fundamentals in Latin American equity
markets contrasted with stock prices there. We believe some stocks were oversold
due to the Asian financial crises, and as a result we sought to take advantage
of cheap valuations throughout Latin America. In our view, political and
economic changes point to stronger, more stable economies, and if privatization
continues, competition and liquidity could improve in the region.
As developments from the Asian crises continue to unfold, we will remain
cautious but committed to uncovering values worldwide for the Fund's
shareholders. We will continue to utilize our diligent, bottom-up research style
in an effort to unearth companies with strong fundamentals whose share prices
have been unduly penalized
TOP 10 COUNTRIES
REPRESENTED IN THE FUND*
Equity Investments
(77.6% Of Total Net Assets)
2/28/98
<TABLE>
<CAPTION>
% OF TOTAL
COUNTRY NET ASSETS
------- ----------
<S> <C>
United States 23.0%
United Kingdom 9.8%
Hong Kong 7.5%
Brazil 4.9%
France 4.3%
Sweden 3.4%
Australia 2.7%
Argentina 2.6%
Netherlands 2.2%
Spain 2.0%
</TABLE>
*Does not include fixed-income securities and short-term obligations and other
net assets.
3
PAGE
TOP 10 EQUITY HOLDINGS
2/28/98
<TABLE>
<CAPTION>
COMPANY, INDUSTRY, % OF TOTAL
COUNTRY NET ASSETS
------- ----------
<S> <C>
Cheung Kong Holdings Ltd.,
Multi-Industry, Hong Kong 2.6%
Ford Motor Co.,
Automobiles, U.S. 1.8%
Morgan Stanley,
Dean Witter Discover & Co.,
Financial Services, U.S. 1.8%
National Westminster Bank Plc.,
Banking, United Kingdom 1.5%
British Energy Ltd.,
Utilities Electrical & Gas,
United Kingdom 1.4%
Telecom Italia SpA,
Telecommunications, Italy 1.4%
General Motors Corp.,
Automobiles, U.S. 1.3%
Hutchinson Whampoa Ltd.,
Multi-Industry, Hong Kong 1.3%
Entergy Corp.,
Utilities Electrical & Gas, U.S. 1.3%
Anglo American Platinum
Corp. Ltd., Metals & Mining,
South Africa 1.2%
</TABLE>
because investors have failed to distinguish them from their less stable peers.
If countries like Thailand, Korea, and the Philippines restructure and reform,
some companies in those areas may provide excellent long-term value. In Europe,
we are optimistic about the potential benefits that a single European currency
could offer to economies there. And in the U.S., we are confident that if
companies continue to restructure their businesses, investors will be rewarded
once restructuring is in place.
This discussion reflects the strategies we employed for the Fund during the six
months under review, and includes our opinions as of the close of the period.
Because economic and market conditions are constantly changing, our strategies
and our evaluations, conclusions and decisions regarding portfolio holdings may
change as new circumstances arise. All figures shown are as of February 28,
1998, and the Fund's holdings can be expected to change with market developments
and management of the portfolio. Although past performance of a specific
investment or sector cannot guarantee future performance, such information can
be useful in analyzing the securities we purchase or sell for the Fund.
There are, of course, special risks associated 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. Although
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
4
PAGE
1,268% in the last 15 years, but has suffered five quarterly declines of more
than 20% during that time.(1) These risks and other considerations are discussed
in the Fund's prospectus.
We thank you for your continued investment in Templeton World 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/ Jeffrey A. Everett
Jeffrey A. Everett, CFA
Portfolio Manager
Templeton World Fund
(1) Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended December 31, 1997.
5
PAGE
PERFORMANCE SUMMARY
CLASS I
Templeton World Fund - Class I produced a 6.82% cumulative total return for the
six-month period ended February 28, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains, if any, and does not include the initial sales charge. We have always
maintained a long-term perspective when managing the Fund, and encourage
shareholders to view their investments in a similar manner. As you can see from
the table on page 7, the Fund's Class I shares delivered a 284.36% cumulative
total return for the 10-year period ended February 28, 1998.
The Fund's share price, as measured by net asset value, decreased $1.76, from
$19.66 on August 31, 1997, to $17.90 on February 28, 1998. During this time,
shareholders received per-share distributions of 44.0 cents ($0.4400) in
dividend income and $2.60 in capital gains, of which $2.5050 represented
long-term gains and 9.5 cents ($0.0950) represented short-term gains.
Distributions will vary depending on income earned by the Fund and any profits
realized from the sale of securities in the portfolio, as well as the level of
the Fund's operating expenses.
Past performance is not predictive of future results.
6
PAGE
CLASS I
Periods ended 2/28/98
<TABLE>
<CAPTION>
Since
Inception
1-Year 5-Year 10-Year (1/17/78)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return (1) 21.60% 143.69% 284.36% 2,132.05%
Average Annual Total Return (2) 14.63% 18.09% 13.74% 16.35%
Value of $10,000 Investment (3) $11,463 $22,960 $36,224 $210,373
2/28/94 2/28/95 2/29/96 2/28/97 2/28/98
- --------------------------------------------------------------------------------
One-Year Total Return (4) 33.23% -0.15% 23.89% 21.60% 21.60%
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the indicated periods and does not include the sales charge.
(2) Average annual total return represents the average annual change in value of
an investment over the indicated periods and includes the current, maximum 5.75%
initial sales charge. Prior to July 1, 1992, Fund shares were offered at a
higher sales charge; thus actual returns would have been lower.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the indicated periods and include the current, maximum 5.75%
initial sales charge. Prior to July 1, 1992, Fund shares were offered at a
higher sales charge; thus actual returns would have been lower.
(4) One-year total return represents the change in value of an investment over
the one-year periods ended on the indicated dates and does not include the sales
charge.
On January 1, 1993, the Fund's Class I shares implemented a Rule 12b-1 plan,
which affects subsequent performance. All calculations assume reinvestment of
dividends and capital gains at net asset value.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social, 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 their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
7
PAGE
CLASS II
Templeton World Fund - Class II provided a 6.39% cumulative total return for the
six-month period ended February 28, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains, if any, and does not include sales charges.
The Fund's share price, as measured by net asset value, decreased $1.76, from
$19.39 on August 31, 1997, to $17.63 on February 28, 1998. During this time,
shareholders received per-share distributions of 35.04 cents ($0.3504) in
dividend income and $2.60 in capital gains, of which $2.5050 represented
long-term gains and 9.5 cents ($0.0950) represented short-term gains.
Distributions will vary depending on income earned by the Fund and any profits
realized from the sale of securities in the portfolio, as well as the level of
the Fund's operating expenses.
Past performance is not predictive of future results.
8
PAGE
CLASS II
Periods ended 2/28/98
<TABLE>
<CAPTION>
Since
Inception
1-Year (5/1/95)
- --------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return (1) 20.57% 68.91%
Average Annual Total Return (2) 18.40% 19.90%
Value of $10,000 Investment (3) $11,840 $16,717
</TABLE>
(1) Cumulative total return represents the change in value of an investment over
the indicated periods and does not include sales charges.
(2) Average annual total return represents the average annual change in value of
an investment over the indicated periods and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge applicable to shares
redeemed within 18 months of investment.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the indicated periods and include all sales charges.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, currency volatility, and the
economic, social, 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 their relatively small size and lesser
liquidity. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
9
PAGE
TEMPLETON WORLD FUND
CLASS I
If you had invested $10,000 in Templeton World Fund - Class I at inception, it
would be worth more than $210,000 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 reinvested
through February 28, 1998.*
[LINE GRAPH]
<TABLE>
<CAPTION>
DATE INITIAL INCOME INITIAL + CAP GAINS INITIAL + TOTAL VALUE
INVESTMENT DIVIDENDS CAP GAINS
<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
12/31/97 $31,706 $41,942 $73,648 $124,031 $155,737 $197,679
2/28/98 $33,742 $44,635 $78,377 $131,995 $165,737 $210,373
</TABLE>
*Cumulative total return represents the change in value of an investment over
the indicated period. All figures have been restated to reflect the maximum
5.75% initial sales charge; thus actual total return for purchasers of shares
during the periods shown may differ. Prior to July 1, 1992, these shares were
offered at a higher initial sales charge. On January 1, 1993, the Fund's Class I
shares implemented a plan of distribution under Rule 12b-1, which will affect
subsequent performance.
All figures assume reinvestment of dividends and capital gains at net asset
value. Investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. This was
a period of generally rising securities prices.
The historical data shown above pertain only to Class I shares of the Fund. The
Fund offers another share class, subject to different fees and expenses, which
will affect performance. Please see the prospectus for more details.
Past performance is not predictive of future results.
10
PAGE
TEMPLETON WORLD FUND
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1998 ------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE - CLASS I
(For a share outstanding throughout
the period)
Net asset value, beginning of
period............................. $19.66 $16.21 $16.76 $17.06 $15.94 $14.42
---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income............. .14 .45 .41 .33 .26 .30
Net realized and unrealized
gain............................ 1.14 4.47 1.29 1.11 2.50 2.81
---------------------------------------------------------------------------------------
Total from investment operations... 1.28 4.92 1.70 1.44 2.76 3.11
---------------------------------------------------------------------------------------
Less distributions from:
Net investment income............. (.44) (.43) (.37) (.28) (.26) (.38)
Net realized gains................ (2.60) (1.04) (1.88) (1.46) (1.38) (1.21)
---------------------------------------------------------------------------------------
Total distributions................ (3.04) (1.47) (2.25) (1.74) (1.64) (1.59)
---------------------------------------------------------------------------------------
Net asset value, end of period..... $17.90 $19.66 $16.21 $16.76 $17.06 $15.94
=======================================================================================
Total Return*...................... 6.82% 32.70% 11.73% 9.87% 18.87% 24.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's).......................... $9,254,452 $8,649,994 $6,483,146 $5,868,967 $5,421,691 $4,621,124
Ratios to average net assets:
Expenses.......................... 1.02%** 1.03% 1.03% 1.05% 1.04% 1.02%
Net investment income............. 1.72%** 2.58% 2.66% 2.18% 1.67% 2.13%
Portfolio turnover rate............ 22.73% 39.16% 22.05% 34.05% 30.77% 23.86%
Average commission rate paid***.... $.0036 $.0010 $.0130 -- -- --
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year
1996 disclosure of average commission rate was not required.
11
PAGE
TEMPLETON WORLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1998 -----------------------------------
(UNAUDITED) 1997 1996 1995+
----------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE - CLASS II
(For a share outstanding throughout the period)
Net asset value, beginning of period...................... $19.39 $16.04 $16.71 $15.36
----------------------------------------------------------
Income from investment operations:
Net investment income.................................... .12 .34 .45 .03
Net realized and unrealized gain......................... 1.07 4.39 1.11 1.32
----------------------------------------------------------
Total from investment operations.......................... 1.19 4.73 1.56 1.35
----------------------------------------------------------
Less distributions from:
Net investment income.................................... (.35) (.34) (.35) --
Net realized gains....................................... (2.60) (1.04) (1.88) --
----------------------------------------------------------
Total distributions....................................... (2.95) (1.38) (2.23) --
----------------------------------------------------------
Net asset value, end of period............................ $17.63 $19.39 $16.04 $16.71
==========================================================
Total Return*............................................. 6.39% 31.61% 10.88% 8.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)......................... $312,496 $207,679 $58,619 $7,623
Ratios to average net assets:
Expenses................................................. 1.80%** 1.83% 1.84% 1.82%**
Net investment income.................................... .95%** 1.92% 2.14% 1.37%**
Portfolio turnover rate................................... 22.73% 39.16% 22.05% 34.05%
Average commission rate paid***........................... $.0036 $.0010 $.0130 --
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year
1996 disclosure of average commission rate was not required.
+For the period May 1, 1995 (effective date) to August 31, 1995.
See Notes to Financial Statements.
12
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 72.1%
AEROSPACE & MILITARY TECHNOLOGY .1%
Raytheon Co., A............................................. United States 114,786 $ 6,657,588
--------------
AUTOMOBILES 5.1%
Autoliv Inc. ............................................... Sweden 2,231,900 68,225,236
Ford Motor Co. ............................................. United States 3,063,400 173,273,563
General Motors Corp. ....................................... United States 1,800,000 124,087,500
Volkswagen AG............................................... Germany 58,960 38,760,606
Volvo AB, B................................................. Sweden 3,241,000 87,726,011
--------------
492,072,916
--------------
BANKING 5.4%
Banco Popular Espanol SA.................................... Spain 527,376 46,892,350
Banque Nationale de Paris BNP............................... France 1,241,680 75,135,779
Credit Suisse Group, reg. .................................. Switzerland 11,530 2,083,498
Deutsche Bank AG............................................ Germany 869,800 59,746,454
HSBC Holdings Plc. ......................................... Hong Kong 1,956,026 56,590,226
National Australia Cap Sec Plc. ............................ Australia 885,353 25,121,891
National Bank of Canada..................................... Canada 2,982,000 49,656,350
National Westminster Bank Plc. ............................. United Kingdom 7,756,226 143,054,098
Shinhan Bank Co. Ltd. ...................................... South Korea 807,667 3,842,973
Svenska Handelsbanken, A.................................... Sweden 1,250,000 53,525,661
--------------
515,649,280
--------------
BROADCASTING & PUBLISHING .3%
*Scholastic Corp. .......................................... United States 302,900 12,002,413
South China Morning Post Ltd. .............................. Hong Kong 19,038,700 13,770,322
--------------
25,772,735
--------------
BUILDING MATERIALS & COMPONENTS .4%
Gujarat Ambuja Cements Ltd.................................. India 2,224,500 14,274,111
Gujarat Ambuja Cements Ltd., GDR............................ India 647,000 4,723,100
Owens Corning............................................... United States 275,000 8,490,625
Pioneer International Ltd. ................................. Australia 3,020,756 8,715,218
Siam Cement Public Co. Ltd., fgn. .......................... Thailand 364,600 5,183,164
--------------
41,386,218
--------------
BUSINESS & PUBLIC SERVICES .8%
Columbia HCA Healthcare Corp. .............................. United States 2,094,700 56,818,738
*Humana Inc. ............................................... United States 739,600 18,813,575
Wheelabrator Technologies Inc. ............................. United States 209,500 3,417,469
--------------
79,049,782
--------------
CHEMICALS 1.0%
*Beijing Yanhua Petrochemical Company Ltd., ADR............. China 390,960 3,616,380
DSM NV...................................................... Netherlands 454,500 45,575,611
European Vinyls Corporation Evc International NV............ Netherlands 65,961 1,219,618
Imperial Chemical Industries Plc. .......................... United Kingdom 1,442,000 26,275,199
</TABLE>
13
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
CHEMICALS (CONT.)
Kemira OY, 144A............................................. Finland 11,000 $ 109,885
Shanghai Petrochemical Co. Ltd., H.......................... China 103,092,000 17,043,301
--------------
93,839,994
--------------
DATA PROCESSING & REPRODUCTION 3.0%
*3com Corp. ................................................ United States 2,560,700 91,545,025
*Bay Networks Inc. ......................................... United States 2,573,663 87,182,834
International Business Machines Corp. ...................... United States 300,000 31,331,250
*Intuit Inc. ............................................... United States 354,600 16,488,900
*Quantum Corp. ............................................. United States 1,024,560 25,742,070
Rank Group Plc. ............................................ United Kingdom 5,522,116 30,386,285
--------------
282,676,364
--------------
ELECTRICAL & ELECTRONICS 1.3%
ABB AB, A................................................... Sweden 2,048,000 25,732,825
Ametek Inc. ................................................ United States 271,700 7,301,938
General Electric Co. Plc. .................................. United Kingdom 6,661,300 43,733,369
Philips Electronics NV...................................... Netherlands 625,460 48,645,359
--------------
125,413,491
--------------
ENERGY EQUIPMENT & SERVICES .1%
Sun Co. Inc. ............................................... United States 163,000 6,509,812
--------------
ENERGY SOURCES 3.7%
Norsk Hydro AS.............................................. Norway 345,333 15,085,417
Petron Corporation.......................................... Philippines 49,928,000 7,406,039
Rao Gazprom, ADR, Reg S..................................... Russia 689,251 14,198,571
Repsol SA................................................... Spain 900,000 40,158,710
Societe Elf Aquitane SA..................................... France 809,000 92,187,289
Transportadora de Gas del Sur SA, ADR, B.................... Argentina 1,400,000 16,450,000
Valero Energy Corp., new.................................... United States 1,899,550 67,434,025
YPF Sociedad Anonima........................................ Argentina 1,400,000 44,542,717
YPF Sociedad Anonima, ADR................................... Argentina 1,822,100 57,623,913
--------------
355,086,681
--------------
FINANCIAL SERVICES 3.6%
Axa-UAP..................................................... France 920,663 89,167,230
Fannie Mae.................................................. United States 729,600 46,577,600
Merrill Lynch & Co. Inc. ................................... United States 513,900 36,775,969
Morgan Stanley, Dean Witter Discover & Co. ................. United States 2,450,972 170,802,111
--------------
343,322,910
--------------
FOOD & HOUSEHOLD PRODUCTS 2.5%
Archer-Daniels Midland Co................................... United States 2,103,407 47,195,195
+*Boston Chicken Inc. ...................................... United States 5,698,900 39,536,119
C P Pokphand Co. Ltd. ...................................... Hong Kong 253,000 49,015
Grupo Embotellador de Mexico SA de CV, GDR.................. Mexico 1,684,000 21,471,000
</TABLE>
14
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FOOD & HOUSEHOLD PRODUCTS (CONT.)
Hillsdown Holdings Plc. .................................... United Kingdom 15,923,076 $ 41,710,914
IBP Inc. ................................................... United States 2,500,000 55,781,250
McBride Plc. ............................................... United Kingdom 2,561,600 8,060,654
Panamerican Beverages Inc., A............................... Mexico 640,400 23,334,575
Pepsi-Gemex SA de CV........................................ Mexico 562,500 1,207,549
--------------
238,346,271
--------------
FOREST PRODUCTS & PAPER 3.8%
Aracruz Celulose SA, ADR.................................... Brazil 1,640,000 22,447,500
Assidomaen AB............................................... Sweden 800,000 19,703,694
Carter Holt Harvey Ltd. .................................... New Zealand 2,686,400 4,099,264
Enso OY, R.................................................. Finland 2,607,500 23,585,070
Fletcher Challenge Ltd. Forestry Division, Aus. ............ New Zealand 313,470 236,207
Fletcher Challenge Ltd. Forestry Division, N.Z. ............ New Zealand 12,481,021 9,267,200
Fletcher Challenge Paper Ltd. .............................. New Zealand 9,189,576 12,357,141
Georgia-Pacific Corp. ...................................... United States 915,200 53,710,800
Georgia-Pacific Timber Group................................ United States 915,200 20,878,000
Metsa Serla OY, B........................................... Finland 2,552,500 22,809,427
Mo Och Domsjoe AB, B........................................ Sweden 600,000 17,478,277
Norske Skogindustrier AS, A................................. Norway 430,170 13,114,247
PT Tjiwi Kimia TBK.......................................... Indonesia 39,745,913 7,438,481
*PT Tjiwi Kimia TBK, wts. .................................. Indonesia 5,370,265 390,019
St. Joe Paper Corp. ........................................ United States 1,126,200 38,431,575
Stora Kopparbergs Bergslags AB, A........................... Sweden 248,000 3,612,177
Stora Kopparbergs Bergslags AB, B........................... Sweden 1,652,000 23,855,223
Svenska Cellulosa AB, B..................................... Sweden 719,600 16,373,970
UPM-Kymmene Corp. .......................................... Finland 2,242,290 58,238,654
--------------
368,026,926
--------------
HEALTH & PERSONAL CARE .7%
China Pharmaceutical Enterprise & Invt. Corp. Ltd. ......... China 578,000 78,386
Pharmacia & Upjohn.......................................... United States 1,682,700 66,571,819
--------------
66,650,205
--------------
INDUSTRIAL COMPONENTS 1.3%
BTR Plc. ................................................... United Kingdom 36,007,800 95,361,525
Goodyear Tire & Rubber Co. ................................. United States 302,600 20,917,225
*Granges AB................................................. Sweden 284,800 4,913,721
Sandvik AB, A............................................... Sweden 121,000 3,418,891
Yamato Kogyo Co. Ltd. ...................................... Japan 272,000 2,200,159
--------------
126,811,521
--------------
INSURANCE 5.9%
Ace Ltd. ................................................... Bermuda 320,800 31,719,100
American Bankers Insurance Group Inc. ...................... United States 1,060,000 59,625,000
American International Group Inc. .......................... United States 562,500 67,605,469
ING Groep NV................................................ Netherlands 1,052,206 55,740,900
</TABLE>
15
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
INSURANCE (CONT.)
National Mutual Asia Ltd. .................................. Hong Kong 8,818,000 $ 7,858,469
Partnerre Ltd. ............................................. Bermuda 875,800 42,695,250
SCOR SA..................................................... France 1,930,533 99,835,999
Travelers Inc. ............................................. United States 699,152 38,977,724
UNUM Corp. ................................................. United States 9,800 504,088
W R Berkley Corp. .......................................... United States 1,078,500 49,206,563
Zuerich Versicherung, new................................... Switzerland 198,480 108,274,122
--------------
562,042,684
--------------
MACHINERY & ENGINEERING
New Holland NV.............................................. Netherlands 21,500 532,125
--------------
MERCHANDISING 2.7%
*Cifra SA de CV............................................. Mexico 20,636,922 39,896,355
Coles Myer Ltd., A.......................................... Australia 6,969,068 36,049,840
Dairy Farm International Holdings Ltd. ..................... Hong Kong 33,014,409 39,617,291
David Jones Ltd. ........................................... Australia 13,322,194 14,922,217
*Gucci Group NV............................................. Netherlands 1,409,700 59,119,294
LI & Fung Ltd. ............................................. Hong Kong 5,248,000 7,930,461
Safeway Plc. ............................................... United Kingdom 4,360,133 25,859,960
W.H. Smith Group............................................ United Kingdom 4,207,600 34,140,219
--------------
257,535,637
--------------
METALS & MINING 4.5%
Alcan Aluminum Ltd. ........................................ Canada 1,111,750 34,408,992
Anglo American Platinum Corp. Ltd. ......................... South Africa 8,003,172 114,018,680
Arbed SA.................................................... Belgium 131,200 15,493,027
British Steel Plc. ......................................... United Kingdom 25,213,500 60,647,320
Companhia Siderurgica Nacional CSN, ADR..................... Brazil 691,280 17,627,640
Elkem AS.................................................... Norway 281,400 3,602,360
Pechiney SA, A.............................................. France 587,123 26,066,466
Pohang Iron & Steel Co. Ltd. ............................... South Korea 461,745 28,945,940
Reynolds Metals Co. ........................................ United States 740,752 46,158,109
RGC Ltd. ................................................... Australia 1,385,581 1,881,203
*Titanium Metals............................................ United States 611,600 18,424,450
*Union Miniere NPV.......................................... Belgium 350,000 25,901,683
Vale do Rio Doce, ADR....................................... Brazil 1,566,800 34,104,570
--------------
427,280,440
--------------
MISCELLANEOUS MATERIALS & COMMODITIES .6%
De Beers Centenary Linked Units, Reg........................ South Africa 2,654,600 52,646,120
--------------
MULTI-INDUSTRY 6.3%
Alfa SA de CV, A............................................ Mexico 83,200 473,365
Broken Hill Proprietary Co. Ltd. ........................... Australia 9,127,600 89,845,901
Cheung Kong Holdings Ltd. .................................. Hong Kong 35,617,000 249,560,510
*Elementis Plc. ............................................ United Kingdom 10,342,027 22,064,854
First Pacific Co. .......................................... Hong Kong 18,265,000 9,318,276
</TABLE>
16
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
Hutchison Whampoa Ltd. ..................................... Hong Kong 17,497,000 $ 123,727,575
Jardine Matheson Holdings Ltd. ............................. Hong Kong 1,600,834 7,491,903
Jardine Strategic Holdings Ltd. ............................ Hong Kong 16,462,602 46,918,416
Metro Pacific Corp. MDI..................................... Philippines 1,558,760 65,054
Pilkington Plc. ............................................ United Kingdom 9,574,519 18,140,131
Swire Pacific Ltd., A....................................... Hong Kong 1,358,100 8,174,034
Swire Pacific Ltd., B....................................... Hong Kong 27,373,500 27,576,790
--------------
603,356,809
--------------
REAL ESTATE 4.3%
American Health Properties Inc. ............................ United States 443,400 12,110,363
Carramerica Realty Corp. ................................... United States 201,900 6,006,525
Crescent Real Estate Equities Co. .......................... United States 1,928,800 65,699,750
Federal Realty Investment Trust............................. United States 300,000 7,425,000
General Growth Properties................................... United States 900,000 32,850,000
Highwood Properties Inc., REIT.............................. United States 1,222,900 42,572,206
Inversiones y Representacion SA............................. Argentina 6,699,668 23,259,710
Inversiones y Representacion SA, GDR........................ Argentina 620,152 21,627,801
IRT Property Co. ........................................... United States 537,600 6,249,600
Meditrust Companies Inc. ................................... United States 136,021 4,182,646
National Health Investors Inc. ............................. United States 1,080,000 44,280,000
Nationwide Health Properties Inc. .......................... United States 400,000 10,575,000
New World Development Co. Ltd. ............................. Hong Kong 13,599,000 50,145,489
Post Properties Inc. ....................................... United States 6,600 257,400
Rouse Co. .................................................. United States 1,120,000 37,240,000
Summit Properties Inc., REIT................................ United States 867,900 17,574,975
Union du Credit Bail Immobilier Unibail..................... France 300,436 32,802,681
--------------
414,859,146
--------------
RECREATION & OTHER CONSUMER GOODS 1.0%
Eastman Kodak Co............................................ United States 409,000 26,840,625
Nintendo Co. Ltd. .......................................... Japan 693,400 63,786,201
--------------
90,626,826
--------------
TELECOMMUNICATIONS 6.2%
Bell Atlantic Corp. ........................................ United States 230,100 20,651,475
British Telecommunications Plc. ............................ United Kingdom 6,312,610 63,648,181
*Digital Telecommunications Philippines Inc. ............... Philippines 25,360,000 1,466,449
Hong Kong Telecommunications Ltd. .......................... Hong Kong 25,919,438 54,567,238
Nokia AB, A................................................. Finland 245,500 24,577,869
PT Indosat TBK, ADR......................................... Indonesia 183,200 2,748,000
Telecom Argentina Stet-France SA, ADR....................... Argentina 2,238,800 82,135,975
Telecom Italia Mobile SpA, di Risp.......................... Italy 1,761,480 5,220,039
Telecom Italia SpA.......................................... Italy 3,278,650 22,335,797
Telecom Italia SpA, di Risp................................. Italy 22,091,250 107,004,975
Telecomunicacoes Brasileiras SA (Telebras).................. Brazil 147,744,000 14,640,402
Telecomunicacoes de Sao Paulo SA (Telesp)................... Brazil 29,630,000 6,148,064
</TABLE>
17
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TELECOMMUNICATIONS (CONT.)
Telefonica de Espana SA..................................... Spain 1,624,680 $ 55,903,195
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 587,151 29,761,216
U.S. West Communications Group.............................. United States 2,000,000 104,125,000
Videsh Sanchar Nigam Ltd., GDR, 144A........................ India 17,100 224,438
--------------
595,158,313
--------------
TEXTILES & APPAREL .3%
Dawson International Plc. .................................. United Kingdom 620,777 526,706
*Fruit of the Loom Inc., A.................................. United States 842,600 27,068,525
Inner Mongolia Erdos Cashmere Products Co. Ltd., B.......... China 3,780,200 1,474,278
Yizheng Chemical Fibre Co. Ltd., H.......................... China 16,536,000 3,075,472
--------------
32,144,981
--------------
TRANSPORTATION 1.1%
Air New Zealand Ltd., B..................................... New Zealand 3,980,000 5,933,596
IMC Holdings Ltd. .......................................... Hong Kong 5,441,400 1,265,033
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 6,292,824 80,865,971
Stolt Nielsen SA............................................ Norway 521,500 9,452,188
Stolt Nielsen SA, ADR....................................... Norway 260,750 4,726,094
--------------
102,242,882
--------------
UTILITIES ELECTRICAL & GAS 6.1%
BG Plc. .................................................... United Kingdom 10,898,823 54,630,579
British Energy Ltd. ........................................ United Kingdom 6,105,300 44,911,141
British Energy Ltd., 144A................................... United Kingdom 12,451,700 91,595,836
*Centrais Eletricas Brasileiras SA (Eletrobras), ADR........ Brazil 1,154,800 25,954,006
*Centrica Plc. ............................................. United Kingdom 12,352,000 22,079,673
Cia Energetica de Minas Gerais, ADR......................... Brazil 7,000 300,403
Cia Sevillana de Electricidad SA............................ Spain 1,531,584 14,744,011
Entergy Corp. .............................................. United States 4,247,300 122,906,244
Guangdong Electric Power Development Co Ltd., B, 144A....... China 29,700 17,952
Hong Kong Electric Holdings Ltd. ........................... Hong Kong 2,636,500 9,364,385
Iberdrola SA................................................ Spain 2,461,317 35,621,376
Korea Electric Power Corp. ................................. South Korea 4,252,040 56,763,302
*Mosenergo, ADR............................................. Russia 1,122,159 44,605,820
National Grid Group Plc. ................................... United Kingdom 5,020,277 28,369,220
Shandong Huaneng Power Development Co. Ltd., ADR............ China 1,000,000 8,437,500
VEBA AG..................................................... Germany 400,000 26,990,820
--------------
587,292,268
--------------
TOTAL COMMON STOCKS (COST $5,193,627,728)................... 6,892,990,925
--------------
PREFERRED STOCKS 5.5%
Banco Bradesco SA, pfd. .................................... Brazil 8,974,931,227 76,237,083
Centrais Eletricas Brasileiras SA (Eletrobras), pfd., ADR... Brazil 3,430,645 80,442,502
Cia Vale do Rio Doce, pfd. ................................. Brazil 1,552,700 33,797,655
Coteminas Cia Tecidos Norte de Minas (CTNM), pfd. .......... Brazil 93,090,200 23,887,234
*Empresa Nacional de Comercio Redito Participacoe, pfd. .... Brazil 28,832,000 76,535
</TABLE>
18
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Fiat SpA, pfd. ............................................. Italy 17,750,700 $ 34,658,280
Nacional Financiera SA, conv., pfd., 11.25%, 5/15/98........ Mexico 1,300,000 64,593,750
News Corp. Ltd., pfd. ...................................... Australia 14,666,631 80,149,333
Petrobras Distribuidora SA, pfd. ........................... Brazil 1,772,395,300 31,052,008
Petroleo Brasileiro SA (Petrobras), pfd. ................... Brazil 179,486,000 40,656,918
Telecomunicacoes Brasileiras SA (Telebras), pfd. ........... Brazil 533,400,000 65,132,239
Telecomunicacoes de Sao Paulo SA (Telesp), pfd. ............ Brazil 116,464 32,255
--------------
TOTAL PREFERRED STOCKS (COST $442,488,834).................. 530,715,792
--------------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
BONDS 8.1%
Alactel Alsthom SA, conv., 6.50%, 1/01/00................... France 168,133,400FRF 34,721,279
Alfa SA de CV, conv., 8.00%, 9/15/00........................ Mexico 6,000,000 7,552,500
Asia Pulp & Paper Co. Ltd., zero coupon, 11/18/12........... Indonesia 96,650,000 21,625,438
Axa-UAP, conv., 4.50%, 1/01/99.............................. France 130,680,000FRF 47,432,987
Bilboa Vizcaya Investment BV, conv., 3.50%, 7/12/06......... Spain 8,765,000 23,753,150
Government of Italy, 5.00%, 6/28/01......................... Italy 123,095,000 198,029,081
Metro Pacific Capital:
conv., 2.50%, 4/11/03..................................... Philippines 16,500,000 12,127,500
144A, 2.50%, 4/11/03...................................... Philippines 7,425,000 5,457,375
National Grid Group Plc., 4.25%, 2/17/08.................... United Kingdom 16,000,000GBP 26,944,282
Robinson Depart. St. Pub Co. Ltd., conv., 3.25%, 7/02/00.... Thailand 3,500,000 1,662,500
Sandoz Capital BVI Ltd., conv., 144A, 2.00%, 10/06/02....... Switzerland 7,930,000 13,639,600
Sony Corp., conv., 1.40%, 3/31/05........................... Japan 7,300,000,000JPY 83,941,317
U.S. Treasury Bond, 6.375%, 8/15/27......................... United States 125,000,000 132,500,125
U.S. Treasury Notes:
6.125%, 5/15/98........................................... United States 75,000,000 75,117,225
6.125%, 8/15/07........................................... United States 75,000,000 77,343,825
Volkswagen Intl Finance, conv., 144A, 3.00%, 1/24/02........ Netherlands 9,510,000 12,187,350
--------------
TOTAL BONDS (COST $687,390,295)............................. 774,035,534
--------------
SHORT TERM INVESTMENTS 12.4%
Federal Farm Credit Banks, 5.35% to 5.62%,
with maturities to 6/01/98................................ United States 376,230,000 376,161,183
Federal Home Loan Banks, 5.315% to 5.32%,
with maturities to 4/13/98................................ United States 123,500,000 122,759,450
Federal Home Loan Mortgage Corporation, 5.31% to 5.41%,
with maturities to 3/31/98................................ United States 347,374,000 346,512,377
Federal National Mortgage Association, 5.50% to 6.07%,
with maturities to 4/23/98................................ United States 118,463,000 118,275,578
U.S. Treasury Bill, 5.055%, 4/30/98......................... United States 70,000,000 69,403,460
U.S. Treasury Notes, 6.00% to 6.25%,
with maturities to 6/30/98................................ United States 150,000,000 150,328,200
--------------
TOTAL SHORT TERM INVESTMENTS (COST $1,113,757,179).......... 1,183,440,248
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST
$7,437,264,036)........................................... 9,381,182,499
--------------
</TABLE>
19
PAGE
TEMPLETON WORLD FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
------------ -------- -------------
<S> <C> <C> <C>
a REPURCHASE AGREEMENTS 1.9%
Barclays de Zoete Wedd Sec Inc., 5.625%, 3/02/98 (Maturity
Value $20,009,375) Collateralized by U.S. Treasury Notes
and Bonds................................................. United States $ 20,000,000 $ 20,000,000
Deutsche Bank AG, 5.65%, 3/02/98 (Maturity Value
$80,037,667) Collateralized by U.S. Treasury Notes and
Bonds..................................................... United States 80,000,000 80,000,000
Swiss Bank Corp., 5.55%, 3/02/98 (Maturity Value
$65,699,392) Collateralized by U.S. Treasury Notes and
Bonds..................................................... United States 65,669,000 65,669,000
UBS Securities Inc., 5.62%, 3/02/98 (Maturity Value
$16,007,493) Collateralized by U.S. Treasury Notes and
Bonds..................................................... United States 16,000,000 16,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $181,669,000)............. 181,669,000
--------------
TOTAL INVESTMENTS (COST $7,618,933,036) 100%................ 9,562,851,499
OTHER ASSETS, LESS LIABILITIES.............................. 4,096,621
--------------
TOTAL NET ASSETS 100.0%..................................... $9,566,948,120
==============
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
FRF -- French Franc
GBP -- British Pound
JPY -- Japanese Yen
</TABLE>
*Non-income producing.
**Securities traded in U.S. dollars unless otherwise indicated.
a At February 28, 1998, all repurchase agreements held by the Fund had been
entered into on that date.
+The Investment Company Act of 1940 defines "affiliated companies" as
investments in portfolio companies in which the Fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" at February
28, 1998 were $39,536,119.
See Notes to Financial Statements.
20
PAGE
TEMPLETON WORLD FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$7,437,264,036)........................................... $9,381,182,499
Repurchase agreements, at value and cost................... 181,669,000
Cash....................................................... 1,958,861
Receivables:
Investment securities sold................................ 19,091,626
Capital shares sold....................................... 30,461,492
Dividends and interest.................................... 27,641,825
--------------
Total assets.......................................... 9,642,005,303
--------------
Liabilities:
Payables:
Investment securities purchased........................... 54,404,050
Capital shares redeemed................................... 10,121,890
To affiliates............................................. 6,982,802
Other liabilities.......................................... 3,548,441
--------------
Total liabilities..................................... 75,057,183
--------------
Net assets, at value........................................ $9,566,948,120
==============
Net assets consist of:
Undistributed net investment income........................ $ 32,099,657
Net unrealized appreciation................................ 1,943,918,463
Accumulated net realized gain.............................. 373,700,558
Capital shares............................................. 7,217,229,442
--------------
Net assets, at value........................................ $9,566,948,120
==============
CLASS I:
Net asset value per share ($9,254,451,634 / 516,949,627
shares outstanding)....................................... $17.90
==============
Maximum offering price per share ($17.90 / 94.25%)......... $18.99
==============
CLASS II:
Net asset value per share ($312,496,486 / 17,727,547 shares
outstanding)*............................................. $17.63
==============
Maximum offering price per share ($17.63 / 99.0%).......... $17.81
==============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
21
PAGE
TEMPLETON WORLD FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $4,547,990)
Dividends.................................................. $ 70,095,363
Interest................................................... 52,836,879
------------
Total investment income............................... $122,932,242
Expenses:
Management fees (Note 3)................................... 27,457,938
Administrative fees (Note 3)............................... 3,465,790
Distribution fees (Note 3)
Class I.............................................. 9,433,353
Class II............................................. 1,282,940
Transfer agent fees (Note 3)............................... 2,969,679
Custodian fees............................................. 1,279,668
Reports to shareholders.................................... 525,000
Registration and filing fees............................... 295,000
Professional fees (Note 3)................................. 24,000
Directors' fees and expenses............................... 17,000
Other...................................................... 31,003
------------
Total expenses........................................ 46,781,371
------------
Net investment income........................... 76,150,871
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 612,314,825
Foreign currency transactions............................. (1,271,093)
------------
Net realized gain...................................... 611,043,732
Net unrealized depreciation on investments............. (81,888,110)
------------
Net realized and unrealized gain............................ 529,155,622
------------
Net increase in net assets resulting from operations........ $605,306,493
============
</TABLE>
See Notes to Financial Statements.
22
PAGE
TEMPLETON WORLD FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1998 YEAR ENDED
(UNAUDITED) AUGUST 31, 1997
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 76,150,871 $ 197,482,420
Net realized gain from investments and foreign currency
transactions............................................ 611,043,732 1,070,814,751
Net unrealized appreciation (depreciation) on
investments.............................................. (81,888,110) 862,081,294
---------------------------------------
Net increase in net assets resulting from operations.... 605,306,493 2,130,378,465
Distributions to shareholders from:
Net investment income:
Class I.................................................. (200,177,241) (173,704,228)
Class II................................................. (4,458,594) (1,366,380)
Net realized gains:
Class I.................................................. (1,180,204,501) (420,453,674)
Class II................................................. (33,489,835) (4,340,189)
Capital share transactions (Note 2):
Class I.................................................. 1,396,641,317 658,499,802
Class II................................................. 125,657,661 126,894,283
---------------------------------------
Net increase in net assets.............................. 709,275,300 2,315,908,079
Net assets:
Beginning of period........................................ 8,857,672,820 6,541,764,741
---------------------------------------
End of period.............................................. $9,566,948,120 $8,857,672,820
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 32,099,657 $ 160,584,621
=======================================
</TABLE>
See Notes to Financial Statements.
23
PAGE
TEMPLETON WORLD FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton World Fund (the Fund) is a separate, diversified series of Templeton
Funds, Inc. (the Company) which is an open-end 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. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
portfolio securities and income items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. When the Fund purchases or sells foreign securities it will customarily
enter into a foreign exchange contract to minimize foreign exchange risk from
the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as
24
PAGE
TEMPLETON WORLD FUND
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS (CONT.)
information is available to the Fund. Interest income and estimated expenses are
accrued daily. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Common expenses incurred by the Company are allocated among the funds based on
the ratio of net assets of each fund to the combined net assets. Other expenses
are charged to each fund on a specific identification basis.
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.
2. CAPITAL STOCK
The Fund offers two classes of shares: Class I and Class II shares. The shares
differ by their initial sales load, distribution fees, voting rights on matters
affecting a single class and the exchange privilege of each class.
At February 28, 1998, there were 3.7 billion shares of capital stock authorized
($1.00 par value) of which 1.2 billion shares 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>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I SHARES:
Shares sold........................................... 55,842,478 $ 996,036,614 50,518,371 $ 908,100,346
Shares issued on reinvestment of distributions........ 69,173,279 1,243,612,255 33,921,940 537,536,364
Shares redeemed....................................... (48,011,532) (843,007,552) (44,339,505) (787,136,908)
------------------------------------------------------------------
Net increase.......................................... 77,004,225 $1,396,641,317 40,100,806 $ 658,499,802
==================================================================
</TABLE>
25
PAGE
TEMPLETON WORLD FUND
Notes to Financial Statements (unaudited) (continued)
2. CAPITAL STOCK (CONT.)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS II SHARES:
Shares sold................................................ 6,751,289 $120,063,647 7,233,238 $130,727,138
Shares issued on reinvestment of distributions............. 1,795,918 31,790,420 301,031 4,729,632
Shares redeemed............................................ (1,530,330) (26,196,406) (479,002) (8,562,487)
------------------------------------------------------------
Net increase............................................... 7,016,877 $125,657,661 7,055,267 $126,894,283
============================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Global
Advisors Ltd. (TGAL), Franklin Templeton Services, Inc. (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors), and Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund's investment manager,
administrative manager, principal underwriter, and transfer agent, respectively.
The Fund pays an investment management fee to TGAL based on the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.75% First $200 million
0.675% Over $200 million, up to and including $1.3 billion
0.60% Over $1.3 billion
</TABLE>
The Fund pays its allocated share of an administrative fee to FT Services based
on the Company's aggregate average daily net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $500 million
0.10% Next $500 million
0.075% Over $1.2 billion
</TABLE>
The Fund reimburses Distributors up to 0.25% and 1.00% per year of the average
daily net assets of Class I and Class II shares, respectively, for costs
incurred in marketing the Fund's Class I and Class II shares. Under the Class I
distribution plan, costs and expenses exceeding the maximum may be reimbursed in
subsequent periods. At February 28, 1998, there were no unreimbursed costs.
Distributors received net commissions from sales of Fund shares, and received
contingent deferred sales charges for the period of $1,519,734 and $68,310,
respectively.
Included in professional fees are legal fees of $7,455 that were paid to a law
firm in which a partner is an officer of the Fund.
26
PAGE
TEMPLETON WORLD FUND
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At February 28, 1998, the net unrealized appreciation
based on the cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $2,336,447,636
Unrealized depreciation..................................... (392,529,173)
--------------
Net unrealized appreciation................................. $1,943,918,463
==============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1998 aggregated $2,059,956,741 and $1,743,822,793,
respectively.
27
PAGE
This page intentionally left blank
PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. To ensure the highest quality of service, telephone calls
to or from our service departments may be monitored, recorded and accessed.
These calls can be determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health Care Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global
Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton Global
Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High Income
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund*
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
For Corporations
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money 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***
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*These funds are now closed to new accounts, with the exception of retirement
accounts.
**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
Allianz 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.
PAGE
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
SHAREHOLDER SERVICES AGENT
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current prospectus for the
Templeton World Fund, which contains more complete information, including risk
factors, charges and expenses. Like any investment in securities, 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 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.
102 S98 04/98 [LOGO] Printed on recycled paper
