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

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

500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
(Address of principal executive offices) (Zip code)

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Name and address of agent for service)

Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28/07
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

FEBRUARY 28, 2007
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | GLOBAL
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WANT TO RECEIVE
THIS DOCUMENT
TEMPLETON WORLD FUND FASTER VIA EMAIL?

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 PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

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

SEMIANNUAL REPORT

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

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

Your Fund's Expenses ....................................................... 11

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

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

Notes to Financial Statements .............................................. 26

Shareholder Information .................................................... 35

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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, 2007.

PERFORMANCE OVERVIEW

For the six months under review, Templeton World Fund - Class A posted a +9.87%
cumulative total return. The Fund underperformed its benchmark, the Morgan
Stanley Capital International (MSCI) World Index, which posted a +10.58% total
return for the same period. 1 In line with our long-term investment strategy, we
are pleased with our long-term results, as shown in the Performance Summary
beginning on page 8. For the 10-year period ended February 28, 2007, Templeton
World Fund - Class A delivered a +149.68% cumulative total return, compared with
the MSCI World Index's +114.01% 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 remained solid during the six months under review, despite
earlier concerns of a U.S.-led global slowdown. Gross domestic product growth
accelerated in Europe underpinned by strong exports and internal demand, while
it slowed in the U.S. mainly due to cooler activity in the housing and auto
sectors.

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. As of 2/28/07, the
Fund's Class A 10-year average annual total return not including sales
charges was +9.58%, compared with the +7.91% 10-year average annual total
return of the MSCI World 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.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 17.

Semiannual Report | 3

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 2/28/07

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

North America 36.3%
Europe 31.8%
Asia 23.1%
Middle East & Africa 2.1%
Latin America 0.4%
Australia & New Zealand 0.1%
Short-Term Investments & Other Net Assets 6.2%

TOP 10 COUNTRIES
Based on Equity Securities
2/28/07

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% OF TOTAL
NET ASSETS
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U.S. 33.2%
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U.K. 14.0%
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Japan 7.7%
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Hong Kong 5.3%
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Germany 4.2%
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South Korea 4.0%
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France 3.2%
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Taiwan 3.0%
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Netherlands 3.0%
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Bermuda 2.4%
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The economic drivers remained consistent with those of the past four years:
strong corporate and consumer demand, reasonably low inflation, improving labor
markets and a relatively moderate, though higher, interest rate environment.
Overall, global liquidity -- petrodollars, corporate cash, private equity,
household savings and central banks' reserves -- remained abundant and continued
to search for a home. Largely as a result, bond yield spreads over U.S. Treasury
securities narrowed, and equity and commodity markets rose. A shift toward
greater risk tolerance was concurrent with the U.S. Federal Reserve Board's
decisions throughout the period to hold the federal funds target rate at 5.25%,
as well as with lower oil prices compared with the $77 per-barrel high reached
in July 2006.

Narrowing corporate credit spreads globally indicated greater risk tolerance,
while abundant cash supplies in the capital markets contributed to record global
merger and acquisition activity in 2006. The total value of deals announced as a
result of hostile takeovers, private equity buyouts and broad corporate
consolidation was $3.8 trillion. 2 This figure surpassed the $3.4 trillion mark
set in 2000. 2 Announced deals from private equity alone reached a record $700
billion, almost double the record set in 2005 and 20 times greater than a decade
ago. 3 The heightened merger activity continued in 2007.

With this economic backdrop, the non-U.S. equity markets -- including emerging
markets that remained a major magnet for global fund flows -- led global equity
markets to end the period with strong total returns. Stock market indexes in the
U.S. and most European countries reached six-year highs during the reporting
period, and many emerging market indexes in Asia, Europe and Latin America
neared or reached all-time highs. As the period ended, however, equity prices
fell from their highs as uncertainties about the U.S. economy and a decline in
China's stock market led many investors to reassess their risk profiles.

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.

2. Source: "Can M&A's 'Best of Times' Get Better?," THE WALL STREET JOURNAL,
1/2/07.

3. Sources: Thomson Financial; "TPG tops buy-out league with $101bn,"
FINANCIAL TIMES, 12/27/06.

4 | Semiannual Report

MANAGER'S DISCUSSION

During the six months under review, it was notable that on a country basis the
U.S. contributed most to absolute Fund performance relative to the benchmark
MSCI World Index. This was mostly due to stock selection although the Fund also
benefited from its underweighted country exposure as many foreign markets
outperformed the U.S. market. For the six months under review, equities in China
rose +32.59%, Indonesia +15.71%, Spain +22.30% and Germany +18.86%, compared
with the MSCI USA Index's return of +9.41% for the same period. 4 The number of
U.S.-based companies on our bargain list increased almost 50% since the end of
2004, and at period-end, we continued to believe valuations were attractive.
Moreover, several of these holdings have been among the Fund's strongest
performers.

Consistent with our investment strategy, we actively sought opportunities where
we believed expectations were the lowest. On absolute and relative bases, the
Fund benefited from several of its TMT (technology, media and
telecommunications) holdings. 5 Many TMT stocks that were once market leaders
have since lagged the broad market until recently. Microsoft led technology
sector contributors to absolute Fund performance, as the company reported record
sales in its fiscal fourth quarter of 2006 and yearly net income that exceeded
sales in 1997. Other technology company holdings that contributed to performance
were Cadence Design Systems and Accenture. In 2005, media was one of the MSCI
World Index's worst performing industries, but due to large-scale stock
repurchases coupled with good performance, several of our overweighted industry
holdings such as News Corp., EchoStar Communications, Time Warner, DIRECTV and
Comcast were among the Fund's top contributors to performance. The Fund also
benefited from its investments in telecommunications companies France Telecom,
Telenor and Vodafone during the reporting period.

4. Source: Standard & Poor's Micropal. The MSCI All Country (AC) World Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed and emerging
markets. Country equity returns are from country subindexes of the MSCI AC
World Index.

5. Technology holdings are in the communications equipment, computers and
peripherals, electronic equipment and instruments, IT Services, office
electronics, semiconductors and semiconductor equipment, and software
industries in the SOI. Telecommunications holdings are in the diversified
telecommunication services and wireless telecommunication services
industries in the SOI.

TOP 10 CONTRIBUTORS TO PERFORMANCE
9/1/06-2/28/07

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COMPANY
SECTOR/INDUSTRY, COUNTRY
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Merrill Lynch & Co. Inc.
CAPITAL MARKETS, U.S.
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The DIRECTV Group Inc.
MEDIA, U.S.
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Qantas Airways Ltd.*
AIRLINES, AUSTRALIA
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News Corp., A
MEDIA, U.S.
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Cheung Kong (Holdings) Ltd.
REAL ESTATE, HONG KONG
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France Telecom SA
DIVERSIFIED TELECOMMUNICATION SERVICES,
FRANCE
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EchoStar Communications Corp., A
MEDIA, U.S.
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Reliance Industries Ltd.
OIL, GAS & CONSUMABLE FUELS, INDIA
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Microsoft Corp.
SOFTWARE, U.S.
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Time Warner Inc.
MEDIA, U.S.
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* Sold during the reporting period.

Semiannual Report | 5

TOP 10 INDUSTRIES
Based on Equity Securities
2/28/07

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% OF TOTAL
NET ASSETS
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Media 10.4%
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Pharmaceuticals 7.8%
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Insurance 7.5%
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Oil, Gas & Consumable Fuels 7.1%
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Software 6.6%
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Commercial Banks 6.1%
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Diversified Financial Services 5.2%
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Diversified Telecommunication Services 4.7%
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Real Estate 4.2%
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Industrial Conglomerates 4.0%
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months ended February 28, 2007, the U.S. dollar declined in value relative to
most non-U.S. currencies. As a result, the Fund's performance was positively
affected by the portfolio's substantial investment in securities with non-U.S.
currency exposure. However, one cannot expect the same result in future periods.

On a country basis, our investments in Japan detracted most from absolute and
positive performance during the period mainly due to stock selection. For the
six months under review, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial
underperformed not only the global markets but their financial peers as well.
Investor concerns included the sustainability of the Japanese economic recovery
and Japanese banks' lending and borrowing activities. Despite these companies'
poor recent performance, our analysis indicates Japan's recovery is still on
track and that economic activity is rebounding, which we think could benefit
these companies. At period-end, following our investment strategy, we maintained
positions in both companies as our outlook remained positive.

In our view, some of the most undervalued stocks with the lowest investor
expectations were large capitalization companies, many of which are well known.
Large companies are often not as responsive to market upturns as many of their
smaller-sized counterparts, which is sometimes a drawback for investors focused
on shorter-term returns. Many large-cap companies are components of widely
followed indexes and considered "bid-proof," meaning that they would be unlikely
takeover targets and, therefore, a premium is not priced into their shares on
hopes for future acquisition. At period-end, several of these stocks were large
Fund holdings such as BP, GlaxoSmithKline (GSK) and Vodafone. Although Vodafone
performed well and was a strong contributor to performance, GSK's stock price
performance was mostly flat during the review period, contributing little to
Fund performance. In addition, BP was among the leading detractors from
performance as its shares lost value. Despite GSK's and BP's lackluster
performances, at period-end, our outlook for them remained positive as in our
analysis they were cheap by most statistical measures. Vodafone, GSK and BP have
reduced the number of shares outstanding over the past three years. History
shows that companies that have bought back shares have often outperformed when
shares are cheap and capital discipline is employed -- which is true for our
three examples.

6 | Semiannual Report

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

[PHOTO] /s/ Jeffrey A. Everett

Jeffrey A. Everett, CFA
Portfolio Manager
Templeton World Fund

TOP 10 EQUITY HOLDINGS
2/28/07

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Cheung Kong (Holdings) Ltd. 3.5%
REAL ESTATE, HONG KONG
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Microsoft Corp. 2.8%
SOFTWARE, U.S.
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News Corp., A 2.4%
MEDIA, U.S.
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Sumitomo Mitsui Financial Group Inc. 2.0%
COMMERCIAL BANKS, JAPAN
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GlaxoSmithKline PLC 2.0%
PHARMACEUTICALS, U.K.
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ING Groep NV 2.0%
DIVERSIFIED FINANCIAL SERVICES,
NETHERLANDS
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Mitsubishi UFJ Financial Group Inc. 1.8%
COMMERCIAL BANKS, JAPAN
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Royal Dutch Shell PLC, A & B 1.8%
OIL, GAS & CONSUMABLE FUELS, U.K.
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KKR Private Equity Investors LP 1.7%
DIVERSIFIED FINANCIAL SERVICES,
GUERNSEY ISLANDS
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Samsung Electronics Co. Ltd., ord. & pfd. 1.6%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF FEBRUARY 28, 2007, 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 2/28/07

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 2/28/07 8/31/06
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Net Asset Value (NAV) -$0.10 $19.36 $19.46
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.3437
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Short-Term Capital Gain $0.0720
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Long-Term Capital Gain $1.5252
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TOTAL $1.9409
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CLASS B (SYMBOL: TWDBX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$0.01 $19.09 $19.08
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.1367
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Short-Term Capital Gain $0.0720
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Long-Term Capital Gain $1.5252
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TOTAL $1.7339
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CLASS C (SYMBOL: TEWTX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) -$0.02 $18.84 $18.86
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.1505
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Short-Term Capital Gain $0.0720
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Long-Term Capital Gain $1.5252
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TOTAL $1.7477
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ADVISOR CLASS (SYMBOL: TWDAX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) -$0.12 $19.36 $19.48
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.3889
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Short-Term Capital Gain $0.0720
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Long-Term Capital Gain $1.5252
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TOTAL $1.9861
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8 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. 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; ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY CHARGE A
2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

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

Cumulative Total Return 1 +9.87% +15.69% +85.46% +149.68%
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Average Annual Total Return 2 +3.54% +9.03% +11.82% +8.94%
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Value of $10,000 Investment 3 $10,354 $10,903 $17,481 $23,537
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Avg. Ann. Total Return (3/31/07) 4 +8.82% +10.94% +9.10%
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Total Annual Operating Expenses 5 1.06%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +9.49% +14.85% +78.70% +94.18%
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Average Annual Total Return 2 +5.49% +10.85% +12.06% +8.47%
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Value of $10,000 Investment 3 $10,549 $11,085 $17,670 $19,418
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Avg. Ann. Total Return (3/31/07) 4 +10.55% +11.16% +8.52%
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Total Annual Operating Expenses 5 1.82%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +9.46% +14.82% +78.52% +131.32%
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Average Annual Total Return 2 +8.47% +13.82% +12.29% +8.75%
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Value of $10,000 Investment 3 $10,847 $11,382 $17,852 $23,132
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Avg. Ann. Total Return (3/31/07) 4 +13.52% +11.42% +8.92%
- -------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.82%
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ADVISOR CLASS 6 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.01% +15.96% +85.89% +150.25%
- -------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.01% +15.96% +13.20% +9.61%
- -------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,001 $11,596 $18,589 $25,025
- -------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +15.72% +12.32% +9.78%
- -------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 0.82%
- -------------------------------------------------------------------------------------------------------------------

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.

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.

2. Average annual total return represents the average annual change in value
of an investment over the periods indicated. 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.

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

5. Figures are as stated in the Fund's prospectus current as of the date of
this report.

6. Effective 5/15/06, 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 5/15/06, 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 5/14/06, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 5/15/06
(commencement of sales), the cumulative total return of Advisor Class
shares was +10.57%.

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 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 9/1/06 VALUE 2/28/07 PERIOD* 9/1/06-2/28/07
- ----------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,098.70 $5.41
- ----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.64 $5.21
- ----------------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,094.90 $9.35
- ----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.87 $9.00
- ----------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,094.60 $9.35
- ----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.87 $9.00
- ----------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,100.10 $4.22
- ----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.78 $4.06
- ----------------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
1.04%; B: 1.80%; C: 1.80%; and Advisor: 0.81%), 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, 2007 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 19.46 $ 18.92 $ 16.78 $ 15.12 $ 13.64 $ 14.70
--------------------------------------------------------------------------------------
Income from investment operations a:

Net investment income b .............. 0.06 0.28 0.25 0.22 0.18 0.17

Net realized and unrealized gains
(losses) ............................. 1.78 2.23 3.46 1.74 1.46 (0.96)
--------------------------------------------------------------------------------------
Total from investment operations ...... 1.84 2.51 3.71 1.96 1.64 (0.79)
--------------------------------------------------------------------------------------
Less distributions from:

Net investment income ................ (0.34) (0.27) (0.32) (0.30) (0.16) (0.27)

Net realized gains ................... (1.60) (1.70) (1.25) -- -- --
--------------------------------------------------------------------------------------
Total distributions ................... (1.94) (1.97) (1.57) (0.30) (0.16) (0.27)
--------------------------------------------------------------------------------------
Redemption fees ....................... -- d -- d -- d -- d -- d --
--------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 19.36 $ 19.46 $ 18.92 $ 16.78 $ 15.12 $ 13.64
======================================================================================

Total return c ........................ 9.87% 14.92% 23.91% 13.10% 12.27% (5.43)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $9,153,801 $8,627,348 $7,988,364 $6,924,779 $6,419,826 $6,161,235

Ratios to average net assets:

Expenses ............................. 1.04% e,f 1.06% f 1.08% f 1.11% f 1.11% 1.08%

Net investment income ................ 0.59% 1.49% 1.41% 1.32% 1.40% 1.15%

Portfolio turnover rate ............... 17.34% 35.41% 24.13% 37.58% 43.91% 44.56%

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to timing of
sales and repurchase of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 13

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

--------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------

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

Net asset value, beginning of period ............ $ 19.08 $ 18.61 $ 16.53 $ 14.92 $ 13.46 $ 14.51
---------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ................. (0.02) 0.13 0.12 0.10 0.09 0.06

Net realized and unrealized gains (losses) ..... 1.77 2.20 3.41 1.71 1.44 (0.95)
---------------------------------------------------------------------------
Total from investment operations ................ 1.75 2.33 3.53 1.81 1.53 (0.89)
---------------------------------------------------------------------------
Less distributions from:

Net investment income .......................... (0.14) (0.16) (0.20) (0.20) (0.07) (0.16)

Net realized gains ............................. (1.60) (1.70) (1.25) -- -- --
---------------------------------------------------------------------------
Total distributions ............................. (1.74) (1.86) (1.45) (0.20) (0.07) (0.16)
---------------------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- d -- d --
---------------------------------------------------------------------------
Net asset value, end of period .................. $ 19.09 $ 19.08 $ 18.61 $ 16.53 $ 14.92 $ 13.46
===========================================================================

Total return c .................................. 9.49% 14.03% 22.99% 12.24% 11.46% (6.12)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............... $65,628 $64,381 $60,564 $49,419 $37,166 $29,311

Ratios to average net assets:

Expenses ....................................... 1.80% e,f 1.82% f 1.83% f 1.86% f 1.86% 1.83%

Net investment income (loss) ................... (0.17)% 0.73% 0.66% 0.57% 0.65% 0.40%

Portfolio turnover rate ......................... 17.34% 35.41% 24.13% 37.58% 43.91% 44.56%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

14 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------

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

Net asset value, beginning of period ............ $ 18.86 $ 18.42 $ 16.37 $ 14.77 $ 13.31 $ 14.34
--------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ................. (0.02) 0.14 0.11 0.09 0.09 0.06

Net realized and unrealized gains (losses) ..... 1.75 2.16 3.38 1.70 1.43 (0.94)
--------------------------------------------------------------------------
Total from investment operations ................ 1.73 2.30 3.49 1.79 1.52 (0.88)
--------------------------------------------------------------------------
Less distributions from:

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

Net realized gains ............................. (1.60) (1.70) (1.25) -- -- --
--------------------------------------------------------------------------
Total distributions ............................. (1.75) (1.86) (1.44) (0.19) (0.06) (0.15)
--------------------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- d -- d --
--------------------------------------------------------------------------
Net asset value, end of period .................. $ 18.84 $ 18.86 $ 18.42 $ 16.37 $ 14.77 $ 13.31
==========================================================================

Total return c .................................. 9.46% 14.03% 23.00% 12.24% 11.46% (6.15)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............... $441,488 $407,087 $351,430 $295,009 $270,417 $264,751

Ratios to average net assets:

Expenses ....................................... 1.80% e,f 1.82% f 1.83% f 1.86% f 1.86% 1.83%

Net investment income (loss) ................... (0.17)% 0.73% 0.66% 0.57% 0.65% 0.40%

Portfolio turnover rate ......................... 17.340% 35.41% 24.13% 37.58% 43.91% 44.56%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 15

Templeton World Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

--------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2006 g
--------------------------------

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

Net asset value, beginning of period .................... $ 19.48 $ 19.38
--------------------------
Income from investment operations a:

Net investment income b ................................ 0.08 0.11

Net realized and unrealized gains (losses) ............. 1.79 (0.01)
--------------------------
Total from investment operations ........................ 1.87 0.10
--------------------------
Less distributions from:

Net investment income .................................. (0.39) --

Net realized gains ..................................... (1.60) --
--------------------------
Total distributions ..................................... (1.99) --
--------------------------
Redemption fees ......................................... -- d -- d
--------------------------
Net asset value, end of period .......................... $ 19.36 $ 19.48
==========================

Total return c .......................................... 10.01% 0.52%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................... $170,795 $ 31,804

Ratios to average net assets:

Expenses ............................................... 0.81% e,f 0.82% e,f

Net investment income .................................. 0.82% 1.73% e

Portfolio turnover rate ................................. 17.34% 35.41%

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchase of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

g For the period May 15, 2006 (effective date) to August 31, 2006.

16 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED)

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

LONG TERM INVESTMENTS 93.8%
COMMON STOCKS AND OTHER EQUITY INTERESTS 92.3%
BERMUDA 2.4%
ACE Ltd. ................................... Insurance 2,632,765 $ 147,856,082
XL Capital Ltd., A ......................... Insurance 1,230,052 87,333,692
---------------
235,189,774
---------------
FINLAND 1.4%
UPM-Kymmene OYJ ............................ Paper & Forest Products 5,421,310 141,344,203
---------------
FRANCE 3.2%
France Telecom SA .......................... Diversified Telecommunication Services 4,961,280 134,388,288
Sanofi-Aventis ............................. Pharmaceuticals 1,652,895 140,361,536
Societe BIC SA ............................. Commercial Services & Supplies 621,001 42,423,474
---------------
317,173,298
---------------
GERMANY 4.2%
Deutsche Post AG ........................... Air Freight & Logistics 3,158,400 101,375,164
a Infineon Technologies AG ................... Semiconductors & Semiconductor Equipment 6,869,570 105,377,262
Siemens AG ................................. Industrial Conglomerates 1,183,870 124,777,384
TUI AG ..................................... Hotels, Restaurants & Leisure 3,665,830 85,384,319
---------------
416,914,129
---------------
GUERNSEY ISLANDS 1.7%
KKR Private Equity Investors LP ............ Diversified Financial Services 6,833,380 163,864,452
---------------
HONG KONG 5.3%
Cheung Kong (Holdings) Ltd. ................ Real Estate 28,187,451 345,756,120
Hutchison Whampoa Ltd. ..................... Industrial Conglomerates 13,935,060 132,699,554
New World Development Co. Ltd. ............. Real Estate 17,382,443 38,246,419
Yue Yuen Industrial Holdings Ltd. .......... Textiles, Apparel & Luxury Goods 1,050,000 3,629,516
---------------
520,331,609
---------------
INDIA 1.6%
Indian Oil Corp. Ltd. ...................... Oil, Gas & Consumable Fuels 1,579,949 14,833,361
Reliance Industries Ltd. ................... Oil, Gas & Consumable Fuels 4,572,880 140,450,293
---------------
155,283,654
---------------
INDONESIA 0.0%
PT Indosat Tbk ............................. Diversified Telecommunication Services 870,000 561,900
---------------
ISRAEL 1.0%
a Check Point Software Technologies Ltd. ..... Software 4,502,950 101,676,611
---------------
ITALY 0.8%
Eni SpA .................................... Oil, Gas & Consumable Fuels 2,541,076 77,832,362
---------------

Semiannual Report | 17

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
JAPAN 7.7%
EBARA Corp. ................................ Machinery 1,671,000 $ 7,852,157
a Konica Minolta Holdings Ltd. ............... Office Electronics 3,733,000 47,901,739
Mitsubishi UFJ Financial Group Inc. ........ Commercial Banks 14,695 180,204,622
Nomura Holdings Inc. ....................... Capital Markets 4,001,300 86,656,195
Olympus Corp. .............................. Health Care Equipment & Supplies 773,000 25,965,805
Sompo Japan Insurance Inc. ................. Insurance 9,036,000 121,499,358
Sumitomo Mitsui Financial Group Inc. ....... Commercial Banks 20,423 198,694,514
Takeda Pharmaceutical Co. Ltd. ............. Pharmaceuticals 1,241,800 85,443,136
---------------
754,217,526
---------------
NETHERLANDS 3.0%
ING Groep NV ............................... Diversified Financial Services 4,594,030 195,995,372
Koninklijke Philips Electronics NV ......... Household Durables 1,318,005 48,369,354
Reed Elsevier NV ........................... Media 2,862,245 50,599,838
---------------
294,964,564
---------------
NORWAY 0.9%
Norske Skogindustrier ASA .................. Paper & Forest Products 1,963,130 34,315,414
Telenor ASA ................................ Diversified Telecommunication Services 3,050,480 56,461,782
---------------
90,777,196
---------------
PHILIPPINES 0.3%
Ayala Land Inc. ............................ Real Estate 78,408,000 25,016,881
---------------
SINGAPORE 1.2%
a Flextronics International Ltd. ............. Electronic Equipment & Instruments 615,177 6,723,885
Parkway Holdings Ltd. ...................... Health Care Providers & Services 216,000 424,313
Singapore Telecommunications Ltd. .......... Diversified Telecommunication Services 30,083,261 62,619,415
United Overseas Bank Ltd. .................. Commercial Banks 869,000 11,691,791
Venture Corp. Ltd. ......................... Electronic Equipment & Instruments 4,196,000 37,936,259
---------------
119,395,663
---------------
SOUTH AFRICA 1.1%
Old Mutual PLC ............................. Insurance 30,316,760 104,502,998
---------------
SOUTH KOREA 3.8%
Hana Financial Group Inc. .................. Commercial Banks 972,111 51,751,143
Kookmin Bank ............................... Commercial Banks 643,433 57,788,064
a KT Corp., ADR .............................. Diversified Telecommunication Services 2,120,300 47,664,344
Lotte Shopping Co. Ltd. .................... Multiline Retail 68,380 24,735,576
Samsung Electronics Co. Ltd. ............... Semiconductors & Semiconductor Equipment 229,519 138,616,406
Shinhan Financial Group Co. Ltd. ........... Commercial Banks 948,860 53,514,536
---------------
374,070,069
---------------

18 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
SPAIN 1.5%
Repsol YPF SA .............................. Oil, Gas & Consumable Fuels 1,578,190 $ 49,954,999
Telefonica SA .............................. Diversified Telecommunication Services 4,350,130 93,574,107
---------------
143,529,106
---------------
SWITZERLAND 1.0%
Ciba Specialty Chemicals AG ................ Chemicals 1,549,252 98,337,681
---------------
TAIWAN 3.0%
Chunghwa Telecom Co. Ltd., ADR ............. Diversified Telecommunication Services 3,629,316 70,009,506
Compal Electronics Inc. .................... Computers & Peripherals 63,811,676 53,255,316
b Compal Electronics Inc., GDR, 144A ......... Computers & Peripherals 24,000 106,320
Lite-On Technology Corp. ................... Computers & Peripherals 49,715,244 68,636,385
Mega Financial Holding Co. Ltd. ............ Commercial Banks 73,723,000 48,760,500
Taiwan Semiconductor Manufacturing
Co. Ltd. .................................. Semiconductors & Semiconductor Equipment 29,245,929 57,436,002
---------------
298,204,029
---------------
UNITED KINGDOM 14.0%
Alliance Boots PLC ......................... Food & Staples Retailing 2,541,265 39,286,269
Amvescap PLC ............................... Capital Markets 8,386,999 98,666,033
Aviva PLC .................................. Insurance 3,261,146 52,227,636
BAE Systems PLC ............................ Aerospace & Defense 11,670,208 99,900,579
BP PLC ..................................... Oil, Gas & Consumable Fuels 12,441,332 127,565,794
a British Energy Group PLC ................... Electric Utilities 1,259,710 10,179,470
British Sky Broadcasting Group PLC ......... Media 13,783,311 150,525,479
Centrica PLC ............................... Multi-Utilities 12,162,090 89,087,092
Compass Group PLC .......................... Hotels, Restaurants & Leisure 14,996,071 88,972,761
GlaxoSmithKline PLC ........................ Pharmaceuticals 7,059,352 198,107,731
Pearson PLC ................................ Media 9,399,292 145,439,096
Reed Elsevier PLC .......................... Media 507,524 5,905,194
Royal Dutch Shell PLC, A ................... Oil, Gas & Consumable Fuels 2,065,346 67,268,534
Royal Dutch Shell PLC, B ................... Oil, Gas & Consumable Fuels 3,316,002 107,046,995
Vodafone Group PLC ......................... Wireless Telecommunication Services 35,409,532 98,114,301
---------------
1,378,292,964
---------------
UNITED STATES 33.2%
Abbott Laboratories ........................ Pharmaceuticals 860,100 46,978,662
Accenture Ltd., A .......................... IT Services 3,329,760 118,872,432
American International Group Inc. .......... Insurance 1,038,600 69,690,060
a Avaya Inc. ................................. Communications Equipment 6,891,530 84,627,988
Bristol-Myers Squibb Co. ................... Pharmaceuticals 3,850,250 101,608,097
a Cadence Design Systems Inc. ................ Software 5,351,980 106,718,481
Chevron Corp. .............................. Oil, Gas & Consumable Fuels 1,684,970 115,605,792
a Chico's FAS Inc. ........................... Specialty Retail 2,012,090 45,131,179
CIGNA Corp. ................................ Health Care Providers & Services 571,710 81,468,675
a Comcast Corp., A ........................... Media 5,610,480 142,786,716
a Convergys Corp. ............................ IT Services 3,164,370 81,387,596

Semiannual Report | 19

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
UNITED STATES (CONTINUED)
a The DIRECTV Group Inc. ..................... Media 2,014,130 $ 45,438,773
a EchoStar Communications Corp., A ........... Media 2,369,780 96,213,068
a Expedia Inc. ............................... Internet & Catalog Retail 719,100 15,288,066
Fannie Mae ................................. Thrifts & Mortgage Finance 847,248 48,064,379
The Gap Inc. ............................... Specialty Retail 2,720,010 52,196,992
General Electric Co. ....................... Industrial Conglomerates 3,946,270 137,803,748
a Interpublic Group of Cos. Inc. ............. Media 29,742 374,452
JPMorgan Chase & Co. ....................... Diversified Financial Services 3,022,290 149,301,126
Merck & Co. Inc. ........................... Pharmaceuticals 2,317,100 102,323,136
Merrill Lynch & Co. Inc. ................... Capital Markets 1,443,923 120,827,477
Microsoft Corp. ............................ Software 9,891,270 278,637,076
a NAVTEQ ..................................... Software 1,579,080 50,467,397
News Corp., A .............................. Media 10,562,920 237,982,588
a Oracle Corp. ............................... Software 6,656,470 109,365,802
Pfizer Inc. ................................ Pharmaceuticals 3,514,890 87,731,654
Pitney Bowes Inc. .......................... Commercial Services & Supplies 1,033,730 49,319,258
R. R. Donnelley & Sons Co. ................. Commercial Services & Supplies 3,604,020 130,393,444
a Reliant Energy Inc. ........................ Electric Utilities 2,995,810 50,659,147
TECO Energy Inc. ........................... Multi-Utilities 2,301,100 38,589,447
a Tellabs Inc. ............................... Communications Equipment 5,596,210 58,648,281
a Tenet Healthcare Corp. ..................... Health Care Providers & Services 15,175,520 103,648,802
Time Warner Inc. ........................... Media 6,856,040 139,520,414
Torchmark Corp. ............................ Insurance 1,557,920 99,582,246
a Viacom Inc., B ............................. Media 131,780 5,144,691
Willis Group Holdings Ltd. ................. Insurance 1,422,700 56,481,190
---------------
3,258,878,332
---------------
TOTAL COMMON STOCKS AND OTHER EQUITY
INTERESTS (COST $6,854,959,731) ........... 9,070,359,001
---------------
PREFERRED STOCKS 1.0%
BRAZIL 0.4%
Companhia Vale do Rio Doce, ADR,
pfd., A ................................... Metals & Mining 1,263,000 37,321,650
---------------
SOUTH KOREA 0.2%
Samsung Electronics Co. Ltd., pfd. ......... Semiconductors & Semiconductor Equipment 51,772 23,966,337
---------------
UNITED STATES 0.4%
XL Capital Ltd., 6.50%, cvt. pfd. .......... Insurance 1,706,700 40,114,277
---------------
TOTAL PREFERRED STOCKS
(COST $49,377,879) ........................ 101,402,264
---------------

20 | Semiannual Report

Templeton World Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

- ---------------------------------------------------------------------------------------------------------------------------------
INDUSTRY PRINCIPAL AMOUNT C VALUE
- ---------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS (CONTINUED)
BONDS & NOTES 0.5%
AUSTRALIA 0.1%
New South Wales Treasury Corp.,
8.00%, 3/01/08 ............................ Government and Agency Securities 17,170,000 AUD $ 13,758,468
CANADA 0.1%
Government of Canada,
6.00%, 6/01/11 ............................ Government and Agency Securities 8,030,000 CAD 7,413,438
SWEDEN 0.1%
Government of Sweden,
5.50%, 10/08/12 ........................... Government and Agency Securities 48,680,000 SEK 7,551,459
UNITED STATES 0.2%
Federal Home Loan Mortgage Corp.,
5.50%, 12/01/35 ........................... Government and Agency Securities 22,344,272 22,193,191
---------------
TOTAL BONDS & NOTES
(COST $42,463,318) ........................ 50,916,556
---------------
TOTAL LONG TERM INVESTMENTS
(COST $6,946,800,928) ..................... 9,222,677,821
---------------
SHORT TERM INVESTMENTS 6.2%
GOVERNMENT AND AGENCY SECURITIES 5.9%
UNITED STATES 5.9%
d Federal Home Loan Bank,
3/01/07 - 4/25/07 ......................... 216,708,000 216,446,892
d Federal Home Loan Mortgage Corp.,
3/30/07 - 8/31/07 ......................... 157,225,000 155,199,902
d Federal National Mortgage Association,
3/22/07 - 7/11/07 ......................... 210,075,000 207,288,325
---------------
TOTAL GOVERNMENT AND AGENCY SECURITIES
(COST $578,882,078) ....................... 578,935,119
---------------
TIME DEPOSIT (COST $26,782,797) 0.3%
UNITED KINGDOM 0.3%
Barclays Bank PLC, Time Deposit,
3.75%, 3/01/07 ............................ 20,310,000 26,782,797
---------------
TOTAL SHORT TERM INVESTMENTS
(COST $605,664,875) ....................... 605,717,916
---------------

Semiannual Report | 21

Templeton World Fund
STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

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

TOTAL INVESTMENTS (COST $7,552,465,803)
100.0% .................................... $ 9,828,395,737
OTHER ASSETS, LESS LIABILITIES
0.0% e .................................... 3,315,800
---------------
NET ASSETS 100.0% ............................ $ 9,831,711,537
===============

CURRENCY ABBREVIATIONS

AUD - Australian Dollar
CAD - Canadian Dollar
SEK - Swedish Krona

PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
GDR - Global Depository Receipt

a Non-income producing for the twelve months ended February 28, 2007.

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,
2007, the aggregate value of this security was $106,320, representing less
than 0.01% of net assets.

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

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

e Rounds to less than 0.1% of net assets.

22 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton World Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2007 (unaudited)

Assets:
Investments in securities:
Cost ...................................................................... $7,552,465,803
==============
Value ..................................................................... $9,828,395,737
Cash ....................................................................... 30,361
Foreign currency, at value (cost $13,922,859) .............................. 14,278,944
Receivables:
Investment securities sold ................................................ 91,691,898
Capital shares sold ....................................................... 5,465,276
Dividends and interest .................................................... 18,776,293
--------------
Total assets ........................................................ 9,958,638,509
--------------
Liabilities:
Payables:
Investment securities purchased ........................................... 103,534,960
Capital shares redeemed ................................................... 9,220,903
Affiliates ................................................................ 9,121,980
Deferred tax ............................................................... 4,123,441
Accrued expenses and other liabilities ..................................... 925,688
--------------
Total liabilities ................................................... 126,926,972
--------------
Net assets, at value ............................................. $9,831,711,537
==============
Net assets consist of:
Paid-in capital ............................................................ $7,091,592,363
Distributions in excess of net investment income ........................... (8,337,995)
Net unrealized appreciation (depreciation) ................................. 2,272,285,621
Accumulated net realized gain (loss) ....................................... 476,171,548
--------------
Net assets, at value ............................................. $9,831,711,537
==============
CLASS A:
Net assets, at value ....................................................... $9,153,800,649
==============
Shares outstanding ......................................................... 472,713,373
==============
Net asset value per share a ................................................ $ 19.36
==============
Maximum offering price per share (net asset value per share / 94.25%) ...... $ 20.55
==============
CLASS B:
Net assets, at value ....................................................... $ 65,627,680
==============
Shares outstanding ......................................................... 3,437,893
==============
Net asset value and maximum offering price per share a ..................... $ 19.09
==============
CLASS C:
Net assets, at value ....................................................... $ 441,488,345
==============
Shares outstanding ......................................................... 23,438,900
==============
Net asset value and maximum offering price per share a ..................... $ 18.84
==============
ADVISOR CLASS:
Net assets, at value ....................................................... $ 170,794,863
==============
Shares outstanding ......................................................... 8,822,115
==============
Net asset value and maximum offering price per share a ..................... $ 19.36
==============

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 |
The accompanying notes are an integral part of these financial statements. | 23

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2007 (unaudited)

Investment income:
Dividends (net of foreign taxes of $3,264,743) ................................. $ 67,601,679
Interest (net of foreign taxes of $1,068) ...................................... 10,666,955
-------------
Total investment income ..................................................... 78,268,634
-------------
Expenses:
Management fees (Note 3a) ...................................................... 29,239,155
Administrative fees (Note 3b) .................................................. 3,720,198
Distribution fees (Note 3c)
Class A ....................................................................... 10,473,723
Class B ....................................................................... 329,830
Class C ....................................................................... 2,129,624
Transfer agent fees (Note 3e) .................................................. 4,101,425
Custodian fees (Note 4) ........................................................ 1,144,538
Reports to shareholders ........................................................ 243,692
Registration and filing fees ................................................... 132,270
Professional fees .............................................................. 95,804
Directors' fees and expenses ................................................... 114,674
Other .......................................................................... 91,395
-------------
Total expenses .............................................................. 51,816,328
Expense reductions (Note 4) ................................................. (52,438)
-------------
Net expenses ............................................................ 51,763,890
-------------
Net investment income ................................................ 26,504,744
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................................... 650,503,778
Foreign currency transactions ................................................. 201,218
-------------
Net realized gain (loss) ................................................ 650,704,996
-------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................... 221,860,421
Translation of assets and liabilities denominated in foreign currencies ....... 505,083
Change in deferred taxes on unrealized appreciation ............................ (2,382,403)
-------------
Net change in unrealized appreciation (depreciation) .................... 219,983,101
-------------
Net realized and unrealized gain (loss) ......................................... 870,688,097
-------------
Net increase (decrease) in net assets resulting from operations ................. $ 897,192,841
=============

24 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton World Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED
(UNAUDITED) AUGUST 31, 2006
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 26,504,744 $ 127,921,676
Net realized gain (loss) from investments and foreign currency transactions ........... 650,704,996 817,124,996
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies, and deferred taxes ........ 219,983,101 268,480,507
---------------------------------
Net increase (decrease) in net assets resulting from operations ................. 897,192,841 1,213,527,179
---------------------------------
Distributions to shareholders from:
Net investment income:
Class A ............................................................................. (152,059,623) (113,657,465)
Class B ............................................................................. (456,095) (511,468)
Class C ............................................................................. (3,266,716) (3,071,088)
Advisor Class ....................................................................... (2,267,081) --
Net realized gains:
Class A ............................................................................. (709,186,552) (728,163,128)
Class B ............................................................................. (5,376,341) (5,616,433)
Class C ............................................................................. (34,907,854) (33,125,852)
Advisor Class ....................................................................... (9,384,023) --
---------------------------------
Total distributions to shareholders .................................................... (916,904,285) (884,145,434)
---------------------------------
Capital share transactions: (Note 2)
Class A ............................................................................. 547,584,795 327,934,519
Class B ............................................................................. 1,021,772 1,705,170
Class C ............................................................................. 34,085,582 42,156,042
Advisor Class ....................................................................... 138,101,153 29,068,862
---------------------------------
Total capital share transactions ....................................................... 720,793,302 400,864,593
---------------------------------
Redemption fees ........................................................................ 9,430 15,447
---------------------------------
Net increase (decrease) in net assets ........................................... 701,091,288 730,261,785
Net assets:
Beginning of period .................................................................... 9,130,620,249 8,400,358,464
---------------------------------
End of period .......................................................................... $9,831,711,537 $9,130,620,249
---------------------------------
Distributions in excess of net investment income/undistributed net investment income
included in net assets:
End of period .......................................................................... $ (8,337,995) $ 123,206,776
=================================

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 25

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
amended, (the 1940 Act) as an open-end investment company, consisting of two
separate funds. 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 offers four classes of shares: Class A, Class B,
Class C, and Advisor Class. Effective May 15, 2006, the Fund began offering
shares of, Advisor Class. 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.

Corporate debt securities, government securities, and other mortgage-backed
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

26 | Semiannual Report

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. The investment manager monitors price movements following the
close of trading in foreign stock markets through a series of country specific
market proxies (such as baskets of American Depository Receipts, futures
contracts and exchange traded funds). These price movements are measured against
established trigger thresholds for each specific market proxy to assist in
determining if an event has occurred. 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.

Semiannual Report | 27

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. FOREIGN CURRENCY CONTRACTS (CONTINUED)

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.

D. INCOME AND DEFERRED TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
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.

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

The Fund may be 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.

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. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.

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.

28 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.

G. REDEMPTION FEES

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. 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. Currently, the Fund expects the
risk of loss to be remote.

2. CAPITAL STOCK

At February 28, 2007, 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, 2007 AUGUST 31, 2006
----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------

CLASS A SHARES:
Shares sold ......................... 23,115,889 $ 450,704,951 39,650,953 $ 731,462,247
Shares issued in reinvestment of
distributions ...................... 41,168,539 778,282,904 44,291,032 757,639,656
Shares redeemed ..................... (34,964,981) (681,403,060) (62,740,724) (1,161,167,384)
----------------------------------------------------------------------
Net increase (decrease) ............. 29,319,447 $ 547,584,795 21,201,261 $ 327,934,519
======================================================================
CLASS B SHARES:
Shares sold ......................... 94,783 $ 1,805,929 296,643 $ 5,345,855
Shares issued in reinvestment of
distributions ...................... 271,889 5,069,215 317,115 5,347,259
Shares redeemed ..................... (303,141) (5,853,372) (493,818) (8,987,944)
----------------------------------------------------------------------
Net increase (decrease) ............. 63,531 $ 1,021,772 119,940 $ 1,705,170
======================================================================

Semiannual Report | 29

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

---------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------

CLASS C SHARES:
Shares sold ......................... 1,803,701 $ 34,181,400 3,623,346 $ 64,916,155
Shares issued in reinvestment of
distributions ...................... 1,781,137 32,775,527 1,896,641 31,634,305
Shares redeemed ..................... (1,729,758) (32,871,345) (3,013,990) (54,394,418)
---------------------------------------------------------------
Net increase (decrease) ............. 1,855,080 $ 34,085,582 2,505,997 $ 42,156,042
===============================================================
ADVISOR CLASS SHARES a:
Shares sold ......................... 7,391,633 $ 142,116,119 1,634,015 $ 29,087,093
Shares issued in reinvestment of
distributions ...................... 238,492 4,537,616 -- --
Shares redeemed ..................... (441,068) (8,552,582) (957) (18,231)
---------------------------------------------------------------
Net increase (decrease) ............. 7,189,057 $ 138,101,153 1,633,058 $ 29,068,862
===============================================================

a For the period May 15, 2006 (effective date) to August 31, 2006.

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

30 | Semiannual Report

Templeton World 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 average aggregate daily net assets as follows:

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 for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate.
Under the Class A reimbursement distribution plan, costs exceeding the maximum
for the current plan year cannot be reimbursed in subsequent periods.

In addition, under the Fund's Class B and C compensation distribution plans, the
Fund pays Distributors for costs incurred in connection with the servicing, sale
and distribution of the Fund's shares up to the maximum annual plan rate for
each class.

The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:

Class A ...................................................... 0.25%
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:

Sales charges retained net of commissions paid to
unaffiliated broker/dealers ............................ $441,587
Contingent deferred sales charges retained .............. $ 28,348

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $4,101,425, of which $2,547,428 was
retained by Investor Services.

Semiannual Report | 31

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended February 28, 2007, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

At February 28, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments .................................. $7,559,818,905
==============

Unrealized appreciation .............................. $2,373,079,731
Unrealized depreciation .............................. (104,502,899)
--------------
Net unrealized appreciation (depreciation) ........... $2,268,576,832
==============

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

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, and passive foreign investment company shares.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2007, aggregated $1,589,773,734 and $2,094,411,112,
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.

32 | Semiannual Report

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), 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 ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006.

The plan of distribution for the market timing settlement is currently under
review by the SEC staff. After publication of notice of the plan and a 30-day
comment period, the proposed plan of distribution will be submitted to the SEC
for approval. Following the SEC's approval of the plan of distribution, with
modifications as appropriate, distribution of the settlement monies will begin
in accordance with the terms and conditions of the settlement and plan.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and 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.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.

The Company and fund management 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.

Semiannual Report | 33

Templeton World Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Fund is
currently evaluating the impact, if any, of applying the various provisions of
FIN 48.

In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund believes the adoption of SFAS 157
will have no material impact on its financial statements.

34 | 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 1-954/527-7678 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 | 35

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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 BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund 1

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 Balanced Fund
Franklin Blue Chip Fund 1
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 Global Real Estate 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

RETIREMENT TARGET FUNDS

Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
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 6

NATIONAL FUNDS

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

LIMITED-TERM FUNDS

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

INTERMEDIATE-TERM FUNDS

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

STATE-SPECIFIC

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

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products
Trust (9)

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

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

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

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

5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.

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

7. Portfolio of insured municipal securities.

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

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

01/07
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 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 S2007 04/07

[GRAPHIC OMITTED]

- --------------------------------------------------------------------------------
FEBRUARY 28, 2007
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SEMIANNUAL REPORT AND SHAREHOLDER LETTER INTERNATIONAL
- --------------------------------------------------------------------------------
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 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.

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.

[GRAPHIC OMITTED]

Not part of the annual report |

Contents

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

SEMIANNUAL REPORT

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

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

Your Fund's Expenses ...................................................... 11

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

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

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

Shareholder Information ................................................... 37

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

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
2/28/07

Europe 49.8%
Asia 39.8%
Middle East & Africa 2.8%
Latin America 1.9%
North America 1.5%
Australia 0.9%
Short-Term Investments & Other Net Assets 3.3%

This semiannual report for Templeton Foreign Fund covers the period ended
February 28, 2007.

PERFORMANCE OVERVIEW

For the six months under review, Templeton Foreign Fund - Class A posted a
+10.44% cumulative total return. The Fund underperformed its benchmark, the
Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE)
Index, which posted a +12.26% total return for the same period. 1 In line with
our long-term investment strategy, we are pleased with our long-term results, as
shown in the Performance Summary beginning on page 8. For the 10-year period
ended February 28, 2007, Templeton Foreign Fund - Class A delivered a +128.92%
cumulative total return, compared with the MSCI EAFE Index's +124.67% 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

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 2/28/07, the Fund's Class A 10-year average annual total
return not including sales charges was +8.63%, compared with the +8.43%
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.

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 18.

Semiannual Report | 3

TOP 10 COUNTRIES
Based on Equity Securities
2/28/07

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
U.K. 21.4%
- --------------------------------------------------------------------------------
Japan 12.4%
- --------------------------------------------------------------------------------
Hong Kong 7.6%
- --------------------------------------------------------------------------------
South Korea 6.7%
- --------------------------------------------------------------------------------
France 5.6%
- --------------------------------------------------------------------------------
Germany 5.3%
- --------------------------------------------------------------------------------
Taiwan 5.0%
- --------------------------------------------------------------------------------
India 3.4%
- --------------------------------------------------------------------------------
Italy 3.3%
- --------------------------------------------------------------------------------
Netherlands 3.0%
- --------------------------------------------------------------------------------

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

2. Source: "Can M&A's 'Best of Times' Get Better?," THE WALL STREET JOURNAL,
1/2/07.

3. Sources: Thomson Financial; "TPG tops buy-out league with $101bn,"
FINANCIAL TIMES, 12/27/06.

4 | Semiannual Report

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

During the six months under review, the Fund benefited from its large
allocations to Europe and Asia. On a country specific basis, China and Russia,
which were not represented in the benchmark MSCI EAFE Index, were the leading
contributors to relative performance, and the U.K. contributed the most to
absolute returns.

On a sector basis, some of the Fund's most significant gains were from
technology and telecommunications companies. 4 Five years ago, we avoided these
sectors due to their high valuations. After they fell out of favor and endured
several years of skepticism and poor performance, investors began to recognize
that some of these companies were in solid financial shape, had low valuations
and were rewarding investors with higher dividends. In 2005, consistent with our
investment strategy, we began building positions in several technology and
telecommunications companies as we believed valuations and expectations were
low.

During the reporting period, the Fund's allocation to telecommunications stocks
was more than twice that of the MSCI EAFE Index. Among our strongest performers
were Telenor, China Mobile (sold during the reporting period) and Mobile
Telesystems. Norway-based Telenor has operations as far-reaching as Hungary,
Pakistan and Malaysia, and we believed the company's growth prospects,
particularly for its overseas wireless assets, were overlooked and
underappreciated by investors. Telenor's stock price rose 46% during the review
period. China Mobile, the world's largest cellular phone operator, has steadily
increased its subscriber lead over its local competitors each month. The
company's shares rose 22% from the beginning of the reporting period to the time
that we sold our investment in December 2006. Shares of Mobile Telesystems,
Russia's second largest wireless telecom provider, rose more than 27% during the
review period. Recently, the company announced a 10% stock buyback. During the
reporting period, we purchased Singapore Telecommunications based on our
assessment of its quality and market share dominance. Singapore Telecom's shares
increased 25% since we began building our position in October 2006. We also
found the growth prospects for its overseas operations attractive.

TOP 10 CONTRIBUTORS TO PERFORMANCE
9/1/06-2/28/07

- --------------------------------------------------------------------------------
COMPANY
SECTOR/INDUSTRY, COUNTRY
- --------------------------------------------------------------------------------
Mobile Telesystems, ADR
WIRELESS TELECOMMUNICATION SERVICES, RUSSIA
- --------------------------------------------------------------------------------
Qantas Airways Ltd.*
AIRLINES, AUSTRALIA
- --------------------------------------------------------------------------------
Vestas Wind Systems AS
ELECTRICAL EQUIPMENT, DENMARK
- --------------------------------------------------------------------------------
Siemens AG
INDUSTRIAL CONGLOMERATES, GERMANY
- --------------------------------------------------------------------------------
China Shenhua Energy Co. Ltd., H
OIL, GAS & CONSUMABLE FUELS, CHINA
- --------------------------------------------------------------------------------
Companhia Vale do Rio Doce, ADR, pfd., A
METALS & MINING, BRAZIL
- --------------------------------------------------------------------------------
Reliance Industries Ltd.
OIL, GAS & CONSUMABLE FUELS, INDIA
- --------------------------------------------------------------------------------
France Telecom SA
DIVERSIFIED TELECOMMUNICATION SERVICES, FRANCE
- --------------------------------------------------------------------------------
Gamesa Corp. Tecnologica SA, 144A
ELECTRICAL EQUIPMENT, SPAIN
- --------------------------------------------------------------------------------
Hana Financial Group Inc.
COMMERCIAL BANKS, SOUTH KOREA
- --------------------------------------------------------------------------------

* Sold during the reporting period.

4. Technology holdings are in the computers and peripherals, electronic
equipment and instruments, office electronics, semiconductors and
semiconductor equipment, and software industries in the SOI.
Telecommunications holdings are in the diversified telecommunication
services and wireless telecommunication services industries in the SOI.

Semiannual Report | 5

TOP 10 INDUSTRIES
Based on Equity Securities
2/28/07

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
Commercial Banks 14.7%
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 9.7%
- --------------------------------------------------------------------------------
Diversified Telecommunication Services 7.1%
- --------------------------------------------------------------------------------
Pharmaceuticals 6.5%
- --------------------------------------------------------------------------------
Media 5.5%
- --------------------------------------------------------------------------------
Insurance 4.9%
- --------------------------------------------------------------------------------
Diversified Financial Services 4.3%
- --------------------------------------------------------------------------------
Real Estate 4.1%
- --------------------------------------------------------------------------------
Industrial Conglomerates 3.7%
- --------------------------------------------------------------------------------
Semiconductors &
Semiconductor Equipment 3.0%
- --------------------------------------------------------------------------------

Specific technology companies that contributed to absolute Fund performance
included Infineon Technologies and Lite-On Technology. Infineon's stock price
rose 31% during the reporting period and Lite-On 25%.

In an environment of volatile oil prices, many of the energy-related companies
represented in the MSCI EAFE Index performed poorly. However, not all of our
energy investments corresponded directly to oil price performance. China Shenhua
Energy, the only energy company in China to own a large-scale integrated
transportation network including railways and ports sold at just 17 times
earnings at period-end, despite sales growth of more than 20%. Shares of China
Shenhua increased 43% during the reporting period. In the electrical equipment
industry, our investment in Denmark-based alternative energy company Vestas Wind
Systems, which is still modestly sized, rose nearly 66% in value.

It is important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar goes up compared with a
foreign currency, an investment traded in that foreign currency will go down in
value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. For the six months
ended February 28, 2007, the U.S. dollar declined in value relative to most
non-U.S. currencies. As a result, the Fund's performance was positively affected
by the portfolio's investment predominantly in securities with non-U.S. currency
exposure. However, one cannot expect the same result in future periods.

In our view, some of the most undervalued stocks with the lowest investor
expectations were large capitalization companies, many of which are well known.
Large-cap companies are often not as responsive to market upturns as many of
their smaller-sized counterparts, which is sometimes a drawback for

6 | Semiannual Report

investors focused on shorter-term returns. Many large-cap companies are
components of widely followed indexes and considered "bid-proof," meaning that
they would be unlikely takeover targets and, therefore, a premium is not priced
into their shares on hopes for future acquisition. At period-end, several of
these stocks were large Fund holdings such as BP, GlaxoSmithKline (GSK) and
Vodafone. Although Vodafone's stock price rose 30% during the reporting period
and was a strong contributor to absolute performance, GSK's stock price gained
just over 1% during the period and contributed little to the Fund's absolute
returns. In addition, BP was among the leading detractors from performance as
its shares lost nearly 8% in value. Despite GSK's and BP's lackluster
performances, at period-end, our outlook for them remained positive as we
believed they were cheap by most statistical measures. Vodafone, GSK and BP have
reduced the number of shares outstanding over the past three years. History
shows that companies that have bought back shares have often outperformed when
shares are cheap and capital discipline is employed -- which we believe is true
for our three examples.

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

/s/ Jeffrey A. Everett

[PHOTO OMITTED]

Jeffrey A. Everett, CFA
Portfolio Manager
Templeton Foreign Fund

TOP 10 EQUITY HOLDINGS
2/28/07

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
Cheung Kong (Holdings) Ltd. 3.3%
REAL ESTATE, HONG KONG
- --------------------------------------------------------------------------------
Sumitomo Mitsui Financial Group Inc. 3.2%
COMMERCIAL BANKS, JAPAN
- --------------------------------------------------------------------------------
GlaxoSmithKline PLC 2.8%
PHARMACEUTICALS, U.K.
- --------------------------------------------------------------------------------
British Sky Broadcasting Group PLC 2.5%
MEDIA, U.K.
- --------------------------------------------------------------------------------
Mitsubishi UFJ Financial Group Inc. 2.3%
COMMERCIAL BANKS, JAPAN
- --------------------------------------------------------------------------------
ING Groep NV 2.3%
DIVERSIFIED FINANCIAL SERVICES,
NETHERLANDS
- --------------------------------------------------------------------------------
Sanofi-Aventis 2.2%
PHARMACEUTICALS, FRANCE
- --------------------------------------------------------------------------------
Royal Dutch Shell PLC, A & B 2.2%
OIL, GAS & CONSUMABLE FUELS, U.K.
- --------------------------------------------------------------------------------
KKR Private Equity Investors LP 2.0%
DIVERSIFIED FINANCIAL SERVICES,
GUERNSEY ISLANDS
- --------------------------------------------------------------------------------
Siemens AG 2.0%
INDUSTRIAL CONGLOMERATES, GERMANY
- --------------------------------------------------------------------------------

Semiannual Report | 7

Performance Summary as of 2/28/07

PRICE AND DISTRIBUTION INFORMATION

- -----------------------------------------------------------------------------
CLASS A (SYMBOL: TEMFX) CHANGE 2/28/07 8/31/06
- -----------------------------------------------------------------------------
Net Asset Value (NAV) -$0.13 $13.66 $13.79
- -----------------------------------------------------------------------------
DISTRIBUTIONS (9/1/06-2/28/07)
- -----------------------------------------------------------------------------
Dividend Income $0.3033
- -----------------------------------------------------------------------------
Short-Term Capital Gain $0.1273
- -----------------------------------------------------------------------------
Long-Term Capital Gain $1.0537
- -----------------------------------------------------------------------------
TOTAL $1.4843
- -----------------------------------------------------------------------------
CLASS B (SYMBOL: TFRBX) CHANGE 2/28/07 8/31/06
- -----------------------------------------------------------------------------
Net Asset Value (NAV) -$0.10 $13.43 $13.53
- -----------------------------------------------------------------------------
DISTRIBUTIONS (9/1/06-2/28/07)
- -----------------------------------------------------------------------------
Dividend Income $0.2014
- -----------------------------------------------------------------------------
Short-Term Capital Gain $0.1273
- -----------------------------------------------------------------------------
Long-Term Capital Gain $1.0537
- -----------------------------------------------------------------------------
TOTAL $1.3824
- -----------------------------------------------------------------------------
CLASS C (SYMBOL: TEFTX) CHANGE 2/28/07 8/31/06
- -----------------------------------------------------------------------------
Net Asset Value (NAV) -$0.10 $13.46 $13.56
- -----------------------------------------------------------------------------
DISTRIBUTIONS (9/1/06-2/28/07)
- -----------------------------------------------------------------------------
Dividend Income $0.2020
- -----------------------------------------------------------------------------
Short-Term Capital Gain $0.1273
- -----------------------------------------------------------------------------
Long-Term Capital Gain $1.0537
- -----------------------------------------------------------------------------
TOTAL $1.3830
- -----------------------------------------------------------------------------
CLASS R (SYMBOL: TEFRX) CHANGE 2/28/07 8/31/06
- -----------------------------------------------------------------------------
Net Asset Value (NAV) -$0.13 $13.55 $13.68
- -----------------------------------------------------------------------------
DISTRIBUTIONS (9/1/06-2/28/07)
- -----------------------------------------------------------------------------
Dividend Income $0.2694
- -----------------------------------------------------------------------------
Short-Term Capital Gain $0.1273
- -----------------------------------------------------------------------------
Long-Term Capital Gain $1.0537
- -----------------------------------------------------------------------------
TOTAL $1.4504
- -----------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: TFFAX) CHANGE 2/28/07 8/31/06
- -----------------------------------------------------------------------------
Net Asset Value (NAV) -$0.16 $13.61 $13.77
- -----------------------------------------------------------------------------
DISTRIBUTIONS (9/1/06-2/28/07)
- -----------------------------------------------------------------------------
Dividend Income $0.3404
- -----------------------------------------------------------------------------
Short-Term Capital Gain $0.1273
- -----------------------------------------------------------------------------
Long-Term Capital Gain $1.0537
- -----------------------------------------------------------------------------
TOTAL $1.5214
- -----------------------------------------------------------------------------

8 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. 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/ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY
CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

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

Cumulative Total Return 1 +10.44% +15.37% +88.19% +128.92%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +4.10% +8.70% +12.15% +7.99%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,410 $10,870 $17,739 $21,571
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +8.38% +11.43% +8.09%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.16%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.05% +14.54% +81.43% +117.74%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +6.08% +10.54% +12.40% +10.00%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,608 $11,054 $17,943 $21,774
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +10.04% +11.64% +10.15%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.91%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +9.95% +14.42% +81.24% +112.41%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +8.96% +13.42% +12.63% +7.82%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,896 $11,342 $18,124 $21,241
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +13.10% +11.91% +7.92%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.90%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/02)
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.26% +15.05% +85.97% +122.73%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.26% +15.05% +13.21% +8.34%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,026 $11,505 $18,597 $22,273
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +14.72% +12.47% +12.72%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.41%
- ------------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.53% +15.56% +90.38% +133.97%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.53% +15.56% +13.74% +8.87%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,053 $11,556 $19,038 $23,397
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +15.23% +13.01% +8.97%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 0.91%
- ------------------------------------------------------------------------------------------------------------------------------

Semiannual Report | 9

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.

2. Average annual total return represents the average annual change in value
of an investment over the periods indicated. 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.

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

5. Figures are as stated in the Fund's prospectus current as of the date of
this report.

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.

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

Semiannual Report | 11

Your Fund's Expenses (CONTINUED)

- ----------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 9/1/06 VALUE 2/28/07 PERIOD* 9/1/06-2/28/07
- ----------------------------------------------------------------------------------------------------------

Actual $1,000 $1,104.40 $6.00
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.09 $5.76
- ----------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,100.50 $9.90
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.37 $9.49
- ----------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,099.50 $9.84
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.42 $9.44
- ----------------------------------------------------------------------------------------------------------
CLASS R
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,102.60 $7.30
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.00
- ----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,105.30 $4.70
- ----------------------------------------------------------------------------------------------------------
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.

12 | Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS

-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
2007 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
-------------------------------------------------------------------------------------------

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

Net asset value, beginning of period $ 13.79 $ 12.86 $ 10.75 $ 9.60 $ 8.82 $ 9.69
-------------------------------------------------------------------------------------------
Income from investment operations a:

Net investment income b ........... 0.04 0.27 0.21 0.17 0.15 0.15

Net realized and unrealized
gains (losses) ................... 1.31 1.54 2.15 1.17 0.77 (0.77)
-------------------------------------------------------------------------------------------
Total from investment operations ... 1.35 1.81 2.36 1.34 0.92 (0.62)
-------------------------------------------------------------------------------------------
Less distributions from:

Net investment income ............. (0.30) (0.21) (0.23) (0.19) (0.14) (0.25)

Net realized gains ................ (1.18) (0.67) (0.02) -- -- --
-------------------------------------------------------------------------------------------
Total distributions ................ (1.48) (0.88) (0.25) (0.19) (0.14) (0.25)
-------------------------------------------------------------------------------------------
Redemption fees .................... -- d -- d -- d -- d -- d --
-------------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 13.66 $ 13.79 $ 12.86 $ 10.75 $ 9.60 $ 8.82
===========================================================================================

Total return c ..................... 10.44% 15.08% 22.26% 14.03% 10.80% (6.31)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .. $12,806,873 $14,139,061 $15,466,639 $13,067,977 $ 9,896,279 $ 8,325,977

Ratios to average net assets:

Expenses .......................... 1.15% e,f 1.16% f 1.15% f 1.23% f 1.22% 1.16%

Net investment income ............. 0.60% e 2.09% 1.71% 1.58% 1.79% 1.63%

Portfolio turnover rate ............ 9.66% 26.15% g 34.00% 25.32% 33.36% 34.15%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

g Excludes the value of portfolio securities delivered as a result of
redemptions in-kind. See Note 9.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 13

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

--------------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
2007 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------

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

Net asset value, beginning of period .......... $ 13.53 $ 12.63 $ 10.57 $ 9.46 $ 8.69 $ 9.56
--------------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ............... (0.01) 0.17 0.11 0.09 0.07 0.08

Net realized and unrealized gains (losses) ... 1.29 1.52 2.12 1.15 0.79 (0.76)
--------------------------------------------------------------------------------
Total from investment operations .............. 1.28 1.69 2.23 1.24 0.86 (0.68)
--------------------------------------------------------------------------------
Less distributions from:

Net investment income ........................ (0.20) (0.12) (0.15) (0.13) (0.09) (0.19)

Net realized gains ........................... (1.18) (0.67) (0.02) -- -- --
--------------------------------------------------------------------------------
Total distributions ........................... (1.38) (0.79) (0.17) (0.13) (0.09) (0.19)
--------------------------------------------------------------------------------
Redemption fees ............................... -- d -- d -- d -- d -- d --
--------------------------------------------------------------------------------
Net asset value, end of period ................ $ 13.43 $ 13.53 $ 12.63 $ 10.57 $ 9.46 $ 8.69
================================================================================
Total return c ................................ 10.05% 14.23% 21.30% 13.27% 10.00% (7.07)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............. $228,332 $229,616 $230,901 $195,116 $138,026 $ 87,135

Ratios to average net assets:

Expenses ..................................... 1.90% e,f 1.91% f 1.90% f 1.98% f 1.97% 1.91%

Net investment income (loss) ................. (0.15)% e 1.34% 0.96% 0.83% 1.04% 0.88%

Portfolio turnover rate ....................... 9.66% 26.15% g 34.00% 25.32% 33.36% 34.15%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

g Excludes the value of portfolio securities delivered as a result of
redemptions in-kind. See Note 9.

14 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

---------------------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
2007 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
---------------------------------------------------------------------------------------

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

Net asset value, beginning of period $ 13.56 $ 12.65 $ 10.59 $ 9.47 $ 8.69 $ 9.55
---------------------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b .... (0.01) 0.18 0.11 0.09 0.08 0.08

Net realized and unrealized gains
(losses) .......................... 1.29 1.52 2.12 1.16 0.77 (0.76)
---------------------------------------------------------------------------------------
Total from investment operations ... 1.28 1.70 2.23 1.25 0.85 (0.68)
---------------------------------------------------------------------------------------
Less distributions from:

Net investment income ............. (0.20) (0.12) (0.15) (0.13) (0.07) (0.18)

Net realized gains ................ (1.18) (0.67) (0.02) -- -- --
---------------------------------------------------------------------------------------
Total distributions ................ (1.38) (0.79) (0.17) (0.13) (0.07) (0.18)
---------------------------------------------------------------------------------------
Redemption fees .................... -- d -- d -- d -- d -- d --
---------------------------------------------------------------------------------------
Net asset value, end of period ..... $ 13.46 $ 13.56 $ 12.65 $ 10.59 $ 9.47 $ 8.69
=======================================================================================

Total return c ..................... 9.95% 14.31% 21.24% 13.29% 9.94% (7.10)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .. $1,478,569 $1,490,648 $1,459,630 $1,188,885 $ 900,811 $ 793,143

Ratios to average net assets:

Expenses .......................... 1.89% e,f 1.90% f 1.90% f 1.98% f 1.97% 1.91%

Net investment income (loss) ...... (0.14)% e 1.35% 0.96% 0.83% 1.04% 0.88%

Portfolio turnover rate ............ 9.66% 26.15% g 34.00% 25.32% 33.36% 34.15%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

g Excludes the value of portfolio securities delivered as a result of
redemptions in-kind. See Note 9.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 15

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
2007 YEAR ENDED AUGUST 31,
CLASS R (UNAUDITED) 2006 2005 2004 2003 2002 h
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 13.68 $ 12.77 $ 10.68 $ 9.56 $ 8.81 $ 9.30
----------------- ----------------------------------------------------------------------
Income from investment operations a:

Net investment income b .............. 0.02 0.25 0.18 0.15 0.14 0.14

Net realized and unrealized gains
(losses) ............................. 1.30 1.52 2.13 1.15 0.76 (0.63)
----------------------------------------------------------------------------------------
Total from investment operations ...... 1.32 1.77 2.31 1.30 0.90 (0.49)
----------------------------------------------------------------------------------------
Less distributions from:

Net investment income ................ (0.27) (0.19) (0.20) (0.18) (0.15) --

Net realized gains ................... (1.18) (0.67) (0.02) -- -- --

----------------------------------------------------------------------------------------
Total distributions ................... (1.45) (0.86) (0.22) (0.18) (0.15) --
----------------------------------------------------------------------------------------
Redemption fees ....................... -- d -- d -- d -- d -- d --
----------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 13.55 $ 13.68 $ 12.77 $ 10.68 $ 9.56 $ 8.81
========================================================================================

Total return c ........................ 10.26% 14.88% 21.88% 13.76% 10.46% (5.27)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $ 206,711 $ 218,355 $ 178,473 $ 114,301 $ 55,346 $ 5,641

Ratios to average net assets:

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

Net investment income ................ 0.35% e 1.84% 1.46% 1.33% 1.54% 1.38% e

Portfolio turnover rate ............... 9.66% 26.15% g 34.00% 25.32% 33.36% 34.15%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

g Excludes the value of portfolio securities delivered as a result of
redemptions in-kind. See Note 9.

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

16 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Foreign Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
2007 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2006 2005 2004 2003 2002
----------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 13.77 $ 12.85 $ 10.75 $ 9.59 $ 8.81 $ 9.69
----------------------------------------------------------------------------------------
Income from investment operations a:

Net investment income b .............. 0.06 0.32 0.25 0.20 0.17 0.17

Net realized and unrealized gains
(losses) ............................. 1.30 1.51 2.12 1.17 0.77 (0.77)
----------------------------------------------------------------------------------------
Total from investment operations ...... 1.36 1.83 2.37 1.37 0.94 (0.60)
----------------- ----------------------------------------------------------------------
Less distributions from:

Net investment income ................ (0.34) (0.24) (0.25) (0.21) (0.16) (0.28)

Net realized gains ................... (1.18) (0.67) (0.02) -- -- --
----------------------------------------------------------------------------------------
Total distributions ................... (1.52) (0.91) (0.27) (0.21) (0.16) (0.28)
----------------------------------------------------------------------------------------
Redemption fees ....................... -- d -- d -- d -- d -- d --
----------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 13.61 $ 13.77 $ 12.85 $ 10.75 $ 9.59 $ 8.81
========================================================================================

Total return c ........................ 10.53% 15.31% 22.46% 14.39% 11.11% (6.15)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $2,149,197 $2,176,785 $1,727,076 $ 762,207 $ 421,725 $ 297,866

Ratios to average net assets:

Expenses ............................. 0.90% e,f 0.91% f 0.90% f 0.98% f 0.97% 0.91%

Net investment income ................ 0.85% e 2.34% 1.96% 1.83% 2.04% 1.88%

Portfolio turnover rate ............... 9.66% 26.15% g 34.00% 25.32% 33.36% 34.15%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

g Excludes the value of portfolio securities delivered as a result of
redemptions in-kind. See Note 9.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 17

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED)

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

LONG TERM INVESTMENTS 96.7%
COMMON STOCKS AND OTHER EQUITY INTERESTS 95.1%
AUSTRALIA 0.9%
Alumina Ltd. ................................. Metals & Mining 19,351,930 $103,572,846
Amcor Ltd. ................................... Containers & Packaging 7,880,869 45,263,474
------------
148,836,320
------------
BERMUDA 1.0%
ACE Ltd. ..................................... Insurance 2,970,374 166,816,204
------------
BRAZIL 0.8%
Companhia de Saneamento Basico do
Estado de Sao Paulo ......................... Water Utilities 940,240,850 125,709,826
Contax Participacoes SA, ADR ................. Commercial Services & Supplies 6,861,122 6,180,025
------------
131,889,851
------------
CHINA 2.2%
China Shenhua Energy Co. Ltd., H ............. Oil, Gas & Consumable Fuels 90,534,714 229,897,061
China Telecom Corp. Ltd., H .................. Diversified Telecommunication Services 307,835,042 142,627,492
Guangdong Electric Power Development
Co. Ltd., B ................................. Independent Power Producers & Energy Traders 10,859 7,742
------------
372,532,295
------------
DENMARK 0.7%
a Vestas Wind Systems AS ....................... Electrical Equipment 2,615,841 121,490,455
------------
FINLAND 1.8%
UPM-Kymmene OYJ .............................. Paper & Forest Products 11,437,285 298,192,491
------------
FRANCE 5.6%
Eutelsat Communications ...................... Media 6,362,598 135,686,777
France Telecom SA ............................ Diversified Telecommunication Services 10,674,343 289,140,439
Sanofi-Aventis ............................... Pharmaceuticals 4,448,052 377,722,368
Societe BIC SA ............................... Commercial Services & Supplies 627,706 42,881,523
Vinci SA ..................................... Construction & Engineering 746,934 103,246,644
------------
948,677,751
------------
GERMANY 5.3%
Celesio AG ................................... Health Care Providers & Services 1,475,388 83,666,161
Deutsche Post AG ............................. Air Freight & Logistics 5,455,505 175,105,343
a Infineon Technologies AG ..................... Semiconductors & Semiconductor Equipment 9,615,960 147,506,108
Siemens AG ................................... Industrial Conglomerates 3,239,925 341,481,214
TUI AG ....................................... Hotels, Restaurants & Leisure 5,858,620 136,458,668
------------
884,217,494
------------
GUERNSEY ISLANDS 2.0%
KKR Private Equity Investors LP .............. Diversified Financial Services 14,356,830 344,276,783
------------

18 | Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

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

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
HONG KONG 7.6%
Cheung Kong (Holdings) Ltd. ........................ Real Estate 46,032,459 $ 564,561,026
Hang Lung Group Ltd. ............................... Real Estate 37,377,522 122,362,098
Hong Kong Electric Holdings Ltd. ................... Electric Utilities 26,308,873 133,206,708
Hutchison Whampoa Ltd. ............................. Industrial Conglomerates 30,502,257 290,464,190
MTR Corp. Ltd. ..................................... Road & Rail 37,463,901 98,922,219
Yue Yuen Industrial Holdings Ltd. .................. Textiles, Apparel & Luxury Goods 21,636,124 74,789,189
--------------
1,284,305,430
--------------
INDIA 3.4%
Gail India Ltd. .................................... Gas Utilities 19,954,680 128,026,657
b Gail India Ltd., GDR, 144A ......................... Gas Utilities 31,782 1,223,455
Hindustan Petroleum Corp. Ltd. ..................... Oil, Gas & Consumable Fuels 11,392,800 69,982,563
Indian Oil Corp. Ltd. .............................. Oil, Gas & Consumable Fuels 5,543,445 52,044,668
Reliance Industries Ltd. ........................... Oil, Gas & Consumable Fuels 10,524,413 323,244,190
--------------
574,521,533
--------------
INDONESIA 0.0% c
PT Indosat Tbk ..................................... Diversified Telecommunication Services 1,505,920 972,616
--------------
ISRAEL 1.3%
a Check Point Software Technologies Ltd. ............. Software 9,875,022 222,977,997
--------------
ITALY 3.3%
Eni SpA ............................................ Oil, Gas & Consumable Fuels 8,195,030 251,011,203
UniCredito Italiano SpA ............................ Commercial Banks 32,513,710 300,300,717
--------------
551,311,920
--------------
JAPAN 12.4%
EBARA Corp. ........................................ Machinery 2,898,000 13,617,924
Hitachi Ltd. ....................................... Electronic Equipment & Instruments 10,179,585 71,070,149
a Konica Minolta Holdings Ltd. ....................... Office Electronics 7,874,668 101,047,492
Makita Corp. ....................................... Household Durables 3,756,592 137,984,494
Mitsubishi UFJ Financial Group Inc. ................ Commercial Banks 32,178 394,598,457
Nomura Holdings Inc. ............................... Capital Markets 8,702,592 188,472,124
Shinsei Bank Ltd. .................................. Commercial Banks 36,313,024 194,743,292
Sompo Japan Insurance Inc. ......................... Insurance 12,510,376 168,216,318
Sumitomo Mitsui Financial Group Inc. ............... Commercial Banks 54,824 533,380,406
Sumitomo Rubber Industries Ltd. .................... Auto Components 1,974,500 23,505,894
Takeda Pharmaceutical Co. Ltd. ..................... Pharmaceuticals 3,713,444 255,506,766
--------------
2,082,143,316
--------------
NETHERLANDS 3.0%
ING Groep NV ....................................... Diversified Financial Services 9,125,835 389,336,034
Reed Elsevier NV ................................... Media 6,194,517 109,508,991
--------------
498,845,025
--------------
NORWAY 0.6%
Telenor ASA ........................................ Diversified Telecommunication Services 5,831,806 107,941,753
--------------

Semiannual Report | 19

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

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

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
PHILIPPINES 0.4%
Philippine Long Distance Telephone
Co. ............................................... Wireless Telecommunication Services 1,508,170 $ 73,671,173
Philippine Long Distance Telephone
Co., ADR .......................................... Wireless Telecommunication Services 11,909 583,541
--------------
74,254,714
--------------
RUSSIA 1.2%
Mobile Telesystems, ADR ............................ Wireless Telecommunication Services 3,864,058 198,226,175
b Novolipetsk Steel, GDR, 144A ....................... Metals & Mining 41,348 1,075,048
--------------
199,301,223
--------------
SINGAPORE 2.0%
a Flextronics International Ltd. ..................... Electronic Equipment & Instruments 10,263,820 112,183,553
Parkway Holdings Ltd. .............................. Health Care Providers & Services 376,000 738,620
Singapore Telecommunications Ltd. .................. Diversified Telecommunication Services 69,647,824 144,974,508
United Overseas Bank Ltd. .......................... Commercial Banks 1,514,000 20,369,817
Venture Corp. Ltd. ................................. Electronic Equipment & Instruments 7,169,633 64,821,033
--------------
343,087,531
--------------
SOUTH AFRICA 1.5%
Old Mutual PLC ..................................... Insurance 74,183,573 255,907,574
--------------
SOUTH KOREA 6.7%
Hana Financial Group Inc. .......................... Commercial Banks 5,300,464 282,174,640
Kookmin Bank ....................................... Commercial Banks 1,891,090 169,842,749
a KT Corp., ADR ...................................... Diversified Telecommunication Services 4,753,831 106,866,121
POSCO .............................................. Metals & Mining 375,270 140,838,411
Samsung Electronics Co. Ltd. ....................... Semiconductors & Semiconductor Equipment 411,084 248,271,326
Shinhan Financial Group Co. Ltd. ................... Commercial Banks 3,337,030 188,204,383
--------------
1,136,197,630
--------------
SPAIN 2.7 %
b Gamesa Corp. Tecnologica SA, 144A .................. Electrical Equipment 5,789,012 165,764,777
Repsol YPF SA ...................................... Oil, Gas & Consumable Fuels 3,058,749 96,819,651
Telefonica SA ...................................... Diversified Telecommunication Services 9,275,210 199,515,759
--------------
462,100,187
--------------
SWEDEN 1.0%
a Husqvarna AB, B .................................... Household Durables 4,992,742 77,074,717
Securitas AB, B .................................... Commercial Services & Supplies 5,593,146 83,307,702
a Securitas Systems AB, B ............................ Commercial Services & Supplies 674,440 2,218,416
--------------
162,600,835
--------------
SWITZERLAND 1.3%
Ciba Specialty Chemicals AG ........................ Chemicals 2,926,650 185,767,049
Lonza Group AG ..................................... Chemicals 370,497 32,897,016
--------------
218,664,065
--------------

20| Semiannual Report

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
TAIWAN 5.0%
Chunghwa Telecom Co. Ltd., ADR ..................... Diversified Telecommunication Services 10,401,987 $ 200,654,329
d Compal Electronics Inc. ............................ Computers & Peripherals 200,758,437 167,546,987
Lite-On Technology Corp. ........................... Computers & Peripherals 113,950,841 157,319,430
Mega Financial Holding Co. Ltd. .................... Commercial Banks 168,795,000 111,641,260
Taishin Financial Holdings Co. Ltd. ................ Commercial Banks 168,835,000 87,863,270
Taiwan Semiconductor Manufacturing
Co. Ltd. .......................................... Semiconductors & Semiconductor Equipment 58,056,496 114,016,998
---------------
839,042,274
---------------
THAILAND 0.0% c
Advanced Info Service Public Co. Ltd.,
fgn. .............................................. Wireless Telecommunication Services 2,825,000 5,927,686
---------------
UNITED KINGDOM 21.4%
Alliance Boots PLC ................................. Food & Staples Retailing 15,594,361 241,078,462
Amvescap PLC ....................................... Capital Markets 20,532,241 241,544,654
Aviva PLC .......................................... Insurance 9,492,271 152,019,833
BP PLC ............................................. Oil, Gas & Consumable Fuels 23,940,783 245,474,118
a British Energy Group PLC ........................... Electric Utilities 15,919,222 128,640,113
British Sky Broadcasting Group PLC ................. Media 38,610,435 421,658,789
Burberry Group PLC ................................. Textiles, Apparel & Luxury Goods 9,602,235 118,606,693
Centrica PLC ....................................... Multi-Utilities 26,732,570 195,815,598
Compass Group PLC .................................. Hotels, Restaurants & Leisure 33,308,392 197,621,070
Electrocomponents PLC .............................. Electronic Equipment & Instruments 18,659,023 96,338,417
GlaxoSmithKline PLC ................................ Pharmaceuticals 16,556,611 464,630,837
Kingfisher PLC ..................................... Specialty Retail 21,669,576 106,753,087
Pearson PLC ........................................ Media 16,245,349 251,370,941
Reed Elsevier PLC .................................. Media 1,522,996 17,720,516
Royal Bank of Scotland Group PLC ................... Commercial Banks 5,038,808 198,148,137
Royal Dutch Shell PLC, A ........................... Oil, Gas & Consumable Fuels 4,470,826 145,615,269
Royal Dutch Shell PLC, B ........................... Oil, Gas & Consumable Fuels 6,900,096 222,748,522
Vodafone Group PLC ................................. Wireless Telecommunication Services 57,214,084 158,531,321
---------------
3,604,316,377
---------------
TOTAL COMMON STOCKS AND OTHER EQUITY
INTERESTS (COST $11,423,425,293) ................. 16,041,349,330
---------------
PREFERRED STOCKS 1.6%
BRAZIL 1.1%
Companhia Vale do Rio Doce, ADR,
pfd., A ........................................... Metals & Mining 6,436,782 190,206,908
---------------
UNITED STATES 0.5%
XL Capital Ltd., 6.50%, cvt. pfd. .................. Insurance 3,775,444 88,738,036
---------------
TOTAL PREFERRED STOCKS
(COST $108,682,499) .............................. 278,944,944
---------------
TOTAL LONG TERM INVESTMENTS
(COST $11,532,107,792) ........................... 16,320,294,274
---------------

Semiannual Report | 21

Templeton Foreign Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

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

SHORT TERM INVESTMENTS (COST $415,585,264) 2.5%
GOVERNMENT AND AGENCY SECURITIES 2.5%
UNITED STATES 2.5%
e U.S. Treasury Bills, 3/8/07 - 5/24/07 ......... $417,092,000 $ 415,641,694
---------------
TOTAL INVESTMENTS (COST $11,947,693,056)
99.2% ....................................... 16,735,935,968
OTHER ASSETS, LESS LIABILITIES
0.8% ........................................ 133,747,013
---------------
NET ASSETS 100.0% ............................. $16,869,682,981
===============

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
GDR - Global Depository Receipt

a Non-income producing for the twelve months ended February 28, 2007.

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,
2007, the aggregate value of these securities was $168,063,280,
representing 1.00% of net assets.

c Rounds to less than 0.1% of net assets.

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

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

22 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Foreign Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2007 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................ $ 11,763,683,928
Cost - Non-controlled affiliated issuers (Note 8) ...... 184,009,128
----------------
Total cost of investments .............................. $ 11,947,693,056
================
Value - Unaffiliated issuers ........................... $ 16,568,388,981
Value - Non-controlled affiliated issuers (Note 8) ..... 167,546,987
----------------
Total value of investments ............................. 16,735,935,968
Foreign currency, at value (cost $24,091,255) ........... 23,430,307
Receivables:
Investment securities sold ............................. 417,720,607
Capital shares sold .................................... 11,495,475
Dividends .............................................. 40,303,598
----------------
Total assets ..................................... 17,228,885,955
================
Liabilities:
Payables:
Investment securities purchased ........................ 124,722,831
Capital shares redeemed ................................ 154,834,750
Affiliates ............................................. 21,578,362
Funds advanced by custodian ............................. 46,540,717
Deferred tax ............................................ 9,128,306
Accrued expenses and other liabilities .................. 2,398,008
----------------
Total liabilities ................................ 359,202,974
----------------
Net assets, at value .......................... $ 16,869,682,981
================
Net assets consist of:
Paid-in capital ......................................... $ 11,185,802,891
Distributions in excess of net investment income ........ (32,479,827)
Net unrealized appreciation (depreciation) .............. 4,778,941,965
Accumulated net realized gain (loss) .................... 937,417,952
----------------
Net assets, at value .......................... $ 16,869,682,981
================

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 23

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 28, 2007 (unaudited)

CLASS A:
Net assets, at value ................................................ $12,806,873,184
===============
Shares outstanding .................................................. 937,510,133
===============
Net asset value per share a ......................................... $ 13.66
===============
Maximum offering price per share (net asset value per share / 94.25%) $ 14.49
===============
CLASS B:
Net assets, at value ................................................ $ 228,332,188
===============
Shares outstanding .................................................. 17,005,332
===============
Net asset value and maximum offering price per share a .............. $ 13.43
===============
CLASS C:
Net assets, at value ................................................ $ 1,478,569,032
===============
Shares outstanding .................................................. 109,883,478
===============
Net asset value and maximum offering price per share a .............. $ 13.46
===============
CLASS R:
Net assets, at value ................................................ $ 206,711,099
===============
Shares outstanding .................................................. 15,254,271
===============
Net asset value and maximum offering price per share a .............. $ 13.55
===============
ADVISOR CLASS:
Net assets, at value ................................................ $ 2,149,197,478
===============
Shares outstanding .................................................. 157,855,122
===============
Net asset value and maximum offering price per share a .............. $ 13.61
===============

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

24 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2007 (unaudited)

Investment Income
Dividends (net of foreign taxes of $9,234,396) ........................ $ 140,018,346
Interest (net of foreign taxes of $981) ............................... 15,488,257
---------------
Total investment income ............................................. 155,506,603
---------------
Expenses:
Management fees (Note 3a) .............................................. 52,666,471
Administrative fees (Note 3b) .......................................... 6,846,701
Distribution fees (Note 3c)
Class A ............................................................... 17,015,359
Class B ............................................................... 1,146,198
Class C ............................................................... 7,356,005
Class R ............................................................... 531,844
Transfer agent fees (Note 3e) .......................................... 15,776,389
Custodian fees (Note 4) ................................................ 3,282,869
Reports to shareholders ................................................ 722,988
Registration and filing fees ........................................... 170,641
Professional fees ...................................................... 126,814
Directors' fees and expenses ........................................... 120,673
Other .................................................................. 204,559
---------------
Total expenses ...................................................... 105,967,511
Expense reductions (Note 4) ......................................... (50,319)
---------------
Net expenses ................................................. 105,917,192
---------------
Net investment income ..................................... 49,589,411
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................... 1,368,251,581
Foreign currency transactions ......................................... (22,166,206)
---------------
Net realized gain (loss) ..................................... 1,346,085,375
---------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................................... 390,608,531
Translation of assets and liabilities denominated in foreign currencies 19,035,948
Change in deferred taxes on unrealized appreciation (depreciation) ..... (5,561,142)
---------------
Net change in unrealized appreciation (depreciation) ......... 404,083,337
---------------
Net realized and unrealized gain (loss) ................................. 1,750,168,712
---------------
Net increase (decrease) in net assets resulting from operations ......... $ 1,799,758,123
===============

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 25

Templeton Foreign Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

--------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED
(UNAUDITED) AUGUST 31, 2006
-------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................. $ 49,589,411 $ 394,494,343
Net realized gain (loss) from investments and foreign currency transactions ....... 1,346,085,375 1,652,016,268
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies and deferred taxes ..... 404,083,337 637,953,651
------------------------------------
Net increase (decrease) in net assets resulting from operations .......... 1,799,758,123 2,684,464,262
------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ......................................................................... (299,791,210) (253,734,049)
Class B ......................................................................... (3,348,603) (2,119,956)
Class C ......................................................................... (21,736,194) (13,844,588)
Class R ......................................................................... (4,143,377) (2,728,271)
Advisor Class ................................................................... (55,162,327) (36,217,093)
Net realized gains:
Class A ......................................................................... (1,169,525,727) (802,770,606)
Class B ......................................................................... (19,803,461) (12,149,229)
Class C ......................................................................... (128,155,580) (77,484,799)
Class R ......................................................................... (18,212,091) (10,001,196)
Advisor Class ................................................................... (191,844,251) (100,722,059)
------------------------------------
Total distributions to shareholders ................................................ (1,911,722,821) (1,311,771,846)
------------------------------------
Capital share transactions: (Note 2)
Class A ......................................................................... (1,249,446,758) (2,399,425,629)
Class B ......................................................................... (334,065) (18,175,997)
Class C ......................................................................... (6,188,924) (78,618,596)
Class R ......................................................................... (10,543,428) 23,990,832
Advisor Class ................................................................... (6,369,361) 291,154,846
------------------------------------
Total capital share transactions ................................................... (1,272,882,536) (2,181,074,544)
------------------------------------
Redemption fees .................................................................... 64,980 128,909
------------------------------------
Net increase (decrease) in net assets ..................................... (1,384,782,254) (808,253,219)
Net assets:
Beginning of period ................................................................ 18,254,465,235 19,062,718,454
------------------------------------
End of period ...................................................................... $ 16,869,682,981 $ 18,254,465,235
====================================
Distributions in excess of net investment income/undistributed net investment income
included in net assets:
End of period ...................................................................... $ (32,479,827) $ 302,112,473
====================================

26 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Funds, Inc. is registered under the Investment Company Act of 1940, as
amended, (the 1940 Act) as an open-end investment company, consisting of two
separate funds. 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. 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

Corporate debt securities, government securities, and other mortgage-backed
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.

Semiannual Report | 27

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

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. The
investment manager monitors price movements following the close of trading in
foreign stock markets through a series of country specific market proxies (such
as baskets of American Depository Receipts, futures contracts and exchange
traded funds). These price movements are measured against established trigger
thresholds for each specific market proxy to assist in determining if an event
has occurred. 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

28 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. FOREIGN CURRENCY CONTRACTS (CONTINUED)

D. INCOME AND DEFERRED TAXES

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Common expenses incurred by the Templeton Funds, Inc. are allocated among the
funds based on the ratio of net assets of each fund to the combined net assets
of the Templeton Funds, Inc. Fund specific expenses are charged directly to the
fund that incurred the expense.

Semiannual Report | 29

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F. ACCOUNTING ESTIMATES

G. REDEMPTION FEES

H. GUARANTEES AND INDEMNIFICATIONS

2. CAPITAL STOCK

At February 28, 2007, there were 3.9 billion shares of 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, 2007 AUGUST 31, 2006
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------

CLASS A SHARES:
Shares sold .................... 71,393,749 $ 974,437,964 216,085,137 $ 2,842,631,359
Shares issued in reinvestment of
distributions ................. 100,987,449 1,329,657,198 78,800,085 961,174,308
Shares redeemed in-kind (Note 9) -- -- (62,080,971) (817,168,617)
Shares redeemed ................ (260,065,186) (3,553,541,920) (410,315,316) (5,386,062,679)
------------------------------------------------------------------
Net increase (decrease) ........ (87,683,988) $(1,249,446,758) (177,511,065) $(2,399,425,629)
==================================================================

30 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. CAPITAL STOCK (CONTINUED)

-----------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2007 AUGUST 31, 2006
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------

CLASS B SHARES:
Shares sold .................... 256,100 $ 3,364,082 548,959 $ 7,026,083
Shares issued in reinvestment of
distributions ................. 1,508,527 19,531,473 1,009,208 12,126,353
Shares redeemed ................ (1,728,935) (23,229,620) (2,869,971) (37,328,433)
-----------------------------------------------------------
Net increase (decrease) ........ 35,692 $ (334,065) (1,311,804) $ (18,175,997)
===========================================================
CLASS C SHARES:
Shares sold .................... 4,767,535 $ 63,404,577 12,058,734 $ 155,458,202
Shares issued in reinvestment of
distributions ................. 9,109,839 118,223,527 6,061,438 72,972,932
Shares redeemed ................ (13,951,798) (187,817,028) (23,510,398) (307,049,730)
-----------------------------------------------------------
Net increase (decrease) ........ (74,424) $ (6,188,924) (5,390,226) $ (78,618,596)
===========================================================
CLASS R SHARES:
Shares sold .................... 2,455,877 $ 33,307,819 6,910,835 $ 89,860,230
Shares issued in reinvestment of
distributions ................. 1,623,638 21,199,822 979,656 11,880,876
Shares redeemed ................ (4,790,752) (65,051,069) (5,906,216) (77,750,274)
-----------------------------------------------------------
Net increase (decrease) ........ (711,237) $ (10,543,428) 1,984,275 $ 23,990,832
===========================================================
ADVISOR CLASS SHARES:
Shares sold .................... 41,303,156 $ 558,311,273 66,863,336 $ 868,444,937
Shares issued in reinvestment of
distributions ................. 11,533,843 151,283,581 7,077,282 86,203,392
Shares redeemed ................ (53,045,145) (715,964,215) (50,305,892) (663,493,483)
-----------------------------------------------------------
Net increase (decrease) ........ (208,146) $ (6,369,361) 23,634,726 $ 291,154,846
===========================================================

3. TRANSACTIONS WITH AFFILIATES

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

Semiannual Report | 31

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

A. MANAGEMENT FEES

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

B. ADMINISTRATIVE FEES

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

C. DISTRIBUTION FEES

In addition, under the Fund's Class B, C, and R compensation distribution plans,
the Fund pays Distributors for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate
for each class.

The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:

Class A .......................................... 0.25%
Class B .......................................... 1.00%
Class C .......................................... 1.00%
Class R .......................................... 0.50%

32 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

D. SALES CHARGES/UNDERWRITING AGREEMENTS

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

Sales charges retained net of commissions
paid to unaffiliated broker/dealers ............................. $313,815
Contingent deferred sales charges retained ....................... $192,911

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $15,776,389, of which $6,669,404 was
retained by Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At August 31, 2006, the Fund had remaining tax basis capital
losses of $21,118,208 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. At August 31, 2006, capital loss carryforwards
were as follows:

Capital loss carryforwards expiring in:
2008 ................................................ $ 4,255,356
2009 ................................................ 4,573,249
2010 ................................................ 10,015,528
2011 ................................................ 2,274,075
-----------
$21,118,208
===========

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, 2006, the Fund deferred realized currency losses of
$4,043,016.

Semiannual Report | 33

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES (CONTINUED)

At February 28, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments $11,957,314,033
===============

Unrealized appreciation $ 4,886,683,499
Unrealized depreciation (108,061,564)
---------------
Net unrealized appreciation (depreciation) $ 4,778,621,935
===============

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.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2007, aggregated $1,672,602,012 and $4,513,964,206
respectively.

7. CONCENTRATION OF RISK

8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

The 1940 Act 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, 2007
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 YEAR ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------

NON-CONTROLLED AFFILIATES
Compal Electronics Inc. ... 200,758,437 -- -- 200,758,437 $167,546,987 $ -- $ --
==========================================
TOTAL AFFILIATED SECURITIES (0.99% of Net Assets)

34 | Semiannual Report

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. REDEMPTION IN-KIND

During the year ended August 31, 2006, the Fund realized $143,266,830 of net
gains resulting from redemptions in-kind in which shareholders redeemed fund
shares for securities held by the Fund rather than for cash. Because such gains
are not taxable to the Fund, and are not distributed to shareholders, they have
been reclassified from accumulated net realized gains to paid-in capital.

10. REGULATORY AND LITIGATION MATTERS

Semiannual Report | 35

Templeton Foreign Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued FASB Statement No. 157, "Fair Value
Measurement" ("SFAS 157"), which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. The Fund believes the adoption of
SFAS 157 will have no material impact on its financial statements.

36 | Semiannual Report

Templeton Foreign Fund

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

QUARTERLY STATEMENT OF INVESTMENTS

Semiannual Report | 37

This page intentionally left blank.

Literature Request

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

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 Balanced Fund
Franklin Blue Chip Fund 1
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

RETIREMENT TARGET FUNDS

Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

TAX-FREE INCOME 6

NATIONAL FUNDS

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

LIMITED-TERM FUNDS

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

INTERMEDIATE-TERM FUNDS

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

STATE-SPECIFIC

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products
Trust 9

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

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

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

5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.

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

7. Portfolio of insured municipal securities.

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

01/07 Not part of the semiannual report

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

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?

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 S2007 04/07

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 and principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a) (1) The Registrant has an audit committee financial expert serving on
its audit committee.

(2) The audit committee financial experts are 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
COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of 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
------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: April 26, 2007

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
------------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: April 26, 2007

By /s/GALEN G. VETTER
------------------------
Galen G. Vetter
Chief Financial Officer
Date: April 26, 2007