SEMI ANNUAL REPORT
TEMPLETON FOREIGN FUND
February 28, 1999
[LOGO FRANKLIN(R)TEMPLETON(R)]
PAGE
[LOGO CELEBRATING OVER 50 YEARS]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and 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.
[PHOTO OF MARK HOLOWESKO APPEARS HERE]
MARK G. HOLOWESKO, CFA
PORTFOLIO MANAGER
TEMPLETON FOREIGN FUND
Mark G. Holowesko is president and portfolio manager of Templeton Foreign Fund
and several other Templeton funds. He joined the Templeton organization in 1985
in Nassau, Bahamas, and serves as chief investment officer of equity research
worldwide, as well as an officer and director of Templeton Worldwide, Inc. Mr.
Holowesko received a B.A. in economics from Holy Cross College and an M.B.A.
from Babson College. He is a Chartered Financial Analyst and a former director
of the International Society of Financial Analysts.
PAGE
SHAREHOLDER LETTER
- -------------------------------------------------------------------------------
Your Fund's Goal: Templeton Foreign Fund seeks long-term capital growth. Under
normal market conditions, the Fund will invest primarily in the equity
securities of companies located outside the United States, including emerging
markets.
- -------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to bring you this semiannual report of Templeton Foreign Fund,
which covers the six months ended February 28, 1999. During this time,
relatively low interest rates, benign inflation and increasing productivity
contributed to a rise in many global equity markets, and on February 28, 1999,
the Morgan Stanley Capital International(R) Europe, Australasia, Far East (MSCI
EAFE) Index was 14.00% higher than on September 1, 1998.(1) Within this
environment, the Fund's Class A shares provided a 9.45% six-month cumulative
total return, as shown in the Performance Summary on page 7.
The underperformance of the Fund relative to the index was due largely to our
value-oriented investment
1. Source: Standard & Poor's(R) Micropal. The unmanaged MSCI EAFE Index tracks
the performance of approximately 1,000 securities in 20 countries. It includes
reinvested dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 13 of
this report.
CONTENTS
Shareholder Letter ...........1
Performance Summary ..........6
Financial Highlights &
Statement of Investments .....9
Financial Statements ........21
Notes to Financial
Statements ..................24
[PYRAMID GRAPH]
FUND CATEGORY
GLOBAL
GROWTH
GROWTH & INCOME
INCOME
TAX-FREE INCOME
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
2/28/992.
[THIS CHART SHOWS IN BAR CHART FORMAT THE GEOGRAPHIC DISTRIBUTION OF TEMPLETON
FOREIGN FUND'S PORTFOLIO HOLDINGS ON FEBRUARY 28, 1999, BASED ON TOTAL NET
ASSTS.]
[BAR GRAPH]
European Stocks 46.7%
Asian Stocks 25.2%
Latin American Stocks 12.4%
Austalian & New Zealand Stocks 5.8%
North American Stocks 3.5%
Mid-East/African Stocks 1.8%
Short-Term Investments & Other Net Assets 4.6%
philosophy, which involves purchasing securities we consider undervalued and
holding them until their value is recognized by the market. During the period
under review, "growth" investors seemed to ignore fundamental values, as share
prices were pushed to record levels in a momentum-driven market. At the end of
the reporting period, the Morgan Stanley Capital International(R) World Index
was trading at 29.8 times earnings, 14.7 times cash earnings and 3.55 times book
value. Globally, the most expensive stocks, as measured by price-to-earnings
(P/E) ratios, outperformed the least expensive by 2.8 times. In Europe, the
ratio was 4.1 times.(2)
ASIA
Improving economic conditions in many Asian countries drove up stock prices
there and, although they remained below their collective peak, Far East markets,
as measured by the Morgan Stanley Capital International(R) Far East Index rose
24% on average during the reporting period.(3) The best performing Asian equity
market was Korea's, which rose 91.8% in U.S. dollar terms.(4)
On February 28, 1999, Hong Kong represented the Fund's largest country weighting
in Asia. In our opinion, the long-term impact of the region's financial problems
on many quality companies has been over-estimated. For example, shares of HSBC
Holdings PLC, a bank and financial organization with
2. Source: Standard & Poor's Micropal. Ratios calculated on a cap weighted
basis. The MSCI World Index tracks the performance of approximately 1,500
securities in 23 countries and is designed to measure world stock market
performance. It includes reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.
3. Source: Standard & Poor's
Micropal. The unmanaged MSCI Far East index includes approximately 400 companies
representing the stock markets of Hong Kong, Japan and Singapore. One cannot
invest directly in an index, nor is an index representative of the Fund's
portfolio.
4. Source: Bloomberg.
2
PAGE
subsidiaries in Asia, Europe, the U.S. and the Middle East, were selling at a
discount to those of other international banks on a price-to-book-value basis.
EUROPE
Events culminating in the euro's successful introduction on January 1, 1999,
helped boost many European equity markets, and the Morgan Stanley Capital
International(R) All Country (MSCI AC) Europe Index rose 10.84% from September
1, 1998 to February 28, 1999.(5) However, we took advantage of weakness in the
energy sources sector and added to our holdings of Norway's Saga Petroleum AS.
We also took advantage of opportunities to buy shares of several European
chemical companies, many of which are consolidating to enhance value. And in the
United Kingdom, we initiated a position in British Airways PLC, an international
and domestic passenger airline, which we believe could benefit from higher
operating margins resulting from improved cost efficiencies and lower fuel
prices.
LATIN AMERICA
Although Latin American companies saw a record number of mergers, equity markets
in the region posted mixed results during the reporting period. Mexico's market
rose 44.4%, Argentina's 7.2%, and Brazil's, where the lack of a strong
international financial policy kept the equity market under pressure, declined
21.4%.(6) As of February 28, 1999, the Fund's Brazilian
5. Source: Standard & Poor's Micropal. The unmanaged MSCI AC Index measures the
weighted average performance, in U.S. dollars, of about 60% of the market
capitalization listed on 21 European stock exchanges (approximately 700
securities). It includes reinvested dividends. One cannot invest directly in an
index.
6. Source: Bloomberg.
TOP 10 EQUITY HOLDINGS
2/28/99
[THIS TABLE LIST THE TOP 10 EQUITY HOLDINGS, INCLUDING INDUSTRY AND COUNTRY OF
ORIGIN, OF TEMPLETON FOREIGN FUND AS OF FEBRUARY 28, 1999, BASED ON TOTAL NET
ASSETS.]
NAME, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- -----------------------------------------------
Telefonos de Mexico SA
(Telmex), L, ADR
Telecommunications, Mexico 2.2%
National Australia Bank Ltd.
Banking, Australia 2.2%
YPF Soc Anonima
Yacimientos Petroliferos
Fiscale, D, ADR
Energy Sources, Argentina 2.0%
Singapore Airlines Ltd., fgn.
Transportation, Singapore 1.9%
General Electric Co. PLC
Electrical & Electronics,
United Kingdom 1.8%
Koninklijke Philips
Electronics NV
Electrical & Electronics,
Netherlands 1.7%
HSBC Holdings PLC
Banking, Hong Kong* 1.7%
Cheung Kong Holdings Ltd.
Multi-Industry, Hong Kong* 1.6%
Sony Corp.
Appliances & Household
Durables, Japan 1.5%
ABB AB, A
Electrical & Electronics,
Sweden 1.5%
*Hong Kong reverted to the sovereignty of China on July 1, 1997.
3
PAGE
TOP 10 COUNTRIES
REPRESENTED IN THE FUND*
EQUITY INVESTMENTS
(95.4% OF TOTAL NET ASSETS)
2/28/99
[THIS CHART SHOWS IN TABLE FORMAT THE TOP 10 COUNTRIES REPRESENTED* IN TEMPLETON
FOREIGN FUND AS OF FEBRUARY 28, 1999 BASED ON 95.4% OF TOTAL NET ASSETS.]
% OF TOTAL
COUNTRY NET ASSETS
----------------------------
United Kingdom 17.9%
Hong Kong** 14.9%
Sweden 6.6%
Netherlands 5.8%
Australia 5.0%
Japan 4.7%
Mexico 4.4%
Germany 4.3%
Argentina 3.9%
Brazil 3.5%
*Does not include fixed-income securities and short-term investments and other
net assets.
**Hong Kong reverted to the sovereignty of China on July 1, 1997.
holdings included shares of several Telebras subsidiaries which we believed were
undervalued. The portfolio also included a position in Telmex, a provider of
local and international telephone services in Mexico. Despite increased
competition arising from the deregulation of the Mexican telephone market,
Telmex experienced only modest market-share loss during the six months under
review.
Looking forward, we are optimistic about the Fund's prospects, and remain
confident in our value style of investing. It has rewarded shareholders with
long-term results in the past, and we firmly believe it would be wrong to change
our style now.
This discussion reflects our views, opinions and portfolio holdings as of
February 28, 1999, the end of the reporting period. However, market and economic
conditions are changing constantly, which can be expected to affect our
strategies and portfolio composition. Although past performance is not
predictive of future results, these insights may help you better understand our
investment and management philosophy.
Please remember, there are special risks associated with global investing
related to market, currency, economic, social, political and other factors.
Emerging market securities involve similar but heightened risks, in addition to
those associated with the relatively small size and lesser liquidity of those
markets.
4
PAGE
Investing in any emerging market means accepting a certain amount of volatility
and, in some cases, severe market corrections. For example, Taiwan's equity
market has increased 951% in the last 15 years, but has suffered six declines of
more than 20% during that time.(7) While short-term volatility can be
disconcerting, declines in excess of 50% are not unusual in emerging markets.
These risks and considerations are discussed in the Fund's prospectus.
Thank you for investing in Templeton Foreign Fund. We welcome your comments and
look forward to serving you in the future.
Sincerely,
/s/MARK G. HOLOWESKO
- ---------------------------
Mark G. Holowesko, CFA
President
Templeton Foreign Fund, Inc.
7. Source: Bloomberg.Based on quarterly percentage price change over 15 years
ended December 31, 1998. Market returns are measured in U.S. dollars and do not
include reinvested dividends.
5
PAGE
- -------------------------------------------------------------------------------
CLASS A (formerly Class I):
Subject to the current, maximum 5.75% initial sales charge. Prior to July 1,
1992, Fund shares were offered at a higher initial sales charge. Thus, actual
total returns would have been lower. On January 1, 1993, the Fund implemented a
Rule 12b-1 plan, which affects subsequent performance.
CLASS B:
Subject to no initial sales charge, but subject to a contingent deferred sales
charge (CDSC) declining from 4% to 0% over six years. These shares have higher
annual fees and expenses than Class A shares.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18
months of investment. These shares have higher annual fees and expenses than
Class A shares.
ADVISOR CLASS:
No initial sales charge or Rule 12b-1 fees and are available to a limited class
of investors.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY AS OF 2/28/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of each class' operating expenses. Past distributions are not indicative
of future trends. All total returns include reinvested distributions at net
asset value.
PRICE AND DISTRIBUTION INFORMATION (9/1/98 - 2/28/99)
<TABLE>
<CAPTION>
Class A Change 2/28/99 8/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.25 $8.18 $8.43
Distributions
-------------------------------
Dividend Income $0.2600
Long-term Capital Gain $0.6600
Short-term Capital Gain $0.1050
TOTAL $1.0250
Class B Change 2/28/99 1/1/99
- ---------------------------------------------------------------
Net Asset Value -$0.22 $8.17 $8.39
Class C Change 2/28/99 8/31/98
- ---------------------------------------------------------------
Net Asset Value -$0.23 $8.07 $8.30
Distributions
-------------------------------
Dividend Income $0.2062
Long-term Capital Gain $0.6600
Short-term Capital Gain $0.1050
TOTAL $0.9712
Advisor Class Change 2/28/99 8/31/98
- ---------------------------------------------------------------
Net Asset Value -$0.25 $8.19 $8.44
Distributions
-------------------------------
Dividend Income $0.2792
Long-term Capital Gain $0.6600
Short-term Capital Gain $0.1050
TOTAL $1.0442
</TABLE>
Templeton Foreign Fund paid distributions derived from long-term
capital gains of $0.6600 per share in October, 1998. The Fund hereby designates
such distributions as capital gain dividends per Internal Revenue Code Section
852 (b)(3).
Past performance is not predictive of future results.
6
PAGE
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (10/5/82)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative
Total Return(1) 9.45% -12.38% 26.58% 155.35% 833.09%
Average Annual
Total Return(2) 3.21% -17.40% 3.60% 9.18% 14.17%
Value of $10,000
Investment(3) $10,321 $8,260 $11,933 $24,066 $87,950
2/28/95 2/28/96 2/28/97 2/28/98 2/28/99
--------------------------------------------------------
One-Year
Total Return(4) -2.74% 16.15% 16.04% 10.21% -12.38%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B (1/1/99)
- --------------------------------------------------------------------------------
<S> <C>
Cumulative Total Return(1) -2.62%
Aggregate Total Return(2) -6.52%
Value of $10,000 Investment(3) $9,348
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative
Total Return(1) 9.15% -12.97% 9.59% 21.49%
Average Annual
Total Return(2) 7.15% -14.65% 2.74% 4.95%
Value of $10,000
Investment(3) $10,715 $8,535 $10,845 $12,031
2/28/97 2/28/98 2/28/99
-------------------------------------
One-Year
Total Return(4) 15.15% 9.36% -12.97%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(5) 6-MONTH 1-YEAR 5-YEAR 10-YEAR (10/5/82)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative
Total Return(1) 9.70% -12.15% 27.31% 156.81% 838.41%
Average Annual
Total Return(2) 9.70% -12.15% 4.95% 9.89% 14.63%
Value of $10,000
Investment(3) $10,970 $8,785 $12,731 $25,681 $93,841
2/28/95 2/28/96 2/28/97 2/28/98 2/28/99
------------------------------------------------------------
One-Year
Total Return(4) -2.74% 16.15% 16.15% 10.45% -12.15%
</TABLE>
Past performance is not predictive of future results.
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 periods indicated and includes the current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized. Since Class B shares have existed for less than one year, the
figures for that class represent aggregate total return from inception;
therefore, average annual total returns are not provided.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
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 sales
charges.
5. On January 2, 1997, the Fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable to that class. Since
January 2, 1997 (commencement of sales), the cumulative and average annual total
return of Advisor Class shares were 0.43% and 0.20% respectively.
- -------------------------------------------------------------------------------
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. 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.
- -------------------------------------------------------------------------------
7
PAGE
TEMPLETON FOREIGN FUND
CLASS A
If you had invested $10,000 in Templeton Foreign Fund - Class A at inception, it
would have been worth more than $87,000 on February 28, 1999. The chart below
illustrates the cumulative total return of a hypothetical $10,000 investment in
the Fund on October 5, 1982 (inception), with income dividends and capital gains
reinvested as shown through February 28, 1999.*
[LINE GRAPH APPEARS HERE]
$87,950
TOTAL VALUED
INVESTMENT
2/28/99
[THE FOLLOWING CHART SHOWS IN GRAPH FORMAT THE CUMULATIVE TOTAL RETURN OF A
$10,000 INVESTMENT IN THE FUND ON OCTOBER 5, 1982 (INCEPTION) AS OF FEBRUARY 28,
1999.]
<TABLE>
<CAPTION>
PRINCIPAL INCOME PRINCIPAL CAP GAINS PRINCIPAL + TOTAL VALUE
+ DIVIDENDS CAP GAINS
<S> <C> <C> <C> <C> <C> <C>
10/05/82 $9,423 $0 $9,423 $0 $9,423 $9,423
12/31/82 $9,823 $0 $9,823 $0 $9,823 $9,823
12/30/83 $13,169 $193 $13,362 $48 $13,217 $13,410
12/31/84 $12,603 $491 $13,094 $156 $12,759 $13,250
12/31/85 $15,489 $1,077 $16,566 $246 $15,735 $16,812
12/31/86 $18,151 $1,752 $19,903 $1,745 $19,896 $21,648
12/31/87 $20,436 $2,816 $23,252 $3,754 $24,190 $27,006
12/30/88 $22,709 $4,156 $26,865 $6,081 $28,790 $32,946
12/29/89 $27,467 $6,387 $33,854 $9,152 $36,619 $43,006
12/31/90 $24,700 $7,170 $31,870 $9,842 $34,542 $41,712
12/31/91 $26,949 $9,249 $36,198 $13,127 $40,076 $49,325
12/31/92 $25,088 $9,876 $34,964 $14,408 $39,496 $49,372
12/31/93 $33,333 $14,060 $47,393 $20,156 $53,489 $67,549
12/30/94 $31,166 $14,231 $45,397 $22,386 $53,552 $67,783
12/29/95 $32,438 $16,772 $49,210 $26,133 $58,571 $75,343
12/31/96 $36,608 $21,301 $57,909 $30,994 $67,602 $88,903
12/31/97 $35,158 $23,062 $58,220 $36,595 $71,753 $94,815
12/31/98 $29,647 $22,041 $51,688 $38,493 $68,140 $90,181
2/28/99 $28,904 $21,490 $50,394 $37,529 $66,433 $87,923
</TABLE>
*Cumulative total return represents the change in value of an investment over
the indicated period. All figures have been restated to reflect the current,
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 A shares implemented a plan of distribution under Rule 12b-1, which will
affect subsequent performance.
Except as noted, all figures 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, and you may have a
gain or loss when you sell your shares. The historical data shown above pertain
only to Class A shares of the Fund. The Fund offers other share classes, subject
to different fees and expenses, which will affect their performance. Please see
the prospectus for more details.
Past performance is not predictive of future results.
8
PAGE
TEMPLETON FOREIGN FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 ----------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the
period)
Net asset value, beginning of period... $8.43 $11.40 $9.97 $9.62 $10.01 $8.74
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income................. .09 .30 .32 .27 .23 .14
Net realized and unrealized gains
(losses)............................ .68 (2.11) 1.56 .69 .05 1.39
------------------------------------------------------------------------------------
Total from investment operations....... .77 (1.81) 1.88 .96 .28 1.53
------------------------------------------------------------------------------------
Less distributions from:
Net investment income................. (.26) (.32) (.28) (.25) (.16) (.13)
Net realized gains.................... (.76) (.84) (.17) (.36) (.51) (.13)
------------------------------------------------------------------------------------
Total distributions.................... (1.02) (1.16) (.45) (.61) (.67) (.26)
------------------------------------------------------------------------------------
Net asset value, end of period......... $8.18 $8.43 $11.40 $9.97 $9.62 $10.01
====================================================================================
Total Return*.......................... 9.45% (17.89)% 19.55% 10.68% 3.14% 17.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)...... $9,841,645 $10,745,504 $14,367,787 $9,602,209 $6,941,238 $5,014,438
Ratios to average net assets:
Expenses.............................. 1.12%** 1.12% 1.08% 1.12% 1.15% 1.14%
Net investment income................. 1.84%** 2.79% 3.28% 3.09% 2.81% 1.84%
Portfolio turnover rate................ 15.56% 38.27% 37.28% 15.91% 21.78% 36.75%
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
9
PAGE
TEMPLETON FOREIGN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
-----------------
PERIOD ENDED
FEBRUARY 28, 1999
(UNAUDITED)+
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period........................ $8.39
-----------------
Income from investment operations:
Net investment loss........................................ --
Net realized and unrealized losses......................... (.22)
-----------------
Total from investment operations............................ (.22)
-----------------
Net asset value, end of period.............................. $8.17
=================
Total Return*............................................... (2.62)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)........................... $1,697
Ratios to average net assets:
Expenses................................................... 1.86%**
Net investment loss........................................ (.26)%**
Portfolio turnover rate..................................... 15.56%
</TABLE>
*Total return does not reflect the contingent deferred sales charge and is not
annualized.
**Annualized.
+For the period January 1, 1999 (effective date) to February 28, 1999.
10
PAGE
TEMPLETON FOREIGN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 -----------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995+
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the
period)
Net asset value, beginning of period........ $8.30 $11.25 $9.87 $9.59 $9.16
----------------------------------------------------------------------------
Income from investment operations:
Net investment income...................... .05 .22 .26 .30 .03
Net realized and unrealized gains
(losses)................................. .69 (2.07) 1.52 .58 .40
----------------------------------------------------------------------------
Total from investment operations............ .74 (1.85) 1.78 .88 .43
----------------------------------------------------------------------------
Less distributions from:
Net investment income...................... (.21) (.26) (.23) (.24) --
Net realized gains......................... (.76) (.84) (.17) (.36) --
----------------------------------------------------------------------------
Total distributions......................... (.97) (1.10) (.40) (.60) --
----------------------------------------------------------------------------
Net asset value, end of period.............. $8.07 $8.30 $11.25 $9.87 $9.59
============================================================================
Total Return*............................... 9.15% (18.46)% 18.65% 9.78% 4.81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)........... $1,020,182 $1,159,810 $1,303,639 $527,443 $63,428
Ratios to average net assets:
Expenses................................... 1.87%** 1.87% 1.83% 1.87% 1.90%**
Net investment income...................... 1.10%** 2.07% 2.62% 2.63% 1.86%**
Portfolio turnover rate..................... 15.56% 38.27% 37.28% 15.91% 21.78%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
+For the period May 1, 1995 (effective date) to August 31, 1995.
11
PAGE
TEMPLETON FOREIGN FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 ----------------------
(UNAUDITED) 1998++ 1997+
---------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period........................ $8.44 $11.42 $10.26
---------------------------------------------
Income from investment operations:
Net investment income...................................... .11 .33 .07
Net realized and unrealized gains (losses)................. .68 (2.12) 1.09
---------------------------------------------
Total from investment operations............................ .79 (1.79) 1.16
---------------------------------------------
Less distributions from:
Net investment income...................................... (.28) (.35) --
Net realized gains......................................... (.76) (.84) --
---------------------------------------------
Total distributions......................................... (1.04) (1.19) --
---------------------------------------------
Net asset value, end of period.............................. $8.19 $8.44 $11.42
=============================================
Total Return*............................................... 9.70% (17.75)% 11.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)........................... $46,510 $50,022 $139,100
Ratios to average net assets:
Expenses................................................... .87%** .87% .83%**
Net investment income...................................... 2.11%** 3.08% 3.37%**
Portfolio turnover rate..................................... 15.56% 38.27% 37.28%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) to August 31, 1997.
++Based on average weighted shares outstanding.
See Notes to Financial Statements.
12
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 91.1%
AEROSPACE & MILITARY TECHNOLOGY .8%
Rolls-Royce PLC............................................. United Kingdom 18,528,127 $ 81,031,987
---------------
APPLIANCES & HOUSEHOLD DURABLES 1.5%
Sony Corp. ................................................. Japan 2,153,800 163,009,895
---------------
AUTOMOBILES 2.3%
Autoliv Inc., ADR........................................... Sweden 1,291,354 48,786,940
Bayerische Motorenwerke AG BMW.............................. Germany 72,690 52,824,831
Fiat SpA, di Risp........................................... Italy 1,352,140 2,192,339
Volvo AB, B................................................. Sweden 5,541,000 143,961,670
---------------
247,765,780
---------------
BANKING 6.6%
Australia & New Zealand Banking Group Ltd. ................. Australia 15,060,131 97,256,254
Banco Popular Espanol SA.................................... Spain 384,017 25,736,031
*Bangkok Bank Public Co. Ltd., fgn. ........................ Thailand 4,776,400 8,063,055
Bank Slaski SA W Katowicach................................. Poland 184,292 8,035,038
Deutsche Bank AG, Br. ...................................... Germany 1,034,100 53,807,937
Development Bank of Singapore Ltd., fgn. ................... Singapore 1,827,400 13,265,099
Guoco Group Ltd. ........................................... Hong Kong 19,272,500 29,849,956
HSBC Holdings PLC........................................... Hong Kong 6,520,812 183,477,399
National Australia Bank Ltd. ............................... Australia 14,252,374 237,622,167
Nordbanken Holding AB....................................... Sweden 7,547,000 45,767,355
Unibanco Uniao de Bancos Brasileiros SA, GDR................ Brazil 953,290 12,869,415
---------------
715,749,706
---------------
BEVERAGES & TOBACCO
*Buenos Aires Embotelladora SA (Baesa), B, ADR.............. Argentina 1,200,000 12,000
---------------
BROADCASTING & PUBLISHING .9%
*Apt Satellite Holdings Ltd., ADR........................... Hong Kong 3,000,000 8,812,500
South China Morning Post Holdings, Ltd. .................... Hong Kong 48,612,400 20,862,345
South China Morning Post Holdings, Ltd., 144A............... Hong Kong 31,530,000 13,531,316
Television Broadcasts Ltd. ................................. Hong Kong 18,000,000 53,551,031
---------------
96,757,192
---------------
BUILDING MATERIALS & COMPONENTS 1.4%
Caradon PLC................................................. United Kingdom 6,546,802 16,151,477
Cemex SA.................................................... Mexico 7,813,770 22,409,155
Cemex SA, B................................................. Mexico 4,696,000 14,458,302
Cemex SA, A, ADR............................................ Mexico 22,119 126,870
Cemex SA, B, ADR............................................ Mexico 776,300 4,780,230
Gujarat Ambuja Cements Ltd. ................................ India 5,356 32,004
+Hepworth PLC............................................... United Kingdom 21,012,458 51,671,082
Okumura Corp. .............................................. Japan 10,093,000 39,044,981
---------------
148,674,101
---------------
</TABLE>
13
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
CHEMICALS 4.7%
Akzo Nobel NV............................................... Netherlands 2,422,200 $ 91,867,841
BASF AG..................................................... Germany 3,211,900 110,360,031
Bayer AG, Br. .............................................. Germany 917,900 32,244,141
Beijing Yanhua Petrochemical Company Limited, ADR........... China 1,300,000 4,306,250
Cookson Group PLC........................................... United Kingdom 22,015,799 56,959,911
+DSM NV, Br. ............................................... Netherlands 1,852,903 160,688,662
European Vinyls Corporation Evc International NV............ Netherlands 442,154 2,596,766
Imperial Chemical Industries Plc. .......................... United Kingdom 351,512 3,057,752
Laporte PLC................................................. United Kingdom 100,000 905,931
Rhone-Poulenc SA, A......................................... France 1,080,000 49,497,777
Shanghai Petrochemical Co. Ltd., H.......................... China 61,677,000 5,015,199
---------------
517,500,261
---------------
CONSTRUCTION & HOUSING .3%
+Hollandsche Beton Groep NV................................. Netherlands 2,032,325 19,409,658
Kyudenko Corp. ............................................. Japan 2,295,000 13,578,508
---------------
32,988,166
---------------
ELECTRICAL & ELECTRONICS 6.4%
ABB AB, A................................................... Sweden 14,137,010 160,746,048
Alcatel SA.................................................. France 900,000 96,821,999
Fuji Photo Film Co. Ltd. ................................... Japan 1,332,000 48,946,650
+G P Batteries International Ltd. .......................... Singapore 6,115,398 10,654,003
General Electric Co. PLC.................................... United Kingdom 24,570,000 197,789,642
Koninklijke Philips Electronics NV.......................... Netherlands 2,674,340 186,421,417
---------------
701,379,759
---------------
ELECTRONIC COMPONENTS & INSTRUMENTS .2%
BICC PLC.................................................... United Kingdom 14,109,692 20,230,326
---------------
ENERGY EQUIPMENT & SERVICES .3%
Koninklijke Pakhoed NV...................................... Netherlands 1,302,048 31,588,189
---------------
ENERGY SOURCES 6.4%
Norsk Hydro AS.............................................. Norway 3,607,174 122,342,730
Perez Companc SA, Reg B..................................... Argentina 10,347,700 42,131,992
*Ranger Oil Ltd. ........................................... Canada 3,305,505 9,296,733
*Renaissance Energy Ltd. ................................... Canada 6,500,000 57,270,619
Repsol SA................................................... Spain 1,011,000 53,160,876
Saga Petroleum AS........................................... Norway 4,707,995 39,547,991
Shell Transport & Trading Co. PLC........................... United Kingdom 16,774,404 93,516,590
Shell Transport & Trading Co. PLC, fgn. .................... United Kingdom 37,600 1,261,950
Societe Elf Aquitaine SA, Br. .............................. France 636,000 66,326,363
YPF Soc Anonima Yacimientos Petroliferos Fiscale, D......... Argentina 1,475,000 42,939,676
YPF Soc Anonima Yacimientos Petroliferos Fiscale, D, ADR.... Argentina 5,927,400 171,894,600
---------------
699,690,120
---------------
</TABLE>
14
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FINANCIAL SERVICES .4%
Lend Lease Corp. Ltd. ...................................... Australia 3,568,936 $ 44,322,496
---------------
FOOD & HOUSEHOLD PRODUCTS 2.5%
Albert Fisher Group PLC..................................... United Kingdom 5,755,712 530,187
Hillsdown Holdings PLC...................................... United Kingdom 13,023,077 14,604,072
Illovo Sugar Ltd. .......................................... South Africa 4,800,000 4,416,465
Industrias Bachoco SA, ADR.................................. Mexico 500,000 3,718,750
Panamerican Beverages Inc., A............................... Mexico 4,202,900 66,458,356
Pepsi-Gemex SA de CV, GDR................................... Mexico 1,484,400 11,225,775
Tate & Lyle Plc. ........................................... United Kingdom 19,100,000 138,456,794
*Terranova Foods PLC........................................ United Kingdom 4,241,101 5,571,277
Vitro SA De CV, A........................................... Mexico 8,183,320 12,363,348
Vitro SA De CV, ADR......................................... Mexico 3,417,640 15,379,380
---------------
272,724,404
---------------
FOREST PRODUCTS & PAPER 6.2%
Aracruz Celulose SA, ADR.................................... Brazil 3,239,700 41,711,138
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 3,804,500 26,155,938
Assidomaen AB............................................... Sweden 1,780,900 32,443,343
Carter Holt Harvey Ltd. .................................... New Zealand 44,890,846 41,172,822
Fletcher Challenge Paper Ltd. .............................. New Zealand 29,863,383 20,659,877
Metsa Serla OY, B........................................... Finland 2,859,000 19,803,820
Mitsubishi Paper Mills Ltd. ................................ Japan 4,923,000 8,215,373
+Mo Och Domsjoe AB (Modo), B................................ Sweden 4,000,800 104,923,780
Munksjo AB.................................................. Sweden 1,079,000 6,860,007
Norske Skogindustrier AS, A................................. Norway 1,619,000 48,162,003
*PT Indah Kiat Pulp & Paper Corporation TBK................. Indonesia 165,994,073 39,444,136
*PT Indah Kiat Pulp & Paper Corporation TBK, wts. .......... Indonesia 11,442 1,424
Sappi Ltd. ................................................. South Africa 8,196,100 29,238,710
*Stora Enso OYJ, A.......................................... Finland 1,210,594 10,286,867
*Stora Enso OYJ, A, fgn. ................................... Finland 634,000 5,637,411
*Stora Enso OYJ, R.......................................... Finland 5,654,331 50,120,919
Stora Enso OYJ, R, fgn. .................................... Finland 8,687,550 77,248,098
Svenska Cellulosa AB (SCA), B............................... Sweden 282,656 5,650,355
Unipapel SA, Br. ........................................... Spain 318,488 4,230,424
UPM-Kymmene Corp. .......................................... Finland 4,067,834 105,608,732
---------------
677,575,177
---------------
INDUSTRIAL COMPONENTS 2.2%
Chudenko Corp. ............................................. Japan 1,000,000 18,963,338
Michelin SA, B.............................................. France 595,584 26,544,498
Sandvik AB, A............................................... Sweden 184,700 3,545,409
Sandvik AB, B............................................... Sweden 3,139,700 60,268,113
SKF AB, A................................................... Sweden 1,925,705 25,545,787
</TABLE>
15
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
INDUSTRIAL COMPONENTS (CONT.)
SKF AB, B................................................... Sweden 4,791,776 $ 66,202,554
+Yamato Kogyo Co. Ltd. ..................................... Japan 7,702,000 37,844,635
---------------
238,914,334
---------------
INSURANCE 1.2%
Ace Ltd. ................................................... Bermuda 1,600,000 43,600,000
HIH Insurance Ltd. ......................................... Australia 3,579,762 4,859,144
Partnerre Ltd. ............................................. Bermuda 647,700 28,013,025
XL Capital Ltd., A.......................................... Bermuda 850,000 52,062,500
---------------
128,534,669
---------------
LEISURE & TOURISM .9%
+Grand Hotel Holdings Ltd. ................................. Hong Kong 34,685,000 4,790,158
Harbour Centre Development Ltd. ............................ Hong Kong 14,330,000 6,242,296
Mandarin Oriental Intl. Ltd. ............................... Singapore 34,207,000 16,590,395
Rank Group PLC.............................................. United Kingdom 8,437,529 32,102,674
Shangri-La Asia Ltd. ....................................... Hong Kong 56,403,000 40,403,556
---------------
100,129,079
---------------
MACHINERY & ENGINEERING 3.2%
BTR Siebe PLC............................................... United Kingdom 27,849,250 117,559,152
Makita Corp. ............................................... Japan 2,965,700 28,419,729
+Mckechnie Group PLC........................................ United Kingdom 10,052,495 56,283,794
New Holland NV.............................................. Netherlands 2,900,900 28,827,694
Rauma OY.................................................... Finland 1,600,000 18,354,465
VA Technologie AG, Br. ..................................... Austria 159,747 12,363,097
Valmet OY................................................... Finland 3,000,000 31,286,020
+Vickers Group PLC.......................................... United Kingdom 22,672,701 53,756,044
---------------
346,849,995
---------------
MERCHANDISING 4.2%
Best Denki Co. Ltd. ........................................ Japan 2,023,140 14,493,628
Dairy Farm International Holdings Ltd. ..................... Hong Kong 56,773,759 60,747,922
Gucci Group NV.............................................. Netherlands 1,062,300 74,361,000
Marks & Spencer PLC......................................... United Kingdom 6,989,000 47,136,731
Matsuzakaya Co. Ltd. ....................................... Japan 3,604,600 16,557,160
Safeway Plc. ............................................... United Kingdom 24,457,089 105,786,646
Storehouse.................................................. United Kingdom 14,931,522 36,598,040
W.H. Smith Group PLC........................................ United Kingdom 11,883,760 104,231,819
---------------
459,912,946
---------------
METALS & MINING 6.5%
Alcan Aluminum Ltd. ........................................ Canada 5,611,870 136,067,866
Anglo American Platinum Corp. Ltd. ......................... South Africa 4,000,000 65,730,428
Antofagasta Holdings PLC.................................... Chile 1,293,749 3,627,024
Billiton Plc. .............................................. United Kingdom 25,553,088 55,570,659
</TABLE>
16
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
METALS & MINING (CONT.)
British Steel PLC........................................... United Kingdom 73,980,192 $ 147,256,398
Companhia Siderurgica Nacional CSN, ADR..................... Brazil 1,483,275 12,422,428
Elkem ASA, A................................................ Norway 1,911,300 25,953,989
Grupo Mexico SA de CV, B.................................... Mexico 15,961,800 43,852,861
Industrias Penoles SA....................................... Mexico 2,324,000 6,956,826
Iscor Ltd. ................................................. South Africa 60,131,200 10,288,793
Minorco SA, ADR............................................. Luxembourg 2,599,841 40,785,006
Outokumpu OY, A............................................. Finland 1,093,400 9,590,280
Pechiney SA, A.............................................. France 1,507,889 49,824,314
*Pohang Iron & Steel Co. Ltd. .............................. South Korea 1,003,460 53,071,019
Union Minier NPV............................................ Belgium 494,000 16,095,197
WMC Ltd. ................................................... Australia 11,468,500 35,606,729
---------------
712,699,817
---------------
MISC MATERIALS & COMMODITIES 1.3%
+Agrium Inc. ............................................... Canada 7,048,695 56,389,560
De Beers/Centenary Linked Units, reg. ...................... South Africa 929,800 16,029,482
De Beers/Centenary Linked Units, ADR........................ South Africa 4,300,000 73,637,500
---------------
146,056,542
---------------
MULTI-INDUSTRY 8.6%
Alfa SA de CV, A............................................ Mexico 7,632,100 18,783,169
Amoy Properties Ltd. ....................................... Hong Kong 65,746,500 47,096,651
Broken Hill Proprietary Co. Ltd. ........................... Australia 8,815,580 66,180,896
Cheung Kong Holdings Ltd. .................................. Hong Kong 25,127,000 171,075,377
DESC SA de CV DESC, B....................................... Mexico 11,250,000 10,713,209
DESC SA de CV DESC, C, ADR.................................. Mexico 27,500 527,656
+Elementis PLC.............................................. United Kingdom 28,738,196 33,838,349
First Pacific Co. Ltd. ..................................... Hong Kong 84,831,800 51,187,592
*Hicom Holdings Bhd. ....................................... Malaysia 14,515,000 4,085,941
Hutchison Whampoa Ltd. ..................................... Hong Kong 18,358,000 127,358,588
+Inchcape PLC............................................... United Kingdom 30,000,000 71,369,069
Jardine Matheson Holdings Ltd. ............................. Hong Kong 13,609,352 35,656,502
Jardine Strategic Holdings Ltd. ............................ Hong Kong 14,694,764 21,307,408
*Metra OY, B................................................ Finland 284,185 5,169,269
Murray & Roberts Holdings Ltd. ............................. South Africa 5,297,400 1,812,831
Pacific Dunlop Ltd. ........................................ Australia 18,323,754 31,972,473
Pilkington PLC.............................................. United Kingdom 50,000,000 50,462,978
*Saab AB, B................................................. Sweden 1,255,450 11,051,767
Swire Pacific Ltd., A....................................... Hong Kong 35,893,400 146,858,221
Swire Pacific Ltd., B....................................... Hong Kong 34,818,700 21,234,340
Wheelock and Company Ltd. .................................. Hong Kong 10,338,809 6,371,890
---------------
934,114,176
---------------
</TABLE>
17
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE 1.4%
+Bail Investissement........................................ France 164,380 $ 22,465,898
Hang Lung Development Co. Ltd. ............................. Hong Kong 39,500,000 37,981,995
Hon Kwok Land Investment Co. Ltd. .......................... Hong Kong 46,529,000 3,363,072
Hong Kong Land Holdings Ltd. ............................... Hong Kong 14,871,000 15,614,550
New Asia Realty and Trust Co. Ltd., A....................... Hong Kong 5,074,000 4,191,359
New World Development Co. Ltd. ............................. Hong Kong 24,473,380 45,012,509
*Wereldhave NV.............................................. Netherlands 526,100 28,356,672
---------------
156,986,055
---------------
RECREATION & OTHER CONSUMER GOODS 1.2%
Nintendo Co. Ltd. .......................................... Japan 1,107,700 95,039,073
Yue Yuen Industrial (Holdings) Ltd. ........................ Hong Kong 27,681,400 39,658,422
---------------
134,697,495
---------------
TELECOMMUNICATIONS 6.2%
Asia Satellite Telecommunications Hldgs. Ltd. .............. Hong Kong 8,945,000 14,431,609
Asia Satellite Telecommunications Hldgs. Ltd., ADR.......... Hong Kong 425,000 7,065,625
Hong Kong Telecommunications Ltd. .......................... Hong Kong 46,177,087 77,480,834
Nortel Inversora SA, ADR.................................... Argentina 700,000 9,712,500
PT Indosat TBK, ADR......................................... Indonesia 66,950 870,350
Rostelecom.................................................. Russia 4,204,200 3,321,318
SK Telecom Co. Ltd., ADR.................................... South Korea 9,004,356 91,169,109
Smartone Telecommunications Holdings Ltd. .................. Hong Kong 22,296,000 60,288,626
Telecom Argentina Stet-France SA (Teco), B, ADR............. Argentina 3,228,900 87,382,106
*Telecomunicacoes de Minas Gerais Celular SA Telemig........ Brazil 176,397,107 1,040,180
*Telecomunicacoes de Minas Gerais SA Telemig................ Brazil 176,397,107 1,863,655
Telecomunicacoes de Sao Paulo SA (Telesp)................... Brazil 183,551,000 10,282,464
Telefonica de Argentina SA (TEAR), B, ADR................... Argentina 1,073,960 31,413,330
Telefonica del Peru SA, B................................... Peru 10,829,856 13,021,234
Telefonica del Peru SA, B, ADR.............................. Peru 1,829,200 21,607,425
Telefonos de Mexico SA (Telmex), L.......................... Mexico 13,623,481 38,591,880
Telefonos de Mexico SA (Telmex), ADR........................ Mexico 3,600,200 205,886,438
---------------
675,428,683
---------------
TEXTILES & APPAREL .2%
*Adidas-Salomon AG.......................................... Germany 174,080 16,606,347
Courtaulds Textiles PLC..................................... United Kingdom 3,750,000 9,071,321
---------------
25,677,668
---------------
TRANSPORTATION 5.2%
+Air New Zealand Ltd., B.................................... New Zealand 16,817,000 27,851,617
British Airways Plc. ....................................... United Kingdom 16,618,800 122,933,115
Cathay Pacific Airways Ltd. ................................ Hong Kong 52,658,000 58,790,191
Great Eastern Shipping Co. Ltd. ............................ India 3,400 1,729
Guangshen Railway Co. Ltd., H, ADR.......................... China 502,620 2,827,238
Hitachi Zosen Corp. ........................................ Japan 21,806,000 26,648,715
</TABLE>
18
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION (CONT.)
Kvaerner ASA, A............................................. Norway 1,622,460 $ 31,664,254
Mayne Nickless Ltd., A...................................... Australia 8,000,000 26,079,829
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 4,185,828 49,186,262
Singapore Airlines Ltd., fgn. .............................. Singapore 27,900,800 205,772,451
Vosper Thornycroft Holdings PLC............................. United Kingdom 1,200,000 16,551,858
---------------
568,307,259
---------------
UTILITIES ELECTRICAL & GAS 7.9%
*CEZ AS..................................................... Czech Republic 10,609,093 13,824,287
CLP Holdings Ltd. .......................................... Hong Kong 21,426,000 100,938,853
Electrabel SA............................................... Belgium 239,550 99,927,548
Gener SA, ADR............................................... Chile 1,918,650 28,779,750
Hong Kong Electric Holdings Ltd. ........................... Hong Kong 39,249,600 111,703,873
Iberdrola SA, Br. .......................................... Spain 6,000,000 93,858,060
*Korea Electric Power Corp. ................................ South Korea 5,355,420 126,499,091
Mosenergo, ADR.............................................. Russia 1,350,000 2,700,000
Mosenergo, ADR, 144A........................................ Russia 1,350,000 2,700,000
National Grid Group PLC..................................... United Kingdom 3,579,093 25,887,676
National Power PLC.......................................... United Kingdom 4,000,000 31,815,706
Powergen PLC................................................ United Kingdom 1,078,256 13,179,798
Thames Water Group PLC...................................... United Kingdom 5,467,833 89,696,918
Transportadora de Gas del Sur SA, B, Reg S, ADR............. Argentina 3,590,600 35,457,175
Veba AG..................................................... Germany 1,500,000 79,203,030
---------------
856,171,765
---------------
TOTAL COMMON STOCKS (COST $11,307,625,264).................. 9,935,480,042
---------------
PREFERRED STOCKS 4.3%
+Ballast Nedam NV, pfd. .................................... Netherlands 240,449 6,810,016
Banco Bradesco SA BBD, pfd. ................................ Brazil 6,996,200,000 28,122,317
*Banco Bradesco SA BBD, new, pfd. .......................... Brazil 289,986,485 1,158,269
Centrais Eletricas Brasileiras SA (Electrobras), B, pfd. ... Brazil 370,900,000 5,085,066
Centrais Eletricas Brasileiras SA (Electrobras), ADR,
pfd. ..................................................... Brazil 3,858,200 26,448,104
*Centrais Geradoras Do Sul Do Brasil SA, ADR, pfd. ......... Brazil 321,660 972,094
Cia Vale do Rio Doce, A, pfd. .............................. Brazil 949,420 12,153,509
Cia Vale do Rio Doce, A, ADR, pfd. ......................... Brazil 1,550,500 19,847,924
Embotelladora Andina SA, B, ADR, pfd. ...................... Chile 684,950 7,962,544
Fiat SpA, pfd. ............................................. Italy 23,886,400 36,473,991
Petroleo Brasileiro SA (Petrobras), pfd. ................... Brazil 340,000,000 26,917,641
Tele Celular Sul Participacoes SA, ADR, pfd. ............... Brazil 205,000 3,305,625
Tele Centro Oeste Celular Participacoes SA, ADR, pfd. ...... Brazil 683,334 1,793,752
*Tele Centro Sul Participacoes SA, ADR, pfd. ............... Brazil 730,000 29,200,000
Tele Leste Celular Participacoes SA, ADR, pfd. ............. Brazil 41,000 858,438
Tele Nordeste Celular Participacoes SA, ADR, pfd. .......... Brazil 102,500 1,563,125
Tele Norte Celular Participacoes SA, ADR, pfd. ............. Brazil 41,000 996,813
*Tele Norte Leste Participacoes SA, ADR, pfd. .............. Brazil 3,650,000 36,500,000
Tele Sudeste Celular Participacoes SA, ADR, pfd. ........... Brazil 410,000 5,458,125
</TABLE>
19
PAGE
TEMPLETON FOREIGN FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Telecomunicacoes Brasileiras SA (Telebras), pfd. ........... Brazil 572,200,000 $ 37,059,440
Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ...... Brazil 2,050,000 352,344
Telecomunicacoes de Minas Gerais Celular Telemig, pfd. ..... Brazil 38,363,000 344,984
Telecomunicacoes de Minas Gerais SA, B, pfd. ............... Brazil 38,363,000 631,529
*Telemig Celular Participacoes SA, ADR, pfd. ............... Brazil 102,500 1,896,250
Telesp Celular Participacoes SA, ADR, pfd. ................. Brazil 820,000 17,220,000
Telesp Participacoes SA, ADR, pfd. ......................... Brazil 2,050,000 33,825,000
+Usinas Siderurgicas De Minas Gerais SA, pfd. .............. Brazil 7,945,430 9,682,883
Volkswagen AG, pfd. ........................................ Germany 3,051,340 121,256,389
---------------
TOTAL PREFERRED STOCKS (COST $844,075,927).................. 473,896,172
---------------
PRINCIPAL
AMOUNT**
-------------
SHORT TERM INVESTMENTS (COST $402,355,412) 3.7%
U.S. Treasury Bills, 3.835% to 4.57%, with maturities to
5/27/99................................................... United States $405,540,000 402,295,657
---------------
TOTAL INVESTMENTS (COST $12,554,056,603) 99.1%.............. 10,811,671,871
OTHER ASSETS, LESS LIABILITIES .9%.......................... 98,362,819
---------------
TOTAL NET ASSETS 100.0%..................................... $10,910,034,690
===============
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
+Affiliated issuers (see note 6).
See Notes to Financial Statements.
20
PAGE
TEMPLETON FOREIGN FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$12,554,056,603).......................................... $10,811,671,871
Cash....................................................... 4,321,083
Receivables:
Investment securities sold................................ 158,672,641
Capital shares sold....................................... 20,976,634
Dividends and interest.................................... 36,453,531
---------------
Total assets.......................................... 11,032,095,760
---------------
Liabilities:
Payables:
Investment securities purchased........................... 50,462,071
Capital shares redeemed................................... 58,659,872
To affiliates............................................. 8,109,265
Accrued Expenses........................................... 4,829,862
---------------
Total liabilities..................................... 122,061,070
---------------
Net assets, at value........................................ $10,910,034,690
===============
Net assets consist of:
Undistributed net investment income........................ $ 77,550,803
Net unrealized depreciation................................ (1,742,384,732)
Accumulated net realized gain.............................. 16,302,175
Capital shares............................................. 12,558,566,444
---------------
Net assets, at value........................................ $10,910,034,690
===============
CLASS A:
Net asset value per share ($9,841,644,761 / 1,202,587,064
shares outstanding)...................................... $8.18
===============
Maximum offering price per share ($8.18 / 94.25%).......... $8.68
===============
CLASS B:
Net asset value per share ($1,697,253 / 207,717 shares
outstanding)*............................................ $8.17
===============
CLASS C:
Net asset value per share ($1,020,182,208 / 126,397,066
shares outstanding)*..................................... $8.07
===============
Maximum offering price per share ($8.07 / 99.00%).......... $8.15
===============
ADVISOR CLASS:
Net asset value per share ($46,510,468 / 5,681,893 shares
outstanding)............................................. $8.19
===============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
21
PAGE
TEMPLETON FOREIGN FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $13,182,198)
Dividends.................................................. $151,549,022
Interest................................................... 24,779,410
------------
Total investment income............................... $ 176,328,432
Expenses:
Management fees (Note 3)................................... 36,231,201
Administrative fees (Note 3)............................... 4,624,334
Distribution fees (Note 3)
Class A................................................... 13,351,917
Class B................................................... 1,199
Class C................................................... 5,661,624
Transfer agent fees (Note 3)............................... 7,100,000
Custodian fees............................................. 2,290,000
Reports to shareholders.................................... 1,345,000
Registration and filing fees............................... 105,000
Professional fees.......................................... 71,800
Directors' fees and expenses............................... 94,500
Other...................................................... 114,843
------------
Total expenses........................................ 70,991,418
--------------
Net investment income........................... 105,337,014
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 21,638,674
Foreign currency transactions............................. (9,262,065)
------------
Net realized gain..................................... 12,376,609
Net unrealized appreciation on investments............ 1,013,854,218
--------------
Net realized and unrealized gain............................ 1,026,230,827
--------------
Net increase in net assets resulting from operations........ $1,131,567,841
==============
</TABLE>
See Notes to Financial Statements.
22
PAGE
TEMPLETON FOREIGN FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1999 YEAR ENDED
(UNAUDITED) AUGUST 31, 1998
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 105,337,014 $ 434,425,533
Net realized gain from investments and foreign currency
transactions............................................ 12,376,609 1,318,565,421
Net unrealized appreciation (depreciation) on
investments.............................................. 1,013,854,218 (4,427,460,673)
----------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 1,131,567,841 (2,674,469,719)
Distributions to shareholders from:
Net investment income:
Class A.................................................. (319,041,711) (418,126,512)
Class C.................................................. (27,555,750) (31,961,548)
Advisor Class............................................ (1,552,073) (4,907,491)
Net realized gains:
Class A.................................................. (940,265,165) (1,101,558,721)
Class C.................................................. (102,255,543) (105,695,936)
Advisor Class............................................ (4,253,117) (11,895,183)
Capital share transactions (Note 2):
Class A.................................................. (666,782,496) 285,456,853
Class B.................................................. 1,723,568 266,405,053
Class C.................................................. (114,594,205) --
Advisor Class............................................ (2,292,607) (58,437,266)
----------------------------------------
Net decrease in net assets.............................. (1,045,301,258) (3,855,190,470)
Net assets:
Beginning of period........................................ 11,955,335,948 15,810,526,418
----------------------------------------
End of period.............................................. $10,910,034,690 $11,955,335,948
========================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 77,550,803 $ 320,363,323
========================================
</TABLE>
See Notes to Financial Statements.
23
PAGE
TEMPLETON FOREIGN FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Foreign 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. Under normal market conditions, the Fund will invest primarily in the
equity securities of companies outside the United States, including in emerging
markets. 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 TRANSLATION:
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
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, 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.
24
PAGE
TEMPLETON FOREIGN FUND
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 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 comprising
the Company 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 four classes of shares; Class A, Class B, Class C and Advisor
Class shares. Effective January 1, 1999, Class I and Class II shares were
renamed Class A and Class C, respectively, and a fourth class of shares, Class
B, was established. 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, 1999, there were 3.7 billion shares of capital stock authorized
($1.00 par value) of which 2.5 billion shares have been classified as Fund
shares as follows: 2 billion Class A shares, 100 million Class B shares, 300
million Class C shares and 100 million Advisor Class shares. Transactions in the
Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
-----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold....................................... 329,885,376 $ 2,751,761,372 483,458,360 $ 5,097,767,696
Shares issued on reinvestment of distributions.... 140,747,928 1,127,387,982 123,818,793 1,329,020,247
Shares redeemed................................... (543,127,079) (4,545,931,850) (593,134,761) (6,141,331,090)
-----------------------------------------------------------------------
Net increase (decrease)........................... (72,493,775) $ (666,782,496) 14,142,392 $ 285,456,853
=======================================================================
</TABLE>
25
PAGE
TEMPLETON FOREIGN FUND
Notes to Financial Statements (unaudited) (continued)
2. CAPITAL STOCK (CONT.)
<TABLE>
<CAPTION>
PERIOD ENDED
FEBRUARY 28, 1999*
----------------------------
SHARES AMOUNT
----------------------------
<S> <C> <C>
CLASS B SHARES:
Shares sold............................................ 208,322 $ 1,728,511
Shares redeemed........................................ (605) (4,943)
----------------------------
Net increase........................................... 207,717 $ 1,723,568
============================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Shares sold............................................ 22,881,188 $ 187,982,730 55,528,728 $ 582,473,124
Shares issued on reinvestment of distributions......... 12,346,592 97,784,887 9,502,152 100,985,613
Shares redeemed........................................ (48,537,283) (400,361,822) (41,180,696) (417,053,684)
-----------------------------------------------------------------
Net increase (decrease)................................ (13,309,503) $(114,594,205) 23,850,184 $ 266,405,053
=================================================================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold............................................ 2,926,061 $ 24,523,026 17,334,441 $ 183,323,322
Shares issued on reinvestment of distributions......... 608,301 4,866,404 260,292 3,067,476
Shares redeemed........................................ (3,782,343) (31,682,037) (23,847,551) (244,828,064)
-----------------------------------------------------------------
Net decrease........................................... (247,981) $ (2,292,607) (6,252,818) $ (58,437,266)
==================================================================
</TABLE>
*Effective date of Class B shares was January 1, 1999.
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.
26
PAGE
TEMPLETON FOREIGN FUND
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
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 $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>
The Fund reimburses Distributors up to 0.25%, 1.00%, and 1.00% per year of the
average daily net assets of Class A, Class B and Class C shares, respectively,
for costs incurred in marketing the Fund's Class A, Class B and Class C shares.
Under the Class A distribution plan, costs and expenses exceeding the maximum
may be reimbursed in subsequent periods. At February 28, 1999, unreimbursed
costs were $$2,967,605. Distributors paid net commissions on sales of the Fund's
shares and received contingent deferred sales charges for the period of $132,493
and $602,793, respectively.
Legal fees of $29,072 were paid to a law firm in which a partner is an officer
of the Fund.
4. INCOME TAXES
At February 28, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $12,564,601,553 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $ 766,475,448
Unrealized depreciation................................... (2,519,405,130)
---------------
Net unrealized depreciation............................... $(1,752,929,682)
===============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1999 aggregated $1,783,286,003 and $3,589,602,468
respectively.
27
PAGE
TEMPLETON FOREIGN FUND
Notes to Financial Statements (unaudited) (continued)
6. INVESTMENT IN AFFILIATES
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, 1999
were $728,429,208. For the period ended February 28, 1999, dividend income from
"affiliated companies" was $11,793,948 and net realized gains from disposition
of "affiliated companies" were $252,841.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES HELD GROSS GROSS SHARES HELD VALUE DIVIDEND INCOME REALIZED
NAME OF ISSUER AUG. 31, 1998 ADDITIONS REDUCTIONS FEB. 28, 1999 FEB. 28, 1999 9/1/98-2/28/99 GAIN
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NON CONTROLLED AFFILIATES
Agrium Inc. ............... 7,048,695 -- -- 7,048,695 $ 56,389,560 $ 329,527 --
Air New Zealand Ltd., B.... 16,817,000 -- -- 16,817,000 27,851,617 612,202 --
Bail Investissement........ 164,380 -- -- 164,380 22,465,898 -- --
Ballast Nedam NV, pfd. .... 256,749 -- (16,300) 240,449 6,810,016 -- $(204,232)
DSM NV, Br................. 1,852,903 -- -- 1,852,903 160,688,662 -- --
Elementis PLC.............. 28,200,000 538,196 -- 28,738,196 33,838,349 966,863 --
Elkem ASA, A............... 2,524,000 -- (612,700) 1,911,300 * -- *
G P Batteries International
Ltd....................... 5,883,398 232,000 -- 6,115,398 10,654,003 456,207 --
Grand Hotel Holdings
Ltd....................... 34,685,000 -- -- 34,685,000 4,790,158 2,687,718 --
Hepworth PLC............... 21,012,458 -- -- 21,012,458 51,671,082 1,143,912 --
Hollandsche Beton Groep
NV........................ 2,194,149 -- (161,824) 2,032,325 19,409,658 -- 457,073
Inchcape PLC............... 30,000,000 -- -- 30,000,000 71,369,069 -- --
Mckechnie Group PLC........ 7,000,000 3,052,495 -- 10,052,495 56,283,794 1,785,010 --
Mo Och Domsjoe AB (Modo),
B......................... 4,000,800 -- -- 4,000,800 104,923,780 -- --
Usinas Siderurgicas De
Minas Gerais SA, pfd. .... 7,945,430 -- -- 7,945,430 9,682,883 1,719,757 --
Vickers Group PLC.......... 19,749,701 2,923,000 -- 22,672,701 53,756,044 1,009,667 --
W.H. Smith Group PLC....... 13,671,360 -- (1,787,600) 11,883,760 * 962,533 *
Yamato Kogyo Co. Ltd....... 7,702,000 -- -- 7,702,000 37,844,635 120,552 --
-------------------------------------------
TOTAL NON CONTROLLED
AFFILIATES................ $728,429,208 $11,793,948 $ 252,841
===========================================
</TABLE>
*As of February 28, 1999, no longer an affiliate.
28
PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending 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
Mutual Discovery 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
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard 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
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 Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Fund Allocator Series
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government Securities Fund
Franklin Federal Money Fund
Franklin Money 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**
California**
Colorado
Connecticut
Florida**
Georgia
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan+
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
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
plan 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. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
01/99
PAGE
[LOGO FRANKLIN(R)TEMPLETON(R)] Bulk Rate
Templeton Foreign Fund U.S. Postage
777 Mariners Island Blvd., P.O. Box 7777 PAID
San Mateo, CA 94403-7777 Permit No. 75
Bell, CA
SEMIANNUAL REPORT
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
1-800/DIAL BEN(R)
www.franklin-templeton.com
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current Templeton Foreign
Fund prospectus, which contains more complete information including risk
factors, charges and expenses. Like any investment in securities, the value of
the Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political and other factors, as well as investment decisions by the
Investment Manager, which will not always be profitable or wise. The Fund and
its investors are not protected from such losses by the Investment Manager.
Therefore, investors who cannot accept this risk should not invest in shares of
the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
[LOGO PRINTED ON RECYCLED PAPER]
104 S99 4/99
