UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-2781
----------

TEMPLETON FUNDS, INC.
----------------------
(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., FORT LAUDERDALE, FL 33394-3091
--------------------------------------------------------
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, 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: 2/29/04
-------

ITEM 1. REPORTS TO STOCKHOLDERS

February 29, 2004

[GRAPHIC OMITTED]

SEMIANNUAL REPORT AND SHAREHOLDER LETTER GLOBAL

WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON WORLD FUND
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.

[GRAPHIC OMITTED]

[LOGO OMITTED]
FRANKLIN(R)TEMPLETON(R)
INVESTMENTS
FRANKLIN O TEMPLETON O MUTUAL SERIES

page

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management
groups--Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.

FRANKLIN. Founded in 1947, Franklin is a leader in
tax-free investing and a driving force in fixed
income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity
investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global fund.
Today, with research offices in over 25 countries,
they offer investors the broadest global reach in
the industry.

MUTUAL SERIES. Established in 1949, Mutual Series
is dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to distinctly different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have a low overlap of securities.
That's why our funds can be used to build truly
diversified portfolios covering every major asset
class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well
as the reliable account services that have helped
us become one of the most trusted names in
financial services.

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

[GRAPHIC OMITTED]

Not part of the semiannual report

page

Contents

SHAREHOLDER LETTER ......................... 1

SEMIANNUAL REPORT

Templeton World Fund ....................... 3

Performance Summary ........................ 6

Financial Highlights and
Statement of Investments ................... 8

Financial Statements ....................... 18

Notes to Financial Statements .............. 21

Special Meeting of Shareholders ............ 27

Proxy Voting Policies and Procedures ....... 33

- --------------------------------------------------------------------------------

Semiannual Report

Templeton World Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Templeton World Fund seeks long-term
capital growth. Under normal market conditions, the Fund invests mainly in the
equity securities of companies located anywhere in the world, including emerging
markets.

We are pleased to bring you Templeton World Fund's semiannual report for the
period ended February 29, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Templeton World Fund - Class A posted a 20.18%
cumulative total return, as shown in the Performance Summary beginning on page
6. The Fund outperformed its benchmark, the Morgan Stanley Capital International
(MSCI) World Index, which posted an 18.97% total return for the same period. 1
In line with our long-term investment strategy, we are pleased with our
long-term results. For the 10-year period ended February 29, 2004, Templeton
World Fund - Class A delivered a 155.07% cumulative total return, as shown in
the Performance Summary, compared with the MSCI World Index's 103.96% cumulative
total return for the same period. 1

Consistent with our investment strategy, we sought value stocks even if this
resulted in a portfolio markedly different from our benchmark index. At
period-end, the U.S., the U.K. and Japan represented nearly 75% of the MSCI
World Index. However, based on our research and stockpicking, the Fund held only
41.5% of its total net assets in these countries.

ECONOMIC AND MARKET OVERVIEW

The global economy continued to improve during the six-month period ended
February 29, 2004. This was the main contributor to strong total returns for
most local stock market indexes. The MSCI World Index returned 18.97% and the
MSCI Europe Australasia Far East (EAFE) Index returned 25.30% for the period
under review. 2

1. Source: Standard & Poor's Micropal. The MSCI World Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global developed markets. The index is unmanaged and
includes reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio. Past performance does not
guarantee future results.

2. Source: Standard & Poor's Micropal. See footnote 1 for a description of the
MSCI World Index. The MSCI EAFE Index is a free float-adjusted, market
capitalization-weighted index designed to measure equity market performance in
global developed markets excluding the U.S. and Canada. The indexes are
unmanaged and include reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.

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.

[BEGIN SIDEBAR]
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 2/29/04

[CHART OMITTED]

Europe 35.2%
Asia 26.9%
North America 23.7%
Australia & New Zealand 3.2%
Latin America 1.4%
Middle East & Africa 0.8%
Short-Term Investments & Other Net Assets 8.8%
[END SIDEBAR]

Semiannual Report | 3
page

[BEGIN SIDEBAR]
TOP 10 COUNTRIES
Based on Equity Securities
2/29/04

- ---------------------------------------------------------
% OF TOTAL
NET ASSETS
- ---------------------------------------------------------
U.S. 21.2%
- ---------------------------------------------------------
U.K. 11.6%
- ---------------------------------------------------------
Japan 8.7%
- ---------------------------------------------------------
Hong Kong 8.1%
- ---------------------------------------------------------
South Korea 6.0%
- ---------------------------------------------------------
Germany 5.3%
- ---------------------------------------------------------
France 4.9%
- ---------------------------------------------------------
Netherlands 4.6%
- ---------------------------------------------------------
Switzerland 3.5%
- ---------------------------------------------------------
Bermuda 2.3%
- ---------------------------------------------------------

TOP 10 SECTORS/INDUSTRIES
Based on Equity Securities
2/29/04

- ---------------------------------------------------------
% OF TOTAL
NET ASSETS
- ---------------------------------------------------------
Pharmaceuticals 8.5%
- ---------------------------------------------------------
Insurance 7.8%
- ---------------------------------------------------------
Oil & Gas 6.0%
- ---------------------------------------------------------
Real Estate 5.6%
- ---------------------------------------------------------
Commercial Banks 5.6%
- ---------------------------------------------------------
Capital Markets 4.4%
- ---------------------------------------------------------
Software 4.1%
- ---------------------------------------------------------
Chemicals 3.3%
- ---------------------------------------------------------
Semiconductors & Semiconductor
Equipment 3.2%
- ---------------------------------------------------------
Diversified Telecommunication Services 3.1%
- ---------------------------------------------------------
[END SIDEBAR]

Economic growth was partially reflected in a synchronized global recovery in
corporate profitability. As of the end of 2003, corporate profits in the U.S.
and the U.K. reached new highs, up 82% and 29% from their recession lows in
2001. 3 Corporate profits in Japan and Canada were still below their recent
highs; however, they increased 32% and 47% from their respective recession low
points in 2001. 3

A theme that was still unfolding in the global economy was China's role as a
main driver in the current recovery. In 2003, 80% of the world's export growth
resulted from greater demand in China. While Japan's exports to China grew 27%
compared with the previous year, U.S. exports grew 54%. 3 As China continued to
industrialize and build its infrastructure (roads, bridges and energy
generation), global demand for commodities intensified, leading to higher prices
of those commodities. In 2003, prices for aluminum contracts rose 19% over the
previous year, silver 24%, zinc 33%, and copper 50%. 4

Historically, surges in commodity prices have generally coincided with labor
shortages and wage inflation, leading to overall inflation and monetary
tightening. However, the current abundant labor supply in the U.S., China and
India, and China's ability to provide low-cost products to many large economies,
have resulted in less inflationary pressure.

In the currency market, the U.S. dollar appreciated versus the euro in the first
two months of 2004. This was a reversal of the trend toward a lower dollar over
the past several months. In 2003, the dollar declined 17% in value versus the
euro. 5 In the short term, a lower dollar boosts total returns generated in
currencies that have appreciated versus the dollar; however, it makes U.S.
operations of foreign-based companies appear less profitable and eventually
increases the cost of U.S. imports.

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. As we look worldwide, we consider specific companies, rather than
sectors or countries, while doing in-depth research to construct a bargain list
from which we buy. Before we make a purchase, we look at the company's potential
for earnings and growth over a five-year horizon.

3. Source: ISI Group.
4. Sources: Reuters, Commodity Research Bureau Index; London Metal Exchange.
5. Source: European Central Bank.

4 | Semiannual Report
page

MANAGER'S DISCUSSION

Merger and acquisition activity benefited Templeton World Fund during the period
as strategic buyers expressed interest in two of the Fund's largest holdings.
AT&T Wireless Services recently concluded a bidding process between several
strategic corporate buyers, with Cingular Wireless winning the support of AT&T's
board, and seeking approval from U.S. regulators to complete the transaction. In
Europe, Aventis stock performed well based on news that Sanofi-Synthelabo, a
French competitor, sought to purchase Aventis despite management's opposition.

By country, the U.S., the U.K., France, Japan and Germany were the top five
contributors to the Fund's positive return. By sector, financials, health care
and information technology were the largest contributors to Fund performance.
Our financial holdings differed from our benchmark because we emphasized the
property and casualty (P&C) insurance industry, whereas the MSCI World Index was
more heavily represented by banks. We favored P&C insurance companies because we
found more compelling valuation and pricing power in the industry.

Two holdings that detracted from Fund performance, Tenet Healthcare and
Electronic Data Systems, were relatively new U.S. purchases. These stocks had
little near-term catalysts, but they possessed characteristics typical of
out-of-favor, undervalued stocks -- few buy ratings from Wall Street analysts, a
string of negative news announcements, and low valuations. However, both
companies have been profitable and have divisions for sale whose proceeds could
eliminate some financial stress. Moreover, each company has a new management
team, which took steps to re-energize the companies' core competencies and rid
the companies of non-core assets.

Thank you for your continued participation in Templeton World Fund. We look
forward to serving your future investment needs.

[PHOTO OMITTED]
JEFFREY A. EVERETT

/S/ JEFFREY A. EVERETT

Jeffrey A. Everett, CFA
Portfolio Manager
Templeton World Fund

THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
FEBRUARY 29, 2004, 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.

[BEGIN SIDEBAR]
TOP 10 EQUITY HOLDINGS
2/29/04

- -----------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- -----------------------------------------------------
Cheung Kong Holdings Ltd. 3.7%
REAL ESTATE, HONG KONG
- -----------------------------------------------------
Aventis SA, ord. & Frankfurt Listed 2.3%
PHARMACEUTICALS, FRANCE
- -----------------------------------------------------
Samsung Electronics Co. Ltd., ord. & pfd. 2.2%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
- -----------------------------------------------------
Hutchison Whampoa Ltd. 2.0%
INDUSTRIAL CONGLOMERATES, HONG KONG
- -----------------------------------------------------
Nippon Telegraph & Telephone Corp. 1.8%
DIVERSIFIED TELECOMMUNICATION
SERVICES, JAPAN
- -----------------------------------------------------
Kookmin Bank 1.6%
COMMERCIAL BANKS, SOUTH KOREA
- -----------------------------------------------------
Dow Chemical Co. 1.6%
CHEMICALS, U.S.
- -----------------------------------------------------
AmerisourceBergen Corp. 1.6%
HEALTH CARE PROVIDERS & SERVICES, U.S.
- -----------------------------------------------------
Nomura Holdings Inc. 1.5%
CAPITAL MARKETS, JAPAN
- -----------------------------------------------------
Hitachi Ltd. 1.5%
ELECTRONIC EQUIPMENT & INSTRUMENTS,
JAPAN
- -----------------------------------------------------
[END SIDEBAR]

Semiannual Report | 5
page

Performance Summary as of 2/29/04

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. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects the Fund's dividend income, capital
gain distributions, if any, and any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- --------------------------------------------------------------------------------
CLASS A CHANGE 2/29/04 8/31/03
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$2.71 $17.83 $15.12
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- --------------------------------------------------------------------------------
Dividend Income $0.2975
- --------------------------------------------------------------------------------
CLASS B CHANGE 2/29/04 8/31/03
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$2.71 $17.63 $14.92
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- --------------------------------------------------------------------------------
Dividend Income $0.2003
- --------------------------------------------------------------------------------
CLASS C CHANGE 2/29/04 8/31/03
- --------------------------------------------------------------------------------
Net Asset Value (NAV)* +$2.69 $17.46 $14.77
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- --------------------------------------------------------------------------------
Dividend Income $0.1924

*NAV DOES NOT AGREE TO NAV DISCLOSED IN THE ACCOMPANYING FINANCIAL STATEMENTS
DUE TO FINANCIAL STATEMENT ADJUSTING ENTRIES POSTED AS OF PERIOD-END.

6 | Past performance does not guarantee future results. | Semiannual Report
page

Performance Summary (CONTINUED)

PERFORMANCE

- ----------------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------------------------------------

Cumulative Total Return 1 20.18% 50.30% 44.44% 155.07%
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 13.29% 41.63% 6.37% 9.17%
- ----------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,329 $14,163 $13,615 $24,041
- ----------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 43.48% 4.64% 9.43%
- ----------------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ----------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 19.71% 49.21% 38.99% 34.72%
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 15.71% 45.21% 6.50% 5.79%
- ----------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,571 $14,521 $13,699 $13,372
- ----------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 47.09% 4.74% 5.38%
- ----------------------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- ----------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 19.71% 49.21% 39.05% 125.13%
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 18.71% 48.21% 6.82% 9.62%
- ----------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,871 $14,821 $13,905 $22,513
- ----------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 50.07% 5.09% 9.34%

PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. ONGOING MARKET VOLATILITY
CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER
FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, AND YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES.

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

ENDNOTES

THE FUND INVESTS IN FOREIGN SECURITIES, WHICH CAN INVOLVE EXPOSURE TO CURRENCY
VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. INVESTMENTS IN
DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN
ADDITION TO THOSE ASSOCIATED WITH THEIR RELATIVELY SMALL SIZE AND LESSER
LIQUIDITY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN
INVESTMENT RISKS.

CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
7/1/92, Fund shares were offered at a higher initial sales charge.
Thus, actual total returns would have been lower. Effective 1/1/93,
the Fund implemented a Rule 12b-1 plan, which affects subsequent
performance.

CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years.
These shares have higher annual fees and expenses than Class A shares.

CLASS C: Subject to no initial sales charge, but subject to 1% CDSC for shares
redeemed within 12 months of investment. Prior to 1/1/04, these shares
were offered with an initial sales charge; thus actual returns would
have differed. These shares have higher annual fees and expenses than
Class A shares.

Semiannual Report | Past performance does not guarantee future results. | 7
page

Templeton World Fund

FINANCIAL HIGHLIGHTS

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period ..... $15.12 $13.64 $14.70 $18.87 $18.14 $15.45
-----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a .................. .02 .18 .17 d .29 .27 .33

Net realized and unrealized
gains (losses) .......................... 2.99 1.46 (.96) d (3.04) 1.93 4.10
-----------------------------------------------------------------------------------

Total from investment operations ......... 3.01 1.64 (.79) (2.75) 2.20 4.43
-----------------------------------------------------------------------------------

Less distributions from:

Net investment income ................... (.30) (.16) (.27) (.27) (.38) (.36)

Net realized gains ...................... -- -- -- (1.15) (1.09) (1.38)
-----------------------------------------------------------------------------------

Total distributions ...................... (.30) (.16) (.27) (1.42) (1.47) (1.74)
-----------------------------------------------------------------------------------

Redemption fees .......................... -- c -- c -- -- -- --
-----------------------------------------------------------------------------------

Net asset value, end of period ........... $17.83 $15.12 $13.64 $14.70 $18.87 $18.14
-----------------------------------------------------------------------------------

Total return b ........................... 20.18% 12.27% (5.43)% (15.18)% 13.59% 31.42%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........ $7,549,235 $6,419,826 $6,161,235 $7,102,237 $9,515,467 $9,115,995

Ratios to average net assets:

Expenses ................................ 1.12% e 1.11% 1.08% 1.09% 1.07% 1.04%

Net investment income ................... .19% e 1.40% 1.15% d 1.79% 1.52% 1.99%

Portfolio turnover rate .................. 19.17% 43.91% 44.56% 24.91% 46.92% 35.81%

<FN>
aBased on average daily shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred sales charge, and is not
annualized for periods less than one year.
cAmount is less than $0.01 per share.
dEffective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing all premium and discount on fixed-income
securities, as required. The effect of this change was as follows:
Net investment income per share .............................. $(0.01)
Net realized and unrealized (gains/losses) per share ......... 0.01
Ratio of net investment income to average net assets ......... (0.08)%
Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
eAnnualized.
</FN>

8 | Semiannual Report
page

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .......... $14.92 $13.46 $14.51 $18.66 $18.05 $15.93
-----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ....................... (.05) .09 .06 d .17 .15 .15

Net realized and unrealized gains (losses) ... 2.96 1.44 (.95) d (3.01) 1.90 1.97
-----------------------------------------------------------------------------------

Total from investment operations .............. 2.91 1.53 (.89) (2.84) 2.05 2.12
-----------------------------------------------------------------------------------
Less distributions from:

Net investment income ........................ (.20) (.07) (.16) (.16) (.35) --

Net realized gains ........................... -- -- -- (1.15) (1.09) --
-----------------------------------------------------------------------------------

Total distributions ........................... (.20) (.07) (.16) (1.31) (1.44) --
-----------------------------------------------------------------------------------
Redemption fees ............................... -- c -- c -- -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ................ $17.63 $14.92 $13.46 $14.51 $18.66 $18.05
-----------------------------------------------------------------------------------

Total return b ................................ 19.71% 11.46% (6.12)% (15.82)% 12.76% 13.31%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............. $49,235 $37,166 $29,311 $25,743 $23,816 $9,261

Ratios to average net assets:

Expenses ..................................... 1.87% f 1.86% 1.83% 1.83% 1.82% 1.85% f

Net investment income (loss) ................. (.56)% f .65% .40% d 1.08% .83% 1.27% f

Portfolio turnover rate ....................... 19.17% 43.91% 44.56% 24.91% 46.92% 35.81%

<FN>
aBased on average daily shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not annualized for
periods less than one year.
cAmount is less than $0.01 per share.
dEffective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing all premium and discount on fixed-income
securities, as required. The effect of this change was as follows:
Net investment income per share ............................... $(0.01)
Net realized and unrealized (gains/losses) per share .......... 0.01
Ratio of net investment income to average net assets .......... (0.08)%
Per share data and ratios for prior periods have not been restated to reflect this change in accounting policy.
eFor the period January 1, 1999 (effective date) to August 31, 1999.
fAnnualized.
</FN>

Semiannual Report | 9

page

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ......... $14.77 $13.31 $14.34 $18.43 $17.71 $15.16
-----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ..................... (.05) .09 .06 d .17 .14 .20

Net realized and unrealized gains (losses) .. 2.94 1.43 (.94)d (2.98) 1.89 4.02
-----------------------------------------------------------------------------------

Total from investment operations ............. 2.89 1.52 (.88) (2.81) 2.03 4.22
-----------------------------------------------------------------------------------

Less distributions from:

Net investment income ....................... (.19) (.06) (.15) (.13) (.22) (.29)

Net realized gains .......................... -- -- -- (1.15) (1.09) (1.38)
-----------------------------------------------------------------------------------
Total distributions .......................... (.19) (.06) (.15) (1.28) (1.31) (1.67)
-----------------------------------------------------------------------------------

Redemption fees .............................. -- c -- c -- -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............... $17.47 $14.77 $13.31 $14.34 $18.43 $17.71
-----------------------------------------------------------------------------------

Total return b ............................... 19.71% 11.46% (6.15)% (15.83)% 12.77% 30.39%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............ $320,901 $270,417 $264,751 $313,538 $423,614 $417,439

Ratios to average net assets:

Expenses .................................... 1.87% e 1.86% 1.83% 1.83% 1.82% 1.81%

Net investment income (loss) ................ (.56)% e .65% .40% d 1.04% .78% 1.22%

Portfolio turnover rate ...................... 19.17% 43.91% 44.56% 24.91% 46.92% 35.81%

<FN>
aBased on average daily shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not annualized for
periods less than one year.
cAmount is less than $0.01 per share.
dEffective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing all premium and discount on fixed-income
securities, as required. The effect of this change was as follows:
Net investment income per share .............................. $(0.01)
Net realized and unrealized (gains/losses) per share ......... 0.01
Ratio of net investment income to average net assets ......... (0.08)%
Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
eAnnualized.
</FN>

10 | See notes to financial statements. | Semiannual Report

page

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS 88.3%
ARGENTINA .2%
a Inversiones y Representacion SA ........... Real Estate 2 $ 2
a Inversiones y Representacion SA, GDR ...... Real Estate 1,571,219 15,350,807
-----------------

15,350,809
-----------------

AUSTRALIA 2.1%
BHP Billiton Ltd. ......................... Metals & Mining 8,244,969 77,990,973
Brambles Industries Ltd. .................. Commercial Services & Supplies 740,295 3,032,943
John Fairfax Holdings Ltd. ................ Media 2,344,901 6,133,227
Lend Lease Corp. Ltd. ..................... Real Estate 3,929,035 30,011,378
Qantas Airways Ltd. ....................... Airlines 14,986,041 42,896,876
Qantas Airways Ltd., 144A ................. Airlines 1,388,612 3,974,840
-----------------
164,040,237
-----------------

BERMUDA 2.3%
Ace Ltd. .................................. Insurance 2,219,900 99,806,704
XL Capital Ltd., A ........................ Insurance 1,044,952 80,106,020
-----------------
179,912,724
-----------------

CANADA .1%
Toronto Dominion Bank ..................... Commercial Banks 172,800 5,825,229
-----------------

CHINA .9%
Guangdong Electric Power Development
Co Ltd., B ............................... Electric Utilities 16,090,315 13,725,816
PetroChina Co. Ltd., H .................... Oil & Gas 110,289,000 59,155,376
-----------------
72,881,192
-----------------

FINLAND 2.2%
Sampo-Leonia OYJ, 144A .................... Insurance 1,183,968 13,283,838
Sampo-Leonia OYJ, A ....................... Insurance 7,341,143 82,365,868
Stora Enso OYJ, R (EUR/FIM Traded) ........ Paper & Forest Products 5,913,360 78,543,069
-----------------
174,192,775
-----------------

FRANCE 4.9%
Aventis SA ................................ Pharmaceuticals 1,965,040 150,400,040
Aventis SA (Frankfurt Listed) ............. Pharmaceuticals 463,578 35,423,688
Galeries Lafayette SA ..................... Multiline Retail 36,944 6,036,226
Societe BIC SA ............................ Commercial Services & Supplies 621,001 26,843,712
Suez SA ................................... Multi-Utilities & Unregulated Power 2,908,340 64,575,172
Unibail Holding ........................... Real Estate 381,588 38,285,391
Valeo SA .................................. Auto Components 1,415,710 65,171,596
-----------------
386,735,825
-----------------

GERMANY 4.8%
Adidas-Salomon AG ......................... Textiles Apparel & Luxury Goods 682,460 76,994,357
Bayer AG, Br. ............................. Chemicals 1,973,500 55,907,210
Deutsche Post AG .......................... Air Freight & Logistics 3,158,400 75,346,694
E.ON AG ................................... Electric Utilities 1,025,000 69,218,034
Muenchener Rueckversicherungs-
Gesellschaft ............................. Insurance 307,483 35,912,431

Semiannual Report | 11

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Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
GERMANY (CONT.)
Muenchener Rueckversicherungs-
Gesellschaft, 144A ....................... Insurance 87,852 $ 10,260,661
Volkswagen AG ............................. Automobiles 999,200 47,301,318
a WCM Beteiligungs & Grundbesitz AG ......... Diversified Financial Services 4,258,868 7,090,793
-----------------
378,031,498
-----------------

HONG KONG 8.1%
Cheung Kong Holdings Ltd. ................. Real Estate 30,770,120 293,515,601
China Mobile (Hong Kong) Ltd., ADR ........ Wireless Telecommunication Services 100,000 1,763,000
China Mobile (Hong Kong) Ltd., fgn. ....... Wireless Telecommunication Services 19,616,800 69,431,302
CNOOC Ltd. ................................ Oil & Gas 14,479,716 29,298,551
HSBC Holdings PLC ......................... Commercial Banks 1,374,102 22,596,152
Hutchison Whampoa Ltd. .................... Industrial Conglomerates 18,852,060 158,637,426
New World Development Co. Ltd. ............ Real Estate 20,236,031 21,837,864
Shangri-La Asia Ltd. ...................... Hotels Restaurants & Leisure 12,464,938 11,690,108
Swire Pacific Ltd., A ..................... Diversified Financial Services 4,326,500 30,292,754
-----------------
639,062,758
-----------------

INDIA 1.2%
Gujarat Ambuja Cements Ltd., GDR .......... Construction Materials 189,590 1,262,669
Housing Development Finance
Corp. Ltd. ............................... Thrifts & Mortgage Finance 3,761,879 50,721,123
ICICI Bank Ltd. ........................... Commercial Banks 664,000 3,989,725
Satyam Computers Services Ltd. ............ IT Services 5,864,530 40,138,355
-----------------
96,111,872
-----------------

ISRAEL .8%
a Check Point Software Technologies Ltd. .... Software 2,901,220 66,786,084
-----------------

ITALY .6%
Eni SpA ................................... Oil & Gas 2,541,076 49,790,351
-----------------

JAPAN 8.7%
Hitachi Ltd. .............................. Electronic Equipment & Instruments 18,019,000 117,586,921
Nintendo Co. Ltd. ......................... Software 816,200 78,437,672
Nippon Telegraph & Telephone Corp. ........Diversified Telecommunication Services 30,120 139,490,390
Nomura Holdings Inc. ...................... Capital Markets 7,407,000 117,619,852
Ono Pharmaceutical Co. Ltd. ............... Pharmaceuticals 1,765,500 76,753,844
Sompo Japan Insurance Inc. ................ Insurance 9,155,000 77,674,217
Sony Corp. ................................ Household Durables 1,993,700 81,382,958
-----------------
688,945,854
-----------------

MEXICO .8%
Cemex SA, ADR ............................. Construction Materials 2,197,401 63,395,019
-----------------

NETHERLANDS 4.6%
Akzo Nobel NV ............................. Chemicals 1,931,014 74,353,744
Koninklijke Philips Electronics NV ........ Household Durables 2,522,305 76,625,321
Reed Elsevier NV .......................... Media 2,975,695 40,818,151

12 | Semiannual Report

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Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
NETHERLANDS (CONT.)
Rodamco Europe NV ..................... Diversified Financial Services 1,339,150 $ 83,177,949
Royal Dutch Petroleum Co. Oil & Gas 1,818,000 89,676,826
-----------------
364,651,991
-----------------

NEW ZEALAND .7%
Telecom Corp. of New Zealand Ltd. ..... Diversified Telecommunication Services 13,517,078 53,093,905
-----------------

PHILIPPINES .1%
Ayala Corp. ........................... Diversified Financial Services 34,890,000 3,655,025
Ayala Land Inc. ....................... Real Estate 81,688,000 7,977,344
-----------------
11,632,369
-----------------

SINGAPORE .8%
DBS Group Holdings Ltd. ............... Commercial Banks 7,780,657 67,190,870
-----------------

SOUTH KOREA 5.2%
Hana Bank ............................. Commercial Banks 1,881,200 40,791,327
Kookmin Bank .......................... Commercial Banks 3,112,413 129,948,536
Koram Bank ............................ Commercial Banks 279,130 3,548,464
KT Corp., ADR ......................... Diversified Telecommunication Services 1,690,800 32,159,016
POSCO ................................. Metals & Mining 289,517 42,590,511
Samsung Electronics Co. Ltd. .......... Semiconductors & Semiconductor Equipment 231,350 107,215,774
Shinhan Financial Group Co. Ltd. ...... Commercial Banks 2,052,800 37,791,768
SK Telecom Co. Ltd., ADR .............. Wireless Telecommunication Services 814,200 20,363,142
-----------------
414,408,538
-----------------

SPAIN 1.8%
Iberdrola SA, Br. ..................... Electric Utilities 3,342,845 68,947,761
Repsol YPF SA ......................... Oil & Gas 3,460,790 70,950,431
-----------------
139,898,192
-----------------

SWEDEN .2%
Securitas AB, B ....................... Commercial Services & Supplies 1,207,500 18,491,577
Volvo AB, B ........................... Machinery 26 817
-----------------
18,492,394
-----------------

SWITZERLAND 3.5%
Nestle SA ............................. Food Products 341,094 89,970,072
Novartis AG ........................... Pharmaceuticals 1,481,089 65,246,982
Swiss Reinsurance Co. ................. Insurance 1,067,315 76,810,040
UBS AG ................................ Capital Markets 620,020 45,547,707
-----------------
277,574,801
-----------------

TAIWAN .9%
Chunghwa Telecom Co. Ltd., ADR ........ Diversified Telecommunication Services 1,328,000 21,832,320
Taiwan Semiconductor
Manufacturing Co. .................... Semiconductors & Semiconductor Equipment 25,395,336 48,346,690
-----------------

70,179,010
-----------------

Semiannual Report | 13

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Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
UNITED KINGDOM 11.6%
Abbey National PLC .................... Commercial Banks 7,111,156 $ 64,005,023
BAE Systems PLC ....................... Aerospace & Defense 11,207,563 39,570,175
BP PLC ................................ Oil & Gas 12,532,434 100,647,876
British Land Co. PLC .................. Real Estate 3,151,332 37,721,242
Cadbury Schweppes PLC ................. Food Products 6,002,181 49,456,590
GKN PLC ............................... Auto Components 8,370,800 42,603,543
GlaxoSmithKline PLC ................... Pharmaceuticals 5,202,028 108,220,718
Kidde PLC ............................. Electrical Equipment 10,986,000 19,419,440
Lloyds TSB Group PLC .................. Commercial Banks 7,784,511 64,684,324
National Grid Transco PLC ............. Multi-Utilities & Unregulated Power 5,603,700 44,717,287
Pearson PLC ........................... Media 2,250,000 25,888,466
Rentokil Initial PLC .................. Commercial Services & Supplies 6,608,030 23,974,573
Rolls-Royce Group PLC ................. Aerospace & Defense 10,808,700 44,129,424
Shell Transport & Trading Co. PLC ..... Oil & Gas 10,586,598 72,299,676
a Shire Pharmaceuticals Group PLC ....... Pharmaceuticals 2,003,690 20,330,658
Smiths Group PLC ...................... Industrial Conglomerates 5,869,239 72,541,768
Unilever PLC .......................... Food Products 8,792,020 91,778,997
-----------------
921,989,780
-----------------

UNITED STATES 21.2%
Abbott Laboratories ................... Pharmaceuticals 1,381,200 59,115,360
a Agere Systems Inc., A ................. Semiconductors & Semiconductor Equipment 9,721,254 37,718,466
American International Group Inc. ..... Insurance 554,500 41,033,000
AmerisourceBergen Corp. ............... Health Care Providers & Services 2,129,940 123,600,418
a AT&T Wireless Services Inc. ........... Wireless Telecommunication Services 1,273,300 17,291,414
a BMC Software Inc. ..................... Software 4,034,700 79,080,120
Boeing Co. ............................ Aerospace & Defense 500,000 21,685,000
Bristol-Myers Squibb Co. .............. Pharmaceuticals 4,119,200 114,596,144
a Cadence Design Systems Inc. ........... Software 4,625,300 71,368,379
CIGNA Corp. ........................... Health Care Providers & Services 584,700 32,409,921
Dow Chemical Co. ...................... Chemicals 2,936,370 127,644,004
Electronic Data Systems Corp. ......... IT Services 1,517,300 29,056,295
Entergy Corp. ......................... Electric Utilities 496,100 29,413,769
Hubbell Inc., B ....................... Electrical Equipment 191,200 7,590,640
Interpublic Group of Cos. Inc. ........ Media 562,057 9,526,866
a Invitrogen Corp. ...................... Biotechnology 1,117,800 82,381,860
JP Morgan Chase & Co. ................. Capital Markets 1,980,260 81,230,265
a King Pharmaceuticals Inc. ............. Pharmaceuticals 1,335,100 25,727,377
a Maxtor Corp. .......................... Computers & Peripherals 1,411,500 14,467,875
Merrill Lynch & Co. Inc. .............. Capital Markets 600,000 36,726,000
Morgan Stanley ........................ Capital Markets 1,189,270 71,070,775
a Noble Corp. ........................... Energy Equipment & Services 1,013,100 41,131,860
a Pactiv Corp. .......................... Containers & Packaging 1,173,700 25,222,813
Pfizer Inc. ........................... Pharmaceuticals 451,400 16,543,810
R.R. Donnelley & Sons Co. ............. Commercial Services & Supplies 2,048,050 65,046,068
Raytheon Co. .......................... Aerospace & Defense 1,988,200 60,441,280
a Synopsys Inc. ......................... Software 1,004,338 29,607,884
TECO Energy Inc. ...................... Electric Utilities 2,956,200 44,549,934

14 | Semiannual Report

page

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
UNITED STATES (CONT.)
a Tenet Healthcare Corp. ................ Health Care Providers & Services 4,352,880 $ 52,321,618
a Time Warner Inc. ...................... Media 2,562,100 44,196,225
a Toys R Us Inc. ........................ Specialty Retail 4,225,510 66,340,507
W.R. Berkley Corp. .................... Insurance 929,325 38,706,386
a Western Digital Corp. ................. Computers & Peripherals 1,516,500 17,272,935
Willis Group Holdings Ltd. ............ Insurance 1,618,000 62,050,300
-----------------
1,676,165,568
-----------------

TOTAL COMMON STOCKS
(COST $5,423,173,776) ................ 6,996,339,645
-----------------

PREFERRED STOCKS 1.4%
BRAZIL .1%
Cia Vale do Rio Doce, ADR, pfd., A .... Metals & Mining 210,500 10,472,375
-----------------

GERMANY .5%
Volkswagen AG, pfd. ................... Automobiles 1,235,616 39,609,474
-----------------

SOUTH KOREA .8%
Samsung Electronics Co. Ltd., pfd. .... Semiconductors & Semiconductor Equipment 228,510 63,345,459
-----------------

TOTAL PREFERRED STOCKS
(COST $75,156,597) ................... 113,427,308
-----------------

--------------------------
PRINCIPAL AMOUNT B
--------------------------

BONDS & NOTES 1.5%
ARGENTINA .2%
Inversiones y Representacion SA, cvt.,
8.00%, 11/14/07 ...................... $ 9,559,212 18,162,503
-----------------

AUSTRALIA .2%
New South Wales Treasury Corp., 8.00%,
3/01/08 .............................. 17,170,000 AUD 14,346,698
-----------------

CANADA .1%
Government of Canada, 6.00%,
6/01/11 .............................. 8,030,000 CAD 6,692,564
-----------------

FRANCE
Axa SA, cvt., zero cpn., 12/21/04 ..... 9,375 EUR 203,148
-----------------

NEW ZEALAND .3%
Government of New Zealand,
8.00%, 11/15/06 ..................... 15,670,000 NZD 11,384,675
7.00%, 7/15/09 ...................... 15,850,000 NZD 11,496,979
-----------------
22,881,654
-----------------

SOUTH KOREA .1%
Korea Telecom Corp., cvt., 144A, .25%,
1/04/07 .............................. 7,500,000 7,659,375
-----------------

Semiannual Report | 15

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Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT B VALUE
- ----------------------------------------------------------------------------------------------------------------------------

BONDS & NOTES (CONT.)
SPAIN .4%
Government of Spain,
4.50%, 7/30/04 ............................ 11,785,000 EUR $ 14,796,213
5.00%, 7/30/12 ............................ 12,570,000 EUR 16,817,683
-----------------
31,613,896
-----------------

SWEDEN .1%
Kingdom of Sweden, 5.50%, 10/08/12 .......... 48,680,000 SEK 7,077,126
-----------------

UNITED STATES .1%
Interpublic Group of Cos. Inc., senior note,
cvt., 4.50%, 3/15/23 ....................... 5,600,000 9,051,000
-----------------

TOTAL BONDS & NOTES
(COST $86,029,177) 117,687,964
-----------------

SHORT TERM INVESTMENTS 4.5%
UNITED STATES 4.5%
Federal Farm Credit Bank,
1.286%, 8/17/04 ............................ 20,000,000 19,907,040
Federal Home Loan Bank, 1.015% to
1.338%, with maturities to 2/09/05 ......... 161,485,000 160,723,744
Federal National Mortgage Association,
0.888% to 1.348%, with maturities to
8/13/04 .................................... 175,000,000 174,489,695
-----------------

TOTAL SHORT TERM INVESTMENTS
(COST $354,945,406) ........................ 355,120,479
-----------------

TOTAL INVESTMENTS BEFORE REPURCHASE
AGREEMENTS (COST $5,939,304,956) ........... 7,582,575,396
-----------------

REPURCHASE AGREEMENTS 3.3%
UNITED STATES 3.3%
c BZW Securities Inc., 0.97%, 3/01/04,
(Maturity Value $50,000,000),
Collateralized by U.S. Treasury Bills,
Notes and Bonds, and U.S. Government
Agency Securities .......................... 50,000,000 50,000,000
c Dresdner Bank AG, 1.00%, 3/01/04
(Maturity Value $30,012,500),
Collateralized by U.S. Treasury Bills,
Notes and Bonds, and U.S. Government
Agency Securities .......................... 30,010,000 30,010,000

16 | Semiannual Report

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Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

REPURCHASE AGREEMENTS (CONT.)
UNITED STATES (CONT.)
Paribas Corp., 1.30%, 3/01/04 (Maturity
Value $180,015,450) Collateralized by
U.S. Treasury Bills, Notes and Bonds,
and U.S. Government Agency
Securities ................................. $ 180,000,000 $ 180,000,000
-----------------

TOTAL REPURCHASE AGREEMENTS
(COST $260,010,000) ........................ 260,010,000
-----------------

TOTAL INVESTMENTS
(COST $6,199,314,956) 99.0% ................ 7,842,585,396
OTHER ASSETS, LESS LIABILITIES 1.0% ......... 76,784,868
-----------------

NET ASSETS 100.0% ........................... $ 7,919,370,264
-----------------

<FN>
CURRENCY ABBREVIATIONS: | AUD - Australian Dollar | CAD - Canadian Dollar | EUR - Euro
NZD - New Zealand Dollar | SEK - Swedish Krona

aNon-income producing.
bThe principal amount is stated in U.S. dollars unless otherwise indicated.
cSee Note 1 (c) regarding repurchase agreements.
</FN>

Semiannual Report | See notes to financial statements. | 17

page

Templeton World Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 29, 2004 (unaudited)

Assets:
Investments in securities:
Cost .................................................................... $6,199,314,956
---------------
Value ................................................................... 7,842,585,396
Cash ..................................................................... 884
Foreign currency, at value (cost $3,785,959) ............................. 4,045,313
Receivables:
Investment securities sold .............................................. 144,365,398
Capital shares sold ..................................................... 5,025,201
Dividends and interest .................................................. 15,213,247
---------------
Total assets ....................................................... 8,011,235,439
---------------
Liabilities:
Payables:
Investment securities purchased ......................................... 70,876,380
Capital shares redeemed ................................................. 7,428,417
Affiliates .............................................................. 7,386,779
Deferred tax liability (Note 1g) ........................................ 4,682,386
Other liabilities ........................................................ 1,491,213
Total liabilities ................................................... 91,865,175
---------------
Net assets, at value .............................................. $7,919,370,264
---------------
Net assets consist of:
Undistributed net investment income ...................................... $ (44,562,148)
Net unrealized appreciation (depreciation) ............................... 1,639,453,374
Accumulated net realized gain (loss) ..................................... 299,722,305
Capital shares ........................................................... 6,024,756,733
---------------
Net assets, at value .............................................. $7,919,370,264
---------------
CLASS A:
Net assets, at value ..................................................... $7,549,234,595
---------------
Shares outstanding ....................................................... 423,289,851
---------------
Net asset value per sharea ............................................... $17.83
---------------
Maximum offering price per share (net asset value per share / 94.25%) .... $18.92
---------------
CLASS B:
Net assets, at value ..................................................... $ 49,234,656
---------------
Shares outstanding ....................................................... 2,791,962
---------------
Net asset value and maximum offering price per sharea .................... $17.63
---------------
CLASS C:
Net assets, at value ..................................................... $ 320,901,013
---------------
Shares outstanding ....................................................... 18,373,341
---------------
Net asset value and maximum offering price per sharea .................... $17.47
---------------
<FN>
aRedemption price is equal to net asset value less any applicable contingent
deferred sales charge and redemption fees retained by the Fund.
</FN>

18 | See notes to financial statements. | Semiannual Report

page

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 29, 2004 (unaudited)

Investment income:
(Net of foreign taxes of $3,412,978)
Dividends ................................................................ $ 40,675,864
Interest ................................................................. 6,463,906
--------------
Total investment income ............................................. 47,139,770
Expenses:
Management fees (Note 3) ................................................. 22,304,212
Administrative fees (Note 3) ............................................. 2,819,204
Distribution fees (Note 3)
Class A ................................................................. 8,652,703
Class B ................................................................. 210,733
Class C ................................................................. 1,463,397
Transfer agent fees (Note 3) ............................................. 4,593,500
Custodian fees ........................................................... 1,067,200
Reports to shareholders .................................................. 181,600
Registration and filing fees ............................................. 85,800
Professional fees ........................................................ 105,100
Directors' fees and expenses ............................................. 72,900
Other .................................................................... 76,900
--------------
Total expenses ...................................................... 41,633,249
--------------
Net investment income ............................................. 5,506,521
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................. 382,495,643
Foreign currency transactions ........................................... 4,439,914
--------------
Net realized gain (loss) ............................................ 386,935,557
Net unrealized appreciation (depreciation) on:
Investments .............................................................. 944,139,721
Translation of assets and liabilities denominated in foreign currencies .. 627,359
Deferred taxes (Note 1g) ................................................. (2,935,970)
--------------
Net unrealized appreciation (depreciation) .......................... 941,831,110
--------------
Net realized and unrealized gain (loss) ................................... 1,328,766,667
--------------
Net increase (decrease) in net assets resulting from operations ........... $1,334,273,188
--------------

Semiannual Report | See notes to financial statements. | 19

page

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended February 29, 2004 (unaudited)
and the year ended August 31, 2003

---------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
---------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................ $ 5,506,521 $ 82,729,644
Net realized gain (loss) from investments and foreign currency transactions ...... 86,935,557 (626,894)
Net unrealized appreciation (depreciation) on investments, translation
of assets and liabilities denominated in foreign currencies, and deferred taxes . 941,831,110 631,124,855
---------------------------------------
Net increase (decrease) in net assets resulting from operations .............. 1,334,273,188 713,227,605
Distributions to shareholders from:
Net investment income:
Class A .......................................................................... (125,077,454) (72,523,383)
Class B .......................................................................... (509,158) (154,762)
Class C .......................................................................... (3,482,916) (1,086,512)
---------------------------------------
Total distributions to shareholders ................................................ (129,069,528) (73,764,657)
Capital share transactions (Note 2):
Class A .......................................................................... (19,376,382) (351,986,944)
Class B .......................................................................... 4,942,657 4,132,452
Class C .......................................................................... 1,180,151 (19,558,003)
---------------------------------------
Total capital share transactions ................................................... (13,253,574) (367,412,495)
Redemption fees (Note 1i) .......................................................... 10,770 62,189
Net increase (decrease) in net assets ....................................... 1,191,960,856 272,112,642

Net assets:
Beginning of period ............................................................... 6,727,409,408 6,455,296,766
---------------------------------------
End of period ..................................................................... $7,919,370,264 $6,727,409,408
---------------------------------------
Undistributed net investment income included in net assets:
End of period ..................................................................... $ (44,562,148) $ 79,000,859
---------------------------------------

20 | See notes to financial statements. | Semiannual Report

page

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton World Fund (the Fund) is a separate, diversified series of Templeton
Funds, Inc. (the Company), which is an open-end investment company registered
under the Investment Company Act of 1940. The Fund seeks long-term capital
growth. Under normal market conditions, the Fund invests primarily in the equity
securities of companies located anywhere in the world, including emerging
markets. The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the last reported sales price. Over-the-counter securities and listed
securities for which no sale is reported are valued within the range of the
latest quoted bid and asked prices. Investments in open-end mutual funds are
valued at the closing net asset value. Foreign securities are valued at the
close of trading of the foreign exchange or the NYSE, whichever is earlier. If
events occur that materially affect the values of securities after the prices or
foreign exchange rates are determined, or if market quotations are not readily
available, the securities will be valued at fair value as determined following
procedures approved by the Board of Directors.

B. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.

The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign denominated assets and liabilities other than investments in
securities held at the end of the reporting period.

C. REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements, which are accounted for as a loan
by the Fund to the seller, collateralized by securities which are delivered to
the Fund's custodian. The market value, including accrued interest, of the
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At February 29, 2004, all
repurchase agreements held by the Fund had been entered into on the last
business day of the month.

Semiannual Report | 21

page

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses are included
in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.

E. INCOME TAXES

No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.

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.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Discounts and premiums on securities purchased are amortized over the lives of
the respective securities. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

Common expenses incurred by the Company are allocated among the funds comprising
the Company based on the ratio of net assets of each fund to the combined net
assets. Other expenses are charged to each fund on a specific identification
basis.

G. DEFERRED TAXES

The Fund is subject to a tax imposed on net realized gains of securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities as reflected in the accompanying
financial statements.

22 | Semiannual Report

page

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 year. Actual results could differ from those
estimates.

I. REDEMPTION FEES

Redemptions and exchanges of Fund shares held 30 days or less may be subject to
the Fund's redemption fee, which is 2% of the amount redeemed. Such fees are
retained by the Fund and accounted for as additional paid in capital.

J. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.

2. CAPITAL STOCK

The Fund offers three classes of shares: Class A, Class B, and Class C shares.
Each class of shares differs by its initial sales load, contingent deferred
sales charges, distribution fees, voting rights on matters affecting a single
class, and its exchange privilege.

At February 29, 2004, there were 3.7 billion shares authorized ($1.00 par
value), of which 800 million shares were designated as Class A, 200 million
shares as Class B, and 200 million shares as Class C.

Semiannual Report | 23

page

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
CLASS A SHARES:

Shares sold .................... 23,881,794 $ 399,333,417 43,108,845 $ 569,487,270
Shares issued in reinvestment of
distributions ................. 6,997,571 109,107,957 4,958,829 63,300,188
Shares redeemed ................ (32,162,335) (527,817,756) (75,159,793) (984,774,402)
-------------------------------------------------------------------
Net increase (decrease) ........ (1,282,970) $ (19,376,382) (27,092,119) $(351,986,944)
-------------------------------------------------------------------

CLASS B SHARES:
Shares sold .................... 404,163 $ 6,678,765 602,090 $ 7,840,084
Shares issued in reinvestment of
distributions ................. 29,047 446,081 10,777 136,180
Shares redeemed ................ (132,775) (2,182,189) (298,967) (3,843,812)
-------------------------------------------------------------------
Net increase (decrease) ........ 300,435 $ 4,942,657 313,900 $ 4,132,452
-------------------------------------------------------------------

CLASS C SHARES:
Shares sold .................... 1,332,606 $ 21,755,585 2,073,210 $ 26,704,749
Shares issued in reinvestment of
distributions ................. 202,026 3,071,264 76,643 959,951
Shares redeemed ................ (1,471,267) (23,646,698) (3,724,434) (47,222,703)
-------------------------------------------------------------------
Net increase (decrease) ........ 63,365 $ 1,180,151 (1,574,581) $ (19,558,003)
-------------------------------------------------------------------

3. TRANSACTIONS WITH AFFILIATES

Certain officers of the Fund are also officers or directors of the following
entities:

- --------------------------------------------------------------------------------
ENTITY AFFILIATION
- --------------------------------------------------------------------------------

Templeton Global Advisers Ltd. (TGAL) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter

The Fund pays an investment management fee to TGAL based on the average daily
net assets of the Fund as follows:

- ------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- ------------------------------------------------

0.750% First $200 million
0.675% Over $200 million, up to and including $1.3 billion
0.600% Over $1.3 billion

24 | Semiannual Report

page

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Fund pays its allocated share of an administrative fee to FT Services based
on the Company's aggregate daily net assets as follows:

- ------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- ------------------------------------------------

0.150% First $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion

The Fund reimburses Distributors up to 0.25%, 1.00%, and 1.00% per year of the
average daily net assets of Class A, Class B, and Class C, respectively for
costs incurred in marketing the Fund's shares under a Rule 12b-1 plan.

Under the Class A distribution plan, costs exceeding the maximum may be
reimbursed in subsequent periods. At February 29, 2004, Distributors advised the
Fund unreimbursed costs were $829,930.

Distributors has advised the Fund it received net commissions from sales of the
Fund's shares, and received contingent deferred sales charges for the period of
$305,929 and $8,639, respectively.

The Fund paid transfer agent fees of $4,593,500 , of which $2,777,912 was paid
to Investor Services.

4. INCOME TAXES

At February 29, 2004, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ................................... $6,247,495,883
---------------
Unrealized appreciation ............................... 1,804,297,768
Unrealized depreciation ............................... (209,208,255)
---------------
Net unrealized appreciation (depreciation) ............ $1,595,089,513
---------------

Net investment income (loss) and net realized gains (losses) differ for
financial statement and tax purposes primarily due to differing treatments of
passive foreign investment companies, wash sales, foreign currency transactions,
and bond discounts and premiums.

At August 31, 2003, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2010 ................................................. $32,161,030
2011 ................................................. 30,904,271
------------
$63,065,301
------------

Semiannual Report | 25

page

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended February 29, 2004 aggregated $1,258,874,369 and $1,363,850,610,
respectively.

6. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.

The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, has been named in shareholder class and
derivative lawsuits related to the matter described above, as well as actions
seeking the return of certain management and other fees to the Fund. The Fund's
management believes that the claims made in the lawsuit are without merit and it
intends to defend vigorously against the allegations. It is anticipated that the
Fund may be named in additional similar civil actions related to the matter
described above.

In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.

The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against an affiliate of the Fund's investment
adviser relating to the frequent trading issues that are the subject of the
SEC's investigation. These issues were previously disclosed as being under
investigation by government authorities and the subject of an internal inquiry
by the Company in its Annual Report on Form 10-K and on its public website. The
Company currently is in discussions with the SEC Staff in an effort to resolve
the issues raised in their investigation. The Fund's management has been advised
that the Company cannot predict the likelihood of whether those discussions will
result in a settlement and, if so, the terms of such settlement. The impact, if
any, of these matters on the Fund is uncertain at this time. If the Company
finds that it bears responsibility for any unlawful or improper conduct, it has
committed to making the Fund or its shareholders whole, as appropriate.

26 | Semiannual Report

page

Templeton Funds, Inc.

Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS

A Special Meeting of Shareholders of Templeton Funds, Inc. (the "Company") was
held at the Company's offices, 500 E. Broward Blvd., Fort Lauderdale, Florida,
on December 15, 2003 and reconvened on January 14, 2004. The purpose of the
meeting was to elect twelve Directors of the Company, and for Templeton World
Fund and Templeton Foreign Fund (each a "Fund") and together, the "Funds"), each
a series of the Company, to vote on the following Proposals and Sub-Proposals:
To approve an Agreement and Plan of Reorganization that provides for the
reorganization of the Company from a Maryland corporation to a Delaware
statutory trust, to approve amendments to certain of each Fund's fundamental
investment restrictions (including eight Sub-Proposals) and to approve the
elimination of certain of each Fund's fundamental investment policies and
restrictions. At the meeting held on December 15, 2003, the following persons
were elected by the shareholders to serve as Independent Directors of the
Company: Harris J. Ashton, Frank J. Crothers, S. Joseph Fortunato, Edith E.
Holiday, Betty P. Krahmer, Gordon S. Macklin, Fred R. Millsaps, Frank A. Olson
and Constantine D. Tseretopoulos. Nicholas F. Brady, Charles B. Johnson and
Rupert H. Johnson were elected by the shareholders to serve as Interested
Directors. At the reconvened meeting held on January 14, 2004, Shareholders
approved amendments to certain of each Fund's fundamental investment
restrictions (including eight Sub-Proposals) and the elimination of certain of
each Fund's fundamental investment restrictions. The Agreement and Plan of
Reorganization that provided for the reorganization of the Company from a
Maryland corporation to a Delaware statutory trust was not approved. No other
business was transacted at the meetings.

The results of the voting at the meetings are as follows:

Proposal 1. The election of Directors:

- -------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
NAME FOR SHARES SHARES WITHHELD SHARES SHARES
- -------------------------------------------------------------------------------------------------------------

Harris J. Ashton ........ 921,784,744.074 55.931% 96.841% 30,069,431.717 1.825% 3.159%
Frank J. Crothers ....... 922,941,744.041 56.002% 96.963% 28,912,431.750 1.754% 3.037%
S. Joseph Fortunato ..... 921,536,770.158 55.916% 96.815% 30,317,405.633 1.840% 3.185%
Edith E. Holiday ........ 922,141,284.526 55.953% 96.878% 29,712,891.265 1.803% 3.122%
Betty P. Krahmer ........ 922,120,923.381 55.952% 96.876% 29,733,252.410 1.804% 3.124%
Gordon S. Macklin ....... 919,950,702.066 55.820% 96.648% 31,903,473.725 1.936% 3.352%
Fred R. Millsaps ........ 921,781,604.376 55.931% 96.841% 30,072,571.415 1.825% 3.159%
Frank A. Olson .......... 921,885,948.423 55.937% 96.852% 29,968,227.368 1.818% 3.148%
Constantine D.
Tseretopoulos .......... 922,494,170.096 55.974% 96.915% 29,360,005.695 1.781% 3.085%
Nicholas F. Brady ....... 920,077,248.202 55.828% 96.662% 31,776,927.589 1.928% 3.338%
Charles B. Johnson ...... 921,934,947.866 55.940% 96.857% 29,919,227.925 1.815% 3.143%
Rupert H. Johnson, Jr. .. 922,312,771.073 55.963% 96.896% 29,541,404.718 1.792% 3.104%

Semiannual Report | 27

page

Templeton Funds, Inc.

Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

TEMPLETON WORLD FUND

Proposal 2. To approve an Agreement and Plan of Reorganization that provides for
the reorganization of the Company from a Maryland corporation to a
Delaware statutory trust:

- ----------------------------------------------------------------------------------------------------
SHARES VOTED % OF OUTSTANDING SHARES % OF VOTED SHARES
- ----------------------------------------------------------------------------------------------------

For ................... 205,986,169.412 46.36% 76.50%
Against ............... 11,145,652.789 2.51% 4.14%
Abstain ............... 17,845,723.640 4.02% 6.63%
Broker Non-Votes ...... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 269,255,163.841 60.60% 100.00%

Proposal 3. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes eight (8) Sub-Proposals):

Proposal 3a: To amend the Fund's fundamental investment restriction
regarding diversification of investments:

For ................... 198,075,490.497 44.58% 73.56%
Against ............... 17,078,193.176 3.84% 6.34%
Abstain ............... 19,823,862.168 4.46% 7.36%
Broker Non-Votes ...... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 269,255,163.841 60.60% 100.00%

Proposal 3b: To amend the Fund's fundamental investment restriction
regarding investments in real estate:

For ................... 196,144,571.180 44.14% 72.85%
Against ............... 18,708,344.423 4.21% 6.95%
Abstain ............... 20,124,630.238 4.53% 7.47%
Broker Non-Votes ...... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 269,255,163.841 60.60% 100.00%

Proposal 3c: To amend the Fund's fundamental investment restriction
regarding investments in commodities:

For ..................... 193,706,578.502 43.60% 71.94%
Against ............... 20,874,505.430 4.70% 7.75%
Abstain ............... 20,396,461.909 4.59% 7.58%
Broker Non-Votes ...... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 269,255,163.841 60.60% 100.00%

28 | Semiannual Report

page

Templeton Funds, Inc.

Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 3d: To amend the Fund's fundamental investment restriction
regarding underwriting:

For ................. 195,372,012.641 43.97% 72.56%
Against ............. 18,789,891.580 4.23% 6.98%
Abstain ............. 20,815,641.620 4.68% 7.73%
Broker Non-Votes .... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ............... 269,255,163.841 60.60% 100.00%

Proposal 3e: To amend the Fund's fundamental investment restriction
regarding issuing senior securities:

For ................. 194,482,896.567 43.77% 72.23%
Against ............. 19,627,049.440 4.42% 7.29%
Abstain ............. 20,867,599.834 4.70% 7.75%
Broker Non-Votes .... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ............... 269,255,163.841 60.60% 100.00%

Proposal 3f: To amend the Fund's fundamental investment restriction
regarding lending:

For ................. 193,332,019.187 43.51% 71.80%
Against ............. 21,001,905.408 4.73% 7.80%
Abstain ............. 20,643,621.246 4.65% 7.67%
Broker Non-Votes .... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ............... 269,255,163.841 60.60% 100.00%

Proposal 3g: To amend the Fund's fundamental investment restriction
regarding borrowing:

For ................. 192,945,793.887 43.42% 71.66%
Against ............. 21,324,278.313 4.80% 7.92%
Abstain ............. 20,707,473.641 4.66% 7.69%
Broker Non-Votes .... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL 269,255,163.841 60.60% 100.00%

Proposal 3h: To amend the Fund's fundamental investment restriction
regarding industry concentration:

For ................. 196,197,703.544 44.16% 72.87%
Against ............. 18,130,780.473 4.08% 6.73%
Abstain ............. 20,649,061.824 4.65% 7.67%
Broker Non-Votes .... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ............... 269,255,163.841 60.60% 100.00%

Semiannual Report | 29

page

Templeton Funds, Inc.

Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 4: To approve the elimination of certain of the Fund's fundamental
investment policies and restrictions:

For ................... 193,188,252.823 43.48% 71.75%
Against ............... 20,289,573.527 4.57% 7.54%
Abstain ............... 21,499,719.491 4.84% 7.98%
Broker Non-Votes ...... 34,277,618.000 7.71% 12.73%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 269,255,163.841 60.60% 100.00%

Note: Due to rounding, the percentage totals may not necessarily agree with the
arithmetic sum of the figures.

TEMPLETON FOREIGN FUND

Proposal 2. To approve an Agreement and Plan of Reorganization that provides
for the reorganization of the Company from a Maryland corporation
to a Delaware statutory trust:

For ................... 510,474,835.581 42.41% 75.32%
Against ............... 14,814,274.570 1.23% 2.19%
Abstain ............... 25,397,576.897 2.11% 3.75%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Proposal 3. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes eight (8) Sub-Proposals):

Proposal 3a: To amend the Fund's fundamental investment restriction regarding
diversification of investments:

For ................... 490,186,478.594 40.72% 72.33%
Against ............... 32,134,290.472 2.67% 4.74%
Abstain ............... 28,365,917.982 2.36% 4.19%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Proposal 3b: To amend the Fund's fundamental investment restriction regarding
investments in real estate:

For ................... 473,774,405.994 39.36% 69.91%
Against ............... 48,254,203.467 4.01% 7.12%
Abstain ............... 28,658,077.587 2.38% 4.23%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

30 | Semiannual Report

page

Templeton Funds, Inc.

Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 3c: To amend the Fund's fundamental investment restriction regarding
investments in commodities:

For ................... 470,466,666.697 39.08% 69.42%
Against ............... 51,398,329.224 4.27% 7.58%
Abstain ............... 28,821,691.127 2.39% 4.25%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Proposal 3d: To amend the Fund's fundamental investment restriction regarding
underwriting:

For ................... 486,800,593.596 40.44% 71.83%
Against ............... 34,499,704.454 2.87% 5.09%
Abstain ............... 29,386,388.998 2.44% 4.34%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Proposal 3e: To amend the Fund's fundamental investment restriction regarding
issuing senior securities:

For ................... 472,426,528.936 39.25% 69.71%
Against ............... 48,195,385.301 4.00% 7.11%
Abstain ............... 30,064,772.811 2.50% 4.44%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Proposal 3f: To amend the Fund's fundamental investment restriction regarding
lending:

For ................... 477,164,806.541 39.64% 70.41%
Against ............... 43,560,024.543 3.62% 6.43%
Abstain ............... 29,961,855.964 2.49% 4.42%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Proposal 3g: To amend the Fund's fundamental investment restriction regarding
borrowing:

For ................... 468,878,504.005 38.95% 69.19%
Against ............... 52,006,297.555 4.32% 7.67%
Abstain ............... 29,801,885.488 2.48% 4.40%
Broker Non-Votes ...... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................. 677,712,033.230 56.30% 100.00%

Semiannual Report | 31

page

Templeton Funds, Inc.

Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 3h: To amend the Fund's fundamental investment restriction regarding
industry concentration:

For .................. 492,392,791.708 40.91% 72.66%
Against .............. 28,612,437.757 2.38% 4.22%
Abstain .............. 29,681,457.583 2.47% 4.38%
Broker Non-Votes ..... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................ 677,712,033.230 56.30% 100.00%

Proposal 4: To approve the elimination of certain of the Fund's fundamental
investment policies and restrictions:

For .................. 478,701,466.998 39.77% 70.63%
Against .............. 41,327,882.755 3.43% 6.10%
Abstain .............. 30,657,337.295 2.55% 4.52%
Broker Non-Votes ..... 127,025,346.182 10.55% 18.74%
- --------------------------------------------------------------------------------------------------
TOTAL ................ 677,712,033.230 56.30% 100.00%

Note: Due to rounding, the percentage totals may not necessarily agree with the
arithmetic sum of the figures.

32 | Semiannual Report

page

Templeton World Fund

PROXY VOTING POLICIES AND PROCEDURES

The Fund 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 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.

Semiannual Report | 33

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Literature Request

For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund

ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Money Fund 5, 6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5, 6

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC 7
Alabama
Arizona
California 9
Colorado
Connecticut
Florida 9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 8
Michigan 8
Minnesota 8
Missouri
New Jersey
New York 9
North Carolina
Ohio 8
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10

1.The fund is closed to new investors. Existing shareholders can continue adding
to their accounts.
2.The fund is only open to existing shareholders as well as select retirement
plans.
3.The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
4.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
5.An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6.No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
7.For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
8.Portfolio of insured municipal securities.
9.These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
10.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

page

[LOGO OMITTED]
FRANKLIN(R)TEMPLETON(R)
INVESTMENTS

One Franklin Parkway
San Mateo, CA 94403-1906

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER
TEMPLETON WORLD FUND

INVESTMENT MANAGER

Templeton Global Advisors Limited

PRINCIPAL UNDERWRITER

Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

Authorized for distribution only when accompanied or preceded by a current
Templeton World Fund prospectus. Investors should carefully consider a fund's
investment goals, risks, charges and expenses before investing. Like any
investment in securities, the value of the Fund's portfolio will be subject to
the risk of loss from market, currency, economic, political and other factors.
The Fund and its investors are not protected from such losses by the Investment
Manager. Therefore, investors who cannot accept this risk should not invest in
shares of the Fund. To obtain a prospectus, which contains this and other
information, talk to your financial advisor, call us at 1-800/DIAL BEN(R)
(1-800/342-5236) or visit franklintempleton.com. Please read the prospectus
carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

102 S2004 04/04

FEBRUARY 29, 2004

[GRAPHIC OMITTED]

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

INTERNATIONAL

WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
Eligible shareholders
can sign up for
eDelivery at
franklintempleton.com.
See inside for details.

TEMPLETON FOREIGN FUND

[GRAPHIC OMITTED]

[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Franklin o TEMPLETON o Mutual Series
page
Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.

SPECIALIZED EXPERTISE

Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.

FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.

MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.

TRUE DIVERSIFICATION

Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.

RELIABILITY YOU CAN TRUST

At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

[GRAPHIC OMITTED]

Not part of the semiannual report
page

Contents

SHAREHOLDER LETTER ................................ 1

SEMIANNUAL REPORT

Templeton Foreign Fund ............................ 3

Performance Summary ............................... 6

Financial Highlights and
Statement of Investments .......................... 9

Financial Statements .............................. 23

Notes to Financial Statements ..................... 27

Special Meeting of Shareholders ................... 35

Proxy Voting Policies and Procedures .............. 41

Semiannual Report

Templeton Foreign Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Templeton Foreign Fund seeks long-term
capital growth. Under normal market conditions, the Fund invests at least 80% of
its net assets in the equity securities of companies located outside the U.S.,
including emerging markets.

[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:

GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 2/29/04
Europe 45.6%
Asia 32.5%
North America 5.4%
Latin America 2.7%
Australia & New Zealand 1.8%
Middle East & Africa 1.0%
Short-Term Investments & Other Net Assets 11.0%

This semiannual report for Templeton Foreign Fund covers the period ended
February 29, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Templeton Foreign Fund - Class A posted a
17.95% cumulative total return, as shown in the Performance Summary beginning on
page 6. The Fund underperformed its benchmark, the Morgan Stanley Capital
International (MSCI) Europe Australasia Far East (EAFE) Index, which posted a
25.30% total return for the same period. 1 In line with our long-term investment
strategy, we are pleased with our long-term results. For the 10-year period
ended February 29, 2004, Templeton Foreign Fund - Class A delivered a 99.78%
cumulative total return, as shown in the Performance Summary, compared with the
MSCI EAFE Index's 52.99% cumulative total return for the same period. 1

Consistent with our investment strategy, we sought value stocks even if this
resulted in a portfolio markedly different from our benchmark index. At
period-end, the U.K., Japan and France represented more than 50% of the MSCI
EAFE Index. However, based on our rigorous research and stockpicking, the Fund
held only 29.7% of its total net assets in these countries.

ECONOMIC AND MARKET OVERVIEW

The global economy continued to improve during the six-month period ended
February 29, 2004. This was the main contributor to strong total returns for
most local stock market indexes. The MSCI World Index returned 18.97% and the
MSCI EAFE Index returned 25.30% for the period under review. 2

1. Source: Standard & Poor's Micropal. The MSCI EAFE Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global developed markets excluding the U.S. and Canada.
The index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
Past performance does not guarantee future results.
2. Source: Standard & Poor's Micropal. See footnote 1 for a description of the
MSCI EAFE Index. The MSCI World Index is a free float-adjusted, market
capitalization-weighted index designed to measure equity market performance in
global developed markets. The indexes are unmanaged and include reinvested
dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

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 14.

Semiannual Report | 3
page

TOP 10 COUNTRIES
Based on Equity Securities
2/29/04

- -------------------------------
% OF TOTAL
NET ASSETS
- -------------------------------
U.K. 14.4%
- -------------------------------
Japan 11.4%
- -------------------------------
Hong Kong 10.9%
- -------------------------------
Germany 6.4%
- -------------------------------
South Korea 5.6%
- -------------------------------
Netherlands 4.7%
- -------------------------------
Switzerland 4.6%
- -------------------------------
Finland 4.0%
- -------------------------------
France 3.9%
- -------------------------------
Canada 2.9%
- -------------------------------

TOP 10 SECTORS/INDUSTRIES
Based on Equity Securities
2/29/04

- ------------------------------------------------------------
% OF TOTAL
NET ASSETS
- ------------------------------------------------------------
Oil & Gas 7.2%
- ------------------------------------------------------------
Insurance 6.8%
- ------------------------------------------------------------
Diversified Telecommunication Services 5.7%
- ------------------------------------------------------------
Pharmaceuticals 5.4%
- ------------------------------------------------------------
Commercial Banks 5.4%
- ------------------------------------------------------------
Household Durables 4.1%
- ------------------------------------------------------------
Electric Utilities 3.7%
- ------------------------------------------------------------
Paper & Forest Products 3.6%
- ------------------------------------------------------------
Real Estate 3.6%
- ------------------------------------------------------------
Industrial Conglomerates 2.9%
- ------------------------------------------------------------

Historically, surges in commodity prices have generally coincided with labor
shortages and wage inflation, leading to overall inflation and monetary
tightening. However the current abundant labor supply in the U.S., China and
India, and China's ability to provide low-cost products to many large economies,
have resulted in less inflationary pressure.

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. As we look internationally, we consider specific companies, rather
than sectors or countries, while doing in-depth research to construct a bargain
list from which we buy. Before we make a purchase, we look at the company's
potential for earnings and growth over a five-year horizon.

3. Source: ISI Group.
4. Sources: Reuters, Commodity Research Bureau Index; London Metal Exchange.
5. Source: European Central Bank.

4 | Semiannual Report
page

MANAGER'S DISCUSSION

Merger and acquisition activity during the period, as well as an increased
health care weighting, benefited Templeton Foreign Fund. One of the Fund's
largest holdings, health care stock Aventis, performed well based on news that
Sanofi-Synthelabo, a French competitor, sought to purchase Aventis despite
management's opposition. The Fund's emerging markets holdings also contributed
materially to performance as 5 of the top 12 companies delivering the strongest
returns were from emerging market countries, including Hong Kong. Notable
emerging market performers included securities of Cheung Kong Holdings, Satyam
Computers Services, PetroChina, Hutchison Whampoa, and China Mobile (Hong Kong).

By country, the U.K., Hong Kong, Japan, France and Germany were the top five
contributors to the Fund's positive return. By sector, financials, industrials
and consumer discretionary were the largest contributors to Fund performance.
Our financial holdings differed from our benchmark because we emphasized the
property and casualty (P&C) insurance industry, whereas the MSCI EAFE Index was
more heavily represented by banks. We favored P&C insurance companies because we
found more compelling valuation and pricing power in the industry.

Among holdings that detracted from Fund performance, two were in Taiwan, Compal
Electronics and Taiwan Semiconductor Manufacturing, as uncertainty preceding
Taiwan's major election in March 2004 inhibited its stock market. Another poor
performer was Royal Dutch Petroleum from the Netherlands. Consistent with our
strategy, we added to our position in this stock, after disappointing news
regarding the classification of the company's oil reserves, because new
management appeared to be untarnished by this major mistake. More generally in
Europe, however, a strong euro weakened the Fund's returns during the period.

Thank you for your continued participation in Templeton Foreign Fund. We look
forward to serving your future investment needs.

[PHOTO OMITTED]

/s/Jeffrey A. Everett, CFA
Portfolio Manager
Templeton Foreign Fund

TOP 10 EQUITY HOLDINGS
2/29/04

- --------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------
Cheung Kong Holdings Ltd. 2.7%
REAL ESTATE, HONG KONG
- --------------------------------------------------------------
Sony Corp. 2.3%
HOUSEHOLD DURABLES, JAPAN
- --------------------------------------------------------------
Nippon Telegraph & Telephone Corp. 2.1%
DIVERSIFIED TELECOMMUNICATION
SERVICES, JAPAN
- --------------------------------------------------------------
Aventis SA 2.1%
PHARMACEUTICALS, FRANCE
- --------------------------------------------------------------
Hutchison Whampoa Ltd. 2.1%
INDUSTRIAL CONGLOMERATES, HONG KONG
- --------------------------------------------------------------
Samsung Electronics Co. Ltd., ord. & pfd. 1.7%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
- --------------------------------------------------------------
GlaxoSmithKline PLC 1.7%
PHARMACEUTICALS, U.K.
- --------------------------------------------------------------
Swiss Reinsurance Co. 1.5%
INSURANCE, SWITZERLAND
- --------------------------------------------------------------
Telefonos de Mexico SA de CV (Telmex),
L, ADR 1.5%
DIVERSIFIED TELECOMMUNICATION SERVICES,
MEXICO
- --------------------------------------------------------------
BASF AG 1.4%
CHEMICALS, GERMANY
- --------------------------------------------------------------

Semiannual Report | 5
page

Performance Summary as of 2/29/04

PRICE AND DISTRIBUTION INFORMATION

- ---------------------------------------------------------------------------------------------------
CLASS A CHANGE 2/29/04 8/31/03
- ---------------------------------------------------------------------------------------------------

Net Asset Value (NAV)* +$1.51 $11.12 $9.61
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1917
- ---------------------------------------------------------------------------------------------------
CLASS B CHANGE 2/29/04 8/31/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.51 $10.97 $9.46
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1344
- ---------------------------------------------------------------------------------------------------
CLASS C CHANGE 2/29/04 8/31/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.52 $10.99 $9.47
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1276
- ---------------------------------------------------------------------------------------------------
CLASS R CHANGE 2/29/04 8/31/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.50 $11.06 $9.56
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.1803
- ---------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 2/29/04 8/31/03
- ---------------------------------------------------------------------------------------------------
Net Asset Value (NAV)* +$1.50 $11.10 $9.60
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-2/29/04)
- ---------------------------------------------------------------------------------------------------
Dividend Income $0.2132
- ---------------------------------------------------------------------------------------------------

*NAV DOES NOT AGREE TO NAV DISCLOSED IN THE ACCOMPANYING FINANCIAL STATEMENTS
DUE TO FINANCIAL STATEMENT ADJUSTING ENTRIES POSTED AS OF PERIOD-END.

6 | Past performance does not guarantee future results. | Semiannual Report
page

Performance Summary (CONTINUED)

PERFORMANCE

- -------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------------

Cumulative Total Return 1 17.95% 44.58% 57.82% 99.78%
- -------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 11.13% 36.24% 8.26% 6.53%
- -------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,113 $13,624 $14,873 $18,832
- -------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 41.05% 6.34% 6.78%
- -------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- -------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 17.56% 43.50% 51.97% 47.99%
- -------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 13.56% 39.50% 8.44% 7.75%
- -------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,356 $13,950 $14,997 $14,699
- -------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 44.60% 6.53% 7.52%
- -------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- -------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 17.57% 43.47% 51.99% 84.66%
- -------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 16.57% 42.47% 8.73% 7.19%
- -------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,657 $14,247 $15,199 $18,466
- -------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 47.56% 6.82% 7.06%
- -------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- -------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 17.81% 44.20% 23.27%
- -------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 16.81% 43.20% 10.19%
- -------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,681 $14,320 $12,327
- -------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 48.29% 9.56%
- -------------------------------------------------------------------------------------------------------
ADVISOR CLASS 5 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 18.12% 44.82% 59.53% 105.07%
- -------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 18.12% 44.82% 9.79% 7.45%
- -------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,812 $14,482 $15,953 $20,507
- -------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04) 4 50.11% 7.86% 7.70%
- -------------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 7
page

Performance Summary (CONTINUED)

ENDNOTES

CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
7/1/92, Fund shares were offered at a higher initial sales charge. Thus, actual
total returns would have been lower. Effective 1/1/93, the Fund implemented a
Rule 12b-1 plan, which affects subsequent performance.

CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years. These
shares have higher annual fees and expenses than Class A shares.

CLASS C: Subject to no initial sales charge, but subject to 1% CDSC for shares
redeemed within 12 months of investment. Prior to 1/1/04, these shares were
offered with an initial sales charge; thus actual returns would have differed.
These shares have higher annual fees and expenses than Class A shares.

CLASS R: No initial sales charge, but subject to 1% CDSC for shares redeemed
within 18 months of investment; shares are available to certain eligible
investors as described in the prospectus. These shares have higher annual fees
and expenses than Class A shares.

ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees; shares are available
to a limited class of investors.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge(s). Six-month return has not been annualized.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge(s).
4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
5. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or a Rule 12b-1 plan. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge, but reflecting the effect of
the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor
Class performance is used reflecting all charges and fees applicable to that
class. Since 1/2/97 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were 60.22% and 6.80%.

8 | Past performance does not guarantee future results. | Semiannual Report
page

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS

---------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
---------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $9.60 $8.82 $9.69 $10.56 $10.49 $8.43
---------------------------------------------------------------------------
Income from investment operations:
Net investment income a ...................... .01 .15 .15 .26 .23 .27
Net realized and unrealized gains (losses) ... 1.70 .77 (.77) (.69) .25 2.82
---------------------------------------------------------------------------
Total from investment operations .............. 1.71 .92 (.62) (.43) .48 3.09
---------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.19) (.14) (.25) (.23) (.32) (.26)
Net realized gains ........................... -- -- -- (.21) (.09) (.77)
---------------------------------------------------------------------------
Total distributions ........................... (.19) (.14) (.25) (.44) (.41) (1.03)
---------------------------------------------------------------------------
Redemption fees ............................... -- c -- c -- -- -- --
---------------------------------------------------------------------------
Net asset value, end of period ................ $11.12 $9.60 $8.82 $9.69 $10.56 $10.49
===========================================================================

Total return b ................................ 17.95% 10.80% (6.31)% (4.08)% 4.79% 40.36%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $13,097,579 $9,896,279 $8,325,977 $9,165,696 $11,489,339 $11,940,654
Ratios to average net assets
Expenses ..................................... 1.17% d 1.22% 1.16% 1.18% 1.15% 1.13%
Net investment income ........................ .15% d 1.79% 1.63% 2.54% 2.14% 2.92%
Portfolio turnover rate ....................... 13.48% 33.36% 34.15% 21.38% 44.77% 26.11%

aBased on average daily shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cAmount is less than $0.01 per share.
dAnnualized.

Semiannual Report | 9
page

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 d
----------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $9.46 $8.69 $9.56 $10.43 $10.43 $ 8.39
----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ............... (.03) .07 .08 .18 .16 .14
Net realized and unrealized gains (losses) ... 1.67 .79 (.76) (.67) .23 1.90
----------------------------------------------------------------------
Total from investment operations .............. 1.64 .86 (.68) (.49) .39 2.04
----------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.13) (.09) (.19) (.17) (.30) --
Net realized gains ........................... -- -- -- (.21) (.09) --
----------------------------------------------------------------------
Total distributions ........................... (.13) (.09) (.19) (.38) (.39) --
----------------------------------------------------------------------
Redemption fees ............................... -- c -- c -- -- -- --
----------------------------------------------------------------------
Net asset value, end of period ................ $10.97 $9.46 $8.69 $ 9.56 $10.43 $10.43
======================================================================

Total return b ................................ 17.56% 10.00% (7.07)% (4.75)% 3.99% 24.31%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $191,733 $138,026 $87,135 $64,360 $53,313 $16,765
Ratios to average net assets:
Expenses ..................................... 1.92% e 1.97% 1.91% 1.93% 1.90% 1.91% e
Net investment income (loss) ................. (.60)% e 1.04% .88% 1.83% 1.54% 2.14% e
Portfolio turnover rate ....................... 13.48% 33.36% 34.15% 21.38% 44.77% 26.11%

aBased on average daily shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
cAmount is less than $0.01 per share.
dFor the period January 1, 1999 (effective date) to August 31, 1999.
eAnnualized.

10 | Semiannual Report
page

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $9.47 $8.69 $9.55 $10.39 $10.31 $ 8.30
----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ............... (.03) .08 .08 .18 .14 .19
Net realized and unrealized gains (losses) ... 1.68 .77 (.76) (.66) .25 2.79
----------------------------------------------------------------------------
Total from investment operations .............. 1.65 .85 (.68) (.48) .39 2.98
----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.13) (.07) (.18) (.15) (.22) (.20)
Net realized gains ........................... -- -- -- (.21) (.09) (.77)
----------------------------------------------------------------------------
Total distributions ........................... (.13) (.07) (.18) (.36) (.31) (.97)
----------------------------------------------------------------------------
Redemption fees ............................... -- c -- c -- -- -- --
----------------------------------------------------------------------------
Net asset value, end of period ................ $10.99 $9.47 $8.69 $ 9.55 $10.39 $10.31
============================================================================

Total return b ................................ 17.57% 9.94% (7.10)% (4.68)% 3.94% 39.45%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $1,193,451 $900,811 $793,143 $899,275 $1,127,869 $1,196,084
Ratios to average net assets:
Expenses ..................................... 1.92% d 1.97% 1.91% 1.92% 1.90% 1.88%
Net investment income (loss) ................. (.60)% d 1.04% .88% 1.80% 1.39% 2.15%
Portfolio turnover rate ....................... 13.48% 33.36% 34.15% 21.38% 44.77% 26.11%

Semiannual Report | 11
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Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

---------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31,
CLASS R (UNAUDITED) 2003 2002 d
---------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............................. $9.56 $8.81 $9.30
---------------------------------------------
Income from investment operations:
Net investment income a ......................................... (.01) .14 .14
Net realized and unrealized gains (losses) ...................... 1.69 .76 (.63)
---------------------------------------------
Total from investment operations ................................. 1.68 .90 (.49)
---------------------------------------------
Less distributions from net investment income .................... (.18) (.15) --
---------------------------------------------
Redemption fees .................................................. -- c -- c --
---------------------------------------------
Net asset value, end of period ................................... $11.06 $9.56 $8.81
=============================================

Total return b ................................................... 17.81% 10.46% (5.27)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................................ $96,882 $55,346 $5,641
Ratios to average net assets:
Expenses ........................................................ 1.42% e 1.47% 1.41% e
Net investment income (loss) .................................... (.10)% e 1.54% 1.38% e
Portfolio turnover rate .......................................... 13.48% 33.36% 34.15%

aBased on average daily shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
cAmount is less than $0.01 per share.
dFor the period January 2, 2002 (effective date) to August 31, 2002.
eAnnualized.

12 | Semiannual Report
page

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 29, 2004 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $9.59 $8.81 $9.69 $10.56 $10.50 $8.44
----------------------------------------------------------------------------
Income from investment operations:
Net investment income a ...................... .02 .17 .17 .28 .26 .29
Net realized and unrealized gains (losses) ... 1.70 .77 (.77) (.68) .24 2.81
----------------------------------------------------------------------------
Total from investment operations .............. 1.72 .94 (.60) (.40) .50 3.10
----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.21) (.16) (.28) (.26) (.35) (.27)
Net realized gains ........................... -- -- -- (.21) (.09) (.77)
----------------------------------------------------------------------------
Total distributions ........................... (.21) (.16) (.28) (.47) (.44) (1.04)
----------------------------------------------------------------------------
Redemption fees ............................... -- c -- c -- -- -- --
----------------------------------------------------------------------------
Net asset value, end of period ................ $11.10 $9.59 $8.81 $9.69 $10.56 $10.50
============================================================================

Total return b ................................ 18.12% 11.11% (6.15)% (3.81)% 5.03% 40.65%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $704,619 $421,725 $297,866 $102,846 $117,129 $77,203
Ratios to average net assets:
Expenses ..................................... .92% d .97% .91% .93% .90% .88%
Net investment income ........................ .40% d 2.04% 1.88% 2.78% 2.45% 3.18%
Portfolio turnover rate ....................... 13.48% 33.36% 34.15% 21.38% 44.77% 26.11%

aBased on average daily shares outstanding.
bTotal return is not annualized for periods less than one year.
cAmount is less than $0.01 per share.
dAnnualized.

Semiannual Report | See notes to financial statements. | 13
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED)

- ----------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS 85.7%
ARGENTINA
a Inversiones y Representacion SA ..... Real Estate 4 $ 4
a Inversiones y Representacion SA, GDR Real Estate 178,776 1,746,646
a Petrobras Energia Participaciones
SA, B, ADR ......................... Oil & Gas 208,455 2,782,874
----------------
4,529,524
----------------
AUSTRALIA .7%
Alumina Ltd. ........................ Metals & Mining 61,470 260,850
APN News & Media Ltd. ............... Media 2,131,074 6,330,297
BHP Billiton Ltd. ................... Metals & Mining 109,158 1,032,550
Brambles Industries Ltd. ............ Commercial Services & Supplies 1,267,188 5,191,590
John Fairfax Holdings Ltd. .......... Media 6,468,631 16,919,087
Qantas Airways Ltd. ................. Airlines 26,394,824 75,554,010
Qantas Airways Ltd., 144A ........... Airlines 1,383,719 3,960,834
Woodside Petroleum Ltd. ............. Oil & Gas 38,500 452,106
----------------
109,701,324
----------------
BERMUDA 2.4%
Ace Ltd. ............................ Insurance 4,483,425 201,574,788
XL Capital Ltd., A .................. Insurance 2,110,174 161,765,939
----------------
363,340,727
----------------
BRAZIL
Banco Itau Holdings Financeira
SA, ADR ............................ Commercial Banks 12,331 585,722
Embraer-Empresa Brasileira de
Aeronautica SA, ADR ................ Aerospace & Defense 150,000 4,528,500
----------------
5,114,222
----------------
CANADA 2.9%
Barrick Gold Corp. .................. Metals & Mining 5,193,770 105,404,403
BCE Inc. ............................ Diversified Telecommunication Services 6,681,409 145,853,154
a Celestica Inc. ...................... Electronic Equipment & Instruments 18,710 320,723
Husky Energy Inc. ................... Oil & Gas 32,730 623,254
Toronto Dominion Bank ............... Commercial Banks 1,603,600 40,783,343
TransCanada Corp. ................... Gas Utilities 6,991,467 144,388,709
----------------
437,373,586
----------------
CHILE
Cia de Telecomunicaciones de
Chile SA, ADR ...................... Diversified Telecommunication Services 46,880 735,078
----------------
CHINA .6%
Guangdong Electric Power
Development Co Ltd., B ............. Electric Utilities 757,704 646,358
PetroChina Co. Ltd., H .............. Oil & Gas 184,502,691 98,961,148
----------------
99,607,506
----------------
DENMARK .6%
Vestas Wind Systems AS .............. Electrical Equipment 5,182,951 98,515,475
----------------

14 | Semiannual Report
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
FINLAND 4.0%
M-real OY, B ........................ Paper & Forest Products 2,834,000 $ 26,937,490
Metso OYJ ........................... Machinery 5,551,822 74,361,842
Sampo-Leonia OYJ, 144A .............. Insurance 5,143,000 57,703,229
Sampo-Leonia OYJ, A ................. Insurance 8,031,280 90,109,040
Stora Enso OYJ, R ................... Paper & Forest Products 2,309,631 30,677,231
Stora Enso OYJ, R (EUR/FIM traded) .. Paper & Forest Products 9,072,760 120,507,193
Stora Enso OYJ, R (SEK traded) ...... Paper & Forest Products 44,900 600,138
UPM-Kymmene Corp. ................... Paper & Forest Products 10,428,058 205,366,002
----------------
606,262,165
----------------
FRANCE 3.9%
Accor SA ............................ Hotels Restaurants & Leisure 5,610 246,125
Aventis SA .......................... Pharmaceuticals 4,097,020 313,577,317
Galeries Lafayette SA ............... Multiline Retail 68,809 11,242,602
Michelin SA, B ...................... Auto Components 13,440 647,928
Societe BIC SA ...................... Commercial Services & Supplies 818,992 35,402,174
Suez SA ............................. Multi-Utilities & Unregulated Power 6,378,510 141,624,907
Total SA, B ......................... Oil & Gas 5,047 921,821
Valeo SA ............................ Auto Components 2,139,209 98,477,559
----------------
602,140,433
----------------
GERMANY 5.5%
Adidas-Salomon AG ................... Textiles Apparel & Luxury Goods 864,290 97,508,209
BASF AG ............................. Chemicals 4,064,546 216,148,216
Bayer AG, Br. ....................... Chemicals 3,008,633 85,231,456
Celesio AG .......................... Health Care Providers & Services 776,204 40,814,773
Deutsche Post AG .................... Air Freight & Logistics 3,206,707 76,499,105
E.ON AG ............................. Electric Utilities 2,251,350 152,033,190
Merck KGAA .......................... Pharmaceuticals 15,780 696,035
Muenchener Rueckversicherungs-
Gesellschaft ....................... Insurance 865,770 101,117,478
Muenchener Rueckversicherungs-
Gesellschaft, 144A ................. Insurance 154,525 18,047,724
Volkswagen AG ....................... Automobiles 814,667 38,565,676
a WCM Beteiligungs &
Grundbesitz AG ..................... Diversified Financial Services 6,978,162 11,618,276
----------------
838,280,138
----------------
HONG KONG 10.9%
Asia Satellite Telecommunications
Holdings Ltd. ...................... Diversified Telecommunication Services 210,500 419,169
Cheung Kong Holdings Ltd. ........... Real Estate 44,021,058 419,916,051
China Mobile (Hong Kong)
Ltd., fgn. ......................... Wireless Telecommunication Services 33,833,749 119,750,481
CLP Holdings Ltd. ................... Electric Utilities 35,126,499 180,960,914
CNOOC Ltd. .......................... Oil & Gas 25,405,205 51,405,407
CNOOC Ltd., ADR ..................... Oil & Gas 739,886 30,172,551
Giordano International Ltd. ......... Specialty Retail 1,124,000 682,297
Hang Lung Group Ltd. ................ Real Estate 28,292,783 44,344,631

Semiannual Report | 15
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Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
HONG KONG (CONT.)
Hang Lung Properties Ltd. ........... Real Estate 339,500 $ 490,679
Hong Kong Electric Holdings Ltd. .... Electric Utilities 27,682,304 118,782,987
Hung Hing Printing Group Ltd. ....... Paper & Forest Products 848,000 675,450
Hutchison Whampoa Ltd. .............. Industrial Conglomerates 37,245,724 313,417,515
Lerado Group Holdings Co. Ltd. ...... Textiles Apparel & Luxury Goods 2,326,000 475,130
MTR Corp. Ltd. ...................... Road & Rail 36,883,500 58,520,042
SCMP Group Ltd. ..................... Media 76,329,780 34,076,451
Shangri-La Asia Ltd. ................ Hotels Restaurants & Leisure 58,750,670 55,098,684
Swire Pacific Ltd., A ............... Diversified Financial Services 24,142,522 169,038,130
Yue Yuen Industrial Holdings Ltd. ... Textiles Apparel & Luxury Goods 20,934,910 60,514,460
----------------
1,658,741,029
----------------
INDIA 2.2%
Gail (India) Ltd. ................... Gas Utilities 12,478,500 55,682,220
Gail (India) Ltd., GDR, 144A ........ Gas Utilities 33,440 911,240
Gujarat Ambuja Cements Ltd., GDR .... Construction Materials 77,335 515,051
Housing Development Finance
Corp. Ltd. ......................... Thrifts & Mortgage Finance 1,639,242 22,101,773
ICICI Bank Ltd. ..................... Commercial Banks 11,341,987 68,149,709
b Satyam Computers Services Ltd. ...... IT Services 18,631,754 127,520,527
Tata Motors Ltd. .................... Automobiles 5,815,200 65,563,214
----------------
340,443,734
----------------
ISRAEL .5%
a Check Point Software
Technologies Ltd. .................. Software 3,063,738 70,527,249
-------------------
ITALY .6%
Banca Intesa SpA .................... Commercial Banks -- c 1
Eni SpA ............................. Oil & Gas 4,940,070 96,796,720
----------------
96,796,721
----------------
JAPAN 11.4%
Acom Co. Ltd. ....................... Consumer Finance 1,757,150 105,821,408
Denso Corp. ......................... Auto Components 34,500 721,513
East Japan Railway Co. .............. Road & Rail 17,440 81,405,821
Fanuc Ltd. .......................... Machinery 9,500 596,467
Hitachi Ltd. ........................ Electronic Equipment & Instruments 31,131,200 203,153,447
Japan Airport Terminal Co. Ltd. ..... Transportation Infrastructure 91,000 691,287
KAO Corp. ........................... Household Products 39,000 822,762
Kurita Water Industries Ltd. ........ Machinery 19,600 226,568
Makita Corp. ........................ Household Durables 3,952,700 46,957,757
Matsushita Electric
Industrial Co. Ltd. ................ Household Durables 31,000 451,977
Meitec Corp. ........................ Commercial Services & Supplies 17,000 600,586
NEC Corp. ........................... Computers & Peripherals 11,880,000 87,420,099
Nintendo Co. Ltd. ................... Software 1,560,400 149,956,068
Nippon Telegraph &
Telephone Corp. .................... Diversified Telecommunication Services 68,825 318,739,246
Nomura Holdings Inc. ................ Capital Markets 11,834,480 187,926,257
Ono Pharmaceutical Co. Ltd. ......... Pharmaceuticals 1,717,000 74,645,341
Pioneer Corp. ....................... Household Durables 45,000 1,247,940

16 | Semiannual Report
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
JAPAN (CONT.)
Shinsei Bank ........................ Commercial Banks 1,953,000 $ 14,424,959
Sompo Japan Insurance Inc. .......... Insurance 13,537,000 114,852,636
Sony Corp. .......................... Household Durables 8,470,000 345,745,927
----------------
1,736,408,066
----------------
MEXICO 2.3%
Cemex SA ............................ Construction Materials 4,086,318 24,005,664
Cemex SA, ADR ....................... Construction Materials 3,259,731 94,043,239
Grupo Aeroportuario del Sureste SA
de CV, ADR ......................... Transportation Infrastructure 29,060 637,867
Grupo Continental SA ................ Beverages 203,148 399,337
Kimberly Clark de Mexico SA de CV, A Household Products 158,795 420,793
Telefonos de Mexico SA de CV (Telmex),
L, ADR ............................. Diversified Telecommunication Services 6,623,283 224,992,924
Wal-Mart de Mexico SA de CV, V, ADR . Food & Staples Retailing 19,494 597,268
----------------
345,097,092
----------------
NETHERLANDS 4.7%
Akzo Nobel NV ....................... Chemicals 3,068,284 118,144,355
IHC Caland NV ....................... Energy Equipment & Services 8,730 424,118
ING Groep NV ........................ Diversified Financial Services 3,026,560 74,006,561
Koninklijke Philips Electronics NV .. Household Durables 5,209,072 158,246,848
Reed Elsevier NV .................... Media 5,422,500 74,381,422
Rodamco Europe NV ................... Diversified Financial Services 2,249,350 139,712,742
Royal Dutch Petroleum Co. ........... Oil & Gas 3,013,000 148,622,815
----------------
713,538,861
----------------
NEW ZEALAND .4%
Telecom Corp. of New
Zealand Ltd. ....................... Diversified Telecommunication Services 13,993,425 54,964,954
----------------
NORWAY 1.0%
Norsk Hydro ASA ..................... Oil & Gas 1,591,030 114,251,208
Norske Skogindustrier ASA, A ........ Paper & Forest Products 2,174,800 44,333,549
----------------
158,584,757
----------------
PERU
Credicorp Ltd. ...................... Commercial Banks 21,700 282,100
----------------
PHILIPPINES .1%
Ayala Land Inc. ..................... Real Estate 105,116,880 10,265,321
a Philippine Long Distance Telephone
Co. ................................ Diversified Telecommunication Services 315,200 5,428,693
a Philippine Long Distance Telephone
Co., ADR ........................... Diversified Telecommunication Services 12,530 218,523
----------------
15,912,537
----------------
PORTUGAL
Portugal Telecom SGPS SA ............ Diversified Telecommunication Services 61,840 697,672
----------------
SINGAPORE .6%
DBS Group Holdings Ltd. ............. Commercial Banks 4,936,740 42,631,856

Semiannual Report | 17
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
SINGAPORE (CONT.)
Singapore Airlines Ltd. ............. Airlines 6,165,985 $ 42,018,168
United Overseas Bank Ltd. ........... Commercial Banks 96,000 795,183
Want Want Holdings Ltd. ............. Food Products 280,000 313,600
----------------
85,758,807
----------------
SOUTH AFRICA .4%
Old Mutual PLC ...................... Insurance 37,041,700 65,305,029
----------------
SOUTH KOREA 5.0%
Hana Bank ........................... Commercial Banks 3,808,740 82,587,475
Kookmin Bank ........................ Commercial Banks 4,192,950 175,062,793
Kookmin Bank, ADR ................... Commercial Banks 16,614 689,979
Koram Bank .......................... Commercial Banks 492,070 6,255,482
KT Corp., ADR ....................... Diversified Telecommunication Services 4,347,924 82,697,514
POSCO ............................... Metals & Mining 511,500 75,246,173
Samsung Electronics
Co. Ltd. ........................... Semiconductors & Semiconductor Equipment 377,805 175,088,202
Samsung Electronics Co. Ltd.,
GDR, Reg S ......................... Semiconductors & Semiconductor Equipment 4,500 1,055,250
Shinhan Financial Group Co. Ltd. .... Commercial Banks 4,350,240 80,087,327
SK Telecom Co. Ltd., ADR ............ Wireless Telecommunication Services 3,383,026 84,609,480
----------------
763,379,675
----------------
SPAIN 2.1%
Iberdrola SA, Br. ................... Electric Utilities 5,754,512 118,689,536
Repsol YPF SA ....................... Oil & Gas 10,015,423 205,328,429
a Telefonica SA, ADR .................. Diversified Telecommunication Services 7,612 374,565
----------------
324,392,530
----------------
SWEDEN 2.8%
Atlas Copco AB, A ................... Machinery 1,020,560 36,535,724
Holmen Aktiebolag AB, B ............. Paper & Forest Products 3,653,879 126,635,607
Nordea Bank AB (SEK Traded) ......... Commercial Banks 7,106,560 49,164,160
Nordea Bank AB (EUR Traded) ......... Commercial Banks 132,030 917,023
Sandvik AB .......................... Machinery 4,559,159 146,068,002
Securitas AB, B ..................... Commercial Services & Supplies 4,472,010 68,484,074
Volvo AB, B ......................... Machinery 17,655 554,965
----------------
428,359,555
----------------
SWITZERLAND 4.6%
Adecco SA ........................... Commercial Services & Supplies 4,440 220,768
Nestle SA ........................... Food Products 644,393 169,970,989
Novartis AG ......................... Pharmaceuticals 3,209,748 141,400,260
Swiss Reinsurance Co. ............... Insurance 3,267,305 235,133,796
UBS AG .............................. Capital Markets 2,057,899 151,176,707
----------------
697,902,520
----------------
TAIWAN 1.1%
a ASE Test Ltd. ....................... Commercial Services & Supplies 27,120 335,474
Chunghwa Telecom
Co. Ltd., ADR ...................... Diversified Telecommunication Services 2,336,100 38,405,484
Compal Electronics Inc. ............. Computers & Peripherals 47,472,000 64,045,570

18 | Semiannual Report
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
TAIWAN (CONT.)
Taiwan Semiconductor
Manufacturing Co. .................. Semiconductors & Semiconductor Equipment 37,159,992 $ 70,743,801
a United Microelectronics
Corp., ADR ......................... Semiconductors & Semiconductor Equipment 70,403 366,800
----------------
173,897,129
----------------
THAILAND
a Bangkok Bank Public Co. Ltd., fgn. .. Commercial Banks 126,400 316,113
----------------
UNITED KINGDOM 14.4%
Abbey National PLC .................. Commercial Banks 13,721,124 123,499,028
Amvescap PLC ........................ Capital Markets 73,000 577,457
BAE Systems PLC ..................... Aerospace & Defense 18,852,986 66,563,618
BHP Billiton PLC .................... Metals & Mining 8,379,597 76,821,396
BP PLC .............................. Oil & Gas 24,905,551 200,016,279
BP PLC, ADR ......................... Oil & Gas 5,110 251,412
Brambles Industries PLC ............. Commercial Services & Supplies 119,658 465,219
British Land Co. PLC ................ Real Estate 6,543,798 78,328,843
Cable & Wireless PLC ................ Diversified Telecommunication Services 144,500 376,100
Cadbury Schweppes PLC ............... Food Products 9,901,881 81,589,221
GKN PLC ............................. Auto Components 16,047,100 81,672,398
GlaxoSmithKline PLC ................. Pharmaceuticals 12,354,569 257,019,056
Hanson PLC .......................... Construction Materials 110,440 890,529
HSBC Holdings PLC ................... Commercial Banks 6,954 112,986
HSBC Holdings PLC (GBP Traded) ...... Commercial Banks 2,131,154 35,045,345
a International Power PLC ............. Multi-Utilities & Unregulated Power 11,957,713 31,178,597
Kidde PLC ........................... Electrical Equipment 20,644,272 36,491,916
Lloyds TSB Group PLC ................ Commercial Banks 11,819,632 98,213,607
Marks & Spencer Group PLC ........... Multiline Retail 540,843 2,940,837
National Grid Transco PLC ........... Multi-Utilities & Unregulated Power 12,508,000 99,813,306
Pearson PLC ......................... Media 9,581,373 110,243,134
Persimmon PLC ....................... Household Durables 7,446,812 78,911,193
Reckitt Benckiser PLC ............... Household Products 50,662 1,321,904
Reed Elsevier PLC ................... Media 100,000 920,015
Rentokil Initial PLC ................ Commercial Services & Supplies 14,558,700 52,820,374
Reuters Group PLC ................... Media 4,925,220 35,738,351
Rolls-Royce Group PLC ............... Aerospace & Defense 20,896,773 85,316,694
Shell Transport & Trading Co. PLC ... Oil & Gas 22,982,568 156,956,203
a Shire Pharmaceuticals Group PLC ..... Pharmaceuticals 3,250,478 32,981,328
Smiths Group PLC .................... Industrial Conglomerates 10,942,447 135,244,868
Tesco PLC ........................... Food & Staples Retailing 253,122 1,209,593
Unilever PLC ........................ Food Products 16,882,686 176,236,631
United Business Media PLC ........... Media 51,780 531,878
Vodafone Group PLC .................. Wireless Telecommunication Services 385,284 959,903
Yell Group .......................... Media 9,569,253 59,935,472
----------------
2,201,194,691
----------------
TOTAL COMMON STOCKS
(COST $10,735,691,612) ............. 13,098,100,999
----------------

Semiannual Report | 19
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

PREFERRED STOCKS 1.8%
BRAZIL .4%
Aracruz Celulose SA, ADR, pfd. ...... Paper & Forest Products 33,415 $ 1,207,952
Cia Vale do Rio Doce, ADR, pfd., A .. Metals & Mining 1,128,801 56,157,850
Tele Norte Leste Participacoes SA,
ADR, pfd. .......................... Diversified Telecommunication Services 20,012 291,175
Telemig Celular Participacoes
SA, ADR, pfd. ...................... Wireless Telecommunication Services 10,710 431,077
----------------
58,088,054
----------------
GERMANY .9%
Volkswagen AG, pfd. ................. Automobiles 4,146,234 132,913,581
----------------
SOUTH KOREA .5%
Samsung Electronics
Co. Ltd., pfd. ..................... Semiconductors & Semiconductor Equipment 310,500 86,073,979
----------------
TOTAL PREFERRED STOCKS
(COST $181,844,046) ............... 277,075,614
----------------

--------------------
PRINCIPAL AMOUNT d
--------------------

BONDS & NOTES 1.5%
ARGENTINA
Inversiones y Representacion SA,
cvt., 8.00%, 11/14/07 .............. $ 1,335,565 $ 2,537,574
----------------
AUSTRALIA .3%
New South Wales Treasury Corp.,
8.00%, 3/01/08 ..................... 59,330,000 AUD 49,574,234
----------------
CANADA .1%
Government of Canada,
6.00%, 6/01/11 ..................... 16,060,000 CAD 13,385,129
----------------
FRANCE
Axa SA, cvt., zero cpn., 12/21/04 ... 11,602 EUR 251,406
----------------
NEW ZEALAND .5%
Government of New Zealand,
8.00%, 11/15/06 ................... 31,330,000 NZD 22,762,084
7.00%, 7/15/09 .................... 31,710,000 NZD 23,001,211
New Zealand Government,
6.50%, 2/15/06 ..................... 31,000,000 NZD 21,628,159
----------------
67,391,454
----------------
SOUTH KOREA .1%
Korea Telecom Corp., cvt., 144A,
.25%, 1/04/07 ...................... 9,500,000 9,701,875
----------------
SPAIN .4%
Government of Spain,
4.50%, 7/30/04 .................... 23,575,000 EUR 29,598,703
5.00%, 7/30/12 .................... 25,160,000 EUR 33,662,125
----------------
63,260,828
----------------

20 | Semiannual Report
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT d VALUE
- ----------------------------------------------------------------------------------------------------------------------------

BONDS & NOTES (CONT.)
SWEDEN .1%
Kingdom of Sweden, 5.50%,
10/08/12 ........................... $ 97,360,000 SEK $ 14,154,252
----------------
TOTAL BONDS & NOTES
(COST $253,986,489) ............... 220,256,752
----------------
SHORT TERM INVESTMENTS 10.9%
AUSTRALIA .8%
New South Wales Treasury Corp.,
6.50%, 5/01/06 ..................... 118,000,000 AUD 92,763,774
Queensland Treasury Corp.,
6.50%, 6/14/05 ..................... 32,000,000 AUD 24,998,264
----------------
117,762,038
----------------
DENMARK .1%
Denmark Treasury Bill, 2.12%,
11/01/04 ........................... 60,000,000 DKK 9,856,521
----------------
FRANCE .4%
French Treasury Bill, zero cpn.,
9/30/04 ............................ 55,500,000 EUR 68,186,325
----------------
GERMANY .4%
German Treasury Bill,
1.98%, 6/16/04 ..................... 56,000,000 EUR 69,152,572
----------------
NEW ZEALAND 1.0%
Government of New Zealand,
Strip, 12/22/04 ................... 71,500,000 NZD 46,727,913
Strip, 9/22/04 .................... 73,500,000 NZD 48,727,811
New Zealand Treasury Bills, 5.38% to
5.40%, with maturities to 6/16/04 .. 84,000,000 NZD 57,021,242
----------------
152,476,966
----------------
NORWAY .1%
Norwegian Treasury Bill, 2.02%,
9/15/04 ............................ 105,000,000 NOK 14,776,301
----------------
SWEDEN .6%
Kingdom of Sweden, 6.00%,
2/09/05 ............................ 186,000,000 SEK 25,781,446
Sweden Treasury Bills, 2.50% to
2.94%, with maturities to 12/15/04 . 460,000,000 SEK 60,684,057
----------------
86,465,503
----------------
THAILAND .1%
Bank of Thailand, zero cpn., 11/11/04 300,000,000 THB 7,533,415
Thailand Treasury Bills, 1.38% to 1.41%,
with maturities to 10/28/04 ........ 508,000,000 THB 12,767,903
----------------
20,301,318
----------------

Semiannual Report | 21
page

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED)

SHORT TERM INVESTMENTS (CONT.)
UNITED STATES 7.4%
U.S. Treasury Bills, 0.832% to 0.927%,
with maturities to 5/27/04 ......... $1,131,105,000 $ 1,129,658,468
----------------
TOTAL SHORT TERM INVESTMENTS
(COST $1,527,117,559) ............. 1,668,636,012
----------------
TOTAL INVESTMENTS
(COST $12,698,639,706) 99.9% ...... 15,264,069,377
OTHER ASSETS, LESS LIABILITIES .1% . 20,194,752
----------------
NET ASSETS 100.0% .................. $15,284,264,129
================

aNon-income producing.
bSee Note 6 regarding Holdings of 5% Voting Securities.
cRepresents 0.25 of a share.
dThe principal amount is stated in U.S. dollars unless otherwise indicated.

22 | See notes to financial statements. | Semiannual Report
page

Templeton Foreign Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 29, 2004 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................ $12,602,137,150
Cost - Non-controlled affiliated issuers ................... 96,502,556
================
Value - Unaffiliated issuers ............................... 15,136,548,850
Value - Non-controlled affiliated issuers .................. 127,520,527
Cash ........................................................ 1,642,659
Foreign currency, at value (cost $92,531) ................... 38,177
Receivables:
Investment securities sold ................................. 74,831,024
Capital shares sold ........................................ 44,929,630
Dividends and interest ..................................... 27,652,880
----------------
Total assets ........................................... 15,413,163,747
----------------
Liabilities:
Payables:
Investment securities purchased ............................ 73,173,628
Capital shares redeemed .................................... 24,395,425
Affiliates ................................................. 13,679,805
Deferred tax liability (Note 1f) ........................... 14,747,820
Other liabilities ........................................... 2,902,940
----------------
Total liabilities ...................................... 128,899,618
----------------
Net assets, at value ................................. $15,284,264,129
================
Net assets consist of:
Undistributed net investment income ......................... $ (36,349,663)
Net unrealized appreciation (depreciation) .................. 2,551,788,788
Accumulated net realized gain (loss) ........................ (507,632,939)
Capital shares .............................................. 13,276,457,943
----------------
Net assets, at value ................................. $15,284,264,129
================

Semiannual Report | 23
page

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 29, 2004 (unaudited)

CLASS A:

Net assets, at value ...................................................... $13,097,579,045
================
Shares outstanding ........................................................ 1,178,144,652
================
Net asset value per share a ............................................... $11.12
================
Maximum offering price per share (net asset value per share / 94.25%) .... $11.80
================
CLASS B:
Net assets, at value ...................................................... $ 191,733,174
================
Shares outstanding ........................................................ 17,480,585
================
Net asset value and maximum offering price per share a .................... $10.97
================
CLASS C:
Net assets, at value ...................................................... $ 1,193,451,371
================
Shares outstanding ........................................................ 108,617,417
================
Net asset value and maximum offering price per share a .................... $10.99
================
CLASS R:
Net assets, at value ...................................................... $ 96,881,796
================
Shares outstanding ........................................................ 8,761,411
================
Net asset value and maximum offering price per share a .................... $11.06
================
ADVISOR CLASS:
Net assets, at value ...................................................... $ 704,618,743
================
Shares outstanding ........................................................ 63,496,674
================
Net asset value and maximum offering price per share ...................... $11.10
================

a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge and redemption fees retained by the Fund.

24 | See notes to financial statements. | Semiannual Report
page

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 29, 2004 (unaudited)

Investment Income:
(Net of foreign taxes of $7,357,202)

Dividends:
Unaffiliated issuers .................................................... $ 70,859,061
Non-controlled affiliated issuers ....................................... 493,611
Interest ................................................................ 16,064,934
---------------
Total investment income ............................................. 87,417,606
---------------
Expenses:
Management fees (Note 3) ................................................. 40,455,814
Administrative fees (Note 3) ............................................. 5,172,139
Distribution fees (Note 3)
Class A ................................................................. 14,332,996
Class B ................................................................. 822,115
Class C ................................................................. 5,211,378
Class R ................................................................. 185,767
Transfer agent fees (Note 3) ............................................. 12,190,300
Custodian fees ........................................................... 2,366,400
Reports to shareholders .................................................. 405,000
Registration and filing fees ............................................. 233,500
Professional fees ........................................................ 159,300
Directors' fees and expenses ............................................. 72,500
Other .................................................................... 62,400
---------------
Total expenses ...................................................... 81,669,609
---------------
Net investment income ............................................. 5,747,997
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................. 272,738,383
Foreign currency transactions ........................................... (403,042)
---------------
Net realized gain (loss) ............................................ 272,335,341
Net unrealized appreciation (depreciation) on:
Investments ............................................................. 1,910,208,565
Translation of assets and liabilities denominated in foreign currencies . 1,111,286
Deferred taxes (Note 1f) ................................................ (9,726,469)
---------------
Net unrealized appreciation (depreciation) .......................... 1,901,593,382
---------------
Net realized and unrealized gain (loss) ................................... 2,173,928,723
---------------
Net increase (decrease) in net assets resulting from operations ........... $2,179,676,720
===============

Semiannual Report | See notes to financial statements. | 25
page

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended February 29, 2004 (unaudited)
and the year ended August 31, 2003

------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 5,747,997 $ 165,956,216
Net realized gain (loss) from investments and
foreign currency transactions ..................................................... 272,335,341 (279,991,963)
Net unrealized appreciation (depreciation) on investments, translation of assets and
liabilities denominated in foreign currencies, and deferred taxes ................... 1,901,593,382 1,245,619,802
------------------------------------
Net increase (decrease) in net assets resulting from operations ................ 2,179,676,720 1,131,584,055
Distributions to shareholders from:
Net investment income:
Class A ............................................................................ (204,009,975) (133,578,786)
Class B ............................................................................ (2,057,816) (899,326)
Class C ............................................................................ (12,329,941) (6,554,060)
Class R ............................................................................ (1,184,897) (287,825)
Advisor Class ...................................................................... (10,826,764) (5,646,522)
------------------------------------
Total distributions to shareholders ................................................. (230,409,393) (146,966,519)
Capital share transactions (Note 2):
Class A ............................................................................ 1,523,770,426 716,963,192
Class B ............................................................................ 29,409,136 38,303,749
Class C ............................................................................ 137,989,117 33,901,022
Class R ............................................................................ 30,831,543 43,058,351
Advisor Class ...................................................................... 200,701,901 85,438,208
------------------------------------
Total capital share transactions ..................................................... 1,922,702,123 917,664,522
Redemption fees (Note 1h) ............................................................ 106,285 144,269
Net increase (decrease) in net assets ......................................... 3,872,075,735 1,902,426,327
Net assets:
Beginning of period ................................................................. 11,412,188,394 9,509,762,067
------------------------------------
End of period ....................................................................... $15,284,264,129 $11,412,188,394
====================================
Undistributed net investment income included in net assets:
End of period ....................................................................... $ (36,349,663) $ 188,311,733
====================================

26 | See notes to financial statements. | Semiannual Report
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Foreign Fund (the Fund) is a separate, diversified series of Templeton
Funds, Inc. (the Company), which is an open-end investment company registered
under the Investment Company Act of 1940. The Fund seeks long-term capital
growth. Under normal market conditions, the Fund will invest primarily in the
equity securities of companies outside the United States, including emerging
markets. The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

B. FOREIGN CURRENCY TRANSLATION

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the recorded amounts of
dividends, interest and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.

Semiannual Report | 27
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. FOREIGN CURRENCY CONTRACTS

D. INCOME TAXES

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

F. DEFERRED TAXES

28 | Semiannual Report
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. ACCOUNTING ESTIMATES

H. REDEMPTION FEES

I. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.

2. CAPITAL STOCK

The Fund offers five classes of shares: Class A, Class B, Class C, Class R and
Advisor Class shares. Each class of shares differs by its initial sales load,
contingent deferred sales charges, distribution fees, voting rights on matters
affecting a single class, and its exchange privilege.

At February 29, 2004, there were 3.7 billion shares authorized ($1.00 par
value), of which 2 billion shares were designated as Class A, 100 million shares
as Class B, 300 million shares as Class C, 100 million shares as Class R, and
100 million shares as Advisor Class.

Semiannual Report | 29
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------

CLASS A SHARES:
Shares sold ........................ 355,131,943 $3,663,162,836 712,065,887 $ 6,008,114,110
Shares issued in reinvestment of
distributions ...................... 17,760,714 176,503,844 13,857,358 114,573,372
Shares issued on merger
(Note 7) ........................... 3,720,765 36,761,330 2,623,697 21,908,151
Shares redeemed .................... (228,792,203) (2,352,657,584) (642,302,526) (5,427,632,441)
-------------------------------------------------------------------------------
Net increase (decrease) ............ 147,821,219 $1,523,770,426 86,244,416 $ 716,963,192
===============================================================================
CLASS B SHARES:
Shares sold ........................ 3,428,959 $ 35,077,447 5,913,956 $ 49,394,071
Shares issued in reinvestment of
distributions ...................... 179,187 1,748,133 94,760 773,164
Shares redeemed .................... (719,734) (7,416,444) (1,438,060) (11,863,486)
-------------------------------------------------------------------------------
Net increase (decrease) ............ 2,888,412 $ 29,409,136 4,570,656 $ 38,303,749
===============================================================================
CLASS C SHARES:
Shares sold ........................ 18,119,751 $ 186,686,062 18,171,471 $ 152,299,454
Shares issued in reinvestment of
distributions ...................... 1,021,688 9,986,227 654,069 5,342,064
Shares issued on merger
(Note 7) ........................... 1,423,906 13,911,650 682,700 5,639,118
Shares redeemed .................... (7,070,771) (72,594,822) (15,631,904) (129,379,614)
-------------------------------------------------------------------------------
Net increase (decrease) ............ 13,494,574 $ 137,989,117 3,876,336 $ 33,901,022
===============================================================================
CLASS R SHARES:
Shares sold ........................ 4,983,774 $ 51,599,510 6,978,027 $ 58,937,552
Shares issued in reinvestment of
distributions ...................... 111,580 1,102,092 34,870 287,279
Shares redeemed .................... (2,121,013) (21,870,059) (1,866,193) (16,166,480)
-------------------------------------------------------------------------------
Net increase (decrease) ............ 2,974,341 $ 30,831,543 5,146,704 $ 43,058,351
===============================================================================
ADVISOR CLASS SHARES:
Shares sold ........................ 22,997,050 $ 236,549,227 28,200,998 $ 237,039,300
Shares issued in reinvestment of
distributions ...................... 556,199 5,523,927 319,212 2,633,633
Shares issued on
merger (Note 7) .................... -- 42,450 354,039
Shares redeemed .................... (4,008,637) (41,371,253) (18,410,771) (154,588,764)
-------------------------------------------------------------------------------
Net increase (decrease) ............ 19,544,612 $ 200,701,901 10,151,889 $ 85,438,208
===============================================================================

30 | Semiannual Report
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES

Certain officers of the Fund are also officers or directors of the following
entities:

- -------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- -------------------------------------------------------------------------------------------

The Fund pays an investment management fee to TGAL based on the average daily
net assets of the Fund as follows:

- ----------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- ----------------------------------------------------------------------------
0.750% First $200 million
0.675% Over $200 million, up to and including $1.3 billion
0.600% Over $1.3 billion

The Fund pays its allocated share of an administrative fee to FT Services based
on the Company's aggregate average daily net assets as follows:

- ----------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- ----------------------------------------------------------------------------
0.150% First $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion

The Fund reimburses Distributors up to 0.25%, 1.00%, 1.00%, and 0.50% per year
of the average daily net assets of Class A, Class B, Class C, and Class R
shares, respectively for costs incurred in marketing the Fund's shares under a
Rule 12b-1 plan.

Under the Class A distribution plan, costs exceeding the maximum may be
reimbursed in subsequent periods. At February 29, 2004, Distributors advised the
Fund unreimbursed costs were $15,719,187.

Distributors has advised the Fund it received net commissions from sales of the
Fund's shares and received contingent deferred sales charges for the period of
$555,898 and $161,837, respectively.

The Fund paid transfer agent fees of $12,190,300, of which $7,066,033 was paid
to Investor Services.

Semiannual Report | 31
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES

At February 29, 2004, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ..................................... $12,756,206,602
----------------
Unrealized appreciation ................................. 2,923,320,608
Unrealized depreciation ................................. (415,457,833)
----------------
Net unrealized appreciation (depreciation) .............. $ 2,507,862,775
================

At August 31, 2003, the Fund had tax basis capital losses including $18,417, 772
from the merged Fiduciary International Equity Fund, $10,177,657 from the merged
Templeton Latin America Fund, Inc., and $15,842,775 from the merged Templeton
Pacific Growth Fund which may be carried over to offset future capital gains,
subject to certain limitations. Such losses expire as follows:

Capital loss carryovers expiring in:
2005 .................................................... $ 8,588,827
2006 .................................................... 2,289,749
2007 .................................................... 4,651,723
2008 .................................................... 24,054,548
2009 .................................................... 4,573,249
2010 .................................................... 268,539,818
2011 .................................................... 153,281,843
-------------
$465,979,757
=============

At August 31, 2003, the Fund had deferred capital losses occurring subsequent to
October 31, 2002 of $262,462,370. For tax purposes, such losses will be
reflected in the year ending August 31, 2004.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended February 29, 2004 aggregated $3,073,746,733 and $1,568,651,354,
respectively.

32 | Semiannual Report
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. AFFILIATES

The Investment Company Act of 1940 defines "affiliated companies" to include
investments in portfolio companies in which a fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" for the
Templeton Foreign Fund at February 29, 2004 were as shown below.

- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES HELD SHARES HELD VALUE REALIZED
AT BEGINNING OF GROSS GROSS AT END OF AT END OF INVESTMENT CAPITAL
NAME OF ISSUER 31-AUG-03 ADDITIONS REDUCTIONS 29-FEB-04 29-FEB-04 INCOME GAINS (LOSSES)
- -----------------------------------------------------------------------------------------------------------------------------

Satyam Computers
Services LTD ....... 18,489,560 142,194 -- 18,631,754 $127,520,527 $493,611 --
--------------------------------------------

7. MERGERS

On May 9, 2003, the Fund acquired the net assets of each of Templeton Latin
America Fund, Inc. ("TLAF") and Templeton Pacific Growth Fund ("TPGF") pursuant
to plans of reorganization approved by the shareholders of each of TLAF, TPFG
and the Fund. The merger with TLAF was accomplished by a tax-free exchange of
936,737 Class A shares, 257,757 Class C shares, 11,510 Advisor shares of the
Fund (valued at $8.35 per share, $8.26 per share, and $8.34 per share
respectively) for $10,046,833 in net assets of TLAF , including $76,620 of
unrealized appreciation. The merger with TPGF was accomplished by a tax-free
exchange of 1,686,960 Class A shares, 424,943 Class C shares, 30,940 Advisor
shares of the Fund (valued at $8.35 per share, $8.26 per share, and $8.34 per
share respectively) for $17,854,475 in net assets of TPFG , including $4,061,534
of unrealized depreciation. The combined net assets of the Fund immediately
after the merger were $9,754,307,218.

On October 24, 2003, the Fund acquired the net assets of Victory International
Fund ("VIF") pursuant to a plan of reorganization approved by the Victory
International Fund's shareholders. The merger was accomplished by a tax-free
exchange of 3,720,765 Class A shares, and 1,423,906 Class C shares (valued at
$9.88 per share, and $9.77 per share respectively) for the net assets of the
Victory International Fund which aggregated $ 50,672,980, including $1,465,250
of unrealized appreciation. The combined net assets of the Fund immediately
after the merger were $12,357,987,189.

8. REGULATORY MATTERS

Semiannual Report | 33
page

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

34 | Semiannual Report
page

Templeton Funds, Inc.
Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS

The results of the voting at the meetings are as follows:

Proposal 1. The election of Directors:

- --------------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
NAME FOR SHARES SHARES WITHHELD SHARES SHARES
- --------------------------------------------------------------------------------------------------------------------

Harris J. Ashton ....... 921,784,744.074 55.931% 96.841% 30,069,431.717 1.825% 3.159%
Frank J. Crothers ...... 922,941,744.041 56.002% 96.963% 28,912,431.750 1.754% 3.037%
S. Joseph Fortunato .... 921,536,770.158 55.916% 96.815% 30,317,405.633 1.840% 3.185%
Edith E. Holiday ....... 922,141,284.526 55.953% 96.878% 29,712,891.265 1.803% 3.122%
Betty P. Krahmer ....... 922,120,923.381 55.952% 96.876% 29,733,252.410 1.804% 3.124%
Gordon S. Macklin ...... 919,950,702.066 55.820% 96.648% 31,903,473.725 1.936% 3.352%
Fred R. Millsaps ....... 921,781,604.376 55.931% 96.841% 30,072,571.415 1.825% 3.159%
Frank A. Olson ......... 921,885,948.423 55.937% 96.852% 29,968,227.368 1.818% 3.148%
Constantine D.
Tseretopoulos ......... 922,494,170.096 55.974% 96.915% 29,360,005.695 1.781% 3.085%
Nicholas F. Brady ...... 920,077,248.202 55.828% 96.662% 31,776,927.589 1.928% 3.338%
Charles B. Johnson ..... 921,934,947.866 55.940% 96.857% 29,919,227.925 1.815% 3.143%
Rupert H. Johnson, Jr. . 922,312,771.073 55.963% 96.896% 29,541,404.718 1.792% 3.104%

Semiannual Report | 35
page

Templeton Funds, Inc.
Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

TEMPLETON WORLD FUND

Proposal 2. To approve an Agreement and Plan of Reorganization that provides for
the reorganization of the Company from a Maryland corporation to a Delaware
statutory trust:

- -------------------------------------------------------------------------------------------------
SHARES VOTED % OF OUTSTANDING SHARES % OF VOTED SHARES
- -------------------------------------------------------------------------------------------------

For .................... 205,986,169.412 46.36% 76.50%
Against ................ 11,145,652.789 2.51% 4.14%
Abstain ................ 17,845,723.640 4.02% 6.63%
Broker Non-Votes ....... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL .................. 269,255,163.841 60.60% 100.00%

Proposal 3. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes eight (8) Sub-Proposals):

Proposal 3a: To amend the Fund's fundamental investment restriction
regarding diversification of investments:

For ....................... 198,075,490.497 44.58% 73.56%
Against ................... 17,078,193.176 3.84% 6.34%
Abstain ................... 19,823,862.168 4.46% 7.36%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Proposal 3b: To amend the Fund's fundamental investment restriction
regarding investments in real estate:

For ....................... 196,144,571.180 44.14% 72.85%
Against ................... 18,708,344.423 4.21% 6.95%
Abstain ................... 20,124,630.238 4.53% 7.47%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Proposal 3c: To amend the Fund's fundamental investment restriction
regarding investments in commodities:

For ....................... 193,706,578.502 43.60% 71.94%
Against ................... 20,874,505.430 4.70% 7.75%
Abstain ................... 20,396,461.909 4.59% 7.58%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

36 | Semiannual Report
page

Templeton Funds, Inc.
Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 3d: To amend the Fund's fundamental investment restriction
regarding underwriting:

For ....................... 195,372,012.641 43.97% 72.56%
Against ................... 18,789,891.580 4.23% 6.98%
Abstain ................... 20,815,641.620 4.68% 7.73%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Proposal 3e: To amend the Fund's fundamental investment restriction
regarding issuing senior securities:

For ....................... 194,482,896.567 43.77% 72.23%
Against ................... 19,627,049.440 4.42% 7.29%
Abstain ................... 20,867,599.834 4.70% 7.75%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Proposal 3f: To amend the Fund's fundamental investment restriction
regarding lending:

For ....................... 193,332,019.187 43.51% 71.80%
Against ................... 21,001,905.408 4.73% 7.80%
Abstain ................... 20,643,621.246 4.65% 7.67%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Proposal 3g: To amend the Fund's fundamental investment restriction
regarding borrowing:

For ....................... 192,945,793.887 43.42% 71.66%
Against ................... 21,324,278.313 4.80% 7.92%
Abstain ................... 20,707,473.641 4.66% 7.69%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Proposal 3h: To amend the Fund's fundamental investment restriction
regarding industry concentration:

For ....................... 196,197,703.544 44.16% 72.87%
Against ................... 18,130,780.473 4.08% 6.73%
Abstain ................... 20,649,061.824 4.65% 7.67%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Semiannual Report | 37
page

Templeton Funds, Inc.
Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 4: To approve the elimination of certain of the Fund's fundamental
investment policies and restrictions:

For ....................... 193,188,252.823 43.48% 71.75%
Against ................... 20,289,573.527 4.57% 7.54%
Abstain ................... 21,499,719.491 4.84% 7.98%
Broker Non-Votes .......... 34,277,618.000 7.71% 12.73%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 269,255,163.841 60.60% 100.00%

Note: Due to rounding, the percentage totals may not necessarily agree with the
arithmetic sum of the figures.

TEMPLETON FOREIGN FUND

Proposal 2. To approve an Agreement and Plan of Reorganization that provides for
the reorganization of the Company from a Maryland corporation to a
Delaware statutory trust:

For ....................... 510,474,835.581 42.41% 75.32%
Against ................... 14,814,274.570 1.23% 2.19%
Abstain ................... 25,397,576.897 2.11% 3.75%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 3. To approve amendments to certain of the Fund's fundamental
investmentrestrictions (includes eight (8) Sub-Proposals):

Proposal 3a: To amend the Fund's fundamental investment restriction
regarding diversification of investments:

For ....................... 490,186,478.594 40.72% 72.33%
Against ................... 32,134,290.472 2.67% 4.74%
Abstain ................... 28,365,917.982 2.36% 4.19%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 3b: To amend the Fund's fundamental investment restriction
regarding investments in real estate:

For ....................... 473,774,405.994 39.36% 69.91%
Against ................... 48,254,203.467 4.01% 7.12%
Abstain ................... 28,658,077.587 2.38% 4.23%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

38 | Semiannual Report
page

Templeton Funds, Inc.
Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 3c: To amend the Fund's fundamental investment restriction
regarding investments in commodities:

For ....................... 470,466,666.697 39.08% 69.42%
Against ................... 51,398,329.224 4.27% 7.58%
Abstain ................... 28,821,691.127 2.39% 4.25%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 3d: To amend the Fund's fundamental investment restriction
regarding underwriting:

For ....................... 486,800,593.596 40.44% 71.83%
Against ................... 34,499,704.454 2.87% 5.09%
Abstain ................... 29,386,388.998 2.44% 4.34%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 3e: To amend the Fund's fundamental investment restriction
regarding issuing senior securities:

For ....................... 472,426,528.936 39.25% 69.71%
Against ................... 48,195,385.301 4.00% 7.11%
Abstain ................... 30,064,772.811 2.50% 4.44%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 3f: To amend the Fund's fundamental investment restriction
regarding lending:

For ....................... 477,164,806.541 39.64% 70.41%
Against ................... 43,560,024.543 3.62% 6.43%
Abstain ................... 29,961,855.964 2.49% 4.42%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 3g: To amend the Fund's fundamental investment restriction
regarding borrowing:

For ....................... 468,878,504.005 38.95% 69.19%
Against ................... 52,006,297.555 4.32% 7.67%
Abstain ................... 29,801,885.488 2.48% 4.40%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Semiannual Report | 39
page

Templeton Funds, Inc.
Templeton World Fund
Templeton Foreign Fund

SPECIAL MEETING OF SHAREHOLDERS (CONTINUED)

Proposal 3h: To amend the Fund's fundamental investment restriction
regarding industry concentration:

For ....................... 492,392,791.708 40.91% 72.66%
Against ................... 28,612,437.757 2.38% 4.22%
Abstain ................... 29,681,457.583 2.47% 4.38%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Proposal 4: To approve the elimination of certain of the Fund's fundamental
investment policies and restrictions:

For ....................... 478,701,466.998 39.77% 70.63%
Against ................... 41,327,882.755 3.43% 6.10%
Abstain ................... 30,657,337.295 2.55% 4.52%
Broker Non-Votes .......... 127,025,346.182 10.55% 18.74%
- -------------------------------------------------------------------------------------------------
TOTAL ..................... 677,712,033.230 56.30% 100.00%

Note: Due to rounding, the percentage totals may not necessarily agree with the
arithmetic sum of the figures.

40 | Semiannual Report
page

Templeton Foreign Fund

PROXY VOTING POLICIES AND PROCEDURES

Semiannual Report | 41
page

This page intentionally left blank.
page

Literature Request

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5,6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Money Fund 5,6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 7

NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5,6

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10

1.The fund is closed to new investors. Existing shareholders can continue adding
to their accounts.

2.The fund is only open to existing shareholders as well as select retirement
plans.

3.The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.

4.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.

5.An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

6.No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.

7.For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.

8.Portfolio of insured municipal securities.

9.These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).

10.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

page

[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER
Templeton Foreign Fund

INVESTMENT MANAGER
Templeton Global Advisors Limited

PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES
1-800/632-2301

Authorized for distribution only when accompanied or preceded by a current
Templeton Foreign Fund prospectus. Investors should carefully consider a fund's
investment goals, risks, charges and expenses before investing. Like any
investment in securities, the value of the Fund's portfolio will be subject to
the risk of loss from market, currency, economic, political and other factors.
The Fund and its investors are not protected from such losses by the Investment
Manager. Therefore, investors who cannot accept this risk should not invest in
shares of the Fund. To obtain a prospectus, which contains this and other
information, talk to your financial advisor, call us at 1-800/DIAL BEN(R)
(1-800/342-5236) or visit franklintempleton.com. Please read the prospectus
carefully before investing.

104 S2004 04/04

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.

(D) N/A

(F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF
ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS 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 EXPERT IS FRED R. MILLSAPS AND HE IS
"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/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASERS. N/A

ITEM 9. SUBMISSTION OF MATTERS OF A VOTE SECURITY HOLDERS.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Directors that would require disclosure
herein.

ITEM 10. CONTROLS AND PROCEDURES.

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 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 significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS

(A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS.

(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
DIOMEDES LOO-TAM, CHIEF FINANCIAL OFFICER

(B)(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
DIOMEDES LOO-TAM, CHIEF FINANCIAL OFFICER

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, INC.

By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date April 30, 2004

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/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date April 30, 2004

By /s/DIOMEDES LOO-TAM
Chief Financial Officer
Date April 30, 2004