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 811-02781
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TEMPLETON FUNDS, INC.
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(Exact name of registrant as specified in charter)

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

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28/05
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ITEM 1. REPORTS TO STOCKHOLDERS

TEMPLETON WORLD FUND

[GRAPHIC OMITTED]

FEBRUARY 28, 2005
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | GLOBAL
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WANT TO RECEIVE
[GRAPHIC OMITTED] THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON WORLD FUND
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.

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

Franklin o TEMPLETON o Mutual Series

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
recognized leader in fixed income investing and
also brings 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. Founded 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.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

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

SEMIANNUAL REPORT

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

Performance Summary ....................................................... 8

Your Fund's Expenses....................................................... 10

Financial Highlights and
Statement of Investments .................................................. 12

Financial Statements ...................................................... 21

Notes to Financial Statements ............................................. 24

Shareholder Information.................................................... 34

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Semiannual Report

Templeton World Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Templeton World 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.

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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
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We are pleased to bring you Templeton World Fund's semiannual report for the
period ended February 28, 2005.

PERFORMANCE OVERVIEW

For the six months under review, Templeton World Fund - Class A posted a 19.39%
cumulative total return. The Fund outperformed its benchmark, the Morgan Stanley
Capital International (MSCI) World Index, which posted a 15.24% total return for
the same period.(1) In line with our long-term investment strategy, we are also
pleased with our long-term results, as shown in the Performance Summary
beginning on page 8. For the 10-year period ended February 28, 2005, Templeton
World Fund - Class A delivered a 187.04% cumulative total return, compared with
the MSCI World Index's 128.82% cumulative total return for the same period.(1)
Please note that index performance information is provided for reference and
that we do not attempt to track the index, but rather undertake investments on
the basis of fundamental research.

ECONOMIC AND MARKET OVERVIEW

(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.

(2) Source: National Bureau of Statistics of China.

(3) Sources: Statistics Canada; Office for National Statistics (U.K.);
Eurostat.

(4) Source: Japan Cabinet Office.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 15.

Semiannual Report | 3

GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 2/28/05

[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]

Europe 41.2%
Asia 28.5%
North America 23.1%
Australia & New Zealand 2.4%
Latin America 1.3%
Middle East & Africa 0.9%
Short-Term Investments & Other Net Assets 2.6%

TOP 10 COUNTRIES
Based on Equity Securities
2/28/05

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% OF TOTAL
NET ASSETS
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U.S. 20.7%
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U.K. 17.8%
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Japan 8.6%
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South Korea 7.7%
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Hong Kong 6.9%
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Netherlands 6.0%
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France 4.5%
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Switzerland 4.4%
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Germany 3.3%
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Bermuda 2.3%
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Industrial metals and several other commodity prices rose particularly due to
increased demand from China. While Chile, Brazil, Canada, Australia and
Argentina benefited from strong overall demand for natural resources, Mexico and
other oil-exporting countries benefited specifically from high oil prices.

Investors' major concerns during the six months were rising energy costs (oil
prices reached a high of $56 in October 2004) and the large U.S. budget and
current account deficits.(5) Offsetting this, relatively low inflation and
short-term interest rates supported global stock market levels, despite recent
rate increases by the U.S. Federal Reserve Board and other central banks. An
additional factor was the large number of companies that returned cash to
shareholders during the period through rising dividends and share repurchases.

During the six-month period under review, the MSCI World Index's total return
was 15.24% and the MSCI Emerging Markets Index's was 35.36%, in U.S. dollars.(6)
In local currencies, their respective total returns were 11.12% and 23.89%.(6)
For most of the period, the majority of the world's currencies strengthened in
relation to the U.S. dollar. However, the U.S. dollar's protracted decline
versus these currencies reversed course in January 2005, as the dollar
appreciated. Still, the currency effect benefited U.S.-based investors who
invested in non-U.S. equities from developed and emerging market countries, as
local currency returns were boosted when translated into a weaker U.S. dollar.

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.

(5) Source: U.S. Department of Energy.

(6) Source: Standard & Poor's Micropal. See footnote 1 for a description of
the MSCI World Index. The MSCI Emerging Markets Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global emerging markets.

4 | Semiannual Report

MANAGER'S DISCUSSION

During the six months under review, a broad array of individual holdings
contributed to the Fund's outperformance versus the benchmark MSCI World Index.
During the period, only 10 of the Fund's 167 holdings posted negative returns,
indicating just how broad our positive performance was in terms of world
regions, market capitalizations and sectors/industries. Of the Fund's top 20
contributors, 11 were based in the U.K. and Europe, eight were Asian, and just
one was U.S.-based (Dow Chemical).

Among our top performers were metals and mining companies Cia Vale do Rio Doce
(Brazil) and BHP Billiton (Australia), which gained more than 60% each during
the six months under review. Other notable gainers included selected emerging
market holdings such as Argentina's Inversiones y Representacion (real estate,
convertible bond investment), Indian banking concern ICICI Bank, South Korea's
POSCO (metals and mining), and Philippine company Ayala Land (real estate).

It is also important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar increases compared with
a foreign currency, an investment traded in that foreign currency will decrease
in value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. For the six months
ended February 28, 2005, the U.S. dollar declined in value relative to most
non-U.S. currencies. The Fund's performance was positively affected by the
portfolio's primary investment in securities with non-U.S. currency exposure due
to the U.S. dollar's decrease in value during the period. However, one cannot
expect the same result in future periods.

Overall, South Korean holdings totaled 7.7% of the Fund's total net assets at
period-end. Within our South Korean investments, a number of bank holdings were
particularly strong. Many investors appeared to realize that the South Korean
banking industry had passed the peak in loan loss provisions for credit card
losses. Although loan growth had yet to strongly improve, profits had the
potential to rebound for several years beginning in 2005. At period-end, we
believed Korean bank stock valuations remained attractive. This was evidenced

TOP 10 SECTORS/INDUSTRIES
Based on Equity Securities
2/28/05

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% OF TOTAL
NET ASSETS
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Oil & Gas 10.1%
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Pharmaceuticals 8.6%
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Insurance 7.4%
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Commercial Banks 5.6%
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Real Estate 5.3%
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Media 4.8%
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Software 4.4%
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Capital Markets 4.0%
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Industrial Conglomerates 3.7%
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Health Care Providers & Services 3.5%
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Semiannual Report | 5

TOP 10 EQUITY HOLDINGS
2/28/05

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COMPANY % OF TOTAL
SECTION/INDUSTRY, COUNTRY NET ASSETS
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Cheung Kong Holdings Ltd. 3.8%
REAL ESTATE, HONG KONG
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Sanofi-Aventis, Ord. & Frankfurt Listed 2.3%
PHARMACEUTICALS, FRANCE
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Royal Dutch Petroleum Co. 2.3%
OIL & GAS, NETHERLANDS
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BP PLC 2.2%
OIL & GAS, U.K.
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Hutchison Whampoa Ltd. 2.1%
INDUSTRIAL CONGLOMERATES, HONG KONG
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Samsung Electronics Co. Ltd.,
common & preferred 2.1%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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Nippon Telegraph & Telephone Corp. 1.8%
DIVERSIFIED TELECOMMUNICATION
SERVICES, JAPAN
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Kookmin Bank 1.7%
COMMERCIAL BANKS, SOUTH KOREA
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Swiss Reinsurance Co. 1.7%
INSURANCE, SWITZERLAND
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El Paso Corp. 1.6%
OIL & GAS, U.S.
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in part by the second major takeover in recent months with Standard Chartered's
successful bid for Korea First Bank in January 2005, although the Fund had no
holdings in either company.

With oil prices spiking over $50 per barrel in October 2004 and again in
February 2005, the improved earnings, cash flows and dividends for major oil and
gas companies continued to make their valuations look compelling to us.(5) Not
surprisingly, our holdings in BP, Royal Dutch Petroleum and Shell Transport &
Trading were a boost to the Fund's overall results this reporting period.

Even though it was a very good six months for the Fund, we had some investments
that detracted from our overall results. For example, DIRECTV Group's stock fell
about 5% due to several conditions, including strong competition from TiVo and
negative investor sentiment stemming from a delay in DIRECTV's potential share
repurchase activity. Secondly, our stock in U.S. insurance firm American
International Group (AIG) declined about 6%. AIG's share price suffered due to
several factors such as continued asbestos claims and recent allegations of
improper pricing. Lastly, pharmaceutical giant Pfizer's share price fell more
than 18% despite a climb in value toward period-end. Inconclusive results from
comparative cholesterol product testing and investor worries about the future
market for Celebrex were the primary negative influences on Pfizer's underlying
stock price. Toward period-end, however, Pfizer's share price was uplifted by
some positive news from the U.S. Food and Drug Administration.

6 | Semiannual Report

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

/s/ Jeffrey A. Everett

[PHOTO OMITTED] Jeffrey A. Everett, CFA
Portfolio Manager
Templeton World Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF FEBRUARY 28, 2005, 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.

Semiannual Report | 7

Performance Summary as of 2/28/05

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 reinvestment of the Fund's dividends
and capital gain distributions, if any, and any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- ---------------------------------------------------------------------------------------
CLASS A CHANGE 2/28/05 8/31/04
- ---------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.45 $18.23 $16.78
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DISTRIBUTIONS (9/1/04-2/28/05)
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Dividend Income $0.3189
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Short-Term Capital Gain $0.0026
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Long-Term Capital Gain $1.2524
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TOTAL $1.5739
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CLASS B CHANGE 2/28/05 8/31/04
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Net Asset Value (NAV) +$1.47 $18.00 $16.53
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DISTRIBUTIONS (9/1/04-2/28/05)
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Dividend Income $0.1982
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Short-Term Capital Gain $0.0026
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Long-Term Capital Gain $1.2524
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TOTAL $1.4532
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CLASS C CHANGE 2/28/05 8/31/04
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Net Asset Value (NAV) +$1.45 $17.82 $16.37
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DISTRIBUTIONS (9/1/04-2/28/05)
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Dividend Income $0.1929
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Short-Term Capital Gain $0.0026
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Long-Term Capital Gain $1.2524
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TOTAL $1.4479
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8 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND VALUE OF $10,000 INVESTMENT INCLUDE
MAXIMUM SALES CHARGES.

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

Cumulative Total Return(1) 19.39% 12.36% 31.05% 187.04%
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Average Annual Total Return(2) 12.55% 5.89% 4.31% 10.47%
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Value of $10,000 Investment(3) $11,255 $10,589 $12,351 $27,061
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Avg. Ann. Total Return (3/31/05)(4) 4.65% 2.70% 9.96%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return(1) 18.96% 11.54% 26.27% 50.27%
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Average Annual Total Return(2) 14.96% 7.54% 4.44% 6.83%
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Value of $10,000 Investment(3) $11,496 $10,754 $12,427 $15,027
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Avg. Ann. Total Return (3/31/05)(4) 6.19% 2.80% 6.27%
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CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
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Cumulative Total Return(1) 18.99% 11.56% 26.30% 151.16%
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Average Annual Total Return(2) 17.99% 10.56% 4.78% 9.82%
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Value of $10,000 Investment(3) $11,799 $11,056 $12,630 $25,116
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Avg. Ann. Total Return (3/31/05)(4) 9.20% 3.15% 9.43%
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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.

FOR MOST RECENT MONTH-END PERFORMANCE, 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 B: These shares have higher annual fees and expenses than Class A
shares.

Class C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares
have higher annual fees and expenses than Class A shares.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(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. 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.

(4) In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

Semiannual Report | 9

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.

ACTUAL FUND EXPENSES

The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.

IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."

IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.

10 | Semiannual Report

Your Fund's Expenses (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.

- ---------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 8/31/04 VALUE 2/28/05 PERIOD* 8/31/04-2/28/05
- ---------------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,193.90 $5.87
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.44 $5.41
- ---------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,189.60 $9.94
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.72 $9.15
- ---------------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,189.90 $9.94
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.72 $9.15
- ---------------------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
1.08%; B: 1.83%; and C: 1.83%), multiplied by the average account value
over the period, multiplied by 181/365 to reflect the one-half year
period.

Semiannual Report | 11

Templeton World Fund

FINANCIAL HIGHLIGHTS

----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period.... $ 16.78 $ 15.12 $ 13.64 $ 14.70 $ 18.87 $ 18.14
----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) .............. .06 .22 .18 .17(e) .29 .27

Net realized and unrealized
gains (losses) ....................... 2.96 1.74 1.46 (.96)(e) (3.04) 1.93
----------------------------------------------------------------------------------------
Total from investment operations ....... 3.02 1.96 1.64 (.79) (2.75) 2.20
----------------------------------------------------------------------------------------
Less distributions from:

Net investment income ................. (.32) (.30) (.16) (.27) (.27) (.38)

Net realized gains .................... (1.25) -- -- -- (1.15) (1.09)
----------------------------------------------------------------------------------------
Total distributions .................... (1.57) (.30) (.16) (.27) (1.42) (1.47)
----------------------------------------------------------------------------------------
Redemption fees ........................ --(c) --(c) --(c) -- -- --
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 18.23 $ 16.78 $ 15.12 $ 13.64 $ 14.70 $ 18.87
========================================================================================

Total return(b) ........................ 19.39% 13.10% 12.27% (5.43)% (15.18)% 13.59%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 7,908,951 $ 6,924,779 $ 6,419,826 $ 6,161,235 $ 7,102,237 $9,515,467

Ratios to average net assets:

Expenses .............................. 1.08%(d) 1.11% 1.11% 1.08% 1.09% 1.07%

Net investment income ................. .77%(d) 1.32% 1.40% 1.15%(e) 1.79% 1.52%

Portfolio turnover rate ................ 9.08% 37.58% 43.91% 44.56% 24.91% 46.92%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

(d) Annualized.

(e) Effective 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.

12 | See notes to financial statements. | Semiannual Report

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period ... $ 16.53 $ 14.92 $ 13.46 $ 14.51 $ 18.66 $ 18.05
----------------------------------------------------------------------------------------
Income from investment operations:

Net investment income (loss)(a) ....... -- .10 .09 .06(e) .17 .15

Net realized and unrealized gains
(losses) ............................. 2.92 1.71 1.44 (.95)(e) (3.01) 1.90
----------------------------------------------------------------------------------------
Total from investment operations ....... 2.92 1.81 1.53 (.89) (2.84) 2.05
----------------------------------------------------------------------------------------
Less distributions from:

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

Net realized gains .................... (1.25) -- -- -- (1.15) (1.09)
----------------------------------------------------------------------------------------
Total distributions .................... (1.45) (.20) (.07) (.16) (1.31) (1.44)
----------------------------------------------------------------------------------------
Redemption fees ........................ --(c) --(c) --(c) -- -- --
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 18.00 $ 16.53 $ 14.92 $ 13.46 $ 14.51 $ 18.66
========================================================================================

Total return(b) ........................ 18.96% 12.24% 11.46% (6.12)% (15.82)% 12.76%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 60,833 $ 49,419 $ 37,166 $ 29,311 $ 25,743 $ 23,816

Ratios to average net assets:

Expenses .............................. 1.83%(d) 1.86% 1.86% 1.83% 1.83% 1.82%

Net investment income ................. .02%(d) .57% .65% .40%(e) 1.08% .83%

Portfolio turnover rate ................ 9.08% 37.58% 43.91% 44.56% 24.91% 46.92%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

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.

Semiannual Report | See notes to financial statements. | 13

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period ... $ 16.37 $ 14.77 $ 13.31 $ 14.34 $ 18.43 $ 17.71
----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income (loss)(a) ....... -- .09 .09 .06(e) .17 .14

Net realized and unrealized gains
(losses) ............................... 2.89 1.70 1.43 (.94)(e) (2.98) 1.89
----------------------------------------------------------------------------------------
Total from investment operations ....... 2.89 1.79 1.52 (.88) (2.81) 2.03
----------------------------------------------------------------------------------------
Less distributions from:

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

Net realized gains .................... (1.25) -- -- -- (1.15) (1.09)
----------------------------------------------------------------------------------------
Total distributions .................... (1.44) (.19) (.06) (.15) (1.28) (1.31)
----------------------------------------------------------------------------------------
Redemption fees ........................ --(c) --(c) --(c) -- -- --
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 17.82 $ 16.37 $ 14.77 $ 13.31 $ 14.34 $ 18.43
========================================================================================

Total return(b) ........................ 18.99% 12.24% 11.46% (6.15)% (15.83)% 12.77%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 341,242 $ 295,009 $ 270,417 $ 264,751 $ 313,538 $ 423,614

Ratios to average net assets:

Expenses .............................. 1.83%(d) 1.86% 1.86% 1.83% 1.83% 1.82%

Net investment income ................. 02%(d) .57% .65% .40%(e) 1.04% .78%

Portfolio turnover rate ................ 9.08% 37.58% 43.91% 44.56% 24.91% 46.92%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

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.

14 | See notes to financial statements. | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED)

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

COMMON STOCKS 94.5%
ARGENTINA .0%(a)
(b) Inversiones y Representacion SA, GDR.... Real Estate 1 $ 12
----------------
AUSTRALIA 1.9%
BHP Billiton Ltd. ...................... Metals & Mining 4,122,969 62,542,997
National Australia Bank Ltd. ........... Commercial Banks 1,961,101 44,762,995
Qantas Airways Ltd. .................... Airlines 17,225,345 49,556,570
----------------
156,862,562
----------------
BERMUDA 2.3%
ACE Ltd. ............................... Insurance 2,588,800 115,098,048
XL Capital Ltd., A ..................... Insurance 1,044,952 78,371,400
----------------
193,469,448
----------------
CHINA 1.7%
China Mobile (Hong Kong) Ltd. .......... Wireless Telecommunication Services 19,616,800 64,014,715
China Mobile (Hong Kong) Ltd., ADR ..... Wireless Telecommunication Services 100,000 1,620,000
Guangdong Electric Power Development
Co Ltd., B ........................... Electric Utilities 16,090,315 8,500,131
PetroChina Co. Ltd., H ................. Oil & Gas 110,289,000 69,646,982
----------------
143,781,828
----------------
FINLAND 1.5%
Sampo OYJ, A ........................... Insurance 562,696 7,880,009
Stora Enso OYJ, R (EUR/FIM Traded) ..... Paper & Forest Products 5,913,360 90,093,502
UPM-Kymmene Corp. ...................... Paper & Forest Products 1,244,590 27,738,498
----------------
125,712,009
----------------
FRANCE 4.5%
Sanofi-Aventis ......................... Pharmaceuticals 1,861,821 148,918,066
Sanofi-Aventis (Frankfurt Listed) ...... Pharmaceuticals 537,750 43,218,539
Societe BIC SA ......................... Commercial Services & Supplies 621,001 34,769,609
Suez SA ................................ Multi-Utilities & Unregulated Power 2,908,340 78,760,962
Valeo SA ............................... Auto Components 1,415,710 67,885,238
----------------
373,552,414
----------------
GERMANY 2.8%
Deutsche Post AG ....................... Air Freight & Logistics 3,158,400 75,787,547
E.ON AG ................................ Electric Utilities 1,025,000 91,988,572
Muenchener Rueckversicherungs-
Gesellschaft ......................... Insurance 97,503 11,969,341
Muenchener Rueckversicherungs-
Gesellschaft, 144A ................... Insurance 27,857 3,419,689
Volkswagen AG .......................... Automobiles 999,200 49,289,138
----------------
232,454,287
----------------

Semiannual Report | 15

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
HONG KONG 6.9%
Cheung Kong Holdings Ltd. .............. Real Estate 33,055,120 $ 314,701,679
Hang Lung Group Ltd. ................... Real Estate 1,345,000 2,448,919
Hutchison Whampoa Ltd. ................. Industrial Conglomerates 19,512,060 176,382,748
New World Development Co. Ltd. ......... Real Estate 28,330,443 28,879,147
Shangri-La Asia Ltd. ................... Hotels Restaurants & Leisure 12,464,938 18,859,753
Swire Pacific Ltd., A .................. Industrial Conglomerates 4,326,500 35,365,578
----------------
576,637,824
----------------
INDIA 1.7%
Housing Development Finance
Corp. Ltd. ........................... Thrifts & Mortgage Finance 3,188,190 56,808,015
ICICI Bank Ltd. ........................ Commercial Banks 3,648,860 31,839,199
Satyam Computers Services Ltd. ......... IT Services 5,864,530 55,285,308
----------------
143,932,522
----------------
ISRAEL .9%
(b) Check Point Software Technologies Ltd. Software 3,507,820 77,628,057
----------------
ITALY .8%
Eni SpA ................................ Oil & Gas 2,541,076 66,291,280
----------------
JAPAN 8.6%
Nintendo Co. Ltd. ...................... Software 948,100 105,198,336
Nippon Telegraph & Telephone Corp. ..... Diversified Telecommunication Services 34,921 151,314,869
Nomura Holdings Inc. ................... Capital Markets 7,407,000 102,236,367
Olympus Corp. .......................... Health Care Equipment & Supplies 773,000 17,006,074
Ono Pharmaceutical Co. Ltd. ............ Pharmaceuticals 1,765,500 96,258,549
Shinsei Bank Ltd., 144A ................ Commercial Banks 1,147,000 6,725,439
Sompo Japan Insurance Inc. ............. Insurance 9,348,000 99,251,805
Sony Corp. ............................. Household Durables 1,993,700 76,090,325
Takeda Pharmaceutical Co. Ltd. ......... Pharmaceuticals 1,241,800 59,509,474
----------------
713,591,238
----------------
MEXICO .7%
Cemex SA, ADR .......................... Construction Materials 1,363,101 54,483,147
----------------
NETHERLANDS 6.0%
Akzo Nobel NV .......................... Chemicals 1,931,014 87,071,307
Koninklijke Philips Electronics NV ..... Household Durables 3,557,105 98,402,844
Reed Elsevier NV ....................... Media 2,975,695 44,686,259
Rodamco Europe NV ...................... Diversified Financial Services 505,588 40,740,829
Royal Dutch Petroleum Co. .............. Oil & Gas 3,036,000 191,373,255
VNU NV ................................. Media 1,154,000 36,126,493
----------------
498,400,987
----------------
PHILIPPINES .2%
Ayala Land Inc. ........................ Real Estate 81,688,000 14,045,495
----------------
SINGAPORE .2%
Venture Corp. Ltd. ..................... Electronic Equipment & Instruments 2,032,000 18,038,839
----------------

16 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
SOUTH KOREA 7.0%
Hana Bank .............................. Commercial Banks 2,955,950 $ 84,602,850
Kookmin Bank ........................... Commercial Banks 3,112,413 143,769,003
KT Corp., ADR .......................... Diversified Telecommunication Services 2,120,300 49,212,163
POSCO .................................. Metals & Mining 289,517 63,840,732
Samsung Electronics Co. Ltd. ........... Semiconductors & Semiconductor Equipment 229,519 120,414,647
Shinhan Financial Group Co. Ltd. ....... Commercial Banks 2,608,250 77,247,822
SK Telecom Co. Ltd., ADR ............... Wireless Telecommunication Services 2,154,000 45,880,200
----------------
584,967,417
----------------
SPAIN 2.2%
Iberdrola SA, Br. ...................... Electric Utilities 3,342,845 88,181,625
Repsol YPF SA .......................... Oil & Gas 3,460,790 94,226,028
----------------
182,407,653
----------------
SWEDEN .2%
Securitas AB, B ........................ Commercial Services & Supplies 1,207,500 19,239,512
----------------
SWITZERLAND 4.4%
Nestle SA .............................. Food Products 341,094 94,719,779
Novartis AG ............................ Pharmaceuticals 2,154,189 108,047,969
Swiss Reinsurance Co. .................. Insurance 1,941,515 142,518,753
UBS AG ................................. Capital Markets 186,410 16,195,608
----------------
361,482,109
----------------
TAIWAN 1.5%
Chunghwa Telecom Co. Ltd., ADR ......... Diversified Telecommunication Services 2,402,000 52,363,600
Lite-on Technology Corp. ............... Computers & Peripherals 28,543,000 30,949,134
Taiwan Semiconductor
Manufacturing Co. .................... Semiconductors & Semiconductor Equipment 22,031,331 38,987,233
----------------
122,299,967
----------------
UNITED KINGDOM 17.8%
Amvescap PLC ........................... Capital Markets 12,739,249 83,495,116
BAE Systems PLC ........................ Aerospace & Defense 11,670,208 57,422,412
Boots Group PLC ........................ Food & Staples Retailing 4,983,700 63,603,767
BP PLC ................................. Oil & Gas 17,012,401 183,765,845
British Land Co. PLC ................... Real Estate 2,550,032 42,248,935
British Sky Broadcasting Group PLC ..... Media 7,658,909 83,393,018
Centrica PLC ........................... Gas Utilities 5,695,920 25,891,541
Compass Group PLC ...................... Hotels Restaurants & Leisure 3,172,894 15,276,581
GKN PLC ................................ Auto Components 14,031,189 69,443,976
GlaxoSmithKline PLC .................... Pharmaceuticals 5,397,277 128,946,246
Lloyds TSB Group PLC ................... Commercial Banks 8,217,185 77,350,011
National Grid Transco PLC .............. Multi-Utilities & Unregulated Power 5,603,700 54,364,334
Pearson PLC ............................ Media 6,354,069 77,917,583
Rentokil Initial PLC ................... Commercial Services & Supplies 6,608,030 20,130,944
(b) Rolls-Royce Group PLC .................. Aerospace & Defense 10,808,700 54,014,415
Shell Transport & Trading Co. PLC ...... Oil & Gas 10,995,668 103,134,581

Semiannual Report | 17

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
UNITED KINGDOM (CONT.)
Shire Pharmaceuticals Group PLC ........ Pharmaceuticals 2,003,690 $ 22,336,822
Smiths Group PLC ....................... Industrial Conglomerates 5,869,239 96,339,089
Unilever PLC ........................... Food Products 9,106,900 87,125,384
Vodafone Group PLC ..................... Wireless Telecommunication Services 49,994,812 130,925,523
----------------
1,477,126,123
----------------
UNITED STATES 20.7%
Abbott Laboratories .................... Pharmaceuticals 860,100 39,555,999
American International Group Inc........ Insurance 554,500 37,040,600
AmerisourceBergen Corp. ................ Health Care Providers & Services 2,129,940 127,583,406
(b) BMC Software Inc. ..................... Software 4,821,200 72,076,940
Boeing Co. ............................. Aerospace & Defense 206,200 11,334,814
Bristol-Myers Squibb Co. ............... Pharmaceuticals 2,076,280 51,969,288
(b) Cadence Design Systems Inc. ........... Software 6,118,800 84,317,064
CIGNA Corp. ............................ Health Care Providers & Services 801,100 72,739,880
(b) DIRECTV Group Inc. .................... Media 7,282,700 109,313,327
Dow Chemical Co. ....................... Chemicals 2,085,270 115,002,640
EI Paso Corp. .......................... Oil & Gas 10,784,870 132,977,447
JPMorgan Chase & Co. ................... Diversified Financial Services 1,486,760 54,341,078
(b) Maxtor Corp. .......................... Computers & Peripherals 2,535,400 14,046,116
Merrill Lynch & Co. Inc. ............... Capital Markets 2,213,268 129,653,239
Noble Corp. ............................ Energy Equipment & Services 1,013,100 57,817,617
(b) Pactiv Corp. .......................... Containers & Packaging 1,173,700 26,537,357
Pfizer Inc. ............................ Pharmaceuticals 451,400 11,867,306
R.R. Donnelley & Sons Co. .............. Commercial Services & Supplies 2,048,050 68,015,741
Raytheon Co. ........................... Aerospace & Defense 1,988,200 76,028,768
(b) Synopsys Inc. ......................... Software 1,681,838 30,441,268
TECO Energy Inc. ....................... Electric Utilities 3,928,600 62,425,454
(b) Tenet Healthcare Corp. ................ Health Care Providers & Services 8,401,380 91,659,056
(b) Time Warner Inc. ...................... Media 2,562,100 44,144,983
(b) Toys R Us Inc. ........................ Specialty Retail 2,272,210 51,965,443
W.R. Berkley Corp. ..................... Insurance 929,325 47,730,132
(b) Western Digital Corp. ................. Computers & Peripherals 2,263,300 25,484,758
Willis Group Holdings Ltd. ............. Insurance 1,828,100 72,301,355
----------------
1,718,371,076
----------------

TOTAL COMMON STOCKS
(COST $5,916,714,730)................. 7,854,775,806
----------------

PREFERRED STOCKS 1.4%
BRAZIL .2%
Cia Vale do Rio Doce, ADR, pfd., A ..... Metals & Mining 631,500 18,180,885
----------------

GERMANY .5%
Volkswagen AG, pfd. .................... Automobiles 1,235,616 45,177,527
----------------

18 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

PREFERRED STOCKS (CONT.)
SOUTH KOREA .7%
Samsung Electronics Co. Ltd., pfd. ..... Semiconductors & Semiconductor Equipment 154,200 $ 53,728,223
--------------
TOTAL PREFERRED STOCKS
(COST $64,129,644).................... 117,086,635
--------------
------------------
PRINCIPAL AMOUNT(c)
------------------
CONVERTIBLE BONDS 1.5%
ARGENTINA .4%
Inversiones y Representacion SA, cvt.,
8.00%, 11/14/07 ...................... 9,081,312 36,325,248
--------------
AUSTRALIA .2%
New South Wales Treasury Corp., 8.00%,
3/01/08 .............................. 17,170,000 AUD 14,391,556
--------------
CANADA .1%
Government of Canada, 6.00%,
6/01/11 .............................. 8,030,000 CAD 7,240,187
--------------
LUXEMBOURG .4%
Repcon Luxembourg SA, cvt., 4.50%,
1/26/11 .............................. 25,000,000 31,453,125
--------------
NEW ZEALAND .3%
Government of New Zealand,
7.00%, 7/15/09 ....................... 15,850,000 NZD 11,879,286
8.00%, 11/15/06 ...................... 15,670,000 NZD 11,694,234
--------------
23,573,520
--------------
SWEDEN .1%
Kingdom of Sweden, 5.50%,
10/08/12 ............................. 48,680,000 SEK 7,994,052
--------------
TOTAL CONVERTIBLE BONDS
(COST $76,914,443).................... 120,977,688
--------------
SHORT TERM INVESTMENTS 2.5%
GERMANY .2%
Deutsche Bank AG, Time Deposit, 2.01%, 3/01/05 14,645,000 EUR 19,392,214
--------------
UNITED STATES 2.3%
Federal Home Loan Bank, 1.214% to
2.808, 3/22/05 to 8/12/05 ............ 105,945,000 105,097,308
Federal Home Loan Mortgage Corp.,
2.769%, 6/30/05 ...................... 40,000,000 39,633,640
Federal National Mortgage Association,
2.626%, 5/04/05 ...................... 50,000,000 49,767,550
--------------
194,498,498
--------------
TOTAL SHORT TERM INVESTMENTS
(COST $214,040,411)..................... 213,890,712
--------------

Semiannual Report | 19

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

- -------------------------------------------------------------------------------------------------------------------------
VALUE
- -------------------------------------------------------------------------------------------------------------------------

TOTAL INVESTMENTS
(COST $6,271,799,228) 99.9%........... $ 8,306,730,841
OTHER ASSETS, LESS LIABILITIES .1%...... 4,294,301
---------------
NET ASSETS 100.0%....................... $ 8,311,025,142
===============

PORTFOLIO ABBREVIATIONS:
ADR - American Depository Receipt
GDR - Global Depository Receipt

CURRENCY ABBREVIATIONS:
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
FIM - Finnish Markka
NZD - New Zealand Dollar
SEK - Swedish Krona

(a) Rounds to less than .05% of net assets.

(b) Non-income producing.

20 | See notes to financial statements. | Semiannual Report

Templeton World Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2005 (unaudited)

Assets:
Investments in securities:
Cost .................................................... $ 6,271,799,228
================
Value ................................................... $ 8,306,730,841
Cash ..................................................... 4,314,791
Foreign currency, at value (cost $2,160,072) ............. 2,653,127
Receivables:
Investment securities sold .............................. 16,648,154
Capital shares sold ..................................... 3,038,937
Dividends and interest .................................. 23,781,880
Affiliates (Note 7)...................................... 1,470,900
----------------
Total assets ........................................ 8,358,638,630
----------------
Liabilities:
Payables:
Investment securities purchased ......................... 28,935,194
Capital shares redeemed ................................. 10,791,617
Affiliates .............................................. 6,997,229
Other liabilities ........................................ 889,448
----------------
Total liabilities ................................... 47,613,488
----------------
Net assets, at value .............................. $ 8,311,025,142
================
Net assets consist of:
Distributions in excess of net investment income ......... $ (23,874,770)
Net unrealized appreciation (depreciation) ............... 2,036,095,641
Accumulated net realized gain (loss) ..................... 114,850,171
Capital shares ........................................... 6,183,954,100
----------------
Net assets, at value .............................. $ 8,311,025,142
================
CLASS A:
Net assets, at value ..................................... $ 7,908,950,878
================
Shares outstanding ....................................... 433,787,661
================
Net asset value per share(a) ............................. $ 18.23
================
Maximum offering price per share (net asset value per
share / 94.25%) ........................................ $ 19.34
================
CLASS B:
Net assets, at value ..................................... $ 60,832,510
================
Shares outstanding ....................................... 3,379,549
================
Net asset value and maximum offering price per share(a) .. $ 18.00
================
CLASS C:
Net assets, at value ..................................... $ 341,241,754
================
Shares outstanding ....................................... 19,152,007
================
Net asset value and maximum offering price per share(a) .. $ 17.82
================

(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.

Semiannual Report | See notes to financial statements. | 21

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2005 (unaudited)

Investment income:
Dividends (net of foreign taxes of $3,717,297) ........... $ 64,200,926
Interest (net of foreign taxes of $2,047) ................ 6,086,061
Other income (Note 7)..................................... 1,470,900
----------------
Total investment income ............................. 71,757,887
----------------
Expenses:
Management fees (Note 3) ................................. 23,649,055
Administrative fees (Note 3) ............................. 2,988,720
Distribution fees (Note 3)
Class A ................................................. 9,180,938
Class B ................................................. 270,690
Class C ................................................. 1,573,099
Transfer agent fees (Note 3) ............................. 3,858,100
Custodian fees (Note 4) .................................. 1,201,246
Reports to shareholders .................................. 138,000
Registration and filing fees ............................. 82,900
Professional fees ........................................ 95,200
Directors' fees and expenses ............................. 93,100
Other .................................................... 124,778
----------------
Total expenses ...................................... 43,255,826
Expense reductions (Note 4) ......................... (2,227)
----------------
Net expenses ...................................... 43,253,599
----------------
Net investment income ........................... 28,504,288
----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................. 187,573,506
Foreign currency transactions ........................... (349,842)
----------------
Net realized gain (loss) ............................ 187,223,664
----------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................. 1,157,257,927
Translation of assets and liabilities denominated in
foreign currencies ..................................... 1,206,070
Deferred taxes .......................................... 3,944,984
----------------
Net change in unrealized appreciation
(depreciation) ..................................... 1,162,408,981
----------------
Net realized and unrealized gain (loss) ................... 1,349,632,645
----------------
Net increase (decrease) in net assets resulting from
operations ............................................... $ 1,378,136,933
================

22 | See notes to financial statements. | Semiannual Report

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended February 28, 2005 (unaudited)
and the year ended August 31, 2004

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
-------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ........................................................ $ 28,504,288 $ 94,741,014
Net realized gain (loss) from investments and foreign currency transactions .. 187,223,664 596,830,943
Net change in unrealized appreciation (depreciation) on investments,
translation of assets and liabilities denominated in foreign currencies,
and deferred taxes ......................................................... 1,162,408,981 176,064,396
-------------------------------------
Net increase (decrease) in net assets resulting from operations .......... 1,378,136,933 867,636,353
-------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ..................................................................... (132,316,964) (125,077,562)
Class B ..................................................................... (603,226) (509,158)
Class C ..................................................................... (3,484,513) (3,482,910)
Net realized gains:
Class A...................................................................... (516,252,466) --
Class B...................................................................... (3,804,334) --
Class C...................................................................... (22,580,982) --
-------------------------------------
Total distributions to shareholders ........................................... (679,042,485) (129,069,630)
-------------------------------------
Capital share transactions (Note 2):
Class A ..................................................................... 319,104,352 (200,487,957)
Class B ..................................................................... 6,341,038 8,345,687
Class C ..................................................................... 17,272,630 (4,657,758)
-------------------------------------
Total capital share transactions .............................................. 342,718,020 (196,800,028)
-------------------------------------
Redemption fees ............................................................... 6,078 30,493
-------------------------------------
Net increase (decrease) in net assets .................................... 1,041,818,546 541,797,188
Net assets:
Beginning of period ........................................................... 7,269,206,596 6,727,409,408
-------------------------------------
End of period ................................................................. $ 8,311,025,142 $ 7,269,206,596
=====================================
Distributions in excess of net investment income (undistributed net investment
income) included in net assets:
End of period ................................................................. $ (23,874,770) $ 84,025,645
=====================================

Semiannual Report | See notes to financial statements. | 23

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. Templeton Funds, Inc. 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 on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Short term securities are valued at cost.

Corporate debt securities and U.S. Government securities generally trade in the
over-the-counter market rather than on a securities exchange. The Fund may
utilize independent pricing services, quotations from bond dealers and
information with respect to bond and note transactions, to assist in determining
a current market value for each security. The Fund's pricing services may use
valuation models or matrix pricing which considers information with respect to
comparable bond and note transactions, quotations from bond dealers, or by
reference to other securities that are considered comparable in such
characteristics as rating, interest rate and maturity date, option adjusted
spread models, prepayment projections, interest rate spreads and yield curves,
to determine current value.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. The value is then converted into its U.S. dollar equivalent at the
foreign exchange rate in effect at the close of the NYSE on the day that the
value of the foreign security is determined. If no sale is reported at that
time, the foreign security will be valued within the range of the most recent
quoted bid and ask prices.

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Some methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Occasionally, events occur between the
time at which trading in a security is completed and the close of the NYSE that
might call into question the availability (including the reliability) of the
value of a portfolio security held by the Fund. If such an event occurs, the
securities may be valued using fair value procedures, which may include the use
of independent pricing services. All security valuation procedures are approved
by the Fund's Board of Directors.

24 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Directors.

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 on the
Statement of Operations.

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

C. 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 on these
contracts 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.

Semiannual Report | 25

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME AND DEFERRED TAXES

No provision has been made for U.S. income taxes because the Fund's policy is to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.

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 in an amount that would be payable
if the securities were disposed of on the valuation date.

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. 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 Templeton Funds, Inc. are allocated among the Funds
based on the ratio of net assets of each Fund to the combined net assets. Other
expenses are charged to each Fund on a specific identification basis.

F. 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 period. Actual results could differ from those
estimates.

G. REDEMPTION FEES

Redemptions and exchanges of Fund shares held five trading days or less (30 days
or less prior to June 1, 2004 and 90 days or less prior to January 1, 2004) 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 as noted in the Statements of Changes in Net Assets.

26 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and directors are
indemnified by the Fund 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. Effective
March 1, 2005, Class B shares will no longer be offered except to existing Class
B shareholders through reinvested distributions or exchanges into other Franklin
Templeton funds' Class B shares, as permitted by the applicable fund prospectus.
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 28, 2005, there were 3.9 billion shares of Templeton Funds, Inc.
authorized ($1.00 par value) of which 1.2 billion shares were classified as, and
allocated to, the Fund and further classified as follows: 800 million shares
have been classified as Class A, 200 million shares as Class B and 200 million
shares as Class C. Transactions in the Fund's shares were as follows:

---------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------

CLASS A SHARES:
Shares sold ...................... 14,020,775 $ 240,780,629 40,542,738 $ 684,785,022
Shares issued in reinvestment of
distributions ................... 36,205,331 581,636,507 6,997,580 109,108,085
Shares redeemed .................. (29,107,035) (503,312,784) (59,444,549) (994,381,064)
---------------------------------------------------------------
Net increase (decrease) .......... 21,119,071 $ 319,104,352 (11,904,231) $(200,487,957)
===============================================================
CLASS B SHARES:
Shares sold ...................... 326,878 $ 5,540,253 769,951 $ 12,890,413
Shares issued in reinvestment of
distributions ................... 243,875 3,864,343 29,047 446,081
Shares redeemed .................. (180,906) (3,063,558) (300,823) (4,990,807)
---------------------------------------------------------------
Net increase (decrease) .......... 389,847 $ 6,341,038 498,175 8,345,687
===============================================================
CLASS C SHARES:
Shares sold ...................... 1,090,826 $ 18,314,799 2,245,793 $ 37,086,276
Shares issued in reinvestment of
distributions ................... 1,469,068 23,041,940 202,026 3,071,259
Shares redeemed .................. (1,427,797) (24,084,109) (2,737,885) (44,815,293)
---------------------------------------------------------------
Net increase (decrease) .......... 1,132,097 $ 17,272,630 (290,066) $ (4,657,758)
===============================================================

Semiannual Report | 27

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
directors of the Fund are also officers and/or directors of the following
subsidiaries:

- ----------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ----------------------------------------------------------------------------------------------

Templeton Global Advisors Ltd. (TGAL) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent

A. MANAGEMENT FEES

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

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.630% Up to and including $1 billion
0.615% Over $1 billion, up to and including $5 billion
0.600% Over $5 billion, up to and including $10 billion
0.580% Over $10 billion, up to and including $15 billion
0.560% Over $15 billion, up to and including $20 billion
0.540% Over $20 billion

B. ADMINISTRATIVE FEES

The Fund pays its allocated share of an administrative fee to FT Services based
on the Templeton Funds, Inc. aggregate average daily net assets as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.150% Up to and including $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

C. DISTRIBUTION FEES

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 for the current
plan period may be reimbursed in subsequent periods. At February 28, 2005,
Distributors advised the Fund that unreimbursed costs were $3,631,720.

28 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:

Net sales charges received........................ $ 222,378
Contingent deferred sales charges retained........ $ 30,182

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $3,858,100, of which $2,701,728 was paid to
Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended February 28, 2005, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, passive foreign
investment company shares, bond discounts and premiums, and contingent debt.

Net realized gains differ for financial statement and tax purposes primarily due
to differing treatments of wash sales, foreign currency transactions, passive
foreign investment company shares, bond discounts and premiums, and contingent
debt.

At February 28, 2005, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes were as follows:

Investments at cost ........................... $ 6,318,852,676
===============
Unrealized appreciation........................ $ 2,099,926,787
Unrealized depreciation ....................... (112,048,622)
---------------
Net unrealized appreciation (depreciation) .... $ 1,987,878,165
===============

Semiannual Report | 29

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended February 28, 2005 aggregated $704,484,619 and $669,491,717,
respectively.

7. REGULATORY MATTERS

INVESTIGATIONS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.

SETTLEMENTS

Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").

On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.

Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The Order also required Franklin Advisers, Inc. to, among other
things, enhance and periodically review compliance policies and procedures.

30 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. REGULATORY MATTERS (CONTINUED)

SETTLEMENTS (CONTINUED)

On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.

Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.

On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing (in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing") failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.

On November 17, 2004, Franklin Resources, Inc. announced that Franklin Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.

Semiannual Report | 31

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. REGULATORY MATTERS (CONTINUED)

SETTLEMENTS (CONTINUED)

On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Second Order").

Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.

The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The independent
distribution consultant has substantially completed preparation of these
distribution plans. The CAGO has approved the distribution plan pertaining to
the distribution of the monies owed under the CAGO settlement agreement and, in
accordance with the terms and conditions of that settlement, the monies were
disbursed to the participating funds and are recorded as other income in the
current period. The SEC has not yet approved the distribution plan pertaining to
the Second Order. When approved, disbursements of settlement monies under the
SEC's Second Order will be made promptly in accordance with the terms and
conditions of that order.

32 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS

The Fund, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority of these lawsuits duplicate, in whole or in part, the
allegations asserted in the February 4, 2004 Massachusetts administrative
complaint and the findings in the SEC's August 2, 2004 Order, as described
above. The lawsuits are styled as class actions or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.

In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.

The Company and fund management strongly believe that the claims made in each of
the lawsuits identified above are without merit and intend to vigorously defend
against them. The Company cannot predict with certainty, however, the eventual
outcome of the remaining governmental investigations or private lawsuits, nor
whether they will have a material negative impact on the Company. Public trust
and confidence are critical to the Company's business and any material loss of
investor and/or client confidence could result in a significant decline in
assets under management by the Company, which would have an adverse effect on
the Company's future financial results. If the Company finds that it bears
responsibility for any unlawful or inappropriate conduct that caused losses to
the Fund, it is committed to making the Fund or its shareholders whole, as
appropriate. The Company is committed to taking all appropriate actions to
protect the interests of its funds' shareholders.

Semiannual Report | 33

Templeton World Fund

SHAREHOLDER INFORMATION

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. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

34 | Semiannual Report

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Literature Request

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. 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

Mutual Discovery 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

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 Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives 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(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund(4),(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund

TAX-FREE INCOME(6)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)

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

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

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products
Trust(9)

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

(5) Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.

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

(7) Portfolio of insured municipal securities.

(8) 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).

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

01/05 Not part of the semiannual report

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

o 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 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. The prospectus
contains this and other information; please read it 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 S2005 04/05

TEMPLETON FOREIGN FUND

[GRAPHIC OMITTED]

FEBRUARY 28, 2005
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SEMIANNUAL REPORT AND SHAREHOLDER LETTER | INTERNATIONAL
- --------------------------------------------------------------------------------

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

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

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

Franklin o TEMPLETON o Mutual Series

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 recognized
leader in fixed income investing and also brings
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. Founded 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.

[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

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

SEMIANNUAL REPORT

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

Performance Summary ..................................................... 7

Your Fund's Expenses .................................................... 10

Financial Highlights and Statement of Investments ....................... 12

Financial Statements .................................................... 24

Notes to Financial Statements ........................................... 28

Shareholder Information ................................................. 39

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

Semiannual Report

Templeton Foreign Fund

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

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

GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 2/28/05

[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]

Europe ............................. 46.5%
Asia ............................... 30.0%
North America ...................... 4.0%
Latin America ...................... 2.6%
Australia & New Zealand ............ 2.2%
Middle East & Africa ............... 1.2%
Short-Term Investments and
Other Net Assets .................. 13.5%

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

This semiannual report for Templeton Foreign Fund covers the period ended
February 28, 2005.

PERFORMANCE OVERVIEW

For the six months under review, Templeton Foreign Fund - Class A posted a
19.59% cumulative total return. The Fund underperformed its benchmark, the
Morgan Stanley Capital International (MSCI) Europe Australasia Far East (EAFE)
Index, which posted a 21.28% total return for the same period.(1) In line with
our long-term investment strategy, we are pleased with our long-term results, as
shown in the Performance Summary beginning on page 7. For the 10-year period
ended February 28, 2005, Templeton Foreign Fund - Class A

(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.

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 17.

Semiannual Report | 3

delivered a 137.49% cumulative total return, compared with the MSCI EAFE Index's
90.24% cumulative total return for the same period.(1) Please note that index
performance information is provided for reference and that we do not attempt to
track the index, but rather undertake investments on the basis of fundamental
research.

ECONOMIC AND MARKET OVERVIEW

For the six months under review, the global economy generally continued to
expand. In fourth quarter 2004, gross domestic product (GDP) increased at
annualized rates of 3.8% in the U.S. and 9.5% in China.(2) For the same quarter,
GDP grew an annualized 1.7% in Canada, while rising 2.8% in the U.K. and 1.6% in
the euro zone.(3) Japan's GDP rose only 0.5% annualized.(4) Industrial metals
and several other commodity prices rose particularly due to increased demand
from China. While Chile, Brazil, Canada, Australia and Argentina benefited from
strong overall demand for natural resources, Mexico and other oil-exporting
countries benefited specifically from high oil prices.

During the six-month period under review, the MSCI All Country World Index's
total return was 16.21% and the MSCI Emerging Markets Index's was 35.36%, in
U.S. dollars.(6) In local currencies, their respective total returns were 11.96%
and 23.89%.(6) For most of the period, the majority of the world's currencies
strengthened in relation to the U.S. dollar. However, the U.S. dollar's
protracted decline versus these currencies reversed course in January 2005, as
the dollar appreciated. Still, the currency effect benefited U.S.-based
investors who invested in non-U.S. equities from developed and emerging market
countries, as local currency returns were boosted when translated into a weaker
U.S. dollar.

(2) Source: National Bureau of Statistics of China.

(3) Sources: Statistics Canada; Office for National Statistics (U.K.);
Eurostat.

(4) Source: Japan Cabinet Office.

(5) Source: U.S. Department of Energy.

(6) Source: Standard & Poor's Micropal. The MSCI All Country World Index is a
free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed and emerging
markets. The MSCI Emerging Markets Index is a free float-adjusted, market
capitalization-weighted index designed to measure equity market
performance in global emerging markets.

4 | Semiannual Report

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.

MANAGER'S DISCUSSION

Templeton Foreign Fund posted strong performance during the six months under
review as a broad array of holdings contributed to the Fund's 19.59% gain.
During the period, only six of the Fund's holdings detracted from returns. The
Fund underperformed its benchmark index primarily due to currency and cash
weightings. As of February 28, 2005, the Fund held 13.5% in short-term
investments and other net assets.

It is important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar increases compared with
a foreign currency, an investment traded in that foreign currency will decrease
in value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. For the six months
ended February 28, 2005, the U.S. dollar declined in value relative to most
non-U.S. currencies. Although one cannot expect the same result in future
periods, the Fund's performance was positively affected by the portfolio's
predominant investment in securities with non-U.S. currency exposure due to the
U.S. dollar's decrease in value during the period. However, the positive
currency effect on the Fund was less than that experienced by the benchmark
index.

Of the top 20 contributors to performance during the reporting period, six were
based in Asia, two in Latin America, eleven in Europe and one in Australia.
Among the best performers were metals and mining companies Cia Vale do Rio Doce
(Brazil) and BHP Billiton Ltd. (Australia), which gained more than 50% each over
the six-month period. Other notable gainers were selected emerging market
positions such as South Korea's Shinhan Financial Group (banking), India's ICICI
Bank (commercial banks), and South Korea's POSCO (metals and mining), each of
which also gained more than 50%.

TOP 10 COUNTRIES
Based on Equity Securities
2/28/05

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
U.K. 18.0%
- --------------------------------------------------------------------------------
Japan 11.1%
- --------------------------------------------------------------------------------
Hong Kong 6.9%
- --------------------------------------------------------------------------------
South Korea 6.9%
- --------------------------------------------------------------------------------
Netherlands 6.0%
- --------------------------------------------------------------------------------
Germany 4.4%
- --------------------------------------------------------------------------------
Switzerland 4.3%
- --------------------------------------------------------------------------------
France 3.9%
- --------------------------------------------------------------------------------
Spain 2.8%
- --------------------------------------------------------------------------------
Finland 2.7%
- --------------------------------------------------------------------------------

TOP 10 SECTORS/INDUSTRIES
Based on Equity Securities
2/28/05

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
Oil & Gas 7.2%
- --------------------------------------------------------------------------------
Diversified Telecommunication Services 6.2%
- --------------------------------------------------------------------------------
Pharmaceuticals 6.1%
- --------------------------------------------------------------------------------
Commercial Banks 5.9%
- --------------------------------------------------------------------------------
Insurance 5.6%
- --------------------------------------------------------------------------------
Household Durables 5.3%
- --------------------------------------------------------------------------------
Media 3.9%
- --------------------------------------------------------------------------------
Real Estate 3.9%
- --------------------------------------------------------------------------------
Paper & Forest Products 3.1%
- --------------------------------------------------------------------------------
Industrial Conglomerates 3.1%
- --------------------------------------------------------------------------------

Semiannual Report | 5

TOP 10 EQUITY HOLDINGS
2/28/05

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
Cheung Kong Holdings Ltd. 2.9%
REAL ESTATE, HONG KONG
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 2.0%
OIL & GAS, NETHERLANDS
- --------------------------------------------------------------------------------
Sanofi-Aventis, common & restricted 1.9%
PHARMACEUTICALS, FRANCE
- --------------------------------------------------------------------------------
BP PLC, ord. & ADR 1.9%
OIL & GAS, U.K.
- --------------------------------------------------------------------------------
Samsung Electronics Co. Ltd.,
ord., GDR & pfd. 1.8%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
- --------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. 1.8%
DIVERSIFIED TELECOMMUNICATION
SERVICES, JAPAN
- --------------------------------------------------------------------------------
Sony Corp. 1.8%
HOUSEHOLD DURABLES, JAPAN
- --------------------------------------------------------------------------------
GlaxoSmithKline PLC 1.6%
PHARMACEUTICALS, U.K.
- --------------------------------------------------------------------------------
BASF AG 1.6%
CHEMICALS, GERMANY
- --------------------------------------------------------------------------------
Swiss Reinsurance Co. 1.6%
INSURANCE, SWITZERLAND
- --------------------------------------------------------------------------------

The Fund's South Korean holdings totaled 6.9% of total net assets on February
28, 2005. Our South Korean bank holdings performed well. Many investors appeared
to realize that the South Korean banking industry had passed the peak in loan
loss provisions for credit card losses. Although loan growth had yet to improve,
profits held the potential to rebound for several years beginning in 2005. Bank
valuations remained attractive as the sector witnessed the second major takeover
in the past year with Standard Chartered making a successful bid for Korea First
Bank in early January 2005, although the Fund had no holdings in either
company.

With oil prices surpassing the $50 level in October 2004 and February 2005,
major oil companies' earnings, cash flows and dividends continued to make their
valuations look compelling to us.(5) Not surprisingly, our holdings in BP, Royal
Dutch Petroleum, and Shell Transport & Trading helped generate positive
performance for the period under review.

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

/s/ Jeffrey A. Everett

[PHOTO OMITTED] Jeffrey A. Everett, CFA
Portfolio Manager
Templeton Foreign Fund

6 | Semiannual Report

Performance Summary as of 2/28/05

PRICE AND DISTRIBUTION INFORMATION

- --------------------------------------------------------------------------------
CLASS A CHANGE 2/28/05 8/31/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.83 $12.58 $10.75
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- --------------------------------------------------------------------------------
Dividend Income $0.2264
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.0192
- --------------------------------------------------------------------------------
TOTAL $0.2456
- --------------------------------------------------------------------------------
CLASS B CHANGE 2/28/05 8/31/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.84 $12.41 $10.57
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- --------------------------------------------------------------------------------
Dividend Income $0.1477
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.0192
- --------------------------------------------------------------------------------
TOTAL $0.1669
- --------------------------------------------------------------------------------
CLASS C CHANGE 2/28/05 8/31/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.84 $12.43 $10.59
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- --------------------------------------------------------------------------------
Dividend Income $0.1462
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.0192
- --------------------------------------------------------------------------------
TOTAL $0.1654
- --------------------------------------------------------------------------------
CLASS R CHANGE 2/28/05 8/31/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.83 $12.51 $10.68
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- --------------------------------------------------------------------------------
Dividend Income $0.2048
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.0192
- --------------------------------------------------------------------------------
TOTAL $0.2240
- --------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 2/28/05 8/31/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.81 $12.56 $10.75
- --------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- --------------------------------------------------------------------------------
Dividend Income $0.2539
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.0192
- --------------------------------------------------------------------------------
TOTAL $0.2731
- --------------------------------------------------------------------------------

Semiannual Report | 7

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.

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

Cumulative Total Return(1) 19.59% 15.61% 40.98% 137.49%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 12.68% 8.95% 5.85% 8.39%
- --------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,268 $10,895 $13,288 $22,374
- --------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 6.72% 4.47% 8.04%
- --------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- --------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 19.18% 14.84% 35.89% 69.95%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 15.18% 10.84% 6.01% 8.99%
- --------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,518 $11,084 $13,389 $16,995
- --------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 8.39% 4.60% 8.41%
- --------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- --------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 19.13% 14.79% 35.84% 111.98%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 18.13% 13.79% 6.32% 7.94%
- --------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,813 $11,379 $13,584 $21,198
- --------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 11.35% 4.92% 7.58%
- --------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR 3-YEAR INCEPTION (1/1/02)
- --------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 19.50% 15.39% 43.95% 42.24%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 18.50% 14.39% 12.91% 11.81%
- --------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,850 $11,439 $14,395 $14,224
- --------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 11.95% 5.45% 10.60%
- --------------------------------------------------------------------------------------------------
ADVISOR CLASS(5) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- --------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 19.70% 15.92% 42.74% 144.43%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 19.70% 15.92% 7.38% 9.35%
- --------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,970 $11,592 $14,274 $24,443
- --------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 13.48% 5.94% 8.98%
- ------------------------------------------------------------------------------------------------

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

8 | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.

CLASS R: 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: Shares are available to certain eligible investors as
described in the prospectus.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(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.

(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 85.73% and 7.88%.

Semiannual Report | 9

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

ACTUAL FUND EXPENSES

You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.

IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."

IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

10 | Semiannual Report

Your Fund's Expenses (CONTINUED)

- -----------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 8/31/04 VALUE 2/28/05 PERIOD* 8/31/04-2/28/05
- -----------------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,195.90 $ 6.21
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.14 $ 5.71
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,191.80 $10.22
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.47 $ 9.39
- -----------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,191.30 $10.27
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.42 $ 9.44
- -----------------------------------------------------------------------------------------------------------------------
CLASS R
- -----------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,195.00 $ 7.56
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.90 $ 6.95
- -----------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,197.00 $ 4.85
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.38 $ 4.46
- -----------------------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
1.14%; B: 1.88%; C: 1.89%; R: 1.39%; and Advisor: 0.89%), multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

Semiannual Report | 11

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------

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

Net asset value, beginning of period ... $ 10.75 $ 9.60 $ 8.82 $ 9.69 $ 10.56 $ 10.49
-----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) .............. .05 .17 .15 .15 .26 .23

Net realized and unrealized
gains (losses) ....................... 2.03 1.17 .77 (.77) (.69) .25
-----------------------------------------------------------------------------------------

Total from investment operations ....... 2.08 1.34 .92 (.62) (.43) .48
-----------------------------------------------------------------------------------------

Less distributions from:

Net investment income ................. (.23) (.19) (.14) (.25) (.23) (.32)

Net realized gains .................... (.02) -- -- -- (.21) (.09)
-----------------------------------------------------------------------------------------

Total distributions .................... (.25) (.19) (.14) (.25) (.44) (.41)
-----------------------------------------------------------------------------------------

Redemption fees ........................ --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------------

Net asset value, end of period ......... $ 12.58 $ 10.75 $ 9.60 $ 8.82 $ 9.69 $ 10.56
=========================================================================================

Total return(b) ........................ 19.59% 14.03% 10.80% (6.31)% (4.08)% 4.79%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $15,659,766 $13,067,977 $ 9,896,279 $ 8,325,977 $ 9,165,696 $11,489,339

Ratios to average net assets

Expenses .............................. 1.14%(d) 1.23% 1.22% 1.16% 1.18% 1.15%

Net investment income ................. .91%(d) 1.58% 1.79% 1.63% 2.54% 2.14%

Portfolio turnover rate ................ 11.55% 25.32% 33.36% 34.15% 21.38% 44.77%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

(d) Annualized.

12 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------

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

Net asset value, beginning of period ... $ 10.57 $ 9.46 $ 8.69 $ 9.56 $ 10.43 $ 10.43
----------------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) .............. .01 .09 .07 .08 .18 .16

Net realized and unrealized gains
(losses) ............................. 2.00 1.15 .79 (.76) (.67) .23
----------------------------------------------------------------------------------------

Total from investment operations ....... 2.01 1.24 .86 (.68) (.49) .39
----------------------------------------------------------------------------------------

Less distributions from:

Net investment income ................. (.15) (.13) (.09) (.19) (.17) (.30)

Net realized gains .................... (.02) -- -- -- (.21) (.09)
----------------------------------------------------------------------------------------

Total distributions .................... (.17) (.13) (.09) (.19) (.38) (.39)
----------------------------------------------------------------------------------------

Redemption fees ........................ --(c) --(c) --(c) -- -- --
----------------------------------------------------------------------------------------

Net asset value, end of period ......... $ 12.41 $ 10.57 $ 9.46 $ 8.69 $ 9.56 $ 10.43
========================================================================================

Total return(b) ........................ 19.18% 13.27% 10.00% (7.07)% (4.75)% 3.99%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 236,995 $ 195,116 $ 138,026 $ 87,135 $ 64,360 $ 53,313

Ratios to average net assets:

Expenses .............................. 1.88%(d) 1.98% 1.97% 1.91% 1.93% 1.90%

Net investment income ................. .17%(d) .83% 1.04% .88% 1.83% 1.54%

Portfolio turnover rate ................ 11.55% 25.32% 33.36% 34.15% 21.38% 44.77%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

Semiannual Report | See notes to financial statements. | 13

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

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

Net asset value, beginning of period ... $ 10.59 $ 9.47 $ 8.69 $ 9.55 $ 10.39 $ 10.31
----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) .............. .01 .09 .08 .08 .18 .14

Net realized and unrealized gains
(losses) ............................. 2.00 1.16 .77 (.76) (.66) .25
----------------------------------------------------------------------------------------

Total from investment operations ....... 2.01 1.25 .85 (.68) (.48) .39
----------------------------------------------------------------------------------------

Less distributions from:

Net investment income ................. (.15) (.13) (.07) (.18) (.15) (.22)

Net realized gains .................... (.02) -- -- -- (.21) (.09)
----------------------------------------------------------------------------------------

Total distributions .................... (.17) (.13) (.07) (.18) (.36) (.31)
----------------------------------------------------------------------------------------

Redemption fees ........................ --(c) --(c) --(c) -- -- --
----------------------------------------------------------------------------------------

Net asset value, end of period ......... $ 12.43 $ 10.59 $ 9.47 $ 8.69 $ 9.55 $ 10.39
========================================================================================

Total return(b) ........................ 19.13% 13.29% 9.94% (7.10)% (4.68)% 3.94%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 1,434,172 $ 1,188,885 $ 900,811 $ 793,143 $ 899,275 $1,127,869

Ratios to average net assets:

Expenses .............................. 1.89%(d) 1.98% 1.97% 1.91% 1.92% 1.90%

Net investment income ................. .16%(d) .83% 1.04% .88% 1.80% 1.39%

Portfolio turnover rate ................ 11.55% 25.32% 33.36% 34.15% 21.38% 44.77%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

14 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS R (UNAUDITED) 2004 2003 2002(e)
-------------------------------------------------------------

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

Net asset value, beginning of period ... $ 10.68 $ 9.56 $ 8.81 $ 9.30
-------------------------------------------------------------

Income from investment operations:

Net investment income(a) .............. .04 .15 .14 .14

Net realized and unrealized gains
(losses) ............................. 2.01 1.15 .76 (.63)
-------------------------------------------------------------

Total from investment operations ....... 2.05 1.30 .90 (.49)
-------------------------------------------------------------

Less distributions from

Net investment income ................. (.20) (.18) (.15) --

Net realized gains .................... (.02) -- -- --
-------------------------------------------------------------

Total distributions .................... (.22) (.18) (.15) --
-------------------------------------------------------------

Redemption fees ........................ --(c) --(c) --(c) --
-------------------------------------------------------------

Net asset value, end of period ......... $ 12.51 $ 10.68 $ 9.56 $ 8.81
=============================================================

Total return(b) ........................ 19.50% 13.76% 10.46% (5.27)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 157,361 $ 114,301 $ 55,346 $ 5,641

Ratios to average net assets:

Expenses .............................. 1.39%(d) 1.48% 1.47% 1.41%(d)

Net investment income ................. .66%(d) 1.33% 1.54% 1.38%(d)

Portfolio turnover rate ................ 11.55% 25.32% 33.36% 34.15%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

(e) For the period January 2, 2002 (effective date) to August 31, 2002.

Semiannual Report | See notes to financial statements. | 15

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period ... $ 10.75 $ 9.59 $ 8.81 $ 9.69 $ 10.56 $ 10.50
----------------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) .............. .07 .20 .17 .17 .28 .26

Net realized and unrealized gains
(losses) ............................. 2.01 1.17 .77 (.77) (.68) .24
----------------------------------------------------------------------------------------

Total from investment operations ....... 2.08 1.37 .94 (.60) (.40) .50
----------------------------------------------------------------------------------------

Less distributions from:

Net investment income ................. (.25) (.21) (.16) (.28) (.26) (.35)

Net realized gains .................... (.02) -- -- -- (.21) (.09)
----------------------------------------------------------------------------------------

Total distributions .................... (.27) (.21) (.16) (.28) (.47) (.44)
----------------------------------------------------------------------------------------

Redemption fees ........................ --(c) --(c) --(c) -- -- --
----------------------------------------------------------------------------------------

Net asset value, end of period ......... $ 12.56 $ 10.75 $ 9.59 $ 8.81 $ 9.69 $ 10.56
========================================================================================

Total return(b) ........................ 19.70% 14.39% 11.11% (6.15)% (3.81)% 5.03%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...... $ 1,353,806 $ 762,207 $ 421,725 $ 297,866 $ 102,846 $ 117,129

Ratios to average net assets:

Expenses .............................. .89%(d) .98% .97% .91% .93% .90%

Net investment income ................. 1.16%(d) 1.83% 2.04% 1.88% 2.78% 2.45%

Portfolio turnover rate ................ 11.55% 25.32% 33.36% 34.15% 21.38% 44.77%

(a) Based on average daily shares outstanding.

(b) Total return is not annualized for periods less than one year.

(d) Annualized.

16 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED)

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

COMMON STOCKS 84.2%
ARGENTINA .0%(a)
(b) Inversiones y Representacion SA, GDR............. Real Estate 1 $ 7
---------------

AUSTRALIA 1.8%
Alumina Ltd. .................................... Metals & Mining 20,362,180 97,312,420
AMP Ltd. ........................................ Insurance 9,878,447 57,309,476
BHP Billiton Ltd. ............................... Metals & Mining 109,158 1,655,862
National Australia Bank Ltd. .................... Commercial Banks 4,106,202 93,725,871
Qantas Airways Ltd. ............................. Airlines 29,221,686 84,069,523
Woodside Petroleum Ltd. ......................... Oil & Gas 38,500 664,577
---------------
334,737,729
---------------

BERMUDA 2.1%
ACE Ltd. ........................................ Insurance 5,319,925 236,523,866
XL Capital Ltd., A .............................. Insurance 2,110,174 158,263,050
---------------
394,786,916
---------------

BRAZIL .0%(a)
Embraer-Empresa Brasileira de
Aeronautica SA, ADR ............................ Aerospace & Defense 150,000 5,064,000
---------------

CANADA 1.9%
Barrick Gold Corp. .............................. Metals & Mining 5,193,770 128,891,255
BCE Inc. ........................................ Diversified Telecommunication Services 9,216,618 214,896,206
Domtar Inc. ..................................... Paper & Forest Products 1,818,500 16,414,505
Husky Energy Inc. ............................... Oil & Gas 32,730 950,804
---------------
361,152,770
---------------

CHINA .6%
China Mobile (Hong Kong) Ltd. ................... Wireless Telecommunication Services 24,476,749 79,873,991
China Telecom Corp. Ltd., 144A .................. Diversified Telecommunication Services 66,360,000 25,313,792
Guangdong Electric Power Development
Co Ltd., B ..................................... Electric Utilities 757,704 400,277
---------------
105,588,060
---------------
DENMARK .6%
(b) Vestas Wind Systems AS .......................... Electrical Equipment 6,716,151 89,605,231
(b) Vestas Wind Systems AS, 144A .................... Electrical Equipment 1,727,650 23,049,880
---------------
112,655,111
---------------

FINLAND 2.7%
M-real OYJ, B ................................... Paper & Forest Products 2,834,000 17,094,671
M-real OYJ, B, 144A ............................. Paper & Forest Products 2,361,665 14,245,549
Sampo OYJ, A .................................... Insurance 1,338,742 18,747,778
Stora Enso OYJ, R (EUR/FIM Traded) .............. Paper & Forest Products 11,903,860 181,362,276
Stora Enso OYJ, R (SEK Traded) .................. Paper & Forest Products 2,354,531 35,794,653
UPM-Kymmene Corp. ............................... Paper & Forest Products 10,726,458 239,063,337
---------------
506,308,264
---------------

Semiannual Report | 17

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
FRANCE 3.9%
Sanofi-Aventis .................................. Pharmaceuticals 3,684,131 $ 294,675,838
Sanofi-Aventis, 144A ............................ Pharmaceuticals 842,400 67,379,506
Societe BIC SA .................................. Commercial Services & Supplies 818,992 45,855,049
Suez SA ......................................... Multi-Utilities & Unregulated Power 6,378,510 172,736,883
Valeo SA ........................................ Auto Components 2,139,209 102,578,009
Vinci SA ........................................ Construction & Engineering 332,507 48,876,072
---------------
732,101,357
---------------

GERMANY 3.6%
BASF AG ......................................... Chemicals 4,064,546 303,088,944
Celesio AG ...................................... Health Care Providers & Services 776,204 58,589,967
Deutsche Post AG ................................ Air Freight & Logistics 3,206,707 76,946,700
E.ON AG ......................................... Electric Utilities 2,251,350 202,047,289
Muenchener Rueckversicherungs-
Gesellschaft ................................... Insurance 274,551 33,703,522
Muenchener Rueckversicherungs-
Gesellschaft, 144A ............................. Insurance 49,001 6,015,299
---------------
680,391,721
---------------

HONG KONG 6.9%
Asia Satellite Telecommunications
Holdings Ltd. .................................. Diversified Telecommunication Services 43,500 79,203
Cheung Kong Holdings Ltd. ....................... Real Estate 57,104,058 543,659,891
Hang Lung Group Ltd. ............................ Real Estate 39,328,783 71,608,193
Hang Lung Properties Ltd. ....................... Real Estate 339,500 526,731
Hong Kong Electric Holdings Ltd. ................ Electric Utilities 27,682,304 126,006,936
Hutchison Whampoa Ltd. .......................... Industrial Conglomerates 20,492,049 185,241,533
Lerado Group Holdings Co. Ltd. .................. Leisure Equipment & Products 2,326,000 381,754
MTR Corp. Ltd. .................................. Road & Rail 38,189,570 60,719,798
SCMP Group Ltd. ................................. Media 41,847,780 19,048,669
Shangri-La Asia Ltd. ............................ Hotels Restaurants & Leisure 27,094,670 40,994,891
Swire Pacific Ltd., A ........................... Industrial Conglomerates 24,142,522 197,345,255
Yue Yuen Industrial Holdings Ltd. ............... Textiles Apparel & Luxury Goods 20,934,910 60,397,294
---------------
1,306,010,148
---------------

INDIA 2.5%
Gail India Ltd. ................................. Gas Utilities 12,478,500 68,919,869
Gail India Ltd., GDR, 144A ...................... Gas Utilities 33,440 1,107,867
Housing Development Finance Corp. Ltd. Thrifts & Mortgage Finance 3,639,242 64,844,979
ICICI Bank Ltd. ................................. Commercial Banks 11,341,987 98,967,837
(c) Satyam Computers Services Ltd. .................. IT Services 18,631,754 175,642,764
Tata Motors Ltd. ................................ Automobiles 5,815,200 63,322,844
---------------
472,806,160
---------------

ISRAEL .7%
(b) Check Point Software
Technologies Ltd. .............................. Software 6,373,738 141,050,822
---------------

18 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
ITALY .7%
Eni SpA ......................................... Oil & Gas 4,940,070 $ 128,875,942
---------------

JAPAN 11.1%
Acom Co. Ltd. ................................... Consumer Finance 2,117,770 145,647,963
East Japan Railway Co. .......................... Road & Rail 17,440 92,917,691
Fanuc Ltd. ...................................... Machinery 9,500 625,185
Hitachi Ltd. .................................... Electronic Equipment & Instruments 31,131,200 197,426,807
Makita Corp. .................................... Household Durables 3,952,700 75,465,964
Matsushita Electric Industrial Co. Ltd........... Household Durables 31,000 464,059
Meitec Corp. .................................... Commercial Services & Supplies 17,000 583,768
NEC Corp. ....................................... Computers & Peripherals 11,880,000 77,158,353
Nintendo Co. Ltd. ............................... Software 1,979,500 219,639,390
Nippon Telegraph & Telephone Corp. .............. Diversified Telecommunication Services 76,976 333,541,805
Nomura Holdings Inc. ............................ Capital Markets 11,834,480 163,347,407
Ono Pharmaceutical Co. Ltd. ..................... Pharmaceuticals 1,717,000 93,614,233
Pioneer Corp. ................................... Household Durables 45,000 790,712
Shinsei Bank Ltd. ............................... Commercial Banks 11,145,000 65,348,749
Shinsei Bank Ltd., 144A ......................... Commercial Banks 4,520,000 26,503,037
Sompo Japan Insurance Inc. ...................... Insurance 13,537,000 143,728,251
Sony Corp. ...................................... Household Durables 8,718,800 332,756,344
Takeda Pharmaceutical Co. Ltd. .................. Pharmaceuticals 2,532,400 121,357,540
---------------
2,090,917,258
---------------

MEXICO 2.1%
Cemex SA ........................................ Construction Materials 4,267,064 34,130,977
Cemex SA, ADR ................................... Construction Materials 2,617,431 104,618,717
Kimberly Clark de Mexico SA de
CV, A .......................................... Household Products 158,795 527,145
Telefonos de Mexico SA de CV (Telmex),
L, ADR ......................................... Diversified Telecommunication Services 6,623,283 259,698,926
Wal-Mart de Mexico SA de CV, V,
ADR ............................................ Food & Staples Retailing 19,751 725,769
---------------
399,701,534
---------------

NETHERLANDS 6.0%
Akzo Nobel NV ................................... Chemicals 3,068,284 138,351,922
ING Groep NV .................................... Diversified Financial Services 4,981,471 153,374,475
Koninklijke Philips Electronics NV .............. Household Durables 7,623,472 210,893,781
Reed Elsevier NV ................................ Media 5,422,500 81,430,132
Rodamco Europe NV ............................... Diversified Financial Services 1,124,580 90,619,876
Royal Dutch Petroleum Co. ....................... Oil & Gas 5,875,200 370,341,288
VNU NV .......................................... Media 2,582,400 80,843,202
---------------
1,125,854,676
---------------

NORWAY .2%
Norske Skogindustrier ASA, A .................... Paper & Forest Products 2,174,800 46,226,888
---------------

Semiannual Report | 19

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
PHILIPPINES .3%
Ayala Land Inc. ................................. Real Estate 105,116,880 $ 18,073,874
(b) Philippine Long Distance
Telephone Co. .................................. Diversified Telecommunication Services 1,530,100 38,623,340
(b) Philippine Long Distance
Telephone Co., ADR ............................. Diversified Telecommunication Services 12,530 319,265
---------------
57,016,479
---------------

PORTUGAL .0%(a)
Portugal Telecom SGPS SA ........................ Diversified Telecommunication Services 61,840 750,951
---------------

SINGAPORE .2%
Singapore Airlines Ltd. ......................... Airlines 985 7,287
United Overseas Bank Ltd. ....................... Commercial Banks 96,000 804,883
Venture Corp. Ltd. .............................. Electronic Equipment & Instruments 4,645,000 41,235,435
---------------
42,047,605
---------------

SOUTH AFRICA .5%
Old Mutual PLC .................................. Insurance 37,041,700 100,919,908
---------------

SOUTH KOREA 6.5%
Hana Bank ....................................... Commercial Banks 7,192,900 205,869,462
Kookmin Bank .................................... Commercial Banks 4,192,950 193,681,314
(b) Kookmin Bank, ADR ............................... Commercial Banks 16,614 765,739
KT Corp., ADR ................................... Diversified Telecommunication Services 5,002,000 116,096,420
POSCO ........................................... Metals & Mining 511,500 112,789,696
Samsung Electronics Co. Ltd. .................... Semiconductors & Semiconductor Equipment 493,974 259,158,087
Samsung Electronics Co. Ltd., GDR,
Reg S .......................................... Semiconductors & Semiconductor Equipment 4,500 1,166,625
Shinhan Financial Group Co. Ltd. ................ Commercial Banks 7,605,410 225,247,335
SK Telecom Co. Ltd., ADR ........................ Wireless Telecommunication Services 5,046,126 107,482,484
---------------
1,222,257,162
---------------

SPAIN 2.8%
Iberdrola SA, Br. ............................... Electric Utilities 5,754,512 151,799,506
Repsol YPF SA ................................... Oil & Gas 10,015,423 272,687,312
Telefonica SA ................................... Diversified Telecommunication Services 5,180,223 95,353,312
Telefonica SA, ADR .............................. Diversified Telecommunication Services 7,612 419,778
---------------
520,259,908
---------------

SWEDEN 2.7%
Atlas Copco AB, A ............................... Machinery 1,020,560 50,871,358
Electrolux AB, B ................................ Household Durables 10,823,670 260,268,048
Holmen Aktiebolag AB, B ......................... Paper & Forest Products 1,251,483 41,892,941
Nordea Bank AB .................................. Commercial Banks 7,106,560 74,794,960
Nordea Bank AB, FDR ............................. Commercial Banks 132,030 1,395,237
Securitas AB, B ................................. Commercial Services & Supplies 4,472,010 71,254,069
---------------
500,476,613
---------------

20 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
SWITZERLAND 4.3%
Lonza Group AG .................................. Chemicals 732,140 $ 45,737,079
Nestle SA ....................................... Food Products 644,393 178,944,110
Novartis AG ..................................... Pharmaceuticals 4,578,978 229,668,462
Swiss Reinsurance Co. ........................... Insurance 4,094,705 300,575,711
UBS AG .......................................... Capital Markets 618,729 53,756,194
---------------
808,681,556
---------------

TAIWAN 1.5%
Chunghwa Telecom Co. Ltd., ADR .................. Diversified Telecommunication Services 3,917,400 85,399,320
Compal Electronics Inc. ......................... Computers & Peripherals 50,871,346 48,939,937
Lite-on Technology Corp. ........................ Computers & Peripherals 64,730,000 70,186,647
Taiwan Semiconductor
Manufacturing Co. .............................. Semiconductors & Semiconductor Equipment 42,089,103 74,482,003
---------------
279,007,907
---------------

UNITED KINGDOM 18.0%
AMVESCAP PLC .................................... Capital Markets 26,516,686 173,794,686
BAE Systems PLC ................................. Aerospace & Defense 19,631,234 96,594,063
BHP Billiton PLC ................................ Metals & Mining 8,379,597 125,062,602
Boots Group PLC ................................. Food & Staples Retailing 6,387,269 81,516,618
BP PLC .......................................... Oil & Gas 33,008,793 356,556,886
BP PLC, ADR ..................................... Oil & Gas 5,110 331,741
British Land Co. PLC ............................ Real Estate 5,644,248 93,513,911
British Sky Broadcasting Group PLC .............. Media 16,944,790 184,501,106
Centrica PLC .................................... Gas Utilities 11,943,720 54,291,723
Compass Group PLC ............................... Hotels Restaurants & Leisure 19,830,700 95,479,172
GKN PLC ......................................... Auto Components 26,898,871 133,129,455
GlaxoSmithKline PLC ............................. Pharmaceuticals 12,815,590 306,177,027
Lloyds TSB Group PLC ............................ Commercial Banks 12,476,584 117,444,588
National Grid Transco PLC ....................... Multi-Utilities & Unregulated Power 12,508,000 121,346,448
Pearson PLC ..................................... Media 16,794,099 205,939,786
Persimmon PLC ................................... Household Durables 7,694,267 115,056,118
Reed Elsevier PLC ............................... Media 100,000 1,017,721
Rentokil Initial PLC ............................ Commercial Services & Supplies 14,558,700 44,352,156
(b) Rolls-Royce Group PLC ........................... Aerospace & Defense 20,896,773 104,427,635
Shell Transport & Trading Co. PLC ............... Oil & Gas 23,870,623 223,896,057
Shire Pharmaceuticals Group PLC ................. Pharmaceuticals 3,250,478 36,235,820
Smiths Group PLC ................................ Industrial Conglomerates 12,293,447 201,787,571
Tesco PLC ....................................... Food & Staples Retailing 259,958 1,525,182
Unilever PLC .................................... Food Products 17,487,329 167,300,646
Vodafone Group PLC .............................. Wireless Telecommunication Services 66,030,010 172,918,214
Yell Group PLC .................................. Media 18,649,000 169,632,491
---------------
3,383,829,423
---------------
TOTAL COMMON STOCKS
(COST $12,133,828,768)......................... 15,859,476,875
---------------

Semiannual Report | 21

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

PREFERRED STOCKS 1.7%
BRAZIL .5%
Cia Vale do Rio Doce, ADR, pfd., A .............. Metals & Mining 3,386,403 $ 97,494,542
---------------

GERMANY .8%
Volkswagen AG, pfd. ............................. Automobiles 4,146,234 151,597,745
---------------

SOUTH KOREA .4%
Samsung Electronics Co. Ltd., pfd. .............. Semiconductors & Semiconductor Equipment 236,190 82,296,167
---------------

TOTAL PREFERRED STOCKS
(COST $169,710,292)............................. 331,388,454
---------------

-------------------
PRINCIPAL AMOUNT(d)
-------------------

BONDS & NOTES .6%
ARGENTINA .0%(a)
Inversiones Y Representacion SA, cvt.,
8.00%, 11/14/07 ................................ 1,268,865 5,075,460
---------------

AUSTRALIA .3%
New South Wales Treasury Corp., 6.50%,
5/01/06 ........................................ 36,000,000 AUD 28,770,042
Queensland Treasury Corp., 6.50%,
6/14/05 ........................................ 30,000,000 AUD 23,827,620
---------------
52,597,662
---------------

LUXEMBOURG .2%
Repcon Luxembourg SA, cvt., 4.50%,
1/26/11 ........................................ 25,000,000 31,453,125
---------------

NEW ZEALAND .1%
Government of New Zealand, 6.50%,
2/15/06 ........................................ 31,000,000 NZD 22,581,357
---------------

TOTAL BONDS & NOTES
(COST $99,909,673).............................. 111,707,604
---------------

SHORT TERM INVESTMENTS 12.5%
GERMANY 1.4%
Deutsche Bank AG, Time Deposit, 2.01%,
3/01/05 ........................................ 204,615,000 EUR 270,963,000
---------------

NEW ZEALAND .6%
(e) New Zealand Treasury Bill,
3/23/05 ....................................... 71,500,000 NZD 51,749,645
Strip, 6/22/05 ................................ 92,980,000 NZD 66,176,435
---------------
117,926,080
---------------

THAILAND .1%
(e) Bank of Thailand, 10/06/05 -
10/20/05 ....................................... 156,000,000 THB 4,004,084
(e) Thailand Treasury Bill, 7/06/05 ................. 660,000,000 THB 17,134,284
---------------
21,138,368
---------------

22 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT(d) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENTS (CONT.)
UNITED STATES 10.4%
(e) U.S. Treasury Bill, 3/03/05 - 5/26/05............ 1,953,996,000 $ 1,948,720,296
---------------

TOTAL SHORT TERM INVESTMENTS
(COST $2,355,189,753)........................... 2,358,747,744
---------------

TOTAL INVESTMENTS
(COST $14,758,638,486) 99.0%.................... 18,661,320,677
OTHER ASSETS, LESS LIABILITIES 1.0%.............. 180,780,148
---------------
NET ASSETS 100.0%................................ $18,842,100,825
===============

PORTFOLIO ABBREVIATIONS:

ADR - American Depository Receipt
FDR - Foreign Depository Receipt
GDR - Global Depository Receipt

CURRENCY ABBREVIATIONS:
AUD - Australian Dollar
EUR - Euro
FIM - Finnish Markka
NZD - New Zealand Dollar
SEK - Swedish Krona
THB - Thai Baht

(a) Rounds to less than .05% of net assets.

(b) Non-income producing.

(d) The principal amount is stated in U.S. dollars unless otherwise indicated.

(e) Security is traded on a discount basis with no stated coupon rate.

Semiannual Report | See notes to financial statements. | 23

Templeton Foreign Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2005 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................ $ 14,662,135,930
Cost - Non-controlled affiliated issuers (Note 8) ...... 96,502,556
----------------
Total cost of investments .............................. $ 14,758,638,486
================
Value - Unaffiliated issuers ........................... $ 18,485,677,913
Value - Non-controlled affiliated issuers (Note 8) ..... 175,642,764
----------------
Total value of investments ............................. 18,661,320,677
Foreign currency, at value (cost $213,551,939) .......... 213,691,466
Receivables:
Investment securities sold ............................. 69,528
Capital shares sold .................................... 37,982,326
Dividends and interest ................................. 51,678,441
Affiliates (Note 9) .................................... 1,480,191
----------------
Total assets ....................................... 18,966,222,629
----------------
Liabilities:
Payables:
Investment securities purchased ........................ 54,476,303
Capital shares redeemed ................................ 44,213,692
Affiliates ............................................. 18,726,772
Funds advanced by the custodian ......................... 4,416,228
Other liabilities ....................................... 2,288,809
----------------
Total liabilities .................................. 124,121,804
----------------
Net assets, at value ............................. $ 18,842,100,825
================
Net assets consist of:
Distributions in excess of net investment income ........ $ (65,840,171)
Net unrealized appreciation (depreciation) .............. 3,904,529,125
Accumulated net realized gain (loss) .................... 328,505,216
Capital shares .......................................... 14,674,906,655
----------------
Net assets, at value ............................. $ 18,842,100,825
================

24 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 28, 2005 (unaudited)

CLASS A:
Net assets, at value ..................................... $ 15,659,765,911
================
Shares outstanding ....................................... 1,244,377,527
================
Net asset value per share(a) ............................. $ 12.58
================
Maximum offering price per share (net asset value
per share / 94.25%) .................................... $ 13.35
================
CLASS B:
Net assets, at value ..................................... $ 236,995,211
================
Shares outstanding ....................................... 19,102,850
================
Net asset value and maximum offering price per share(a) .. $ 12.41
================
CLASS C:
Net assets, at value ..................................... $ 1,434,172,340
================
Shares outstanding ....................................... 115,379,788
================
Net asset value and maximum offering price per share(a) .. $ 12.43
================
CLASS R:
Net assets, at value ..................................... $ 157,361,163
================
Shares outstanding ....................................... 12,581,374
================
Net asset value and maximum offering price per share(a) .. $ 12.51
================
ADVISOR CLASS:
Net assets, at value ..................................... $ 1,353,806,200
================
Shares outstanding ....................................... 107,816,156
================
Net asset value and maximum offering price per share(a) .. $ 12.56
================

(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.

Semiannual Report | See notes to financial statements. | 25

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2005 (unaudited)

Investment income:
Dividends (net of foreign taxes of $10,593,492)
Unaffiliated issuers ................................... $ 146,674,151
Non-controlled affiliated issuers (Note 8) ............. 1,135,959
Interest - Unaffiliated issuers ......................... 23,034,616
Other income (Note 9) ................................... 1,480,191
----------------
Total investment income ............................ 172,324,917
----------------
Expenses:
Management fees (Note 3) ................................ 49,972,226
Administrative fees (Note 3) ............................ 6,496,432
Distribution fees (Note 3)
Class A ................................................ 17,692,474
Class B ................................................ 1,067,412
Class C ................................................ 6,488,283
Class R ................................................ 334,758
Transfer agent fees (Note 3) ............................ 14,659,800
Custodian fees (Note 4) ................................. 3,160,746
Reports to shareholders ................................. 243,400
Professional fees ....................................... 129,000
Directors' fees and expenses ............................ 104,700
Other ................................................... 204,700
----------------
Total expenses ..................................... 100,553,931
Expense reductions (Note 4) ........................ (11,738)
----------------
Net expenses ..................................... 100,542,193
----------------
Net investment income .......................... 71,782,724
----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers .................................. 629,121,964
Non-controlled affiliated issuers (Note 8) ............ 2,557,068
Foreign currency transactions .......................... (1,306,248)
----------------
Net realized gain (loss) ........................... 630,372,784
----------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 2,305,817,636
Translation of assets and liabilities denominated in
foreign currencies .................................... 1,330,964
Deferred taxes ......................................... 4,817,504
----------------
Net change in unrealized appreciation (depreciation) 2,311,966,104
----------------
Net realized and unrealized gain (loss) .................. 2,942,338,888
----------------
Net increase (decrease) in net assets resulting from
operations ............................................. $ 3,014,121,612
================

26 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended February 28, 2005 (unaudited)
and the year ended August 31, 2004

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
-------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ........................................................... $ 71,782,724 $ 218,185,637
Net realized gain (loss) from investments and foreign currency transactions ..... 630,372,784 502,151,093
Net change in unrealized appreciation (depreciation) on investments,
translation of assets and liabilities denominated in foreign currencies
and deferred taxes ............................................................ 2,311,966,104 942,367,615
-------------------------------------
Net increase (decrease) in net assets resulting from operations ............. 3,014,121,612 1,662,704,345
-------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ........................................................................ (273,912,956) (204,011,408)
Class B ........................................................................ (2,748,776) (2,057,816)
Class C ........................................................................ (16,468,761) (12,329,894)
Class R ........................................................................ (2,322,076) (1,184,897)
Advisor Class .................................................................. (19,608,644) (10,826,764)
Net realized gains:
Class A ........................................................................ (23,671,179) --
Class B ........................................................................ (362,129) --
Class C ........................................................................ (2,187,458) --
Class R ........................................................................ (225,827) --
Advisor Class .................................................................. (1,502,661) --
-------------------------------------
Total distributions to shareholders .............................................. (343,010,467) (230,410,779)
-------------------------------------
Capital share transactions (Note 2):
Class A ........................................................................ 341,590,541 1,933,013,114
Class B ........................................................................ 7,311,783 39,903,930
Class C ........................................................................ 35,422,627 178,088,702
Class R ........................................................................ 21,782,948 51,324,072
Advisor Class .................................................................. 436,365,657 281,492,911
-------------------------------------
Total capital share transactions ................................................. 842,473,556 2,483,822,729
-------------------------------------
Redemption fees .................................................................. 29,705 181,730
-------------------------------------
Net increase (decrease) in net assets ...................................... 3,513,614,406 3,916,298,025
Net assets:
Beginning of period .............................................................. 15,328,486,419 11,412,188,394
-------------------------------------
End of period .................................................................... $ 18,842,100,825 $ 15,328,486,419
=====================================
Distributions in excess of net investment income (undistributed net investment
income) included in net assets:
End of period .................................................................... $ (65,840,171) $ 177,438,318
=====================================

Semiannual Report | See notes to financial statements. | 27

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. Templeton Funds, Inc. 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 mainly 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

28 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. FOREIGN CURRENCY TRANSLATION

C. FOREIGN CURRENCY CONTRACTS

D. INCOME AND DEFERRED TAXES

Semiannual Report | 29

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME AND DEFERRED TAXES (CONTINUED)

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

F. 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.

G. REDEMPTION FEES

H. GUARANTEES AND INDEMNIFICATIONS

30 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK

The Fund offers five classes of shares: Class A, Class B, Class C, Class R and
Advisor Class. Effective March 1, 2005, Class B shares will no longer be offered
except to existing Class B shareholders through reinvested distributions or
exchanges into other Franklin Templeton funds' Class B shares, as permitted by
the applicable fund prospectus. 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 28, 2005, there were 3.9 billion shares of Templeton Funds, Inc.
authorized ($1.00 par value), of which 2.7 billion shares were classified as,
and allocated to, the Fund and further classified as follows: 2 billion shares
have been classified as Class A, 100 million as Class B, 300 million as Class C,
200 million as Advisor Class and 100 million as Class R. Transactions in the
Fund's shares were as follows:

------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------

CLASS A SHARES:
Shares sold ...................................... 174,122,495 $ 2,043,655,618 529,901,793 $ 5,560,556,885
Shares issued in reinvestment of reinvestme
distributions .................................. 23,280,518 261,601,861 17,760,833 176,505,043
Shares issued on merger
(Note 7) ....................................... -- -- 3,720,765 36,761,330
Shares redeemed .................................. (168,266,571) (1,963,666,938) (366,465,739) (3,840,810,144)
------------------------------------------------------------------
Net increase (decrease) .......................... 29,136,442 $ 341,590,541 184,917,652 $ 1,933,013,114
==================================================================
CLASS B SHARES:
Shares sold ...................................... 1,368,057 $ 15,787,920 5,409,338 $ 56,245,126
Shares issued in reinvestment of
distributions .................................. 238,964 2,643,773 179,187 1,748,133
Shares redeemed .................................. (964,224) (11,119,910) (1,720,645) (18,089,329)
------------------------------------------------------------------
Net increase (decrease) .......................... 642,797 $ 7,311,783 3,867,880 $ 39,903,930
==================================================================
CLASS C SHARES:
Shares sold ...................................... 9,801,193 $ 113,642,083 30,509,222 $ 318,483,878
Shares issued in reinvestment of
distributions .................................. 1,336,800 14,827,279 1,021,682 9,986,179
Shares redeemed .................................. (8,042,189) (93,046,735) (14,369,763) (150,381,355)
------------------------------------------------------------------
Net increase (decrease) .......................... 3,095,804 $ 35,422,627 17,161,141 $ 178,088,702
==================================================================
CLASS R SHARES:
Shares sold ...................................... 3,196,033 $ 37,190,198 6,679,102 $ 70,817,402
Shares issued in reinvestment of
distributions .................................. 211,179 2,357,409 111,580 1,102,092
Shares issued on merger
(Note 7) ....................................... -- -- 1,423,906 13,911,650
Shares redeemed .................................. (1,525,811) (17,764,659) (3,301,685) (34,507,072)
------------------------------------------------------------------
Net increase (decrease) .......................... 1,881,401 $ 21,782,948 4,912,903 $ 51,324,072
==================================================================

Semiannual Report | 31

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------

ADVISOR CLASS SHARES:
Shares sold ........................... 44,516,727 $ 525,588,962 34,924,844 $ 365,757,590
Shares issued in reinvestment of ......
distributions ........................ 1,167,912 13,111,683 556,200 5,523,927
Shares redeemed ....................... (8,790,415) (102,334,988) (8,511,174) (89,788,606)
-------------------------------------------------------------
Net increase (decrease) ............... 36,894,224 $ 436,365,657 26,969,870 $ 281,492,911
=============================================================

3. TRANSACTIONS WITH AFFILIATES

- -------------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- -------------------------------------------------------------------------------------------------

A. MANAGEMENT FEES

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

32 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

The Fund pays its allocated share of an administrative fee to FT Services based
on Templeton Funds, Inc. aggregate average daily net assets as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.150% Up to and including $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

C. DISTRIBUTION FEES

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,
respectively, for costs incurred in marketing the Fund's shares under a Rule
12b-1 plan.

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:

Net sales charges received ........................ $ 366,342
Contingent deferred sales charges retained ........ $ 174,123

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $14,659,800, of which $8,083,135 was paid
to Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

Semiannual Report | 33

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. INCOME TAXES

At August 31, 2004, 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:

2008 ........................... $ 9,784,222
2009 ........................... 4,983,869
2010 ........................... 53,392,716
2011 ........................... 155,555,918
-------------
$ 223,716,725
=============

At August 31, 2004, the Fund had deferred currency losses occurring subsequent
to October 31, 2003 of $2,901,150. For tax purposes, such losses will be
reflected in the year ending August 31, 2005.

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of passive foreign investment company
shares, foreign currency transactions, and bond discounts and premiums.

Net realized gains differ for financial statement and tax purposes primarily due
to differing treatments of wash sales, foreign currency transactions, and bond
discounts and premiums.

At February 28, 2005, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes were as follows:

Cost of investments ............................. $ 14,858,931,843
================
Unrealized appreciation ......................... $ 4,127,024,622
Unrealized depreciation ......................... (324,635,788)
----------------
Net unrealized appreciation (depreciation) ...... $ 3,802,388,834
================

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended February 28, 2005 aggregated $1,734,058,331 and $2,185,135,225,
respectively.

7. MERGERS

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 R 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.

34 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. HOLDINGS OF 5% VOTING SECURITIES

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
Fund at February 28, 2005 were as shown below:

- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES HELD SHARES HELD VALUE
AT BEGINNING GROSS GROSS AT END AT END INVESTMENT REALIZED CAPITAL
NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------

Holmen Aktiebolag
AB, B .............. 3,653,879 -- 2,402,396 1,251,483 $ --(a) $ -- $ 2,557,068
Satyam Computers
Services Ltd ....... 18,631,754 -- -- 18,631,754 175,642,764 1,135,959 --
-----------------------------------------------
TOTAL AFFILIATED SECURITIES (0.93% of Net Assets) $175,642,764 $ 1,135,959 $ 2,557,068
===============================================

(a) As of February 28, 2005, no longer an affiliate.

9. REGULATORY MATTERS

INVESTIGATIONS

SETTLEMENTS

Semiannual Report | 35

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY MATTERS (CONTINUED)

SETTLEMENTS (CONTINUED)

36 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY MATTERS (CONTINUED)

SETTLEMENTS (CONTINUED)

Semiannual Report | 37

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS

38 | Semiannual Report

Templeton Foreign Fund

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

QUARTERLY STATEMENT OF INVESTMENTS

Semiannual Report | 39

This page intentionally left blank.

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

GLOBAL

Mutual Discovery 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

BLEND

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

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 Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME

TAX-FREE INCOME(6)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)

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

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust(9)

(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 and select retirement
plans.

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

(5) Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.

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

(7) Portfolio of insured municipal securities.

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

01/05 Not part of the semiannual report

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

o 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

104 S2005 04/05

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 11(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 experts are Fred R. Millsaps and Frank A.
Olson, they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

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

N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES.

N/A/

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

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of 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

(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
Galen G. Vetter, 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
Galen G. Vetter, 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 25, 2005

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 25, 2005

By /s/Galen G. Vetter
Chief Financial Officer
Date April 25, 2005