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)

CRAIG S. TYLE, 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: 2/28/06
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ITEM 1. REPORTS TO STOCKHOLDERS

TEMPLETON WORLD FUND

[GRAPHIC OMITTED]

FEBRUARY 28, 2006
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | GLOBAL
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON WORLD FUND
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.

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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

Franklin o TEMPLETON o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

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 offices in over 25 countries, Templeton
offers investors a truly global perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans 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, accurate and personal service that
has helped us become one of the most trusted names
in financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLAN | 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 ...................................................... 11

Financial Highlights and Statement of Investments ........................ 13

Financial Statements ...................................................... 22

Notes to Financial Statements ............................................. 25

Shareholder Information ................................................... 33

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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 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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This semiannual report for Templeton World Fund covers the period ended February
28, 2006.

PERFORMANCE OVERVIEW

Templeton World Fund - Class A posted a +9.13% cumulative total return for the
six months under review. The Fund underperformed its benchmark, the Morgan
Stanley Capital International (MSCI) World Index, which posted a +10.50% total
return for the same period. 1 In line with our long-term investment strategy, we
place more significance on the Fund's long-term performance. For the 10-year
period ended February 28, 2006, Templeton World Fund -Class A delivered a
+162.42% cumulative total return, compared with the MSCI World Index's +109.42%
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. You can find more performance data in the Performance Summary
beginning on page 8.

ECONOMIC AND MARKET OVERVIEW

The global economy overcame fears of derailment generated by higher energy costs
and advanced at a fair pace over the six-month period ended February 28, 2006.
In the fourth quarter of 2005, gross domestic product grew at annualized rates
of 5.5% in Japan, 1.6% in the U.S. and 1.2% in the euro zone. 2 Based on more
recent economic indicators, the economic expansion probably accelerated in the
first two months of this year.

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. Sources: Economic and Social Research Institute (Japan); U.S. Bureau of
Economic Analysis; Eurostat.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 16.

Semiannual Report | 3

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 2/28/06

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

North America 33.0%
Europe 32.2%
Asia 26.0%
Middle East & Africa 1.7%
Australia & New Zealand 1.1%
Latin America 0.7%
Short-Term Investments & Other Net Assets 5.3%

TOP 10 COUNTRIES
Based on Equity Securities 2/28/06

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% OF TOTAL
NET ASSETS
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U.S. 28.8%
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U.K. 16.3%
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Japan 8.5%
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South Korea 6.7%
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Hong Kong 6.1%
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Bermuda 3.7%
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Netherlands 3.7%
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France 3.5%
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Taiwan 2.8%
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Germany 2.4%
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Excluding the volatile energy and food sectors, inflation was relatively subdued
worldwide and monetary policy remained fairly accommodative. The U.S. Federal
Reserve Board raised the short-term federal funds target rate in four
quarter-point increments, bringing it to 4.50%. The European Central Bank made
one increase that brought short-term rates to 2.25%, after keeping rates at
historically low levels for more than two and a half years. Even after these
increases, both rates remained at levels considered supportive of further
economic growth.

Strong demand for oil sustained high prices during most of the reporting period,
while prices for other commodities such as industrial metals were also high, led
by copper, whose contract price rose 29% over the six-month period. 3 This
contributed to economic growth in countries such as Australia and Canada, and
emerging markets in Asia and Latin America that are tied to mining and
industrial commodities.

In this environment, global equity markets performed strongly, particularly
outside the U.S. The six-month total return for the MSCI Europe, Australasia,
Far East (EAFE) Index was +15.23%, calculated in U.S. dollars. 4 By comparison
the total return for the MSCI USA Index was +6.20%. 5 The performance of the
non-U.S. equity markets would have been stronger had the dollar not appreciated
in value versus other major currencies. For the reporting period, the dollar
rose against the British pound (+2.70%), the euro (+3.16%), the yen (+4.22%) and
the Swiss franc (+4.22%). 6 However, the dollar declined versus some other
currencies. For example, the dollar fell against the Brazilian real (-9.72%),
the South Korean won (-6.68%), the Canadian dollar (-4.22%) and the Mexican peso
(-3.27%). 6

In terms of global sector performance, as measured by the MSCI World Index,
materials and financial stocks provided the strongest total returns, while
energy and consumer staples provided the lowest positive returns. 7 The
telecommunication services sector was the only sector that had negative returns
for the period.

3. Source: New York Mercantile Exchange.

4. 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.

5. Source: Standard & Poor's Micropal. The MSCI USA Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in the U.S.

6. Source: IDC/ExShare via FactSet Research Systems.

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 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.

MANAGER'S DISCUSSION

The Fund's gains over the six-month reporting period were attributable to stocks
from a broad array of sectors, industries and geographic regions. Financials
sector stocks were the standout, and were by far the greatest contributor to the
Fund's absolute performance. 7 We held a substantial weighting in this sector
throughout the period, averaging about 25% of the Fund's total net assets, and
the most notable performers were U.S.-based company Merrill Lynch and South
Korean- and Japanese-based financial institutions. Of the Fund's top 10
contributors, 8 were financial companies, and 7 out of 10 were based in South
Korea or Japan.

Among non-U.S. equity markets, the strongest performance came from several
emerging markets, especially South Korea's, where share prices gained
substantially amid strong earnings growth at many companies. For example, South
Korean banks Kookmin Bank and Shinhan Financial Group produced solid earnings
during fourth quarter 2005. Both of these institutions showed a high return on
equity (a measure of profitability) when compared with their stock valuations at
period-end. Furthermore, Shinhan held good growth potential for its non-banking
business, offered a management team with a proven track record, and garnered
good market share through consolidations. By country, Japan was one of the
Fund's single largest contributors to performance over the six-month reporting
period. Despite this boost to performance, our stock selection and relatively
light weighting in Japanese stocks hurt performance compared with the benchmark
MSCI World Index. Certain information technology stocks also produced notable
contributions to the Fund's return. For example, Samsung Electronics was the
sector's single largest contributor. It is one of the world's premier technology
companies and has set a goal to double its revenues over the next five years.
Increased

TOP 10 CONTRIBUTORS TO PERFORMANCE
2/28/06

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COMPANY
SECTOR/INDUSTRY, COUNTRY
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Merrill Lynch & Co. Inc.
CAPITAL MARKETS, U.S.
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Samsung Electronics Co. Ltd., ord. & pfd.
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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Kookmin Bank
COMMERCIAL BANKS, SOUTH KOREA
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Hana Financial Group Inc.
COMMERCIAL BANKS, SOUTH KOREA
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Nomura Holdings Inc.
CAPITAL MARKETS, JAPAN
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Amvescap PLC
CAPITAL MARKETS, U.K.
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SONY Corp.
HOUSEHOLD DURABLES, JAPAN
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ACE Ltd.
INSURANCE, BERMUDA
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Sompo Japan Insurance Inc.
INSURANCE, JAPAN
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Shinhan Financial Group Co. Ltd.
COMMERCIAL BANKS, SOUTH KOREA
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7. The financials sector comprises insurance, capital markets, commercial banks,
consumer finance, real estate, and thrifts and mortgage finance in the SOI.

Semiannual Report | 5

TOP 10 INDUSTRIES
Based on Equity Securities
2/28/06

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% OF TOTAL
NET ASSETS
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Media 10.4%
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Insurance 7.3%
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Oil, Gas & Consumable Fuels 6.9%
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Pharmaceuticals 5.9%
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Commercial Banks 5.8%
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Real Estate 5.1%
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Diversified Telecommunication Services 4.7%
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Capital Markets 4.7%
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Software 3.6%
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Industrial Conglomerates 3.5%
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TOP 10 EQUITY HOLDINGS
2/28/06

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Cheung Kong (Holdings) Ltd. 3.7%
REAL ESTATE, HONG KONG
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Samsung Electronics Co. Ltd., ord. & pfd. 2.7%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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Merrill Lynch & Co. Inc. 2.5%
CAPITAL MARKETS, U.S.
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News Corp., A 2.1%
MEDIA, U.S.
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JPMorgan Chase & Co. 2.0%
DIVERSIFIED FINANCIAL SERVICES, U.S.
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DIRECTV Group Inc. 2.0%
MEDIA, U.S.
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Royal Dutch Shell PLC, A & B 1.8%
OIL, GAS & CONSUMABLE FUELS, U.K.
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El Paso Corp. 1.7%
OIL, GAS & CONSUMABLE FUELS, U.S.
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ACE Ltd. 1.6%
INSURANCE, BERMUDA
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GlaxoSmithKline PLC 1.6%
PHARMACEUTICALS, U.K.
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investor confidence in the memory, handset and display businesses contributed to
a marked increase in Samsung's share price this reporting period.

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, 2006, the U.S. dollar rose in value relative to most non-U.S.
currencies. As a result, the Fund's performance was negatively affected by the
portfolio's primary investment in securities with non-U.S. currency exposure.

Globally, our search for values was focused on laggard companies, industries,
and markets, consistent with our time-tested investment strategy. Not
surprisingly, some of our recent purchases in the media and telecommunication
services industries, and in Taiwan, were significant underperformers in 2005. 8
In fact, media was 2005's single worst performing industry according to the MSCI
World Index. 9 At period-end, media happened to be one of the Fund's largest
industry overweightings versus the benchmark MSCI World Index, mostly as a
result of our bargain hunting throughout the sector. This exposure hindered the
Fund's absolute and relative performance. One of the media companies that
detracted from performance, British Sky Broadcasting (Sky), the dominant U.K.
pay television provider, showed recent improvement. At period-end, Sky still
commanded a strong position in the under-penetrated U.K. pay television market,
and we believed many of the fears concerning competitive threats were overblown
and already discounted into the stock price. In the first half of its 2006
fiscal year, Sky reported that its margins had expanded 120 basis points (100
basis points equal one percentage point) versus the same period in fiscal year
2005. Sky's revenues, operating profit, earnings per share and free cash flow
also increased substantially. Among U.S. media companies, our overweightings in
News Corp. and DIRECTV Group dampened the Fund's relative performance. News
Corp. recently reported excellent quarterly results, while DIRECTV reported
better-than-expected earnings and announced a $3 billion stock buyback, equal to
16% of its market capitalization.

8. The telecommunication services industry comprises diversified
telecommunication services and wireless telecommunication services in the SOI.

9. Source: MSCI. See footnote 1 for a description of the MSCI World Index.

6 | Semiannual Report

Our bottom-up, long-term investment strategy can yield noteworthy results, as it
did for one of our pharmaceuticals holdings, GlaxoSmithKline (GSK), whose recent
performance reflected improving fundamentals and greater information about
products in development. The company reported 33% growth in earnings per share
(EPS) during fourth quarter 2005, which resulted in 18% EPS growth for 2005
overall.

During the six months under review, we initiated a position in Comcast, which
develops, manages and operates hybrid fiber-coaxial broadband cable
communication networks. Based on our strategy, we found Comcast's value
attractive.

We also purchased shares of William Morrison Supermarkets, which operates 125
supermarkets in the U.K. and has recently acquired another large grocery store
chain (Safeway), bringing total operations to 552 stores. Success at these newly
added locations illustrated the viability of the Morrison business model.
Moreover, we believe the longer-term growth potential remains positive, making
this what we consider an attractive addition to the Fund.

At period-end we believe emerging market performance will likely remain a strong
theme. We believe in the potential for emerging markets because technology is
now available to many of them, their capital markets have begun to mature and
financing is more readily available than in past periods, and in the past decade
billions of people in emerging market economies have become an important part of
the world economy.

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, 2006, 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 2/28/06

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 that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

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CLASS A (SYMBOL: TEMWX) CHANGE 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.44 $18.48 $18.92
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DISTRIBUTIONS (9/1/05-2/28/06)
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Dividend Income $0.2685
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Short-Term Capital Gain $0.0813
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Long-Term Capital Gain $1.6226
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TOTAL $1.9724
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CLASS B (SYMBOL: TWDBX) CHANGE 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.42 $18.19 $18.61
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DISTRIBUTIONS (9/1/05-2/28/06)
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Dividend Income $0.1579
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Short-Term Capital Gain $0.0813
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Long-Term Capital Gain $1.6226
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TOTAL $1.8618
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CLASS C (SYMBOL: TEWTX) CHANGE 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.44 $17.98 $18.42
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DISTRIBUTIONS (9/1/05-2/28/06)
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Dividend Income $0.1610
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Short-Term Capital Gain $0.0813
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Long-Term Capital Gain $1.6226
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TOTAL $1.8649
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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 +9.13% +13.26% +48.72% +162.42%
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Average Annual Total Return 2 +2.88% +6.76% +6.99% +9.48%
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Value of $10,000 Investment 3 $10,288 $10,676 $ 14,017 $ 24,730
- -----------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +11.02% +8.64% +9.47%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +8.71% +12.40% +43.30% +68.89%
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Average Annual Total Return 2 +4.80% +8.40% +7.16% +7.59%
- -----------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,480 $10,840 $ 14,130 $ 16,889
- -----------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +12.94% +8.84% +7.68%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +8.71% +12.37% +43.21% +143.06%
- -----------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +7.73% +11.37% +7.45% +9.29%
- -----------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,773 $11,137 $ 14,321 $ 24,306
- -----------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +15.89% +9.12% +9.29%
- -----------------------------------------------------------------------------------------------------------

PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.

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

Semiannual Report | 9

Performance Summary (CONTINUED)

ENDNOTES

SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
FLUCTUATIONS, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS. INVESTMENTS IN
DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN
ADDITION TO THOSE ASSOCIATED WITH THESE MARKETS' SMALLER 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.

10 | Semiannual Report

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.

Semiannual Report | 11

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 9/1/05 VALUE 2/28/06 PERIOD* 9/1/05-2/28/06
- ----------------------------------------------------------------------------------------------------------

Actual $ 1,000 $ 1,091.30 $ 5.50
Hypothetical (5% return before expenses) $ 1,000 $ 1,019.54 $ 5.31
- ----------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 1,087.10 $ 9.37
Hypothetical (5% return before expenses) $ 1,000 $ 1,015.82 $ 9.05
- ----------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 1,087.10 $ 9.42
Hypothetical (5% return before expenses) $ 1,000 $ 1,015.77 $ 9.10

* Expenses are equal to the annualized expense ratio for each class (A: 1.06%;
B: 1.81%; and C: 1.82%), multiplied by the average account value over the
period, multiplied by 181/365 to reflect the one-half year period.

12 | Semiannual Report

Templeton World Fund

FINANCIAL HIGHLIGHTS

-------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
-------------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 18.92 $ 16.78 $ 15.12 $ 13.64 $ 14.70 $ 18.87
-------------------------------------------------------------------------------------------
Income from investment operations:

Net investment income a ............. 0.07 0.25 0.22 0.18 0.17 f 0.29

Net realized and unrealized gains
(losses) ........................... 1.46 3.46 1.74 1.46 (0.96) f (3.04)
-------------------------------------------------------------------------------------------
Total from investment operations ...... 1.53 3.71 1.96 1.64 (0.79) (2.75)
-------------------------------------------------------------------------------------------
Less distributions from:

Net investment income ............... (0.27) (0.32) (0.30) (0.16) (0.27) (0.27)

Net realized gains .................. (1.70) (1.25) -- -- -- (1.15)
-------------------------------------------------------------------------------------------
Total distributions ................... (1.97) (1.57) (0.30) (0.16) (0.27) (1.42)
-------------------------------------------------------------------------------------------
Redemption fees ....................... -- c -- c -- c -- c -- --
-------------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 18.48 $ 18.92 $ 16.78 $ 15.12 $ 13.64 $ 14.70
===========================================================================================

Total return b ........................ 9.13% 23.91% 13.10% 12.27% (5.43)% (15.18)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $ 8,446,092 $ 7,988,364 $ 6,924,779 $ 6,419,826 $ 6,161,235 $ 7,102,237

Ratios to average net assets:

Expenses ............................ 1.06% d,e 1.08% e 1.11% e 1.11% 1.08% 1.09%

Net investment income ............... 0.82% d 1.41% 1.32% 1.40% 1.15% f 1.79%

Portfolio turnover rate ............... 17.61% 24.13% 37.58% 43.91% 44.56% 24.91%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f 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.

Semiannual Report | See notes to financial statements. | 13

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
-------------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 18.61 $ 16.53 $ 14.92 $ 13.46 $ 14.51 $ 18.66
-------------------------------------------------------------------------------------------
Income from investment operations:

Net investment income a ............. 0.01 0.12 0.10 0.09 0.06 f 0.17

Net realized and unrealized gains
(losses) ........................... 1.43 3.41 1.71 1.44 (0.95) f (3.01)
-------------------------------------------------------------------------------------------
Total from investment operations ...... 1.44 3.53 1.81 1.53 (0.89) (2.84)
-------------------------------------------------------------------------------------------
Less distributions from:

Net investment income ............... (0.16) (0.20) (0.20) (0.07) (0.16) (0.16)

Net realized gains .................. (1.70) (1.25) -- -- -- (1.15)
-------------------------------------------------------------------------------------------
Total distributions ................... (1.86) (1.45) (0.20) (0.07) (0.16) (1.31)
-------------------------------------------------------------------------------------------
Redemption fees ....................... -- c -- c -- c -- c -- --
-------------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 18.19 $ 18.61 $ 16.53 $ 14.92 $ 13.46 $ 14.51
===========================================================================================

Total return b ........................ 8.71% 22.99% 12.24% 11.46% (6.12)% (15.82)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $ 64,670 $ 60,564 $ 49,419 $ 37,166 $ 29,311 $ 25,743

Ratios to average net assets:

Expenses ............................ 1.81% d,e 1.83% e 1.86% e 1.86% 1.83% 1.83%

Net investment income ............... 0.07% d 0.66% 0.57% 0.65% 0.40% f 1.08%

Portfolio turnover rate ............... 17.61% 24.13% 37.58% 43.91% 44.56% 24.91%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

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

FINANCIAL HIGHLIGHTS (CONTINUED)

-------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
-------------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 18.42 $ 16.37 $ 14.77 $ 13.31 $ 14.34 $ 18.43
-------------------------------------------------------------------------------------------
Income from investment operations:

Net investment income a ............. -- c 0.11 0.09 0.09 0.06 f 0.17

Net realized and unrealized gains
(losses) .......................... 1.42 3.38 1.70 1.43 (0.94) f (2.98)
-------------------------------------------------------------------------------------------
Total from investment operations ...... 1.42 3.49 1.79 1.52 (0.88) (2.81)
-------------------------------------------------------------------------------------------
Less distributions from:

Net investment income ............... (0.16) (0.19) (0.19) (0.06) (0.15) (0.13)

Net realized gains .................. (1.70) (1.25) -- -- -- (1.15)
-------------------------------------------------------------------------------------------
Total distributions ................... (1.86) (1.44) (0.19) (0.06) (0.15) (1.28)
-------------------------------------------------------------------------------------------
Redemption fees ....................... -- c -- c -- c -- c -- --
-------------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 17.98 $ 18.42 $ 16.37 $ 14.77 $ 13.31 $ 14.34
===========================================================================================

Total return b ........................ 8.71% 23.00% 12.24% 11.46% (6.15)% (15.83)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $ 389,884 $ 351,430 $ 295,009 $ 270,417 $ 264,751 $ 313,538

Ratios to average net assets:

Expenses ............................ 1.82% d,e 1.83% e 1.86% e 1.86% 1.83% 1.83%

Net investment income ............... 0.06% d 0.66% 0.57% 0.65% 0.40% f 1.04%

Portfolio turnover rate ............... 17.61% 24.13% 37.58% 43.91% 44.56% 24.91%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

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. | 15

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED)

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

COMMON STOCKS 91.8%
ARGENTINA 0.4%
a Inversiones y Representacion SA, GDR ........... Real Estate 2,894,489 $ 36,962,624
-------------

AUSTRALIA 1.0%
National Australia Bank Ltd. ................... Commercial Banks 385 10,485
Qantas Airways Ltd. ............................ Airlines 28,451,898 86,608,861
-------------
86,619,346
-------------

BERMUDA 3.7%
Accenture Ltd., A .............................. IT Services 3,329,760 108,749,961
ACE Ltd. ....................................... Insurance 2,588,800 144,273,824
XL Capital Ltd., A ............................. Insurance 1,159,452 78,320,983
-------------
331,344,768
-------------

CHINA 1.0%
a Bank of Communications Ltd. .................... Commercial Banks 29,221,000 17,702,963
China Mobile (Hong Kong) Ltd. .................. Wireless Telecommunication Services 13,720,800 67,030,378
Guangdong Electric Power
Development Co. Ltd., B ..................... Independent Power Producers & Energy Traders 14,668,613 6,655,562
-------------
91,388,903
-------------

FINLAND 2.0%
Stora Enso OYJ, R .............................. Paper & Forest Products 6,902,980 98,596,329
UPM-Kymmene OYJ ................................ Paper & Forest Products 3,734,310 79,249,710
-------------
177,846,039
-------------

FRANCE 3.5%
France Telecom SA .............................. Diversified Telecommunication Services 4,961,280 107,950,316
Sanofi-Aventis ................................. Pharmaceuticals 1,380,621 117,527,636
Societe BIC SA ................................. Commercial Services & Supplies 621,001 37,870,867
Valeo SA ....................................... Auto Components 1,282,164 51,347,688
-------------
314,696,507
-------------

GERMANY 2.1%
Deutsche Post AG ............................... Air Freight & Logistics 3,158,400 82,165,441
Siemens AG ..................................... Industrial Conglomerates 1,135,130 104,357,488
-------------
186,522,929
-------------

HONG KONG 6.1%
Cheung Kong (Holdings) Ltd. .................... Real Estate 30,850,451 325,685,514
Hang Lung Group Ltd. ........................... Real Estate 1,345,000 2,973,305
Hutchison Whampoa Ltd. ......................... Industrial Conglomerates 13,935,060 132,920,996
New World Development Co. Ltd. ................. Real Estate 17,382,443 27,783,408
Shangri-La Asia Ltd. ........................... Hotels, Restaurants & Leisure 7,750,938 12,438,747
Swire Pacific Ltd., A .......................... Real Estate 4,326,500 41,519,722
-------------
543,321,692
-------------

16 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
INDIA 0.1%
Housing Development
Finance Corp. Ltd. ........................... Thrifts & Mortgage Finance 354,870 $ 10,867,318
-------------

ISRAEL 1.0%
a Check Point Software Technologies Ltd. ......... Software 4,007,820 85,206,253
-------------

ITALY 0.8%
Eni SpA ........................................ Oil, Gas & Consumable Fuels 2,541,076 72,589,161
-------------

JAPAN 8.5%
Fuji Photo Film Co. Ltd. ....................... Leisure Equipment & Products 1,303,500 42,224,550
Konica Minolta Holdings Ltd. ................... Office Electronics 2,014,500 25,406,384
Mitsubishi UFJ Financial Group Inc. ............ Commercial Banks 3,725 56,310,197
Nippon Telegraph & Telephone Corp. ............. Diversified Telecommunication Services 28,621 125,100,212
Nomura Holdings Inc. ........................... Capital Markets 4,001,300 77,596,152
Olympus Corp. .................................. Health Care Equipment & Supplies 773,000 22,502,570
Sompo Japan Insurance Inc. ..................... Insurance 9,348,000 137,193,901
Sony Corp. ..................................... Household Durables 2,499,200 119,384,753
Sumitomo Mitsui Financial Group Inc. ........... Commercial Banks 7,673 84,839,459
Takeda Pharmaceutical Co. Ltd. ................. Pharmaceuticals 1,241,800 69,724,874
-------------
760,283,052
-------------

NETHERLANDS 3.7%
Akzo Nobel NV .................................. Chemicals 909,615 46,199,207
Koninklijke Philips Electronics NV ............. Household Durables 3,855,105 125,569,515
Reed Elsevier NV ............................... Media 3,184,895 43,060,145
VNU NV ......................................... Media 3,593,633 116,452,948
-------------
331,281,815
-------------

NORWAY 0.6%
Norske Skogindustrier ASA . .................... Paper & Forest Products 1,963,130 29,389,263
b Norske Skogindustrier ASA, 144A ................ Paper & Forest Products 562,545 8,421,644
Telenor ASA .................................... Diversified Telecommunication Services 974,200 10,541,180
-------------
48,352,087
-------------

PHILIPPINES 0.2%
Ayala Land Inc. ................................ Real Estate 81,688,000 17,775,435
-------------

SINGAPORE 0.4%
Venture Corp. Ltd. ............................. Electronic Equipment & Instruments 4,753,000 38,375,532
-------------

SOUTH AFRICA 0.7%
Old Mutual PLC ................................. Insurance 19,091,570 62,880,076
-------------

SOUTH KOREA 5.8%
Hana Financial Group Inc. ...................... Commercial Banks 2,813,981 120,267,992
Kookmin Bank ................................... Commercial Banks 1,342,653 103,153,361
KT Corp., ADR .................................. Diversified Telecommunication Services 2,120,300 43,296,526

Semiannual Report | 17

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
SOUTH KOREA (CONTINUED)
Samsung Electronics Co. Ltd. ................... Semiconductors & Semiconductor Equipment 229,519 $ 162,388,829
Shinhan Financial Group Co. Ltd. ............... Commercial Banks 2,238,270 88,170,780
SK Telecom Co. Ltd., ADR ....................... Wireless Telecommunication Services 20,900 504,735
--------------
517,782,223
--------------

SPAIN 1.8%
Repsol YPF SA .................................. Oil, Gas & Consumable Fuels 3,216,190 89,880,735
Telefonica SA .................................. Diversified Telecommunication Services 4,350,130 67,112,563
--------------
156,993,298
--------------

SWITZERLAND 0.6%
Nestle SA ...................................... Food Products 140,684 41,369,761
Swiss Reinsurance Co. .......................... Insurance 123,442 8,793,761
--------------
50,163,522
--------------

TAIWAN 2.8%
Chunghwa Telecom Co. Ltd., ADR ................. Diversified Telecommunication Services 3,425,800 64,747,620
Compal Electronics Inc. ........................ Computers & Peripherals 10,229,170 9,582,804
Lite-On Technology Corp. ....................... Computers & Peripherals 49,472,040 67,079,699
Mega Financial Holding Co. Ltd. ................ Commercial Banks 65,188,000 49,618,452
Taiwan Semiconductor
Manufacturing Co. Ltd. ......................... Semiconductors & Semiconductor Equipment 28,394,372 53,287,846
--------------
244,316,421
--------------

UNITED KINGDOM 16.3%
Amvescap PLC ................................... Capital Markets 12,739,249 120,398,916
BAE Systems PLC ................................ Aerospace & Defense 11,670,208 85,984,339
Boots Group PLC ................................ Food & Staples Retailing 2,508,996 31,205,966
BP PLC ......................................... Oil, Gas & Consumable Fuels 12,133,621 134,098,044
British Sky Broadcasting Group PLC ............. Media 13,476,513 119,387,919
Centrica PLC ................................... Multi-Utilities 12,162,090 61,979,179
Compass Group PLC .............................. Hotels, Restaurants & Leisure 14,996,071 57,151,646
GKN PLC ........................................ Auto Components 14,693,118 87,571,926
GlaxoSmithKline PLC ............................ Pharmaceuticals 5,525,505 140,162,469
Pearson PLC .................................... Media 9,199,087 114,414,859
Reed Elsevier PLC .............................. Media 1,986,500 17,946,810
Rentokil Initial PLC ........................... Commercial Services & Supplies 2,473,030 6,832,842
Royal Dutch Shell PLC, A ....................... Oil, Gas & Consumable Fuels 2,051,200 61,945,606
Royal Dutch Shell PLC, B ....................... Oil, Gas & Consumable Fuels 3,253,830 102,516,238
Smiths Group PLC ............................... Industrial Conglomerates 2,525,039 41,593,470
Unilever PLC ................................... Food Products 9,430,567 97,193,483
Vodafone Group PLC ............................. Wireless Telecommunication Services 63,991,203 122,359,654
William Morrison Supermarkets PLC .............. Food & Staples Retailing 11,913,608 44,568,069
--------------
1,447,311,435
--------------

18 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
UNITED STATES 28.7%
Abbott Laboratories ............................ Pharmaceuticals 860,100 $ 37,999,218
American International Group Inc. .............. Insurance 1,038,600 68,921,496
a Avaya Inc. ..................................... Communications Equipment 4,834,650 53,761,308
a BMC Software Inc. .............................. Software 4,446,600 97,247,142
a Boston Scientific Corp. ........................ Health Care Equipment & Supplies 1,567,450 38,277,129
Bristol-Myers Squibb Co. ....................... Pharmaceuticals 2,076,280 47,962,068
a Cadence Design Systems Inc. .................... Software 6,118,800 108,608,700
CIGNA Corp. .................................... Health Care Providers & Services 571,710 70,177,403
a Comcast Corp., A ............................... Media 3,210,270 85,874,723
a Convergys Corp. ................................ IT Services 3,164,370 54,965,107
a DIRECTV Group Inc. ............................. Media 11,111,850 175,122,756
Dow Chemical Co. ............................... Chemicals 1,915,040 82,404,171
a EchoStar Communications Corp., A ............... Media 700,000 20,559,000
El Paso Corp. .................................. Oil, Gas & Consumable Fuels 11,394,070 149,034,436
Fannie Mae ..................................... Consumer Finance 1,764,068 96,459,239
JPMorgan Chase & Co. ........................... Diversified Financial Services 4,434,420 182,432,039
Lear Corp. ..................................... Auto Components 1,436,170 29,958,506
Merck & Co. Inc. ............................... Pharmaceuticals 2,939,080 102,456,329
Merrill Lynch & Co. Inc. ....................... Capital Markets 2,851,668 220,177,286
Microsoft Corp. ................................ Software 1,171,610 31,516,309
News Corp., A .................................. Media 11,369,320 185,092,530
Noble Corp. .................................... Energy Equipment & Services 772,910 57,125,778
a Pactiv Corp. ................................... Containers & Packaging 1,173,700 26,912,941
Pfizer Inc. .................................... Pharmaceuticals 451,400 11,822,166
R.R. Donnelley & Sons Co. ...................... Commercial Services & Supplies 1,764,250 59,384,655
Raytheon Co. ................................... Aerospace & Defense 1,988,200 86,287,880
TECO Energy Inc. ............................... Multi-Utilities 3,928,600 67,021,915
a Tenet Healthcare Corp. ......................... Health Care Providers & Services 11,950,150 94,286,683
Time Warner Inc. ............................... Media 2,562,100 44,349,951
Torchmark Corp. ................................ Insurance 1,557,920 85,171,486
Tyco International Ltd. ........................ Industrial Conglomerates 1,401,600 36,147,264
Willis Group Holdings Ltd. ..................... Insurance 1,422,700 48,997,788
--------------
2,556,515,402
--------------

TOTAL COMMON STOCKS
(COST $6,245,189,757) ....................... 8,169,395,838
--------------

PREFERRED STOCKS 1.6%
BRAZIL 0.3%
Companhia Vale do Rio Doce,
ADR, pfd., A ................................ Metals & Mining 631,500 25,702,050
--------------

GERMANY 0.3%
Volkswagen AG, pfd. ............................ Automobiles 448,756 23,102,566
--------------

SOUTH KOREA 0.9%
Samsung Electronics Co. Ltd., pfd. ............. Semiconductors & Semiconductor Equipment 154,200 82,578,785
--------------

Semiannual Report | 19

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

PREFERRED STOCKS (CONTINUED)
UNITED STATES 0.1%
XL Capital Ltd., 6.50%, cvt. pfd. .............. Insurance 541,500 $ 12,232,485
--------------
TOTAL PREFERRED STOCKS
(COST $50,559,250) .......................... 143,615,886
--------------

--------------
PRINCIPAL
AMOUNT d
--------------
BONDS & NOTES 1.3%
AUSTRALIA 0.1%
New South Wales Treasury Corp.,
8.00%, 3/01/08 .............................. 17,170,000 AUD 13,355,570
--------------

CANADA 0.1%
Government of Canada,
3.25%, 12/01/06. ............................ 5,150,000 CAD 4,509,933
6.00%, 6/01/11 .............................. 8,030,000 CAD 7,707,344
--------------
12,217,277
--------------

LUXEMBOURG 0.6%
b Repcon Luxembourg SA, cvt.,
144A, 4.50%, 1/26/11 ........................ 41,250,000 53,645,625
--------------

SINGAPORE 0.1%
Government of Singapore,
1.75%, 2/01/07 .............................. 7,300,000 SGD 4,458,287
--------------

SWEDEN 0.1%
Government of Sweden,
5.50%, 10/08/12. ............................ 48,680,000 SEK 6,957,713
--------------

UNITED STATES 0.3%
Federal Home Loan Mortgage Corp.,
5.50%, 12/01/35. ............................ 24,820,850 24,625,404
--------------

TOTAL BONDS & NOTES
(COST $104,856,004) ......................... 115,259,876
--------------

SHORT TERM INVESTMENTS 6.0%
GERMANY 1.0%
Dresdner Bank AG, Time Deposit,
2.27%, 3/01/06 .............................. 75,000,000 EUR 88,878,745
--------------

IRELAND 0.5%
Bank of Scotland, Time Deposit,
2.40%, 3/01/06 .............................. 35,000,000 EUR 41,476,748
--------------

SWEDEN 0.1%
c Sweden Treasury Bill, 12/20/06. ................ 35,600,000 SEK 4,423,091
--------------

20 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

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

SHORT TERM INVESTMENTS (CONTINUED)
UNITED KINGDOM 1.7%
Royal Bank of Canada, Time Deposit,
2.33%, 3/01/06 .............................. 130,130,000 EUR $ 154,210,547
---------------

UNITED STATES 2.7%
c Federal Home Loan Bank, 3/01/06 ................ 40,815,000 40,815,000
c U.S. Treasury Bills, 3/30/06 - 5/25/06 ......... 202,707,000 200,832,473
---------------
241,647,473
---------------

TOTAL SHORT TERM INVESTMENTS
(COST $530,607,874) ......................... 530,636,604
---------------

TOTAL INVESTMENTS
(COST $6,931,212,885) 100.7% ................ 8,958,908,204
OTHER ASSETS, LESS
LIABILITIES (0.7)% .......................... (58,262,416)
---------------
NET ASSETS 100.0% .............................. $ 8,900,645,788
===============

CURRENCY ABBREVIATIONS

AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
SEK - Swedish Krona
SGD - Singapore Dollar

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
GDR - Global Depository Receipt

a Non-income producing.

b Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and may be sold in transactions exempt from registration only to qualified
institutional buyers or in a public offering registered under the Securities Act
of 1933. These securities have been deemed liquid under the guidelines approved
by the Fund's Board of Directors. At February 28, 2006, the aggregate value of
these securities was $62,067,269, representing 0.70% of net assets.

c The security is traded on a discount basis with no stated coupon rate.

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

Semiannual Report | See notes to financial statements. | 21

Templeton World Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2006 (unaudited)

Assets:
Investments in securities:
Cost .................................................................. $ 6,931,212,885
===============
Value ................................................................. $ 8,958,908,204
Cash .................................................................... 14,156
Foreign currency, at value (cost $18,764,980) ........................... 18,376,315
Receivables:
Investment securities sold ............................................ 64,787,377
Capital shares sold ................................................... 6,881,026
Dividends and interest ................................................ 16,575,711
---------------
Total assets ........................................................ 9,065,542,789
===============
Liabilities:
Payables:
Investment securities purchased ....................................... 148,847,203
Capital shares redeemed ............................................... 7,256,813
Affiliates ............................................................ 7,790,041
Accrued expenses and other liabilities .................................. 1,002,944
---------------
Total liabilities ................................................... 164,897,001
---------------
Net assets, at value .............................................. $ 8,900,645,788
===============
Net assets consist of:
Paid-in capital ......................................................... $ 6,604,165,248
Distributions in excess of net investment income ........................ (25,900,932)
Net unrealized appreciation (depreciation) .............................. 2,027,025,616
Accumulated net realized gain (loss) .................................... 295,355,856
---------------
Net assets, at value .............................................. $ 8,900,645,788
===============
CLASS A:
Net assets, at value .................................................... $ 8,446,091,778
===============
Shares outstanding ...................................................... 457,106,319
===============
Net asset value per share a ............................................. $ 18.48
===============
Maximum offering price per share (net asset value per share / 94.25%) ... $ 19.61
===============
CLASS B:
Net assets, at value .................................................... $ 64,670,388
===============
Shares outstanding ...................................................... 3,555,659
===============
Net asset value and maximum offering price per share a .................. $ 18.19
===============
CLASS C:
Net assets, at value .................................................... $ 389,883,622
===============
Shares outstanding ...................................................... 21,685,206
===============
Net asset value and maximum offering price per share a .................. $ 17.98
===============

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

22 | See notes to financial statements. | Semiannual Report

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2006 (unaudited)

Investment income:
Dividends ............................................................... $ 72,632,335
Interest ................................................................ 7,820,838
---------------
Total investment income ............................................. 80,453,173
---------------
Expenses:
Management fees (Note 3a) ............................................... 26,097,526
Administrative fees (Note 3b) ........................................... 3,288,725
Distribution fees (Note 3c)
Class A ............................................................... 9,729,070
Class B ............................................................... 307,893
Class C ............................................................... 1,821,424
Transfer agent fees (Note 3e) ........................................... 3,996,755
Custodian fees (Note 4) ................................................. 1,208,026
Reports to shareholders ................................................. 190,609
Registration and filing fees ............................................ 125,335
Professional fees ....................................................... 79,377
Directors' fees and expenses ............................................ 123,358
Other ................................................................... 14,941
---------------
Total expenses ...................................................... 46,983,039
Expense reductions (Note 4) ......................................... (6,676)
---------------
Net expenses ...................................................... 46,976,363
---------------
Net investment income ........................................... 33,476,810
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................... 477,682,605
Foreign currency transactions ......................................... (4,186,106)
---------------
Net realized gain (loss) ............................................ 473,496,499
---------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................... 243,800,963
Translation of assets and liabilities denominated in foreign
currencies .......................................................... (597,360)
---------------
Net change in unrealized appreciation (depreciation) ................ 243,203,603
---------------
Net realized and unrealized gain (loss) .................................... 716,700,102
---------------
Net increase (decrease) in net assets resulting from operations ............ $ 750,176,912
===============

Semiannual Report | See notes to financial statements. | 23

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

-----------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED
(UNAUDITED) AUGUST 31, 2005
-----------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income . ................................................................ $ 33,476,810 $ 109,290,218
Net realized gain (loss) from investments and foreign currency transactions ............ 473,496,499 662,089,877
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies, and deferred taxes ......... 243,203,603 910,135,353
-----------------------------------
Net increase (decrease) in net assets resulting from operations ...................... 750,176,912 1,681,515,448
-----------------------------------
Distributions to shareholders from:
Net investment income:
Class A .............................................................................. (113,657,382) (132,317,197)
Class B .............................................................................. (511,468) (603,226)
Class C .............................................................................. (3,071,088) (3,484,513)
Net realized gains:
Class A .............................................................................. (728,163,001) (516,252,922)
Class B .............................................................................. (5,616,433) (3,804,334)
Class C .............................................................................. (33,125,868) (22,580,982)
-----------------------------------
Total distributions to shareholders ...................................................... (884,145,240) (679,043,174)
-----------------------------------
Capital share transactions: (Note 2)
Class A .............................................................................. 585,292,940 108,561,157
Class B .............................................................................. 5,014,107 4,124,400
Class C .............................................................................. 43,944,922 15,983,062
-----------------------------------
Total capital share transactions ......................................................... 634,251,969 128,668,619
-----------------------------------
Redemption fees .......................................................................... 3,683 10,975
-----------------------------------
Net increase (decrease) in net assets .............................................. 500,287,324 1,131,151,868
Net assets:
Beginning of period . .................................................................... 8,400,358,464 7,269,206,596
-----------------------------------
End of period ............................................................................ $ 8,900,645,788 $ 8,400,358,464
===================================
Undistributed net investment income (distributions in excess of net investment income)
included in net assets:
End of period .......................................................................... $ (25,900,932) $ 57,862,196
===================================

24 | See notes to financial statements. | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Funds, Inc. is registered under the Investment Company Act of 1940 as
an open-end investment company, consisting of two separate series. The Templeton
World Fund (the Fund) included in this report is diversified. The financial
statements of the remaining fund in the series are presented separately. The
Fund currently offers three classes of shares: Class A, Class B, and Class C.
Effective March 1, 2005, Class B shares are only offered to existing Class B
shareholders in the form of reinvested distributions and certain exchanges from
other Franklin Templeton Class B shares. Effective May 15, 2006, the Fund will
begin offering Advisor Class shares. Each class of shares differs by its initial
sales load, contingent deferred sales charges, distribution fees, voting rights
on matters affecting a single class and its exchange privilege.

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 and 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. 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 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.

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. 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. Due to the inherent uncertainty of
valuations of

Semiannual Report | 25

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

such securities, the fair values may differ significantly from the values that
would have been used had a ready market for such investments existed.
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.

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, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

26 | Semiannual Report

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
continue to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.

The Fund is subject to a tax imposed on net realized gains on 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.

Foreign securities held by the Fund may be subject to foreign taxation. Foreign
taxes, if any, are recorded based on the tax regulations and rates that exist in
the foreign markets in which the Fund invests.

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recognized as soon as the Fund is notified
of the ex-dividend date. Distributions to shareholders are recorded on the
ex-dividend date and are determined according to income tax regulations (tax
basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States. These differences may be permanent or temporary. Permanent
differences are reclassified among capital accounts to reflect their tax
character. These reclassifications have no impact on net assets or the results
of operations. Temporary differences are not reclassified, as they may reverse
in subsequent periods.

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 of
Templeton Funds, Inc. Fund specific expenses are charged directly to the fund
that incurred the expense.

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.

Semiannual Report | 27

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. REDEMPTION FEES

A short term trading redemption fee will be imposed, with some exceptions, on
any Fund shares that are redeemed or exchanged within seven calendar days
following their purchase date (30 days or less prior to June 1, 2004). The
redemption fee is 2% of the amount redeemed. Such fees are retained by the Fund
and accounted for as an addition to paid-in capital.

H. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and directors are
indemnified by the Fund against certain liabilities 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

At February 28, 2006, there were 3.9 billion shares of Templeton Funds, Inc.
authorized ($1.00 par value) of which 1.2 billion shares were allocated to the
Fund. Transactions in the Fund's shares were as follows:

-------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2006 AUGUST 31, 2005
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------

CLASS A SHARES:
Shares sold .................... 22,671,366 $ 411,279,382 28,733,088 $ 507,183,248
Shares issued in reinvestment
of distributions ............ 44,289,115 757,605,580 36,205,371 581,637,172
Shares redeemed ................ (32,046,827) (583,592,022) (55,414,384) (980,259,263)
-------------------------------------------------------------
Net increase (decrease) ........ 34,913,654 $ 585,292,940 9,524,075 $ 108,561,157
=============================================================
CLASS B SHARES:
Shares sold .................... 199,656 $ 3,536,434 412,603 $ 7,072,448
Shares issued in reinvestment
of distributions ............ 317,116 5,347,259 243,875 3,864,343
Shares redeemed ................ (215,535) (3,869,586) (391,758) (6,812,391)
-------------------------------------------------------------
Net increase (decrease) ........ 301,237 $ 5,014,107 264,720 $ 4,124,400
=============================================================
CLASS C SHARES:
Shares sold .................... 2,162,262 $ 38,169,362 2,380,823 $ 41,127,240
Shares issued in reinvestment of
distributions ................ 1,896,648 31,634,426 1,469,068 23,041,940
Shares redeemed ................ (1,451,527) (25,858,866) (2,791,978) (48,186,118)
-------------------------------------------------------------
Net increase (decrease) ........ 2,607,383 $ 43,944,922 1,057,913 $ 15,983,062
=============================================================

28 | Semiannual Report

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 Limited (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 average daily
net assets of the Fund 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% In excess of $20 billion

B. ADMINISTRATIVE FEES

The Fund pays its allocated share of an administrative fee to FT Services based
on Templeton Funds, Inc.'s 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% In excess of $1.2 billion

C. DISTRIBUTION FEES

The Fund's Board of Directors has adopted distribution plans for each share
class pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's Class A
reimbursement distribution plan, the Fund reimburses Distributors up to 0.25%
per year of Class A's average daily net assets for costs incurred in connection
with the sale and distribution of the Fund's shares. Prior to November 1, 2005,
Class A distribution costs exceding the maximum for the current plan year could
be reimbursed in subsequent periods. Effective November 1, 2005, the Class A
reimbursement distribution plan was amended to discontinue the reimbursement of
excess plan year costs in subsequent periods.

Semiannual Report | 29

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

C. DISTRIBUTION FEES (CONTINUED)

Under the Fund's compensation distribution plans, the Fund pays Distributors for
costs incurred in connection with the sale and distribution of the Fund's shares
up to a certain percentage per year of its average daily net assets of each
class as follows:

Class B ............................................................ 1.00%
Class C ............................................................ 1.00%

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 a ....................................... $ 452,296
Contingent deferred sales charges retained ......................... $ 35,752

a Net of commissions paid to unaffiliated broker/dealers.

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $3,996,755, of which $2,624,184 was
retained by 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, 2006, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

For tax purposes, realized currency losses, occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At August 31, 2005, the Fund deferred realized currency losses of
$9,402,829.

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 (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, and contingent debt.

30 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. INCOME TAXES (CONTINUED)

At February 28, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ..................................... $6,963,466,108
==============

Unrealized appreciation ................................. $2,155,834,019
Unrealized depreciation ................................. (160,391,923)
--------------
Net unrealized appreciation (depreciation) .............. $1,995,442,096
==============

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2006, aggregated $1,432,749,558 and $1,509,367,197,
respectively.

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.

8. REGULATORY MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, 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 (collectively, the "Company"), entered into
settlements with certain of those regulators.

Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds in March, 2005. The
SEC has not yet approved the distribution plan pertaining to the December 13,
2004 SEC Order. When approved, disbursements of settlement

Semiannual Report | 31

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

monies will be made promptly to the relevant funds, in accordance with the terms
and conditions of that order. The IDC has also prepared and submitted to the SEC
for its approval a plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.

The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company 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.

32 | Semiannual Report

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.

Semiannual Report | 33

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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 MidCap Value Fund
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
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
Templeton Income Fund

TAX-FREE INCOME 5

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC

Alabama
Arizona
California 7
Colorado
Connecticut
Florida 7
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 6
Michigan 6
Minnesota 6
Missouri
New Jersey
New York 7
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products
Trust 8

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

6. Portfolio of insured municipal securities.

7. 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).

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

09/05 Not part of the semiannual report

[LOGO](R)
FRANKLIN TEMPLETON 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.

SEMI ANNUAL 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 S2006 04/06

TEMPLETON FOREIGN FUND

[GRAPHIC OMITTED]

FEBRUARY 28, 2006
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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(R)

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 offices in over 25 countries, Templeton offers
investors a truly global perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
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, accurate and personal service that has
helped us become one of the most trusted names in
financial services.

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

[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

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

SEMIANNUAL REPORT

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

Performance Summary ....................................................... 9

Your Fund's Expenses ...................................................... 12

Financial Highlights and Statement of Investments ......................... 14

Financial Statements ...................................................... 26

Notes to Financial Statements ............................................. 30

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 primarily in
the equity securities of companies located outside the U.S., including emerging
markets.

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

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 2/28/06

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

Europe .............................................................. 45.9%
Asia ................................................................ 33.3%
North America ....................................................... 4.1%
Latin America ....................................................... 3.3%
Middle East & Africa ................................................ 1.7%
Australia & New Zealand ............................................. 1.7%
Short-Term Investments &
Other Net Assets .................................................... 10.0%

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

This semiannual report for Templeton Foreign Fund covers the period ended
February 28, 2006.

PERFORMANCE OVERVIEW

Templeton Foreign Fund - Class A posted a +10.15% cumulative total return for
the six months under review. The Fund underperformed its benchmark, the Morgan
Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index,
which posted a +15.23% total return for the same period. 1 In line with our
long-term investment strategy, we place more significance on the Fund's
long-term performance. For the 10-year period ended February 28,

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.
As of 2/28/06, the Fund's Class A 10-year average annual total return not
including the maximum sales charge was +8.70%, compared with the +6.70% 10-year
average annual total return of the MSCI EAFE Index. The index is unmanaged and
includes reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio. Past performance does not
guarantee future results.

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 19.

Semiannual Report | 3

TOP 10 COUNTRIES
Based on Equity Securities
2/28/06

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
U.K. 18.6%
- --------------------------------------------------------------------------------
Japan 11.8%
- --------------------------------------------------------------------------------
Hong Kong 7.7%
- --------------------------------------------------------------------------------
South Korea 5.9%
- --------------------------------------------------------------------------------
Netherlands 5.6%
- --------------------------------------------------------------------------------
Germany 4.4%
- --------------------------------------------------------------------------------
France 4.0%
- --------------------------------------------------------------------------------
Taiwan 3.5%
- --------------------------------------------------------------------------------
Spain 3.2%
- --------------------------------------------------------------------------------
Sweden 3.0%
- --------------------------------------------------------------------------------

2006, Templeton Foreign Fund - Class A delivered a +130.24% cumulative total
return, compared with the MSCI EAFE Index's +91.36% 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. You can find more
performance data in the Performance Summary beginning on page 9.

ECONOMIC AND MARKET OVERVIEW

2. Sources: Economic and Social Research Institute (Japan); U.S. Bureau of
Economic Analysis; Eurostat.

3. Source: New York Mercantile Exchange.

4 | Semiannual Report

In this environment, global equity markets performed strongly, particularly
outside the U.S. The six-month total return for the MSCI EAFE Index was +15.23%,
calculated in U.S. dollars. 4 By comparison the total return for the MSCI USA
Index was +6.20%. 5 The performance of the non-U.S. equity markets would have
been stronger had the dollar not appreciated in value versus other major
currencies. For the reporting period, the dollar rose against the British pound
(+2.70%), the euro (+3.16%), the yen (+4.22%) and the Swiss franc (+4.22%). 6
However, the dollar declined versus some other currencies. For example, the
dollar fell against the Brazilian real (-9.72%), the South Korean won (-6.68%),
the Canadian dollar (-4.22%) and the Mexican peso (-3.27%). 6

In terms of sector performance in the non-U.S. equity markets, as measured by
the MSCI EAFE Index, the materials, financial and industrial stocks provided the
strongest total returns, while energy and telecommunication services had
negative investment returns for the period.

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

4. Source: Standard & Poor's Micropal. See footnote 1 for a description of the
MSCI EAFE Index.

5. Source: Standard & Poor's Micropal. The MSCI USA Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in the U.S.

6. Source: IDC/ExShare via FactSet Research Systems.

7. The financials sector comprises insurance, capital markets, commercial banks,
consumer finance, real estate, and thrifts and mortgage finance in the SOI.

TOP 10 CONTRIBUTORS TO
PERFORMANCE
2/28/06

- -------------------------------------------------------------------------------
COMPANY
SECTOR/INDUSTRY, COUNTRY
- --------------------------------------------------------------------------------
Mitsubishi UFJ Financial Group Inc.
COMMERCIAL BANKS, JAPAN
- --------------------------------------------------------------------------------
Kookmin Bank, ord. & ADR
COMMERCIAL BANKS, SOUTH KOREA
- --------------------------------------------------------------------------------
Samsung Electronics Co. Ltd., ord. & GDR, Reg. S
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT, SOUTH KOREA
- --------------------------------------------------------------------------------
Sumitomo Mitsui Financial Group Inc.
COMMERCIAL BANKS, JAPAN
- --------------------------------------------------------------------------------
Hana Financial Group Inc.
COMMERCIAL BANKS, SOUTH KOREA
- --------------------------------------------------------------------------------
ING Groep NV
CAPITAL MARKETS, NETHERLANDS
- --------------------------------------------------------------------------------
SONY Corp.
HOUSEHOLD DURABLES, JAPAN
- --------------------------------------------------------------------------------
Amvescap PLC
CAPITAL MARKETS, U.K.
- --------------------------------------------------------------------------------
Shinhan Financial Group Co. Ltd.
COMMERCIAL BANKS, SOUTH KOREA
- --------------------------------------------------------------------------------
Electrolux AB, B
HOUSEHOLD DURABLES, SWEDEN
- --------------------------------------------------------------------------------

Semiannual Report | 5

TOP 10 INDUSTRIES
Based on Equity Securities
2/28/06

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
Commercial Banks 11.2%
- --------------------------------------------------------------------------------
Diversified Telecommunication Services 9.3%
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 6.8%
- --------------------------------------------------------------------------------
Household Durables 5.4%
- --------------------------------------------------------------------------------
Pharmaceuticals 5.3%
- --------------------------------------------------------------------------------
Media 5.1%
- --------------------------------------------------------------------------------
Real Estate 4.6%
- --------------------------------------------------------------------------------
Insurance 4.4%
- --------------------------------------------------------------------------------
Capital Markets 4.0%
- --------------------------------------------------------------------------------
Industrial Conglomerates 3.4%
- --------------------------------------------------------------------------------

net assets. The most notable performers were South Korean- and Japanese-based
financial institutions. Of these, Japan's Mitsubishi UFJ Financial Group, the
product of an October 2005 merger which made it the world's largest bank, was
the single largest contributor. Of the Fund's top 10 contributors, 7 were
financial companies, and 7 out of 10 were based in South Korea or Japan.

The consumer discretionary sector also contributed to the Fund's return.
Electrolux was one of our largest contributors from the sector, and the stock
has been re-rated to reflect the potential value of its outdoor business, which
Electrolux is planning to spin off to shareholders. The company is in the midst
of an aggressive restructuring program that has the potential to improve its
competitive position over the long term.

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, 2006, the U.S. dollar rose in value relative to most non-U.S.
currencies. As a result, the Fund's performance was negatively affected by the
portfolio's predominant investment in securities with non-U.S. currency
exposure.

6 | Semiannual Report

Globally, our search for values was focused on laggard companies, industries,
and markets, consistent with our time-tested investment strategy. Not
surprisingly, some of our recent purchases in the media and telecommunication
services industries, and in Taiwan, were significant underperformers in 2005. 8
In fact, media was 2005's single worst performing industry according to the MSCI
World Index. 9 At period-end, media happened to be one of the Fund's largest
industry overweightings versus the benchmark MSCI EAFE Index, mostly as a result
of our bargain hunting throughout the sector. This exposure hindered the Fund's
absolute and relative performance. One of the media companies that detracted
from performance, British Sky Broadcasting (Sky), the dominant U.K. pay
television provider, showed recent improvement. At period-end, Sky still
commanded a strong position in the under-penetrated U.K. pay television market,
and we believed many of the fears concerning competitive threats were overblown
and already discounted into the stock price. In the first half of its 2006
fiscal year, Sky reported that its margins had expanded 120 basis points (100
basis points equal one percentage point) versus the same period in fiscal year
2005. Sky's revenues, operating profit, earnings per share and free cash flow
also increased substantially. In telecommunication services, Vodafone Group and
France Telecom hurt the Fund's performance.

During the six months under review we initiated a position in Burberry Group,
which designs, produces and sells high-quality apparel and accessories. With a
decline in share price of around 14% following the company's late summer and
fall 2005 announcements that included dropping sales and a newly appointed CEO,
we thought Burberry represented a buying opportunity that fit our strategy. Two
key drivers for our optimism were the potential we saw for growth opportunities
through the company's plans for further expansion, plus margin improvement
opportunities that we believe could result as the company implements a major
efficiency program.

8. The telecommunication services industry comprises diversified
telecommunication services and wireless telecommunication services in the SOI.

9. The MSCI World Index is a free float-adjusted, market capitalization-weighted
index designed to measure equity market performance in global developed markets.

TOP 10 EQUITY HOLDINGS
2/28/06

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
Cheung Kong (Holdings) Ltd. 2.9%
REAL ESTATE, HONG KONG
- --------------------------------------------------------------------------------
GlaxoSmithKline PLC 2.1%
PHARMACEUTICALS, U.K.
- --------------------------------------------------------------------------------
Sanofi-Aventis, common & restricted 1.8%
PHARMACEUTICALS, FRANCE
- --------------------------------------------------------------------------------
Royal Dutch Shell PLC, A & B 1.8%
OIL, GAS & CONSUMABLE FUELS, U.K.
- --------------------------------------------------------------------------------
Electrolux AB, B 1.8%
HOUSEHOLD DURABLES, SWEDEN
- --------------------------------------------------------------------------------
ING Groep NV 1.8%
CAPITAL MARKETS, NETHERLANDS
- --------------------------------------------------------------------------------
Samsung Electronics Co. Ltd.,
ord. & GDR, Reg. S 1.8%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
- --------------------------------------------------------------------------------
British Sky Broadcasting Group PLC 1.8%
MEDIA, U.K.
- --------------------------------------------------------------------------------
Koninklijke Philips Electronics NV 1.6%
HOUSEHOLD DURABLES, NETHERLANDS
- --------------------------------------------------------------------------------
BP PLC, ord. & ADR 1.6%
OIL, GAS & CONSUMABLE FUELS, U.K
- --------------------------------------------------------------------------------

Semiannual Report | 7

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

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

8 | Semiannual Report

Performance Summary as of 2/28/06

PRICE AND DISTRIBUTION INFORMATION

- ----------------------------------------------------------------------------------------------------------
CLASS A (SYMBOL: TEMFX) CHANGE 2/28/06 8/31/05
- ----------------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$0.34 $13.20 $12.86
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/05-2/28/06)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.2115
- ----------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.6691
- ----------------------------------------------------------------------------------------------------------
TOTAL $0.8806
- ----------------------------------------------------------------------------------------------------------
CLASS B (SYMBOL: TFRBX) CHANGE 2/28/06 8/31/05
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.37 $13.00 $12.63
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/05-2/28/06)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.1177
- ----------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.6691
- ----------------------------------------------------------------------------------------------------------
TOTAL $0.7868
- ----------------------------------------------------------------------------------------------------------
CLASS C (SYMBOL: TEFTX) CHANGE 2/28/06 8/31/05
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.38 $13.03 $12.65
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/05-2/28/06)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.1208
- ----------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.6691
- ----------------------------------------------------------------------------------------------------------
TOTAL $0.7899
- ----------------------------------------------------------------------------------------------------------
CLASS R (SYMBOL: TEFRX) CHANGE 2/28/06 8/31/05
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.34 $13.11 $12.77
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/05-2/28/06)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.1862
- ----------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.6691
- ----------------------------------------------------------------------------------------------------------
TOTAL $0.8553
- ----------------------------------------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: TFFAX) CHANGE 2/28/06 8/31/05
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.32 $13.17 $12.85
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/05-2/28/06)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.2433
- ----------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $0.6691
- ----------------------------------------------------------------------------------------------------------
TOTAL $0.9124
- ----------------------------------------------------------------------------------------------------------

Semiannual Report | 9

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 +10.15% +12.61% +50.99% +130.24%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +3.86% +6.11% +7.32% +8.06%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,386 $10,611 $14,236 $21,707
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +11.27% +9.38% +8.24%
- -----------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +9.75% +11.70% +45.48% +89.83%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +5.75% +7.70% +7.49% +9.36%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,575 $10,770 $14,348 $18,983
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +13.21% +9.59% +9.58%
- -----------------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +9.85% +11.79% +45.56% +113.76%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +8.85% +10.79% +7.80% +7.89%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,885 $11,079 $14,556 $21,376
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +16.21% +9.87% +8.08%
- -----------------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR 3-YEAR INCEPTION (1/1/02)
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.09% +12.29% +86.85% +59.73%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +9.09% +11.29% +23.17% +11.93%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,909 $11,129 $18,685 $15,973
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +16.79% +25.70% +12.25%
- -----------------------------------------------------------------------------------------------------------------
ADVISOR CLASS 5 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.29% +12.83% +52.74% +137.45%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.29% +12.83% +8.84% +9.03%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,029 $11,283 $15,274 $23,745
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +18.42% +10.94% +9.22%
- -----------------------------------------------------------------------------------------------------------------

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

10 | 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 +109.56% and +8.41%.

Semiannual Report | 11

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

12 | Semiannual Report

Your Fund's Expenses (CONTINUED)

BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 9/1/05 VALUE 2/28/06 PERIOD* 9/1/05-2/28/06
- -----------------------------------------------------------------------------------------------------------

Actual $1,000 $1,101.50 $5.99
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.09 $5.76
- -----------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,097.50 $9.88
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.37 $9.49
- -----------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,098.50 $9.83
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.42 $9.44
- -----------------------------------------------------------------------------------------------------------
CLASS R
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,100.90 $7.29
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.00
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,102.90 $4.69
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.33 $4.51
- -----------------------------------------------------------------------------------------------------------

*Expenses are equal to the annualized expense ratio, for each class (A: 1.15%;
B: 1.90%; C: 1.89%; R: 1.40%; and Advisor: 0.90%), multiplied by the average
account value over the period, multiplied by 181/365 to reflect the one-half
year period.

Semiannual Report | 13

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS

--------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
--------------------------------------------------------------------------------------------------

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

Net asset value, beginning of
period ......................... $ 12.86 $ 10.75 $ 9.60 $ 8.82 $ 9.69 $ 10.56
----------------------------------------------------------------------------------------------

Income from investment
operations:

Net investment income a ........ 0.07 0.21 0.17 0.15 0.15 0.26

Net realized and unrealized
gains (losses) ................ 1.15 2.15 1.17 0.77 (0.77) (0.69)
----------------------------------------------------------------------------------------------
Total from investment operations 1.22 2.36 1.34 0.92 (0.62) (0.43)
----------------------------------------------------------------------------------------------

Less distributions from:

Net investment income .......... (0.21) (0.23) (0.19) (0.14) (0.25) (0.23)

Net realized gains ............. (0.67) (0.02) -- -- -- (0.21)
----------------------------------------------------------------------------------------------
Total distributions ............. (0.88) (0.25) (0.19) (0.14) (0.25) (0.44)
----------------------------------------------------------------------------------------------
Redemption fees ................. -- c -- c -- c -- c -- --
----------------------------------------------------------------------------------------------
Net asset value, end of period .. $ 13.20 $ 12.86 $ 10.75 $ 9.60 $ 8.82 $ 9.69
==============================================================================================

Total return b .................. 10.15% 22.26% 14.03% 10.80% (6.31)% (4.08)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period
(000's) ........................ $15,356,709 $15,466,639 $13,067,977 $9,896,279 $8,325,977 $9,165,696

Ratios to average net assets:

Expenses ....................... 1.15% d,e 1.15% e 1.23% e 1.22% 1.16% 1.18%

Net investment income .......... 1.12% d 1.71% 1.58% 1.79% 1.63% 2.54%

Portfolio turnover rate ......... 11.20% f 34.00% 25.32% 33.36% 34.15% 21.38%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share. dAnnualized.

e Benefit of expense reduction is less than 0.01%.

f Excludes the value of portfolio securities delivered as a result of
in-kind redemptions (Note 9).

14 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------------

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

Net asset value, beginning of period .... $ 12.63 $ 10.57 $ 9.46 $ 8.69 $ 9.56 $ 10.43
-----------------------------------------------------------------------------------

Income from investment operations:

Net investment income a ................ 0.02 0.11 0.09 0.07 0.08 0.18

Net realized and unrealized gains
(losses) .............................. 1.14 2.12 1.15 0.79 (0.76) (0.67)
-----------------------------------------------------------------------------------
Total from investment operations ........ 1.16 2.23 1.24 0.86 (0.68) (0.49)
-----------------------------------------------------------------------------------

Less distributions from:

Net investment income .................. (0.12) (0.15) (0.13) (0.09) (0.19) (0.17)
Net realized gains ..................... (0.67) (0.02) -- -- -- (0.21)
-----------------------------------------------------------------------------------
Total distributions ..................... (0.79) (0.17) (0.13) (0.09) (0.19) (0.38)
-----------------------------------------------------------------------------------
Redemption fees ......................... --c --c --c --c -- --
-----------------------------------------------------------------------------------
Net asset value, end of period .......... $ 13.00 $ 12.63 $ 10.57 $ 9.46 $ 8.69 $ 9.56
===================================================================================

Total return b .......................... 9.75% 21.30% 13.27% 10.00% (7.07)% (4.75)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....... $ 238,272 $230,901 $195,116 $138,026 $87,135 $64,360

Ratios to average net assets:

Expenses ............................... 1.90% d,e 1.90% e 1.98% e 1.97% 1.91% 1.93%

Net investment income .................. 0.37% d 0.96% 0.83% 1.04% 0.88% 1.83%

Portfolio turnover rate ................. 11.20% f 34.00% 25.32% 33.36% 34.15% 21.38%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f Excludes the value of portfolio securities delivered as a result of
in-kind redemptions (Note 9).

Semiannual Report | See notes to financial statements. | 15

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

--------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
--------------------------------------------------------------------------------------

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

Net asset value, beginning of period ......... $ 12.65 $ 10.59 $ 9.47 $ 8.69 $ 9.55 $ 10.39
-----------------------------------------------------------------------------------
Income from investment operations:

Net investment income a ..................... 0.03 0.11 0.09 0.08 0.08 0.18

Net realized and unrealized gains (losses) .. 1.14 2.12 1.16 0.77 (0.76) (0.66)
-----------------------------------------------------------------------------------
Total from investment operations ............. 1.17 2.23 1.25 0.85 (0.68) (0.48)
-----------------------------------------------------------------------------------

Less distributions from:

Net investment income ....................... (0.12) (0.15) (0.13) (0.07) (0.18) (0.15)

Net realized gains .......................... (0.67) (0.02) -- -- -- (0.21)
-----------------------------------------------------------------------------------
Total distributions .......................... (0.79) (0.17) (0.13) (0.07) (0.18) (0.36)
-----------------------------------------------------------------------------------
Redemption fees .............................. -- c -- c -- c -- c -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............... $ 13.03 $ 12.65 $ 10.59 $ 9.47 $ 8.69 $ 9.55
===================================================================================

Total return b ............................... 9.85% 21.24% 13.29% 9.94% (7.10)% (4.68)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............ $1,546,675 $1,459,630 $1,188,885 $900,811 $793,143 $899,275

Ratios to average net assets:

Expenses .................................... 1.89% d,e 1.90% e 1.98% e 1.97% 1.91% 1.92%

Net investment income ....................... 0.38% d 0.96% 0.83% 1.04% 0.88% 1.80%

Portfolio turnover rate ...................... 11.20% f 34.00% 25.32% 33.36% 34.15% 21.38%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f Excludes the value of portfolio securities delivered as a result of
in-kind redemptions (Note 9).

16 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS R (UNAUDITED) 2005 2004 2003 2002 g
-------------------------------------------------------------------------

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

Net asset value, beginning of period ................... $ 12.77 $ 10.68 $ 9.56 $ 8.81 $ 9.30
-------------------------------------------------------------------

Income from investment operations:

Net investment income a ............................... 0.06 0.18 0.15 0.14 0.14

Net realized and unrealized gains (losses) ............ 1.14 2.13 1.15 0.76 (0.63)
-------------------------------------------------------------------
Total from investment operations ....................... 1.20 2.31 1.30 0.90 (0.49)
-------------------------------------------------------------------
Less distributions from:

Net investment income ................................. (0.19) (0.20) (0.18) (0.15) --

Net realized gains .................................... (0.67) (0.02) -- -- --
-------------------------------------------------------------------
Total distributions .................................... (0.86) (0.22) (0.18) (0.15) --
-------------------------------------------------------------------
Redemption fees ........................................ -- c -- c -- c -- c --
-------------------------------------------------------------------

Net asset value, end of period ......................... $ 13.11 $ 12.77 $ 10.68 $ 9.56 $ 8.81
===================================================================

Total return b ......................................... 10.09% 21.88% 13.76% 10.46% (5.27)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ...................... $218,361 $178,473 $114,301 $55,346 $ 5,641

Ratios to average net assets:

Expenses .............................................. 1.40% d,e 1.40% e 1.48% e 1.47% 1.41% d

Net investment income ................................. 0.87% d 1.46% 1.33% 1.54% 1.38% d

Portfolio turnover rate ................................ 11.20% f 34.00% 25.32% 33.36% 34.15%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f Excludes the value of portfolio securities as a result of in-kind
redemptions (Note 9).

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

Semiannual Report | See notes to financial statements. | 17

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2005 2004 2003 2002 2001
----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the
period)

Net asset value, beginning of period ...... $ 12.85 $ 10.75 $ 9.59 $ 8.81 $ 9.69 $ 10.56
-----------------------------------------------------------------------------------

Income from investment operations:

Net investment incomea ................... 0.09 0.25 0.20 0.17 0.17 0.28

Net realized and unrealized gains (losses) 1.14 2.12 1.17 0.77 (0.77) (0.68)
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.23 2.37 1.37 0.94 (0.60) (0.40)
-----------------------------------------------------------------------------------

Less distributions from:

Net investment income .................... (0.24) (0.25) (0.21) (0.16) (0.28) (0.26)

Net realized gains ....................... (0.67) (0.02) -- -- -- (0.21)
-----------------------------------------------------------------------------------
Total distributions ....................... (0.91) (0.27) (0.21) (0.16) (0.28) (0.47)
-----------------------------------------------------------------------------------
Redemption fees ........................... -- c -- c -- c -- c -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $ 13.17 $ 12.85 $ 10.75 $ 9.59 $ 8.81 $ 9.69
===================================================================================

Total return b ............................ 10.29% 22.46% 14.39% 11.11% (6.15)% (3.81)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $2,188,378 $1,727,076 $762,207 $421,725 $297,866 $102,846

Ratios to average net assets:

Expenses ................................. 0.90% d,e 0.90% e 0.98% e 0.97% 0.91% 0.93%

Net investment income .................... 1.37% d 1.96% 1.83% 2.04% 1.88% 2.78%

Portfolio turnover rate ................... 11.20% f 34.00% 25.32% 33.36% 34.15% 21.38%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f Excludes the value of portfolio securities delivered as a result of
in-kind redemptions (Note 9).

18 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED)

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

COMMON STOCKS 86.6%
ARGENTINA 0.0% a
b Inversiones y Representacion SA, GDR ........ Real Estate 398,345 $ 5,086,866
-------------
AUSTRALIA 1.5%
Alumina Ltd. ................................ Metals & Mining 20,070,335 103,414,472
Qantas Airways Ltd. ......................... Airlines 60,776,099 185,005,187
-------------
288,419,659
-------------
BERMUDA 2.4%
ACE Ltd. .................................... Insurance 5,243,677 292,230,119
XL Capital Ltd., A .......................... Insurance 2,685,730 181,421,062
-------------
473,651,181
-------------
BRAZIL 0.1%
Contax Participacoes SA, ADR ................ Commercial Services & Supplies 7,115,828 9,985,951
Empresa Brasileira de
Aeronautica SA, ADR ......................... Aerospace & Defense 147,851 5,877,077
-------------
15,863,028
-------------
CANADA 1.3%
BCE Inc. .................................... Diversified Telecommunication Services 10,136,164 246,422,718
Domtar Inc. ................................. Paper & Forest Products 509,016 1,664,135
-------------
248,086,853
-------------
CHINA 2.3%
b Bank of Communications Ltd. ................. Commercial Banks 129,760,224 78,612,656
China Mobile (Hong Kong) Ltd. ............... Wireless Telecommunication Services 21,815,931 106,577,612
b China Shenhua Energy Co. Ltd., H ............ Oil, Gas & Consumable Fuels 93,895,652 142,817,199
China Telecom Corp. Ltd., H ................. Diversified Telecommunication Services 253,853,984 93,257,092
c China Telecom Corp. Ltd., H, 144A ........... Diversified Telecommunication Services 65,408,881 24,028,940
Guangdong Electric Power
Development Co. Ltd., B ..................... Independent Power Producers & Energy Traders 651,845 295,760
-------------
445,589,259
-------------
DENMARK 0.5%
b Vestas Wind Systems AS ...................... Electrical Equipment 3,398,038 71,257,328
b,c Vestas Wind Systems AS, 144A ................ Electrical Equipment 955,038 20,027,279
-------------
91,284,607
-------------
FINLAND 2.4%
Stora Enso OYJ, R (EUR/FIM Traded) .......... Paper & Forest Products 12,406,099 177,198,227
Stora Enso OYJ, R (SEK Traded) .............. Paper & Forest Products 2,320,785 32,994,441
UPM-Kymmene OYJ ............................. Paper & Forest Products 11,861,873 251,733,251
-------------
461,925,919
-------------
FRANCE 4.0%
France Telecom SA ........................... Diversified Telecommunication Services 11,070,608 240,880,505
Sanofi-Aventis .............................. Pharmaceuticals 3,631,328 309,122,774
c Sanofi-Aventis, 144A ........................ Pharmaceuticals 600,587 51,125,957

Semiannual Report | 19

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
Societe BIC SA .......................................... Commercial Services & Supplies 807,254 $ 49,229,243
Valeo SA ................................................ Auto Components 1,909,646 76,476,883
Vinci SA ................................................ Construction & Engineering 655,483 60,566,217
--------------
787,401,579
--------------
GERMANY 3.8%
BASF AG ................................................. Chemicals 4,006,291 303,116,705
Celesio AG .............................................. Health Care Providers & Services 765,079 71,030,319
Deutsche Post AG ........................................ Air Freight & Logistics 3,870,185 100,682,452
Siemens AG .............................................. Industrial Conglomerates 3,025,220 278,121,765
--------------
752,951,241
--------------
HONG KONG 7.7%
Cheung Kong (Holdings) Ltd. ............................. Real Estate 53,373,947 563,464,093
Hang Lung Group Ltd. .................................... Real Estate 38,765,095 85,695,497
Hang Lung Properties Ltd. ............................... Real Estate 166,635 300,710
Hong Kong Electric Holdings Ltd. ........................ Electric Utilities 27,285,542 126,088,294
Hutchison Whampoa Ltd. .................................. Industrial Conglomerates 31,634,598 301,749,850
Lerado Group Holdings Co. Ltd. .......................... Leisure Equipment & Products 2,236,663 164,334
MTR Corp. Ltd. .......................................... Road & Rail 38,854,681 88,397,724
Shangri-La Asia Ltd. .................................... Hotels, Restaurants & Leisure 26,706,330 42,858,462
Swire Pacific Ltd., A ................................... Real Estate 23,796,495 228,365,619
Yue Yuen Industrial Holdings Ltd. ....................... Textiles, Apparel & Luxury Goods 20,634,856 63,968,998
--------------
1,501,053,581
--------------
INDIA 1.3%
Gail India Ltd. ......................................... Gas Utilities 12,478,500 76,914,345
c Gail India Ltd., GDR, 144A .............................. Gas Utilities 32,961 1,237,685
Hindustan Petroleum Corp. Ltd. .......................... Oil, Gas & Consumable Fuels 5,741,644 42,010,290
Housing Development Finance
Corp. Ltd. ............................................. Thrifts & Mortgage Finance 812,922 24,894,417
Tata Motors Ltd. ........................................ Machinery 5,815,200 106,958,964
--------------
252,015,701
--------------
ISRAEL 1.0%
b Check Point Software Technologies Ltd. .................. Software 9,238,052 196,400,985
--------------
ITALY 2.5%
Eni SpA ................................................. Oil, Gas & Consumable Fuels 8,499,255 242,792,342
Unicredito Italiano SpA ................................. Commercial Banks 33,720,723 245,442,552
--------------
488,234,894
--------------
JAPAN 11.8%
Acom Co. Ltd. ........................................... Consumer Finance 1,726,052 106,457,144
East Japan Railway Co. .................................. Road & Rail 3,263 23,338,349
Fanuc Ltd. .............................................. Machinery 9,364 800,791
Fuji Photo Film Co. Ltd. ................................ Leisure Equipment & Products 2,934,628 95,062,022
Hitachi Ltd. ............................................ Electronic Equipment & Instruments 10,557,483 74,873,179

20 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
Konica Minolta Holdings Ltd. ....................... Office Electronics 4,453,000 $ 56,160,152
Makita Corp. ....................................... Household Durables 3,896,048 114,426,322
Matsushita Electric Industrial Co. Ltd. ............ Household Durables 30,556 654,593
Mitsubishi UFJ Financial Group Inc. ................ Commercial Banks 18,826 284,589,470
NEC Corp. .......................................... Computers & Peripherals 2,304,491 14,352,680
Nippon Telegraph & Telephone Corp. ................. Diversified Telecommunication Services 38,077 166,431,668
Nomura Holdings Inc. ............................... Capital Markets 9,025,660 175,032,235
Pioneer Corp. ...................................... Household Durables 44,356 702,324
Shinsei Bank Ltd. .................................. Commercial Banks 31,878,453 216,167,111
c Shinsei Bank Ltd., 144A ............................ Commercial Banks 2,530,208 17,157,287
Sompo Japan Insurance Inc. ......................... Insurance 13,342,979 195,825,347
Sony Corp. ......................................... Household Durables 5,665,082 270,616,365
Sumitomo Mitsui Financial Group Inc. ............... Commercial Banks 25,275 279,462,705
Takeda Pharmaceutical Co. Ltd. ..................... Pharmaceuticals 3,851,298 216,243,571
--------------
2,308,353,315
--------------
MEXICO 1.5%
Telefonos de Mexico SA de CV
(Telmex), L, ADR .................................. Diversified Telecommunication Services 13,056,707 292,339,670
--------------
NETHERLANDS 5.6%
Akzo Nobel NV ...................................... Chemicals 1,494,450 75,902,888
ING Groep NV ....................................... Capital Markets 9,464,615 355,790,407
Koninklijke Philips Electronics NV ................. Household Durables 9,730,579 316,947,032
Reed Elsevier NV ................................... Media 6,615,581 89,443,412
VNU NV ............................................. Media 7,928,224 256,916,902
--------------
1,095,000,641
--------------
NORWAY 0.4%
Telenor ASA ........................................ Diversified Telecommunication Services 6,564,144 71,026,304
--------------
PHILIPPINES 0.4%
Ayala Land Inc. .................................... Real Estate 103,610,270 22,545,755
Philippine Long Distance Telephone Co. ............ Diversified Telecommunication Services 1,508,170 52,071,247
Philippine Long Distance
Telephone Co., ADR ................................ Diversified Telecommunication Services 12,351 426,109
--------------
75,043,111
--------------
PORTUGAL 0.0% a
Portugal Telecom SGPS SA ........................... Diversified Telecommunication Services 60,954 704,922
--------------
SINGAPORE 0.4%
Singapore Airlines Ltd. ............................ Airlines 971 8,857
United Overseas Bank Ltd. .......................... Commercial Banks 94,625 874,807
b United Overseas Land Ltd. .......................... Real Estate 9,463 15,572
Venture Corp. Ltd. ................................. Electronic Equipment & Instruments 9,895,849 79,898,689
--------------
80,797,925
--------------

Semiannual Report | 21

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
SOUTH AFRICA 0.7%
Old Mutual PLC (GBP Traded) .................... Insurance 42,842,778 $ 141,107,156
--------------
SOUTH KOREA 5.9%
Hana Financial Group Inc. ...................... Commercial Banks 6,359,364 271,795,681
Kookmin Bank ................................... Commercial Banks 3,045,110 233,949,749
b Kookmin Bank, ADR .............................. Commercial Banks 16,376 1,240,482
KT Corp., ADR .................................. Diversified Telecommunication Services 4,930,308 100,676,889
Samsung Electronics Co. Ltd. ................... Semiconductors & Semiconductor Equipment 493,974 349,495,508
d Samsung Electronics Co. Ltd.,
GDR, Reg S ................................... Semiconductors & Semiconductor Equipment 4,436 1,568,126
Shinhan Financial Group Co. Ltd. ............... Commercial Banks 5,076,900 199,991,169
SK Telecom Co. Ltd., ADR ....................... Wireless Telecommunication Services 43,568 1,052,167
--------------
1,159,769,771
--------------
SPAIN 3.2%
e Gamesa Corp. Tecnologica SA .................... Electrical Equipment 1,192,178 20,652,567
c,e Gamesa Corp. Tecnologica SA, 144A .............. Electrical Equipment 12,641,100 218,986,727
Grupo Ferrovial SA ............................. Construction & Engineering 18,493 1,385,734
Repsol YPF SA .................................. Oil, Gas & Consumable Fuels 8,596,225 240,233,016
Telefonica SA .................................. Diversified Telecommunication Services 9,257,015 148,407,300
Telefonica SA, ADR ............................. Diversified Telecommunication Services 7,802 360,608
--------------
630,025,952
--------------
SWEDEN 3.0%
Electrolux AB, B ............................... Household Durables 12,982,688 359,304,024
Holmen AB, B ................................... Paper & Forest Products 1,233,546 47,857,176
Nordea Bank AB ................................. Commercial Banks 7,004,704 79,225,715
Securitas AB, B ................................ Commercial Services & Supplies 5,800,781 106,660,302
--------------
593,047,217
--------------
SWITZERLAND 0.8%
Lonza Group AG ................................. Chemicals 721,647 46,842,691
Nestle SA ...................................... Food Products 312,244 91,818,969
Swiss Reinsurance Co. .......................... Insurance 276,034 19,664,108
--------------
158,325,768
--------------
TAIWAN 3.5%
Chunghwa Telecom Co. Ltd., ADR ................. Diversified Telecommunication Services 10,541,314 199,230,835
Compal Electronics Inc. ........................ Computers & Peripherals 116,234,780 108,890,073
Lite-On Technology Corp. ....................... Computers & Peripherals 113,393,400 153,751,393
Mega Financial Holding Co. Ltd. ................ Commercial Banks 145,977,000 111,111,751
Taiwan Semiconductor Manufacturing
Co. Ltd. ..................................... Semiconductors & Semiconductor Equipment 56,366,058 105,782,436
--------------
678,766,488
--------------

22 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

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

COMMON STOCKS (CONTINUED)
UNITED KINGDOM 18.6%
Amvescap PLC ..................................... Capital Markets 26,136,630 $ 247,017,853
Boots Group PLC .................................. Food & Staples Retailing 11,785,741 146,586,708
BP PLC ........................................... Oil, Gas & Consumable Fuels 27,422,721 303,069,731
BP PLC, ADR ...................................... Oil, Gas & Consumable Fuels 5,037 334,558
British Sky Broadcasting Group PLC ............... Media 39,152,456 346,850,126
Burberry Group PLC ............................... Textiles, Apparel & Luxury Goods 9,958,700 80,100,174
Centrica PLC ..................................... Multi-Utilities 27,724,968 141,289,100
Compass Group PLC ................................ Hotels, Restaurants & Leisure 34,544,906 131,654,367
Electrocomponents PLC ............................ Electronic Equipment & Instruments 19,351,705 97,939,193
GKN PLC .......................................... Auto Components 27,764,120 165,475,936
GlaxoSmithKline PLC .............................. Pharmaceuticals 16,526,791 419,226,084
Pearson PLC ...................................... Media 20,328,347 252,836,500
Reed Elsevier PLC ................................ Media 6,180,731 55,839,117
Rentokil Initial PLC ............................. Commercial Services & Supplies 5,373,476 14,846,611
Royal Bank of Scotland Group PLC ................. Commercial Banks 4,961,357 166,149,055
Royal Dutch Shell PLC, A ......................... Oil, Gas & Consumable Fuels 4,605,038 139,070,725
Royal Dutch Shell PLC, B ......................... Oil, Gas & Consumable Fuels 7,019,586 221,161,385
Shire PLC ........................................ Pharmaceuticals 3,203,890 50,077,976
Smiths Group PLC ................................. Industrial Conglomerates 5,648,906 93,051,078
Tesco PLC ........................................ Food & Staples Retailing 262,701 1,557,650
Unilever PLC ..................................... Food Products 17,849,295 183,958,732
Vodafone Group PLC ............................... Wireless Telecommunication Services 144,703,211 276,691,702
William Morrison Supermarkets PLC ................ Food & Staples Retailing 27,802,300 104,006,680
---------------
3,638,791,041
---------------
TOTAL COMMON STOCKS
(COST $12,551,241,413) .......................... 16,931,064,634
---------------
PREFERRED STOCKS 2.4%
BRAZIL 1.7%
Companhia Vale do Rio Doce,
ADR, pfd., A .................................... Metals & Mining 3,337,867 135,851,187
Tele Norte Leste Participacoes SA,
ADR, pfd ........................................ Diversified Telecommunication Services 10,319,821 191,226,283
---------------
327,077,470
---------------
GERMANY 0.6%
Volkswagen AG, pfd ............................... Automobiles 2,140,004 110,170,301
---------------
UNITED STATES 0.1%
XL Capital Ltd., 6.50%, cvt. pfd ................. Insurance 1,207,400 27,275,166
---------------
TOTAL PREFERRED STOCKS
(COST $261,379,807) ............................. 464,522,937
---------------

Semiannual Report | 23

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT g VALUE
- --------------------------------------------------------------------------------------------------------------------

BONDS & NOTES 1.0%
AUSTRALIA 0.2%
New South Wales Treasury Corp.,
6.50%, 5/01/06 .................................... 64,493,000 AUD $ 47,958,963
--------------
CANADA 0.0% a
Government of Canada,
3.25%, 12/01/06 ................................... 4,975,000 CAD 4,356,683
--------------
LUXEMBOURG 0.5%
c Repcon Luxembourg SA, cvt.,
144A, 4.50%, 1/26/11 .............................. 67,765,000 88,128,382
--------------
SINGAPORE 0.0% a
Government of Singapore,
1.75%, 2/01/07 .................................... 7,100,000 SGD 4,336,142
--------------
UNITED STATES 0.3%
Federal Home Loan Mortgage Corp.,
5.50%, 12/01/2035 ................................. 49,744,029 49,352,332
--------------
TOTAL BONDS & NOTES
(COST $190,787,539) .............................. 194,132,502
--------------
SHORT TERM INVESTMENTS 9.2%
SWEDEN 0.0% a
f Sweden Treasury Bill,
12/20/06 .......................................... 34,300,000 SEK 4,261,574
--------------
THAILAND 0.2%
f Thailand Treasury Bills,
3/09/06 - 2/22/07 ................................. 1,464,585,000 THB 36,384,628
--------------
UNITED STATES 9.0%
f U.S. Treasury Bills,
3/02/06 - 6/15/06 ................................. 1,764,908,000 1,755,073,630
--------------
TOTAL SHORT TERM INVESTMENTS
(COST $1,795,094,230) ............................ 1,795,719,832
--------------

24 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

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

TOTAL INVESTMENTS
(COST $14,798,502,989) 99.2% .............. $19,385,439,905
OTHER ASSETS, LESS
LIABILITIES 0.8% ....................... 162,955,168
---------------

NET ASSETS 100.0% .......................... $19,548,395,073
===============

CURRENCY ABBREVIATIONS

AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
FIM - Finnish Markka
GBP - British Pound
SEK - Swedish Krona
SGD - Singapore Dollar
THB - Thai Baht

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
GDR - Global Depository Receipt

a Rounds to less than 0.1% of net assets.

b Non-income producing.

c Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. These securities have been deemed liquid under
the guidelines approved by the Fund's Board of Directors. At February 28,
2006, the aggregate value of these securities was $420,692,257,
representing 2.15% of net assets.

d Security was purchased pursuant to Regulation S under the Securities Act
of 1933, which exempts from registration securities offered and sold
outside of the United States. Such a security cannot be sold in the United
States without either an effective registration statement filed pursuant
to the Securities Act of 1933, or pursuant to an exemption from
registration. These securities have been deemed liquid under guidelines
approved by the Fund's Board of Directors. At February 28, 2006, the value
of this security was $1,568,126, representing 0.01% of net assets.

e See Note 8 regarding holdings of 5% voting securities.

f The security is traded on a discount basis with no stated coupon rate.

g The principal amount is stated in U.S. dollars unless otherwise indicated.

Semiannual Report | See notes to financial statements. | 25

Templeton Foreign Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2006 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................ $ 14,582,294,015
Cost - Non-controlled affiliated issuers (Note 8) ...... 216,208,974
----------------
Total cost of investments .............................. $ 14,798,502,989
----------------
Value - Unaffiliated issuers ........................... $ 19,145,800,611
Value - Non-controlled affiliated issuers (Note 8) ..... 239,639,294
----------------
Total value of investments ............................. 19,385,439,905
Cash .................................................... 718,510
Foreign currency, at value (cost $330,518,321) .......... 299,307,032
Receivables:
Investment securities sold ............................. 80,784,410
Capital shares sold .................................... 25,238,776
Dividends and interest ................................. 37,940,817
----------------
Total assets ...................................... 19,829,429,450
----------------
Liabilities:
Payables:
Investment securities purchased ........................ 149,844,318
Capital shares redeemed ................................ 109,185,387
Affiliates ............................................. 19,911,651
Accrued expenses and other liabilities .................. 2,093,021
----------------
Total liabilities ................................ 281,034,377
----------------
Net assets, at value .......................... $ 19,548,395,073
================
Net assets consist of:
Paid-in capital ......................................... $ 14,439,349,115
Distributions in excess of net investment income ........ (29,422,005)
Net unrealized appreciation (depreciation) .............. 4,555,733,786
Accumulated net realized gain (loss) .................... 582,734,177
----------------
Net assets, at value .......................... $ 19,548,395,073
================

26 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 28, 2006 (unaudited)

CLASS A:
Net assets, at value .................................................... $15,356,708,970
===============
Shares outstanding ...................................................... 1,163,004,462
===============
Net asset value per share a ............................................. $ 13.20
===============
Maximum offering price per share (net asset value / 94.25%) ............. $ 14.01
===============
CLASS B:
Net assets, at value .................................................... $ 238,271,623
===============
Shares outstanding ...................................................... 18,322,992
===============
Net asset value and maximum offering price per share a .................. $ 13.00
===============
CLASS C:
Net assets, at value .................................................... $ 1,546,674,730
===============
Shares outstanding ...................................................... 118,720,832
===============
Net asset value and maximum offering price per share a .................. $ 13.03
===============
CLASS R:
Net assets, at value .................................................... $ 218,361,375
===============
Shares outstanding ...................................................... 16,655,787
===============
Net asset value and maximum offering price per share a .................. $ 13.11
===============
ADVISOR CLASS:
Net assets, at value .................................................... $ 2,188,378,375
===============
Shares outstanding ...................................................... 166,182,105
===============
Net asset value and maximum offering price per share a .................. $ 13.17
===============

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. | 27

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2006 (unaudited)

Investment income:
Dividends - unaffiliated issuers ...................................................................... $ 184,515,178
Interest - unaffiliated issuers ....................................................................... 33,324,063
Other Income .......................................................................................... 42,939
---------------
Total investment income ........................................................................ 217,882,180
---------------
Expenses:
Management fees (Note 3a) ............................................................................. 56,819,068
Administrative fees (Note 3b) ......................................................................... 7,408,168
Distribution fees (Note 3c)
Class A .............................................................................................. 19,198,105
Class B .............................................................................................. 1,157,590
Class C .............................................................................................. 7,341,425
Class R .............................................................................................. 497,371
Transfer agent fees (Note 3e) ......................................................................... 17,845,862
Custodian fees (Note 4) ............................................................................... 3,406,185
Reports to shareholders ............................................................................... 392,364
Registration and filing fees .......................................................................... 137,885
Professional fees ..................................................................................... 98,564
Directors' fees and expenses .......................................................................... 113,600
---------------
Total expenses ................................................................................. 114,416,187
Expense reductions (Note 4) .................................................................... (6,488)
---------------
Net expenses ................................................................................ 114,409,699
---------------
Net investment income .................................................................... 103,472,481
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (including gain from redemption in-kind of $8,460,748)(Note 9):
Unaffiliated ....................................................................................... 943,165,422
Non-controlled affiliated issuers (Note 8) ......................................................... (3,159,029)
Foreign currency transactions ........................................................................ (5,648,949)
---------------
Net realized gain (loss) ....................................................................... 934,357,444
---------------
Net change in unrealized appreciation (depreciation) on:
Investments .......................................................................................... 833,010,160
Translation of assets and liabilities denominated in foreign currencies .............................. (14,181,351)
---------------
Net change in unrealized appreciation (depreciation) ........................................... 818,828,809
---------------
Net realized and unrealized gain (loss) ................................................................ 1,753,186,253
---------------
Net increase (decrease) in net assets resulting from operations ........................................ $ 1,856,658,734
===============

28 | See notes to financial statements. | Semiannual Report

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED
(UNAUDITED) AUGUST 31, 2005
--------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................... $ 103,472,481 $ 294,930,582
Net realized gain (loss) from investments and foreign currency transactions .......... 934,357,444 971,811,565
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies and deferred taxes ........ 818,828,809 2,144,341,956
--------------------------------------
Net increase (decrease) in net assets resulting from operations .............. 1,856,658,734 3,411,084,103
--------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ............................................................................ (253,733,869) (273,911,468)
Class B ............................................................................ (2,119,956) (2,747,991)
Class C ............................................................................ (13,844,368) (16,469,565)
Class R ............................................................................ (2,728,273) (2,322,092)
Advisor Class ...................................................................... (36,217,093) (19,608,644)
Net realized gains:
Class A ............................................................................ (802,769,866) (23,672,555)
Class B ............................................................................ (12,149,229) (362,026)
Class C ............................................................................ (77,483,659) (2,187,583)
Class R ............................................................................ (10,001,212) (225,830)
Advisor Class ...................................................................... (100,722,059) (1,502,661)
--------------------------------------
Total distributions to shareholders ................................................... (1,311,769,584) (343,010,415)
--------------------------------------
Capital share transactions: (Note 2)
Class A ............................................................................ (530,324,853) (167,929,607)
Class B ............................................................................ (190,687) (2,695,369)
Class C ............................................................................ 38,063,427 34,862,854
Class R ............................................................................ 33,157,111 38,612,358
Advisor Class ...................................................................... 400,017,174 763,227,503
--------------------------------------
Total capital share transactions ...................................................... (59,277,828) 666,077,739
--------------------------------------
Redemption fees ....................................................................... 65,297 80,608
--------------------------------------
Net increase (decrease) in net assets ........................................ 485,676,619 3,734,232,035
Net assets:
Beginning of period ................................................................... 19,062,718,454 15,328,486,419
--------------------------------------

End of period ......................................................................... $ 19,548,395,073 $ 19,062,718,454
======================================
Undistributed net investment income (distributions in excess of net investment income)
included in net assets:
End of period ......................................................................... $ (29,422,005) $ 175,749,073
======================================

Semiannual Report | See notes to financial statements. | 29

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Funds, Inc. is registered under the Investment Company Act of 1940 as
an open-end investment company, consisting of two separate series. The Templeton
Foreign Fund (the Fund) included in this report is diversified. The financial
statements of the remaining fund in the series are presented separately. 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 are only offered to
existing Class B shareholders in the form of reinvested distributions and
certain exchanges from other Franklin Templeton Class B shares. Each class of
shares differs by its initial sales load, contingent deferred sales charges,
distribution fees, voting rights on matters affecting a single class and its
exchange privilege.

The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

30 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

ready market for such investments existed. 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.

B. FOREIGN CURRENCY TRANSLATION

C. FOREIGN CURRENCY CONTRACTS

Semiannual Report | 31

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME AND DEFERRED TAXES

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

F. ACCOUNTING ESTIMATES

32 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. REDEMPTION FEES

H. GUARANTEES AND INDEMNIFICATIONS

2. CAPITAL STOCK

At February 28, 2006, there were 3.9 billion shares of the Templeton Funds, Inc.
authorized ($1.00 par value) of which 2.7 billion shares were allocated to the
Fund. Transactions in the Fund's shares were as follows:

----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2006 AUGUST 31, 2005
----------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------

CLASS A SHARES:
Shares sold ........................... 120,300,812 $ 1,545,222,407 304,697,362 $ 3,659,746,659
Shares issued on reinvestment of
distributions ....................... 78,800,061 961,173,998 23,280,535 261,602,080
Shares redeemed in-kind (Note 9) ...... (18,258,638) (220,746,939) -- --
Shares redeemed ....................... (220,542,959) (2,815,974,319) (340,513,796) (4,089,278,346)
----------------------------------------------------------------------------------
Net increase (decrease) ............... (39,700,724) $ (530,324,853) (12,535,899) $ (167,929,607)
==================================================================================

CLASS B SHARES:
Shares sold ........................... 371,882 $ 4,665,604 1,555,187 $ 18,077,425
Shares issued on reinvestment of
distributions ....................... 1,009,208 12,126,353 238,884 2,642,884
Shares redeemed ....................... (1,339,542) (16,982,644) (1,972,680) (23,415,678)
----------------------------------------------------------------------------------
Net increase (decrease) ............... 41,548 $ (190,687) (178,609) $ (2,695,369)
==================================================================================

Semiannual Report | 33

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2006 AUGUST 31, 2005
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------

CLASS C SHARES:
Shares sold ............................... 7,531,875 $ 95,036,516 18,413,417 $ 218,475,505
Shares issued on reinvestment of
distributions ........................... 6,061,236 72,970,499 1,336,883 14,828,204
Shares redeemed ........................... (10,220,407) (129,943,588) (16,686,156) (198,440,855)
-------------------------------------------------------------------------------
Net increase (decrease) ................... 3,372,704 $ 38,063,427 3,064,144 $ 34,862,854
===============================================================================

CLASS R SHARES:
Shares sold ............................... 4,135,403 $ 52,609,058 7,141,384 $ 85,405,546
Shares issued on reinvestment of
distributions ........................... 979,656 11,880,876 211,180 2,357,422
Shares redeemed ........................... (2,440,505) (31,332,823) (4,071,304) (49,150,610)
-------------------------------------------------------------------------------
Net increase (decrease) ................... 2,674,554 $ 33,157,111 3,281,260 $ 38,612,358
===============================================================================
ADVISOR CLASS SHARES:
Shares sold ............................... 46,350,716 $ 591,379,343 81,064,337 $ 975,160,244
Shares issued on reinvestment of
distributions ........................... 7,077,282 86,203,392 1,167,912 13,111,683
Shares redeemed ........................... (21,674,435) (277,565,561) (18,725,639) (225,044,424)
-------------------------------------------------------------------------------
Net increase (decrease) ................... 31,753,563 $ 400,017,174 63,506,610 $ 763,227,503
===============================================================================

3. TRANSACTIONS WITH AFFILIATES

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

A. MANAGEMENT FEES

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

34 | 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 the Templeton Funds, Inc.'s aggregate average daily net assets of the Funds
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% In excess of $1.2 billion

C. DISTRIBUTION FEES

The Fund's Board of Directors has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's Class A reimbursement distribution plan, the Fund
reimburses Distributors up to 0.25% per year of Class A's average daily net
assets for costs incurred in connection with the sale and distribution of the
Fund's shares. Prior to November 1, 2005, Class A distribution costs exceeding
the maximum for the current plan year could be reimbursed in subsequent periods.
Effective November 1, 2005, the Class A reimbursement distribution plan was
amended to discontinue the reimbursement of excess plan year costs in subsequent
periods.

Class B ....................... 1.00%
Class C ....................... 1.00%
Class R ....................... 0.50%

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 a ....................................... $408,498
Contingent deferred sales charges retained ......................... $221,508

a Net of commissions paid to unaffiliated broker/dealers.

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $17,845,862, of which $8,007,564 was
retained by Investor Services.

Semiannual Report | 35

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

At August 31, 2005, the Fund had remaining tax basis capital losses of
$26,284,540 from the merged Fiduciary International Equity Fund, Templeton Latin
America Fund, Templeton Pacific Growth Fund, and Victory International Fund,
which may be carried over to offset future capital gains, subject to certain
limitations under the Internal Revenue Code. At August 31, 2005, capital loss
carryforwards expire as follows:

Capital loss carryforwards expiring in:
2008 .................................................... $ 7,019,789
2009 .................................................... 4,573,249
2010 .................................................... 12,417,427
2011 .................................................... 2,274,075
-----------
$26,284,540
===========

Net realized gains (losses) 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, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ..................................... $14,883,363,007
---------------
Unrealized appreciation ................................. $ 4,768,466,955
Unrealized depreciation ................................. (266,390,057)
---------------
Net unrealized appreciation (depreciation) .............. $ 4,502,076,898
===============

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2006, aggregated $1,961,716,182 and $3,453,293,912,
respectively. Sales of investments excludes $220,746,939 of in-kind redemptions.

36 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. CONCENTRATION OF RISK

8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

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
period ended February 28, 2006 were as shown below.

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

NON-CONTROLLED AFFILIATES
Gamesa Corp.
Tecnologica SA ............ -- 1,209,513 17,335 1,192,178 $ 20,652,567 $ -- $ (288,403)
Gamesa Corp.
Tecnologica SA, 144A ...... -- 12,824,915 183,815 12,641,100 218,986,727 -- (2,870,626)
------------------------------------------
TOTAL AFFILIATED SECURITIES (1.23% of Net Assets) $ 239,639,294 $ -- $(3,159,029)
==========================================

9. REDEMPTION IN-KIND

During the period ended February 28, 2006, the Fund realized $8,460,748 of net
gains resulting from in-kind redemptions in which a shareholder exchanged fund
shares for securities held by the Fund rather than for cash. Such gains are not
taxable to the Fund, and are not distributed to shareholders, and as such, will
be reclassified from accumulated net realized gains to paid-in capital in the
Statement of Assets and Liabilities at the Fund's fiscal year end.

10. REGULATORY MATTERS

Semiannual Report | 37

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. REGULATORY MATTERS (CONTINUED)

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

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
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
Templeton Income Fund

TAX-FREE INCOME 5

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund

STATE-SPECIFIC

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 8

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

6. Portfolio of insured municipal securities.

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

09/05 Not part of the semiannual report

[LOGO](R)
FRANKLIN TEMPLETON 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 S2006 04/06

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 12(a)(1), 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 David W. Niemiec 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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

N/A/

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES. N/A/

ITEM 10. 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 11. 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 12. EXHIBITS

(a)(1) Code of Ethics

(a)(2) 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) 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 24, 2006

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 24, 2006

By /s/Galen G. Vetter
Chief Financial Officer
Date April 24, 2006