UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02781
Templeton Funds
(Exact name of registrant as specified in charter)
300 S.E. 2nd Street, Fort Lauderdale, FL 33301-1923
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: 954 527-7500
Date of fiscal year end: 8/31
Date of reporting period: 2/28/22
Item 1. Reports to Stockholders.
a.)
The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1.)
b.)
A copy of the notice transmitted to shareholders in reliance on Rule 30e-3 under the 1940 Act that contains disclosures specified by paragraph (c)(3) of that rule is included in the Annual Report.
Not Applicable
.
SEMIANNUAL
REPORT
AND
SHAREHOLDER
LETTER
Templeton
Foreign
Fund
A
Series
of
Templeton
Funds
February
28,
2022
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up
for
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delivery
at
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franklintempleton.com
Semiannual
Report
1
SHAREHOLDER
LETTER
Dear
Shareholder:
During
the
six
months
ended
February
28,
2022,
the
global
economic
recovery
was
hampered
by
renewed
outbreaks
of
COVID-19,
supply-chain
disruptions
and
geopolitical
tensions
and
conflict.
Rising
inflation
across
multiple
countries
caused
many
central
banks,
including
the
U.S.
Federal
Reserve,
to
adopt
less
accommodative
monetary
stances,
putting
pressure
on
global
equity
markets.
New
Chinese
government
regulations
on
some
businesses
further
dampened
investor
sentiment
in
Asian
and
emerging
market
stocks.
Near
period-end,
Russia’s
invasion
of
Ukraine
increased
investor
uncertainty,
as
international
sanctions
on
Russia
constrained
companies
that
do
business
with
Russia
and
threatened
to
disrupt
global
economic
activity
and
commodity
markets.
In
this
environment,
stocks
in
global
developed
and
emerging
markets
excluding
the
U.S.,
as
measured
by
the
MSCI
All
Country
World
Index
ex
USA
Index-NR
(net
of
tax
withholding
when
dividends
are
paid),
posted
a
-6.95%
total
return
for
the
period.
1
We
are
committed
to
our
long-term
perspective
and
disciplined
investment
approach
as
we
conduct
a
rigorous,
fundamental
analysis
of
securities
with
a
regular
emphasis
on
investment
risk
management.
Historically,
patient
investors
have
achieved
rewarding
results
by
evaluating
their
goals,
diversifying
their
assets
globally
and
maintaining
a
disciplined
investment
program,
all
hallmarks
of
the
Templeton
investment
philosophy.
We
continue
to
recommend
investors
consult
financial
professionals
and
review
their
portfolios
to
design
a
long-term
strategy
and
portfolio
allocation
that
meet
their
individual
needs,
goals
and
risk
tolerance.
Templeton
Foreign
Fund’s
semiannual
report
includes
more
detail
about
prevailing
conditions
and
a
discussion
about
investment
decisions
during
the
period.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
We
thank
you
for
investing
with
Franklin
Templeton,
welcome
your
questions
and
comments,
and
look
forward
to
serving
your
investment
needs
in
the
years
ahead.
Sincerely,
Alan
Bartlett
Chief
Investment
Officer
Templeton
Global
Equity
Group
This
letter
reflects
our
analysis
and
opinions
as
of
February
28,
2022,
unless
otherwise
indicated.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
fund.
Statements
of
fact
are
from
sources
considered
reliable.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Semiannual
Report
2
Contents
Semiannual
Report
Templeton
Foreign
Fund
3
Performance
Summary
8
Your
Fund’s
Expenses
10
Financial
Highlights
and
Statement
of
Investments
11
Financial
Statements
19
Notes
to
Financial
Statements
23
Shareholder
Information
32
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
3
franklintempleton.com
Semiannual
Report
SEMIANNUAL
REPORT
Templeton
Foreign
Fund
This
semiannual
report
for
Templeton
Foreign
Fund
covers
the
period
ended
February
28,
2022
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
long-term
capital
growth.
Under
normal
market
conditions,
the
Fund
invests
at
least
80%
of
its
net
assets
in
foreign
securities.
These
securities
are
predominantly
equity
securities
of
companies
located
outside
the
U.S.,
including
developing
markets.
Performance
Overview
The
Fund’s
Class
A
shares
posted
a
-2.65%
cumulative
total
return
for
the
six
months
under
review.
In
comparison,
the
MSCI
All
Country
World
Index
(ACWI)
ex
USA
Index-NR,
which
measures
stock
performance
in
global
developed
and
emerging
markets
excluding
the
U.S.,
posted
a
-6.95%
cumulative
total
return.
1
Please
note
index
performance
information
is
provided
for
reference
and
we
do
not
attempt
to
track
the
index
but
rather
undertake
investments
on
the
basis
of
fundamental
research.
You
can
find
more
performance
data
in
the
Performance
Summary
beginning
on
page
8
.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Economic
and
Market
Overview
Global
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
ACWI-NR,
posted
a
-5.26%
total
return
for
the
six
months
ended
February
28,
2022.
1
The
combination
of
increased
consumer
demand
and
persistent
supply-chain
disruptions
contributed
to
higher
inflation
in
many
countries.
This
inflationary
pressure
led
many
of
the
world’s
central
banks
to
adopt
less
accommodative
stances
regarding
monetary
policy.
The
Chinese
government’s
imposition
of
new
restrictions
on
some
businesses
also
pressured
Asian
and
global
emerging
market
stocks.
Near
period-end,
Russia’s
invasion
of
Ukraine
increased
investor
uncertainty,
as
international
sanctions
on
Russia
constrained
companies
that
do
business
with
Russia
and
threatened
to
disrupt
global
economic
activity
and
commodity
markets.
In
the
U.S.,
the
economy
continued
to
recover
amid
declining
unemployment,
solid
wage
growth
and
strong
business
confidence.
Gross
domestic
product
(GDP)
growth
accelerated
in
the
fourth
quarter
of
2021,
as
strong
consumer
and
business
spending
supported
the
economy.
However,
investor
expectations
for
higher
interest
rates
and
geopolitical
uncertainty
late
in
the
reporting
period
negatively
impacted
U.S.
equities.
The
U.S.
Federal
Reserve
(Fed)
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%
and
continued
its
program
of
open-ended
U.S.
Treasury
(UST)
and
mortgage
bond
purchases
to
help
keep
markets
functioning.
In
its
January
2022
meeting
statement,
however,
the
Fed
noted
that
due
to
employment
gains
and
elevated
inflation,
it
expected
conditions
would
soon
be
appropriate
for
raising
interest
rates.
Furthermore,
the
Fed
maintained
its
timetable
for
reducing
its
purchases
of
UST
and
mortgage-backed
securities.
Economic
growth
slowed
in
the
eurozone,
declining
notably
in
the
fourth
quarter
of
2021
as
the
spread
of
the
Omicron
variant
of
COVID-19
disrupted
labor
markets
and
led
to
renewed
restrictions.
Additionally,
in
February
2022,
the
annual
inflation
rate
in
the
eurozone
reached
the
highest
level
on
record,
and
the
prospect
of
energy
shortages
during
the
winter
tempered
investor
optimism.
The
European
Central
Bank
struck
a
less
accommodative
tone
at
its
February
meeting,
acknowledging
that
inflation
has
been
more
persistent
than
expected
and
opening
the
possibility
of
an
interest-rate
increase
in
2022.
Stocks
of
companies
Geographic
Composition
2/28/22
%
of
Total
Net
Assets
Europe
49.8%
Asia
40.4%
North
America
7.0%
Latin
America
&
Caribbean
1.9%
Short-Term
Investments
&
Other
Net
Assets
0.9%
1.
Source:
Morningstar.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
or
distributions.
It
does
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
16
.
Templeton
Foreign
Fund
4
franklintempleton.com
Semiannual
Report
with
exposure
to
Russia,
particularly
banks,
endured
further
declines
late
in
the
reporting
period.
Consequently,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index-NR,
posted
a
-6.70%
total
return
for
the
six
months
under
review.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index-NR,
posted
a
-9.34%
total
return
for
the
six-month
period.
1
Although
China’s
economy
continued
to
grow,
it
was
pressured
by
COVID-19
restrictions
and
government
measures
to
limit
real
estate
speculation.
Unexpected
regulatory
changes
by
the
Chinese
government,
which
negatively
impacted
education-
and
technology-related
businesses,
and
investor
concerns
about
the
solvency
of
several
large
Chinese
property
developers
further
pressured
Asian
stocks
during
the
six-
month
period.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index-NR,
posted
a
-9.81%
total
return
for
the
six
months
under
review.
1
Rising
interest
rates
and
elevated
inflation
dampened
investor
enthusiasm
in
global
emerging
market
equities.
Geopolitical
instability
drove
strength
in
the
U.S.
dollar,
further
pressuring
stocks
in
emerging
market
countries,
especially
Russia
as
the
ruble
plunged
against
the
U.S.
dollar.
Interest-rate
increases
to
curb
inflation
by
several
central
banks,
including
those
of
Brazil
and
Mexico,
as
well
as
the
international
sanctions
on
Russia,
raised
investor
concerns
about
a
slowdown
in
economic
growth.
Investment
Strategy
Our
investment
strategy
employs
a
bottom-up,
value-
oriented,
long-term
approach.
We
focus
on
the
market
price
of
a
company’s
securities
relative
to
our
evaluation
of
the
company’s
long-term
earnings,
asset
value
and
cash
flow
potential.
Our
analysis
includes
an
assessment
of
the
potential
impacts
of
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
We
also
consider
the
company’s
price/
earnings
ratio,
price/cash
flow
ratio,
profit
margins
and
liquidation
value.
The
Fund
may,
from
time
to
time,
engage
in
currency-related
derivatives,
such
as
currency
and
cross-currency
forwards
and
currency
futures
contracts,
to
seek
to
hedge
(protect)
against
currency
risks.
Manager’s
Discussion
Templeton
Foreign
Fund
outperformed
its
benchmark,
the
MSCI
ACWI
ex-USA
Index-NR,
during
the
semiannual
review
period,
led
by
stock
selection
and
a
favorable
overweighted
allocation
in
energy.
Stock
selection
in
industrials,
information
technology
(IT),
health
care
and
several
other
sectors
also
contributed.
Consumer
discretionary
and,
to
lesser
extents,
consumer
staples
and
financials
were
the
only
sectors
that
detracted
from
relative
results.
From
a
geographical
standpoint,
an
overweighting
in
the
U.K.,
underweighting
in
China
and
stock
selection
in
Germany
and
Japan
all
aided
relative
returns.
Top
10
Industries
2/28/22
%
of
Total
Net
Assets
a
Banks
13.5%
Oil,
Gas
&
Consumable
Fuels
8.7%
Pharmaceuticals
7.6%
Industrial
Conglomerates
5.4%
Metals
&
Mining
4.5%
Automobiles
4.4%
Aerospace
&
Defense
4.3%
Semiconductors
&
Semiconductor
Equipment
4.1%
Internet
&
Direct
Marketing
Retail
3.7%
Insurance
3.3%
Top
10
Countries
2/28/22
A
%
of
Total
Net
Assets
A
a
United
Kingdom
22.8%
Japan
17.4%
Germany
10.2%
Netherlands
8.3%
South
Korea
7.0%
United
States
7.0%
China
6.6%
Switzerland
3.4%
France
3.4%
Hong
Kong
3.2%
Templeton
Foreign
Fund
5
franklintempleton.com
Semiannual
Report
The
period
under
review
encompassed
what
we
viewed
as
a
meaningful
inflection
point
in
markets.
After
several
months
of
more
persistent
and
higher-than-expected
inflation,
in
November
2021
the
Fed
signaled
a
more
hawkish
position,
including
likely
interest
rate
hikes
and
the
gradual
phasing
out
of
asset
purchases
known
as
quantitative
easing.
The
Fed’s
policy
pivot
was
echoed
by
other
major
central
banks,
pushing
bond
yields
higher,
steepening
key
yield
curves
and
benefiting
value-oriented
sectors
with
positive
interest-rate
exposure
(like
financials)
and
inflation
hedge
characteristics
(like
energy
and
materials).
At
the
same
time,
the
erstwhile
leaders
of
the
last
market
cycle—expensive,
growth-oriented
stocks
in
areas
like
technology,
consumer
discretionary,
and
media
and
entertainment—sold
off
sharply.
Overall,
investors
seemed
to
refocus
on
fundamental
and
quality
characteristics
and
de-emphasize
the
speculative
extrapolation
of
revenue
growth
trends,
an
about-face
that
benefited
Templeton’s
strategies
given
our
emphasis
on
rigorous
fundamental
analysis
and
valuation
discipline.
Indeed,
Templeton
Foreign
Fund
had
its
best
start
to
a
year
relative
to
its
benchmark
in
more
than
three
decades
during
the
first
two
months
of
2022,
and
was
comfortably
ahead
of
its
benchmark
on
a
trailing
one-year
basis.
The
energy
sector
was
the
biggest
relative
contributor
at
a
time
when
the
price
of
oil
soared
to
its
highest
levels
since
2014.
The
sector
accounted
for
three
of
the
Fund’s
top-five
contributors:
U.K.-based
oil
majors
Shell
and
BP
and
Canadian
energy
producer
Cenovus
Energy
(not
held
at
period-end).
We
have
been
adding
selectively
to
our
energy
position
over
the
past
year
given
growing
supply-and-demand
imbalances,
stemming
from
years
of
underinvestment
in
production
on
the
supply
side
and
a
likely
slower-than-expected
transition
to
renewables
supporting
hydrocarbon
demand.
Rising
inflationary
pressures
and
continued
supply
discipline
from
the
Organization
of
the
Petroleum
Exporting
Countries
kept
energy
prices
raised
during
the
period,
even
before
Russia’s
invasion
of
Ukraine
led
to
a
breakout
in
oil
prices
well
above
$100
per
barrel
in
the
early
days
of
March
2022.
While
we
expect
significant
volatility
in
oil
prices
given
current
geopolitical
events,
we
continue
to
believe
that
intermediate-term
supply-and-
demand
fundamentals
remain
supportive.
Against
this
backdrop,
high-quality
oil
and
gas
producers
remain,
in
our
view,
cheaply-valued
and
highly
cash-generative,
with
much
of
that
cash
being
returned
to
shareholders
in
the
form
of
buybacks
and
dividends.
Industrials
stocks
also
outperformed,
led
by
U.K.-based
defense
and
aerospace
specialist
BAE
Systems.
The
market’s
rotation
toward
value
in
the
latter
half
of
the
reporting
period
had
a
defensive
flavor
to
it,
which
benefited
BAE
as
a
lowly-valued,
capital-intensive
company
that
benefits
from
both
COVID-19
reopening
and
escalating
geopolitical
tensions.
In
our
view,
BAE
offers
an
attractive
revenue
profile
with
above-industry
growth
and
an
enviable
order
backlog
that
creates
high
visibility.
The
firm
has
strong
incumbent
positions
that
are
well-supported
by
government
spending
initiatives,
as
well
as
a
geographically
diversified
client
base
and
attractive
product
mix
between
production
and
after-market.
In
our
opinion,
valuations
remain
undemanding
and
dividend
and
free
cash-flow
yields
are
generous,
with
the
firm’s
new
chief
financial
officer
prioritizing
capital
return
to
shareholders.
IT
holdings
also
notably
outperformed.
While
there
were
no
IT
holdings
among
the
Fund’s
10
biggest
contributors,
our
reasonably-valued
sector
holdings
successfully
limited
losses
relative
to
their
more
expensive
benchmark
counterparts.
Our
underweighted
exposure
to
the
weak
sector
also
supported
relative
outperformance.
Health
care,
communication
services,
real
estate,
materials
and
utilities
all
also
outperformed
during
the
period,
while
our
slightly
elevated
cash
position
positively
impacted
relative
returns
in
a
weak
market
environment.
Turning
to
detractors,
consumer
discretionary
was
the
biggest
relative
laggard,
pressured
by
an
unfavorable
overweighting
and
weakness
at
European
food-delivery
firm
Just
Eat
Takeaway.com.
The
stock
remained
under
pressure
amid
concerns
about
competition
and
profitability,
and
this
remains
a
“show-me”
story
going
forward.
Investors
will
want
to
see
the
strategic
divestiture
of
certain
assets
Top
10
Holdings
2/28/22
Company
Industry
,
Country
%
of
Total
Net
Assets
A
a
Shell
plc
3.9%
Oil,
Gas
&
Consumable
Fuels,
Netherlands
BP
plc
3.7%
Oil,
Gas
&
Consumable
Fuels,
United
Kingdom
Hitachi
Ltd.
3.1%
Industrial
Conglomerates,
Japan
Samsung
Electronics
Co.
Ltd.
2.8%
Technology
Hardware,
Storage
&
Peripherals,
South
Korea
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
2.7%
Semiconductors
&
Semiconductor
Equipment,
Taiwan
Standard
Chartered
plc
2.7%
Banks,
United
Kingdom
Sumitomo
Metal
Mining
Co.
Ltd.
2.6%
Metals
&
Mining,
Japan
Bayer
AG
2.6%
Pharmaceuticals,
Germany
KB
Financial
Group,
Inc.
2.4%
Banks,
South
Korea
AstraZeneca
plc
2.3%
Pharmaceuticals,
United
Kingdom
Templeton
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Fund
6
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(which
management
is
exploring),
more
consistency
hitting
guidance
targets,
and
an
improving
competitive
environment
that
shifts
from
“growth
at
any
cost”
to
“profitable
growth.”
We
see
numerous
catalysts
that
should
help
Just
Eat
achieve
these
goals,
creating
considerable
upside
potential
from
current
depressed
valuation
levels.
Financials
and
consumer
staples
also
detracted
from
relative
results,
albeit
to
lesser
extents.
Asia-focused
life
insurers
Prudential
and
AIA
Group
were
among
the
financials
sector’s
biggest
laggards.
Shares
declined
as
regulatory
tightening
and
slowing
growth
in
China
led
to
decelerating
new
business
in
this
key
end-market.
However,
we
believe
that
current
growth
headwinds
in
China
are
likely
to
be
transient
and
that
long-term
growth
opportunities
in
this
attractive
market
remain
robust
for
industry
leaders
like
AIA
and
Prudential.
The
stocks
currently
trade
near
the
lower-end
of
their
historical
valuation
range
and
remain
core
holdings
that
we
expect
will
benefit
from
Asia’s
rising
middle-class
and
compound
value
over
time.
In
consumer
staples,
Japanese
pharmacy
Sundrug
slumped
after
reporting
slight
sales
weakness
in
its
most
recent
quarter.
We
remain
constructive
on
the
stock
given
management’s
continued
emphasis
on
returns
on
invested
capital
and
the
company’s
strong
platform
for
profitable
growth
in
a
consolidating
industry.
From
a
geographical
standpoint,
all
major
regions
outperformed,
led
by
favorable
allocations
in
the
U.K.
(overweighted)
and
China
(underweighted)
and
stock
selection
in
Germany,
Japan
and
South
Korea.
Market
volatility
spiked
at
the
end
of
the
reporting
period
after
Russia
invaded
Ukraine,
sparking
a
risk-off
event
across
asset
classes.
The
Fund
has
no
direct
exposure
(and
little
indirect
exposure)
to
Russia.
We
have
not
found
attractive
opportunities
in
Russian
equities
given
heightened
corporate
governance
concerns
and
geopolitical
risks.
Nevertheless,
the
impact
of
war
in
Europe
is
creating
volatility
in
all
risk
assets.
We
are
not
currently
making
any
major
changes
to
our
strategic
positioning,
though
the
portfolio
manager
continues
to
make
incremental
adjustments
designed
to
take
advantage
of
volatility
and
manage
evolving
risks.
This
has
included
slowly
reducing
exposure
to
certain
stocks
that
have
performed
positively
despite
the
selloff
and
appear
fully-valued,
and
rotating
into
high-quality
companies
with
strong
long-term
fundamentals
that
have
sold
off
on
the
back
of
recent
volatility.
Many
such
opportunities
are
emerging
in
Europe,
where
already-wide
valuation
spreads
have
expanded
further
amid
the
Russia-
Ukraine
conflict.
We
also
continue
to
find
select
opportunities
in
“away-from-home”
stocks,
which
should
benefit
as
economies
eventually
reopen
from
COVID-19
and
consumer
demand
shifts
from
goods
to
services.
While
the
near-term
impact
of
war
in
Europe
will
likely
be
negative
for
financial
markets
(and
is
a
tragic
humanitarian
crisis),
it
also
accelerates
the
move
away
from
the
low
interest
rate,
low
inflation,
benign
economic
environment
that
favored
expensive
growth
stocks
in
the
past
cycle.
We
have
continued
to
see
risks
in
both
tails
of
the
market’s
valuation
distribution:
valuation
risk
among
expensive
growth
stocks
and
credit
risk
among
lower
quality
value
stocks.
We
have
viewed
the
recent
leadership
of
these
market
extremes
as
unsustainable
and
have
tried
to
manage
the
portfolio
toward
a
better
balance
of
quality,
earnings
growth
and
valuation.
It
is
important
to
recognize
the
effect
of
currency
movements
on
the
Fund’s
performance.
In
general,
if
the
value
of
the
U.S.
dollar
goes
up
compared
with
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
go
down
in
value
because
it
will
be
worth
fewer
U.S.
dollars.
This
can
have
a
negative
effect
on
Fund
performance.
Conversely,
when
the
U.S.
dollar
weakens
in
relation
to
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
increase
in
value,
which
can
contribute
to
Fund
performance.
For
the
six
months
ended
February
28,
2022,
the
U.S.
dollar
rose
in
value
relative
to
most
currencies.
As
a
result,
the
Fund’s
performance
was
negatively
affected
by
the
portfolio’s
investment
predominantly
in
securities
with
non-
U.S.
currency
exposure.
Thank
you
for
your
continued
participation
in
Templeton
Foreign
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Christopher
James
Peel,
CFA
Lead
Portfolio
Manager
Herbert
J.
Arnett,
Jr.
Peter
M.
Moeschter,
CFA
Warren
Pustam,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
February
28,
2022,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
CFA
®
is
a
trademark
owned
by
CFA
Institute
Templeton
Foreign
Fund
7
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market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Performance
Summary
as
of
February
28,
2022
Templeton
Foreign
Fund
8
franklintempleton.com
Semiannual
Report
The
performance
table
does
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
2/28/22
1
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
5.50%
and
the
minimum
is
0%.
Class
A
:
5.50%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Share
Class
Cumulative
Total
Return
2
Average
Annual
Total
Return
3
–
A
4
6-Month
-2.65%
-7.98%
1-Year
+1.40%
-4.13%
5-Year
+13.45%
+1.41%
10-Year
+46.07%
+3.27%
Advisor
6-Month
-2.53%
-2.53%
1-Year
+1.59%
+1.59%
5-Year
+14.82%
+2.80%
10-Year
+49.70%
+4.12%
See
page
9
for
Performance
Summary
footnotes.
Templeton
Foreign
Fund
Performance
Summary
9
franklintempleton.com
Semiannual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
possible
loss
of
principal.
Special
risks
are
associated
with
foreign
investing,
including
currency
fluctuations,
economic
instability
and
political
developments;
investments
in
developing
markets
involve
heightened
risks
related
to
the
same
factors.
Currency
rates
may
fluctuate
significantly
over
short
periods
of
time,
and
can
reduce
returns.
Because
the
Fund
may
invest
its
assets
in
companies
in
a
specific
region,
including
Europe,
it
is
subject
to
greater
risks
of
adverse
developments
in
that
region
and/or
the
surrounding
regions
than
a
fund
that
is
more
broadly
diversified
geographical-
ly.
Current
political
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Derivatives,
including
currency
management
strategies,
involve
costs
and
can
create
economic
leverage
in
the
portfolio
which
may
result
in
significant
volatility
and
cause
the
Fund
to
participate
in
losses
(as
well
as
enable
gains)
on
an
amount
that
exceeds
the
Fund’s
initial
investment.
The
Fund
may
not
achieve
the
anticipated
benefits,
and
may
realize
losses
when
a
counterparty
fails
to
perform
as
promised.
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
Russia’s
military
invasion
of
Ukraine
in
February
2022,
the
resulting
responses
by
the
United
States
and
other
countries,
and
the
potential
for
wider
conflict
could
increase
volatility
and
uncertainty
in
the
financial
markets
and
adversely
affect
regional
and
global
economies.
The
United
States
and
other
countries
have
im-
posed
broad-ranging
economic
sanctions
on
Russia
and
certain
Russian
individuals,
banking
entities
and
corporations
as
a
response
to
its
invasion
of
Ukraine.
The
United
States
and
other
countries
have
also
imposed
economic
sanctions
on
Belarus
and
may
impose
sanctions
on
other
countries
that
support
Russia’s
military
invasion.
These
sanctions,
as
well
as
any
other
economic
consequences
related
to
the
invasion,
such
as
additional
sanctions,
boycotts
or
changes
in
consumer
or
purchaser
preferences
or
cyberattacks
on
governments,
companies
or
individuals,
may
further
decrease
the
value
and
liquidity
of
certain
Russian
securities
and
securities
of
issuers
in
other
countries
that
are
subject
to
economic
sanctions
related
to
the
invasion.
1.
The
Fund
has
an
expense
reduction
contractually
guaranteed
through
12/31/22.
Fund
investment
results
reflect
the
expense
reduction;
without
this
reduction,
the
results
would
have
been
lower.
2.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
3.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
4.
Prior
to
9/10/18
these
shares
were
offered
at
a
higher
initial
sales
charge
of
5.75%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
5.50%.
5.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(9/1/21–2/28/22)
Share
Class
Net
Investment
Income
A
$0.2951
C
$0.2131
R
$0.2795
R6
$0.3281
Advisor
$0.3165
Total
Annual
Operating
Expenses
5
Share
Class
With
Fee
Waiver
Without
Fee
Waiver
A
1.10%
1.15%
Advisor
0.85%
0.90%
Your
Fund’s
Expenses
Templeton
Foreign
Fund
10
franklintempleton.com
Semiannual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=
$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
181/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
9/1/21
Ending
Account
Value
2/28/22
Expenses
Paid
During
Period
9/1/21–2/28/22
1,2
Ending
Account
Value
2/28/22
Expenses
Paid
During
Period
9/1/21–2/28/22
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$973.50
$5.31
$1,019.41
$5.44
1.09%
C
$1,000
$970.10
$8.97
$1,015.69
$9.18
1.84%
R
$1,000
$972.10
$6.54
$1,018.17
$6.69
1.34%
R6
$1,000
$974.90
$3.37
$1,021.38
$3.45
0.69%
Advisor
$1,000
$974.70
$4.10
$1,020.64
$4.20
0.84%
Templeton
Funds
Financial
Highlights
Templeton
Foreign
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
11
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$7.77
$6.22
$6.61
$7.69
$7.81
$6.87
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.04
0.18
c
0.10
0.19
0.12
0.11
Net
realized
and
unrealized
gains
(losses)
(0.25)
1.46
(0.25)
(1.09)
(0.13)
0.96
Total
from
investment
operations
........
(0.21)
1.64
(0.15)
(0.90)
(0.01)
1.07
Less
distributions
from:
Net
investment
income
..............
(0.30)
(0.09)
(0.24)
(0.18)
(0.11)
(0.13)
Net
asset
value,
end
of
period
..........
$7.26
$7.77
$6.22
$6.61
$7.69
$7.81
Total
return
d
.......................
(2.65)%
26.57%
(2.76)%
(11.73)%
(0.15)%
15.83%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
1.17%
1.15%
1.19%
1.15%
1.16%
1.21%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
1.09%
1.07%
1.10%
1.08%
1.11%
f
1.21%
f,g
Net
investment
income
...............
0.98%
2.45%
c
1.55%
2.69%
1.54%
1.55%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$1,725,874
$1,990,939
$1,766,365
$2,395,260
$2,929,181
$3,287,394
Portfolio
turnover
rate
................
15.56%
37.85%
h
42.37%
h
30.81%
23.01%
42.56%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.09
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.23%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
3(h).
Templeton
Funds
Financial
Highlights
Templeton
Foreign
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$7.70
$6.17
$6.54
$7.49
$7.60
$6.69
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.01
0.13
c
0.05
0.12
0.06
0.05
Net
realized
and
unrealized
gains
(losses)
(0.24)
1.43
(0.25)
(1.05)
(0.12)
0.94
Total
from
investment
operations
........
(0.23)
1.56
(0.20)
(0.93)
(0.06)
0.99
Less
distributions
from:
Net
investment
income
..............
(0.21)
(0.03)
(0.17)
(0.02)
(0.05)
(0.08)
Net
asset
value,
end
of
period
..........
$7.26
$7.70
$6.17
$6.54
$7.49
$7.60
Total
return
d
.......................
(2.99)%
25.55%
(3.42)%
(12.40)%
(0.79)%
14.92%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
1.92%
1.90%
1.94%
1.90%
1.91%
1.96%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
1.84%
1.82%
1.85%
1.83%
1.86%
f
1.96%
f,g
Net
investment
income
...............
0.24%
1.81%
c
0.81%
1.94%
0.79%
0.80%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$32,681
$39,083
$54,093
$87,160
$281,640
$346,032
Portfolio
turnover
rate
................
15.56%
37.85%
h
42.37%
h
30.81%
23.01%
42.56%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.09
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.58%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
3(h).
Templeton
Funds
Financial
Highlights
Templeton
Foreign
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
13
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$7.58
$6.08
$6.47
$7.53
$7.65
$6.73
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.03
0.16
c
0.08
0.17
0.10
0.09
Net
realized
and
unrealized
gains
(losses)
(0.24)
1.42
(0.24)
(1.07)
(0.12)
0.94
Total
from
investment
operations
........
(0.21)
1.58
(0.16)
(0.90)
(0.02)
1.03
Less
distributions
from:
Net
investment
income
..............
(0.28)
(0.08)
(0.23)
(0.16)
(0.10)
(0.11)
Net
asset
value,
end
of
period
..........
$7.09
$7.58
$6.08
$6.47
$7.53
$7.65
Total
return
d
.......................
(2.79)%
26.29%
(3.03)%
(11.96)%
(0.32)%
15.57%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
1.42%
1.40%
1.44%
1.40%
1.41%
1.46%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
1.34%
1.32%
1.35%
1.33%
1.36%
f
1.46%
f,g
Net
investment
income
...............
0.73%
2.21%
c
1.33%
2.44%
1.29%
1.30%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$121,388
$123,744
$109,187
$127,546
$148,638
$153,516
Portfolio
turnover
rate
................
15.56%
37.85%
h
42.37%
h
30.81%
23.01%
42.56%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.09
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.98%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
3(h).
Templeton
Funds
Financial
Highlights
Templeton
Foreign
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$7.64
$6.12
$6.51
$7.58
$7.70
$6.78
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.05
0.21
c
0.12
0.22
0.15
0.16
Net
realized
and
unrealized
gains
(losses)
(0.25)
1.43
(0.24)
(1.08)
(0.12)
0.93
Total
from
investment
operations
........
(0.20)
1.64
(0.12)
(0.86)
0.03
1.09
Less
distributions
from:
Net
investment
income
..............
(0.33)
(0.12)
(0.27)
(0.21)
(0.15)
(0.17)
Net
asset
value,
end
of
period
..........
$7.11
$7.64
$6.12
$6.51
$7.58
$7.70
Total
return
d
.......................
(2.51)%
27.02%
(2.38)%
(11.34)%
0.24%
16.52%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
0.80%
0.79%
0.79%
0.77%
0.73%
0.74%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
0.69%
0.69%
0.70%
0.68%
0.68%
f
0.73%
f
Net
investment
income
...............
1.40%
2.86%
c
1.96%
3.09%
1.97%
2.03%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$414,216
$531,344
$594,452
$906,474
$1,496,328
$1,757,902
Portfolio
turnover
rate
................
15.56%
37.85%
g
42.37%
g
30.81%
23.01%
42.56%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.09
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.63%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
Note
3(h).
Templeton
Funds
Financial
Highlights
Templeton
Foreign
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
15
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$7.64
$6.12
$6.51
$7.58
$7.70
$6.78
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.05
0.20
c
0.11
0.20
0.14
0.13
Net
realized
and
unrealized
gains
(losses)
(0.25)
1.43
(0.24)
(1.07)
(0.12)
0.94
Total
from
investment
operations
........
(0.20)
1.63
(0.13)
(0.87)
0.02
1.07
Less
distributions
from:
Net
investment
income
..............
(0.32)
(0.11)
(0.26)
(0.20)
(0.14)
(0.15)
Net
asset
value,
end
of
period
..........
$7.12
$7.64
$6.12
$6.51
$7.58
$7.70
Total
return
d
.......................
(2.53)%
26.88%
(2.57)%
(11.53)%
0.16%
16.10%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
0.92%
0.90%
0.94%
0.90%
0.91%
0.96%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
0.84%
0.82%
0.85%
0.83%
0.86%
f
0.96%
f,g
Net
investment
income
...............
1.24%
2.80%
c
1.79%
2.94%
1.79%
1.80%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$792,023
$620,885
$857,179
$857,482
$1,627,827
$1,717,937
Portfolio
turnover
rate
................
15.56%
37.85%
h
42.37%
h
30.81%
23.01%
42.56%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.09
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.57%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
See
N
ote
3(h).
Templeton
Funds
Statement
of
Investments
(unaudited),
February
28,
2022
Templeton
Foreign
Fund
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
a
Industry
Shares
a
Value
a
Common
Stocks
99.1%
Brazil
1.9%
Wheaton
Precious
Metals
Corp.
.....
Metals
&
Mining
1,343,006
$
58,841,599
China
6.6%
a
Alibaba
Group
Holding
Ltd.
.........
Internet
&
Direct
Marketing
Retail
3,672,870
48,349,516
a
Baidu,
Inc.,
ADR
.................
Interactive
Media
&
Services
148,719
22,670,724
China
Overseas
Land
&
Investment
Ltd.
Real
Estate
Management
&
Development
9,569,600
29,217,796
Gree
Electric
Appliances,
Inc.
of
Zhuhai,
A
...........................
Household
Durables
3,965,000
23,145,804
NXP
Semiconductors
NV
..........
Semiconductors
&
Semiconductor
Equipment
230,683
43,857,452
Sinopec
Engineering
Group
Co.
Ltd.,
H
Construction
&
Engineering
26,233,380
12,549,757
a
Vipshop
Holdings
Ltd.,
ADR
........
Internet
&
Direct
Marketing
Retail
2,626,112
22,768,391
202,559,440
France
3.4%
Dassault
Aviation
SA
..............
Aerospace
&
Defense
292,460
43,511,298
Faurecia
SE
....................
Auto
Components
561,720
21,146,314
Valeo
.........................
Auto
Components
1,790,043
39,468,999
104,126,611
Germany
10.2%
Bayer
AG
......................
Pharmaceuticals
1,364,167
78,780,795
Bayerische
Motoren
Werke
AG
......
Automobiles
507,607
48,875,337
a
Continental
AG
..................
Auto
Components
450,059
38,342,403
b
Covestro
AG,
144A,
Reg
S
.........
Chemicals
693,025
36,642,964
E.ON
SE
.......................
Multi-Utilities
4,215,997
57,331,311
Fresenius
Medical
Care
AG
&
Co.
KGaA
Health
Care
Providers
&
Services
864,099
55,427,107
315,399,917
Hong
Kong
3.2%
AIA
Group
Ltd.
..................
Insurance
5,316,653
55,207,653
CK
Asset
Holdings
Ltd.
............
Real
Estate
Management
&
Development
3,707,406
23,416,292
Swire
Pacific
Ltd.,
A
..............
Real
Estate
Management
&
Development
3,599,862
19,893,743
98,517,688
India
2.0%
Housing
Development
Finance
Corp.
Ltd.
.........................
Thrifts
&
Mortgage
Finance
1,952,237
61,560,691
Japan
17.4%
Elecom
Co.
Ltd.
.................
Technology
Hardware,
Storage
&
Peripherals
1,078,000
14,862,204
Hitachi
Ltd.
.....................
Industrial
Conglomerates
1,941,279
96,009,903
Honda
Motor
Co.
Ltd.
.............
Automobiles
2,116,405
64,303,903
Isuzu
Motors
Ltd.
................
Automobiles
1,666,816
22,544,995
Seria
Co.
Ltd.
...................
Multiline
Retail
1,071,607
27,494,457
Sony
Group
Corp.
................
Household
Durables
328,794
33,596,529
Sumitomo
Metal
Mining
Co.
Ltd.
.....
Metals
&
Mining
1,589,983
79,319,198
Sumitomo
Mitsui
Financial
Group,
Inc.
.
Banks
1,531,623
54,319,568
Sundrug
Co.
Ltd.
.................
Food
&
Staples
Retailing
1,809,559
49,263,961
Taisei
Corp.
....................
Construction
&
Engineering
1,256,330
41,778,444
Takeda
Pharmaceutical
Co.
Ltd.
.....
Pharmaceuticals
1,252,700
38,198,534
Toyota
Industries
Corp.
............
Machinery
196,134
14,919,466
536,611,162
Netherlands
8.3%
EXOR
NV
......................
Diversified
Financial
Services
437,163
33,114,558
ING
Groep
NV
..................
Banks
3,254,078
37,994,286
SBM
Offshore
NV
................
Energy
Equipment
&
Services
4,209,864
64,111,737
Templeton
Funds
Statement
of
Investments
(unaudited)
Templeton
Foreign
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
17
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Netherlands
(continued)
Shell
plc
.......................
Oil,
Gas
&
Consumable
Fuels
4,535,447
$
119,585,520
254,806,101
Portugal
1.0%
Galp
Energia
SGPS
SA,
B
.........
Oil,
Gas
&
Consumable
Fuels
2,899,995
32,093,797
South
Korea
7.0%
KB
Financial
Group,
Inc.
...........
Banks
1,474,406
72,742,963
Samsung
Electronics
Co.
Ltd.
.......
Technology
Hardware,
Storage
&
Peripherals
1,421,831
85,674,784
Shinhan
Financial
Group
Co.
Ltd.
....
Banks
1,801,271
58,608,874
217,026,621
Spain
0.7%
a
Amadeus
IT
Group
SA
............
IT
Services
184,537
12,172,415
a,c
Tecnicas
Reunidas
SA
............
Energy
Equipment
&
Services
1,170,272
9,564,418
21,736,833
Switzerland
3.4%
Adecco
Group
AG
................
Professional
Services
1,227,413
57,962,740
Roche
Holding
AG
...............
Pharmaceuticals
128,083
48,504,050
106,466,790
Taiwan
2.7%
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
......................
Semiconductors
&
Semiconductor
Equipment
3,876,044
83,383,797
Thailand
1.5%
Kasikornbank
PCL
...............
Banks
9,198,837
46,213,864
United
Kingdom
22.8%
AstraZeneca
plc
.................
Pharmaceuticals
579,288
70,399,846
BAE
Systems
plc
................
Aerospace
&
Defense
6,645,848
63,797,198
BP
plc
.........................
Oil,
Gas
&
Consumable
Fuels
23,710,950
115,552,678
CK
Hutchison
Holdings
Ltd.
.........
Industrial
Conglomerates
9,929,086
69,613,935
Imperial
Brands
plc
...............
Tobacco
2,696,656
58,956,982
a
Informa
plc
.....................
Media
4,416,503
34,963,962
a
International
Consolidated
Airlines
Group
SA
.....................
Airlines
14,579,294
28,613,364
a,b
Just
Eat
Takeaway.com
NV,
144A,
Reg
S
...........................
Internet
&
Direct
Marketing
Retail
1,038,480
42,020,179
Lloyds
Banking
Group
plc
..........
Banks
96,964,280
62,484,705
c
Prudential
plc,
(HKD
Traded)
........
Insurance
589,500
8,814,444
Prudential
plc,
(GBP
Traded)
........
Insurance
2,518,531
38,070,666
a
Rolls-Royce
Holdings
plc
..........
Aerospace
&
Defense
19,383,025
26,734,162
Standard
Chartered
plc
............
Banks
11,699,705
83,366,666
703,388,787
United
States
7.0%
a
Array
Technologies,
Inc.
...........
Electrical
Equipment
2,664,300
29,946,732
a
Berkshire
Hathaway,
Inc.,
B
.........
Diversified
Financial
Services
148,063
47,594,851
a
Booking
Holdings,
Inc.
............
Hotels,
Restaurants
&
Leisure
20,484
44,496,369
a
DXC
Technology
Co.
..............
IT
Services
1,778,180
60,511,466
H&R
Block,
Inc.
..................
Diversified
Consumer
Services
1,314,157
32,604,235
215,153,653
Total
Common
Stocks
(Cost
$2,757,597,673)
....................................
3,057,887,351
Templeton
Funds
Statement
of
Investments
(unaudited)
Templeton
Foreign
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
Short
Term
Investments
0.7%
a
a
Principal
Amount
*
a
Value
a
a
a
a
a
a
Time
Deposits
0.7%
France
0.7%
Credit
Agricole
Corporate
and
Investment
Bank
SA,
0.07%,
3/01/22
20,400,000
$
20,400,000
Total
Time
Deposits
(Cost
$20,400,000)
........................................
20,400,000
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$20,400,000
)
................................
20,400,000
a
a
a
Total
Investments
(Cost
$2,777,997,673)
99.8%
..................................
$3,078,287,351
Other
Assets,
less
Liabilities
0.2%
.............................................
7,894,197
Net
Assets
100.0%
...........................................................
$3,086,181,548
a
a
a
See
Abbreviations
on
page
31.
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
February
28,
2022,
the
aggregate
value
of
these
securities
was
$78,663,143,
representing
2.5%
of
net
assets.
c
A
portion
or
all
of
the
security
is
on
loan
at
February
28,
2022.
See
Note
1(c).
Templeton
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
February
28,
2022
(unaudited)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
19
Templeton
Foreign
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$2,777,997,673
Value
-
Unaffiliated
issuers
(Includes
securities
loaned
of
$3,281,183)
.................................
$3,078,287,351
Cash
....................................................................................
67,351
Receivables:
Investment
securities
sold
...................................................................
22,433,052
Capital
shares
sold
........................................................................
2,076,592
Dividends
and
interest
.....................................................................
17,412,655
European
Union
tax
reclaims
(Note
1
d
)
.........................................................
1,662,504
Total
assets
..........................................................................
3,121,939,505
Liabilities:
Payables:
Investment
securities
purchased
..............................................................
2,641,935
Capital
shares
redeemed
...................................................................
6,285,016
Management
fees
.........................................................................
1,590,156
Distribution
fees
..........................................................................
418,459
Transfer
agent
fees
........................................................................
1,251,445
Trustees'
fees
and
expenses
.................................................................
5,236
IRS
closing
agreement
payments
for
European
Union
tax
reclaims
(Note
1
d
)
.............................
20,788,322
Deferred
tax
...............................................................................
1,787,502
Accrued
expenses
and
other
liabilities
...........................................................
989,886
Total
liabilities
.........................................................................
35,757,957
Net
assets,
at
value
.................................................................
$3,086,181,548
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$3,267,633,348
Total
distributable
earnings
(losses)
.............................................................
(181,451,800)
Net
assets,
at
value
.................................................................
$3,086,181,548
Templeton
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
February
28,
2022
(unaudited)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
Templeton
Foreign
Fund
Class
A:
Net
assets,
at
value
.......................................................................
$1,725,873,804
Shares
outstanding
........................................................................
237,746,377
Net
asset
value
per
share
a
..................................................................
$7.26
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$7.68
Class
C:
Net
assets,
at
value
.......................................................................
$32,681,299
Shares
outstanding
........................................................................
4,504,214
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$7.26
Class
R:
Net
assets,
at
value
.......................................................................
$121,387,761
Shares
outstanding
........................................................................
17,120,114
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$7.09
Class
R6:
Net
assets,
at
value
.......................................................................
$414,216,124
Shares
outstanding
........................................................................
58,230,146
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$7.11
Advisor
Class:
Net
assets,
at
value
.......................................................................
$792,022,560
Shares
outstanding
........................................................................
111,207,971
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$7.12
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Templeton
Funds
Financial
Statements
Statement
of
Operations
for
the
six
months
ended
Februaury
28,
2022
(unaudited)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
21
Templeton
Foreign
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$3,346,502)
Unaffiliated
issuers
........................................................................
$33,504,647
Interest:
Unaffiliated
issuers
........................................................................
30,827
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
25,534
Non-controlled
affiliates
(Note
3
f
)
.............................................................
5
Other
income
(Note
1
d
)
......................................................................
26,686
Less:
IRS
closing
agreement
payments
for
European
Union
tax
reclaims
(Note
1
d
)
..........................
(49,253)
Total
investment
income
...................................................................
33,538,446
Expenses:
Management
fees
(Note
3
a
)
...................................................................
11,244,561
Distribution
fees:
(Note
3c
)
Class
A
................................................................................
2,246,001
Class
C
................................................................................
179,459
Class
R
................................................................................
305,084
Transfer
agent
fees:
(Note
3e
)
Class
A
................................................................................
1,581,873
Class
C
................................................................................
31,604
Class
R
................................................................................
107,523
Class
R6
...............................................................................
136,151
Advisor
Class
............................................................................
708,092
Custodian
fees
.............................................................................
148,129
Reports
to
shareholders
fees
..................................................................
229,905
Registration
and
filing
fees
....................................................................
68,283
Professional
fees
...........................................................................
11,826
Trustees'
fees
and
expenses
..................................................................
121,383
Other
....................................................................................
164,191
Total
expenses
.........................................................................
17,284,065
Expenses
waived/paid
by
affiliates
(Note
3
f
and
3
g
)
..............................................
(1,381,667)
Net
expenses
.........................................................................
15,902,398
Net
investment
income
................................................................
17,636,048
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
97,026,802
Foreign
currency
transactions
................................................................
(313,388)
Net
realized
gain
(loss)
..................................................................
96,713,414
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(200,260,969)
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
(515,435)
Change
in
deferred
taxes
on
unrealized
appreciation
...............................................
1,016,163
Net
change
in
unrealized
appreciation
(depreciation)
............................................
(199,760,241)
Net
realized
and
unrealized
gain
(loss)
............................................................
(103,046,827)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(85,410,779)
Templeton
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
Templeton
Foreign
Fund
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$17,636,048
$92,940,813
Net
realized
gain
(loss)
.................................................
96,713,414
337,726,333
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(199,760,241)
398,219,453
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(85,410,779)
828,886,599
Distributions
to
shareholders:
Class
A
.............................................................
(68,477,455)
(25,789,554)
Class
C
.............................................................
(999,549)
(254,786)
Class
R
.............................................................
(4,571,272)
(1,399,512)
Class
R6
............................................................
(20,850,055)
(9,135,018)
Advisor
Class
........................................................
(34,087,582)
(14,872,436)
Total
distributions
to
shareholders
..........................................
(128,985,913)
(51,451,306)
Capital
share
transactions:
(Note
2
)
Class
A
.............................................................
(150,488,628)
(197,236,237)
Class
C
.............................................................
(4,372,202)
(27,080,860)
Class
R
.............................................................
5,496,434
(11,727,543)
Class
R6
............................................................
(83,795,484)
(176,375,993)
Advisor
Class
........................................................
227,742,983
(440,296,554)
Total
capital
share
transactions
............................................
(5,416,897)
(852,717,187)
Net
increase
(decrease)
in
net
assets
...................................
(219,813,589)
(75,281,894)
Net
assets:
Beginning
of
period
.....................................................
3,305,995,137
3,381,277,031
End
of
period
..........................................................
$3,086,181,548
$3,305,995,137
Templeton
Funds
23
franklintempleton.com
Semiannual
Report
Notes
to
Financial
Statements
(unaudited)
Templeton
Foreign
Fund
1.
Organization
and
Significant
Accounting
Policies
Templeton
Funds (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
an
open-end
management
investment
company,
consisting
of three separate
funds
and
applies
the
specialized
accounting
and
reporting
guidance
in
U.S.
Generally
Accepted
Accounting
Principles
(U.S.
GAAP).
Templeton
Foreign
Fund
(Fund)
is
included
in
this
report.
The
Fund
offers five
classes
of
shares:
Class
A,
Class
C,
Class
R,
Class
R6
and
Advisor
Class.
Class
C
shares
automatically
convert
to
Class
A
shares
on
a
monthly
basis,
after
they
have
been
held
for
8
years. Each
class
of
shares
may
differ
by
its
initial
sales
load,
contingent
deferred
sales
charges,
voting
rights
on
matters
affecting
a
single
class,
its
exchange
privilege
and
fees
due
to
differing
arrangements
for
distribution
and
transfer
agent
fees.
The
following
summarizes
the Fund's
significant
accounting
policies.
a.
Financial
Instrument
Valuation
The
Fund's
investments
in
financial
instruments
are
carried
at
fair
value
daily.
Fair
value
is
the
price
that
would
be
received
to
sell
an
asset
or
paid
to
transfer
a
liability
in
an
orderly
transaction
between
market
participants
on
the
measurement
date.
The
Fund
calculates
the
net
asset
value
(NAV)
per
share
each business
day as
of
4
p.m.
Eastern
time
or
the
regularly
scheduled
close
of
the
New
York
Stock
Exchange
(NYSE),
whichever
is
earlier.
Under
compliance
policies
and
procedures
approved
by
the
Trust’s
Board
of
Trustees
(the
Board),
the Fund's
administrator
has
responsibility
for
oversight
of
valuation,
including
leading
the
cross-functional
Valuation
Committee
(VC).
The
Fund
may
utilize
independent
pricing
services,
quotations
from
securities
and
financial
instrument
dealers,
and
other
market
sources
to
determine
fair
value.
Equity
securities
listed
on
an
exchange
or
on
the
NASDAQ
National
Market
System
are
valued
at
the
last
quoted
sale
price
or
the
official
closing
price of
the
day,
respectively.
Foreign
equity
securities
are
valued
as
of
the
close
of
trading
on
the
foreign
stock
exchange
on
which
the
security
is
primarily
traded,
or
as
of
4
p.m.
Eastern
time.
The
value
is
then
converted
into
its
U.S.
dollar
equivalent
at
the
foreign
exchange
rate
in
effect
at
4
p.m.
Eastern
time
on
the
day
that
the
value
of
the
security
is
determined.
Over-the-
counter
(OTC)
securities
are
valued
within
the
range
of
the
most
recent
quoted
bid
and
ask
prices.
Securities
that
trade
in
multiple
markets
or
on
multiple
exchanges
are
valued
according
to
the
broadest
and
most
representative
market.
Certain
equity
securities
are
valued
based
upon
fundamental
characteristics
or
relationships
to
similar
securities.
Investments
in
open-end
mutual
funds
are
valued
at
the
closing
NAV.
Investments
in
time
deposits
are
valued
at
cost,
which
approximates
fair
value.
The
Fund
has
procedures
to
determine
the
fair
value
of
financial
instruments
for
which
market
prices
are
not
reliable
or
readily
available.
Under
these
procedures,
the Fund
primarily
employs
a
market-based
approach
which
may
use
related
or
comparable
assets
or
liabilities,
recent
transactions,
market
multiples,
book
values,
and
other
relevant
information
for
the
investment
to
determine
the
fair
value
of
the
investment.
An
income-based
valuation
approach
may
also
be
used
in
which
the
anticipated
future
cash
flows
of
the
investment
are
discounted
to
calculate
fair
value.
Discounts
may
also
be
applied
due
to
the
nature
or
duration
of
any
restrictions
on
the
disposition
of
the
investments.
Due
to
the
inherent
uncertainty
of
valuations
of
such
investments,
the
fair
values
may
differ
significantly
from
the
values
that
would
have
been
used
had
an
active
market
existed.
Trading
in
securities
on
foreign
securities
stock
exchanges
and
OTC
markets
may
be
completed
before
4
p.m.
Eastern
time.
In
addition,
trading
in
certain
foreign
markets
may
not
take
place
on
every
Fund's
business
day.
Events
can
occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time.
In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund’s
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
February
28,
2022,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy
(referred
to
as
“market
level
fair
value”).
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
24
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
security
valuation
changes
due
to
an
open
foreign
market
are
adjusted
and
reflected
by
the
Fund
for
financial
reporting
purposes.
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.
The
Fund
may
enter
into
foreign
currency
exchange
contracts
to
facilitate
transactions
denominated
in
a
foreign
currency.
Purchases
and
sales
of
securities,
income
and
expense
items
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
at
the
exchange
rate
in
effect
on
the
transaction
date.
Portfolio
securities
and
assets
and
liabilities
denominated
in
foreign
currencies
contain
risks
that
those
currencies
will
decline
in
value
relative
to
the
U.S.
dollar.
Occasionally,
events
may
impact
the
availability
or
reliability
of
foreign
exchange
rates
used
to
convert
the
U.S.
dollar
equivalent
value.
If
such
an
event
occurs,
the
foreign
exchange
rate
will
be
valued
at
fair
value
using
procedures
established
and
approved
by
the
Board.
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
in
the
Statement of
Operations.
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
denominated
assets
and
liabilities
other
than
investments
in
securities
held
at
the
end
of
the
reporting
period.
c.
Securities
Lending
The
Fund
participates
in
an
agency
based
securities
lending
program
to
earn
additional
income.
The
Fund
receives
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund.
Additionally, the
Fund
held $3,460,591
in
U.S.
Government
and
Agency
securities
as
collateral.
These
securities
are
held as
collateral
in
segregated
accounts
with
the
Fund’s
custodian.
The
Fund
cannot
repledge
or
resell
these
securities
held
as
collateral.
As
such,
the
non-cash
collateral
is
excluded
from
the
Statement
of
Assets
and
Liabilities.
The
Fund
may
receive
income
from
the
investment
of
cash
collateral,
in
addition
to
lending
fees
and
rebates
paid
by
the
borrower.
Income
from
securities
loaned,
net
of
fees
paid
to
the
securities
lending
agent
and/
or
third-party
vendor,
is
reported
separately
in
the
Statement
of
Operations.
The
Fund
bears
the
market
risk
with
respect
to any
cash collateral
investment,
securities
loaned,
and
the
risk
that
the
agent
may
default
on
its
obligations
to
the
Fund.
If
the
borrower
defaults
on
its
obligation
to
return
the
securities
loaned,
the
Fund
has
the
right
to
repurchase
the
securities
in
the
open
market
using
the
collateral
received.
The
securities
lending
agent
has
agreed
to
indemnify
the
Fund
in
the
event
of
default
by
a
third
party
borrower.
d.
Income
and
Deferred
Taxes
It
is the Fund's
policy
to
qualify
as
a
regulated
investment
company
under
the
Internal
Revenue
Code. The Fund
intends
to
distribute
to
shareholders
substantially
all
of
its
taxable
income
and
net
realized
gains
to
relieve
it
from
federal
income
and excise
taxes.
As
a
result,
no
provision
for
U.S.
federal
income
taxes
is
required.
The
Fund
may
be
subject
to
foreign
taxation
related
to
income
received,
capital
gains
on
the
sale
of
securities
and
certain
foreign
currency
transactions
in
the
foreign
jurisdictions
in
which it
invests.
Foreign
taxes,
if
any,
are
recorded
based
on
the
tax
regulations
and
rates
that
exist
in
the
foreign
markets
in
which
the
Fund
invests.
When
a
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
25
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
capital
gain
tax
is
determined
to
apply,
the
Fund
records
an
estimated
deferred
tax
liability
in
an
amount
that
would
be
payable
if
the
securities
were
disposed
of
on
the
valuation
date.
As
a
result
of
several
court
cases,
in
certain
countries
across
the
European
Union, the
Fund
filed
additional
tax
reclaims
for
previously
withheld
taxes
on
dividends
earned
in
those
countries
(EU
reclaims). Income
recognized,
if
any,
for
EU
reclaims
is
reflected
as
other
income
in
the
Statement
of
Operations
and
any
related
receivable,
if
any,
is
reflected
as
European
Union
tax
reclaims
in
the
Statement
of
Assets
and
Liabilities.
Any
fees
associated
with
these
filings
are
reflected
in
other
expenses
in
the
Statement
of
Operations.
When
uncertainty
exists
as
to
the
ultimate
resolution
of
these
proceedings,
the
likelihood
of
receipt
of
these
EU
reclaims,
and
the
potential
timing
of
payment,
no
amounts
are
reflected
in
the
financial
statements.
For
U.S.
income
tax
purposes,
EU
reclaims
received
by
the
Fund,
if
any,
reduce
the
amount
of
foreign
taxes
Fund
shareholders
can
use
as
tax
deductions
or credits
on
their
income
tax
returns.
In
the
event
that
EU
reclaims
received
by
the Fund
during a
fiscal
year
exceed
foreign
withholding
taxes
paid
by
the
Fund,
and
the
Fund previously
passed
through to
its
shareholders
foreign
taxes
incurred
by
the
Fund
to
be
used
as
a
credit
or
deduction
on
a
shareholder’s
income
tax
return,
the Fund
will enter
into
a
closing
agreement
with
the
Internal
Revenue
Service
(IRS)
in
order
to
pay
the
associated
tax
liability
on
behalf
of
the Fund's
shareholders.
The
Fund
determined
to
enter
into
a
closing
agreement
with
the
IRS
and
recorded
the
estimated
payments
as
a
reduction
to
income,
as
reflected
in
the
Statement
of
Operations.
The
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
February
28,
2022,
the
Fund
has
determined
that
no
tax
liability
is
required
in
its
financial
statements
related
to
uncertain
tax
positions
for
any
open
tax
years
(or
expected
to
be
taken
in
future
tax
years).
Open
tax
years
are
those
that
remain
subject
to
examination
and
are
based
on
the
statute
of
limitations
in
each
jurisdiction
in
which
the
Fund
invests.
e.
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.
Interest
income
and
estimated
expenses
are
accrued
daily.
Dividend
income
is
recorded
on
the
ex-dividend
date
except
for
certain
dividends
from
securities
where
the
dividend
rate
is
not
available.
In
such
cases,
the
dividend
is
recorded
as
soon
as
the
information
is
received
by
the
Fund.
Distributions
to shareholders
are
recorded
on
the
ex-dividend
date.
Distributable
earnings
are
determined
according
to
income
tax
regulations
(tax
basis)
and
may
differ
from
earnings
recorded
in
accordance
with
U.S.
GAAP.
These
differences
may
be
permanent
or
temporary.
Permanent
differences
are
reclassified
among
capital
accounts
to
reflect
their
tax
character.
These
reclassifications
have
no
impact
on
net
assets
or
the
results
of
operations.
Temporary
differences
are
not
reclassified,
as
they
may
reverse
in
subsequent
periods.
Common
expenses
incurred
by
the
Trust
are
allocated
among
the
Funds
based
on
the
ratio
of
net
assets
of
each
Fund
to
the
combined
net
assets
of
the
Trust
or
based
on
the
ratio
of
number
of
shareholders
of
each
Fund
to
the
combined
number
of
shareholders
of
the
Trust.
Fund
specific
expenses
are
charged
directly
to
the
Fund
that
incurred
the
expense.
Realized
and
unrealized
gains
and
losses
and
net
investment
income,
excluding
class
specific
expenses,
are
allocated
daily
to
each
class
of
shares
based
upon
the
relative
proportion
of
net
assets
of
each
class.
Differences
in
per
share
distributions
by
class
are
generally
due
to
differences
in
class
specific
expenses.
f.
Accounting
Estimates
The
preparation
of
financial
statements
in
accordance
with
U.S.
GAAP
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
expenses
during
the
reporting
period.
Actual
results
could
differ
from
those
estimates.
g.
Guarantees
and
Indemnifications
Under
the
Trust's
organizational
documents,
its
officers
and
trustees
are
indemnified
by
the
Trust
against
certain
liabilities
arising
out
of
the
performance
of
their
duties
to
the
Trust.
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Income
and
Deferred
Taxes
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
26
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
Additionally,
in
the
normal
course
of
business,
the
Trust,
on
behalf
of
the
Fund,
enters
into
contracts
with
service
providers
that
contain
general
indemnification
clauses.
The
Trust’s
maximum
exposure
under
these
arrangements
is
unknown
as
this
would
involve
future
claims
that
may
be
made
against
the
Trust
that
have
not
yet
occurred.
Currently,
the
Trust
expects
the
risk
of
loss
to
be
remote.
2.
Shares
of
Beneficial
Interest
At
February
28,
2022,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
Six
Months
Ended
February
28,
2022
Year
Ended
August
31,
2021
Shares
Amount
Shares
Amount
Class
A
Shares:
Shares
sold
a
...................................
8,957,437
$67,589,973
28,785,548
$209,553,273
Shares
issued
in
reinvestment
of
distributions
..........
9,189,756
64,695,879
3,171,878
22,520,330
Shares
redeemed
...............................
(36,796,986)
(282,774,480)
(59,457,247)
(429,309,840)
Net
increase
(decrease)
..........................
(18,649,793)
$(150,488,628)
(27,499,821)
$(197,236,237)
Class
C
Shares:
Shares
sold
...................................
233,005
$1,748,319
641,829
$4,680,418
Shares
issued
in
reinvestment
of
distributions
..........
139,410
982,841
35,520
251,483
Shares
redeemed
a
..............................
(942,974)
(7,103,362)
(4,376,336)
(32,012,761)
Net
increase
(decrease)
..........................
(570,559)
$(4,372,202)
(3,698,987)
$(27,080,860)
Class
R
Shares:
Shares
sold
...................................
1,404,246
$10,304,397
2,527,401
$18,072,742
Shares
issued
in
reinvestment
of
distributions
..........
662,175
4,555,764
200,428
1,392,973
Shares
redeemed
...............................
(1,262,085)
(9,363,727)
(4,363,676)
(31,193,258)
Net
increase
(decrease)
..........................
804,336
$5,496,434
(1,635,847)
$(11,727,543)
Class
R6
Shares:
Shares
sold
...................................
5,620,883
$41,718,276
22,666,025
$167,068,991
Shares
issued
in
reinvestment
of
distributions
..........
2,743,028
18,899,459
1,210,174
8,422,812
Shares
redeemed
...............................
(19,724,407)
(144,413,219)
(51,442,655)
(351,867,796)
Net
increase
(decrease)
..........................
(11,360,496)
$(83,795,484)
(27,566,456)
$(176,375,993)
Advisor
Class
Shares:
Shares
sold
...................................
42,660,852
$324,766,630
29,013,447
$207,655,897
Shares
issued
in
reinvestment
of
distributions
..........
4,600,357
31,742,463
2,047,132
14,268,511
Shares
redeemed
in-kind
(Note
3h)
..................
—
—
(48,183,921)
(363,822,338)
Shares
redeemed
...............................
(17,355,057)
(128,766,110)
(41,534,758)
(298,398,624)
Net
increase
(decrease)
..........................
29,906,152
$227,742,983
(58,658,100)
$(440,296,554)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
1.
Organization
and
Significant
Accounting
Policies
(continued)
g.
Guarantees
and
Indemnifications
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
27
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
3.
Transactions
with
Affiliates
Franklin
Resources,
Inc.
is
the
holding
company
for
various
subsidiaries
that
together
are
referred
to
as
Franklin
Templeton.
Certain
officers
and
trustees
of
the
Trust
are
also
officers
and/or
directors
of
the
following
subsidiaries:
a.
Management
Fees
The
Fund
pays
an
investment
management
fee,
calculated
daily
and
paid
monthly,
to
Global
Advisors
based
on
the
average
daily
net
assets
of
the
Fund
as
follows:
For
the
period
ended
February
28,
2022,
the
annualized
gross
effective
investment
management
fee
rate
was
0.695%
of
the
Fund’s
average
daily
net
assets.
b.
Administrative
Fees
Under
an
agreement
with
Global
Advisors,
FT
Services
provides
administrative
services
to
the
Fund.
The
fee
is
paid
by
Global
Advisors
based
on
the
Fund’s
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
c.
Distribution
Fees
The
Board
has
adopted
distribution
plans
for
each
share
class,
with
the
exception
of
Class
R6
and
Advisor
Class
shares,
pursuant
to
Rule
12b-1
under
the
1940
Act.
Under
the
Fund’s
Class A reimbursement
distribution
plan,
the
Fund
reimburses
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
Fund's
shares
up
to
the
maximum
annual
plan
rate.
Under
the
Class
A
reimbursement
distribution
plan,
costs
exceeding
the
maximum
for
the
current
plan
year
cannot
be
reimbursed
in
subsequent
periods.
In
addition,
under
the
Fund’s
Class C
and
R
compensation
distribution
plans,
the
Fund
pays
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
Fund's
shares
up
to
the
maximum
annual
plan
rate
for
each
class.
The
plan
year,
for
purposes
of
monitoring
compliance
with
the
maximum
annual
plan
rates,
is
February
1
through
January
31.
The
maximum
annual
plan
rates,
based
on
the
average
daily
net
assets,
for
each
class,
are
as
follows:
Subsidiary
Affiliation
Templeton
Global
Advisors
Limited
(Global
Advisors)
Investment
manager
Franklin
Templeton
Services,
LLC
(FT
Services)
Administrative
manager
Franklin
Distributors,
LLC
(Distributors)
Principal
underwriter
Franklin
Templeton
Investor
Services,
LLC
(Investor
Services)
Transfer
agent
Annualized
Fee
Rate
Net
Assets
0.705%
Up
to
and
including
$1
billion
0.690%
Over
$1
billion,
up
to
and
including
$5
billion
0.675%
Over
$5
billion,
up
to
and
including
$10
billion
0.655%
Over
$10
billion,
up
to
and
including
$15
billion
0.635%
Over
$15
billion,
up
to
and
including
$20
billion
0.615%
Over
$20
billion,
up
to
and
including
$25
billion
0.605%
Over
$25
billion,
up
to
and
including
$30
billion
0.595%
Over
$30
billion,
up
to
and
including
$35
billion
0.585%
In
excess
of
$35
billion
Class
A
....................................................................................
0.25%
Class
C
....................................................................................
1.00%
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
28
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
d.
Sales
Charges/Underwriting
Agreements
Front-end
sales
charges
and
contingent
deferred
sales
charges
(CDSC)
do
not
represent
expenses
of
the
Fund.
These
charges
are
deducted
from
the
proceeds
of
sales
of
Fund
shares
prior
to
investment
or
from
redemption
proceeds
prior
to
remittance,
as
applicable.
Distributors
has
advised
the
Fund
of
the
following
commission
transactions
related
to
the
sales
and
redemptions
of
the
Fund's
shares
for
the
period:
e.
Transfer
Agent
Fees
Each
class
of
shares pays
transfer
agent
fees
to
Investor
Services
for
its
performance
of
shareholder
servicing
obligations.
The
fees
are
based
on
an
annualized
asset
based
fee
of
0.02%
plus
a
transaction
based
fee.
In
addition,
each
class reimburses
Investor
Services
for
out
of
pocket
expenses
incurred
and,
except
for
Class
R6,
reimburses
shareholder
servicing
fees
paid
to
third
parties.
These
fees
are
allocated
daily
based
upon
their
relative
proportion
of
such
classes'
aggregate
net
assets.
Class
R6
pays
Investor
Services
transfer
agent
fees
specific
to
that
class.
For
the
period
ended
February
28,
2022,
the
Fund
paid
transfer
agent
fees
of
$2,565,243,
of
which
$878,653
was
retained
by
Investor
Services.
f.
Investments
in
Affiliated
Management
Investment
Companies
The
Fund
invests
in
one
or
more
affiliated
management
investment
companies.
As
defined
in
the
1940
Act,
an
investment
is
deemed
to
be
a
“Controlled
Affiliate”
of
a
fund
when
a
fund
owns,
either
directly
or
indirectly,
25%
or
more
of
the
affiliated
fund’s
outstanding
shares
or
has
the
power
to
exercise
control
over
management
or
policies
of
such
fund.
The
Fund
does
not
invest
for
purposes
of
exercising
a
controlling
influence
over
the
management
or
policies.
Management
fees
paid
by
the
Fund
are
waived
on
assets
invested
in
the
affiliated
management
investment
companies,
as
noted
in
the
Statement
of
Operations,
in
an
amount
not
to
exceed
the
management
and
administrative
fees
paid
directly
or
indirectly
by
each
affiliate.
During
the
period
ended
February
28,
2022,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
Class
R
....................................................................................
0.50%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$55,340
CDSC
retained
..............................................................................
$2,801
aa
Value
at
Beginning
of
Period
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Period
Number
of
Shares
Held
at
End
of
Period
Investment
Income
a
a
a
a
a
a
a
a
Templeton
Foreign
Fund
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.
$—
$1,390,420
$(1,390,420)
$—
$—
$—
—
$5
Total
Affiliated
Securities
...
$—
$1,390,420
$(1,390,420)
$—
$—
$—
$5
3.
Transactions
with
Affiliates
(continued)
c.
Distribution
Fees
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
29
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
g.
Waiver
and
Expense
Reimbursements
Global
Advisors
and
Investor
Services
have
contractually
agreed
in
advance
to
waive
or
limit
their
respective
fees
and
to
assume
as
their
own
expense
certain
expenses
otherwise
payable
by
the
Fund
so
that
the
operating
expenses
(excluding
interest
expense,
distribution
fees,
acquired
fund
fees
and
expenses,
and
certain
non-routine
expenses
or
costs,
including
those
relating
to
litigation,
indemnification,
reorganizations,
and
liquidations)
for
each
class
of
the
Fund
do
not
exceed
0.85%,
based
on
the
average
net
assets
of
each
class
until
December
31,
2022.
Total
expenses
waived
or
paid
are
not
subject
to
recapture
subsequent
to
the
Fund's
fiscal
year
end.
Investor
Services
has
contractually
agreed
in
advance
to
waive
or
limit
its
fees
so
that
the
Class
R6
transfer
agent
fees
do
not
exceed
0.03%
based
on
the
average
net
assets
of
the
class
until
December
31,
2022.
h.
Other
Affiliated
Transactions
During
the
year
ended
August
31,
2021,
CollegeInvest
(Colorado
529
Plans),
an
affiliated
shareholder
of
the
Fund,
fully
redeemed
out
of
the
Fund.
As
a
result,
on
July
16,
2021,
the
Fund
delivered
portfolio
securities
and
cash
that
were
transferred
in-kind
to
the
Colorado
529
Plans,
which
included
$32,278,642
of
net
realized
gains.
As
such
gains
are
not
taxable
to
the
Fund
and
are
not
distributed
to
remaining
shareholders,
they
are
reclassified
from
accumulated
net
realized
gains
to
paid-in
capital.
4.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
August
31,
2021,
the
capital
loss
carryforwards
were
as
follows:
At
February
28,
2022,
the
cost
of
investments
and
net
unrealized
appreciation
(depreciation)
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
EU
reclaims,
wash
sales,
passive
foreign
investment
company
shares
and
gains
realized
on
in-kind
shareholder
redemptions.
5.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
period
ended
February
28,
2022,
aggregated
$486,635,976
and
$534,906,623,
respectively.
Capital
loss
carryforwards
not
subject
to
expiration:
Long
term
................................................................................
$525,755,254
Cost
of
investments
..........................................................................
$2,807,601,432
Unrealized
appreciation
........................................................................
$618,977,393
Unrealized
depreciation
........................................................................
(348,291,474
)
Net
unrealized
appreciation
(depreciation)
..........................................................
$270,685,919
3.
Transactions
with
Affiliates
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
30
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
6.
Concentration
of
Risk
Investing
in
foreign
securities
may
include
certain
risks
and
considerations
not
typically
associated
with
investing
in
U.S.
securities,
such
as
fluctuating
currency
values
and
changing
local,
regional
and
global
economic,
political
and
social
conditions,
which
may
result
in
greater
market
volatility.
Political
and
financial
uncertainty
in
many
foreign
regions
may
increase
market
volatility
and
the
economic
risk
of
investing
in
foreign
securities.
In
addition,
certain
foreign
securities
may
not
be
as
liquid
as
U.S.
securities.
7.
Geopolitical
Risk
On
February
24,
2022,
Russia
engaged
in
military
actions
in
the
sovereign
territory
of
Ukraine.
The
current
political
and
financial
uncertainty
surrounding
Russia
and
Ukraine
may
increase
market
volatility
and
the
economic
risk
of
investing
in
securities
in
these
countries
and
may
also
cause
uncertainty
for
the
global
economy
and
broader
financial
markets.
The
ultimate
fallout
and
long-term
impact
from
these
events
are
not
known.
The
Fund
will
continue
to
assess
the
impact
on
valuations
and
liquidity
and
will
take
any
potential
actions
needed
in
accordance
with
procedures
approved
by
the
Board.
8.
Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
9.
Credit
Facility
The
Fund,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2.675
billion
(Global
Credit
Facility)
which
matures
on
February
3,
2023.
This
Global
Credit
Facility
provides
a
source
of
funds
to
the
Borrowers
for
temporary
and
emergency
purposes,
including
the
ability
to
meet
future
unanticipated
or
unusually
large
redemption
requests.
Under
the
terms
of
the
Global
Credit
Facility,
the
Fund
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Fund
and
other
costs
incurred
by
the
Fund,
pay
its
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
its
relative
share
of
the
aggregate
net
assets
of
all
of
the
Borrowers,
including
an
annual
commitment
fee
of
0.15%
based
upon
the
unused
portion
of
the
Global
Credit
Facility.
These
fees
are
reflected
in
other
expenses
in
the
Statement
of
Operations.
During
the
period
ended
February
28,
2022,
the Fund
did
not
use
the
Global
Credit
Facility.
10.
Fair
Value
Measurements
The
Fund
follows
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Fund's
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the
Fund's financial
instruments
and
are
summarized
in
the
following
fair
value
hierarchy:
Level
1
–
quoted
prices
in
active
markets
for
identical
financial
instruments
Level
2
–
other
significant
observable
inputs
(including
quoted
prices
for
similar
financial
instruments,
interest
rates,
prepayment
speed,
credit
risk,
etc.)
Level
3
–
significant
unobservable
inputs
(including
the
Fund's
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
31
franklintempleton.com
Semiannual
Report
Templeton
Foreign
Fund
(continued)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
February
28,
2022,
in
valuing
the
Fund's
assets
carried
at
fair
value,
is
as
follows:
11.
Subsequent
Events
The
Fund
has
evaluated
subsequent
events
through
the
issuance
of
the financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure.
Abbreviations
Level
1
Level
2
Level
3
Total
Templeton
Foreign
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Brazil
...............................
$
58,841,599
$
—
$
—
$
58,841,599
China
...............................
89,296,567
113,262,873
—
202,559,440
France
..............................
—
104,126,611
—
104,126,611
Germany
............................
—
315,399,917
—
315,399,917
Hong
Kong
...........................
—
98,517,688
—
98,517,688
India
................................
—
61,560,691
—
61,560,691
Japan
...............................
—
536,611,162
—
536,611,162
Netherlands
..........................
—
254,806,101
—
254,806,101
Portugal
.............................
—
32,093,797
—
32,093,797
South
Korea
..........................
—
217,026,621
—
217,026,621
Spain
...............................
—
21,736,833
—
21,736,833
Switzerland
...........................
—
106,466,790
—
106,466,790
Taiwan
..............................
—
83,383,797
—
83,383,797
Thailand
.............................
—
46,213,864
—
46,213,864
United
Kingdom
.......................
—
703,388,787
—
703,388,787
United
States
.........................
215,153,653
—
—
215,153,653
Short
Term
Investments
...................
—
20,400,000
—
20,400,000
Total
Investments
in
Securities
...........
$363,291,819
$2,714,995,532
a
$—
$3,078,287,351
a
Includes
foreign
securities
valued
at
$2,694,595,532,
which
were
categorized
as
Level
2
as
a
result
of
the
application
of
market
level
fair
value
procedures.
See
the
Financial
Instrument
Valuation
note
for
more
information.
Selected
Portfolio
ADR
American
Depositary
Receipt
Cu
r
rency
GBP
British
Pound
HKD
Hong
Kong
Dollar
10.
Fair
Value
Measurements
(continued)
Templeton
Funds
Shareholder
Information
32
franklintempleton.com
Semiannual
Report
BOARD
APPROVAL
OF
INVESTMENT
MANAGEMENT
AGREEMENTS
TEMPLETON
FUNDS
Templeton
Foreign
Fund
(Fund)
At
an
in-person
meeting
held
on
February
28,
2022
(Meeting),
the
Board
of
Trustees
(Board)
of
Templeton
Funds
(Trust),
including
a
majority
of
the
trustees
who
are
not
“interested
persons”
as
defined
in
the
Investment
Company
Act
of
1940
(Independent
Trustees),
reviewed
and
approved
the
continuance
of
the
investment
management
agreement
between
Templeton
Global
Advisors
Limited
(Manager)
and
the
Trust,
on
behalf
of
the
Fund
(Management
Agreement)
for
an
additional
one-year
period.
The
Independent
Trustees
received
advice
from
and
met
separately
with
Independent
Trustee
counsel
in
considering
whether
to
approve
the
continuation
of
the
Management
Agreement.
In
considering
the
continuation
of
the
Management
Agreement,
the
Board
reviewed
and
considered
information
provided
by
the
Manager
at
the
Meeting
and
throughout
the
year
at
meetings
of
the
Board
and
its
committees.
The
Board
also
reviewed
and
considered
information
provided
in
response
to
a
detailed
set
of
requests
for
information
submitted
to
the
Manager
by
Independent
Trustee
counsel
on
behalf
of
the
Independent
Trustees
in
connection
with
the
annual
contract
renewal
process.
In
addition,
prior
to
the
Meeting,
the
Independent
Trustees
held
a
virtual
contract
renewal
meeting
at
which
the
Independent
Trustees
first
conferred
amongst
themselves
and
Independent
Trustee
counsel
about
contract
renewal
matters;
then
met
with
senior
leadership
regarding
the
performance
of
the
global
equity
funds,
as
well
as
expected
enhancements
to
the
Templeton
Global
Equity
Group
leadership;
and
last
met
with
management
to
request
additional
information
that
the
Independent
Trustees
reviewed
and
considered
at
the
Meeting.
The
Board
later
had
an
opportunity
for
an
expanded
discussion
with
the
leadership
of
the
Templeton
Global
Equity
Group
to
hear
about
strategies
to
deliver
improved
investment
returns
to
shareholders.
The
Board
reviewed
and
considered
all
of
the
factors
it
deemed
relevant
in
approving
the
continuance
of
the
Management
Agreement,
including,
but
not
limited
to:
(i)
the
nature,
extent
and
quality
of
the
services
provided
by
the
Manager;
(ii)
the
investment
performance
of
the
Fund;
(iii)
the
costs
of
the
services
provided
and
profits
realized
by
the
Manager
and
its
affiliates
from
the
relationship
with
the
Fund;
(iv)
the
extent
to
which
economies
of
scale
are
realized
as
the
Fund
grows;
and
(v)
whether
fee
levels
reflect
these
economies
of
scale
for
the
benefit
of
Fund
investors.
In
approving
the
continuance
of
the
Management
Agreement,
the
Board,
including
a
majority
of
the
Independent
Trustees,
determined
that
the
terms
of
the
Management
Agreement
are
fair
and
reasonable
and
that
the
continuance
of
such
Management
Agreement
is
in
the
best
interests
of
the
Fund
and
its
shareholders.
While
attention
was
given
to
all
information
furnished,
the
following
discusses
some
primary
factors
relevant
to
the
Board’s
determination.
Nature,
Extent
and
Quality
of
Services
The
Board
reviewed
and
considered
information
regarding
the
nature,
extent
and
quality
of
investment
management
services
provided
by
the
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
This
information
included,
among
other
things,
the
qualifications,
background
and
experience
of
the
senior
management
and
investment
personnel
of
the
Manager,
as
well
as
information
on
succession
planning
where
appropriate;
the
structure
of
investment
personnel
compensation;
oversight
of
third-party
service
providers;
investment
performance
reports
and
related
financial
information
for
the
Fund;
reports
on
expenses
and
shareholder
services;
legal
and
compliance
matters;
risk
controls;
pricing
and
other
services
provided
by
the
Manager
and
its
affiliates;
and
management
fees
charged
by
the
Manager
and
its
affiliates
to
US
funds
and
other
accounts,
including
management’s
explanation
of
differences
among
accounts
where
relevant.
The
Board
also
reviewed
and
considered
an
annual
report
on
payments
made
by
Franklin
Templeton
(FT)
or
the
Fund
to
financial
intermediaries,
as
well
as
a
memorandum
relating
to
third-party
servicing
arrangements,
which
included
discussion
of
the
changing
distribution
landscape
for
the
Fund.
The
Board
noted
management’s
continued
focus
on
enhancing
the
leadership
of
the
Templeton
Global
Equity
Group
and
commitment
to
providing
the
resources
important
to
delivering
sustainable
returns.
The
Board
also
acknowledged
the
ongoing
integration
of
the
Legg
Mason
family
of
funds
into
the
FT
family
of
funds
and
developing
strategies
to
address
areas
of
heightened
concern
in
the
mutual
fund
industry,
including
various
regulatory
initiatives
and
recent
geopolitical
concerns.
Templeton
Funds
Shareholder
Information
33
franklintempleton.com
Semiannual
Report
The
Board
also
reviewed
and
considered
the
benefits
provided
to
Fund
shareholders
of
investing
in
a
fund
that
is
part
of
the
FT
family
of
funds.
The
Board
noted
the
financial
position
of
Franklin
Resources,
Inc.
(FRI),
the
Manager’s
parent,
and
its
commitment
to
the
mutual
fund
business
as
evidenced
by
its
reassessment
of
the
fund
offerings
in
response
to
the
market
environment
and
project
initiatives
and
capital
investments
relating
to
the
services
provided
to
the
Fund
by
the
FT
organization.
The
Board
specifically
noted
FT’s
commitment
to
being
a
global
leader
in
stewardship
and
sustainability
and
the
recent
addition
of
a
senior
executive
focused
on
environmental,
social
and
governance
and
climate
control
initiatives.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
by
the
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
Fund
Performance
The
Board
reviewed
and
considered
the
performance
results
of
the
Fund
over
various
time
periods
ended
November
30,
2021.
The
Board
considered
the
performance
returns
for
the
Fund
in
comparison
to
the
performance
returns
of
mutual
funds
deemed
comparable
to
the
Fund
included
in
a
universe
(Performance
Universe)
selected
by
Broadridge
Financial
Solutions,
Inc.
(Broadridge),
an
independent
provider
of
investment
company
data.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
a
Performance
Universe.
The
Board
also
reviewed
and
considered
Fund
performance
reports
provided
and
discussions
that
occurred
with
portfolio
managers
at
Board
meetings
throughout
the
year.
A
summary
of
the
Fund’s
performance
results
is
below.
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
international
multi-cap
value
funds.
The
Board
noted
that
the
Fund’s
annualized
total
return
for
the
one-,
three-,
five-
and
10-year
periods
was
below
the
median
of
its
Performance
Universe.
The
Board
discussed
this
performance
with
management
and
management
explained
that,
even
though
the
Fund’s
peer
group
is
comprised
of
multi-cap
value
funds,
some
funds
within
the
Performance
Universe
are
more
skewed
toward
the
growth
style,
which
has
negatively
impacted
the
Fund’s
relative
returns
during
longer-term
periods
of
outperformance
of
growth
investing
strategies
over
value
investing
strategies.
Management
also
explained
that
the
Fund
had
a
larger
allocation
to
the
energy
sector
in
comparison
to
the
Performance
Universe,
which
underperformed
for
the
three-
and
five-year
periods.
Management
further
explained
that
the
Fund
had
an
underweight
position
to
the
industrials
sector
during
the
one-,
three-
and
five-year
periods
compared
to
its
peer
group,
which
was
a
top
performing
sector
for
the
Fund’s
benchmark,
the
MSCI
All
Country
World
ex
U.S.
Index-NR,
in
each
of
these
periods.
Management
reported
that
the
Fund’s
performance
had
recently
improved,
ranking
in
the
12th
percentile
of
the
Performance
Universe
for
the
one-
month
period
ended
January
31,
2022.
Management
then
discussed
with
the
Board
the
actions
that
are
being
taken
in
an
effort
to
improve
the
performance
of
the
Fund
and
the
global
equity
funds
as
a
whole.
Management
specifically
highlighted
the
strategic
initiatives
being
undertaken
in
the
Templeton
Global
Equity
Group,
including
enhancements
to
the
leadership
of
the
group
and
the
commitment
of
additional
resources
important
to
delivering
sustainable
returns.
The
Board
concluded
that
the
Fund’s
Management
Agreement
should
be
continued
for
an
additional
one-year
period,
while
management’s
efforts
continue
to
be
closely
monitored.
Comparative
Fees
and
Expenses
The
Board
reviewed
and
considered
information
regarding
the
Fund’s
actual
total
expense
ratio
and
its
various
components,
including,
as
applicable,
management
fees;
transfer
agent
expenses;
underlying
fund
expenses;
Rule
12b-1
and
non-Rule
12b-1
service
fees;
and
other
non-
management
fees.
The
Board
also
noted
the
quarterly
and
annual
reports
it
receives
on
all
marketing
support
payments
made
by
FT
to
financial
intermediaries.
The
Board
considered
the
actual
total
expense
ratio
and,
separately,
the
contractual
management
fee
rate,
without
the
effect
of
fee
waivers,
if
any
(Management
Rate)
of
the
Fund
in
comparison
to
the
median
expense
ratio
and
median
Management
Rate,
respectively,
of
other
mutual
funds
deemed
comparable
to
and
with
a
similar
expense
structure
as
the
Fund
selected
by
Broadridge
(Expense
Group).
Broadridge
fee
and
expense
data
is
based
upon
information
taken
from
each
fund’s
most
recent
annual
or
semi-annual
report,
which
reflects
historical
asset
levels
that
may
be
quite
different
from
those
currently
existing,
particularly
in
a
period
of
market
volatility.
While
recognizing
such
inherent
limitation
and
the
fact
that
expense
ratios
and
Management
Rates
generally
increase
as
assets
decline
and
decrease
as
assets
grow,
the
Board
believed
the
independent
analysis
conducted
by
Broadridge
to
be
an
appropriate
measure
of
comparative
fees
and
expenses.
The
Broadridge
Management
Rate
includes
administrative
charges,
and
the
actual
total
expense
ratio,
for
comparative
consistency,
was
shown
for
Class
A
shares
for
the
Fund
and
for
each
of
the
other
funds
in
the
Expense
Group.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
an
Expense
Group.
Templeton
Funds
Shareholder
Information
34
franklintempleton.com
Semiannual
Report
The
Expense
Group
for
the
Fund
included
the
Fund,
two
other
international
multi-cap
value
funds,
four
international
multi-cap
growth
funds,
and
four
international
multi-cap
core
funds.
The
Board
noted
that
the
Management
Rate
and
actual
total
expense
ratio
for
the
Fund
were
below
the
medians
of
its
Expense
Group.
The
Board
also
noted
that
the
Fund’s
actual
total
expense
ratio
reflected
a
fee
waiver
from
management.
The
Board
concluded
that
the
Management
Rate
charged
to
the
Fund
is
reasonable.
Profitability
The
Board
reviewed
and
considered
information
regarding
the
profits
realized
by
the
Manager
and
its
affiliates
in
connection
with
the
operation
of
the
Fund.
In
this
respect,
the
Board
considered
the
Fund
profitability
analysis
provided
by
the
Manager
that
addresses
the
overall
profitability
of
FT’s
US
fund
business,
as
well
as
its
profits
in
providing
investment
management
and
other
services
to
each
of
the
individual
funds
during
the
12-month
period
ended
September
30,
2021,
being
the
most
recent
fiscal
year-
end
for
FRI.
The
Board
noted
that
although
management
continually
makes
refinements
to
its
methodologies
used
in
calculating
profitability
in
response
to
organizational
and
product-related
changes,
the
overall
methodology
has
remained
consistent
with
that
used
in
the
Fund’s
profitability
report
presentations
from
prior
years.
The
Board
also
noted
that
PricewaterhouseCoopers
LLP,
auditor
to
FRI
and
certain
FT
funds,
has
been
engaged
by
the
Manager
to
periodically
review
and
assess
the
allocation
methodologies
to
be
used
solely
by
the
Fund’s
Board
with
respect
to
the
profitability
analysis.
The
Board
noted
management’s
belief
that
costs
incurred
in
establishing
the
infrastructure
necessary
for
the
type
of
mutual
fund
operations
conducted
by
the
Manager
and
its
affiliates
may
not
be
fully
reflected
in
the
expenses
allocated
to
the
Fund
in
determining
its
profitability,
as
well
as
the
fact
that
the
level
of
profits,
to
a
certain
extent,
reflected
operational
cost
savings
and
efficiencies
initiated
by
management.
As
part
of
this
evaluation,
the
Board
considered
management’s
outsourcing
of
certain
operations,
which
effort
has
required
considerable
up-front
expenditures
by
the
Manager
but,
over
the
long
run
is
expected
to
result
in
greater
efficiencies.
The
Board
also
noted
management’s
expenditures
in
improving
shareholder
services
provided
to
the
Fund,
as
well
as
the
need
to
implement
systems
and
meet
additional
regulatory
and
compliance
requirements
resulting
from
recent
US
Securities
and
Exchange
Commission
and
other
regulatory
requirements.
The
Board
also
considered
the
extent
to
which
the
Manager
and
its
affiliates
might
derive
ancillary
benefits
from
fund
operations,
including
revenues
generated
from
transfer
agent
services,
potential
benefits
resulting
from
personnel
and
systems
enhancements
necessitated
by
fund
growth,
as
well
as
increased
leverage
with
service
providers
and
counterparties.
Based
upon
its
consideration
of
all
these
factors,
the
Board
concluded
that
the
level
of
profits
realized
by
the
Manager
and
its
affiliates
from
providing
services
to
the
Fund
was
not
excessive
in
view
of
the
nature,
extent
and
quality
of
services
provided
to
the
Fund.
Economies
of
Scale
The
Board
reviewed
and
considered
the
extent
to
which
the
Manager
may
realize
economies
of
scale,
if
any,
as
the
Fund
grows
larger
and
whether
the
Fund’s
management
fee
structure
reflects
any
economies
of
scale
for
the
benefit
of
shareholders.
With
respect
to
possible
economies
of
scale,
the
Board
noted
the
existence
of
management
fee
breakpoints,
which
operate
generally
to
share
any
economies
of
scale
with
the
Fund’s
shareholders
by
reducing
the
Fund’s
effective
management
fees
as
the
Fund
grows
in
size.
The
Board
considered
the
Manager’s
view
that
any
analyses
of
potential
economies
of
scale
in
managing
a
particular
fund
are
inherently
limited
in
light
of
the
joint
and
common
costs
and
investments
the
Manager
incurs
across
the
FT
family
of
funds
as
a
whole.
The
Board
concluded
that
to
the
extent
economies
of
scale
may
be
realized
by
the
Manager
and
its
affiliates,
the
Fund’s
management
fee
structure
provided
a
sharing
of
benefits
with
the
Fund
and
its
shareholders
as
the
Fund
grows.
Conclusion
Based
on
its
review,
consideration
and
evaluation
of
all
factors
it
believed
relevant,
including
the
above-described
factors
and
conclusions,
the
Board
unanimously
approved
the
continuation
of
the
Management
Agreement
for
an
additional
one-year
period.
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
Templeton
Funds
Shareholder
Information
35
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Semiannual
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proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund's
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
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This
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called
“householding,”
will
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you
instruct
us
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prospectuses
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reports
on
our
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If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
104
S
04/22
©
2022
Franklin
Templeton
Investments.
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reserved.
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prospectus
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please
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SEMIANNUAL
REPORT
AND
SHAREHOLDER
LETTER
Templeton
International
Climate
Change
Fund
A
Series
of
Templeton
Funds
February
28,
2022
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franklintempleton.com
Semiannual
Report
1
SHAREHOLDER
LETTER
Dear
Shareholder:
During
the
six
months
ended
February
28,
2022,
the
global
economic
recovery
was
hampered
by
renewed
outbreaks
of
COVID-19,
supply-chain
disruptions
and
geopolitical
tensions
and
conflict.
Rising
inflation
across
multiple
countries
caused
many
central
banks,
including
the
U.S.
Federal
Reserve,
to
adopt
less
accommodative
monetary
stances,
putting
pressure
on
global
equity
markets.
New
Chinese
government
regulations
on
some
businesses
further
dampened
investor
sentiment
in
Asian
and
emerging
market
stocks.
Near
period-end,
Russia’s
invasion
of
Ukraine
increased
investor
uncertainty,
as
international
sanctions
on
Russia
constrained
companies
that
do
business
with
Russia
and
threatened
to
disrupt
global
economic
activity
and
commodity
markets.
In
this
environment,
stocks
in
global
developed
and
emerging
markets
excluding
the
U.S.,
as
measured
by
the
MSCI
All
Country
World
Index
ex
USA
Index-NR
(net
of
tax
withholding
when
dividends
are
paid),
posted
a
-6.95%
total
return
for
the
period.
1
We
are
committed
to
our
long-term
perspective
and
disciplined
investment
approach
as
we
conduct
a
rigorous,
fundamental
analysis
of
securities
with
a
regular
emphasis
on
investment
risk
management.
Historically,
patient
investors
have
achieved
rewarding
results
by
evaluating
their
goals,
diversifying
their
assets
globally
and
maintaining
a
disciplined
investment
program,
all
hallmarks
of
the
Templeton
investment
philosophy.
We
continue
to
recommend
investors
consult
financial
professionals
and
review
their
portfolios
to
design
a
long-term
strategy
and
portfolio
allocation
that
meet
their
individual
needs,
goals
and
risk
tolerance.
Templeton
International
Climate
Change
Fund’s
semiannual
report
includes
more
detail
about
prevailing
conditions
and
a
discussion
about
investment
decisions
during
the
period.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
We
thank
you
for
investing
with
Franklin
Templeton,
welcome
your
questions
and
comments,
and
look
forward
to
serving
your
investment
needs
in
the
years
ahead.
Sincerely,
Alan
Bartlett
Chief
Investment
Officer
Templeton
Global
Equity
Group
This
letter
reflects
our
analysis
and
opinions
as
of
February
28,
2022,
unless
otherwise
indicated.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
fund.
Statements
of
fact
are
from
sources
considered
reliable.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Semiannual
Report
2
Contents
Semiannual
Report
Templeton
International
Climate
Change
Fund
3
Performance
Summary
7
Your
Fund’s
Expenses
9
Financial
Highlights
and
Statement
of
Investments
10
Financial
Statements
13
Notes
to
Financial
Statements
16
Shareholder
Information
24
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
3
franklintempleton.com
Semiannual
Report
SEMIANNUAL
REPORT
Templeton
International
Climate
Change
Fund
This
semiannual
report
for
Templeton
International
Climate
Change
Fund
covers
the
period
ended
February
28,
2022.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
total
return
over
the
longer
term.
Under
normal
market
conditions,
the
Fund
invests
at
least
80%
of
its
net
assets
in
“non-U.S.
securities,”
as
defined
in
the
prospectus.
These
securities
are
predominantly
equity
securities
of
companies
located
outside
the
U.S.,
including
developing
markets.
Under
normal
market
conditions,
the
Fund
invests
predominantly
in
companies
that
we
determined
to
exhibit
superior
practices
in
identifying,
adapting
and
providing
solutions
to
the
consequences
of
climate
change
(i.e.,
companies
that,
based
on
our
fundamental
analysis
and
research,
are
able
to
successfully
transition
to
a
lower
carbon
economy).
Performance
Overview
The
Fund’s
Advisor
Class
shares
posted
a
-11.88%
cumulative
total
return
for
the
six
months
under
review.
In
comparison,
the
MSCI
All
Country
World
Index
(ACWI)
ex
USA
Index-NR,
which
measures
stock
performance
in
global
developed
and
emerging
markets
excluding
the
U.S.,
posted
a
-6.95%
cumulative
total
return.
1
Please
note
index
performance
information
is
provided
for
reference
and
we
do
not
attempt
to
track
the
index
but
rather
undertake
investments
on
the
basis
of
fundamental
research.
You
can
find
more
performance
data
in
the
Performance
Summary
beginning
on
page
7
.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Economic
and
Market
Overview
Global
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
ACWI-NR,
posted
a
-5.26%
total
return
for
the
six
months
ended
February
28,
2022.
1
The
combination
of
increased
consumer
demand
and
persistent
supply-chain
disruptions
contributed
to
higher
inflation
in
many
countries.
This
inflationary
pressure
led
many
of
the
world’s
central
banks
to
adopt
less
accommodative
stances
regarding
monetary
policy.
The
Chinese
government’s
imposition
of
new
restrictions
on
some
businesses
also
pressured
Asian
and
global
emerging
market
stocks.
Near
period-end,
Russia’s
invasion
of
Ukraine
increased
investor
uncertainty,
as
international
sanctions
on
Russia
constrained
companies
that
do
business
with
Russia
and
threatened
to
disrupt
global
economic
activity
and
commodity
markets.
In
the
U.S.,
the
economy
continued
to
recover
amid
declining
unemployment,
solid
wage
growth
and
strong
business
confidence.
Gross
domestic
product
(GDP)
growth
accelerated
in
the
fourth
quarter
of
2021,
as
strong
consumer
and
business
spending
supported
the
economy.
However,
investor
expectations
for
higher
interest
rates
and
geopolitical
uncertainty
late
in
the
reporting
period
negatively
impacted
U.S.
equities.
The
U.S.
Federal
Reserve
(Fed)
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%
and
continued
its
program
of
open-ended
U.S.
Treasury
(UST)
and
mortgage
bond
purchases
to
help
keep
markets
functioning.
In
its
January
2022
meeting
statement,
however,
the
Fed
noted
that
due
to
employment
gains
and
elevated
inflation,
it
expected
conditions
would
soon
be
appropriate
for
raising
interest
rates.
Furthermore,
the
Fed
maintained
its
timetable
for
reducing
its
purchases
of
UST
and
mortgage-backed
securities.
Economic
growth
slowed
in
the
eurozone,
declining
notably
in
the
fourth
quarter
of
2021
as
the
spread
of
the
Omicron
variant
of
COVID-19
disrupted
labor
markets
and
led
to
renewed
restrictions.
Additionally,
in
February
2022,
the
annual
inflation
rate
in
the
eurozone
reached
the
highest
Geographic
Composition
2/28/22
%
of
Total
Net
Assets
Europe
69.4%
Asia
28.9%
North
America
2.2%
Short-Term
Investments
&
Other
Net
Assets
(0.5)%
1.
Source:
Morningstar.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
or
distributions.
It
does
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
11
.
Templeton
International
Climate
Change
Fund
4
franklintempleton.com
Semiannual
Report
level
on
record,
and
the
prospect
of
energy
shortages
during
the
winter
tempered
investor
optimism.
The
European
Central
Bank
struck
a
less
accommodative
tone
at
its
February
meeting,
acknowledging
that
inflation
has
been
more
persistent
than
expected
and
opening
the
possibility
of
an
interest-rate
increase
in
2022.
Stocks
of
companies
with
exposure
to
Russia,
particularly
banks,
endured
further
declines
late
in
the
reporting
period.
Consequently,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index-NR,
posted
a
-6.70%
total
return
for
the
six
months
under
review.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index-NR,
posted
a
-9.34%
total
return
for
the
six-month
period.
1
Although
China’s
economy
continued
to
grow,
it
was
pressured
by
COVID-19
restrictions
and
government
measures
to
limit
real
estate
speculation.
Unexpected
regulatory
by
the
Chinese
government,
which
negatively
impacted
education-
and
technology-related
businesses,
and
investor
concerns
about
the
solvency
of
several
large
Chinese
property
developers
further
pressured
Asian
stocks
during
the
six-
month
period.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index-NR,
posted
a
-9.81%
total
return
for
the
six
months
under
review.
1
Rising
interest
rates
and
elevated
inflation
dampened
investor
enthusiasm
in
global
emerging
market
equities.
Geopolitical
instability
drove
strength
in
the
U.S.
dollar,
further
pressuring
stocks
in
emerging
market
countries,
especially
Russia
as
the
ruble
plunged
against
the
U.S.
dollar.
Interest-rate
increases
to
curb
inflation
by
several
central
banks,
including
those
of
Brazil
and
Mexico,
as
well
as
the
international
sanctions
on
Russia,
raised
investor
concerns
about
a
slowdown
in
economic
growth.
Investment
Strategy
When
choosing
equity
investments
for
the
Fund,
we
apply
a
bottom-up,
value-oriented,
long-term
approach
to
select
attractively
valued
companies
preparing
for
a
transition
to
a
lower
carbon
economy
and
that
meet
our
climate
change
criteria.
We
focus
on
the
market
price
of
the
company’s
securities
relative
to
our
evaluation
of
the
company’s
long-
term
earnings,
asset
value
and
cash
flow
potential.
Our
analysis
includes
an
assessment
of
the
potential
impacts
of
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
We
also
consider
a
company’s
price/earnings
ratio,
price/cash
flow
ratio,
profit
margins
and
liquidation
value.
Manager’s
Discussion
Templeton
International
Climate
Change
Fund
underperformed
its
benchmark
index
during
the
six-month
period.
The
“risk-off”
sentiment
was
driven
by
a
growing
expectation
of
monetary
tightening
in
developed
markets,
as
central
banks
began
to
react
to
more
persistent
inflation
and
tightness
in
the
labor
market.
Toward
the
end
of
the
reporting
period,
however,
Russia’s
invasion
of
Ukraine
heightened
geopolitical
risk
and
weakened
expectations
of
monetary
tightening,
creating
headwinds
for
our
financials
and
automobile
supplier
holdings.
Relative
performance
was
hurt
by
stock
selection
and
an
overweighting
in
the
industrials
sector
and
an
underweighting
in
the
financials
sector.
In
industrials,
relative
performance
was
hurt
by
Spanish
solar
power
equipment
manufacturer
Soltec
Power
Holdings
and
by
Denmark’s
Vestas
Wind
Systems,
the
world’s
largest
manufacturer
of
onshore
wind
turbines.
Shares
of
Vestas
declined
following
the
company’s
second
cut
to
operating
margin
expectations
in
2021
due
to
rising
input
costs,
most
notably
steel
and
transportation
costs.
We
believe
this
remains
a
temporary
issue
and
that
the
case
for
long-
term
profitable
growth
in
the
wind
industry
has
continued
to
strengthen,
as
companies
and
countries
target
more
aggressive
decarbonization
plans.
Elsewhere,
relative
performance
was
hampered
primarily
by
our
investment
in
Umicore,
a
Belgian-based
specialty
chemicals
company
comprising
three
businesses.
Umicore
provides
metals
recycling
services,
vehicle
catalysts
and
cathode
materials
for
electric
vehicles.
Shares
underperformed
in
the
fourth
quarter
of
2021
after
the
company’s
new
CEO
announced
a
profit
warning
for
both
Top
10
Industries
2/28/22
%
of
Total
Net
Assets
a
Electrical
Equipment
20.5%
Banks
12.4%
Semiconductors
&
Semiconductor
Equipment
12.0%
Multi-Utilities
9.4%
Automobiles
7.1%
Independent
Power
and
Renewable
Electricity
Producers
5.2%
Food
Products
5.2%
Pharmaceuticals
5.1%
Building
Products
4.5%
Metals
&
Mining
3.9%
Templeton
International
Climate
Change
Fund
5
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Report
2022
and
2023,
driven
by
substantially
lower
volumes
in
its
cathode
materials
business,
dampening
earnings
growth
for
several
years.
While
this
business
has
experienced
operational
issues
in
the
past,
we
had
remained
constructive
given
the
long-term
opportunity
around
the
growth
of
electric
vehicles.
However,
we
are
concerned
that
the
latest,
more
meaningful
profit
warning
is
evidence
that
Umicore
has
lost
its
technology
leadership
position
and
calls
into
question
its
substantial
investments
in
cathode
materials
capacity
in
recent
years.
We
have
since
exited
our
position
in
the
stock.
In
contrast,
stock
selection
and
underweightings
in
the
consumer
discretionary
and
health
care
sectors
contributed
to
relative
performance.
Elsewhere,
relative
performance
in
the
utilities
sector
was
led
higher
by
our
investment
in
French
global
water
and
waste
utility
company
Veolia
Environnement.
The
company’s
shares
have
continued
to
benefit
from
investor
optimism
regarding
the
company’s
upcoming
merger
with
competitor
Suez
(not
a
Fund
holding).
Shares
outperformed
in
late
2021
after
the
company
reported
better-than-expected
third-quarter
results
and
reconfirmed
its
fiscal
2021
earnings
outlook.
In
the
longer
term,
the
company
should
benefit
from
a
multi-year
growth
trend
in
the
demand
for
waste,
water
and
recycling
services,
driven
by
increasing
consumer
awareness
and
regulation.
Also
from
the
utilities
sector,
shares
of
German
power
provider
E.ON
advanced
after
the
company
reported
third-quarter
2021
results
that
pointed
to
recoveries
in
key
business
segments
and
highlighted
encouraging
debt
reduction
progress.
We
continue
to
see
numerous
potential
value
catalysts
for
E.ON
over
time,
including
continued
balance
sheet
improvements,
lower
financing
costs
and
the
green
energy
transition,
which
would
spur
grid
investment
and
upgrades
in
Germany
that
ultimately
should
help
expand
E.ON’s
regulated
asset
base.
Regionally,
stock
selection
in
France,
Spain
and
Belgium
detracted
from
relative
performance
during
the
six-month
reporting
period.
Stock
selection
and
an
overweighting
in
Denmark
also
pressured
results,
as
did
a
lack
of
exposure
to
Canada.
In
contrast,
stock
selection
in
Japan
contributed
to
relative
performance,
as
did
a
lack
of
exposure
to
China.
Our
zero-weighting
to
Russian
equities
also
supported
relative
results.
It
is
important
to
recognize
the
effect
of
currency
movements
on
the
Fund’s
performance.
In
general,
if
the
value
of
the
U.S.
dollar
goes
up
compared
with
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
go
down
in
value
because
it
will
be
worth
fewer
U.S.
dollars.
This
can
have
a
negative
effect
on
Fund
performance.
Conversely,
when
the
U.S.
dollar
weakens
in
relation
to
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
increase
in
value,
which
can
contribute
to
Fund
performance.
For
the
six
months
ended
February
28,
2022,
the
U.S.
dollar
rose
in
value
relative
to
most
currencies.
As
a
result,
the
Fund’s
performance
was
negatively
affected
by
the
portfolio’s
investment
predominantly
in
securities
with
non-
U.S.
currency
exposure.
Thank
you
for
your
continued
participation
in
Templeton
International
Climate
Change
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Top
10
Holdings
2/28/22
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Prysmian
SpA
5.2%
Electrical
Equipment,
Italy
E.ON
SE
5.2%
Multi-Utilities,
Germany
AstraZeneca
plc
5.1%
Pharmaceuticals,
United
Kingdom
STMicroelectronics
NV
4.8%
Semiconductors
&
Semiconductor
Equipment,
Singapore
Standard
Chartered
plc
4.8%
Banks,
United
Kingdom
Signify
NV
4.7%
Electrical
Equipment,
Netherlands
Cie
de
Saint-Gobain
4.5%
Building
Products,
France
Danone
SA
4.3%
Food
Products,
France
Veolia
Environnement
SA
4.2%
Multi-Utilities,
France
Honda
Motor
Co.
Ltd.
3.9%
Automobiles,
Japan
Top
10
Countries
2/28/22
a
%
of
Total
Net
Assets
a
a
France
20.3%
Germany
11.8%
Japan
11.0%
United
Kingdom
10.9%
Netherlands
8.5%
Italy
6.2%
Denmark
6.2%
India
6.0%
Spain
5.6%
Singapore
4.8%
Templeton
International
Climate
Change
Fund
6
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Semiannual
Report
Craig
Cameron,
CFA
Tina
Sadler,
CFA
Herbert
J.
Arnett,
Jr.
Lauran
Halpin
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
February
28,
2022,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
February
28,
2022
Templeton
International
Climate
Change
Fund
7
franklintempleton.com
Semiannual
Report
The
performance
table
does
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
2/28/2022
1
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
Advisor
Class
shares
are
offered
without
sales
charges.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Cumulative
Total
Return
2
Average
Annual
Total
Return
3
–
6-Month
-11.88%
-11.88%
1-Year
-3.02%
-3.02%
3-Year
+47.34%
+13.79%
Since
Inception
(6/1/18)
+35.13%
+8.37%
See
page
8
for
Performance
Summary
footnotes.
Templeton
International
Climate
Change
Fund
Performance
Summary
8
franklintempleton.com
Semiannual
Report
All
investments
involve
risks,
including
possible
loss
of
principal.
Special
risks
are
associated
with
foreign
investing,
including
currency
fluctuations,
economic
instability
and
political
developments;
investments
in
developing
markets
involve
heightened
risks
related
to
the
same
factors.
Currency
rates
may
fluctuate
significantly
over
short
periods
of
time,
and
can
reduce
returns.
Because
the
Fund
may
invest
its
assets
in
companies
in
a
specific
region,
including
Europe,
it
is
subject
to
greater
risks
of
adverse
developments
in
that
region
and/or
the
surrounding
regions
than
a
fund
that
is
more
broadly
diversified
geographical-
ly.
Current
political
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Derivatives,
including
currency
management
strategies,
involve
costs
and
can
create
economic
leverage
in
the
portfolio,
which
may
result
in
significant
volatility
and
cause
the
Fund
to
participate
in
losses
(as
well
as
enable
gains)
on
an
amount
that
exceeds
the
Fund’s
initial
investment.
The
Fund
may
not
achieve
the
anticipated
benefits,
and
may
realize
losses
when
a
counterparty
fails
to
perform
as
promised.
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
Russia’s
military
invasion
of
Ukraine
in
February
2022,
the
resulting
responses
by
the
United
States
and
other
countries,
and
the
potential
for
wider
conflict
could
increase
volatility
and
uncertainty
in
the
financial
markets
and
adversely
affect
regional
and
global
economies.
The
United
States
and
other
countries
have
im-
posed
broad-ranging
economic
sanctions
on
Russia
and
certain
Russian
individuals,
banking
entities
and
corporations
as
a
response
to
its
invasion
of
Ukraine.
The
United
States
and
other
countries
have
also
imposed
economic
sanctions
on
Belarus
and
may
impose
sanctions
on
other
countries
that
support
Russia’s
military
invasion.
These
sanctions,
as
well
as
any
other
economic
consequences
related
to
the
invasion,
such
as
additional
sanctions,
boycotts
or
changes
in
consumer
or
purchaser
preferences
or
cyberattacks
on
governments,
companies
or
individuals,
may
further
decrease
the
value
and
liquidity
of
certain
Russian
securities
and
securities
of
issuers
in
other
countries
that
are
subject
to
economic
sanctions
related
to
the
invasion.
1.
The
Fund
has
an
expense
reduction
contractually
guaranteed
through
12/31/22.
Fund
investment
results
reflect
the
expense
reduction;
without
this
reduction,
the
results
would
have
been
lower.
2.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
3.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
4.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(9/1/21–2/28/22)
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
$0.1314
$0.1212
$0.4827
$0.7353
Total
Annual
Operating
Expenses
4
With
Fee
Waiver
Without
Fee
Waiver
0.97%
8.16%
Your
Fund’s
Expenses
Templeton
International
Climate
Change
Fund
9
franklintempleton.com
Semiannual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value.”
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=
$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
181/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Beginning
Account
Value
9/1/21
Ending
Account
Value
2/28/22
Expenses
Paid
During
Period
9/1/21–2/28/22
1,2
Ending
Account
Value
2/28/22
Expenses
Paid
During
Period
9/1/21–2/28/22
1,2
a
Annualized
Expense
Ratio
2
$1,000
$881.20
$4.53
$1,019.98
$4.87
0.97%
Templeton
Funds
Financial
Highlights
Templeton
International
Climate
Change
Fund
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
10
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
Year
Ended
August
31,
2018
a
2021
2020
2019
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.................
$14.68
$10.71
$8.91
$9.64
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
.........................
0.04
0.10
0.07
0.27
0.04
Net
realized
and
unrealized
gains
(losses)
...........
(1.77)
3.96
2.03
(0.93)
(0.40)
Total
from
investment
operations
....................
(1.73)
4.06
2.10
(0.66)
(0.36)
Less
distributions
from:
Net
investment
income
..........................
(0.13)
(0.09)
(0.30)
(0.05)
—
Net
realized
gains
.............................
(0.60)
—
—
(0.02)
—
Total
distributions
...............................
(0.73)
(0.09)
(0.30)
(0.07)
—
Net
asset
value,
end
of
period
......................
$12.22
$14.68
$10.71
$8.91
$9.64
Total
return
d
...................................
(11.88)%
37.89%
23.70%
(6.75)%
(3.60)%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
......
7.92%
8.16%
6.48%
9.65%
13.30%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
0.98%
0.97%
0.97%
0.97%
0.97%
Expenses
net
of
waiver
and
payments
by
affiliates
and
expense
reduction
...............................
0.97%
0.97%
f
0.97%
0.97%
0.97%
Net
investment
income
...........................
0.55%
0.80%
0.74%
2.94%
1.51%
Supplemental
data
Net
assets,
end
of
period
(000’s)
....................
$2,463
$2,935
$2,142
$1,783
$1,929
Portfolio
turnover
rate
............................
17.15%
53.37%
39.99%
9.55%
7.95%
a
For
the
period
June
1,
2018
(commencement
of
operations)
to
August
31,
2018.
b
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Templeton
Funds
Statement
of
Investments
(unaudited),
February
28,
2022
Templeton
International
Climate
Change
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
11
a
a
Industry
Shares
a
Value
a
Common
Stocks
100.5%
Denmark
6.2%
a
Orsted
A/S,
144A,
Reg
S
...........
Electric
Utilities
428
$
55,379
Vestas
Wind
Systems
A/S
..........
Electrical
Equipment
2,978
96,014
151,393
France
20.3%
BNP
Paribas
SA
.................
Banks
1,633
94,733
Cie
de
Saint-Gobain
..............
Building
Products
1,799
111,522
Danone
SA
.....................
Food
Products
1,754
106,688
Valeo
.........................
Auto
Components
3,758
82,861
Veolia
Environnement
SA
..........
Multi-Utilities
2,960
103,183
498,987
Germany
11.8%
E.ON
SE
.......................
Multi-Utilities
9,346
127,092
Infineon
Technologies
AG
..........
Semiconductors
&
Semiconductor
Equipment
2,674
90,457
Siemens
AG
....................
Industrial
Conglomerates
510
71,834
289,383
Hong
Kong
0.8%
b
Cadeler
A/S
....................
Construction
&
Engineering
5,443
20,589
b
India
6.0%
b
Azure
Power
Global
Ltd.
...........
Independent
Power
and
Renewable
Electricity
Producers
4,300
71,165
Kaveri
Seed
Co.
Ltd.
..............
Food
Products
3,124
20,211
NHPC
Ltd.
.....................
Independent
Power
and
Renewable
Electricity
Producers
157,200
57,207
148,583
Italy
6.2%
Danieli
&
C
Officine
Meccaniche
SpA
.
Machinery
1,563
24,530
Prysmian
SpA
...................
Electrical
Equipment
3,873
127,468
151,998
Japan
11.0%
Honda
Motor
Co.
Ltd.
.............
Automobiles
3,190
96,924
Sumitomo
Metal
Mining
Co.
Ltd.
.....
Metals
&
Mining
1,923
95,932
Toyota
Motor
Corp.
...............
Automobiles
4,300
78,680
271,536
Netherlands
8.5%
ING
Groep
NV
..................
Banks
8,020
93,641
a
Signify
NV,
144A,
Reg
S
...........
Electrical
Equipment
2,284
116,809
210,450
Singapore
4.8%
STMicroelectronics
NV
............
Semiconductors
&
Semiconductor
Equipment
2,844
119,359
South
Korea
2.7%
a
Samsung
Electronics
Co.
Ltd.,
GDR,
144A,
Reg
S
..................
Technology
Hardware,
Storage
&
Peripherals
22
33,004
Samsung
SDI
Co.
Ltd.
............
Electronic
Equipment,
Instruments
&
Components
70
32,261
65,265
Spain
5.6%
Red
Electrica
Corp.
SA
............
Electric
Utilities
1,371
27,154
Templeton
Funds
Statement
of
Investments
(unaudited)
Templeton
International
Climate
Change
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Spain
(continued)
b
Siemens
Gamesa
Renewable
Energy
SA
..........................
Electrical
Equipment
2,001
$
46,032
b
Soltec
Power
Holdings
SA
..........
Electrical
Equipment
11,567
63,516
136,702
Taiwan
3.5%
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.,
ADR
..................
Semiconductors
&
Semiconductor
Equipment
800
85,608
United
Kingdom
10.9%
AstraZeneca
plc
.................
Pharmaceuticals
1,036
125,903
DS
Smith
plc
....................
Containers
&
Packaging
5,463
25,169
Standard
Chartered
plc
............
Banks
16,499
117,564
268,636
United
States
2.2%
Schneider
Electric
SE
.............
Electrical
Equipment
357
55,300
Total
Common
Stocks
(Cost
$2,106,150)
.......................................
2,473,789
Short
Term
Investments
1.0%
a
a
Industry
Shares
a
Value
a
a
a
a
a
a
Money
Market
Funds
1.0%
United
States
1.0%
c,d
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..........
24,951
24,951
Total
Money
Market
Funds
(Cost
$24,951)
......................................
24,951
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$24,951
)
...................................
24,951
a
a
a
Total
Investments
(Cost
$2,131,101)
101.5%
....................................
$2,498,740
Other
Assets,
less
Liabilities
(1.5)%
...........................................
(36,228)
Net
Assets
100.0%
...........................................................
$2,462,512
a
a
a
See
Abbreviations
on
page
23
.
a
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
February
28,
2022,
the
aggregate
value
of
these
securities
was
$205,192,
representing
8.3%
of
net
assets.
b
Non-income
producing.
c
See
Note
3(e)
regarding
investments
in
affiliated
management
investment
companies.
d
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Templeton
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
February
28,2022
(unaudited)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
13
Templeton
International
Climate
Change
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$2,106,150
Cost
-
Non-controlled
affiliates
(Note
3
e
)
........................................................
24,951
Value
-
Unaffiliated
issuers
..................................................................
$2,473,789
Value
-
Non-controlled
affiliates
(Note
3
e
)
.......................................................
24,951
Receivables:
Dividends
...............................................................................
7,234
Affiliates
................................................................................
45,931
Total
assets
..........................................................................
2,551,905
Liabilities:
Payables:
Transfer
agent
fees
........................................................................
367
Reports
to
shareholders
fees
................................................................
5,096
Professional
fees
.........................................................................
66,809
Trustees'
fees
and
expenses
.................................................................
509
Deferred
tax
...............................................................................
294
Accrued
expenses
and
other
liabilities
...........................................................
16,318
Total
liabilities
.........................................................................
89,393
Net
assets,
at
value
.................................................................
$2,462,512
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$2,009,800
Total
distributable
earnings
(losses)
.............................................................
452,712
Net
assets,
at
value
.................................................................
$2,462,512
Shares
outstanding
.........................................................................
201,474
Net
asset
value
and
maximum
offering
price
per
share
...............................................
$12.22
Templeton
Funds
Financial
Statements
Statement
of
Operations
for
the
six
months
ended
February
28,
2022
(unaudited)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
Templeton
International
Climate
Change
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$3,114)
Unaffiliated
issuers
........................................................................
$20,709
Non-controlled
affiliates
(Note
3
e
)
.............................................................
5
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
35
Total
investment
income
...................................................................
20,749
Expenses:
Management
fees
(Note
3
a
)
...................................................................
9,629
Transfer
agent
fees
(Note
3
d
)
..................................................................
343
Custodian
fees
(Note
4
)
......................................................................
293
Reports
to
shareholders
fees
..................................................................
2,820
Registration
and
filing
fees
....................................................................
30,670
Professional
fees
...........................................................................
52,949
Trustees'
fees
and
expenses
..................................................................
603
Other
....................................................................................
10,611
Total
expenses
.........................................................................
107,918
Expense
reductions
(Note
4
)
...............................................................
(67)
Expenses
waived/paid
by
affiliates
(Note
3
e
and
3
f
)
..............................................
(94,600)
Net
expenses
.........................................................................
13,251
Net
investment
income
................................................................
7,498
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
(net
of
foreign
taxes
of
$821)
Unaffiliated
issuers
......................................................................
100,245
Foreign
currency
transactions
................................................................
(705)
Net
realized
gain
(loss)
..................................................................
99,540
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(453,026)
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
(116)
Change
in
deferred
taxes
on
unrealized
appreciation
...............................................
1,466
Net
change
in
unrealized
appreciation
(depreciation)
............................................
(451,676)
Net
realized
and
unrealized
gain
(loss)
............................................................
(352,136)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(344,638)
Templeton
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
15
Templeton
International
Climate
Change
Fund
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$7,498
$20,990
Net
realized
gain
(loss)
.................................................
99,540
336,629
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(451,676)
453,276
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(344,638)
810,895
Distributions
to
shareholders
..............................................
(147,060)
(17,160)
Capital
share
transactions
(Note
2
)
..........................................
18,
948
—
Net
increase
(decrease)
in
net
assets
...................................
(472,750)
793,735
Net
assets:
Beginning
of
period
.....................................................
2,935,262
2,141,527
End
of
period
..........................................................
$2,462,512
$2,935,262
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
Templeton
International
Climate
Change
Fund
16
franklintempleton.com
Semiannual
Report
1.
Organization
and
Significant
Accounting
Policies
Templeton
Funds (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
an
open-end
management
investment
company,
consisting
of three separate
funds
and
applies
the
specialized
accounting
and
reporting
guidance
in
U.S.
Generally
Accepted
Accounting
Principles
(U.S.
GAAP).
Templeton
International
Climate
Change
Fund
(Fund)
is
included
in
this
report.
The
Fund
has
five
classes
of
shares:
Class
A,
Class
C,
Class
R,
Class
R6
and
Advisor
Class.
Each
class
of
shares
may
differ
by
its
initial
sales
load,
contingent
deferred
sales
charges,
voting
rights
on
matters
affecting
a
single
class,
its
exchange
privilege
and
fees
due
to
differing
arrangements
for
distribution
and
transfer
agent
fees.
The
Fund
currently
operates
with
one
class
of
shares,
Advisor
Class.
The
Fund
began
publicly
offering
its
shares
on
December
15,
2021.
The
following
summarizes
the Fund's
significant
accounting
policies.
a.
Financial
Instrument
Valuation
The
Fund’s
investments
in
financial
instruments
are
carried
at
fair
value
daily.
Fair
value
is
the
price
that
would
be
received
to
sell
an
asset
or
paid
to
transfer
a
liability
in
an
orderly
transaction
between
market
participants
on
the
measurement
date.
The
Fund
calculates
the
net
asset
value
(NAV)
per
share
each business
day as
of
4
p.m.
Eastern
time
or
the
regularly
scheduled
close
of
the
New
York
Stock
Exchange
(NYSE),
whichever
is
earlier.
Under
compliance
policies
and
procedures
approved
by
the
Trust’s
Board
of
Trustees
(the
Board),
the
Fund’s
administrator
has
responsibility
for
oversight
of
valuation,
including
leading
the
cross-functional
Valuation
Committee
(VC).
The
Fund
may
utilize
independent
pricing
services,
quotations
from
securities
and
financial
instrument
dealers,
and
other
market
sources
to
determine
fair
value.
Equity
securities
listed
on
an
exchange
or
on
the
NASDAQ
National
Market
System
are
valued
at
the
last
quoted
sale
price
or
the
official
closing
price of
the
day,
respectively.
Foreign
equity
securities
are
valued
as
of
the
close
of
trading
on
the
foreign
stock
exchange
on
which
the
security
is
primarily
traded,
or
as
of
4
p.m.
Eastern
time.
The
value
is
then
converted
into
its
U.S.
dollar
equivalent
at
the
foreign
exchange
rate
in
effect
at
4
p.m.
Eastern
time
on
the
day
that
the
value
of
the
security
is
determined.
Over-the-counter
(OTC)
securities
are
valued
within
the
range
of
the
most
recent
quoted
bid
and
ask
prices.
Securities
that
trade
in
multiple
markets
or
on
multiple
exchanges
are
valued
according
to
the
broadest
and
most
representative
market.
Certain
equity
securities
are
valued
based
upon
fundamental
characteristics
or
relationships
to
similar
securities.
Investments
in
open-end
mutual
funds
are
valued
at
the
closing
NAV.
The
Fund
has
procedures
to
determine
the
fair
value
of
financial
instruments
for
which
market
prices
are
not
reliable
or
readily
available.
Under
these
procedures,
the Fund
primarily
employs
a
market-based
approach
which
may
use
related
or
comparable
assets
or
liabilities,
recent
transactions,
market
multiples,
book
values,
and
other
relevant
information
for
the
investment
to
determine
the
fair
value
of
the
investment.
An
income-based
valuation
approach
may
also
be
used
in
which
the
anticipated
future
cash
flows
of
the
investment
are
discounted
to
calculate
fair
value.
Discounts
may
also
be
applied
due
to
the
nature
or
duration
of
any
restrictions
on
the
disposition
of
the
investments.
Due
to
the
inherent
uncertainty
of
valuations
of
such
investments,
the
fair
values
may
differ
significantly
from
the
values
that
would
have
been
used
had
an
active
market
existed.
Trading
in
securities
on
foreign
securities
stock
exchanges
and
OTC
markets
may
be
completed
before
4
p.m.
Eastern
time.
In
addition,
trading
in
certain
foreign
markets
may
not
take
place
on
every
Fund's
business
day. Events
can occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
February
28,
2022,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy
(referred
to
as
“market
level
fair
value”).
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
17
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
security
valuation
changes
due
to
an
open
foreign
market
are
adjusted
and
reflected
by
the
Fund
for
financial
reporting
purposes.
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.
The
Fund
may
enter
into
foreign
currency
exchange
contracts
to
facilitate
transactions
denominated
in
a
foreign
currency.
Purchases
and
sales
of
securities,
income
and
expense
items
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
at
the
exchange
rate
in
effect
on
the
transaction
date.
Portfolio
securities
and
assets
and
liabilities
denominated
in
foreign
currencies
contain
risks
that
those
currencies
will
decline
in
value
relative
to
the
U.S.
dollar.
Occasionally,
events
may
impact
the
availability
or
reliability
of
foreign
exchange
rates
used
to
convert
the
U.S.
dollar
equivalent
value.
If
such
an
event
occurs,
the
foreign
exchange
rate
will
be
valued
at
fair
value
using
procedures
established
and
approved
by
the
Board.
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
in
the
Statement of
Operations.
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
denominated
assets
and
liabilities
other
than
investments
in
securities
held
at
the
end
of
the
reporting
period.
c.
Income
and
Deferred
Taxes
It
is the Fund's
policy
to
qualify
as
a
regulated
investment
company
under
the
Internal
Revenue
Code. The Fund
intends
to
distribute
to
shareholders
substantially
all
of
its
taxable
income
and
net
realized
gains
to
relieve
it
from
federal
income
and excise
taxes.
As
a
result,
no
provision
for
U.S.
federal
income
taxes
is
required.
The Fund
may
be
subject
to
foreign
taxation
related
to
income
received,
capital
gains
on
the
sale
of
securities
and
certain
foreign
currency
transactions
in
the
foreign
jurisdictions
in
which
it
invests.
Foreign
taxes,
if
any,
are
recorded
based
on
the
tax
regulations
and
rates
that
exist
in
the
foreign
markets
in
which
the
Fund
invests.
When
a
capital
gain
tax
is
determined
to
apply,
the
Fund
records
an
estimated
deferred
tax
liability
in
an
amount
that
would
be
payable
if
the
securities
were
disposed
of
on
the
valuation
date.
The
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
February
28,
2022,
the
Fund
has
determined
that
no
tax
liability
is
required
in
its
financial
statements
related
to
uncertain
tax
positions
for
any
open
tax
years
(or
expected
to
be
taken
in
future
tax
years).
Open
tax
years
are
those
that
remain
subject
to
examination
and
are
based
on
the
statute
of
limitations
in
each
jurisdiction
in
which
the
Fund
invests.
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.
Estimated
expenses
are
accrued
daily.
Dividend
income
is
recorded
on
the
ex-dividend
date
except
for
certain
dividends
from
securities
where
the
dividend
rate
is
not
available.
In
such
cases,
the
dividend
is
recorded
as
soon
as
the
information
is
received
by
the
Fund.
Distributions
to shareholders
are
recorded
on
the
ex-dividend
date.
Distributable
earnings
are
determined
according
to
income
tax
regulations
(tax
basis)
and
may
differ
from
earnings
recorded
in
accordance
with
U.S.
GAAP.
These
differences
may
be
permanent
or
temporary.
Permanent
differences
are
reclassified
among
capital
accounts
to
reflect
their
tax
character.
These
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
18
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
reclassifications
have
no
impact
on
net
assets
or
the
results
of
operations.
Temporary
differences
are
not
reclassified,
as
they
may
reverse
in
subsequent
periods.
Common
expenses
incurred
by
the
Trust
are
allocated
among
the
Funds
based
on
the
ratio
of
net
assets
of
each
Fund
to
the
combined
net
assets
of
the
Trust
or
based
on
the
ratio
of
number
of
shareholders
of
each
Fund
to
the
combined
number
of
shareholders
of
the
Trust.
Fund
specific
expenses
are
charged
directly
to
the
Fund
that
incurred
the
expense.
Realized
and
unrealized
gains
and
losses
and
net
investment
income,
excluding
class
specific
expenses,
are
allocated
daily
to
each
class
of
shares
based
upon
the
relative
proportion
of
net
assets
of
each
class.
Differences
in
per
share
distributions
by
class
are
generally
due
to
differences
in
class
specific
expenses.
e.
Accounting
Estimates
The
preparation
of
financial
statements
in
accordance
with
U.S.
GAAP
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
expenses
during
the
reporting
period.
Actual
results
could
differ
from
those
estimates.
f.
Guarantees
and
Indemnifications
Under
the
Trust's
organizational
documents,
its
officers
and
trustees
are
indemnified
by
the
Trust
against
certain
liabilities
arising
out
of
the
performance
of
their
duties
to
the
Trust.
Additionally,
in
the
normal
course
of
business,
the
Trust, on
behalf
of
the
Fund,
enters
into
contracts
with
service
providers
that
contain
general
indemnification
clauses.
The
Trust's
maximum
exposure
under
these
arrangements
is
unknown
as
this
would
involve
future
claims
that
may
be
made
against
the
Trust
that
have
not
yet
occurred.
Currently,
the
Trust
expects
the
risk
of
loss
to
be
remote.
2.
Shares
of
Beneficial
Interest
At
February
28,
2022,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:.
3.
Transactions
with
Affiliates
Franklin
Resources,
Inc.
is
the
holding
company
for
various
subsidiaries
that
together
are
referred
to
as
Franklin
Templeton.
Certain
officers
and
trustees
of
the
Fund
are
also
officers
and/or
directors
of
the
following
subsidiaries:
Six
Months
Ended
February
28,
2022
Year
Ended
August
31,
2021
Shares
Amount
Shares
Amount
Shares
sold
...................................
1,474
$18,948
—
$—
Net
increase
(decrease)
..........................
1,474
$18,948
—
$—
Subsidiary
Affiliation
Franklin
Templeton
Investments
Corp.
(FTIC)
Investment
manager
Franklin
Templeton
Investment
Management
Ltd.
(FTIML)
Investment
manager
Templeton
Global
Advisors
Ltd.
(Global
Advisors)
Investment
manager
Franklin
Templeton
Services,
LLC
(FT
Services)
Administrative
manager
Franklin
Distributors,
LLC
(Distributors)
Principal
underwriter
Franklin
Templeton
Investor
Services,
LLC
(Investor
Services)
Transfer
agent
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
19
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
a.
Management
Fees
The
Fund
pays
an
investment
management
fee,
calculated
daily
and
paid
monthly,
to
FTIC
based
on
the
average
daily
net
assets
of
the
Fund
as
follows:
For
the
period
ended
February
28,
2022,
the
gross
annualized
effective
investment
management
fee
rate
was
0.705%
of
the
Fund’s
average
daily
net
assets.
Under
a
subadvisory
agreement,
FTIML
and
Global
Advisors,
affiliates
of
FTIC,
provide
subadvisory
services
to
the
Fund.
The
subadvisory
fee
is
paid
by
FTIC
based
on
the
Fund’s
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
b.
Administrative
Fees
Under
an
agreement
with
FTIC,
FT
Services
provides
administrative
services
to
the
Fund.
The
fee
is
paid
by
FTIC
based
on
the
Fund's
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
c.
Distribution
Fees
The
Board
has
adopted
distribution
plans
for
each
share
class,
with
the
exception
of
Class
R6
and
Advisor
Class
shares,
pursuant
to
Rule
12b-1
under
the
1940
Act.
Under
the
Fund’s
Class
A
reimbursement
distribution
plan,
the
Fund
reimburses
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of the
Fund's
shares
up
to
the
maximum
annual
plan
rate.
Under
the
Class
A
reimbursement
distribution
plan,
costs
exceeding
the
maximum
for
the
current
plan
year
cannot
be
reimbursed
in
subsequent
periods.
In
addition,
under
the
Fund’s
Class
C
and
R
compensation
distribution
plans,
the
Fund
pays
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
Fund's
shares
up
to
the
maximum
annual
plan
rate
for
each
class.
The
plan
year,
for
purposes
of
monitoring
compliance
with
the
maximum
annual
plan
rates,
is
February
1
through
January
31.
The
maximum
annual
plan
rates,
based
on
the
average
daily
net
assets,
for
each
class,
are
as
follows:
Annualized
Fee
Rate
Net
Assets
0.705%
Up
to
and
including
$1
billion
0.690%
Over
$1
billion,
up
to
and
including
$5
billion
0.675%
Over
$5
billion,
up
to
and
including
$10
billion
0.655%
Over
$10
billion,
up
to
and
including
$15
billion
0.635%
Over
$15
billion,
up
to
and
including
$20
billion
0.615%
Over
$20
billion,
up
to
and
including
$25
billion
0.605%
Over
$25
billion,
up
to
and
including
$30
billion
0.595%
Over
$30
billion,
up
to
and
including
$35
billion
0.585%
In
excess
of
$35
billion
Class
A
....................................................................................
0.25%
Class
C
....................................................................................
1.00%
Class
R
....................................................................................
0.50%
3.
Transactions
with
Affiliates
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
20
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
d.
Transfer
Agent
Fees
Each
class
of
shares pays
transfer
agent
fees
to
Investor
Services
for
its
performance
of
shareholder
servicing
obligations.
The
fees
are
based
on
an
annualized
asset
based
fee
of
0.02%
plus
a
transaction
based
fee.
In
addition,
each
class reimburses
Investor
Services
for
out
of
pocket
expenses
incurred
and,
except
for
Class
R6,
reimburses
shareholder
servicing
fees
paid
to
third
parties.
These
fees
are
allocated
daily
based
upon
their
relative
proportion
of
such
classes’
aggregate
net
assets.
Class
R6
pays
Investor
Services
transfer
agent
fees
specific
to
that
class.
For
the
period
ended
February
28,
2022,
the
Fund
paid
transfer
agent
fees
of
$343,
of
which
$326
were
retained
by
Investor
Services.
e.
Investments
in
Affiliated
Management
Investment
Companies
The
Fund
invests
in
one
or
more
affiliated
management
investment
companies.
As
defined
in
the
1940
Act,
an
investment
is
deemed
to
be
a
“Controlled
Affiliate”
of
a
fund
when
a
fund
owns,
either
directly
or
indirectly,
25%
or
more
of
the
affiliated
fund’s
outstanding
shares
or
has
the
power
to
exercise
control
over
management
or
policies
of
such
fund.
The
Fund
does
not
invest
for
purposes
of
exercising
a
controlling
influence
over
the
management
or
policies.
Management
fees
paid
by
the
Fund
are
waived
on
assets
invested
in
the
affiliated
management
investment
companies,
as
noted
in
the
Statement
of
Operations,
in
an
amount
not
to
exceed
the
management
and
administrative
fees
paid
directly
or
indirectly
by
each
affiliate.
During
the
period
ended
February
28,
2022,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
f.
Waiver
and
Expense
Reimbursements
FTIC
has
contractually
agreed
in
advance
to
waive
or
limit
its
fees
and
to
assume
as
its
own
expense
certain
expenses
otherwise
payable
by
the
Fund
so
that
the
operating expenses
(excluding
distribution
fees,
acquired
fund
fees
and
expenses
and
certain
non-routine
expenses
or
costs,
including
those
relating
to
litigation,
indemnification,
reorganizations,
and
liquidations)
of
the
Fund
does
not
exceed
0.97%
based
on
the
average
net
assets
of
each
class
until
December
31,
2022.
Total
expenses
waived
or
paid
are
not
subject
to
recapture
subsequent
to
the
Fund's
fiscal
year
end.
g.
Other
Affiliated
Transactions
At
February
28,
2022,
Franklin
Resources,
Inc.
owned
99.3%
of
the
Fund's
outstanding
shares.
Investment
activities
of
this
shareholder
could
have
a
material
impact
on
the
Fund.
aa
Value
at
Beginning
of
Period
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Period
Number
of
Shares
Held
at
End
of
Period
Investment
Income
a
a
a
a
a
a
a
a
Templeton
International
Climate
Change
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.
$
158,272
$
282,151
$
(415,472)
$
—
$
—
$
24,951
24,951
$
5
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.
$—
$174,280
$(174,280)
$—
$—
$—
—
$—
Total
Affiliated
Securities
...
$158,272
$456,431
$(589,752)
$—
$—
$24,951
$5
3.
Transactions
with
Affiliates
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
21
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
4.
Expense
Offset
Arrangement
The Fund has
entered
into
an
arrangement
with
its
custodian
whereby
credits
realized
as
a
result
of
uninvested
cash
balances
are
used
to
reduce
a
portion
of
the
Fund's
custodian
expenses.
During
the
period
ended
February
28,
2022,
the
custodian
fees
were
reduced
as
noted
in
the
Statement
of
Operations.
5.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
February
28,
2022,
the
cost
of
investments
and
net
unrealized
appreciation
(depreciation)
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatment
of
wash
sales
and
corporate
actions.
6.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
period
ended
February
28,
2022,
aggregated
$460,867
and
$501,640,
respectively.
7.
Concentration
of
Risk
Investing
in
foreign
securities
may
include
certain
risks
and
considerations
not
typically
associated
with
investing
in
U.S.
securities,
such
as
fluctuating
currency
values
and
changing
local,
regional
and
global
economic,
political
and
social
conditions,
which
may
result
in
greater
market
volatility.
Political
and
financial
uncertainty
in
many
foreign
regions
may
increase
market
volatility
and
the
economic
risk
of
investing
in
foreign
securities.
In
addition,
certain
foreign
securities
may
not
be
as
liquid
as
U.S.
securities.
8.
Geopolitical
Risk
On
February
24,
2022,
Russia
engaged
in
military
actions
in
the
sovereign
territory
of
Ukraine.
The
current
political
and
financial
uncertainty
surrounding
Russia
and
Ukraine
may
increase
market
volatility
and
the
economic
risk
of
investing
in
securities
in
these
countries
and
may
also
cause
uncertainty
for
the
global
economy
and
broader
financial
markets.
The
ultimate
fallout
and
long-term
impact
from
these
events
are
not
known.
The
Fund
will
continue
to
assess
the
impact
on
valuations
and
liquidity
and
will
take
any
potential
actions
needed
in
accordance
with
procedures
approved
by
the
Board.
9.
Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
Cost
of
investments
..........................................................................
$2,142,358
Unrealized
appreciation
........................................................................
$479,929
Unrealized
depreciation
........................................................................
(123,547)
Net
unrealized
appreciation
(depreciation)
..........................................................
$356,382
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
22
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
10.
Credit
Facility
The
Fund,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2.675
billion
(Global
Credit
Facility)
which
matures
on
February
3,
2023.
This
Global
Credit
Facility
provides
a
source
of
funds
to
the
Borrowers
for
temporary
and
emergency
purposes,
including
the
ability
to
meet
future
unanticipated
or
unusually
large
redemption
requests.
Under
the
terms
of
the
Global
Credit
Facility,
the
Fund
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Fund
and
other
costs
incurred
by
the
Fund,
pay
its
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
its
relative
share
of
the
aggregate
net
assets
of
all
of
the
Borrowers,
including
an
annual
commitment
fee
of
0.15%
based
upon
the
unused
portion
of
the
Global
Credit
Facility.
These
fees
are
reflected
in
other
expenses
in
the
Statement
of
Operations.
During
the
period
ended
February
28,
2022,
the Fund
did
not
use
the
Global
Credit
Facility.
11.
Fair
Value
Measurements
The
Fund
follows
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Fund's
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the
Fund's financial
instruments
and
are
summarized
in
the
following
fair
value
hierarchy:
Level
1
–
quoted
prices
in
active
markets
for
identical
financial
instruments
Level
2
–
other
significant
observable
inputs
(including
quoted
prices
for
similar
financial
instruments,
interest
rates,
prepayment
speed,
credit
risk,
etc.)
Level
3
–
significant
unobservable
inputs
(including
the
Fund's
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
February
28,
2022,
in
valuing
the
Fund's
assets
carried
at
fair
value,
is
as
follows:
Level
1
Level
2
Level
3
Total
Templeton
International
Climate
Change
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Denmark
............................
$
—
$
151,393
$
—
$
151,393
France
..............................
—
498,987
—
498,987
Germany
............................
—
289,383
—
289,383
Hong
Kong
...........................
—
20,589
—
20,589
India
................................
71,165
77,418
—
148,583
Italy
................................
—
151,998
—
151,998
Japan
...............................
—
271,536
—
271,536
Netherlands
..........................
—
210,450
—
210,450
Singapore
............................
—
119,359
—
119,359
South
Korea
..........................
—
65,265
—
65,265
Spain
...............................
—
136,702
—
136,702
Taiwan
..............................
85,608
—
—
85,608
United
Kingdom
.......................
—
268,636
—
268,636
United
States
.........................
—
55,300
—
55,300
Short
Term
Investments
...................
24,951
—
—
24,951
Total
Investments
in
Securities
...........
$181,724
$2,317,016
a
$—
$2,498,740
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
23
franklintempleton.com
Semiannual
Report
Templeton
International
Climate
Change
Fund
(continued)
12.
Subsequent
Events
The
Fund
has
evaluated
subsequent
events
through
the
issuance
of
the financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure.
Abbreviations
a
Includes
foreign
securities
valued
at
$2,317,016,
which
were
categorized
as
Level
2
as
a
result
of
the
application
of
market
level
fair
value
procedures.
See
the
Financial
Instrument
Valuation
note
for
more
information.
Selected
Portfolio
ADR
American
Depositary
Receipt
GDR
Global
Depositary
Receipt
11.
Fair
Value
Measurements
(continued)
Templeton
Funds
Shareholder
Information
24
franklintempleton.com
Semiannual
Report
BOARD
APPROVAL
OF
INVESTMENT
MANAGEMENT
AGREEMENTS
TEMPLETON
FUNDS
Templeton
International
Climate
Change
Fund
(Fund)
At
an
in-person
meeting
held
on
February
28,
2022
(Meeting),
the
Board
of
Trustees
(Board)
of
the
Fund,
including
a
majority
of
the
trustees
who
are
not
“interested
persons”
as
defined
in
the
Investment
Company
Act
of
1940
(Independent
Trustees),
reviewed
and
approved
the
continuance
of
the:
(i)
investment
management
agreement
between
Franklin
Templeton
Investments
Corp.
(FTIC)
and
the
Trust,
(ii)
investment
sub-advisory
agreement
between
FTIC
and
Franklin
Templeton
Investment
Management
Limited
(FTIML),
an
affiliate
of
FTIC,
and
(iii)
investment
sub-advisory
agreement
between
FTIC
and
Templeton
Global
Advisors
Limited
(TGAL,
and
collectively
with
FTIML,
the
Sub-Advisers),
an
affiliate
of
FTIC,
each
on
behalf
of
the
Fund
(each
a
Management
Agreement)
for
an
additional
one-year
period.
The
Independent
Trustees
received
advice
from
and
met
separately
with
Independent
Trustee
counsel
in
considering
whether
to
approve
the
continuation
of
each
Management
Agreement.
FTIC,
FTIML
and
TGAL
are
each
referred
to
herein
as
a
Manager.
In
considering
the
continuation
of
each
Management
Agreement,
the
Board
reviewed
and
considered
information
provided
by
each
Manager
at
the
Meeting
and
throughout
the
year
at
meetings
of
the
Board
and
its
committees.
The
Board
also
reviewed
and
considered
information
provided
in
response
to
a
detailed
set
of
requests
for
information
submitted
to
each
Manager
by
Independent
Trustee
counsel
on
behalf
of
the
Independent
Trustees
in
connection
with
the
annual
contract
renewal
process.
In
addition,
prior
to
the
Meeting,
the
Independent
Trustees
held
a
virtual
contract
renewal
meeting
at
which
the
Independent
Trustees
first
conferred
amongst
themselves
and
Independent
Trustee
counsel
about
contract
renewal
matters;
then
met
with
senior
leadership
regarding
the
performance
of
the
global
equity
funds,
as
well
as
expected
enhancements
to
the
Templeton
Global
Equity
Group
leadership;
and
last
met
with
management
to
request
additional
information
that
the
Independent
Trustees
reviewed
and
considered
at
the
Meeting.
The
Board
later
had
an
opportunity
for
an
expanded
discussion
with
the
leadership
of
the
Templeton
Global
Equity
Group
to
hear
about
strategies
to
deliver
improved
investment
returns
to
shareholders.
The
Board
reviewed
and
considered
all
of
the
factors
it
deemed
relevant
in
approving
the
continuance
of
each
Management
Agreement,
including,
but
not
limited
to:
(i)
the
nature,
extent
and
quality
of
the
services
provided
by
each
Manager;
(ii)
the
investment
performance
of
the
Fund;
(iii)
the
costs
of
the
services
provided
and
profits
realized
by
each
Manager
and
its
affiliates
from
the
relationship
with
the
Fund;
(iv)
the
extent
to
which
economies
of
scale
are
realized
as
the
Fund
grows;
and
(v)
whether
fee
levels
reflect
these
economies
of
scale
for
the
benefit
of
Fund
investors.
In
approving
the
continuance
of
each
Management
Agreement,
the
Board,
including
a
majority
of
the
Independent
Trustees,
determined
that
the
terms
of
the
Management
Agreement
are
fair
and
reasonable
and
that
the
continuance
of
such
Management
Agreement
is
in
the
best
interests
of
the
Fund
and
its
shareholders.
While
attention
was
given
to
all
information
furnished,
the
following
discusses
some
primary
factors
relevant
to
the
Board’s
determination.
Nature,
Extent
and
Quality
of
Services
The
Board
reviewed
and
considered
information
regarding
the
nature,
extent
and
quality
of
investment
management
services
provided
by
each
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
This
information
included,
among
other
things,
the
qualifications,
background
and
experience
of
the
senior
management
and
investment
personnel
of
each
Manager,
as
well
as
information
on
succession
planning
where
appropriate;
the
structure
of
investment
personnel
compensation;
oversight
of
third-
party
service
providers;
investment
performance
reports
and
related
financial
information
for
the
Fund;
reports
on
expenses
and
shareholder
services;
legal
and
compliance
matters;
risk
controls;
pricing
and
other
services
provided
by
each
Manager
and
its
affiliates;
and
management
fees
charged
by
each
Manager
and
its
affiliates
to
US
funds
and
other
accounts,
including
management’s
explanation
of
differences
among
accounts
where
relevant.
The
Board
also
reviewed
and
considered
an
annual
report
on
payments
made
by
Franklin
Templeton
(FT)
or
the
Fund
to
financial
intermediaries,
as
well
as
a
memorandum
relating
to
third-party
servicing
arrangements,
which
included
discussion
of
the
changing
distribution
landscape
for
the
Fund.
The
Board
noted
management’s
continued
focus
on
enhancing
the
leadership
of
the
Templeton
Global
Equity
Group
and
commitment
to
providing
the
resources
important
to
delivering
sustainable
returns.
The
Board
also
acknowledged
the
ongoing
integration
of
the
Legg
Mason
Templeton
Funds
Shareholder
Information
25
franklintempleton.com
Semiannual
Report
family
of
funds
into
the
FT
family
of
funds
and
developing
strategies
to
address
areas
of
heightened
concern
in
the
mutual
fund
industry,
including
various
regulatory
initiatives
and
recent
geopolitical
concerns.
The
Board
also
reviewed
and
considered
the
benefits
provided
to
Fund
shareholders
of
investing
in
a
fund
that
is
part
of
the
FT
family
of
funds.
The
Board
noted
the
financial
position
of
Franklin
Resources,
Inc.
(FRI),
the
Managers’
parent,
and
its
commitment
to
the
mutual
fund
business
as
evidenced
by
its
reassessment
of
the
fund
offerings
in
response
to
the
market
environment
and
project
initiatives
and
capital
investments
relating
to
the
services
provided
to
the
Fund
by
the
FT
organization.
The
Board
specifically
noted
FT’s
commitment
to
being
a
global
leader
in
stewardship
and
sustainability
and
the
recent
addition
of
a
senior
executive
focused
on
environmental,
social
and
governance
and
climate
control
initiatives.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
by
each
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
Fund
Performance
The
Board
reviewed
and
considered
the
performance
results
of
the
Fund
over
the
one-
and
three-year
periods
ended
November
30,
2021.
The
Board
noted
that
the
Fund
commenced
operations
on
June
1,
2018
and
was
100%
owned
by
FRI
until
December
15,
2021
when
the
Fund
became
publicly
available.
The
Board
considered
the
performance
return
for
the
Fund
in
comparison
to
the
performance
returns
of
mutual
funds
deemed
comparable
to
the
Fund
included
in
a
universe
(Performance
Universe)
selected
by
Broadridge
Financial
Solutions,
Inc.
(Broadridge),
an
independent
provider
of
investment
company
data.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
a
Performance
Universe.
The
Board
also
reviewed
and
considered
Fund
performance
reports
provided
and
discussions
that
occurred
with
portfolio
managers
at
Board
meetings
throughout
the
year.
A
summary
of
the
Fund’s
performance
results
is
below.
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
international
multi-cap
core
funds.
The
Board
noted
that
the
Fund’s
annualized
total
return
for
the
one-
and
three-year
periods
was
above
the
median
of
its
Performance
Universe.
The
Board
concluded
that
the
Fund’s
performance
was
satisfactory.
Comparative
Fees
and
Expenses
The
Board
reviewed
and
considered
information
regarding
the
Fund’s
actual
total
expense
ratio
and
its
various
components,
including,
as
applicable,
management
fees;
transfer
agent
expenses;
underlying
fund
expenses;
Rule
12b-1
and
non-Rule
12b-1
service
fees;
and
other
non-
management
fees.
The
Board
also
noted
the
quarterly
and
annual
reports
it
receives
on
all
marketing
support
payments
made
by
FT
to
financial
intermediaries.
The
Board
considered
the
actual
total
expense
ratio
and,
separately,
the
contractual
management
fee
rate,
without
the
effect
of
fee
waivers,
if
any
(Management
Rate)
of
the
Fund
in
comparison
to
the
median
expense
ratio
and
median
Management
Rate,
respectively,
of
other
mutual
funds
deemed
comparable
to
and
with
a
similar
expense
structure
to
the
Fund
selected
by
Broadridge
(Expense
Group).
Broadridge
fee
and
expense
data
is
based
upon
information
taken
from
each
fund’s
most
recent
annual
or
semi-annual
report,
which
reflects
historical
asset
levels
that
may
be
quite
different
from
those
currently
existing,
particularly
in
a
period
of
market
volatility.
While
recognizing
such
inherent
limitation
and
the
fact
that
expense
ratios
and
Management
Rates
generally
increase
as
assets
decline
and
decrease
as
assets
grow,
the
Board
believed
the
independent
analysis
conducted
by
Broadridge
to
be
an
appropriate
measure
of
comparative
fees
and
expenses.
The
Broadridge
Management
Rate
includes
administrative
charges,
and
the
actual
total
expense
ratio,
for
comparative
consistency,
was
shown
for
Advisor
Class
shares
for
the
Fund
and
Class
I,
Class
IS,
Class
R5
and
Institutional
Class
shares
for
funds
in
the
Expense
Group
with
multiple
classes
of
shares.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
an
Expense
Group.
The
Expense
Group
for
the
Fund
included
the
Fund
and
11
other
international
multi-cap
core
funds.
The
Board
noted
that
the
Management
Rate
for
the
Fund
was
below
the
median
of
its
Expense
Group.
The
Board
also
noted
that
the
actual
total
expense
ratio
for
the
Fund
was
above
the
median
of
its
Expense
Group.
The
Board
further
noted
that
the
Fund’s
actual
total
expense
ratio
reflected
a
fee
waiver
from
management.
The
Board
also
noted
that
each
of
the
Fund’s
Sub-Advisers
is
paid
by
FTIC
out
of
the
management
fee
FTIC
receives
from
the
Fund
and
that
the
allocation
of
the
fee
between
FTIC
and
each
Sub-Adviser
reflected
the
services
provided
by
each
to
the
Fund.
After
consideration
of
the
above,
the
Board
concluded
that
the
Management
Rate
charged
to
the
Fund
and
the
sub-advisory
fee
paid
to
each
Sub-Adviser
are
reasonable.
Templeton
Funds
Shareholder
Information
26
franklintempleton.com
Semiannual
Report
Profitability
The
Board
reviewed
and
considered
information
regarding
the
profits
realized
by
each
Manager
and
its
affiliates
in
connection
with
the
operation
of
the
Fund.
In
this
respect,
the
Board
considered
the
Fund
profitability
analysis
that
addresses
the
overall
profitability
of
FT’s
US
fund
business,
as
well
as
its
profits
in
providing
investment
management
and
other
services
to
each
of
the
individual
funds
during
the
12-month
period
ended
September
30,
2021,
being
the
most
recent
fiscal
year-end
for
FRI.
The
Board
noted
that
although
management
continually
makes
refinements
to
its
methodologies
used
in
calculating
profitability
in
response
to
organizational
and
product-related
changes,
the
overall
methodology
has
remained
consistent
with
that
used
in
the
Fund’s
profitability
report
presentations
from
prior
years.
The
Board
also
noted
that
PricewaterhouseCoopers
LLP,
auditor
to
FRI
and
certain
FT
funds,
has
been
engaged
to
periodically
review
and
assess
the
allocation
methodologies
to
be
used
solely
by
the
Fund’s
Board
with
respect
to
the
profitability
analysis.
The
Board
noted
management’s
belief
that
costs
incurred
in
establishing
the
infrastructure
necessary
for
the
type
of
mutual
fund
operations
conducted
by
each
Manager
and
its
affiliates
may
not
be
fully
reflected
in
the
expenses
allocated
to
the
Fund
in
determining
its
profitability,
as
well
as
the
fact
that
the
level
of
profits,
to
a
certain
extent,
reflected
operational
cost
savings
and
efficiencies
initiated
by
management.
As
part
of
this
evaluation,
the
Board
considered
management’s
outsourcing
of
certain
operations,
which
effort
has
required
considerable
up-front
expenditures
by
each
Manager
but,
over
the
long
run
is
expected
to
result
in
greater
efficiencies.
The
Board
also
noted
management’s
expenditures
in
improving
shareholder
services
provided
to
the
Fund,
as
well
as
the
need
to
implement
systems
and
meet
additional
regulatory
and
compliance
requirements
resulting
from
recent
US
Securities
and
Exchange
Commission
and
other
regulatory
requirements.
The
Board
also
considered
the
extent
to
which
each
Manager
and
its
affiliates
might
derive
ancillary
benefits
from
fund
operations,
including
revenues
generated
from
transfer
agent
services,
potential
benefits
resulting
from
personnel
and
systems
enhancements
necessitated
by
fund
growth,
as
well
as
increased
leverage
with
service
providers
and
counterparties.
Based
upon
its
consideration
of
all
these
factors,
the
Board
concluded
that
the
level
of
profits
realized
by
each
Manager
and
its
affiliates
from
providing
services
to
the
Fund
was
not
excessive
in
view
of
the
nature,
extent
and
quality
of
services
provided
to
the
Fund.
Economies
of
Scale
The
Board
reviewed
and
considered
the
extent
to
which
each
Manager
may
realize
economies
of
scale,
if
any,
as
the
Fund
grows
larger
and
whether
the
Fund’s
management
fee
structure
reflects
any
economies
of
scale
for
the
benefit
of
shareholders.
With
respect
to
possible
economies
of
scale,
the
Board
noted
the
existence
of
management
fee
breakpoints,
which
operate
generally
to
share
any
economies
of
scale
with
the
Fund’s
shareholders
by
reducing
the
Fund’s
effective
management
fees
as
the
Fund
grows
in
size.
The
Board
considered
management’s
view
that
any
analyses
of
potential
economies
of
scale
in
managing
a
particular
fund
are
inherently
limited
in
light
of
the
joint
and
common
costs
and
investments
each
Manager
incurs
across
the
FT
family
of
funds
as
a
whole.
The
Board
noted
that
the
Fund
does
not
currently
have
an
asset
size
that
would
likely
enable
the
Fund
to
achieve
economies
of
scale.
The
Board
concluded
that
to
the
extent
economies
of
scale
may
be
realized
by
each
Manager
and
its
affiliates,
the
Fund’s
management
fee
structure
provided
a
sharing
of
benefits
with
the
Fund
and
its
shareholders
as
the
Fund
grows.
Conclusion
Based
on
its
review,
consideration
and
evaluation
of
all
factors
it
believed
relevant,
including
the
above-described
factors
and
conclusions,
the
Board
unanimously
approved
the
continuation
of
each
Management
Agreement
for
an
additional
one-year
period.
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Templeton
Funds
Shareholder
Information
27
franklintempleton.com
Semiannual
Report
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund's
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
"householding,"
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
6316
S
04/22
©
2022
Franklin
Templeton
Investments.
All
rights
reserved.
Authorized
for
distribution
only
when
accompanied
or
preceded
by
a
summary
prospectus
and/or
prospectus.
Investors
should
carefully
consider
a
fund’s
investment
goals,
risks,
charges
and
expenses
before
investing.
A
prospectus
contains
this
and
other
information;
please
read
it
carefully
before
investing.
To
help
ensure
we
provide
you
with
quality
service,
all
calls
to
and
from
our
service
areas
are
monitored
and/or
recorded.
Semiannual
Report
and
Shareholder
Letter
Templeton
International
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Change
Fund
Investment
Manager
Distributor
Shareholder
Services
Franklin
Templeton
Investments
Corp.
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LLC
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BEN
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/
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(800)
632-2301
SEMIANNUAL
REPORT
AND
SHAREHOLDER
LETTER
Templeton
World
Fund
A
Series
of
Templeton
Funds
February
28,
2022
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up
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franklintempleton.com
Semiannual
Report
1
SHAREHOLDER
LETTER
Dear
Shareholder:
During
the
six
months
ended
February
28,
2022,
the
global
economic
recovery
was
hampered
by
renewed
outbreaks
of
COVID-19,
supply-chain
disruptions
and
geopolitical
tensions
and
conflict.
Rising
inflation
across
multiple
countries
caused
many
central
banks,
including
the
U.S.
Federal
Reserve,
to
adopt
less
accommodative
monetary
stances,
putting
pressure
on
global
equity
markets.
New
Chinese
government
regulations
on
some
businesses
further
dampened
investor
sentiment
in
Asian
and
emerging
market
stocks.
Near
period-end,
Russia’s
invasion
of
Ukraine
increased
investor
uncertainty,
as
international
sanctions
on
Russia
constrained
companies
that
do
business
with
Russia
and
threatened
to
disrupt
global
economic
activity
and
commodity
markets.
In
this
environment,
global
developed
and
emerging
market
stocks,
as
measured
by
the
MSCI
All
Country
World
Index-NR
(net
of
tax
withholding
when
dividends
are
paid),
posted
a
-5.26%
total
return
for
the
period.
1
We
are
committed
to
our
long-term
perspective
and
disciplined
investment
approach
as
we
conduct
a
rigorous,
fundamental
analysis
of
securities
with
a
regular
emphasis
on
investment
risk
management.
Historically,
patient
investors
have
achieved
rewarding
results
by
evaluating
their
goals,
diversifying
their
assets
globally
and
maintaining
a
disciplined
investment
program,
all
hallmarks
of
the
Templeton
investment
philosophy.
We
continue
to
recommend
investors
consult
financial
professionals
and
review
their
portfolios
to
design
a
long-term
strategy
and
portfolio
allocation
that
meet
their
individual
needs,
goals
and
risk
tolerance.
Templeton
World
Fund’s
semiannual
report
includes
more
detail
about
prevailing
conditions
and
a
discussion
about
investment
decisions
during
the
period.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
We
thank
you
for
investing
with
Franklin
Templeton,
welcome
your
questions
and
comments,
and
look
forward
to
serving
your
investment
needs
in
the
years
ahead.
Sincerely,
Alan
Bartlett
Chief
Investment
Officer
Templeton
Global
Equity
Group
This
letter
reflects
our
analysis
and
opinions
as
of
February
28,
2022,
unless
otherwise
indicated.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
fund.
Statements
of
fact
are
from
sources
considered
reliable.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Semiannual
Report
2
Contents
Semiannual
Report
Templeton
World
Fund
3
Performance
Summary
8
Your
Fund’s
Expenses
10
Financial
Highlights
and
Statement
of
Investments
11
Financial
Statements
17
Notes
to
Financial
Statements
21
Shareholder
Information
30
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
3
franklintempleton.com
Semiannual
Report
SEMIANNUAL
REPORT
Templeton
World
Fund
This
semiannual
report
for
Templeton
World
Fund
covers
the
period
ended
February
28,
2022.
Effective
September
30,
2021,
Templeton
World
Fund
repositioned
to
implement
a
more
focused
global
equity
strategy
with
a
greater
emphasis
on
quality
companies.
The
Fund
remains
diversified
but
may
hold
a
smaller
number
of
issuers.
Additionally,
the
Fund’s
primary
benchmark
changed
to
the
MSCI
All
Country
World
Index
(net
of
dividend
tax
withholdings).
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
long-term
capital
growth.
Under
normal
market
conditions,
the
Fund
invests
primarily
in
the
equity
securities
of
companies
located
anywhere
in
the
world,
including
developing
markets.
Under
normal
circumstances,
the
Fund
will
invest
in
issuers
located
in
at
least
three
different
countries
(including
the
U.S.).
Performance
Overview
The
Fund’s
Class
A
shares
posted
a
-7.13%
cumulative
total
return
for
the
six
months
under
review.
In
comparison,
the
Fund’s
new
primary
benchmark,
the
MSCI
All
Country
World
Index
(ACWI)-NR,
which
measures
stock
performance
in
global
developed
and
emerging
markets,
posted
a
-5.26%
cumulative
total
return,
while
the
Fund’s
former
primary
benchmark,
the
MSCI
ACWI
100%
Hedged
to
USD-NR,
posted
a
-4.04%
cumulative
total
return.
1
The
MSCI
ACWI-
NR
replaced
the
MSCI
ACWI
100%
Hedged
to
USD-NR
as
the
Fund’s
primary
benchmark
because
the
investment
manager
believes
the
MSCI
ACWI-NR
is
a
more
appropriate
index
of
the
Fund
due
to
the
fact
that,
as
of
September
30,
2021,
the
Fund
no
longer
regularly
engages
in
currency-
related
derivatives
to
hedge
all
or
substantially
all
of
its
foreign
currency
exposure
to
the
U.S.
dollar.
Please
note
index
performance
information
is
provided
for
reference
and
we
do
not
attempt
to
track
the
index
but
rather
undertake
investments
on
the
basis
of
fundamental
research.
You
can
find
more
performance
data
in
the
Performance
Summary
beginning
on
page
8
.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Economic
and
Market
Overview
Global
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
ACWI-NR,
posted
a
-5.26%
total
return
for
the
six
months
ended
February
28,
2022.
1
The
combination
of
increased
consumer
demand
and
persistent
supply-chain
disruptions
contributed
to
higher
inflation
in
many
countries.
This
inflationary
pressure
led
many
of
the
world’s
central
banks
to
adopt
less
accommodative
stances
regarding
monetary
policy.
The
Chinese
government’s
imposition
of
new
restrictions
on
some
businesses
also
pressured
Asian
and
global
emerging
market
stocks.
Near
period-end,
Russia’s
invasion
of
Ukraine
increased
investor
uncertainty,
as
international
sanctions
on
Russia
constrained
companies
that
do
business
with
Russia
and
threatened
to
disrupt
global
economic
activity
and
commodity
markets.
In
the
U.S.,
the
economy
continued
to
recover
amid
declining
unemployment,
solid
wage
growth
and
strong
business
confidence.
Gross
domestic
product
(GDP)
growth
accelerated
in
the
fourth
quarter
of
2021,
as
strong
consumer
and
business
spending
supported
the
economy.
However,
investor
expectations
for
higher
interest
rates
and
geopolitical
uncertainty
late
in
the
reporting
period
negatively
impacted
U.S.
equities.
The
U.S.
Federal
Reserve
(Fed)
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%
and
continued
its
program
of
open-ended
U.S.
Treasury
(UST)
and
mortgage
bond
purchases
to
help
keep
Geographic
Composition
2/28/22
%
of
Total
Net
Assets
North
America
54.8%
Europe
27.6%
Asia
15.8%
Short-Term
Investments
&
Other
Net
Assets
1.8%
1.
Source:
Morningstar.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
They
do
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
15
.
Templeton
World
Fund
4
franklintempleton.com
Semiannual
Report
markets
functioning.
In
its
January
2022
meeting
statement,
however,
the
Fed
noted
that
due
to
employment
gains
and
elevated
inflation,
it
expected
conditions
would
soon
be
appropriate
for
raising
interest
rates.
Furthermore,
the
Fed
maintained
its
timetable
for
reducing
its
purchases
of
UST
and
mortgage-backed
securities.
Economic
growth
slowed
in
the
eurozone,
declining
notably
in
the
fourth
quarter
of
2021
as
the
spread
of
the
Omicron
variant
of
COVID-19
disrupted
labor
markets
and
led
to
renewed
restrictions.
Additionally,
in
February
2022,
the
annual
inflation
rate
in
the
eurozone
reached
the
highest
level
on
record,
and
the
prospect
of
energy
shortages
during
the
winter
tempered
investor
optimism.
The
European
Central
Bank
struck
a
less
accommodative
tone
at
its
February
meeting,
acknowledging
that
inflation
has
been
more
persistent
than
expected
and
opening
the
possibility
of
an
interest-rate
increase
in
2022.
Stocks
of
companies
with
exposure
to
Russia,
particularly
banks,
endured
further
declines
late
in
the
reporting
period.
Consequently,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index-NR,
posted
a
-6.70%
total
return
for
the
six
months
under
review.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index-NR,
posted
a
-9.34%
total
return
for
the
six-month
period.
1
Although
China’s
economy
continued
to
grow,
it
was
pressured
by
COVID-19
restrictions
and
government
measures
to
limit
real
estate
speculation.
Unexpected
regulatory
changes
by
the
Chinese
government,
which
negatively
impacted
education-
and
technology-related
businesses,
and
investor
concerns
about
the
solvency
of
several
large
Chinese
property
developers
further
pressured
Asian
stocks
during
the
six-
month
period.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index-NR,
posted
a
-9.81%
total
return
for
the
six
months
under
review.
1
Rising
interest
rates
and
elevated
inflation
dampened
investor
enthusiasm
in
global
emerging
market
equities.
Geopolitical
instability
drove
strength
in
the
U.S.
dollar,
further
pressuring
stocks
in
emerging
market
countries,
especially
Russia
as
the
ruble
plunged
against
the
U.S.
dollar.
Interest-rate
increases
to
curb
inflation
by
several
central
banks,
including
those
of
Brazil
and
Mexico,
as
well
as
the
international
sanctions
on
Russia,
raised
investor
concerns
about
a
slowdown
in
economic
growth.
Investment
Strategy
Our
investment
strategy
employs
a
bottom-up,
value-
oriented,
long-term
approach.
We
focus
on
the
market
price
of
a
company’s
securities
relative
to
our
evaluation
of
the
company’s
long-term
earnings,
asset
value
and
cash
flow
potential.
Our
analysis
includes
an
assessment
of
the
potential
impacts
of
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
We
also
consider
the
company’s
price/
earnings
ratio,
price/cash
flow
ratio,
profit
margins
and
liquidation
value.
The
Fund
may
use
a
variety
of
equity-related
derivatives,
which
may
include
equity
futures
and
equity
index
futures,
for
various
purposes
including
enhancing
Fund
returns,
increasing
liquidity
and
gaining
exposure
to
particular
markets
in
more
efficient
or
less
expensive
ways.
The
Fund
also
may
from
time
to
time
engage
in
currency-related
derivatives,
such
as
currency
and
cross-currency
forwards
and
currency
futures
contracts,
to
hedge
some
of
its
foreign
currency
exposure.
Manager’s
Discussion
Templeton
World
Fund
underperformed
its
benchmark,
the
MSCI
ACWI-NR,
during
the
semiannual
review
period,
pressured
primarily
by
stock-specific
weakness
in
the
consumer
discretionary
sector
and
in
Europe.
Stock-specific
issues
in
materials
and
an
unfavorable
underweighting
in
financials
also
negatively
impacted
performance.
On
the
other
hand,
the
Fund
benefited
from
an
overweighted
allocation
to
energy
at
a
time
when
oil
rallied
above
$100
per
barrel,
as
well
as
stock
selection
(i.e.,
the
avoidance
of
the
most
expensive
and
vulnerable
stocks)
in
information
Top
10
Industries
2/28/22
%
of
Total
Net
Assets
a
Internet
&
Direct
Marketing
Retail
8.5%
Semiconductors
&
Semiconductor
Equipment
7.4%
Beverages
6.8%
Pharmaceuticals
6.6%
Hotels,
Restaurants
&
Leisure
5.6%
Interactive
Media
&
Services
4.7%
Health
Care
Equipment
&
Supplies
4.7%
IT
Services
3.9%
Technology
Hardware,
Storage
&
Peripherals
3.4%
Health
Care
Providers
&
Services
3.2%
Templeton
World
Fund
5
franklintempleton.com
Semiannual
Report
technology
(IT)
and
communication
services,
formerly
well-
performing
sectors
that
sold
off
sharply
during
the
review
period.
Templeton
World
Fund
is
evolving
toward
a
more
focused
(40-50
stocks),
unhedged
global
equity
strategy
with
a
greater
emphasis
on
quality
stocks.
As
part
of
this
evolution,
the
Fund’s
primary
benchmark
changed
from
the
MSCI
ACWI
100%
Hedged
to
USD-NR
to
the
MSCI
ACWI-NR.
However,
no
other
investment
strategies
of
the
Fund
are
changing
and
the
Fund
will
retain
the
flexibility
to
invest
in
U.S.
and
foreign
(both
developed
and
emerging
markets)
companies
of
any
capitalization
range.
This
transition
has
been
underway
for
several
months
and
is
nearing
completion.
The
market
environment
during
the
review
period
was
quite
favorable
for
the
repositioning,
as
a
number
of
higher
quality
stocks
with
attractive
longer-term
growth
prospects
have
sold
off
indiscriminately,
creating
what
we
believe
are
buying
opportunities.
The
period
encompassed
what
we
viewed
as
a
meaningful
inflection
point
in
markets.
After
several
months
of
more
persistent
and
higher-than-expected
inflation,
in
November
2021
the
Fed
signaled
a
more
hawkish
position,
including
likely
interest
rate
hikes
and
the
gradual
phasing
out
of
asset
purchases
known
as
quantitative
easing.
The
policy
pivot
pushed
bond
yields
higher,
steepening
key
yield
curves
and
benefiting
value-oriented
sectors
with
positive
interest
rate
exposure
(like
financials)
and
inflation
hedge
characteristics
(like
energy
and
materials).
At
the
same
time,
the
erstwhile
leaders
of
the
last
market
cycle—expensive,
growth-oriented
stocks
in
areas
like
technology,
consumer
discretionary
and
media
and
entertainment—sold
off
sharply.
Overall,
investors
seemed
to
be
refocusing
on
fundamental
and
quality
characteristics
and
de-emphasizing
the
speculative
extrapolation
of
revenue
growth
trends,
an
about-face
that
began
to
benefit
Templeton’s
strategies
given
our
emphasis
on
rigorous
fundamental
analysis
and
valuation
discipline.
While
the
Fund
underperformed
during
the
six-month
period
overall,
relative
performance
began
to
improve
significantly
after
the
policy
pivot
in
late
November
2021.
In
fact,
the
first
two
months
of
2022
saw
Templeton
World
Fund’s
best
start
to
a
year
since
2004.
An
overweighted
allocation
and
stock-specific
issues
in
the
consumer
discretionary
sector
were
the
primary
drags
on
relative
performance
at
the
sector
level.
European
food-
delivery
platform
Just
Eat
Takeaway.com
was
the
Fund’s
biggest
individual
relative
detractor.
The
stock
remained
under
pressure
amid
concerns
about
competition
and
profitability,
and
this
remains
a
“show-me”
story
going
forward.
Investors
will
want
to
see
the
strategic
divestiture
of
certain
assets
(which
management
is
exploring),
more
consistency
hitting
guidance
targets,
and
an
improving
competitive
environment
that
shifts
from
“growth
at
any
cost”
to
“profitable
growth.”
We
see
numerous
catalysts
that
should
help
Just
Eat
achieve
these
goals,
creating
considerable
upside
potential
from
current
depressed
valuation
levels.
While
we
view
management’s
intentions
as
credible,
we
are
also
in
the
process
of
directly
expressing
our
views
on
how
the
company
can
unlock
value
to
Just
Eat’s
chairman
and
supervisory
board.
Offsetting
Just
Eat
within
the
consumer
discretionary
sector
was
U.S.-based
discount
grocer
Dollar
Tree.
Shares
were
up
more
than
50%
during
the
six-month
period
and
the
stock
finished
as
the
Fund’s
top
relative
performer.
Management
reported
inline
results,
successfully
raised
prices
and
engaged
with
activist
shareholders
seeking
to
unlock
value,
all
of
which
led
to
a
raft
of
analyst
upgrades.
Materials
stocks
were
led
lower
by
Belgian
specialty
chemicals
firm
Umicore.
The
company,
which
operates
a
scrap
recycling
business
and
makes
cathodes
for
batteries
as
well
as
catalysts
for
internal
combustion
engine
vehicles,
issued
two
consecutive
profit
warnings
at
the
end
of
2021.
These
unexpected
warnings
underscored
a
loss
of
technology
leadership
in
cathode
materials
(which
will
negatively
impact
growth
and
margins)
and
raised
questions
about
management’s
ability
to
execute.
Those
concerns,
combined
with
an
elevated
earnings
profile
in
the
cyclical
scrap
metals
recycling
business
given
high
Top
10
Holdings
2/28/22
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Amazon.com,
Inc.
4.4%
Internet
&
Direct
Marketing
Retail,
United
States
Samsung
Electronics
Co.
Ltd.
3.4%
Technology
Hardware,
Storage
&
Peripherals,
South
Korea
UnitedHealth
Group,
Inc.
3.2%
Health
Care
Providers
&
Services,
United
States
T-Mobile
US,
Inc.
3.2%
Wireless
Telecommunication
Services,
United
States
Walt
Disney
Co.
(The)
3.2%
Entertainment,
United
States
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
3.0%
Semiconductors
&
Semiconductor
Equipment,
Taiwan
Roche
Holding
AG
2.8%
Pharmaceuticals,
Switzerland
Keurig
Dr
Pepper,
Inc.
2.8%
Beverages,
United
States
Medtronic
plc
2.7%
Health
Care
Equipment
&
Supplies,
United
States
Alphabet,
Inc.
2.6%
Interactive
Media
&
Services,
United
States
Templeton
World
Fund
6
franklintempleton.com
Semiannual
Report
commodity
prices,
caused
us
to
reevaluate
our
investment
thesis.
We
exited
the
stock
in
November
2021,
and
the
company
went
on
to
significantly
underperform
the
market
in
the
subsequent
three-month
period.
Offsetting
Umicore’s
weakness
within
the
materials
sector
was
strength
at
Freeport-McMoRan,
the
world’s
largest
copper
producer
and
a
top-10
contributor
during
the
month.
We
have
been
encouraged
to
see
our
copper
thesis
come
to
fruition
as
structurally
constrained
global
supply
meets
elevated
demand
from
infrastructure
and
building
projects
as
well
as
“green”
applications
like
electric
vehicles
and
smart
power
grids.
Financials
holdings
also
detracted,
pressured
by
our
underweighted
allocation
to
a
sector
that
held
up
well
on
rising
expectations
for
higher
interest
rates.
We
have
long
been
underweighting
the
sector
given
concerns
about
credit
risk
and
poor
earnings
quality.
With
the
shift
in
the
Fund’s
strategy
towards
quality
companies
that
are
resilient
in
most
economic
cycles,
we
are
not
compelled
to
participate
in
the
financial
sector
given
the
sensitivity
of
the
stocks
to
macroeconomic
variables
that
are
hard
to
forecast.
Given
the
lack
of
structural
change
in
the
banking
industry,
we
believe
the
banks
carry
cycle
risk
without
a
commensurate
return
during
the
good
periods.
Our
light
positioning
negatively
impacted
relative
returns
during
the
semiannual
review
period.
Turning
to
contributors,
stock
selection
in
the
IT
sector
aided
relative
performance
during
the
period.
Shares
of
U.S.-based
semiconductor
specialist
Micron
Technology
rose
to
all-time
highs
as
the
combination
of
supply
shortages
and
capacity
discipline
created
a
favorable
pricing
environment
for
the
chipmaker.
Micron
remains
well-positioned
in
an
oligopolistic
memory
chip
market,
with
a
strong
operating
track
record
and
consistent
history
of
prodigious
positive
free
cash
flow
generation.
Energy
holdings
also
outperformed,
accounting
for
two
of
the
Fund’s
10
biggest
contributors.
The
sector
was
led
by
U.S.
refiner
Marathon
Petroleum,
which
rallied
after
beating
earnings
estimates,
buoyed
by
stronger-than-expected
refining
results
and
the
authorization
of
a
multibillion
U.S.
dollar
share
buyback.
U.K.-based
oil
and
gas
giant
BP
also
finished
among
the
Fund’s
top-10
contributors.
We
are
maintaining
our
energy
position
given
what
we
believe
are
multi-year
structural
changes
to
the
sector.
Supply-and-
demand
imbalances
continue
to
increase,
stemming
from
years
of
under-investment
in
production
on
the
supply
side
and
a
likely
slower-than-expected
transition
to
renewables
supporting
hydrocarbon
demand.
Communication
services
and
health
care
stocks
also
outperformed
slightly
during
the
period.
Furthermore,
the
Fund’s
elevated
cash
position
positively
contributed
in
a
broadly
weak
market.
From
a
regional
standpoint,
relative
weakness
was
concentrated
in
the
U.K.,
Japan
and
Canada,
while
Taiwan,
South
Korea,
Norway
and
the
Netherlands
were
all
notable
contributors.
The
catalyst
for
the
market
rotation
was,
first,
the
Fed’s
hawkish
policy
pivot,
and
second,
Russia’s
invasion
of
Ukraine
late
in
the
period,
which
sparked
a
risk-off
event
across
asset
classes.
The
Fund
has
no
direct
exposure
(and
little
indirect
exposure)
to
Russia.
We
have
not
found
attractive
opportunities
in
Russian
equities
given
heightened
corporate
governance
concerns
and
geopolitical
risks.
Nevertheless,
the
impact
of
war
in
Europe
is
creating
volatility
in
all
risk
assets.
While
the
near-term
impact
of
war
in
Europe
will
likely
be
negative
for
financial
markets
(as
well
as
a
tragic
humanitarian
crisis),
it
also
accelerates
the
move
away
from
the
low
interest
rate,
low
inflation,
benign
economic
environment
that
favored
expensive
growth
stocks
in
the
past
cycle.
We
have
continued
to
see
risks
in
both
tails
of
the
market’s
valuation
distribution:
valuation
risk
among
expensive
growth
stocks
and
credit
risk
among
lower
quality
value
stocks.
We
have
viewed
the
recent
leadership
off
these
market
extremes
as
unsustainable
and
have
tried
to
manage
the
portfolio
toward
a
better
balance
of
quality,
earnings
growth
and
valuation.
It
is
important
to
recognize
the
effect
of
currency
movements
on
the
Fund’s
performance.
In
general,
if
the
value
of
the
U.S.
dollar
goes
up
compared
with
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
go
down
in
value
because
it
will
be
worth
fewer
U.S.
dollars.
This
can
have
a
negative
effect
on
Fund
performance.
Conversely,
Top
10
Countries
2/28/22
a
%
of
Total
Net
Assets
a
a
United
States
54.8%
United
Kingdom
11.2%
Germany
5.7%
Japan
4.4%
France
3.5%
South
Korea
3.4%
Taiwan
3.0%
Switzerland
2.8%
Belgium
2.6%
Hong
Kong
2.5%
Templeton
World
Fund
7
franklintempleton.com
Semiannual
Report
when
the
U.S.
dollar
weakens
in
relation
to
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
increase
in
value,
which
can
contribute
to
Fund
performance.
For
the
six
months
ended
February
28,
2022,
the
U.S.
dollar
rose
in
value
relative
to
most
currencies.
As
a
result,
the
Fund’s
performance
was
negatively
affected
by
the
portfolio’s
significant
investment
in
securities
with
non-U.S.
currency
exposure.
Thank
you
for
your
continued
participation
in
Templeton
World
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Warren
Pustam,
CFA
Lead
Portfolio
Manager
Herbert
J.
Arnett,
Jr.
Christopher
James
Peel,
CFA
Peter
M.
Moeschter,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
February
28,
2022,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
February
28,
2022
Templeton
World
Fund
8
franklintempleton.com
Semiannual
Report
The
performance
table
does
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
2/28/22
Cumulative
total
return
excludes
sales
charges.
Average
annual
total
return
includes
maximum
sales
charges.
Sales
charges
will
vary
depending
on
the
size
of
the
investment
and
the
class
of
share
purchased.
The
maximum
is
5.50%
and
the
minimum
is
0%.
Class
A
:
5.50%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
A
3
6-Month
-7.13%
-12.23%
1-Year
-0.80%
-6.29%
5-Year
+17.99%
+2.20%
10-Year
+73.40%
+5.06%
Advisor
6-Month
-7.01%
-7.01%
1-Year
-0.54%
-0.54%
5-Year
+19.53%
+3.63%
10-Year
+77.77%
+5.92%
See
page
9
for
Performance
Summary
footnotes.
Templeton
World
Fund
Performance
Summary
9
franklintempleton.com
Semiannual
Report
Each
class
of
shares
is
available
to
certain
eligible
investors
and
has
different
annual
fees
and
expenses,
as
described
in
the
prospectus.
All
investments
involve
risks,
including
possible
loss
of
principal.
Special
risks
are
associated
with
foreign
investing,
including
currency
fluctuations,
economic
instability
and
political
developments;
investments
in
developing
markets
involve
heightened
risks
related
to
the
same
factors.
Currency
rates
may
fluctuate
significantly
over
short
periods
of
time,
and
can
reduce
returns.
Because
the
Fund
may
invest
its
assets
in
companies
in
a
specific
region,
including
Europe,
it
is
subject
to
greater
risks
of
adverse
developments
in
that
region
and/or
the
surrounding
regions
than
a
fund
that
is
more
broadly
diversified
geographically.
Current
political
and
financial
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Derivatives,
including
currency
management
strategies,
involve
costs
and
can
create
economic
leverage
in
the
portfolio
which
may
result
in
significant
volatility
and
cause
the
Fund
to
participate
in
losses
(as
well
as
enable
gains)
on
an
amount
that
exceeds
the
Fund’s
initial
investment.
The
Fund
may
not
achieve
the
anticipated
benefits,
and
may
realize
losses
when
a
counterparty
fails
to
perform
as
promised.
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
Russia’s
military
invasion
of
Ukraine
in
February
2022,
the
resulting
responses
by
the
United
States
and
other
countries,
and
the
potential
for
wider
conflict
could
increase
volatility
and
uncertainty
in
the
financial
markets
and
adversely
affect
regional
and
global
economies.
The
United
States
and
other
countries
have
im-
posed
broad-ranging
economic
sanctions
on
Russia
and
certain
Russian
individuals,
banking
entities
and
corporations
as
a
response
to
its
invasion
of
Ukraine.
The
United
States
and
other
countries
have
also
imposed
economic
sanctions
on
Belarus
and
may
impose
sanctions
on
other
countries
that
support
Russia’s
military
invasion.
These
sanctions,
as
well
as
any
other
economic
consequences
related
to
the
invasion,
such
as
additional
sanctions,
boycotts
or
changes
in
consumer
or
purchaser
preferences
or
cyberattacks
on
governments,
companies
or
individuals,
may
further
decrease
the
value
and
liquidity
of
certain
Russian
securities
and
securities
of
issuers
in
other
countries
that
are
subject
to
economic
sanctions
related
to
the
invasion.
1.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
2.
Average
annual
total
return
represents
the
average
annual
change
in
value
of
an
investment
over
the
periods
indicated.
Return
for
less
than
one
year,
if
any,
has
not
been
annualized.
3.
Prior
to
9/10/18
these
shares
were
offered
at
a
higher
initial
sales
charge
of
5.75%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
5.50%.
4.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(9/1/21–2/28/22)
Share
Class
Net
Investment
Income
A
$0.2303
C
$0.0702
R6
$0.2751
Advisor
$0.2690
Total
Annual
Operating
Expenses
4
Share
Class
A
1.05%
Advisor
0.80%
Your
Fund’s
Expenses
Templeton
World
Fund
10
franklintempleton.com
Semiannual
Report
As
a
Fund
shareholder,
you
can
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
(loads)
on
Fund
purchases
and
redemptions;
and
(2)
ongoing
Fund
costs,
including
management
fees,
distribution
and
service
(12b-1)
fees,
and
other
Fund
expenses.
All
mutual
funds
have
ongoing
costs,
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value”
for
each
class
of
shares.
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
for
your
class
of
shares
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=
$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
for
the
class
of
shares
you
hold
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
181/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
9/1/21
Ending
Account
Value
2/28/22
Expenses
Paid
During
Period
9/1/21–2/28/22
1,2
Ending
Account
Value
2/28/22
Expenses
Paid
During
Period
9/1/21–2/28/22
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$928.70
$4.97
$1,019.64
$5.21
1.04%
C
$1,000
$925.30
$8.58
$1,015.88
$8.99
1.80%
R6
$1,000
$930.20
$3.63
$1,021.04
$3.80
0.76%
Advisor
$1,000
$929.90
$3.82
$1,020.84
$4.00
0.80%
Templeton
Funds
Financial
Highlights
Templeton
World
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
11
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$15.52
$12.71
$12.76
$17.24
$16.94
$15.47
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
........
(0.02)
0.20
c
0.16
0.29
0.28
0.27
Net
realized
and
unrealized
gains
(losses)
(1.09)
2.61
0.45
(2.17)
1.03
2.21
Total
from
investment
operations
........
(1.11)
2.81
0.61
(1.88)
1.31
2.48
Less
distributions
from:
Net
investment
income
..............
(0.23)
—
(0.50)
(0.67)
(0.02)
(0.57)
Net
realized
gains
.................
—
—
(0.16)
(1.93)
(0.99)
(0.44)
Total
distributions
...................
(0.23)
—
(0.66)
(2.60)
(1.01)
(1.01)
Net
asset
value,
end
of
period
..........
$14.18
$15.52
$12.71
$12.76
$17.24
$16.94
Total
return
d
.......................
(7.13)%
22.11%
4.47%
(10.22)%
7.81%
16.45%
Ratios
to
average
net
assets
e
Expenses
.........................
1.04%
1.03%
f
1.05%
1.05%
f
1.04%
g
1.06%
f,g
Net
investment
income
(loss)
..........
(0.23)%
1.42%
c
1.29%
2.06%
1.64%
1.63%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$2,690,812
$3,060,714
$2,831,844
$3,150,057
$3,973,648
$4,240,117
Portfolio
turnover
rate
................
48.08%
41.83%
52.25%
25.16%
28.39%
31.46%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.13
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.48%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Templeton
Funds
Financial
Highlights
Templeton
World
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$14.76
$12.18
$12.26
$16.35
$16.21
$14.84
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
........
(0.07)
0.10
c
0.07
0.13
0.14
0.14
Net
realized
and
unrealized
gains
(losses)
(1.04)
2.48
0.42
(2.01)
0.99
2.12
Total
from
investment
operations
........
(1.11)
2.58
0.49
(1.88)
1.13
2.26
Less
distributions
from:
Net
investment
income
..............
(0.07)
—
(0.41)
(0.28)
—
(0.45)
Net
realized
gains
.................
—
—
(0.16)
(1.93)
(0.99)
(0.44)
Total
distributions
...................
(0.07)
—
(0.57)
(2.21)
(0.99)
(0.89)
Net
asset
value,
end
of
period
..........
$13.58
$14.76
$12.18
$12.26
$16.35
$16.21
Total
return
d
.......................
(7.47)%
21.18%
3.61%
(10.94)%
7.01%
15.59%
Ratios
to
average
net
assets
e
Expenses
.........................
1.80%
1.80%
f
1.82%
1.80%
f
1.80%
g
1.81%
f,g
Net
investment
income
(loss)
..........
(0.99)%
0.70%
c
0.54%
1.31%
0.88%
0.88%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$10,196
$12,585
$18,630
$28,850
$117,879
$138,534
Portfolio
turnover
rate
................
48.08%
41.83%
52.25%
25.16%
28.39%
31.46%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.13
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
(0.24)%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Templeton
Funds
Financial
Highlights
Templeton
World
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
13
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$15.53
$12.69
$12.73
$17.21
$16.92
$15.45
Income
from
investment
operations
a
:
Net
investment
income
b
.............
—
c
0.24
d
0.20
0.34
0.33
0.32
Net
realized
and
unrealized
gains
(losses)
(1.08)
2.60
0.45
(2.17)
1.03
2.22
Total
from
investment
operations
........
(1.08)
2.84
0.65
(1.83)
1.36
2.54
Less
distributions
from:
Net
investment
income
..............
(0.28)
—
(0.53)
(0.72)
(0.08)
(0.63)
Net
realized
gains
.................
—
—
(0.16)
(1.93)
(0.99)
(0.44)
Total
distributions
...................
(0.28)
—
(0.69)
(2.65)
(1.07)
(1.07)
Net
asset
value,
end
of
period
..........
$14.17
$15.53
$12.69
$12.73
$17.21
$16.92
Total
return
e
.......................
(6.98)%
22.38%
4.71%
(9.88)%
8.13%
16.87%
Ratios
to
average
net
assets
f
Expenses
before
waiver
and
payments
by
affiliates
..........................
0.78%
0.78%
0.79%
0.77%
0.74%
0.73%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
0.76%
0.76%
0.76%
0.75%
0.72%
g
0.73%
g,h
Net
investment
income
...............
0.06%
1.68%
d
1.59%
2.36%
1.96%
1.96%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$41,228
$42,010
$38,885
$43,595
$51,431
$55,504
Portfolio
turnover
rate
................
48.08%
41.83%
52.25%
25.16%
28.39%
31.46%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Amount
rounds
to
less
than
$0.01
per
share.
d
Net
investment
income
per
share
includes
approximately
$0.13
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.74%.
e
Total
return
is
not
annualized
for
periods
less
than
one
year.
f
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Templeton
Funds
Financial
Highlights
Templeton
World
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
2020
2019
2018
2017
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$15.54
$12.70
$12.74
$17.23
$16.93
$15.46
Income
from
investment
operations
a
:
Net
investment
income
b
.............
—
c
0.24
d
0.19
0.33
0.32
0.32
Net
realized
and
unrealized
gains
(losses)
(1.09)
2.60
0.45
(2.17)
1.03
2.20
Total
from
investment
operations
........
(1.09)
2.84
0.64
(1.84)
1.35
2.52
Less
distributions
from:
Net
investment
income
..............
(0.27)
—
(0.52)
(0.72)
(0.06)
(0.61)
Net
realized
gains
.................
—
—
(0.16)
(1.93)
(0.99)
(0.44)
Total
distributions
...................
(0.27)
—
(0.68)
(2.65)
(1.05)
(1.05)
Net
asset
value,
end
of
period
..........
$14.18
$15.54
$12.70
$12.74
$17.23
$16.93
Total
return
e
.......................
(7.01)%
22.36%
4.66%
(9.99)%
8.09%
16.74%
Ratios
to
average
net
assets
f
Expenses
.........................
0.80%
0.80%
g
0.81%
0.80%
g
0.80%
h
0.81%
g,h
Net
investment
income
...............
0.02%
1.64%
d
1.53%
2.31%
1.88%
1.88%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$106,716
$115,823
$99,546
$112,891
$146,883
$157,237
Portfolio
turnover
rate
................
48.08%
41.83%
52.25%
25.16%
28.39%
31.46%
a
The
amount
shown
for
a
share
outstanding
throughout
the
period
may
not
correlate
with
the
Statement
of
Operations
for
the
period
due
to
the
timing
of
sales
and
repurchases
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Amount
rounds
to
less
than
$0.01
per
share.
d
Net
investment
income
per
share
includes
approximately
$0.13
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.70%.
e
Total
return
is
not
annualized
for
periods
less
than
one
year.
f
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Templeton
Funds
Statement
of
Investments
(unaudited),
February
28,
2022
Templeton
World
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
15
a
a
Industry
Shares
a
Value
a
Common
Stocks
98.2%
Belgium
2.6%
Anheuser-Busch
InBev
SA/NV
......
Beverages
1,180,760
$
72,845,933
China
2.4%
NXP
Semiconductors
NV
..........
Semiconductors
&
Semiconductor
Equipment
189,738
36,072,988
a
Prosus
NV
.....................
Internet
&
Direct
Marketing
Retail
540,765
33,564,090
69,637,078
France
3.5%
LVMH
Moet
Hennessy
Louis
Vuitton
SE
Textiles,
Apparel
&
Luxury
Goods
74,810
54,965,994
Pernod
Ricard
SA
................
Beverages
198,916
43,413,768
98,379,762
Germany
5.7%
Deutsche
Boerse
AG
..............
Capital
Markets
352,530
59,995,275
E.ON
SE
.......................
Multi-Utilities
3,031,820
41,228,259
Infineon
Technologies
AG
..........
Semiconductors
&
Semiconductor
Equipment
855,659
28,945,560
Siemens
AG
....................
Industrial
Conglomerates
227,496
32,043,047
162,212,141
Hong
Kong
2.5%
AIA
Group
Ltd.
..................
Insurance
6,988,604
72,569,044
Ireland
1.9%
a
ICON
plc
.......................
Life
Sciences
Tools
&
Services
230,940
54,966,029
a
Japan
4.4%
Fujitsu
Ltd.
.....................
IT
Services
252,180
36,640,926
Honda
Motor
Co.
Ltd.
.............
Automobiles
1,428,555
43,404,576
Sony
Group
Corp.
................
Household
Durables
457,870
46,785,656
126,831,158
South
Korea
3.4%
Samsung
Electronics
Co.
Ltd.
.......
Technology
Hardware,
Storage
&
Peripherals
1,608,660
96,932,476
Switzerland
2.8%
Roche
Holding
AG
...............
Pharmaceuticals
213,811
80,968,586
Taiwan
3.0%
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
......................
Semiconductors
&
Semiconductor
Equipment
3,918,809
84,303,783
United
Kingdom
11.2%
AstraZeneca
plc
.................
Pharmaceuticals
518,949
63,066,954
BAE
Systems
plc
................
Aerospace
&
Defense
4,693,668
45,057,134
BP
plc
.........................
Oil,
Gas
&
Consumable
Fuels
8,255,226
40,230,926
Compass
Group
plc
..............
Hotels,
Restaurants
&
Leisure
1,808,196
40,864,666
a
Farfetch
Ltd.,
A
..................
Internet
&
Direct
Marketing
Retail
1,244,340
23,704,677
a,b
Just
Eat
Takeaway.com
NV,
144A,
Reg
S
...........................
Internet
&
Direct
Marketing
Retail
1,430,592
57,886,268
a
Rolls-Royce
Holdings
plc
..........
Aerospace
&
Defense
19,190,798
26,469,032
Unilever
plc
.....................
Personal
Products
414,600
20,797,730
318,077,387
United
States
54.8%
Albemarle
Corp.
.................
Chemicals
152,445
29,862,451
a
Alphabet,
Inc.,
A
.................
Interactive
Media
&
Services
27,180
73,416,985
a
Amazon.com,
Inc.
................
Internet
&
Direct
Marketing
Retail
41,216
126,585,052
American
Express
Co.
............
Consumer
Finance
337,159
65,590,912
a
Booking
Holdings,
Inc.
............
Hotels,
Restaurants
&
Leisure
33,025
71,738,556
Comcast
Corp.,
A
................
Media
1,229,129
57,474,072
Templeton
Funds
Statement
of
Investments
(unaudited)
Templeton
World
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
United
States
(continued)
a
Dollar
Tree,
Inc.
.................
Multiline
Retail
283,624
$
40,297,298
DuPont
de
Nemours,
Inc.
..........
Chemicals
453,917
35,119,558
a
DXC
Technology
Co.
..............
IT
Services
1,460,902
49,714,495
a
F5,
Inc.
........................
Communications
Equipment
130,570
26,224,985
Freeport-McMoRan,
Inc.
...........
Metals
&
Mining
682,407
32,039,009
Honeywell
International,
Inc.
........
Industrial
Conglomerates
129,728
24,615,888
Johnson
&
Johnson
..............
Pharmaceuticals
265,801
43,742,871
Keurig
Dr
Pepper,
Inc.
.............
Beverages
2,030,350
78,513,635
Lear
Corp.
.....................
Auto
Components
245,812
38,676,060
Marathon
Petroleum
Corp.
.........
Oil,
Gas
&
Consumable
Fuels
490,313
38,180,673
Medtronic
plc
...................
Health
Care
Equipment
&
Supplies
732,733
76,929,638
a
Meta
Platforms,
Inc.,
A
............
Interactive
Media
&
Services
91,239
19,254,166
Micron
Technology,
Inc.
............
Semiconductors
&
Semiconductor
Equipment
682,436
60,641,263
a
Snap,
Inc.,
A
....................
Interactive
Media
&
Services
1,050,480
41,956,171
Starbucks
Corp.
.................
Hotels,
Restaurants
&
Leisure
495,700
45,500,303
TJX
Cos.,
Inc.
(The)
..............
Specialty
Retail
509,659
33,688,460
a
T-Mobile
US,
Inc.
................
Wireless
Telecommunication
Services
739,231
91,080,652
a
Twilio
,
Inc.,
A
....................
IT
Services
147,210
25,732,308
a
Uber
Technologies,
Inc.
............
Road
&
Rail
816,380
29,414,171
UnitedHealth
Group,
Inc.
...........
Health
Care
Providers
&
Services
193,782
92,215,040
a
Walt
Disney
Co.
(The)
.............
Entertainment
613,364
91,060,019
Westinghouse
Air
Brake
Technologies
Corp.
........................
Machinery
700,578
65,027,650
Zimmer
Biomet
Holdings,
Inc.
.......
Health
Care
Equipment
&
Supplies
440,817
56,067,514
1,560,359,855
Total
Common
Stocks
(Cost
$2,472,083,148)
....................................
2,798,083,232
Short
Term
Investments
2.2%
a
a
Principal
Amount
*
a
Value
a
a
a
a
a
a
Time
Deposits
2.2%
Canada
0.9%
National
Bank
of
Canada,
0.06%,
3/01/22
......................
26,400,000
26,400,000
France
1.3%
Credit
Agricole
Corporate
and
Investment
Bank
SA,
0.07%,
3/01/22
35,000,000
35,000,000
Total
Time
Deposits
(Cost
$61,400,000)
........................................
61,400,000
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$61,400,000
)
................................
61,400,000
a
a
a
Total
Investments
(Cost
$2,533,483,148)
100.4%
................................
$2,859,483,232
Other
Assets,
less
Liabilities
(0.4)%
...........................................
(10,531,379)
Net
Assets
100.0%
...........................................................
$2,848,951,853
a
a
a
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
February
28,
2022,
the
value
of
this
security
was
$57,886,268,
representing
2.0%
of
net
assets.
Templeton
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
February
28,
2022
(unaudited)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
17
Templeton
World
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$2,533,483,148
Value
-
Unaffiliated
issuers
..................................................................
$2,859,483,232
Cash
....................................................................................
43,874
Foreign
currency,
at
value
(cost
$303,755)
........................................................
340,813
Receivables:
Investment
securities
sold
...................................................................
2,797,920
Capital
shares
sold
........................................................................
651,513
Dividends
and
interest
.....................................................................
6,184,542
European
Union
tax
reclaims
(Note
1
e
)
.........................................................
893,942
Total
assets
..........................................................................
2,870,395,836
Liabilities:
Payables:
Investment
securities
purchased
..............................................................
2,952,696
Capital
shares
redeemed
...................................................................
2,351,485
Management
fees
.........................................................................
1,551,606
Distribution
fees
..........................................................................
535,189
Transfer
agent
fees
........................................................................
237,359
IRS
closing
agreement
payments
for
European
Union
tax
reclaims
(Note
1
e
)
.............................
13,245,674
Accrued
expenses
and
other
liabilities
...........................................................
569,974
Total
liabilities
.........................................................................
21,443,983
Net
assets,
at
value
.................................................................
$2,848,951,853
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$2,564,011,072
Total
distributable
earnings
(losses)
.............................................................
284,940,781
Net
assets,
at
value
.................................................................
$2,848,951,853
Templeton
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
February
28,
2022
(unaudited)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
Templeton
World
Fund
Class
A:
Net
assets,
at
value
.......................................................................
$2,690,811,862
Shares
outstanding
........................................................................
189,722,672
Net
asset
value
per
share
a
..................................................................
$14.18
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$15.01
Class
C:
Net
assets,
at
value
.......................................................................
$10,195,901
Shares
outstanding
........................................................................
750,904
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$13.58
Class
R6:
Net
assets,
at
value
.......................................................................
$41,228,008
Shares
outstanding
........................................................................
2,910,330
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$14.17
Advisor
Class:
Net
assets,
at
value
.......................................................................
$106,716,082
Shares
outstanding
........................................................................
7,526,862
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$14.18
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Templeton
Funds
Financial
Statements
Statement
of
Operations
for
the
six
months
ended
February
28,
2022
(unaudited)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
19
Templeton
World
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,142,979)
Unaffiliated
issuers
........................................................................
$15,517,389
Interest:
Unaffiliated
issuers
........................................................................
43,240
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
351
Other
income
(Note
1
e
)
......................................................................
193,097
Less:
IRS
closing
agreement
payments
for
European
Union
tax
reclaims
(Note
1
e
)
..........................
(3,336,336)
Total
investment
income
...................................................................
12,417,741
Expenses:
Management
fees
(Note
3
a
)
...................................................................
10,608,159
Distribution
fees:
(Note
3c
)
Class
A
................................................................................
3,483,812
Class
C
................................................................................
57,168
Transfer
agent
fees:
(Note
3e
)
Class
A
................................................................................
1,017,415
Class
C
................................................................................
4,027
Class
R6
...............................................................................
10,847
Advisor
Class
............................................................................
39,427
Custodian
fees
.............................................................................
61,573
Reports
to
shareholders
fees
..................................................................
119,063
Registration
and
filing
fees
....................................................................
41,893
Professional
fees
...........................................................................
26,738
Trustees'
fees
and
expenses
..................................................................
106,768
Other
....................................................................................
135,990
Total
expenses
.........................................................................
15,712,880
Expenses
waived/paid
by
affiliates
(Note
3f)
....................................................
(4,512)
Net
expenses
.........................................................................
15,708,368
Net
investmen
t
income
(loss)
............................................................
(3,290,627)
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
157,015,877
Foreign
currency
transactions
................................................................
(366,992)
Forward
exchange
contracts
.................................................................
15,752,137
Net
realized
gain
(loss)
..................................................................
172,401,022
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(393,619,102)
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
(560,233)
Forward
exchange
contracts
.................................................................
1,232,490
Net
change
in
unrealized
appreciation
(depreciation)
............................................
(392,946,845)
Net
realized
and
unrealized
gain
(loss)
............................................................
(220,545,823)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(223,836,450)
Templeton
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
Templeton
World
Fund
Six
Months
Ended
February
28,
2022
(unaudited)
Year
Ended
August
31,
2021
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
(loss)
............................................
$(3,290,627)
$45,221,882
Net
realized
gain
(loss)
.................................................
172,401,022
208,380,573
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(392,946,845)
372,038,154
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(223,836,450)
625,640,609
Distributions
to
shareholders:
Class
A
.............................................................
(44,013,452)
—
Class
C
.............................................................
(55,139)
—
Class
R6
............................................................
(780,101)
—
Advisor
Class
........................................................
(1,988,799)
—
Total
distributions
to
shareholders
..........................................
(46,837,491)
—
Capital
share
transactions:
(Note
2
)
Class
A
.............................................................
(114,243,148)
(364,041,894)
Class
C
.............................................................
(1,458,095)
(9,478,984)
Class
R6
............................................................
3,087,929
(4,859,427)
Advisor
Class
........................................................
1,106,797
(5,032,934)
Total
capital
share
transactions
............................................
(111,506,517)
(383,413,239)
Net
increase
(decrease)
in
net
assets
...................................
(382,180,458)
242,227,370
Net
assets:
Beginning
of
period
.....................................................
3,231,132,311
2,988,904,941
End
of
period
..........................................................
$2,848,951,853
$3,231,132,311
Templeton
Funds
21
franklintempleton.com
Semiannual
Report
Notes
to
Financial
Statements
(unaudited)
Templeton
World
Fund
1.
Organization
and
Significant
Accounting
Policies
Templeton
Funds (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
an
open-end
management
investment
company,
consisting
of three separate
funds
and
applies
the
specialized
accounting
and
reporting
guidance
in
U.S.
Generally
Accepted
Accounting
Principles
(U.S.
GAAP).
Templeton
World
Fund
(Fund)
is
included
in
this
report.
The
Fund
offers four
classes
of
shares:
Class
A,
Class
C,
Class
R6
and
Advisor
Class. Class
C
shares
automatically
convert
to
Class
A
shares
on
a
monthly
basis,
after
they
have
been
held
for
8
years.
Each
class
of
shares
may
differ
by
its
initial
sales
load,
contingent
deferred
sales
charges,
voting
rights
on
matters
affecting
a
single
class,
its
exchange
privilege
and
fees
due
to
differing
arrangements
for
distribution
and
transfer
agent
fees.
The
following
summarizes
the Fund's
significant
accounting
policies.
a.
Financial
Instrument
Valuation
The
Fund's
investments
in
financial
instruments
are
carried
at
fair
value
daily.
Fair
value
is
the
price
that
would
be
received
to
sell
an
asset
or
paid
to
transfer
a
liability
in
an
orderly
transaction
between
market
participants
on
the
measurement
date.
The
Fund
calculates
the
net
asset
value
(NAV)
per
share
each business
day as
of
4
p.m.
Eastern
time
or
the
regularly
scheduled
close
of
the
New
York
Stock
Exchange
(NYSE),
whichever
is
earlier.
Under
compliance
policies
and
procedures
approved
by
the
Trust's
Board
of
Trustees
(the
Board),
the Fund's
administrator
has
responsibility
for
oversight
of
valuation,
including
leading
the
cross-functional
Valuation
Committee
(VC).
The
Fund
may
utilize
independent
pricing
services,
quotations
from
securities
and
financial
instrument
dealers,
and
other
market
sources
to
determine
fair
value.
Equity
securities
listed
on
an
exchange
or
on
the
NASDAQ
National
Market
System
are
valued
at
the
last
quoted
sale
price
or
the
official
closing
price of
the
day,
respectively.
Foreign
equity
securities
are
valued
as
of
the
close
of
trading
on
the
foreign
stock
exchange
on
which
the
security
is
primarily
traded,
or
as
of
4
p.m.
Eastern
time.
The
value
is
then
converted
into
its
U.S.
dollar
equivalent
at
the
foreign
exchange
rate
in
effect
at
4
p.m.
Eastern
time
on
the
day
that
the
value
of
the
security
is
determined.
Over-the-counter
(OTC)
securities
are
valued
within
the
range
of
the
most
recent
quoted
bid
and
ask
prices.
Securities
that
trade
in
multiple
markets
or
on
multiple
exchanges
are
valued
according
to
the
broadest
and
most
representative
market.
Certain
equity
securities
are
valued
based
upon
fundamental
characteristics
or
relationships
to
similar
securities.
Investments
in
open-end
mutual
funds
are
valued
at
the
closing
NAV.
Investments
in
time
deposits
are
valued
at
cost,
which
approximates
fair
value.
Certain
derivative
financial
instruments
trade
in
the
OTC
market.
The
Fund's
pricing
services
use
various
techniques
including
industry
standard
option
pricing
models
and
proprietary
discounted
cash
flow
models
to
determine
the
fair
value
of
those
instruments.
The
Fund's
net
benefit
or
obligation
under
the
derivative
contract,
as
measured
by
the
fair
value
of
the
contract,
is
included
in
net
assets.
The
Fund
has
procedures
to
determine
the
fair
value
of
financial
instruments
for
which
market
prices
are
not
reliable
or
readily
available.
Under
these
procedures,
the Fund
primarily
employs
a
market-based
approach
which
may
use
related
or
comparable
assets
or
liabilities,
recent
transactions,
market
multiples,
book
values,
and
other
relevant
information
for
the
investment
to
determine
the
fair
value
of
the
investment.
An
income-based
valuation
approach
may
also
be
used
in
which
the
anticipated
future
cash
flows
of
the
investment
are
discounted
to
calculate
fair
value.
Discounts
may
also
be
applied
due
to
the
nature
or
duration
of
any
restrictions
on
the
disposition
of
the
investments.
Due
to
the
inherent
uncertainty
of
valuations
of
such
investments,
the
fair
values
may
differ
significantly
from
the
values
that
would
have
been
used
had
an
active
market
existed.
Trading
in
securities
on
foreign
securities
stock
exchanges
and
OTC
markets
may
be
completed
before
4
p.m.
Eastern
time.
In
addition,
trading
in
certain
foreign
markets
may
not
take
place
on
every
Fund's
business
day.
Events
can
occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time.
In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
February
28,
2022,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
22
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy
(referred
to
as
“market
level
fair
value”).
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
security
valuation
changes
due
to
an
open
foreign
market
are
adjusted
and
reflected
by
the
Fund
for
financial
reporting
purposes.
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.
The
Fund
may
enter
into
foreign
currency
exchange
contracts
to
facilitate
transactions
denominated
in
a
foreign
currency.
Purchases
and
sales
of
securities,
income
and
expense
items
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
at
the
exchange
rate
in
effect
on
the
transaction
date.
Portfolio
securities
and
assets
and
liabilities
denominated
in
foreign
currencies
contain
risks
that
those
currencies
will
decline
in
value
relative
to
the
U.S.
dollar.
Occasionally,
events
may
impact
the
availability
or
reliability
of
foreign
exchange
rates
used
to
convert
the
U.S.
dollar
equivalent
value.
If
such
an
event
occurs,
the
foreign
exchange
rate
will
be
valued
at
fair
value
using
procedures
established
and
approved
by
the
Board.
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
in
the
Statement of
Operations.
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
denominated
assets
and
liabilities
other
than
investments
in
securities
held
at
the
end
of
the
reporting
period.
c.
Derivative
Financial
Instruments
The
Fund invested
in
derivative
financial
instruments
in
order
to
manage
risk
or
gain
exposure
to
various
other
investments
or
markets.
Derivatives
are
financial
contracts
based
on
an
underlying
or
notional
amount,
require
no
initial
investment
or
an
initial
net
investment
that
is
smaller
than
would
normally
be
required
to
have
a
similar
response
to
changes
in
market
factors,
and
require
or
permit
net
settlement.
Derivatives
contain
various
risks
including
the
potential
inability
of
the
counterparty
to
fulfill
their
obligations
under
the
terms
of
the
contract,
the
potential
for
an
illiquid
secondary
market,
and/or
the
potential
for
market
movements
which
expose
the
Fund
to
gains
or
losses
in
excess
of
the
amounts
shown
in
the
Statement
of
Assets
and
Liabilities.
Realized
gain
and
loss
and
unrealized
appreciation
and
depreciation
on
these
contracts
for
the
period
are
included
in
the
Statement
of
Operations.
Derivative
counterparty
credit
risk
is
managed
through
a
formal
evaluation
of
the
creditworthiness
of
all
potential
counterparties.
The
Fund
attempts
to
reduce its
exposure
to
counterparty
credit
risk
on
OTC
derivatives,
whenever
possible,
by
entering
into
International
Swaps
and
Derivatives
Association
(ISDA)
master
agreements
with
certain
counterparties.
These
agreements
contain
various
provisions,
including
but
not
limited
to
collateral
requirements,
events
of
default,
or
early
termination.
Termination
events
applicable
to
the
counterparty
include
certain
deteriorations
in
the
credit
quality
of
the
counterparty.
Termination
events
applicable
to
the Fund
include
failure
of
the
Fund
to
maintain
certain
net
asset
levels
and/or
limit
the
decline
in
net
assets
over
various
periods
of
time.
In
the
event
of
default
or
early
termination,
the
ISDA
master
agreement
gives
the
non-defaulting
party
the
right
to
net
and
close-out
all
transactions
traded,
whether
or
not
arising
under
the
ISDA
agreement,
to
one
net
amount
payable
by
one
counterparty
to
the
other.
However,
absent
an
event
of
default
or
early
termination,
OTC
derivative
assets
and
liabilities
are
presented
gross
and
not
offset
in
the
Statement
of
Assets
and
Liabilities.
Early
termination
by
the
counterparty
may
result
in
an
immediate
payment
by
the
Fund
of
any
net
liability
owed
to
that
counterparty
under
the
ISDA
agreement.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
23
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
Collateral
requirements
differ
by
type
of
derivative.
Collateral
terms
are
contract
specific
for
OTC
derivatives.
For
OTC
derivatives
traded
under
an
ISDA
master
agreement,
posting
of
collateral
is
required
by
either
the
Fund
or
the
applicable
counterparty
if
the
total
net
exposure
of
all
OTC
derivatives
with
the
applicable
counterparty
exceeds
the
minimum
transfer
amount,
which
typically
ranges
from
$100,000
to
$250,000,
and
can
vary
depending
on
the
counterparty
and
the
type
of
agreement.
Generally,
collateral
is
determined
at
the
close
of
Fund
business
each
day
and
any
additional
collateral
required
due
to
changes
in
derivative
values
may
be
delivered
by
the
Fund
or
the
counterparty
the
next
business
day,
or
within
a
few
business
days.
Collateral
pledged
and/or
received
by
the
Fund,
if
any,
is
held
in
segregated
accounts
with
the
Fund’s
custodian/counterparty
broker
and
can
be
in
the
form
of
cash
and/or
securities.
Unrestricted
cash
may
be
invested
according
to
the
Fund's
investment
objectives.
To
the
extent
that
the
amounts
due
to
the
Fund
from
its
counterparties
are
not
subject
to
collateralization
or
are
not
fully
collateralized,
the
Fund
bears
the
risk
of
loss
from
counterparty
non-performance.
The
Fund
entered
into
OTC
forward
exchange
contracts
primarily
to
manage
and/or
gain
exposure
to
certain
foreign
currencies.
A
forward
exchange
contract
is
an
agreement
between
the
Fund
and
a
counterparty
to
buy
or
sell
a
foreign
currency
at
a
specific
exchange
rate
on
a
future
date.
See
Note
9
regarding
other
derivative
information.
d.
Securities
Lending
The
Fund
participates
in
an
agency
based
securities
lending
program
to
earn
additional
income.
The
Fund
receives
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund.
The
Fund
may
receive
income
from
the
investment
of
cash
collateral,
in
addition
to
lending
fees
and
rebates
paid
by
the
borrower.
Income
from
securities
loaned,
net
of
fees
paid
to
the
securities
lending
agent
and/
or
third-party
vendor,
is
reported
separately
in
the
Statement
of
Operations.
The
Fund
bears
the
market
risk
with
respect
to any
cash collateral
investment,
securities
loaned,
and
the
risk
that
the
agent
may
default
on
its
obligations
to
the
Fund.
If
the
borrower
defaults
on
its
obligation
to
return
the
securities
loaned,
the
Fund
has
the
right
to
repurchase
the
securities
in
the
open
market
using
the
collateral
received.
The
securities
lending
agent
has
agreed
to
indemnify
the
Fund
in
the
event
of
default
by
a
third
party
borrower.
At
February
28,
2022,
the
Fund
had
no
securities
on
loan.
e.
Income
and
Deferred
Taxes
It
is the Fund's
policy
to
qualify
as
a
regulated
investment
company
under
the
Internal
Revenue
Code. The Fund
intends
to
distribute
to
shareholders
substantially
all
of
its
taxable
income
and
net
realized
gains
to
relieve
it
from
federal
income
and excise
taxes.
As
a
result,
no
provision
for
U.S.
federal
income
taxes
is
required.
The
Fund
may
be
subject
to
foreign
taxation
related
to
income
received,
capital
gains
on
the
sale
of
securities
and
certain
foreign
currency
transactions
in
the
foreign
jurisdictions
in
which it
invests.
Foreign
taxes,
if
any,
are
recorded
based
on
the
tax
regulations
and
rates
that
exist
in
the
foreign
markets
in
which
the
Fund
invests.
When
a
capital
gain
tax
is
determined
to
apply,
the
Fund
records
an
estimated
deferred
tax
liability
in
an
amount
that
would
be
payable
if
the
securities
were
disposed
of
on
the
valuation
date.
As
a
result
of
several
court
cases,
in
certain
countries
across
the
European
Union, the
Fund
filed
additional
tax
reclaims
for
previously
withheld
taxes
on
dividends
earned
in
those
countries
(EU
reclaims). Income
recognized,
if
any,
for
EU
reclaims
is
reflected
as
other
income
in
the
Statement
of
Operations
and
any
related
receivable,
if
any,
is
reflected
as
European
Union
tax
reclaims
in
the
Statement
of
Assets
and
Liabilities.
Any
fees
associated
with
these
filings
are
reflected
in
other
expenses
in
the
Statement
of
Operations.
When
uncertainty
exists
as
to
the
ultimate
resolution
of
these
proceedings,
the
likelihood
of
receipt
of
these
EU
reclaims,
and
the
potential
timing
of
payment,
no
amounts
are
reflected
in
the
financial
statements.
For
U.S.
income
tax
purposes,
EU
reclaims
received
by
the
Fund,
if
any,
reduce
the
amount
of
foreign
taxes
Fund
shareholders
can
use
as
tax
deductions
or credits
on
their
income
tax
returns.
In
the
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Derivative
Financial
Instruments
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
24
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
event
that
EU
reclaims
received
by
the Fund
during a
fiscal
year
exceed
foreign
withholding
taxes
paid
by
the
Fund,
and
the
Fund previously
passed
through to
its
shareholders
foreign
taxes
incurred
by
the
Fund
to
be
used
as
a
credit
or
deduction
on
a
shareholder’s
income
tax
return,
the Fund
will enter
into
a
closing
agreement
with
the
Internal
Revenue
Service
(IRS)
in
order
to
pay
the
associated
tax
liability
on
behalf
of
the Fund's
shareholders.
The
Fund
determined
to
enter
into
a
closing
agreement
with
the
IRS
and
recorded
the
estimated
payments
as
a
reduction
to
income,
as
reflected
in
the
Statement
of
Operations.
The
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
February
28,
2022,
the
Fund
has
determined
that
no
tax
liability
is
required
in
its
financial
statements
related
to
uncertain
tax
positions
for
any
open
tax
years
(or
expected
to
be
taken
in
future
tax
years).
Open
tax
years
are
those
that
remain
subject
to
examination
and
are
based
on
the
statute
of
limitations
in
each
jurisdiction
in
which
the
Fund
invests.
f.
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.
Interest
income
and
estimated
expenses
are
accrued
daily.
Dividend
income
is
recorded
on
the
ex-dividend
date
except
for
certain
dividends
from
securities
where
the
dividend
rate
is
not
available.
In
such
cases,
the
dividend
is
recorded
as
soon
as
the
information
is
received
by
the
Fund.
Distributions
to shareholders
are
recorded
on
the
ex-dividend
date.
Distributable
earnings
are
determined
according
to
income
tax
regulations
(tax
basis)
and
may
differ
from
earnings
recorded
in
accordance
with
U.S.
GAAP.
These
differences
may
be
permanent
or
temporary.
Permanent
differences
are
reclassified
among
capital
accounts
to
reflect
their
tax
character.
These
reclassifications
have
no
impact
on
net
assets
or
the
results
of
operations.
Temporary
differences
are
not
reclassified,
as
they
may
reverse
in
subsequent
periods.
Common
expenses
incurred
by
the
Trust
are
allocated
among
the
Funds
based
on
the
ratio
of
net
assets
of
each
Fund
to
the
combined
net
assets
of
the
Trust
or
based
on
the
ratio
of
number
of
shareholders
of
each
Fund
to
the
combined
number
of
shareholders
of
the
Trust.
Certain
Fund
specific
expenses
are
charged
directly
to
the
Fund
that
incurred
the
expense.
Realized
and
unrealized
gains
and
losses
and
net
investment
income,
excluding
class
specific
expenses,
are
allocated
daily
to
each
class
of
shares
based
upon
the
relative
proportion
of
net
assets
of
each
class.
Differences
in
per
share
distributions
by
class
are
generally
due
to
differences
in
class
specific
expenses.
g.
Accounting
Estimates
The
preparation
of
financial
statements
in
accordance
with
U.S.
GAAP
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
expenses
during
the
reporting
period.
Actual
results
could
differ
from
those
estimates.
h.
Guarantees
and
Indemnifications
Under
the
Trust's
organizational
documents,
its
officers
and
trustees
are
indemnified
by
the
Trust
against
certain
liabilities
arising
out
of
the
performance
of
their
duties
to
the
Trust.
Additionally,
in
the
normal
course
of
business,
the
Trust,
on
behalf
of
the
Fund,
enters
into
contracts
with
service
providers
that
contain
general
indemnification
clauses.
The
Trust's
maximum
exposure
under
these
arrangements
is
unknown
as
this
would
involve
future
claims
that
may
be
made
against
the
Trust
that
have
not
yet
occurred.
Currently,
the
Trust
expects
the
risk
of
loss
to
be
remote.
1.
Organization
and
Significant
Accounting
Policies
(continued)
e.
Income
and
Deferred
Taxes
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
25
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
2.
Shares
of
Beneficial
Interest
At
February
28,
2022,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:
3.
Transactions
with
Affiliates
Franklin
Resources,
Inc.
is
the
holding
company
for
various
subsidiaries
that
together
are
referred
to
as
Franklin
Templeton.
Certain
officers
and
trustees
of
the
Trust
are
also
officers
and/or
directors
of
the
following
subsidiaries:
Six
Months
Ended
February
28,
2022
Year
Ended
August
31,
2021
Shares
Amount
Shares
Amount
Class
A
Shares:
Shares
sold
a
...................................
3,763,942
$56,629,243
9,217,073
$133,230,977
Shares
issued
in
reinvestment
of
distributions
..........
2,756,371
40,243,011
—
—
Shares
redeemed
...............................
(14,022,424)
(211,115,402)
(34,710,249)
(497,272,871)
Net
increase
(decrease)
..........................
(7,502,111)
$(114,243,148)
(25,493,176)
$(364,041,894)
Class
C
Shares:
Shares
sold
...................................
33,663
$483,046
111,842
$1,540,029
Shares
issued
in
reinvestment
of
distributions
..........
3,911
54,747
—
—
Shares
redeemed
a
..............................
(139,382)
(1,995,888)
(788,496)
(11,019,013)
Net
increase
(decrease)
..........................
(101,808)
$(1,458,095)
(676,654)
$(9,478,984)
Class
R6
Shares:
Shares
sold
...................................
374,157
$5,638,538
519,191
$7,465,031
Shares
issued
in
reinvestment
of
distributions
..........
28,589
416,823
—
—
Shares
redeemed
...............................
(198,241)
(2,967,432)
(878,650)
(12,324,458)
Net
increase
(decrease)
..........................
204,505
$3,087,929
(359,459)
$(4,859,427)
Advisor
Class
Shares:
Shares
sold
...................................
860,876
$13,039,299
1,575,746
$22,918,244
Shares
issued
in
reinvestment
of
distributions
..........
125,855
1,836,223
—
—
Shares
redeemed
...............................
(915,275)
(13,768,725)
(1,959,012)
(27,951,178)
Net
increase
(decrease)
..........................
71,456
$1,106,797
(383,266)
$(5,032,934)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
Subsidiary
Affiliation
Templeton
Global
Advisors
Limited
(Global
Advisors)
Investment
manager
Franklin
Templeton
Services,
LLC
(FT
Services)
Administrative
manager
Franklin
Distributors,
LLC
(Distributors)
Principal
underwriter
Franklin
Templeton
Investor
Services,
LLC
(Investor
Services)
Transfer
agent
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
26
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
a.
Management
Fees
The
Fund
pays
an
investment
management
fee,
calculated
daily
and
paid
monthly,
to
Global
Advisors
based
on
the
average
daily
net
assets
of
the
Fund
as
follows:
For
the
period
ended
February
28,
2022,
the
annualized
gross
effective
investment
management
fee
rate
was
0.695%
of
the
Fund’s
average
daily
net
assets.
b.
Administrative
Fees
Under
an
agreement
with
Global
Advisors,
FT
Services
provides
administrative
services
to
the
Fund.
The
fee
is
paid
by
Global
Advisors
based
on
the
Fund’s
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
c.
Distribution
Fees
The
Board
has
adopted
distribution
plans
for
each
share
class,
with
the
exception
of
Class
R6
and
Advisor
Class
shares,
pursuant
to
Rule
12b-1
under
the
1940
Act.
Under
the
Fund’s
Class A reimbursement
distribution
plan,
the
Fund
reimburses
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
Fund's
shares
up
to
the
maximum
annual
plan
rate.
Under
the
Class
A
reimbursement
distribution
plan,
costs
exceeding
the
maximum
for
the
current
plan
year
cannot
be
reimbursed
in
subsequent
periods.
In
addition,
under
the
Fund’s
Class C
compensation
distribution
plan,
the
Fund
pays
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
Fund's
shares
up
to
the
maximum
annual
plan
rate.
The
plan
year,
for
purposes
of
monitoring
compliance
with
the
maximum
annual
plan
rates,
is
February
1
through
January
31.
The
maximum
annual
plan
rates,
based
on
the
average
daily
net
assets,
for
each
class,
are
as
follows:
d.
Sales
Charges/Underwriting
Agreements
Front-end
sales
charges
and
contingent
deferred
sales
charges
(CDSC)
do
not
represent
expenses
of
the
Fund.
These
charges
are
deducted
from
the
proceeds
of
sales
of
Fund
shares
prior
to
investment
or
from
redemption
proceeds
prior
to
remittance,
as
applicable.
Distributors
has
advised
the
Fund
of
the
following
commission
transactions
related
to
the
sales
and
redemptions
of
the
Fund's
shares
for
the
period:
Annualized
Fee
Rate
Net
Assets
0.705%
Up
to
and
including
$1
billion
0.690%
Over
$1
billion,
up
to
and
including
$5
billion
0.675%
Over
$5
billion,
up
to
and
including
$10
billion
0.655%
Over
$10
billion,
up
to
and
including
$15
billion
0.635%
Over
$15
billion,
up
to
and
including
$20
billion
0.615%
In
excess
of
$20
billion
Class
A
....................................................................................
0.25%
Class
C
....................................................................................
1.00%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$14,973
CDSC
retained
..............................................................................
$374
3.
Transactions
with
Affiliates
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
27
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
e.
Transfer
Agent
Fees
Each
class
of
shares pays
transfer
agent
fees
to
Investor
Services
for
its
performance
of
shareholder
servicing
obligations.
The
fees
are
based
on
an
annualized
asset
based
fee
of
0.02%
plus
a
transaction
based
fee.
In
addition,
each
class reimburses
Investor
Services
for
out
of
pocket
expenses
incurred
and,
except
for
Class
R6,
reimburses
shareholder
servicing
fees
paid
to
third
parties.
These
fees
are
allocated
daily
based
upon
their
relative
proportion
of
such
classes'
aggregate
net
assets.
Class
R6
pays
Investor
Services
transfer
agent
fees
specific
to
that
class.
For
the
period
ended
February
28,
2022,
the
Fund
paid
transfer
agent
fees
of
$1,071,716,
of
which $575,406
was
retained
by
Investor
Services.
f.
Waiver
and
Expense
Reimbursements
Investor
Services
has
contractually
agreed
in
advance
to
waive
or
limit
its
fees
so
that
the
Class
R6
transfer
agent
fees
do
not
exceed
0.03%
based
on
the
average
net
assets
of
the
class
until
December
31,
2022.
4.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
August
31,
2021,
the
capital
loss
carryforwards
were
as
follows:
At
February
28,
2022,
the
cost
of
investments
and
net
unrealized
appreciation
(depreciation)
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
foreign
currency
transactions,
EU
reclaims
and
corporate
actions.
5.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
period
ended
February
28,
2022,
aggregated
$1,427,651,063
and
$1,399,907,194,
respectively.
6.
Concentration
of
Risk
Investing
in
foreign
securities
may
include
certain
risks
and
considerations
not
typically
associated
with
investing
in
U.S.
securities,
such
as
fluctuating
currency
values
and
changing
local,
regional
and
global
economic,
political
and
social
conditions,
which
may
result
in
greater
market
volatility.
Political
and
financial
uncertainty
in
many
foreign
regions
may
increase
market
volatility
and
the
economic
risk
of
investing
in
foreign
securities.
In
addition,
certain
foreign
securities
may
not
be
as
liquid
as
U.S.
securities.
Capital
loss
carryforwards
not
subject
to
expiration:
Long
term
................................................................................
$203,817,446
Cost
of
investments
..........................................................................
$2,534,454,937
Unrealized
appreciation
........................................................................
$454,974,751
Unrealized
depreciation
........................................................................
(129,946,456)
Net
unrealized
appreciation
(depreciation)
..........................................................
$325,028,295
3.
Transactions
with
Affiliates
(continued)
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
28
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
7.
Geopolitical
Risk
On
February
24,
2022,
Russia
engaged
in
military
actions
in
the
sovereign
territory
of
Ukraine.
The
current
political
and
financial
uncertainty
surrounding
Russia
and
Ukraine
may
increase
market
volatility
and
the
economic
risk
of
investing
in
securities
in
these
countries
and
may
also
cause
uncertainty
for
the
global
economy
and
broader
financial
markets.
The
ultimate
fallout
and
long-term
impact
from
these
events
are
not
known.
The
Fund
will
continue
to
assess
the
impact
on
valuations
and
liquidity
and
will
take
any
potential
actions
needed
in
accordance
with
procedures
approved
by
the
Board.
8.
Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
9.
Other
Derivative
Information
For
the
period
ended
February
28,
2022,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
as
follows:
For
the
period
ended
February
28,
2022,
the
average
month
end
contract
value
of
forward
exchange
contracts
was
$229,173,380.
See
Note
1(c)
regarding
derivative
financial
instruments.
10.
Credit
Facility
The
Fund,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2.675
billion
(Global
Credit
Facility)
which
matures
on
February
3,
2023.
This
Global
Credit
Facility
provides
a
source
of
funds
to
the
Borrowers
for
temporary
and
emergency
purposes,
including
the
ability
to
meet
future
unanticipated
or
unusually
large
redemption
requests.
Under
the
terms
of
the
Global
Credit
Facility,
the
Fund
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Fund
and
other
costs
incurred
by
the
Fund,
pay
its
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
its
relative
share
of
the
aggregate
net
assets
of
all
of
the
Borrowers,
including
an
annual
commitment
fee
of
0.15%
based
upon
the
unused
portion
of
the
Global
Credit
Facility.
These
fees
are
reflected
in
other
expenses
in
the
Statement
of
Operations.
During
the
period
ended
February
28,
2022,
the Fund
did
not
use
the
Global
Credit
Facility.
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement
of
Operations
Location
Net
Realized
Gain
(Loss)
for
the
Period
Statement
of
Operations
Location
Net
Change
in
Unrealized
Appreciation
(Depreciation)
for
the
Period
Templeton
World
Fund
Net
realized
gain
(loss)
from:
Net
change
in
unrealized
appreciation
(depreciation)
on:
Foreign
exchange
contracts
.....
Forward
exchange
contracts
$15,752,137
Forward
exchange
contracts
$1,232,490
Total
.......................
$15,752,137
$1,232,490
Templeton
Funds
Notes
to
Financial
Statements
(unaudited)
29
franklintempleton.com
Semiannual
Report
Templeton
World
Fund
(continued)
11.
Fair
Value
Measurements
The
Fund
follows
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Fund's
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the
Fund's financial
instruments
and
are
summarized
in
the
following
fair
value
hierarchy:
Level
1
–
quoted
prices
in
active
markets
for
identical
financial
instruments
Level
2
–
other
significant
observable
inputs
(including
quoted
prices
for
similar
financial
instruments,
interest
rates,
prepayment
speed,
credit
risk,
etc.)
Level
3
–
significant
unobservable
inputs
(including
the
Fund's
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
February
28,
2022,
in
valuing
the
Fund's
assets
carried
at
fair
value,
is
as
follows:
12.
Subsequent
Events
The
Fund
has
evaluated
subsequent
events
through
the
issuance
of
the financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure.
Level
1
Level
2
Level
3
Total
Templeton
World
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Belgium
.............................
$
—
$
72,845,933
$
—
$
72,845,933
China
...............................
36,072,988
33,564,090
—
69,637,078
France
..............................
—
98,379,762
—
98,379,762
Germany
............................
—
162,212,141
—
162,212,141
Hong
Kong
...........................
—
72,569,044
—
72,569,044
Ireland
..............................
54,966,029
—
—
54,966,029
Japan
...............................
—
126,831,158
—
126,831,158
South
Korea
..........................
—
96,932,476
—
96,932,476
Switzerland
...........................
—
80,968,586
—
80,968,586
Taiwan
..............................
—
84,303,783
—
84,303,783
United
Kingdom
.......................
23,704,677
294,372,710
—
318,077,387
United
States
.........................
1,560,359,855
—
—
1,560,359,855
Short
Term
Investments
...................
—
61,400,000
—
61,400,000
Total
Investments
in
Securities
...........
$1,675,103,549
$1,184,379,683
a
$—
$2,859,483,232
a
Includes
foreign
securities
valued
at
$1,122,979,683,
which
were
categorized
as
Level
2
as
a
result
of
the
application
of
market
level
fair
value
procedures.
See
the
Financial
Instrument
Valuation
note
for
more
information.
Templeton
Funds
Shareholder
Information
30
franklintempleton.com
Semiannual
Report
BOARD
APPROVAL
OF
INVESTMENT
MANAGEMENT
AGREEMENTS
TEMPLETON
FUNDS
Templeton
World
Fund
(Fund)
At
an
in-person
meeting
held
on
February
28,
2022
(Meeting),
the
Board
of
Trustees
(Board)
of
Templeton
Funds
(Trust),
including
a
majority
of
the
trustees
who
are
not
“interested
persons”
as
defined
in
the
Investment
Company
Act
of
1940
(Independent
Trustees),
reviewed
and
approved
the
continuance
of
the
investment
management
agreement
between
Templeton
Global
Advisors
Limited
(Manager)
and
the
Trust,
on
behalf
of
the
Fund
(Management
Agreement)
for
an
additional
one-year
period.
The
Independent
Trustees
received
advice
from
and
met
separately
with
Independent
Trustee
counsel
in
considering
whether
to
approve
the
continuation
of
the
Management
Agreement.
In
considering
the
continuation
of
the
Management
Agreement,
the
Board
reviewed
and
considered
information
provided
by
the
Manager
at
the
Meeting
and
throughout
the
year
at
meetings
of
the
Board
and
its
committees.
The
Board
also
reviewed
and
considered
information
provided
in
response
to
a
detailed
set
of
requests
for
information
submitted
to
the
Manager
by
Independent
Trustee
counsel
on
behalf
of
the
Independent
Trustees
in
connection
with
the
annual
contract
renewal
process.
In
addition,
prior
to
the
Meeting,
the
Independent
Trustees
held
a
virtual
contract
renewal
meeting
at
which
the
Independent
Trustees
first
conferred
amongst
themselves
and
Independent
Trustee
counsel
about
contract
renewal
matters;
then
met
with
senior
leadership
regarding
the
performance
of
the
global
equity
funds,
as
well
as
expected
enhancements
to
the
Templeton
Global
Equity
Group
leadership;
and
last
met
with
management
to
request
additional
information
that
the
Independent
Trustees
reviewed
and
considered
at
the
Meeting.
The
Board
later
had
an
opportunity
for
an
expanded
discussion
with
the
leadership
of
the
Templeton
Global
Equity
Group
to
hear
about
strategies
to
deliver
improved
investment
returns
to
shareholders.
The
Board
reviewed
and
considered
all
of
the
factors
it
deemed
relevant
in
approving
the
continuance
of
the
Management
Agreement,
including,
but
not
limited
to:
(i)
the
nature,
extent
and
quality
of
the
services
provided
by
the
Manager;
(ii)
the
investment
performance
of
the
Fund;
(iii)
the
costs
of
the
services
provided
and
profits
realized
by
the
Manager
and
its
affiliates
from
the
relationship
with
the
Fund;
(iv)
the
extent
to
which
economies
of
scale
are
realized
as
the
Fund
grows;
and
(v)
whether
fee
levels
reflect
these
economies
of
scale
for
the
benefit
of
Fund
investors.
In
approving
the
continuance
of
the
Management
Agreement,
the
Board,
including
a
majority
of
the
Independent
Trustees,
determined
that
the
terms
of
the
Management
Agreement
are
fair
and
reasonable
and
that
the
continuance
of
such
Management
Agreement
is
in
the
best
interests
of
the
Fund
and
its
shareholders.
While
attention
was
given
to
all
information
furnished,
the
following
discusses
some
primary
factors
relevant
to
the
Board’s
determination.
Nature,
Extent
and
Quality
of
Services
The
Board
reviewed
and
considered
information
regarding
the
nature,
extent
and
quality
of
investment
management
services
provided
by
the
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
This
information
included,
among
other
things,
the
qualifications,
background
and
experience
of
the
senior
management
and
investment
personnel
of
the
Manager,
as
well
as
information
on
succession
planning
where
appropriate;
the
structure
of
investment
personnel
compensation;
oversight
of
third-party
service
providers;
investment
performance
reports
and
related
financial
information
for
the
Fund;
reports
on
expenses
and
shareholder
services;
legal
and
compliance
matters;
risk
controls;
pricing
and
other
services
provided
by
the
Manager
and
its
affiliates;
and
management
fees
charged
by
the
Manager
and
its
affiliates
to
US
funds
and
other
accounts,
including
management’s
explanation
of
differences
among
accounts
where
relevant.
The
Board
also
reviewed
and
considered
an
annual
report
on
payments
made
by
Franklin
Templeton
(FT)
or
the
Fund
to
financial
intermediaries,
as
well
as
a
memorandum
relating
to
third-party
servicing
arrangements,
which
included
discussion
of
the
changing
distribution
landscape
for
the
Fund.
The
Board
noted
management’s
continued
focus
on
enhancing
the
leadership
of
the
Templeton
Global
Equity
Group
and
commitment
to
providing
the
resources
important
to
delivering
sustainable
returns.
The
Board
also
acknowledged
the
ongoing
integration
of
the
Legg
Mason
family
of
funds
into
the
FT
family
of
funds
and
developing
strategies
to
address
areas
of
heightened
concern
in
the
mutual
fund
industry,
including
various
regulatory
initiatives
and
recent
geopolitical
concerns.
Templeton
Funds
Shareholder
Information
31
franklintempleton.com
Semiannual
Report
The
Board
also
reviewed
and
considered
the
benefits
provided
to
Fund
shareholders
of
investing
in
a
fund
that
is
part
of
the
FT
family
of
funds.
The
Board
noted
the
financial
position
of
Franklin
Resources,
Inc.
(FRI),
the
Manager’s
parent,
and
its
commitment
to
the
mutual
fund
business
as
evidenced
by
its
reassessment
of
the
fund
offerings
in
response
to
the
market
environment
and
project
initiatives
and
capital
investments
relating
to
the
services
provided
to
the
Fund
by
the
FT
organization.
The
Board
specifically
noted
FT’s
commitment
to
being
a
global
leader
in
stewardship
and
sustainability
and
the
recent
addition
of
a
senior
executive
focused
on
environmental,
social
and
governance
and
climate
control
initiatives.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
by
the
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
Fund
Performance
The
Board
reviewed
and
considered
the
performance
results
of
the
Fund
over
various
time
periods
ended
November
30,
2021.
The
Board
considered
the
performance
returns
for
the
Fund
in
comparison
to
the
performance
returns
of
mutual
funds
deemed
comparable
to
the
Fund
included
in
a
universe
(Performance
Universe)
selected
by
Broadridge
Financial
Solutions,
Inc.
(Broadridge),
an
independent
provider
of
investment
company
data.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
a
Performance
Universe.
The
Board
also
reviewed
and
considered
Fund
performance
reports
provided
and
discussions
that
occurred
with
portfolio
managers
at
Board
meetings
throughout
the
year.
A
summary
of
the
Fund’s
performance
results
is
below.
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
global
multi-cap
value
funds.
The
Board
noted
that
the
Fund’s
annualized
total
return
was
below
the
median
of
its
Performance
Universe
for
the
one-,
three-,
five-
and
10-year
periods.
The
Board
discussed
this
performance
with
management
and
management
explained
that,
even
though
the
Fund’s
peer
group
is
comprised
of
multi-cap
value
funds,
some
funds
within
the
Performance
Universe
are
more
skewed
toward
the
growth
style,
which
negatively
impacted
the
Fund’s
relative
returns
during
periods
of
outperformance
of
growth
investing
strategies
over
value
investing
strategies.
Management
further
explained
that
the
Fund
had
underweight
positions
to
domestic
securities
and
the
information
technology
sector
during
the
one-,
three-
and
five-year
periods
compared
to
its
peer
group,
which
detracted
from
the
Fund’s
relative
performance.
Management
then
discussed
with
the
Board
the
actions
that
are
being
taken
in
an
effort
to
improve
the
performance
of
the
Fund
and
the
global
equity
funds
as
a
whole.
Management
specifically
highlighted
the
strategic
initiatives
being
undertaken
in
the
Templeton
Global
Equity
Group,
including
enhancements
to
the
leadership
of
the
group
and
the
commitment
of
additional
resources
important
to
delivering
sustainable
returns.
The
Board
concluded
that
the
Fund’s
Management
Agreement
should
be
continued
for
an
additional
one-year
period,
while
management’s
efforts
continue
to
be
closely
monitored.
Comparative
Fees
and
Expenses
The
Board
reviewed
and
considered
information
regarding
the
Fund’s
actual
total
expense
ratio
and
its
various
components,
including,
as
applicable,
management
fees;
transfer
agent
expenses;
underlying
fund
expenses;
Rule
12b-1
and
non-Rule
12b-1
service
fees;
and
other
non-
management
fees.
The
Board
also
noted
the
quarterly
and
annual
reports
it
receives
on
all
marketing
support
payments
made
by
FT
to
financial
intermediaries.
The
Board
considered
the
actual
total
expense
ratio
and,
separately,
the
contractual
management
fee
rate,
without
the
effect
of
fee
waivers,
if
any
(Management
Rate)
of
the
Fund
in
comparison
to
the
median
expense
ratio
and
median
Management
Rate,
respectively,
of
other
mutual
funds
deemed
comparable
to
and
with
a
similar
expense
structure
to
the
Fund
selected
by
Broadridge
(Expense
Group).
Broadridge
fee
and
expense
data
is
based
upon
information
taken
from
each
fund’s
most
recent
annual
or
semi-annual
report,
which
reflects
historical
asset
levels
that
may
be
quite
different
from
those
currently
existing,
particularly
in
a
period
of
market
volatility.
While
recognizing
such
inherent
limitation
and
the
fact
that
expense
ratios
and
Management
Rates
generally
increase
as
assets
decline
and
decrease
as
assets
grow,
the
Board
believed
the
independent
analysis
conducted
by
Broadridge
to
be
an
appropriate
measure
of
comparative
fees
and
expenses.
The
Broadridge
Management
Rate
includes
administrative
charges,
and
the
actual
total
expense
ratio,
for
comparative
consistency,
was
shown
for
Class
A
shares
for
the
Fund
and
for
each
other
fund
in
the
Expense
Group.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
an
Expense
Group.
The
Expense
Group
for
the
Fund
included
the
Fund
and
eleven
other
global
multi-cap
value
funds.
The
Board
noted
that
the
Management
Rate
and
actual
total
expense
ratio
for
the
Fund
were
below
the
medians
of
its
Expense
Group.
The
Board
concluded
that
the
Management
Rate
charged
to
the
Fund
is
reasonable.
Templeton
Funds
Shareholder
Information
32
franklintempleton.com
Semiannual
Report
Profitability
The
Board
reviewed
and
considered
information
regarding
the
profits
realized
by
the
Manager
and
its
affiliates
in
connection
with
the
operation
of
the
Fund.
In
this
respect,
the
Board
considered
the
Fund
profitability
analysis
provided
by
the
Manager
that
addresses
the
overall
profitability
of
FT’s
US
fund
business,
as
well
as
its
profits
in
providing
investment
management
and
other
services
to
each
of
the
individual
funds
during
the
12-month
period
ended
September
30,
2021,
being
the
most
recent
fiscal
year-
end
for
FRI.
The
Board
noted
that
although
management
continually
makes
refinements
to
its
methodologies
used
in
calculating
profitability
in
response
to
organizational
and
product-related
changes,
the
overall
methodology
has
remained
consistent
with
that
used
in
the
Fund’s
profitability
report
presentations
from
prior
years.
The
Board
also
noted
that
PricewaterhouseCoopers
LLP,
auditor
to
FRI
and
certain
FT
funds,
has
been
engaged
by
the
Manager
to
periodically
review
and
assess
the
allocation
methodologies
to
be
used
solely
by
the
Fund’s
Board
with
respect
to
the
profitability
analysis.
The
Board
noted
management’s
belief
that
costs
incurred
in
establishing
the
infrastructure
necessary
for
the
type
of
mutual
fund
operations
conducted
by
the
Manager
and
its
affiliates
may
not
be
fully
reflected
in
the
expenses
allocated
to
the
Fund
in
determining
its
profitability,
as
well
as
the
fact
that
the
level
of
profits,
to
a
certain
extent,
reflected
operational
cost
savings
and
efficiencies
initiated
by
management.
As
part
of
this
evaluation,
the
Board
considered
management’s
outsourcing
of
certain
operations,
which
effort
has
required
considerable
up-front
expenditures
by
the
Manager
but,
over
the
long
run
is
expected
to
result
in
greater
efficiencies.
The
Board
also
noted
management’s
expenditures
in
improving
shareholder
services
provided
to
the
Fund,
as
well
as
the
need
to
implement
systems
and
meet
additional
regulatory
and
compliance
requirements
resulting
from
recent
US
Securities
and
Exchange
Commission
and
other
regulatory
requirements.
The
Board
also
considered
the
extent
to
which
the
Manager
and
its
affiliates
might
derive
ancillary
benefits
from
fund
operations,
including
revenues
generated
from
transfer
agent
services,
potential
benefits
resulting
from
personnel
and
systems
enhancements
necessitated
by
fund
growth,
as
well
as
increased
leverage
with
service
providers
and
counterparties.
Based
upon
its
consideration
of
all
these
factors,
the
Board
concluded
that
the
level
of
profits
realized
by
the
Manager
and
its
affiliates
from
providing
services
to
the
Fund
was
not
excessive
in
view
of
the
nature,
extent
and
quality
of
services
provided
to
the
Fund.
Economies
of
Scale
The
Board
reviewed
and
considered
the
extent
to
which
the
Manager
may
realize
economies
of
scale,
if
any,
as
the
Fund
grows
larger
and
whether
the
Fund’s
management
fee
structure
reflects
any
economies
of
scale
for
the
benefit
of
shareholders.
With
respect
to
possible
economies
of
scale,
the
Board
noted
the
existence
of
management
fee
breakpoints,
which
operate
generally
to
share
any
economies
of
scale
with
the
Fund’s
shareholders
by
reducing
the
Fund’s
effective
management
fees
as
the
Fund
grows
in
size.
The
Board
considered
the
Manager’s
view
that
any
analyses
of
potential
economies
of
scale
in
managing
a
particular
fund
are
inherently
limited
in
light
of
the
joint
and
common
costs
and
investments
the
Manager
incurs
across
the
FT
family
of
funds
as
a
whole.
The
Board
concluded
that
to
the
extent
economies
of
scale
may
be
realized
by
the
Manager
and
its
affiliates,
the
Fund’s
management
fee
structure
provided
a
sharing
of
benefits
with
the
Fund
and
its
shareholders
as
the
Fund
grows.
Conclusion
Based
on
its
review,
consideration
and
evaluation
of
all
factors
it
believed
relevant,
including
the
above-described
factors
and
conclusions,
the
Board
unanimously
approved
the
continuation
of
the
Management
Agreement
for
an
additional
one-year
period.
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
Templeton
Funds
Shareholder
Information
33
franklintempleton.com
Semiannual
Report
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund's
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
102
S
04/22
©
2022
Franklin
Templeton
Investments.
All
rights
reserved.
Authorized
for
distribution
only
when
accompanied
or
preceded
by
a
summary
prospectus
and/or
prospectus.
Investors
should
carefully
consider
a
fund’s
investment
goals,
risks,
charges
and
expenses
before
investing.
A
prospectus
contains
this
and
other
information;
please
read
it
carefully
before
investing.
To
help
ensure
we
provide
you
with
quality
service,
all
calls
to
and
from
our
service
areas
are
monitored
and/or
recorded.
Semiannual
Report
and
Shareholder
Letter
Templeton
World
Fund
Investment
Manager
Distributor
Shareholder
Services
Templeton
Global
Advisors
Limited
Franklin
Distributors,
LLC
(800)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial experts are Ann Torre Bates andDavid W. Niemiec and they are "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4.
Principal Accountant Fees and Services.
N/A
Item 5. Audit Committee
of Listed Registrants.
N/AItem 6. Schedule of Investments.
N/A
Item 7
. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b)
Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A
Item 13. Exhibits.
(a)(1)
Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Christopher Kings, Chief Financial Officer, Chief Accounting Officer and Treasurer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Christopher Kings, Chief Financial Officer, Chief Accounting Officer and Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEMPLETON FUNDS
By S\MATTHEW T. HINKLE______________________
Matthew T. Hinkle
Chief Executive Officer - Finance and Administration
Date April 26, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By S\MATTHEW T. HINKLE______________________
Matthew T. Hinkle
Chief Executive Officer - Finance and Administration
Date April 26, 2022
By S\CHRISTOPHER KINGS______________________
Christopher Kings
Chief Financial Officer, Chief Accounting Officer and Treasurer
Date April 26, 2022