<PAGE> 1
Templeton Growth Fund
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Principal Underwriter:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceded or accompanied by the current prospectus of the
Templeton Growth Fund, Inc., which contains more complete information including
charges and expenses. 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, as well as investment decisions by the investment
manager which will not always be profitable or wise. The Fund and its investors
are not protected from such losses by the investment manager. Therefore,
investors who cannot accept this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
[GRAPHIC OF GLOBE]
TEMPLETON
GROWTH
FUND
ANNUAL REPORT
AUGUST 31, 1996
[GRAPH OF RECYCLE SYMBOL]
TL101 A96 10/96
[FRANKLIN TEMPLETON LOGO BOTTOM RIGHT HAND CORNER]
FRANKLIN TEMPLETON
<PAGE> 2
Mark G. Holowesko is the president and portfolio manager of Templeton Growth
Fund, as well as several other Templeton funds. He joined the Templeton
organization in 1985 in Nassau, Bahamas, and serves as chief investment officer
of global equity research, as well as an officer and director of Templeton
Worldwide, Inc. Mr. Holowesko received a B.A. in economics from Holy Cross
College and an M.B.A. from Babson College. He is a Chartered Financial Analyst,
Chartered Investment Counselor, and a former director of the International
Society of Financial Analysts.
[PHOTO OF MARK HOLOWESKO CAPTION FOLLOWS]
Mark Holowesko
Chief Investment Officer
of Global Equity Research
<PAGE> 3
MANAGEMENT
DISCUSSION
Your Fund's Objective:
The Templeton Growth Fund seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and governments
of any nation.
OCTOBER 15, 1996
Dear Shareholder:
We are pleased to bring you the 42nd annual report of the Templeton Growth Fund,
which covers the period ended August 31, 1996.
During the past fiscal year, global economic growth strengthened as many
governments kept interest rates relatively low and allowed money supplies to
grow. This combination of stronger growth and more liberal monetary policies led
to mixed results worldwide. For Latin American countries saddled by high foreign
debt, economic growth worldwide has enabled them to restructure fragile
economies and banking systems overburdened by problem loans. In the more
developed nations, however, particularly the United States, lower interest rates
and easy credit drove personal debt to historically high levels.
This liquidity has also ignited inflation in financial assets. During the last
twelve months, strong corporate-profit growth benefited the stocks of many
companies, and equity market returns have been strong with large upswings in
emerging markets and above average returns in developed countries. One exception
has been Asia. Although companies are benefiting from a resumption of economic
growth in Japan and consumer spending in Asian emerging markets, where standards
of living continue to increase, the Japanese market has been flat over the
reporting period and Asian emerging markets have declined.
Consistent with our history of low portfolio turnover, we made no significant
changes to the Fund's weightings over the course of the fiscal year. On a
regional basis, most changes made to the Fund were subtle. For example, our
exposure to Latin America increased from 6.0% to 6.6% of total net assets,
Europe from 25.8% to 31.3%, Asia from 8.2% to 9.1%, and the United States
decreased from 26.9% to 25.3%. Shifts in industry exposure were also relatively
minor, with the most significant increases occurring in the telecommunications,
real estate, and forest products industries. Financial exposure declined
slightly as we reduced the Fund's exposure to the banking, financial services,
and insurance industries.
1
<PAGE> 4
<TABLE>
<CAPTION>
TEMPLETON GROWTH FUND
Geographic Distribution on 8/31/96
Based on Total Net Assets
<S> <C>
European Stocks 31.3%
Asian Stocks 9.1%
Latin American Stocks 6.6%
Australian & New Zealand Stocks 4.6%
United States Stocks 25.3%
Other Stocks 2.1%
Fixed-Income Securities 14.1%
Short-Term Obligations & Other Net Assets 6.9%
</TABLE>
Although the overall country and industry weightings remained relatively stable,
we made substantial changes to the Fund's individual holdings. Within the
aerospace sector, we sold a long-standing position in British Aerospace and
purchased shares of GMH, the aerospace division of General Motors. GMH holds a
dominant position in the satellite industry and offers exciting prospects for
future growth.
In the electronics sector, we more than doubled our position in Sony Corporation
because we believe that it may be among the greatest beneficiaries of a trend in
the consumer electronics field to merge multiple products and software. In our
opinion, the Digital Versatile Disc being introduced over the next several
months should help boost Sony's profits in the future.
On the telecommunications front, we added hardware suppliers like Nokia in
Finland and increased the Fund's exposure to telecommunication providers by
adding to positions in Europe and Latin America. We also increased our exposure
to the forest products industry by adding to some of our Nordic holdings such as
Assidomaen AB, Enso OY, and Metsa Serla OY. In our opinion, these stocks were
selling at very low valuations relative to the companies' future earnings and
the replacement value of their plants and equipment.
TEMPLETON GROWTH FUND
TOP 10 COUNTRIES REPRESENTED IN
THE FUND ON 8/31/96
Based on Total Net Assets
<TABLE>
<CAPTION>
Country % of Total Net Assets
- ------------------------------------------
<S> <C>
United States 25.3%
Hong Kong 5.4%
Spain 4.9%
France 4.6%
Sweden 4.5%
United Kingdom 4.1%
Australia 3.8%
Netherlands 3.4%
Finland 2.5%
Mexico 2.3%
</TABLE>
As in all reporting periods, we held some positions that helped and some that
hindered the Fund's performance. In general, the rebound in emerging markets had
a positive effect. The stock of Gold Peak Industries Ltd., a Hong Kong-based
manufacturer of batteries and electronic products, appreciated by 31%. And
Telecomunicacoes Brasileiras SA (Telebras), Brazil's largest telephone company,
rose more than 70%. The
2
<PAGE> 5
TEMPLETON GROWTH FUND
Asset Allocation on 8/31/96
Based on Total Net Assets
Stocks 79.0%
Fixed-Income Securities 14.1%
Short-Term Obligations & Other Net Assets 6.9%
Fund's holdings of some large U.S. companies, including Boeing Co., Travelers
Inc., and GMH also posted large gains. Our positions in financial companies such
as Citicorp (U.S.), HSBC Holdings PLC (Hong Kong), ABN Amro NV (Netherlands),
and Westpac Banking Corp. (Australia) also appreciated considerably during the
fiscal year. Holdings that did not meet our expectations included Niagara Mohawk
Power Corp., a U.S. utility company; Quantum Corp., a U.S.-based disc drive
manufacturer; and Burns Philp & Co. Ltd., an Australian food processor.
This discussion reflects the strategies we employed for the Fund during the
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and our
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past
performance of a specific investment or sector cannot guarantee future
performance, such information can be useful in analyzing securities we purchase
or sell for the Fund.
TEMPLETON GROWTH FUND
TOP 10 EQUITY HOLDINGS ON 8/31/96
Based on Total Net Assets
<TABLE>
<CAPTION>
Company,
Industry, % of Total
Country Net Assets
- ---------------------------------------
<S> <C>
Ford Motor Co.
Automobiles,
United States 1.3%
General Motors Corp.
Automobiles,
United States 1.3%
Citicorp
Banking,
United States 1.3%
Sony Corp.
Appliances & Household Durables,
Japan 1.3%
Telebras-Telecomunicacoes
Brasileiras SA
Telecommunications, Brazil 1.3%
HSBC Holdings PLC
Banking,
Hong Kong 1.2%
Motorola Inc.
Electrical & Electronics,
United States 1.2%
Telefonos de Mexico SA
Telecommunications,
Mexico 1.2%
Merrill Lynch & Co. Inc.
Financial Services,
United States 1.2%
Telefonica de Espana SA
Telecommunications,
Spain 1.1%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 14 OF THIS REPORT.
There are, of course, special risks involved with global investing related to
market, currency, economic, social, political, and other factors. Developing
markets involve similar but heightened risks, in addition to risks associated
with
3
<PAGE> 6
the relatively small size and lesser liquidity of these markets. While
short-term volatility can be disconcerting, declines of as much as 40% to 50%
are not unusual in emerging markets. For example, the Hong Kong market has
increased 535% in the last 15 years, but has suffered six declines of more than
20% during that time.* These risks are discussed in the Fund's prospectus.
In closing, we would like to mention the importance of our global research staff
to the performance of your portfolio. Over 30 analysts in our four global equity
offices in the Bahamas, the United States, Canada and the United Kingdom work
diligently to provide the Fund with stock ideas. We are proud of their
contribution. Our additions to their ranks over the past twelve months give us
greater confidence in our ability to serve you in the future.
As always, we thank you for your participation in the Fund and look forward to
serving your investment needs in the years to come.
Sincerely,
/s/Mark Holowesko
Mark Holowesko, CFA
President
Templeton Growth Fund, Inc.
*SOURCE: BLOOMBERG. BASED ON QUARTERLY PERCENTAGE
CHANGE OVER 15 YEARS ENDED JUNE 30, 1996.
4
<PAGE> 7
THE FOLLOWING IS AN INTERVIEW WITH MARK HOLOWESKO, PORTFOLIO MANAGER OF
TEMPLETON GROWTH FUND:
[PHOTO OF MARK HOLOWESKO]
Q. It seems that the Fund's investment objective allows an unusual amount of
flexibility regarding the markets and types of securities in which you can
invest. What effects, if any, has this had on your investment strategy?
A. One of the key elements of the Fund's success historically has been the low
volatility in its share price relative to other global funds. I believe this is
partly the result of diversification, a fundamental investment principle and an
integral part of our investment strategy. Diversification allows us to spread
risk over a large number of countries and industries, and helps to expand the
areas for discovering undervalued assets. Today, the Fund has investments in
more than two dozen countries and industries.
Q. Although you use primarily a bottom-up investment approach, are there any
specific industries or sectors that you find appealing?
A. Our investment style occasionally results in a concentration of stocks in
certain industries or countries. Today, it would be fair to say that we have
been finding a concentration of value in Europe and certain emerging markets, as
well as in forest products, real estate, and companies that are benefiting from
the growth in consumer spending throughout many emerging markets. Although we do
not attempt to identify cheap sectors, it is important to keep in mind that we
do evaluate certain industry dynamics in order to properly evaluate specific
companies. For example, in the forest products group, we need to evaluate supply
and demand trends to gain an understanding of how pricing may develop for
specific companies. We also benefit from
5
<PAGE> 8
knowing the costs involved in expanding production capacity in an industry,
which helps us estimate the asset values of specific companies.
Q. Much has been written about "value" investing vs. "growth" investing. What
exactly is the difference between these two styles, and which do you favor?
A. Value investing is normally associated with low current valuations, such as
price to book values, price to cash flow, price to earnings, or high dividend
yields. Growth investing, on the other hand, normally involves companies with
the potential for high future growth earnings. Our investment style actually
encompasses both approaches. We are generally known as value investors, but for
us, value over time is what matters. When we look at companies with low
price-to-earnings ratios, we are concerned with the current price relative to
future earnings. For example, a company may have a price-to-current-earnings
ratio of 20, but the current price may be only 8-10 times what we believe those
earnings could be in the future. Our investment philosophy tries to uncover
stocks that are inexpensive relative to assets or future earnings.
Q. You have stated before that the bargain list of stocks is a key element of
the Templeton investment process. What exactly is this "bargain list" and how is
it constructed?
A. The bargain list is a collection of what we consider the most undervalued
securities in the world. Templeton portfolio managers share responsibility for
covering certain sectors and countries around the world, and individual analysts
contribute to the process by recommending specific stocks for this list. Only
stocks that have been approved for the bargain list may be purchased for the
Templeton Growth Fund. Although the list is a key element of the Templeton
investment process, our research doesn't end there. Templeton portfolio managers
ultimately make the decision to invest in certain stocks on the list based on
the Fund's investment criteria and their own individual research.
6
<PAGE> 9
PERFORMANCE
SUMMARY
Class I Shares
The Templeton Growth Fund Class I shares reported a total return of 10.85% for
the one-year period ended August 31, 1996. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include the initial sales charge. We have always
maintained a long-term perspective when managing the Fund and encourage
shareholders to view their investments in a similar manner. As you can see from
the table on page 8, the Fund delivered a cumulative total return of more than
252% for the 10-year period ended August 31, 1996.
As measured by net asset value, the Fund's share price decreased 21 cents, from
$18.96 on August 31, 1995 to $18.75 on August 31, 1996. During this time,
shareholders received distributions of 43.5 cents ($0.435) per share in dividend
income and $1.61 per share in capital gains, of which $1.43 represented
long-term gains and 18 cents ($0.18) represented short-term gains. Of course,
past performance is not predictive of future results, and distributions will
vary depending on income earned by the Fund, as well as any profits realized
from the sale of securities in the portfolio.
The graph on page 8 compares the Fund's performance over the past ten years with
the performance of the unmanaged Morgan Stanley Capital International (MSCI)
World Index. As you can see, the Fund has outperformed the index during the past
five years. It also shows how a $10,000 investment in the Fund has kept your
purchasing power well ahead of inflation, as measured by the Consumer Price
Index (CPI). Please remember that the Fund's performance differs from that of
the index because, among other things, the index is not managed according to any
investment strategy, includes no sales charges or management expenses, and does
not contain cash (the Fund generally carries a certain percentage of cash at any
given time). Of course, one cannot invest directly in an index.
7
<PAGE> 10
TEMPLETON GROWTH FUND - CLASS I
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year Ten-Year (11/29/54)
<S> <C> <C> <C> <C>
Cumulative Total Return1 10.85% 92.57% 252.15% 30,125.84%
Average Annual Total Return2 4.46% 12.67% 12.75% 14.50%
Value of $10,000 Investment3 $10,446 $18,154 $33,195 $2,848,809
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE INDICATED PERIODS, AND DOES NOT INCLUDE THE MAXIMUM 5.75% INITIAL SALES
CHARGE.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE INDICATED PERIODS, AND INCLUDES THE INITIAL SALES CHARGE.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE SPECIFIED PERIODS AND INCLUDE THE INITIAL SALES CHARGE.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS WHEN PAID.
PRIOR TO JULY 1, 1992, CLASS I SHARES WERE OFFERED AT A HIGHER INITIAL SALES
CHARGE. THUS, ACTUAL TOTAL RETURN TO PURCHASERS OF SHARES DURING THAT PERIOD
WOULD HAVE BEEN SOMEWHAT LOWER THAN NOTED ABOVE. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCIES AND THE ECONOMIC AND
POLITICAL CLIMATES WHERE INVESTMENTS ARE MADE, SO THAT YOUR SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR INITIAL COST. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE RESULTS.
TEMPLETON GROWTH FUND-CLASS I
Total Return Index COmparison-$10,000 Investment (8/31/86-8/31/96)
Growth Class I
<TABLE>
<CAPTION>
DATE TEMPLETON GRID MS WORLD GD$ CPI $
- -------- ------ ----- -----
<S> <C> <C> <C>
9/1/86 $9,426 $10,000 $10,000
9/30/86 9,336 9,605 10,046
10/31/86 9,758 9,443 10,055
11/30/86 9,774 9,845 10,064
12/31/86 9,856 10,044 10,073
1/31/87 10,407 11,226 10,137
2/28/87 10,997 11,599 10,173
3/31/87 11,319 12,319 10,219
4/30/87 11,211 13,043 10,274
5/31/87 11,296 13,064 10,310
6/30/87 11,862 13,059 10,346
7/31/87 12,643 13,323 10,373
8/31/87 13,118 14,113 10,428
9/30/87 13,065 13,869 10,482
10/31/87 10,093 11,516 10,509
11/30/87 9,649 11,239 10,519
12/31/87 10,162 11,728 10,519
1/31/88 10,526 12,016 10,546
2/29/88 10,942 12,716 10,574
3/31/88 11,158 13,102 10,619
4/30/88 11,253 13,270 10,674
5/31/88 11,557 13,007 10,711
6/30/88 11,843 12,992 10,757
7/31/88 11,886 13,238 10,802
8/31/88 11,825 12,513 10,847
9/30/88 12,232 13,046 10,920
10/31/88 12,565 13,916 10,956
11/30/88 12,529 14,403 10,965
12/31/88 12,560 14,536 10,983
1/31/89 13,446 15,065 11,038
2/28/89 13,080 14,973 11,084
3/31/89 13,318 14,880 11,148
4/30/89 13,766 15,225 11,220
5/31/89 13,866 14,854 11,284
6/30/89 13,784 14,689 11,311
7/31/89 14,999 16,352 11,338
8/31/89 15,181 15,959 11,357
9/30/89 15,200 16,413 11,393
10/31/89 14,579 15,868 11,448
11/30/89 14,848 16,504 11,475
12/31/89 15,393 17,037 11,493
1/31/90 14,710 16,245 11,612
2/28/90 14,710 15,551 11,666
3/31/90 15,032 14,615 11,731
4/30/90 14,563 14,407 11,749
5/31/90 15,901 15,927 11,776
6/30/90 15,989 15,816 11,840
7/31/90 16,419 15,963 11,885
8/31/90 14,876 14,472 11,994
9/30/90 13,508 12,948 12,095
10/31/90 13,317 14,160 12,168
11/30/90 13,747 13,931 12,194
12/31/90 13,999 14,225 12,194
1/31/91 14,790 14,748 12,268
2/28/91 15,891 16,115 12,286
3/31/91 16,073 15,643 12,304
4/30/91 16,329 15,768 12,323
5/31/91 17,024 16,128 12,360
6/30/91 16,169 15,134 12,396
7/31/91 17,152 15,852 12,414
8/31/91 17,237 15,804 12,450
9/30/91 17,408 16,221 12,505
10/31/91 17,669 16,487 12,524
11/30/91 17,225 15,772 12,560
12/31/91 18,385 16,923 12,569
1/31/92 18,552 16,613 12,588
2/29/92 18,910 16,329 12,633
3/31/92 18,588 15,564 12,698
4/30/92 19,112 15,783 12,715
5/31/92 19,827 16,414 12,733
6/30/92 19,446 15,868 12,779
7/31/92 19,398 15,911 12,806
8/31/92 18,838 16,300 12,842
9/30/92 18,791 16,154 12,878
10/31/92 18,532 15,719 12,923
11/30/92 18,757 16,004 12,941
12/31/92 19,160 16,136 12,932
1/31/93 19,413 16,193 12,995
2/28/93 19,840 16,580 13,041
3/31/93 20,533 17,545 13,086
4/30/93 20,946 18,361 13,123
5/31/93 21,559 18,787 13,141
6/30/93 21,465 18,633 13,160
7/31/93 22,025 19,020 13,160
8/31/93 23,264 19,895 13,196
9/30/93 23,171 19,531 13,224
10/31/93 24,238 20,072 13,278
11/30/93 23,784 18,940 13,288
12/31/93 25,425 19,870 13,288
1/31/94 26,839 21,183 13,324
2/28/94 26,161 20,912 13,369
3/31/94 25,165 20,015 13,414
4/30/94 25,598 20,638 13,433
5/31/94 25,843 20,693 13,443
6/30/94 25,266 20,637 13,488
7/31/94 26,435 21,034 13,525
8/31/94 27,344 21,669 13,579
9/30/94 26,724 21,103 13,615
10/31/94 26,970 21,709 13,625
11/30/94 25,860 20,771 13,643
12/31/94 25,633 20,977 13,643
1/31/95 25,428 20,666 13,697
2/28/95 26,186 20,972 13,752
3/31/95 26,675 21,987 13,797
4/30/95 27,607 22,759 13,843
5/31/95 28,428 22,957 13,871
6/30/95 28,839 22,955 13,898
7/31/95 30,134 24,107 13,898
8/31/95 29,945 23,574 13,934
9/30/95 30,624 24,265 13,962
10/31/95 29,645 23,886 14,008
11/30/95 30,321 24,720 13,999
12/31/95 30,716 25,447 13,989
1/31/96 31,814 25,913 14,071
2/29/96 31,920 26,076 14,116
3/31/96 32,292 26,514 14,190
4/30/96 33,018 27,142 14,245
5/31/96 33,407 27,169 14,272
6/30/96 33,400 27,311 14,281
7/31/96 32,363 26,349 14,308
8/31/96 33,195 26,658 14,335
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
3. SOURCE: U.S. BUREAU OF LABOR STATISTICS.
Under section 854(b)(2) of the Internal Revenue Code, the Templeton Growth Fund
hereby designates 21.56% of its ordinary income dividends paid by the Fund
during the fiscal year ended August 31, 1996, as income qualifying for the
corporate dividends received deduction.
8
<PAGE> 11
PERFORMANCE
SUMMARY
Class II Shares
The Templeton Growth Fund Class II shares reported a total return of 9.99% for
the one-year period ended August 31, 1996. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include sales charges.
As measured by net asset value, the Fund's share price decreased 33 cents, from
$18.90 on August 31, 1995 to $18.57 on August 31, 1996. During this time,
shareholders received distributions of 40.28 cents ($0.4028) per share in
dividend income and $1.61 per share in capital gains, of which $1.43 represented
long-term gains and 18 cents ($0.18) represented short-term gains. Of course,
past performance is not predictive of future results, and distributions will
vary depending on income earned by the Fund, as well as any profits realized
from the sale of securities in the portfolio.
The graph on page 10 shows how a $10,000 investment in the Fund since inception
has kept your purchasing power well ahead of inflation, as measured by the
Consumer Price Index (CPI). It also compares the Fund's performance over the
same period, with the performance of the unmanaged Morgan Stanley Capital
International (MSCI) World Index. Please remember that the Fund's performance
differs from that of the index because, among other things, the index is not
managed according to any investment strategy, includes no sales charges or
management expenses, and does not contain cash (the Fund generally carries a
certain percentage of cash at any given time). Of course, one cannot invest
directly in an index.
9
<PAGE> 12
TEMPLETON GROWTH FUND - CLASS II
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
<S> <C> <C>
Cumulative Total Return1 9.99% 18.92%
Average Annual Total Return2 7.90% 12.28%
Value of $10,000 Investment3 $10,790 $11,679
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT
OVER THE INDICATED PERIODS AND DOES NOT INCLUDE THE 1.0% INITIAL SALES CHARGE
AND THE 1.0% CONTINGENT DEFERRED SALES CHARGE, APPLICABLE TO SHARES REDEEMED
WITHIN THE FIRST 18 MONTHS OF INVESTMENT.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE
OF AN INVESTMENT OVER THE INDICATED PERIODS AND INCLUDES ALL SALES CHARGES.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
THE FUND OVER THE SPECIFIED PERIODS AND INCLUDE ALL SALES CHARGES.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS WHEN PAID.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
CURRENCIES AND THE ECONOMIC AND POLITICAL CLIMATES WHERE INVESTMENTS ARE MADE,
SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR INITIAL
COST. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
TEMPLETON GROWTH FUND -- CLASS II
Total Return Index Comparison - $10,000 investment (5/1/95-8/31/96)
GROWTH CLASS II
<TABLE>
<CAPTION>
DATE Class II MS WORLD GD$ CPI $
- -------- ------ ------------ ------
<S> <C> <C> <C>
5/1/95 $9,898 $10,000 $10,000
5/31/95 10,187 10,087 10,020
6/30/95 10,329 10,086 10,040
7/31/95 10,788 10,592 10,040
8/31/95 10,708 10,358 10,066
9/30/95 10,941 10,662 10,086
10/31/95 10,588 10,495 10,120
11/30/95 10,818 10,862 10,112
12/31/95 10,960 11,181 10,105
1/31/96 11,340 11,386 10,165
2/29/96 11,372 11,457 10,198
3/31/96 11,493 11,650 10,251
4/30/96 11,746 11,926 10,291
5/31/96 11,873 11,938 10,310
6/30/96 11,880 12,000 10,316
7/31/96 11,493 11,578 10,336
8/31/96 11,679 11,713 10,356
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
3. SOURCE: U.S. BUREAU OF LABOR STATISTICS.
Under section 854(b)(2) of the Internal Revenue Code, the Templeton Growth Fund
hereby designates 21.56% of its ordinary income dividends paid by the Fund
during the fiscal year ended August 31, 1996, as income qualifying for the
corporate dividends received deduction.
10
<PAGE> 13
TEMPLETON
GROWTH FUND
Class I Shares
<TABLE>
<CAPTION>
Initial + Initial +
Dividends Capital Total
Date Reinvested Gains Value
- -----------------------------------------------------------------------
<S> <C> <C> <C>
11/29/54 9425 9425 9425
12/31/54 9576 9576 9576
12/31/55 10250 10250 10250
12/31/56 10726 10726 10726
12/31/57 8911 8911 8911
12/31/58 13261 13261 13261
12/31/59 15118 15118 15118
12/31/60 17210 17210 17210
12/31/61 20358 20358 20358
12/31/62 17606 17606 17606
12/31/63 18511 18511 18511
12/31/64 23802 23506 23802
12/31/65 29073 28313 29073
12/31/66 27532 26484 27532
12/31/67 31314 29632 31314
12/31/68 43140 40283 43139
12/31/69 51622 47446 51622
12/31/70 48298 43676 48298
12/31/71 57875 52568 58888
12/31/72 95625 87992 99263
12/31/73 78887 79615 89416
12/31/74 68187 69154 78623
12/31/75 93731 93527 108183
12/31/76 136291 135840 158747
12/31/77 155059 162989 191092
12/31/78 184488 192793 227799
12/31/79 231143 241866 288937
12/31/80 275936 302407 363734
12/31/81 276914 296033 362862
12/31/82 293516 322040 402077
12/31/83 392896 419718 534386
12/31/84 391770 423668 545974
12/31/85 482619 536262 697674
12/31/86 572152 637582 845832
12/31/87 550764 653005 872100
12/31/88 682366 784306 1077886
12/31/89 831579 935101 1321061
12/31/90 737440 834404 1201438
12/31/91 912477 1101651 1577841
12/31/92 889020 1161913 1644335
12/31/93 1121885 1558306 2181981
12/31/94 1068975 1589761 2199829
12/31/95 1203903 1922770 2636098
8/31/96 1301049 2077922 2848809
</TABLE>
If you had invested $10,000 in the Templeton Growth Fund at inception, it would
be worth over $2.8 million today. The chart below illustrates the cumulative
total return of an assumed $10,000 investment in the Fund on November 29, 1954,
with income dividends and capital gains distributions reinvested through August
31, 1996.*
*The amount of capital gains distributions accepted in shares was $1,547,761.
The total amount of dividends reinvested was $770,888. The performance
information shown represents past performance and is not an indication of future
results. For standardized performance figures, please refer to the Performance
Summary on page 8. Class II shares, which the fund began offering on May 1,
1995, are subject to different fees and expenses, which will affect their
performance. Please see the prospectus for more details regarding Class I and
Class II shares.
11
<PAGE> 14
TEMPLETON GROWTH FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS I
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.96 $ 18.95 $ 17.47 $ 15.81 $ 16.14
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income .50 .39 .29 .32 .41
Net realized and unrealized gain 1.34 1.20 2.58 2.97 .92
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.84 1.59 2.87 3.29 1.33
---------- ---------- ---------- ---------- ----------
Distributions:
Dividends from net investment income (.44) (.29) (.27) (.36) (.44)
Distributions from net realized gains (1.61) (1.29) (1.12) (1.27) (1.22)
---------- ---------- ---------- ---------- ----------
Total distributions (2.05) (1.58) (1.39) (1.63) (1.66)
---------- ---------- ---------- ---------- ----------
Change in net asset value (.21) .01 1.48 1.66 (.33)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 18.75 $ 18.96 $ 18.95 $ 17.47 $ 15.81
========== ========== ========== ========== ==========
TOTAL RETURN* 10.85% 9.51% 17.47% 23.57% 9.22%
RATIOS /SUPPLEMENTAL DATA
Net assets, end of year (000) $8,450,737 $6,964,298 $5,611,560 $4,033,911 $3,268,644
Ratio of expenses to average net assets 1.09% 1.12% 1.10% 1.03% .88%
Ratio of net investment income to average net assets 2.87% 2.40% 1.76% 2.10% 2.62%
Portfolio turnover rate 19.63% 35.21% 27.35% 28.89% 24.46%
Average commission rate paid (per share) $ .0146
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
12
<PAGE> 15
TEMPLETON GROWTH FUND, INC.
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995+
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period $ 18.90 $ 17.48
-------- -------
Income from investment operations:
Net investment income .49 .04
Net realized and unrealized gain 1.19 1.38
-------- -------
Total from investment operations 1.68 1.42
-------- -------
Distributions:
Dividends from net investment income (.40) --
Distributions from net realized gains (1.61) --
-------- -------
Total distributions (2.01) --
-------- -------
Change in net asset value (.33) 1.42
-------- -------
Net asset value, end of period $ 18.57 $ 18.90
======== =======
TOTAL RETURN* 9.99% 8.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 280,087 $42,548
Ratio of expenses to average net assets 1.87% 1.86%**
Ratio of net investment income to average net assets 2.25% 1.61%**
Portfolio turnover rate 19.63% 35.21%
Average commission rate paid (per share) $ .0146
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE DEFERRED CONTINGENT
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF OFFERING OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 16
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 77.0%
- ---------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNICAL SYSTEMS: 1.1%
Boeing Co. U.S. 625,500 $ 56,607,750
General Motors Corp., H U.S. 641,300 35,832,637
-------------
92,440,387
- ---------------------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 2.0%
Electrolux AB, B Swe. 700,000 40,695,523
Email Ltd. Aus. 6,557,700 16,496,184
Sony Corp. Jpn. 1,856,700 116,545,734
-------------
173,737,441
- ---------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES: 5.4%
Bayerische Motorenwerke (BMW) Ger. 44,500 25,740,447
* Ciadea SA Arg. 1,804,190 8,033,225
* Consorcio G Grupo Dina SA de CV Mex. 372,000 269,832
* Consorcio G Grupo Dina SA de CV, ADR Mex. 18,400 52,900
Ford Motor Co. U.S. 3,516,600 117,806,100
General Motors Corp. U.S. 2,350,000 116,912,500
Peugeot SA Fr. 301,650 34,547,465
Regie Nationale des Usines Renault SA Fr. 919,450 20,388,850
Volkswagen AG Ger. 164,000 60,841,301
Volkswagen AG, prf. Ger. 22,000 6,110,079
Volvo AB, B Swe. 3,941,000 83,909,941
-------------
474,612,640
- ---------------------------------------------------------------------------------------------------------------------------------
BANKING: 9.9%
ABN AMRO NV Neth. 954,400 52,131,334
* Abn Amro NV, trading cpn. Neth. 954,400 1,034,580
Argentaria Corporacion Bancaria de Espana SA Sp. 1,100,000 45,432,395
Australia & New Zealand Banking Group Ltd. Aus. 14,546,182 76,059,822
Banco Bilbao Vizcaya Sp. 1,350,000 56,728,580
Banco Central Hispano Sp. 1,200,000 24,397,843
Banco Popular Espanol SA Sp. 210,029 36,410,060
Bank of Ireland Irl. 1,221,000 8,969,391
BankAmerica Corp. U.S. 500,000 38,750,000
Bankinter SA Sp. 67,417 7,620,935
Canadian Imperial Bank of Commerce Can. 500,000 16,680,674
Citicorp U.S. 1,403,000 116,799,750
Den Norske Bank Nor. 6,693,800 21,511,888
HSBC Holdings PLC H.K. 6,228,541 107,534,461
National Australia Bank Ltd. Aus. 7,483,199 72,988,628
National Bank of Canada Can. 2,485,600 20,980,509
National Westminster Bank PLC U.K. 5,807,407 60,069,746
Royal Bank of Canada Can. 474,920 11,922,024
Shinhan Bank Co. Ltd. Kor. 953,538 22,522,934
Svenska Handelsbanken, A Swe. 1,250,000 25,576,268
Westpac Banking Corp. Aus. 8,534,063 41,922,992
-------------
866,044,814
- ---------------------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING: 0.8%
News Corp. Ltd. Aus. 3,573,980 16,115,055
News International PLC Aus. 6,529,600 38,739,840
Sing Tao Holdings Ltd. H.K. 3,561,800 1,796,446
South China Morning Post (Holdings) Ltd. H.K. 19,997,100 14,094,303
-------------
70,745,644
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 17
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 0.6%
* Owens Corning U.S. 1,265,000 $ 46,014,375
Pioneer International Ltd. Aus. 2,863,049 8,266,591
-------------
54,280,966
- ---------------------------------------------------------------------------------------------------------------------------------
BUSINESS & PUBLIC SERVICES: 0.3%
* Humana Inc. U.S. 363,200 6,810,000
Wheelabrator Technologies Inc. U.S. 43,400 645,575
WMX Technologies Inc. U.S. 650,000 20,556,250
-------------
28,011,825
- ---------------------------------------------------------------------------------------------------------------------------------
CHEMICALS: 2.7%
Akzo Nobel NV Neth. 439,942 51,107,987
Bayer AG Ger. 1,200,000 42,855,695
DSM NV Neth. 750,000 69,105,691
European Vinyls Corp. EVC International NV Neth. 460,271 13,554,503
Kemira OY, 144A Fin. 421,000 4,611,842
Lyondell Petrochemical Co. U.S. 868,600 19,760,650
Rhone-Poulenc SA, A Fr. 1,258,500 32,976,838
-------------
233,973,206
- ---------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 0.4%
Dragados y Construcciones SA Sp. 1,042,416 13,157,717
* Fletcher Challenge Building Ltd. N.Z. 4,176,817 9,200,927
Hollandsche Beton Groep NV Neth. 1,000 181,873
Kaufman & Broad Home Corp. U.S. 1,092,500 13,383,125
-------------
35,923,642
- ---------------------------------------------------------------------------------------------------------------------------------
DATA PROCESSING & REPRODUCTION: 1.1%
* Enator AB, B Swe. 236,400 5,122,562
International Business Machines Corp. U.S. 620,000 70,912,500
* Quantum Corp. U.S. 1,300,000 19,987,500
-------------
96,022,562
- ---------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS: 4.2%
Alcatel Alsthom SA Fr. 684,085 52,951,833
Asea AB, A Swe. 770,000 83,135,141
G.P. Batteries International Ltd. Sing. 261,000 730,800
Gold Peak Industries (Holdings) Ltd. H.K. 7,080,000 4,303,395
Hitachi Ltd. Jpn. 6,000,000 55,112,747
Motorola Inc. U.S. 1,967,600 105,020,650
Philips Electronics NV Neth. 1,802,000 60,880,578
-------------
362,135,144
- ---------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES: 0.4%
Koninklijke Pakhoed NV Neth. 150,100 4,230,461
Sun Co. Inc. U.S. 1,400,000 33,075,000
-------------
37,305,461
- ---------------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 4.6%
* Fletcher Challenge Energy Ltd. N.Z. 4,176,817 9,662,415
Norsk Hydro AS Nor. 596,265 27,347,979
Repsol SA Sp. 1,229,700 39,933,936
Saga Petroleum AS, A Nor. 142,800 2,160,919
Saga Petroleum AS, B Nor. 1,557,110 21,498,153
Societe Elf Aquitane SA Fr. 1,105,000 80,470,751
Total SA, B Fr. 1,125,300 82,771,240
Transportadora de Gas del Sur SA, ADR B Arg. 1,400,000 16,800,000
USX-Marathon Group Inc. U.S. 864,500 18,046,438
Valero Energy Corp. U.S. 1,938,300 40,946,587
</TABLE>
15
<PAGE> 18
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES (cont.)
YPF Sociedad Anonima Arg. 1,400,000 $ 29,416,768
YPF Sociedad Anonima, ADR Arg. 1,532,800 32,380,400
-------------
401,435,586
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 3.6%
A.G. Edwards Inc. U.S. 488,700 13,683,600
American Express Co. U.S. 1,000,000 43,750,000
Axa SA Fr. 509,371 28,585,326
Dean Witter Discover & Co. U.S. 923,810 46,190,500
Federal National Mortgage Assn. U.S. 2,155,600 66,823,600
Merrill Lynch & Co. Inc. U.S. 1,642,800 100,621,500
Peregrine Investments Holdings Ltd. H.K. 10,000,000 14,096,347
-------------
313,750,873
- ---------------------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS: 2.3%
Archer Daniels Midland Co. U.S. 2,518,140 44,696,985
Burns Philp & Co. Ltd. Aus. 8,478,577 12,542,075
C.P. Pokphand Co. Ltd. H.K. 12,625,000 4,285,887
Cafe de Coral Holdings Ltd. H.K. 762,000 211,872
Embotelladora Andina SA, ADR Chil. 511,500 17,263,125
Goodman Fielder Ltd. Aus. 5,945,049 6,160,721
* Grupo Embotellador de Mexico SA de CV, GDR Mex. 1,684,750 16,636,906
* Grupo Embotellador de Mexico SA, B Mex. 561,600 962,849
Hillsdown Holdings PLC U.K. 20,423,076 58,830,856
Melco International Development Ltd. H.K. 1,445,300 471,954
Panamerican Beverages Inc., A Mex. 610,900 25,810,525
Vitro SA Mex. 6,090,720 11,888,250
Vitro SA, ADR Mex. 492,840 2,957,040
-------------
202,719,045
- ---------------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 6.4%
Aracruz Celulose SA, ADR Braz. 3,177,300 28,198,538
Assidomaen AB Swe. 1,000,000 24,915,627
Boise Cascade Corp. U.S. 604,000 20,385,000
Bowater Inc. U.S. 700,000 25,200,000
Carter Holt Harvey Ltd. N.Z. 4,286,600 9,620,370
Champion International Corp. U.S. 138,500 5,955,500
* Enso OY, R Fin. 2,554,800 21,818,079
Fletcher Challenge Ltd. Forestry Division Aus. 223,875 302,835
Fletcher Challenge Ltd. Forestry Division N.Z. 12,297,348 16,983,880
* Fletcher Challenge Paper Ltd. N.Z. 9,094,135 17,521,087
Georgia-Pacific Corp. U.S. 1,275,000 94,828,125
International Paper Co. U.S. 754,800 30,192,000
Metsa Serla OY, B Fin. 2,611,000 19,554,554
Mo Och Domsjoe AB, B Swe. 1,200,000 34,700,673
Norske Skogindustrier AS, A Nor. 384,280 11,840,048
+ PT Pabrik Kertas Tjiwi Kimia, fgn. Indo. 18,249,351 18,116,883
Sappi Ltd. S.AF. 2,000,000 19,253,482
St. Joe Paper Corp. U.S. 562,600 34,599,900
Stora Kopparbergs Bergslags AB, A Swe. 714,200 10,029,763
Stora Kopparbergs Bergslags AB, B Swe. 2,085,800 29,134,144
Svenska Cellulosa AB, B Swe. 737,400 15,644,703
* UPM-Kymmene Corp. Fin. 2,951,840 67,641,453
-------------
556,436,644
- ---------------------------------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE: 0.4%
Ciba-Geigy AG Swtz. 30,000 37,875,000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 1.3%
Goodyear Tire & Rubber Co. U.S. 1,532,600 $ 69,924,875
Sandvik AB, A Swe. 158,000 3,602,649
Sandvik AB, B Swe. 1,563,000 35,638,859
-------------
109,166,383
- ---------------------------------------------------------------------------------------------------------------------------------
INSURANCE: 3.8%
Ace Ltd. Bmu. 869,300 40,531,113
American International Group Inc. U.S. 461,250 43,818,750
Baloise-Holding Swtz. 23,338 49,593,250
Cigna Corp. U.S. 445,172 51,695,599
Ing Groep NV Neth. 1,275,000 39,697,380
* Ing Groep NV, trading cpn. Neth. 1,275,000 637,308
London Insurance Group Inc. Can. 300,000 6,774,583
National Mutual Asia Ltd. H.K. 8,822,000 7,358,797
Reliastar Financial Corp. U.S. 552,200 24,365,825
Travelers Inc. U.S. 936,142 40,605,138
W.R. Berkley Corp. U.S. 627,100 28,533,050
-------------
333,610,793
- ---------------------------------------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING: 0.0%
* Saurer AG Swtz. 575 224,250
- ---------------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.7%
* Cifra SA, B Mex. 17,206,000 26,867,002
Dairy Farm International Holdings Ltd. H.K. 34,561,543 27,303,619
Hudsons Bay Co. Can. 1,188,200 17,410,319
K Mart Corp. U.S. 1,800,000 18,000,000
Kwik Save Group PLC U.K. 1,974,267 12,175,607
Limited Inc. U.S. 2,750,000 50,875,000
* Office Depot Inc. U.S. 1,152,600 18,297,525
Safeway PLC U.K. 4,309,883 23,013,318
W.H. Smith Group U.K. 4,820,500 38,383,972
-------------
232,326,362
- ---------------------------------------------------------------------------------------------------------------------------------
METALS & MINING: 3.4%
Alcan Aluminum Ltd. Can. 1,016,850 32,102,839
Arbed SA Lux. 86,725 9,841,538
* Asturiana del Zinc SA Sp. 1,300,000 9,450,769
Companhia Siderurgica Nacional ADR Braz. 777,205 17,932,264
Elkem AS Nor. 164,200 2,331,058
Maanshan Iron & Steel Co. Ltd., H CHINA 17,230,000 3,119,560
Outokumpu OY, A Fin. 2,281,804 43,105,362
Pechiney SA, A Fr. 1,518,775 63,579,069
Pohang Iron & Steel Co. Ltd. Kor. 404,993 31,395,361
Reynolds Metals Co. U.S. 853,408 45,657,328
RGC Ltd. Aus. 1,211,912 5,560,373
* Union Miniere NPV Bel. 400,000 30,764,185
-------------
294,839,706
- ---------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES: 0.2%
De Beers Consolidated Mines Ltd. S.AF. 580,150 18,067,067
- ---------------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 2.8%
Alfa SA de CV, A Mex. 466,000 2,043,455
* Alfa SA de CV, A 144A Mex. 2,534,000 11,111,836
Cheung Kong Holdings Ltd. H.K. 8,000,000 56,126,738
* Fotex First Hungarian-American Photo-Service Hun. 110,594 82,838
Jardine Matheson Holdings Ltd. (Singapore) H.K. 4,065,978 25,615,661
Jardine Strategic Holdings Ltd. (Singapore) H.K. 11,280,152 36,096,486
</TABLE>
17
<PAGE> 20
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY (cont.)
Nokia AB, "A" Fin. 1,445,600 $ 61,404,187
Pacific Dunlop Ltd. Aus. 15,000,000 32,512,222
Swire Pacific Ltd., A H.K. 1,259,000 11,193,825
Swire Pacific Ltd., B H.K. 3,204,000 4,475,034
-------------
240,662,282
- ---------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 3.0%
American Health Properties Inc. U.S. 420,700 9,202,813
Beacon Properties Corp. U.S. 900,000 24,525,000
Carramerica Realty Corp. U.S. 200,000 4,900,000
* Fastighets Naeckebro AB, A Swe. 8,600 118,825
Federal Realty Investment Trust U.S. 348,400 8,187,400
General Growth Properties U.S. 950,000 23,868,750
Hang Lung Development Co. Ltd. H.K. 15,803,000 29,838,189
* Hang Lung Development Co. Ltd., wts. H.K. 840,000 180,330
Highwood Properties Inc., REIT U.S. 500,000 14,875,000
Hong Kong Land H.K. 8,481,000 19,251,870
IRT Property Co. U.S. 592,300 5,478,775
Meditrust Inc. U.S. 1,000,000 34,250,000
National Health Investors Inc. U.S. 500,000 16,750,000
Nationwide Health Properties Inc. U.S. 800,000 17,800,000
Rouse Co. U.S. 1,200,000 31,050,000
Summit Properties Inc., REIT U.S. 315,500 6,033,937
Tai Cheung Holdings Ltd. H.K. 891,412 685,923
Trans Tasman Properties Ltd. N.Z. 228,238 111,903
Union du Credit Bail Immobilier Unibail Fr. 90,000 9,205,707
Universal Health Realty Income Trust U.S. 200,000 3,775,000
-------------
260,089,422
- ---------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 6.3%
A T & T Corp. U.S. 1,300,000 68,250,000
British Telecommunications PLC U.K. 9,502,470 55,710,120
Cpt-Telefonica del Peru SA, ADR B PER. 115,000 2,688,125
Cpt-Telefonica del Peru SA, B PER. 4,379,874 10,231,528
* SPT Telecom AS CSK. 26,000 3,411,511
STET (Sta Finanziaria Telefonica Torino) SPA Itl. 6,276,000 19,953,141
STET (Sta Finanziaria Telefonica Torino) SPA, di Risp Itl. 14,782,000 35,552,698
Telecom Argentina Stet France SA, ADR Arg. 846,600 32,911,575
Telecom Italia Spa, di Risp Itl. 31,178,050 50,129,131
Teledanmark AS, B Den. 750,000 36,981,990
Telefonica de Argentina SA, B, ADR Arg. 1,500,000 35,812,500
Telefonica de Espana SA Sp. 5,210,000 96,770,521
Telmex-Telefonos de Mexico SA, L Mex. 14,118,470 22,939,604
Telmex-Telefonos de Mexico SA, L, ADR Mex. 2,400,000 78,900,000
-------------
550,242,444
- ---------------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 0.3%
Daehan Synthetic Fiber Co. Ltd. Kor. 18,550 1,743,485
* Fruit of the Loom Inc., A U.S. 713,700 19,805,175
Winsor Industrial Corp. Ltd. H.K. 6,716,000 5,949,512
-------------
27,498,172
- ---------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 2.7%
Anangel-American Shipholdings Ltd., ADR Gr. 39,100 342,125
APL Ltd. U.S. 892,200 21,078,225
British Airways PLC U.K. 2,000,000 16,424,925
Cathay Pacific Airways Ltd. H.K. 30,603,000 50,856,586
IMC Holdings Ltd. H.K. 6,860,000 3,903,524
</TABLE>
18
<PAGE> 21
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (cont.)
Malaysian International Shipping Corp. Bhd., fgn. Mal. 4,000,000 $ 12,364,980
* OMI Corp. U.S. 332,400 2,659,200
Peninsular & Oriental Steam Navigation Co. U.K. 1,400,000 11,246,077
Qantas Airways Ltd., ADR, 144A Aus. 481,700 8,068,475
Shun Tak Holdings H.K. 28,906,000 17,009,027
Singapore Airlines Ltd., fgn. Sing. 4,278,000 45,297,186
Stolt Nielsen SA Nor. 463,500 7,821,562
Stolt Nielsen SA, ADR Nor. 231,750 4,084,594
* Swissair Schweizerische Luftverkehr AG Swtz. 33,350 30,487,458
-------------
231,643,944
- ---------------------------------------------------------------------------------------------------------------------------------
UTILITIES ELECTRICAL & GAS: 4.2%
* British Energy Ltd. U.K. 58,500 89,510
* British Energy Ltd., 144A U.K. 9,681,640 14,813,670
British Gas PLC U.K. 14,415,000 46,250,254
Centerior Energy Corp. U.S. 1,820,600 13,882,075
* CEZ CSK. 213,761 8,481,926
Cia Energetica de Minas Gerais, ADR Braz. 7,000 210,754
Compania Sevillana de Electricidad Sp. 5,034,492 40,420,727
Consolidated Electric Power Asia Ltd. H.K. 4,644,800 8,559,767
Electrabel SA Bel. 100,000 22,105,608
Electricidad de Caracas Venz. 9,201,045 7,469,119
Entergy Corp. U.S. 1,350,000 34,256,250
Hongkong Electric Holdings Ltd. H.K. 2,662,000 7,952,434
Iberdrola SA Sp. 6,754,448 60,974,845
Long Island Lighting Co. U.S. 1,650,000 28,462,500
New York State Electric & Gas Corp. U.S. 500,000 10,750,000
Niagara Mohawk Power Corp. U.S. 1,719,600 14,186,700
Shandong Huaneng Power CHINA 900,000 8,437,500
Thames Water Group PLC U.K. 2,500,000 21,741,167
VEBA AG Ger. 400,000 20,961,584
-------------
370,006,390
- ---------------------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 0.1%
Sime Darby Hongkong Ltd. H.K. 6,660,000 7,019,593
-------------
TOTAL COMMON STOCKS (cost $5,543,380,441) 6,712,847,688
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 2.0%
- ---------------------------------------------------------------------------------------------------------------------------------
ABN Amro NV, conv., pfd. Neth. 46,000 2,360,253
American Health Properties Inc., dep. shs., pfd. U.S. 24,330 334,537
Bayerische Motorenwerke (BMW), pfd. Ger. 15,000 6,213,468
Cemig-Cia Energetica de Minas Gerais, pfd. Braz. 419,099,884 12,618,150
Fiat Spa, pfd. Itl. 15,989,000 25,284,487
Jardine Strategic Holdings Ltd., 7.50%, conv., pfd. H.K. 9,050,000 9,864,500
Petrobras-Petroleo Brasileiro SA, pfd. Braz. 8,357,400 999,089
Reynolds Metals Co., conv., pfd. U.S. 45,715 2,177,177
Telebras-Telecomunicacoes Brasileiras SA, pfd., ADR Braz. 650,000 48,343,750
Telebras-Telecomunicacoes Brasileiras SA, pfd. Braz. 875,600,000 65,044,325
Telesp-Telecomunicacoes de Sao Paulo SA, pfd. Braz. 24,241,700 4,651,086
-------------
TOTAL PREFERRED STOCKS (cost $109,894,550) 177,890,822
- ---------------------------------------------------------------------------------------------------------------------------------
BONDS: 14.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Arbed SA, 2.50%, conv., 7/15/03 Lux. 3,250,000 1,872,234
Government of Australia:
7.00%, 8/15/98 Aus. 40,000,000 31,651,558
6.25%, 3/15/99 Aus. 40,000,000 30,999,731
7.00%, 4/15/00 Aus. 40,000,000 31,282,928
</TABLE>
19
<PAGE> 22
TEMPLETON GROWTH FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
BONDS: (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------------
Softe SA, 4.25%, conv., 7/30/98, 144A Itl. 2,880,000,000 $ 2,629,702
U.S. Treasury Notes:
7.00%, 9/30/96 U.S. 160,000,000 160,200,000
6.875%, 10/31/96 U.S. 160,000,000 160,350,400
7.25%, 11/30/96 U.S. 160,000,000 160,625,600
7.50%, 12/31/96 U.S. 160,000,000 161,000,000
8.50%, 7/15/97 U.S. 50,000,000 51,070,500
7.875%, 1/15/98 U.S. 10,000,000 10,220,300
6.125%, 3/31/98 U.S. 200,000,000 199,656,000
6.375%, 7/15/99 U.S. 78,000,000 77,780,820
6.00%, 10/15/99 U.S. 78,000,000 76,890,840
6.375%, 1/15/00 U.S. 78,000,000 77,488,320
-------------
TOTAL BONDS (cost $1,230,760,131) 1,233,718,933
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 6.8% (cost $594,615,587)
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.96% to 5.145% with maturities to
11/21/96 U.S. 598,268,000 594,816,819
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9% (cost $7,478,650,709) 8,719,274,262
OTHER ASSETS, LESS LIABILITIES: 0.1% 11,549,672
-------------
TOTAL NET ASSETS: 100.0% $8,730,823,934
==============
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRIES INDICATED.
+ SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 23
TEMPLETON GROWTH FUND, INC.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $7,478,650,709) $8,719,274,262
Cash 194,275
Receivables:
Investment securities sold 23,009,211
Capital shares sold 14,378,975
Dividends and interest 43,944,389
--------------
Total assets 8,800,801,112
--------------
Liabilities:
Payables:
Investment securities purchased 56,540,211
Capital shares redeemed 4,180,492
Accrued expenses 9,256,475
--------------
Total liabilities 69,977,178
--------------
Net assets, at value $8,730,823,934
==============
Net assets consist of:
Undistributed net investment income $ 174,874,776
Net unrealized appreciation 1,240,623,553
Accumulated net realized gain 321,485,545
Net capital paid in on shares of capital stock 6,993,840,060
--------------
Net assets, at value $8,730,823,934
==============
Class I
Net asset value per share
($8,450,736,694 / 450,598,194
shares outstanding) $ 18.75
==============
Maximum offering price ($18.75 / 94.25%) $ 19.89
==============
Class II
Net asset value per share
($280,087,240 / 15,081,215
shares outstanding) $ 18.57
==============
Maximum offering price ($18.57 / 99.00%) $ 18.76
==============
</TABLE>
STATEMENT OF OPERATIONS
for the year ended August 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
(net of $15,296,936 foreign taxes
withheld)
Dividends $200,174,599
Interest 111,518,586
------------
Total income $311,693,185
Expenses:
Management fees (Note 3) 48,379,594
Administrative fees (Note 3) 6,481,909
Distribution fees (Note 3)
Class I 17,147,688
Class II 1,530,229
Transfer agent fees (Note 3) 7,420,000
Custodian fees 2,305,759
Reports to shareholders 2,400,000
Audit fees 60,000
Legal fees (Note 3) 83,000
Registration and filing fees 790,000
Directors' fees and expenses 140,000
Other 113,493
------------
Total expenses 86,851,672
------------
Net investment income 224,841,513
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 432,679,597
Foreign currency transactions (4,058,805)
------------
428,620,792
Net unrealized appreciation on
investments 145,676,185
------------
Net realized and unrealized gain 574,296,977
------------
Net increase in net assets resulting
from operations $799,138,490
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 24
TEMPLETON GROWTH FUND, INC.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 224,841,513 $ 143,824,713
Net realized gain on investment and foreign currency transactions 428,620,792 536,276,781
Net unrealized appreciation (depreciation) 145,676,185 (70,834,341)
-------------- --------------
Net increase in net assets resulting from operations 799,138,490 609,267,153
Distributions to shareholders:
From net investment income
Class I (166,533,266) (89,841,133)
Class II (1,511,634) --
From net realized gain
Class I (608,010,954) (391,713,252)
Class II (5,832,380) --
Capital share transactions (Note 2)
Class I 1,474,318,953 1,225,661,539
Class II 232,408,151 41,911,887
-------------- --------------
Net increase in net assets 1,723,977,360 1,395,286,194
Net assets:
Beginning of year 7,006,846,574 5,611,560,380
-------------- --------------
End of year $8,730,823,934 $7,006,846,574
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 25
TEMPLETON GROWTH FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Growth Fund, Inc. (the Fund) is an open-end, diversified management
investment company registered under the Investment Company Act of 1940. The Fund
seeks long term capital growth through a flexible policy of investing in stocks
and debt obligations of companies and governments of any nation. The following
summarizes the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Directors.
B. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
E. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
The Fund offers two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At August 31, 1996, there
were 800 million Class I shares and 600 million Class II shares of capital stock
authorized ($0.01 par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
CLASS I
-------------------------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 87,361,685 $1,592,605,239 79,757,433 $1,395,342,956
Shares issued on reinvestment of distributions 40,241,914 692,244,640 25,222,610 425,065,372
Shares redeemed (44,402,254) (810,530,926) (33,772,952) (594,746,789)
----------- -------------- ----------- --------------
Net increase 83,201,345 $1,474,318,953 71,207,091 $1,225,661,539
=========== ============== =========== ==============
</TABLE>
23
<PAGE> 26
TEMPLETON GROWTH FUND, INC.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS II
-------------------------------------------------------
FOR THE PERIOD
YEAR ENDED MAY 1, 1995 THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 13,048,416 $ 236,745,973 2,265,948 $ 42,184,648
Shares issued on reinvestment of distributions 369,922 6,330,234 -- --
Shares redeemed (588,522) (10,668,056) (14,549) (272,761)
----------- -------------- ----------- --------------
Net increase 12,829,816 $ 232,408,151 2,251,399 $ 41,911,887
=========== ============== =========== ==============
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Global
Advisors Ltd. (TGAL), Templeton Global Investors, Inc. (TGII), Franklin
Templeton Distributors, Inc. (FTD) and Franklin Templeton Investor Services,
Inc. (FTIS), the Fund's investment manager, administrative manager, principal
underwriter, and transfer agent, respectively.
The Fund pays monthly an investment management fee to TGAL equal, on an annual
basis, to 0.75% of the average daily net assets of the Fund up to $200 million,
reduced to 0.675% of such average daily net assets in excess of $200 million,
and further reduced to 0.60% of such net assets in excess of $1.3 billion. The
Fund pays TGII monthly an administrative fee of 0.15% per annum on the first
$200 million of the Fund's aggregate average daily net assets, 0.135% of the
next $500 million, 0.10% of the next $500 million, and 0.075% per annum of such
average net assets in excess of $1.2 billion. For the year ended August 31,
1996, FTD received net commissions of $5,546,704 from the sale of the Fund's
shares and FTIS received fees of $7,420,000.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity that is primarily intended to result in a sale of Fund shares, subject
to a maximum of 0.25% and 1.00% per annum of the average daily net assets of
Class I and Class II shares, respectively. Under the Class I distribution plan,
costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At August 31, 1996, unreimbursed expenses amounted to $1,614,335. Class
II shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales charges of $52,196 were paid to FTD for the
year ended August 31, 1996.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received fees of $83,000 for the year ended August 31,
1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1996 aggregated $2,518,671,256 and $1,239,274,010,
respectively. The cost of securities for federal income tax purposes is
$7,481,079,537. Realized gains and losses are reported on an identified cost
basis.
At August 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $1,476,607,693
Unrealized depreciation (238,412,968)
--------------
Net unrealized appreciation $1,238,194,725
==============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in "affiliated companies" at August 31, 1996
amounted to $18,116,883. For the year ended August 31, 1996, dividend income
from "affiliated companies" was $726,494.
24
<PAGE> 27
TEMPLETON GROWTH FUND, INC.
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Growth Fund, Inc. as of August 31, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods indicated in the accompanying financial
statements. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Growth Fund, Inc. as of August 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
[McGladrey & Pullen, LLP]
New York, New York
September 27, 1996
25
<PAGE> 28
NOTES
-----
<PAGE> 29
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. 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 determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH INCOME
Franklin Global Health Franklin Adjustable Rate
Care Fund Securities Fund
Franklin Templeton Franklin Adjustable U.S.
Japan Fund Government Securities Fund
Templeton Developing Franklin's AGE High
Markets Trust Income Fund
Templeton Foreign Fund Franklin Investment Grade
Templeton Foreign Smaller Income Fund
Companies Fund Franklin Short-Intermediate U.S.
Templeton Global Government Securities Fund
Infrastructure Fund Franklin U.S. Government
Templeton Global Securities Fund
Opportunities Trust Franklin Money Fund
Templeton Global Franklin Federal Money Fund
Real Estate Fund
Templeton Global Smaller FOR NON-U.S. INVESTORS:
Companies Fund
Templeton Greater Franklin Tax-Advantaged
European Fund High Yield Securities Fund
Templeton Growth Fund Franklin Tax-Advantaged
Templeton Latin America International Bond Fund
Fund Franklin Tax-Advantaged U.S.
Templeton Pacific Government Securities Fund
Growth Fund
Templeton World Fund FOR CORPORATIONS:
GLOBAL GROWTH AND INCOME Franklin Corporate Qualified
Dividend Fund
Franklin Global Utilities Fund
Franklin Templeton German FRANKLIN FUNDS SEEKING
Government Bond Fund TAX-FREE INCOME
Franklin Templeton
Global Currency Fund Federal Intermediate-Term
Templeton Global Bond Fund Tax-Free Income Fund
Templeton Growth and Federal Tax-Free Income Fund
Income Fund High Yield Tax-Free
Income Fund
GLOBAL INCOME Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Franklin Global Government Income Fund
Income Fund Tax-Exempt Money Fund
Franklin Templeton Hard
Currency Fund FRANKLIN STATE-SPECIFIC
Franklin Templeton High FUNDS SEEKING
Income Currency Fund TAX-FREE INCOME
Templeton Americas
Government Securities Fund Alabama
Arizona*
GROWTH Arkansas**
California*
Franklin Blue Chip Fund Colorado
Franklin California Growth Fund Connecticut
Franklin DynaTech Fund Florida*
Franklin Equity Fund Georgia
Franklin Gold Fund Hawaii**
Franklin Growth Fund Indiana
Franklin MidCap Growth Fund Kentucky
Franklin Small Cap Growth Fund Louisiana
Maryland
GROWTH AND INCOME Massachusetts***
Michigan*
Franklin Asset Allocation Fund Minnesota***
Franklin Balance Sheet Missouri
Investment Fund New Jersey
Franklin Convertible New York*
Securities Fund North Carolina
Franklin Equity Income Fund Ohio***
Franklin Income Fund Oregon
Franklin MicroCap Value Fund Pennsylvania
Franklin Natural Resources Fund Tennessee**
Franklin Real Estate Texas
Securities Fund Virginia
Franklin Rising Dividends Fund Washington**
Franklin Strategic Income Fund
Franklin Utilities Fund VARIABLE ANNUITIES
Franklin Value Fund
Templeton American Trust, Inc. Franklin Valuemark(SM)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities. 10/96.1
