Annual Report
AUGUST 31, 1998
TEMPLETON
GROWTH FUND, INC.
[FRANKLIN TEMPLETON(R) LOGO]
[Celebrating Over 50 Years LOGO]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently he devotes all of his time and efforts to the John
Templeton Foundation. A major portion of his assets remain invested in the
Templeton funds which are managed by many of the investment professionals he
selected and trained.
[PHOTO]
MARK G. HOLOWESKO, CFA
Portfolio Manager
Templeton Growth Fund
Mark G. Holowesko is 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 equity
research worldwide, 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 and a former
director of the International Society of Financial Analysts.
CONTENTS
Shareholder Letter 1
Performance Summaries
Class I 8
Class II 12
Advisor Class 16
Financial Highlights &
Statement of Investments 21
Financial Statements 32
Notes to the Financial
Statements 35
Independent Auditor's Report 39
Tax Designation 40
[PYRAMID GRAPHIC]
SHAREHOLDER LETTER
Your Fund's Goal: Templeton Growth Fund seeks long-term capital growth through a
flexible policy of investing in the equity and debt securities of companies and
governments of any nation.
Dear Shareholder:
This annual report of Templeton Growth Fund covers the fiscal year ended August
31, 1998, a difficult time for the Fund. Early in the period, we boosted our
exposure to Asia and decreased our European and U.S. positions. Unfortunately,
these moves resulted in poor short-term performance for the Fund, as many Asian
shares continued to fall in value and U.S. and European stock prices rose.
Within this environment, the Fund's Class I shares provided a 12-month
cumulative total return of -12.61%, as discussed in the Performance Summary on
page 8.
This was not the first time we have experienced poor performance while
repositioning the Fund to take advantage of long-term opportunities. In the
mid-to-late 1980s, we sold our Japanese holdings and bought U.S. shares. As a
result, at the end of 1989, the Fund had no Japanese exposure and a large
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 24 of
this report.
TEMPLETON GROWTH FUND
VS. THE MSCI WORLD INDEX
Based on Total Net Assets
12/31/89
[Pie Chart]
TEMPLETON GROWTH FUND
North America 49%
Europe 25%
Japan 0%
Pacific Ex-Japan 15%
Latin America 3%
Short Term
Investments &
Other Net Assets 8%
[Pie Chart]
MSCI WORLD INDEX
Japan 40%
North America 34%
Europe 24%
Pacific Ex-Japan 2%
U.S. position. Consequently, as investor enthusiasm for Japanese stocks and
neglect for U.S. securities reached a peak during that period, the Fund lagged
market indices like the MSCI World Index,(1) which had a large weighting in
Japan. But in 1989, Japan's market began a 10-year correction and the U.S.
entered the early stages of one of its greatest bull markets. So our actions
proved correct over time, illustrating that, although value investing tends to
lag in the later stages of market advances when many investors pick stocks based
on momentum, fads and momentum typically fade and the market usually returns to
its roots in value.
There are some striking similarities between the current investment environment
and that of the late 1980s. A decade ago, valuations were ignored by many
investors, as evidenced by the number of Japanese shares selling at more than 80
times earnings. In 1998, investors also seemed to show a lack of respect for
valuations. Many price/earnings (p/e) ratios of Internet stocks exceeded even
those of Japanese shares during the 1980s, and some of the most overvalued
equities in January were the top performers during the first half of 1998. For
example, the 20% most expensive stocks in the Morgan Stanley Capital
International(R) All Country World Free Index(2) rose 20%. Conversely, the
cheapest 20% advanced only 5%.(3)
1. The Morgan Stanley Capital International(R) (MSCI) World Index includes
approximately 1,500 companies representing the stock markets of 23 countries,
including the U.S., Canada, the United Kingdom, and Japan. An index is an
unmanaged group of securities that is used to measure market performance. One
cannot invest directly in an index.
2. The unmanaged Morgan Stanley Capital International(R) (MSCI) All Country
World Free Index represents the stock markets of 48 developed and emerging
countries, including the U.S., Germany, Mexico, Indonesia, Thailand, and Japan.
3. Stock rankings measured by 1997 year-end p/e ratios, which averaged 57 for
the 20% most expensive stocks and 8 for the cheapest 20% of the stocks.
Performance is measured in U.S. dollars and includes reinvested dividends.
2
In the late 1980s, we were too quick to sell Japanese securities and buy U.S.
stocks; we now believe that in 1998, we were too quick to sell some of our
European and U.S. holdings and increase our positions in Asia and Latin America.
On August 31, 1998, the MSCI World Index, which significantly outperformed the
Fund during the reporting period, had a North American weighting of 51% (most of
which was in the U.S.) and a European weighting of 37%. The Fund, on the other
hand, only had a European weighting of 29% and a North American weighting of
28%, most of which was in the U.S.
ASIA
During the reporting period, Asia experienced dramatic stock price declines, and
its share of world stock market capitalization shrank appreciably. At their
height in the 1980s, Asian stocks accounted for more than half the value of
equities worldwide. However, as the chart on the following page shows, between
1993 and 1998, Asia's share of global stock value dropped from 38% to 14%.
During the same period, the value of North American stocks increased from 37% to
51% of equities worldwide.(4)
As many Asian shares declined in value, we slowly built positions in companies
that we considered to have above average long-term potential. Our largest Asian
exposure was Hong Kong SAR, which
TEMPLETON GROWTH FUND
VS. THE MSCI WORLD INDEX
Based on Total Net Assets
8/31/98
TEMPLETON GROWTH FUND
Europe 29%
North America 28%
Pacific Ex-Japan 15%
Latin America 7%
Japan 1%
Middle East/Africa 1%
Short Term
Investments &
Other Net Assets 19%
MSCI WORLD INDEX
North America 51%
Europe 37%
Japan 10%
Pacific Ex-Japan 2%
4. Source: IFC 1998 Emerging Market Factbook.
3
HOW THE ASIAN SHARE OF WORLD
STOCK MARKET CAPITALIZATION
HAS SHRUNK
12/31/93 Total $12.7 Trillion
Asia (including Japan) $4.9 Trillion 38%
North America $4.7 Trillion 37%
Euro Area $2.8 Trillion 22%
Other Countries $356 Billion 3%
6/30/98 Total $24.0 Trillion
North America $12.2 Trillion 51%
Euro Area $7.5 Trillion 31%
Asia (including Japan) $3.4 Trillion 14%
Other Countries $910 Billion 4%
represented 8.7% of the Fund's total net assets on August 31, 1998. The stocks
of Hong Kong companies we bought have what we consider to be solid balance
sheets, dividend yields three times the level of the U.S. market, p/e ratios a
quarter of those of Europe, and discounts as high as 50% of the replacement cost
of their plant and equipment. Hong Kong real estate prices, which fell
substantially during the reporting period, remain its primary economic problem.
The possible devaluation of the Hong Kong dollar is also a major concern, but,
in our opinion, is not likely. So far Hong Kong has fought off currency
speculators, and has over $90 billion in foreign currency reserves to support
its currency.(5) It also has one of the freest market economies in the world,
lacks the elements of crony capitalism found in many other parts of Asia, and
its companies generally have little corporate debt. In our current opinion, the
selling in Hong Kong's financial markets during the Fund's fiscal year was
excessive in relation to economic conditions, and we are optimistic about Hong
Kong's future.
EUROPE
As numerous Asian stocks sank to historic lows, many European share prices
reached all-time highs. This was particularly true of southern European equity
markets, which were boosted by interest rates declining in anticipation of the
new common currency (the euro) being introduced in early 1999. We took profits
in several of our southern European holdings, but maintained investments in the
5. Source: Bloomberg.
4
Nordic region and the United Kingdom. Although European stock valuations are
close to record highs, they are still cheaper on average than those of other
developed markets.
UNITED STATES
Stocks have become an increasingly important part of the U.S. economy largely
because of their value relative to the size of the economy and the average
household's net worth. Fueled by low interest rates, benign inflation and
investor enthusiasm, the U.S. stock market advanced during most of the Fund's
fiscal year, and by July 17, 1998, the Dow Jones(R) Industrial Average (the Dow)
had increased 24.3% from its level at the beginning of the reporting period.
However, in August, growing concerns about Asia's continuing financial problems
and Russia's economic and political crisis sent the U.S. market plummeting. On
August 26, the Dow dropped 0.9%, the next day it tumbled 4.2%, and on August 31,
it plunged an additional 6.4%.(6),(8) These declines nearly eliminated all
previous gains in the Index for the reporting period, and on August 31, the Dow
was only 0.7% higher than it had been 12 months earlier.(7),(8)
Our U.S. equity holdings, which represented 25.9% of the Fund's total net assets
as of August 31, 1998, were concentrated in the automobile, aerospace, forest
products, and energy sectors. Our largest U.S. positions at the close of the
period were General Motors Corp., Boeing Co., and Motorola Inc.
TOP 10 EQUITY HOLDINGS
8/31/98
<TABLE>
<CAPTION>
NAME, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
----------------- ----------
<S> <C>
General Motors Corp.
Automobiles, U.S. 2.2%
Philips Electronics NV
Electrical & Electronics,
Netherlands 2.2%
HSBC Holdings Plc.
Banking, Hong Kong** 2.0%
Boeing Co.
Aerospace & Military
Technology, U.S. 1.6%
Motorola Inc.
Electrical & Electronics, U.S. 1.4%
American Stores Co.
Merchandising, U.S. 1.3%
Deutsche Bank AG
Banking, Germany 1.2%
YPF Sociedad Anonima
(and YPF Sociedad
Anonima ADR)
Energy Sources, Argentina 1.2%
Archer-Daniels Midland Co.
Food & Household
Products, U.S. 1.2%
Bell Atlantic Corp.
Telecommunications, U.S. 1.1%
</TABLE>
**Hong Kong reverted to the sovereignty of China on July 1, 1997.
6. Source: Bloomberg.
7. Source: Standard & Poor's(R) Micropal.
8. The Dow's market return, calculated by Wilshire Associates Inc., includes
reinvested dividends. An index is an unmanaged group of securities that is used
to measure market performance. One cannot invest directly in an index.
5
TOP 10 COUNTRIES
REPRESENTED IN THE FUND*
Equity Investments
(80.2% of Total Net Assets)
8/31/98
<TABLE>
<CAPTION>
% OF TOTAL
COUNTRY NET ASSETS
------- ----------
<S> <C>
United States 25.9%
United Kingdom 9.3%
Hong Kong** 8.7%
Sweden 4.7%
Netherlands 3.7%
Australia 3.5%
Germany 3.1%
Brazil 2.5%
France 2.5%
Argentina 2.2%
</TABLE>
*Does not include fixed-income securities and short-term investments and other
net assets.
**Hong Kong reverted to the sovereignty of China on July 1, 1997.
Looking forward, we are confident about our ability to deal with future
volatility in global stock markets. Turbulent markets are not new to us, and
where many people see only risk, we see potential returns. Our investment
approach is based on a philosophy comprising four basic principles: the patience
to look beyond the emotions of the moment to the longer-term value of a
security, the discipline to subject an idea to rigorous and detailed analysis,
the courage to think independently, and the common sense to know that share
prices become cheap under the pressure of selling, or expensive during periods
of "irrational exuberance." We will consistently use this approach in the future
in our efforts to protect the Fund's assets and produce profits for our
shareholders.
This discussion reflects our views, opinions and portfolio holdings as of August
31, 1998, the end of the reporting period. However, market and economic
conditions are changing constantly, which can be expected to affect our
strategies and the Fund's portfolio composition. Although historical performance
is no guarantee of future results, these insights may help you better understand
our investment and management philosophy.
Please remember that there are special risks associated with global investing
related to market, currency, economic, social, political and other factors.
Emerging markets involve similar but heightened risks, in addition to those
associated with their relatively small size and lesser liquidity. Investing in
any emerging market means accepting
6
a certain amount of volatility and, in some cases, severe market corrections.
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 equity
market has increased 785% in the last 15 years, but has suffered six declines of
more than 20% during that time.(9) These risks and other considerations are
discussed in the Fund's prospectus.
Thank you for investing in Templeton Growth Fund. We welcome your comments and
look forward to serving you in the future.
Sincerely,
/s/ Mark G. Holowesko
Mark G. Holowesko, CFA
President
Templeton Growth Fund, Inc.
9. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended June 30, 1998. Market returns are measured in Hong Kong dollars.
7
PERFORMANCE SUMMARY
CLASS I
Templeton Growth Fund - Class I produced a - 12.61% cumulative total return for
the one-year period ended August 31, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include the initial sales charge. While we expect market volatility
in the short term, we have always maintained a long-term perspective when
managing the Fund, and we encourage shareholders to view their investments in a
similar manner. As you can see from the table on page 11, the Fund's Class I
shares delivered a cumulative total return of 214.67% for the 10-year period
ended August 31, 1998.
The Fund's share price, as measured by net asset value, decreased $5.69, from
$22.47 on August 31, 1997, to $16.78 on August 31, 1998. During the reporting
period, shareholders received per-share distributions of 54.5 cents ($0.545) in
income dividends, 33 cents ($0.33) in short-term capital gains, and $2.55 in
long-term capital gains. Distributions will vary depending on income earned by
the Fund and any profits realized from the sale of securities in the portfolio,
as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
8
The graph on page 10 compares the performance of the Fund's Class I shares over
the past ten years and the unmanaged Morgan Stanley Capital International(R)
(MSCI) World Index, which includes approximately 1,500 companies representing
the stock markets of 23 countries, including the U.S., Canada, the United
Kingdom, and Japan. It also shows the Fund's performance versus the Consumer
Price Index (CPI), a commonly used measure of inflation. Please remember, the
Fund's performance differs from that of an index because an index is not managed
according to any investment strategy, does not contain cash (the Fund generally
carries a certain percentage of cash at any given time), and includes no sales
charges or management or operating expenses. Of course, one cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
Past performance is not predictive of future results.
9
CLASS I
Total Return Index Comparison
$10,000 Investment (9/1/88 - 8/31/98)
[LINE GRAPH]
The following line graph hypothetically compares the performance of the
Templeton Growth Fund Class I shares to that of the MSCI World Index and CPI,
based on a $10,000 investment from 9/1/88 to 8/31/98.
<TABLE>
<CAPTION>
Total Return Index Comparison
Templeton Growth MSCI World CPI
Fund -Class I Index
--------------------------------------------------
<S> <C> <C> <C>
9/1/88 $9,427 $10,000 $10,000
Sep 88 $9,751 $10,426 $10,068
Oct-88 $10,016 $11,122 $10,101
Nov-88 $9,988 $11,511 $10,110
Dec-88 $10,012 $11,617 $10,127
Jan-89 $10,719 $12,039 $10,178
Feb-89 $10,427 $11,966 $10,218
Mar-89 $10,617 $11,891 $10,277
Apr-89 $10,974 $12,167 $10,345
May-89 $11,054 $11,871 $10,404
Jun-89 $10,988 $11,739 $10,429
Jul-89 $11,957 $13,068 $10,455
Aug-89 $12,102 $12,753 $10,472
Sep-89 $12,117 $13,115 $10,505
Oct-89 $11,622 $12,680 $10,556
Nov-89 $11,836 $13,188 $10,580
Dec-89 $12,271 $13,615 $10,597
Jan-90 $11,726 $12,981 $10,706
Feb-90 $11,726 $12,426 $10,756
Mar-90 $11,983 $11,678 $10,815
Apr-90 $11,609 $11,512 $10,833
May-90 $12,676 $12,726 $10,857
Jun-90 $12,746 $12,638 $10,916
Jul-90 $13,089 $12,755 $10,958
Aug-90 $11,859 $11,563 $11,058
Sep-90 $10,768 $10,346 $11,151
Oct-90 $10,616 $11,314 $11,218
Nov-90 $10,959 $11,131 $11,243
Dec-90 $11,160 $11,366 $11,243
Jan-91 $11,790 $11,784 $11,311
Feb-91 $12,668 $12,877 $11,327
Mar-91 $12,813 $12,499 $11,344
Apr-91 $13,017 $12,599 $11,360
May-91 $13,571 $12,886 $11,393
Jun-91 $12,889 $12,093 $11,428
Jul-91 $13,673 $12,666 $11,445
Aug-91 $13,741 $12,628 $11,478
Sep-91 $13,878 $12,961 $11,529
Oct-91 $14,085 $13,174 $11,546
Nov-91 $13,731 $12,602 $11,579
Dec-91 $14,656 $13,522 $11,588
Jan-92 $14,789 $13,274 $11,604
Feb-92 $15,074 $13,047 $11,647
Mar-92 $14,818 $12,435 $11,705
Apr-92 $15,236 $12,610 $11,722
May-92 $15,806 $13,113 $11,738
Jun-92 $15,502 $12,676 $11,781
Jul-92 $15,464 $12,711 $11,806
Aug-92 $15,017 $13,023 $11,839
Sep-92 $14,979 $12,905 $11,873
Oct-92 $14,773 $12,559 $11,915
Nov-92 $14,952 $12,786 $11,931
Dec-92 $15,274 $12,892 $11,924
Jan-93 $15,476 $12,937 $11,983
Feb-93 $15,816 $13,245 $12,024
Mar-93 $16,368 $14,017 $12,067
Apr-93 $16,697 $14,668 $12,100
May-93 $17,186 $15,009 $12,117
Jun-93 $17,112 $14,885 $12,134
Jul-93 $17,558 $15,194 $12,133
Aug-93 $18,546 $15,893 $12,167
Sep-93 $18,471 $15,602 $12,192
Oct-93 $19,322 $16,034 $12,243
Nov-93 $18,960 $15,130 $12,251
Dec-93 $20,268 $15,873 $12,251
Jan-94 $21,395 $16,923 $12,285
Feb-94 $20,855 $16,706 $12,328
Mar-94 $20,061 $15,989 $12,370
Apr-94 $20,406 $16,486 $12,386
May-94 $20,602 $16,531 $12,394
Jun-94 $20,142 $16,488 $12,436
Jul-94 $21,073 $16,805 $12,469
Aug-94 $21,798 $17,314 $12,521
Sep-94 $21,303 $16,862 $12,554
Oct-94 $21,500 $17,344 $12,563
Nov-94 $20,615 $16,596 $12,579
Dec-94 $20,434 $16,759 $12,579
Jan-95 $20,270 $16,511 $12,629
Feb-95 $20,875 $16,755 $12,679
Mar-95 $21,265 $17,566 $12,721
Apr-95 $22,008 $18,181 $12,763
May-95 $22,662 $18,340 $12,789
Jun-95 $22,990 $18,338 $12,814
Jul-95 $24,022 $19,259 $12,814
Aug-95 $23,871 $18,834 $12,848
Sep-95 $24,412 $19,386 $12,872
Oct-95 $23,632 $19,084 $12,915
Nov-95 $24,171 $19,751 $12,906
Dec-95 $24,486 $20,332 $12,897
Jan-96 $25,361 $20,702 $12,973
Feb-96 $25,446 $20,832 $13,015
Mar-96 $25,742 $21,184 $13,082
Apr-96 $26,321 $21,685 $13,132
May-96 $26,632 $21,707 $13,157
Jun-96 $26,660 $21,821 $13,166
Jul-96 $25,799 $21,055 $13,191
Aug-96 $26,462 $21,301 $13,216
Sep-96 $26,999 $22,139 $13,258
Oct-96 $27,440 $22,297 $13,300
Nov-96 $28,932 $23,550 $13,325
Dec-96 $29,519 $23,178 $13,325
Jan-97 $30,229 $23,460 $13,367
Feb-97 $30,471 $23,734 $13,407
Mar-97 $30,335 $23,269 $13,441
Apr-97 $31,014 $24,034 $13,457
May-97 $32,555 $25,522 $13,449
Jun-97 $33,855 $26,798 $13,465
Jul-97 $35,139 $28,037 $13,481
Aug-97 $33,945 $26,165 $13,506
Sep-97 $36,136 $27,590 $13,540
Oct-97 $33,774 $26,143 $13,574
Nov-97 $33,876 $26,609 $13,566
Dec-97 $34,295 $26,938 $13,550
Jan-98 $34,348 $27,693 $13,574
Feb-98 $36,240 $29,571 $13,601
Mar-98 $37,849 $30,824 $13,629
Apr-98 $38,043 $31,129 $13,653
May-98 $36,894 $30,744 $13,678
Jun-98 $35,833 $31,478 $13,694
Jul-98 $34,985 $31,432 $13,710
Aug-98 $29,664 $27,245 $13,727
</TABLE>
THE HISTORICAL DATA SHOWN PERTAIN ONLY TO THE FUND'S CLASS I SHARES. THE FUND
OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND EXPENSES, WHICH AFFECT
THEIR PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Performance figures represent the change in value of an investment over the
period shown and have been restated to include the current, maximum 5.75%
initial sales charge, assuming reinvestment of distributions at net asset value.
Prior to July 1, 1992, Fund shares were offered at a higher initial sales
charge; thus, actual total returns would have been lower. On January 1, 1993,
the Fund implemented a Rule 12b-1 plan, which affects subsequent performance.
Past performance is not predictive of future results.
**Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index. Source: Morgan Stanley Capital International.
***Source: U.S. Bureau of Labor Statistics (8/31/98).
Past performance is not predictive of future results.
10
CLASS I
Periods ended 8/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR 10-YEAR (11/29/54)
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Cumulative Total
Return(1) -12.61% 59.95% 214.67% 33,782.59%
Average Annual Total
Return(2) -17.63% 8.55% 11.49% 14.08%
Value of $10,000
Investment(3) $8,237 $15,071 $29,664 $3,193,461
</TABLE>
<TABLE>
<CAPTION>
8/31/94 8/31/95 8/31/96 8/31/97 8/31/98
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) 17.47% 9.51% 10.85% 28.28% -12.61%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and has been restated to include the
current, maximum 5.75% initial sales charge. Prior to July 1, 1992, Fund shares
were offered at a higher sales charge; thus actual total returns would have been
lower.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and have been restated to include the current,
maximum 5.75% initial sales charge. Prior to July 1, 1992, Fund shares were
offered at a higher sales charge; thus actual total returns would have been
lower.
4. One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charge.
On January 1, 1993, the Fund's Class I shares implemented a Rule 12b-1 plan,
which affects subsequent performance. All calculations assume reinvestment of
distributions at net asset value. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions,
currency volatility, and the economic, social and political climates of
countries where the Fund invests. Emerging markets involve heightened risks
related to the same factors, in addition to those associated with their
relatively small size and lesser liquidity. You may have a gain or loss when you
sell your shares.
Past performance is not predictive of future results.
11
CLASS II
Templeton Growth Fund - Class II produced a - 13.32% cumulative total return for
the one-year period ended August 31, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include sales charges.
The Fund's share price, as measured by net asset value, decreased $5.69, from
$22.18 on August 31, 1997, to $16.49 on August 31, 1998. During the reporting
period, shareholders received per-share distributions of 42.51 cents ($0.4251)
in income dividends, 33 cents ($0.33) in short-term capital gains, and $2.55 in
long-term capital gains. Distributions will vary depending on income earned by
the Fund and any profits realized from the sale of securities in the portfolio,
as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
12
The graph on page 14 compares the performance of the Fund's Class II shares
since inception and the unmanaged Morgan Stanley Capital International(R) (MSCI)
World Index, which includes approximately 1,500 companies representing the stock
markets of 23 countries, including the U.S., Canada, the United Kingdom, and
Japan. The graph also compares the Fund's performance versus the Consumer Price
Index (CPI), a commonly used measure of inflation. Please remember, the Fund's
performance differs from that of an index because an index is not managed
according to any investment strategy, does not contain cash (the Fund generally
carries a certain percentage of cash at any given time), and includes no sales
charges or management or operating expenses. Of course, one cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
Past performance is not predictive of future results.
13
CLASS II
Total Return Index Comparison
$10,000 Investment (5/1/95 - 8/31/98)
[LINE GRAPH]
The following line graph hypothetically compares the performance of the
Templeton Growth Fund Class II shares to that of the MSCI World Index and CPI,
based on a $10,000 investment from 9/1/88 to 8/31/98.
<TABLE>
<CAPTION>
Total Return Index Comparison
Templeton Growth MSCI World Index CPI
Fund- Class II
---------------------------------------------------
<S> <C> <C> <C>
5/1/95 $9,898 $10,000 $10,000
May 95 $10,187 $10,088 $10,020
Jun-95 $10,329 $10,086 $10,040
Jul-95 $10,788 $10,593 $10,040
Aug-95 $10,708 $10,359 $10,067
Sep-95 $10,941 $10,663 $10,086
Oct-95 $10,588 $10,497 $10,119
Nov-95 $10,818 $10,863 $10,112
Dec-95 $10,960 $11,183 $10,105
Jan-96 $11,340 $11,387 $10,164
Feb-96 $11,372 $11,458 $10,197
Mar-96 $11,493 $11,651 $10,250
Apr-96 $11,746 $11,927 $10,289
May-96 $11,873 $11,940 $10,309
Jun-96 $11,880 $12,002 $10,316
Jul-96 $11,493 $11,581 $10,335
Aug-96 $11,778 $11,716 $10,355
Sep-96 $12,006 $12,177 $10,388
Oct-96 $12,191 $12,264 $10,421
Nov-96 $12,847 $12,953 $10,441
Dec-96 $13,107 $12,748 $10,441
Jan-97 $13,412 $12,904 $10,473
Feb-97 $13,506 $13,054 $10,505
Mar-97 $13,439 $12,799 $10,531
Apr-97 $13,729 $13,219 $10,544
May-97 $14,405 $14,038 $10,537
Jun-97 $14,973 $14,739 $10,550
Jul-97 $15,527 $15,421 $10,563
Aug-97 $14,993 $14,392 $10,583
Sep-97 $15,947 $15,175 $10,609
Oct-97 $14,898 $14,379 $10,636
Nov-97 $14,928 $14,636 $10,629
Dec-97 $15,108 $14,816 $10,617
Jan-98 $15,124 $15,232 $10,636
Feb-98 $15,944 $16,265 $10,657
Mar-98 $16,637 $16,954 $10,678
Apr-98 $16,716 $17,122 $10,697
May-98 $16,196 $16,910 $10,717
Jun-98 $15,723 $17,314 $10,730
Jul-98 $15,337 $17,288 $10,742
Aug-98 $12,991 $14,985 $10,755
</TABLE>
THE HISTORICAL DATA SHOWN PERTAINS ONLY TO THE FUND'S CLASS II SHARES. THE FUND
OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND EXPENSES, WHICH AFFECT
THEIR PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Performance figures represent the change in value of an investment over the
periods shown and include all sales charges, assuming reinvestment of
distributions at net asset value. Past performance is not predictive of future
results.
**Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index. Source: Morgan Stanley Capital International.
***Source: U.S. Bureau of Labor Statistics (8/31/98).
Past performance is not predictive of future results.
14
CLASS II
Periods ended 8/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 3-YEAR (5/1/95)
<S> <C> <C> <C>
Cumulative Total Return(1) - 13.32% 21.37% 31.22%
Average Annual Total Return(2) - 15.03% 6.31% 8.16%
Value of $10,000 Investment(3) $8,497 $12,015 $12,991
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge applicable to shares
redeemed within 18 months of investment.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include all sales charges.
All calculations assume reinvestment of distributions at net asset value. Since
markets can go down as well as up, investment return and principal value will
fluctuate with market conditions, currency volatility and the economic, social
and political climates of countries where the Fund invests. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with their relatively small size and lesser liquidity. You may have a
gain or loss when you sell your shares.
Past performance is not predictive of future results.
15
ADVISOR CLASS
Templeton Growth Fund - Advisor Class produced a -12.41% cumulative total
return for the one-year period ended August 31, 1998. Cumulative total return
measures the change in value of an investment, assuming reinvestment of all
distributions.
The Fund's share price, as measured by net asset value, decreased $5.69, from
$22.49 on August 31, 1997, to $16.80 on August 31, 1998. During the reporting
period, shareholders received per-share distributions of 59.13 cents ($0.5913)
in income dividends, 33 cents ($0.33) in short-term capital gains, and $2.55 in
long-term capital gains. Distributions will vary depending on income earned by
the Fund and any profits realized from the sale of securities in the portfolio,
as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
16
The graph on the following page compares the performance of the Fund's Advisor
Class shares over a ten-year period and the unmanaged Morgan Stanley Capital
International(R) (MSCI) World Index. The MSCI World Index includes approximately
1,500 companies representing the stock markets of 23 countries, including the
U.S., Canada, the United Kingdom, and Japan. The graph also compares the Fund's
performance versus the Consumer Price Index (CPI), a commonly used measure of
inflation. Please remember, the Fund's performance differs from that of an index
because an index is not managed according to any investment strategy, does not
contain cash (the Fund generally carries a certain percentage of cash at any
given time), and includes no management or operating expenses. Of course, one
cannot invest directly in an index, nor is an index representative of the Fund's
portfolio.
Past performance is not predictive of future results.
17
ADVISOR CLASS
Total Return Index Comparison
$10,000 Investment (9/1/88 - 8/31/98)
[LINE GRAPH]
The following line graph hypothetically compares the performance of the
Templeton Growth Fund Advisor shares to that of the MSCI World Index and CPI,
based on a $10,000 investment from 9/1/88 to 8/31/98.
<TABLE>
<CAPTION>
Total Return Index Comparison
Templeton Growth MSCI World CPI
Fund- Advisor Class Index
----------------------------------------------------------
<S> <C> <C> <C>
9/1/88 $10,000 $10,000 $10,000
Sep 88 $10,344 $10,426 $10,068
Oct-88 $10,626 $11,122 $10,101
Nov-88 $10,595 $11,511 $10,110
Dec-88 $10,621 $11,617 $10,127
Jan-89 $11,370 $12,039 $10,178
Feb-89 $11,061 $11,966 $10,218
Mar-89 $11,262 $11,891 $10,277
Apr-89 $11,641 $12,167 $10,345
May-89 $11,726 $11,871 $10,404
Jun-89 $11,656 $11,739 $10,429
Jul-89 $12,684 $13,068 $10,455
Aug-89 $12,838 $12,753 $10,472
Sep-89 $12,854 $13,115 $10,505
Oct-89 $12,329 $12,680 $10,556
Nov-89 $12,556 $13,188 $10,580
Dec-89 $13,017 $13,615 $10,597
Jan-90 $12,439 $12,981 $10,706
Feb-90 $12,439 $12,426 $10,756
Mar-90 $12,712 $11,678 $10,815
Apr-90 $12,315 $11,512 $10,833
May-90 $13,447 $12,726 $10,857
Jun-90 $13,521 $12,638 $10,916
Jul-90 $13,885 $12,755 $10,958
Aug-90 $12,580 $11,563 $11,058
Sep-90 $11,423 $10,346 $11,151
Oct-90 $11,262 $11,314 $11,218
Nov-90 $11,625 $11,131 $11,243
Dec-90 $11,839 $11,366 $11,243
Jan-91 $12,507 $11,784 $11,311
Feb-91 $13,438 $12,877 $11,327
Mar-91 $13,592 $12,499 $11,344
Apr-91 $13,809 $12,599 $11,360
May-91 $14,396 $12,886 $11,393
Jun-91 $13,673 $12,093 $11,428
Jul-91 $14,505 $12,666 $11,445
Aug-91 $14,577 $12,628 $11,478
Sep-91 $14,721 $12,961 $11,529
Oct-91 $14,942 $13,174 $11,546
Nov-91 $14,566 $12,602 $11,579
Dec-91 $15,548 $13,522 $11,588
Jan-92 $15,689 $13,274 $11,604
Feb-92 $15,991 $13,047 $11,647
Mar-92 $15,719 $12,435 $11,705
Apr-92 $16,162 $12,610 $11,722
May-92 $16,767 $13,113 $11,738
Jun-92 $16,444 $12,676 $11,781
Jul-92 $16,404 $12,711 $11,806
Aug-92 $15,930 $13,023 $11,839
Sep-92 $15,890 $12,905 $11,873
Oct-92 $15,671 $12,559 $11,915
Nov-92 $15,861 $12,786 $11,931
Dec-92 $16,203 $12,892 $11,924
Jan-93 $16,417 $12,937 $11,983
Feb-93 $16,777 $13,245 $12,024
Mar-93 $17,363 $14,017 $12,067
Apr-93 $17,713 $14,668 $12,100
May-93 $18,231 $15,009 $12,117
Jun-93 $18,152 $14,885 $12,134
Jul-93 $18,625 $15,194 $12,133
Aug-93 $19,673 $15,893 $12,167
Sep-93 $19,594 $15,602 $12,192
Oct-93 $20,497 $16,034 $12,243
Nov-93 $20,113 $15,130 $12,251
Dec-93 $21,501 $15,873 $12,251
Jan-94 $22,696 $16,923 $12,285
Feb-94 $22,123 $16,706 $12,328
Mar-94 $21,281 $15,989 $12,370
Apr-94 $21,647 $16,486 $12,386
May-94 $21,854 $16,531 $12,394
Jun-94 $21,366 $16,488 $12,436
Jul-94 $22,355 $16,805 $12,469
Aug-94 $23,123 $17,314 $12,521
Sep-94 $22,599 $16,862 $12,554
Oct-94 $22,808 $17,344 $12,563
Nov-94 $21,868 $16,596 $12,579
Dec-94 $21,676 $16,759 $12,579
Jan-95 $21,503 $16,511 $12,629
Feb-95 $22,144 $16,755 $12,679
Mar-95 $22,558 $17,566 $12,721
Apr-95 $23,346 $18,181 $12,763
May-95 $24,040 $18,340 $12,789
Jun-95 $24,388 $18,338 $12,814
Jul-95 $25,483 $19,259 $12,814
Aug-95 $25,323 $18,834 $12,848
Sep-95 $25,897 $19,386 $12,872
Oct-95 $25,069 $19,084 $12,915
Nov-95 $25,641 $19,751 $12,906
Dec-95 $25,975 $20,332 $12,897
Jan-96 $26,904 $20,702 $12,973
Feb-96 $26,993 $20,832 $13,015
Mar-96 $27,308 $21,184 $13,082
Apr-96 $27,922 $21,685 $13,132
May-96 $28,251 $21,707 $13,157
Jun-96 $28,281 $21,821 $13,166
Jul-96 $27,368 $21,055 $13,191
Aug-96 $28,071 $21,301 $13,216
Sep-96 $28,640 $22,139 $13,258
Oct-96 $29,108 $22,297 $13,300
Nov-96 $30,691 $23,550 $13,325
Dec-96 $31,314 $23,178 $13,325
Jan-97 $32,067 $23,460 $13,368
Feb-97 $32,323 $23,734 $13,408
Mar-97 $32,179 $23,269 $13,441
Apr-97 $32,900 $24,034 $13,457
May-97 $34,535 $25,522 $13,449
Jun-97 $35,929 $26,798 $13,465
Jul-97 $37,291 $28,037 $13,481
Aug-97 $36,041 $26,165 $13,507
Sep-97 $38,365 $27,591 $13,541
Oct-97 $35,892 $26,143 $13,575
Nov-97 $36,001 $26,609 $13,566
Dec-97 $36,456 $26,938 $13,550
Jan-98 $36,531 $27,693 $13,575
Feb-98 $38,542 $29,571 $13,602
Mar-98 $40,252 $30,824 $13,629
Apr-98 $40,478 $31,129 $13,654
May-98 $39,237 $30,744 $13,678
Jun-98 $38,129 $31,478 $13,694
Jul-98 $37,227 $31,432 $13,711
Aug-98 $31,570 $27,245 $13,727
</TABLE>
THE HISTORICAL DATA SHOWN PERTAIN ONLY TO THE FUND'S ADVISOR CLASS SHARES. THE
FUND OFFERS OTHER SHARE CLASSES SUBJECT TO DIFFERENT FEES AND EXPENSES, WHICH
AFFECT THEIR PERFORMANCE. SEE THE PROSPECTUS FOR DETAILS.
*Performance figures represent the change in value of an investment over the
periods shown, assuming reinvestment of distributions at net asset value. On
January 2, 1997, the Fund began selling Advisor Class shares to certain eligible
investors as described in the prospectus. This share class does not have sales
charges or a Rule 12b-1 plan. Performance quotations have been calculated as
follows: (a) For periods prior to January 2, 1997, figures reflect the Fund's
Class I performance, excluding the effect of the Class I sales charge, but
including the effect of Class I expenses, containing Rule 12b-1 fees; and (b)
for periods after January 1, 1997, figures reflect actual Advisor Class
performance, including the deduction of all fees and expenses applicable only to
that class. Past performance is not predictive of future results.
**Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index. Source: Morgan Stanley Capital International.
***Source: U.S. Bureau of Labor Statistics (8/31/98).
Past performance is not predictive of future results.
18
ADVISOR CLASS
Periods ended 8/31/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
OF THE FUND
1-YEAR* 5-YEAR* 10-YEAR* (11/29/54)*
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -12.41% 60.47% 215.70% 33,893.42%
Average Annual Total Return(1) -12.41% 9.92% 12.18% 14.24%
Value of $10,000 Investment(2) $8,759 $16,047 $31,570 $3,399,342
</TABLE>
<TABLE>
<CAPTION>
8/31/94 8/31/95 8/31/96 8/31/97 8/31/98
<S> <C> <C> <C> <C> <C>
One-Year Total Return(3),* 17.47% 9.51% 10.85% 28.39% -12.41%
</TABLE>
*On January 2, 1997, the Fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the Fund's Class I performance, excluding the effect of the Class I sales
charge, but including the effect of Class I expenses, containing Rule 12b-1
fees; and (b) for periods after January 1, 1997, figures reflect actual Advisor
Class performance, including the deduction of all fees and expenses applicable
only to that class. Since January 2, 1997 (commencement of sales), the
cumulative total return of Advisor Class shares was 1.70%.
1. Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated.
2. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
3. One-year total return represents the change in value of an investment over
the periods ended on the dates indicated.
All calculations assume reinvestment of distributions at net asset value. Since
markets can go down as well as up, investment return and principal value will
fluctuate with market conditions, currency volatility and the economic, social
and political climates of countries where the Fund invests. Emerging markets
involve heightened risks related to the same factors, in addition to those
associated with their relatively small size and lesser liquidity. You may have a
gain or loss when you sell your shares.
Past performance is not predictive of future results.
19
TEMPLETON GROWTH FUND
CLASS I
If you had invested $10,000 in Templeton Growth Fund - Class I at inception, it
would be worth more than $3.1 million today. The chart below illustrates the
cumulative total return of a hypothetical $10,000 investment in the Fund on
November 29, 1954 (inception), with income dividends and capital gains
reinvested as shown through August 31, 1998.*
[3-D GRAPH]
The following mountain chart illustrates the cumulative total return of a
$10,000 investment in the Fund on November 29, 1954 (inception).
<TABLE>
Principal + Principal + Total Value Principal Income Cap Gains
Dividends Cap Gains
<S> <C> <C> <C> <C> <C> <C>
11/54 $9,425 $9,425 $9,425 $9,425 $0 $0
12/54 $9,576 $9,576 $9,576 $9,576 $0 $0
12/55 $10,250 $10,250 $10,250 $10,250 $0 $0
12/56 $10,726 $10,726 $10,726 $10,726 $0 $0
12/57 $8,911 $8,911 $8,911 $8,911 $0 $0
12/58 $13,261 $13,261 $13,261 $13,261 $0 $0
12/59 $15,118 $15,118 $15,118 $15,118 $0 $0
12/60 $17,210 $17,210 $17,210 $17,210 $0 $0
12/61 $20,358 $20,358 $20,358 $20,358 $0 $0
12/62 $17,606 $17,606 $17,606 $17,606 $0 $0
12/63 $18,511 $18,511 $18,511 $18,511 $0 $0
12/64 $23,802 $23,506 $23,802 $23,506 $296 $0
12/65 $29,073 $28,313 $29,073 $28,313 $760 $0
12/66 $27,532 $26,485 $27,532 $26,485 $1,048 $0
12/67 $31,314 $29,632 $31,314 $29,632 $1,682 $0
12/68 $43,140 $40,283 $43,140 $40,283 $2,857 $0
12/69 $51,622 $47,446 $51,622 $47,446 $4,176 $0
12/70 $48,298 $43,676 $48,298 $43,676 $4,622 $0
12/71 $57,875 $52,568 $58,888 $51,555 $6,320 $1,013
12/72 $95,625 $87,992 $99,262 $84,354 $11,271 $3,637
12/73 $78,886 $79,615 $89,415 $69,086 $9,801 $10,529
12/74 $68,188 $69,154 $78,623 $58,718 $9,469 $10,435
12/75 $93,732 $93,527 $108,183 $79,076 $14,655 $14,451
12/76 $136,290 $135,840 $158,747 $113,384 $22,907 $22,456
12/77 $155,058 $162,989 $191,092 $126,956 $28,103 $36,033
12/78 $184,487 $192,793 $227,799 $149,482 $35,006 $43,311
12/79 $231,142 $241,866 $288,936 $184,072 $47,071 $57,794
12/80 $275,936 $302,407 $363,734 $214,609 $61,327 $87,798
12/81 $276,914 $296,032 $362,862 $210,085 $66,829 $85,948
12/82 $293,516 $322,039 $402,077 $213,478 $80,038 $108,561
12/83 $392,896 $419,717 $534,385 $278,228 $114,668 $141,489
12/84 $391,769 $423,667 $545,974 $269,463 $122,307 $154,205
12/85 $482,619 $536,261 $697,673 $321,206 $161,412 $215,055
12/86 $572,151 $637,582 $845,831 $363,902 $208,249 $273,680
12/87 $550,763 $653,004 $872,099 $331,668 $219,095 $321,336
12/88 $682,365 $784,305 $1,077,886 $388,784 $293,580 $395,521
12/89 $831,578 $935,100 $1,321,060 $445,617 $385,960 $489,483
12/90 $737,439 $834,403 $1,201,437 $370,405 $367,034 $463,998
12/91 $912,476 $1,101,650 $1,577,840 $436,287 $476,190 $665,364
12/92 $889,020 $1,161,912 $1,644,334 $406,598 $482,422 $755,314
12/93 $1,121,884 $1,558,305 $2,181,979 $498,209 $623,674 $1,060,095
12/94 $1,068,974 $1,589,760 $2,199,827 $458,907 $610,067 $1,130,853
12/95 $1,203,903 $1,922,768 $2,636,096 $490,575 $713,328 $1,432,194
12/96 $1,434,286 $2,296,081 $3,177,869 $552,498 $881,788 $1,743,583
12/97 $1,510,347 $2,730,272 $3,692,080 $548,539 $961,808 $2,181,733
8/31/98 $1,306,372 $2,361,545 $3,193,461 $474,458 $831,914 $1,887,087
</TABLE>
*Cumulative total return represents the change in value of an investment over
the indicated period. All figures have been restated to reflect the current,
maximum 5.75% initial sales charge; thus actual total return for purchasers of
shares during the periods shown may differ. Prior to July 1, 1992, these shares
were offered at a higher initial sales charge. On January 1, 1993, the Fund's
Class I shares implemented a Rule 12b-1 plan, which will affect subsequent
performance.
Except as noted, all figures assume reinvestment of income dividends and capital
gains at net asset value. Since markets can go down as well as up, investment
return and principal value will fluctuate with market conditions, and you may
have a gain or loss when you sell your shares.
The historical data shown above pertain only to Class I shares of the Fund. The
Fund offers other share classes, subject to different fees and expenses, which
will affect their performance. Please see the prospectus for more details.
Past performance is not predictive of future results.
20
TEMPLETON GROWTH FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
CLASS I
--------------------------------------------------------------------
YEAR ENDED AUGUST 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year................ $22.47 $18.75 $18.96 $18.95 $17.47
--------------------------------------------------------------------
Income from investment operations:
Net investment income............................ .50 .54 .50 .39 .29
Net realized and unrealized gains (losses)....... (2.76) 4.48 1.34 1.20 2.58
--------------------------------------------------------------------
Total from investment operations.................. (2.26) 5.02 1.84 1.59 2.87
--------------------------------------------------------------------
Less distributions from:
Net investment income............................ (.55) (.49) (.44) (.29) (.27)
Net realized gains............................... (2.88) (.81) (1.61) (1.29) (1.12)
--------------------------------------------------------------------
Total distributions............................... (3.43) (1.30) (2.05) (1.58) (1.39)
--------------------------------------------------------------------
Net asset value, end of year...................... $16.78 $22.47 $18.75 $18.96 $18.95
--------------------------------------------------------------------
--------------------------------------------------------------------
Total Return*..................................... (12.61)% 28.28% 10.85% 9.51% 17.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)................... $11,116,564 $12,129,283 $8,450,737 $6,964,298 $5,611,560
Ratios to average net assets:
Expenses......................................... 1.08% 1.08% 1.09% 1.12% 1.10%
Net investment income............................ 2.53% 2.81% 2.87% 2.40% 1.76%
Portfolio turnover rate........................... 48.23% 41.81% 19.63% 35.21% 27.35%
</TABLE>
*Total return does not reflect sales commissions.
21
TEMPLETON GROWTH FUND, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS II
-------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------
1998 1997 1996 1995+
-------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $22.18 $18.57 $18.90 $17.48
-------------------------------------------
Income from investment operations:
Net investment income...................................... .38 .42 .49 .04
Net realized and unrealized gains (losses)................. (2.77) 4.39 1.19 1.38
-------------------------------------------
Total from investment operations............................ (2.39) 4.81 1.68 1.42
-------------------------------------------
Less distributions from:
Net investment income...................................... (.42) (.39) (.40) --
Net realized gains......................................... (2.88) (.81) (1.61) --
-------------------------------------------
Total distributions......................................... (3.30) (1.20) (2.01) --
-------------------------------------------
Net asset value, end of year................................ $16.49 $22.18 $18.57 $18.90
-------------------------------------------
-------------------------------------------
Total Return*............................................... (13.32)% 27.30% 9.99% 8.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $872,219 $755,184 $280,087 $42,548
Ratios to average net assets:
Expenses................................................... 1.83% 1.84% 1.87% 1.86%**
Net investment income...................................... 1.79% 2.14% 2.25% 1.61%**
Portfolio turnover rate..................................... 48.23% 41.81% 19.63% 35.21%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
+For the period May 1, 1995 (effective date) to August 31, 1995.
22
TEMPLETON GROWTH FUND, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------------
YEAR ENDED AUGUST 31,
---------------------
1998 1997+
---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $22.49 $19.37
---------------------
Income from investment operations:
Net investment income...................................... .56 .37
Net realized and unrealized gains (losses)................. (2.78) 2.75
---------------------
Total from investment operations............................ (2.22) 3.12
---------------------
Less distributions from:
Net investment income...................................... (.59) --
Net realized gains......................................... (2.88) --
---------------------
Total distributions......................................... (3.47) --
---------------------
Net asset value, end of year................................ $16.80 $22.49
---------------------
---------------------
Total Return*............................................... (12.41)% 16.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $36,301 $29,531
Ratios to average net assets:
Expenses................................................... .83% .83%**
Net investment income...................................... 2.81% 3.68%**
Portfolio turnover rate..................................... 48.23% 41.81%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) to August 31, 1997.
See Notes to Financial Statements.
23
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 77.0%
AEROSPACE & MILITARY TECHNOLOGY 2.8%
Boeing Co. ................................................. United States 6,411,000 $ 198,340,313
*General Motors Corp., H.................................... United States 1,631,300 58,930,713
Raytheon Co., A............................................. United States 1,647,015 73,806,860
---------------
331,077,886
---------------
APPLIANCES & HOUSEHOLD DURABLES .7%
Sony Corp. ................................................. Japan 956,700 69,860,309
Toro Co. ................................................... United States 550,000 12,100,000
---------------
81,960,309
---------------
AUTOMOBILES 5.0%
Autoliv Inc., ADR........................................... Sweden 1,201,152 36,977,714
Fiat SpA, di Risp........................................... Italy 3,589,960 6,525,515
Ford Motor Co. ............................................. United States 3,016,600 132,730,400
General Motors Corp. ....................................... United States 4,556,700 263,149,425
Volkswagen AG............................................... Germany 368,350 27,153,672
Volvo AB, B................................................. Sweden 4,741,000 130,712,634
---------------
597,249,360
---------------
BANKING 5.9%
Australia & New Zealand Banking Group Ltd. ................. Australia 14,055,105 71,035,993
Bangkok Bank Public Co. Ltd., fgn. ......................... Thailand 24,930,800 17,552,711
Citicorp.................................................... United States 103,000 11,136,875
Deutsche Bank AG............................................ Germany 2,300,000 149,724,979
Development Bank of Singapore Ltd., fgn. ................... Singapore 3,392,500 11,747,677
Guoco Group Ltd. ........................................... Hong Kong 19,237,000 11,605,453
HSBC Holdings Plc. ......................................... Hong Kong 11,336,941 240,660,558
*Kookmin Bank............................................... South Korea 1,424,403 3,923,568
National Australia Bank Ltd. ............................... Australia 10,723,122 132,685,204
National Australia Capital Securities Plc. ................. Australia 1,329,253 36,055,988
Unibanco Uniao de Bancos Brasileiros SA, GDR................ Brazil 773,440 11,601,600
Union Bank of Norway, Primary Capital Cert. ................ Norway 385,000 9,302,744
---------------
707,033,350
---------------
BROADCASTING & PUBLISHING .1%
South China Morning Post Holdings, Ltd. .................... Hong Kong 30,911,000 10,171,766
South China Morning Post Holdings, Ltd., 144A............... Hong Kong 8,976,000 2,953,698
---------------
13,125,464
---------------
BUILDING MATERIALS & COMPONENTS 1.6%
Caradon Plc. ............................................... United Kingdom 5,154,667 11,954,677
Cemex SA.................................................... Mexico 2,019,680 4,051,718
*Cemex SA, ADR.............................................. Mexico 22,092 88,638
Cemex SA, B................................................. Mexico 4,694,000 11,535,483
Cemex SA, B, ADR............................................ Mexico 777,000 3,818,948
+Hepworth Plc. ............................................. United Kingdom 16,767,410 42,536,925
</TABLE>
24
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BUILDING MATERIALS & COMPONENTS (CONT.)
+Owens Corning.............................................. United States 3,313,700 $ 116,186,606
*Siam Cement Public Co. Ltd., fgn. ......................... Thailand 923,530 5,907,065
---------------
196,080,060
---------------
BUSINESS & PUBLIC SERVICES 1.1%
Columbia HCA Healthcare Corp. .............................. United States 1,155,200 26,064,200
*Humana Inc. ............................................... United States 8,335,200 108,357,600
---------------
134,421,800
---------------
CHEMICALS 3.9%
BASF AG..................................................... Germany 2,671,000 107,536,717
Cookson Group Plc. ......................................... United Kingdom 11,025,284 28,800,621
DSM NV...................................................... Netherlands 1,273,290 112,097,891
Eastman Chemical Co. ....................................... United States 1,100,000 56,718,750
European Vinyls Corporation Evc International NV............ Netherlands 388,971 4,905,993
Imperial Chemical Industries Plc. .......................... United Kingdom 551,888 6,071,609
Lyondell Chemical Co. ...................................... United States 2,568,600 55,385,438
Rhone-Poulenc SA, A......................................... France 1,800,000 90,913,706
---------------
462,430,725
---------------
CONSTRUCTION & HOUSING .1%
Fletcher Challenge Building Ltd. ........................... New Zealand 5,267,917 6,135,959
Hollandsche Beton Groep NV.................................. Netherlands 588,511 9,551,974
---------------
15,687,933
---------------
ELECTRICAL & ELECTRONICS 5.7%
ABB AB, A................................................... Sweden 11,700,000 130,188,049
General Electric Co. Plc. .................................. United Kingdom 18,500,000 121,280,497
Gold Peak Industries (Holdings) Ltd. ....................... Hong Kong 4,307,000 666,959
Hitachi Ltd. ............................................... Japan 1,648,500 8,254,760
Motorola Inc. .............................................. United States 3,817,600 164,395,400
Philips Electronics NV...................................... Netherlands 4,005,600 261,263,225
---------------
686,048,890
---------------
ELECTRONIC COMPONENTS & INSTRUMENTS .1%
BICC Plc. .................................................. United Kingdom 9,641,820 14,288,603
---------------
ENERGY SOURCES 7.8%
Amerada Hess Corp. ......................................... United States 2,008,000 98,643,000
*Barrett Resources Corp. ................................... United States 1,100,000 22,343,750
Burlington Resources Inc. .................................. United States 1,000,000 29,562,500
Norsk Hydro AS.............................................. Norway 3,251,577 117,224,773
Occidental Petroleum Corp. ................................. United States 5,000,000 92,500,000
Perez Companc SA, B......................................... Argentina 6,863,400 27,184,501
*Ranger Oil Ltd. ........................................... Canada 2,810,900 14,932,906
*Renaissance Energy Ltd. ................................... Canada 5,250,000 57,395,390
</TABLE>
25
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ENERGY SOURCES (CONT.)
Repsol SA................................................... Spain 2,429,700 $ 109,508,063
Saga Petroleum AS, A........................................ Norway 1,052,250 11,157,461
Saga Petroleum AS, B........................................ Norway 1,927,910 18,831,844
Societe Elf Aquitane SA..................................... France 1,305,000 133,370,558
Transportadora de Gas del Sur SA, B, ADR.................... Argentina 1,400,000 13,300,000
Valero Energy Corp., new.................................... United States 2,500,000 44,687,500
Woodside Petroleum Ltd. .................................... Australia 679,200 3,070,507
YPF Sociedad Anonima........................................ Argentina 1,400,000 31,366,273
YPF Sociedad Anonima, ADR................................... Argentina 5,282,800 116,881,950
---------------
941,960,976
---------------
FINANCIAL SERVICES 1.0%
Lend Lease Corp. Ltd. ...................................... Australia 923,300 17,462,226
Merrill Lynch & Co. Inc. ................................... United States 1,580,300 104,299,800
---------------
121,762,026
---------------
FOOD & HOUSEHOLD PRODUCTS 3.1%
Archer-Daniels Midland Co. ................................. United States 9,232,794 138,491,908
Embotelladora Andina SA, B, ADR............................. Chile 186,700 2,088,706
Hillsdown Holdings Plc. .................................... United Kingdom 20,423,076 48,391,052
IBP Inc. ................................................... United States 3,750,000 62,109,375
Panamerican Beverages Inc., A............................... Mexico 616,400 9,823,875
Tate & Lyle Plc. ........................................... United Kingdom 13,600,000 100,601,149
Vitro SA de CV.............................................. Mexico 6,090,720 7,648,911
Vitro SA de CV, ADR......................................... Mexico 962,440 3,669,303
---------------
372,824,279
---------------
FOREST PRODUCTS & PAPER 5.4%
Aracruz Celulose SA, ADR.................................... Brazil 2,338,900 14,764,306
Assidomaen AB............................................... Sweden 1,198,100 27,699,850
+Boise Cascade Corp. ....................................... United States 3,082,600 75,331,037
Carter Holt Harvey Ltd. .................................... New Zealand 21,502,738 15,134,142
Champion International Corp. ............................... United States 1,000,000 33,000,000
Enso OY, A.................................................. Finland 98,700 827,596
Enso OY, R.................................................. Finland 4,973,575 41,981,264
Fletcher Challenge Paper Ltd. .............................. New Zealand 18,802,836 11,649,548
International Paper Co. .................................... United States 3,400,000 125,800,000
Metsa Serla OY, B........................................... Finland 2,611,000 19,947,082
Mitsubishi Paper Mills Ltd. ................................ Japan 4,647,000 7,833,317
Mo Och Domsjoe AB, B........................................ Sweden 2,950,000 57,991,172
Norske Skogindustrier AS, A................................. Norway 994,000 27,467,386
*PT Tjiwi Kimia TBK......................................... Indonesia 11,861,214 1,663,790
*Sappi Ltd. ................................................ South Africa 3,000,000 9,361,503
St. Joe Co. ................................................ United States 661,800 13,277,363
Stora Kopparbergs Bergslags AB, A........................... Sweden 1,414,200 17,134,824
Stora Kopparbergs Bergslags AB, B........................... Sweden 2,085,800 25,272,109
</TABLE>
26
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FOREST PRODUCTS & PAPER (CONT.)
Svenska Cellulosa AB, B..................................... Sweden 1,642,844 $ 34,935,545
UPM-Kymmene Corp. .......................................... Finland 4,301,840 86,569,846
---------------
647,641,680
---------------
HEALTH & PERSONAL CARE .1%
Aetna Inc. ................................................. United States 117,500 7,072,031
Ono Pharmaceutical Co. Ltd. ................................ Japan 173,000 4,080,246
---------------
11,152,277
---------------
INDUSTRIAL COMPONENTS 2.4%
BTR Plc. ................................................... United Kingdom 47,031,250 103,168,066
Goodyear Tire & Rubber Co. ................................. United States 1,722,600 84,407,400
*RMI Titanium Co. .......................................... United States 462,700 8,270,763
Sandvik AB, B............................................... Sweden 2,156,000 43,848,769
SKF AB, A................................................... Sweden 1,002,995 15,500,708
SKF AB, B................................................... Sweden 2,480,374 38,026,084
---------------
293,221,790
---------------
INSURANCE 1.1%
American General Corp. ..................................... United States 1,100,000 70,675,000
American International Group Inc. .......................... United States 137,813 10,654,629
+W R Berkley Corp. ......................................... United States 1,690,650 53,466,806
---------------
134,796,435
---------------
LEISURE & TOURISM .5%
Rank Group Plc. ............................................ United Kingdom 9,845,000 46,818,935
Shangri-La Asia Ltd. ....................................... Hong Kong 23,233,000 13,191,710
---------------
60,010,645
---------------
MACHINERY & ENGINEERING 1.2%
+Agco Corp. ................................................ United States 5,739,500 49,503,188
Harnischfeger Industries Inc. .............................. United States 1,786,700 28,698,869
Makita Corp. ............................................... Japan 840,000 9,768,964
New Holland NV.............................................. Netherlands 1,600,000 17,700,000
Valmet (OY)................................................. Finland 2,000,000 26,831,881
Vickers Group Plc. ......................................... United Kingdom 5,396,988 14,550,060
---------------
147,052,962
---------------
MERCHANDISING 2.6%
American Stores Co. ........................................ United States 5,405,000 156,745,000
Best Denki Co. Ltd. ........................................ Japan 529,000 2,922,445
*CompUSA Inc. .............................................. United States 2,000,000 23,750,000
Dairy Farm International Holdings Ltd. ..................... Hong Kong 36,629,531 34,798,054
</TABLE>
27
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MERCHANDISING (CONT.)
Gucci Group NV.............................................. Netherlands 700,000 $ 24,281,250
Safeway Plc. ............................................... United Kingdom 4,309,883 22,480,761
W.H. Smith Group............................................ United Kingdom 5,740,290 44,408,211
---------------
309,385,721
---------------
METALS & MINING 4.3%
AK Steel Holding Corp. ..................................... United States 1,029,900 14,289,862
Alcan Aluminum Ltd. ........................................ Canada 3,463,361 65,429,987
Alcan Aluminum Ltd., fgn. .................................. Canada 1,500,000 28,500,000
Anglo American Platinum Corp. Ltd. ......................... South Africa 3,000,000 37,352,632
Billiton Plc. .............................................. United Kingdom 19,141,800 32,854,443
British Steel Plc. ......................................... United Kingdom 63,665,600 114,337,742
Companhia Siderurgica Nacional CSN, ADR..................... Brazil 1,177,905 18,846,480
Grupo Mexico SA de CV, B.................................... Mexico 6,004,300 10,780,578
Industrias Penoles SA....................................... Mexico 3,223,400 7,727,495
Iscor Ltd. ................................................. South Africa 21,374,700 4,224,874
*Maanshan Iron & Steel Co. Ltd., H.......................... China 8,979,000 247,962
Minorco SA, ADR............................................. Luxembourg 2,013,724 16,864,939
Outokumpu OY, A............................................. Finland 666,200 6,951,544
Pechiney SA, A.............................................. France 2,368,775 76,754,723
Pohang Iron & Steel Co. Ltd. ............................... South Korea 1,022,390 39,878,793
+Titanium Metals............................................ United States 2,322,000 26,703,000
WMC Ltd. ................................................... Australia 6,933,500 17,021,394
---------------
518,766,448
---------------
MISC MATERIALS & COMMODITIES .8%
Agrium Inc. ................................................ Canada 6,182,100 52,161,469
De Beers/Centenary Linked Units, Reg. ...................... South Africa 870,850 10,531,115
De Beers/Centenary Linked Units, ADR........................ South Africa 2,950,000 33,925,000
---------------
96,617,584
---------------
MULTI-INDUSTRY 5.7%
Alfa SA de CV, A............................................ Mexico 6,608,600 14,914,840
Amoy Properties Ltd. ....................................... Hong Kong 53,975,000 25,945,501
Broken Hill Proprietary Co. Ltd. ........................... Australia 15,752,699 108,714,528
Cheung Kong Holdings Ltd. .................................. Hong Kong 30,000,000 116,141,021
DESC SA de CV, B............................................ Mexico 2,059,000 7,331,812
DESC SA de CV, C, ADR....................................... Mexico 25,800 399,900
Elementis Plc. ............................................. United Kingdom 19,800,000 32,823,724
First Pacific Co. .......................................... Hong Kong 37,473,000 11,605,740
Hicom Holdings BHD.......................................... Malaysia 1,289,800 187,988
Hutchison Whampoa Ltd. ..................................... Hong Kong 10,000,000 43,359,315
Inchcape Plc. .............................................. United Kingdom 26,000,000 70,530,317
Jardine Matheson Holdings Ltd. ............................. Hong Kong 10,087,768 17,956,227
Jardine Strategic Holdings Ltd. ............................ Hong Kong 14,245,732 16,667,506
Metra OY, B................................................. Finland 284,280 7,585,391
</TABLE>
28
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MULTI-INDUSTRY (CONT.)
Pacific Dunlop Ltd. ........................................ Australia 18,044,277 $ 31,452,465
Pilkington Plc.............................................. United Kingdom 40,000,000 52,244,679
*Saab AB, B................................................. Sweden 1,254,300 10,390,082
Swire Pacific Ltd., A....................................... Hong Kong 33,386,500 96,292,298
Swire Pacific Ltd., B....................................... Hong Kong 24,783,300 11,113,659
Wheelock and Company Ltd. .................................. Hong Kong 10,000,000 5,258,607
---------------
680,915,600
---------------
REAL ESTATE .9%
Hang Lung Development Co. Ltd. ............................. Hong Kong 27,818,000 21,538,739
Hong Kong Land Holdings Ltd. ............................... Hong Kong 13,093,000 10,736,260
New World Development Co. Ltd. ............................. Hong Kong 17,699,244 19,071,477
Rouse Co. .................................................. United States 1,732,500 49,809,375
Wereldhave NV............................................... Netherlands 160,000 9,125,399
---------------
110,281,250
---------------
RECREATION & OTHER CONSUMER GOODS
Yue Yuen Industrial (Holdings) Ltd. ........................ Hong Kong 1,677,000 3,029,732
---------------
TELECOMMUNICATIONS 4.9%
Bell Atlantic Corp. ........................................ United States 3,100,000 136,787,500
Hong Kong Telecommunications Ltd. .......................... Hong Kong 41,597,548 73,541,321
PT Indosat TBK, ADR......................................... Indonesia 544,700 3,268,200
Rostelecom.................................................. Russia 11,958,000 7,294,380
Rostelecom, ADR............................................. Russia 7,000 25,375
SK Telecom Co. Ltd., ADR.................................... South Korea 7,484,398 44,906,388
Smartone Telecommunications Holdings Ltd. .................. Hong Kong 15,000,000 31,551,644
Telecom Argentina Stet-France SA, ADR....................... Argentina 2,974,700 66,558,913
Telefonica de Argentina SA, B, ADR.......................... Argentina 566,000 12,664,250
Telefonica del Peru SA, B................................... Peru 8,459,874 11,227,437
Telefonica del Peru SA, B, ADR.............................. Peru 1,083,200 13,946,200
Telefonica SA............................................... Spain 1,389,200 51,944,847
Telefonos de Mexico SA (Telmex), L.......................... Mexico 14,118,470 25,066,144
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 2,900,000 103,493,750
---------------
582,276,349
---------------
TRANSPORTATION 1.6%
Cathay Pacific Airways Ltd. ................................ Hong Kong 35,082,000 25,578,550
Hitachi Zosen Corp. ........................................ Japan 4,496,000 5,572,633
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 4,621,630 53,398,830
Singapore Airlines Ltd., fgn. .............................. Singapore 23,586,900 100,934,932
Stolt Nielsen SA............................................ Norway 463,500 4,866,750
Stolt Nielsen SA, ADR....................................... Norway 459,000 4,590,000
---------------
194,941,695
---------------
</TABLE>
29
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
UTILITIES ELECTRICAL & GAS 6.6%
*CEZ AS..................................................... Czech Republic 186,161 $ 3,378,810
CLP Holdings Ltd. .......................................... Hong Kong 17,999,900 75,723,525
Electrabel SA............................................... Belgium 154,364 50,291,801
Entergy Corp. .............................................. United States 3,600,000 103,725,000
Gener SA, ADR............................................... Chile 1,252,800 16,521,300
Hong Kong Electric Holdings Ltd. ........................... Hong Kong 41,999,600 124,656,842
Illinova Corp. ............................................. United States 2,900,000 74,856,250
Korea Electric Power Corp. ................................. South Korea 6,273,800 80,832,373
Mosenergo................................................... Russia 100,000,000 1,500,000
National Grid Group Plc. ................................... United Kingdom 11,900,000 86,033,339
Potomac Electric Power Co. ................................. United States 4,000,000 98,000,000
Thames Water Group Plc. .................................... United Kingdom 4,170,833 75,148,892
---------------
790,668,132
---------------
WHOLESALE & INTERNATIONAL TRADE
Sime Darby Hongkong Ltd. ................................... Hong Kong 6,660,000 1,632,943
---------------
TOTAL COMMON STOCKS (COST $10,967,607,988).................. 9,258,342,904
---------------
PREFERRED STOCKS 3.4%
Ballast Nedam NV, ctf., cvt., pfd........................... Netherlands 92,082 3,562,882
Banco Bradesco SA, pfd. .................................... Brazil 3,171,500,000 17,785,623
*Banco Bradesco SA, rts., pfd. ............................. Brazil 76,911,803 8,496
Centrais Eletricas Brasileiras SA (Electrobras), B, pfd. ... Brazil 120,400,000 1,841,448
*Centrais Eletricas Brasileiras SA (Electrobras), ADR,
pfd. ..................................................... Brazil 3,759,200 28,747,388
Centrais Geradoras Do Sul Do Brasil SA (Gerasul), ADR,
pfd. ..................................................... Brazil 350,790 1,773,473
Cia Vale do Rio Doce, pfd. ................................. Brazil 949,560 12,586,571
Cia Vale do Rio Doce, A, ADR, pfd. ......................... Brazil 1,350,400 17,899,771
Fiat SpA, pfd. ............................................. Italy 30,914,350 56,636,842
Petroleo Brasileiro SA (Petrobras), pfd. ................... Brazil 250,000,000 25,490,696
+++Receipts of Telebras Stock............................... Brazil 875,600,000 62,123,035
++Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. .... Brazil 1,025,000 72,454,688
*Telecomunicacoes de Minas Gerais Celular SA Telemig, C,
pfd. ..................................................... Brazil 38,363,000 945,303
Telecomunicacoes de Minas Gerais SA Telemig, B, pfd. ....... Brazil 38,363,000 1,533,021
Usinas Siderurgicas de Minas Gerais SA, pfd. ............... Brazil 4,188,959 17,440,648
Volkswagen AG, pfd. ........................................ Germany 1,718,960 86,264,792
---------------
TOTAL PREFERRED STOCKS (COST $626,056,787).................. 407,094,677
---------------
</TABLE>
30
TEMPLETON GROWTH FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1998 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT** VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS 6.5%
U.S. Treasury Bonds:
14.00%, 11/15/11.......................................... United States $ 97,000,000 $ 153,260,097
7.875%, 2/15/21........................................... United States 128,500,000 168,254,816
6.25%, 8/15/23............................................ United States 155,303,000 172,095,292
U.S. Treasury Notes:
6.375%, 7/15/99........................................... United States 78,000,000 78,828,828
6.00%, 10/15/99........................................... United States 108,000,000 109,012,608
6.375%, 1/15/00........................................... United States 98,000,000 99,684,424
---------------
TOTAL BONDS (COST $727,148,534)............................. 781,136,065
---------------
SHORT TERM INVESTMENTS (COST $1,621,608,892) 13.5%
U.S. Treasury Bills, 4.809% to 5.11%, with maturities to
1/21/99................................................... United States 1,636,830,000 1,622,674,363
---------------
TOTAL INVESTMENTS (COST $13,942,422,201) 100.4%............. 12,069,248,009
OTHER ASSETS, LESS LIABILITIES (.4%)........................ (44,164,385)
---------------
TOTAL NET ASSETS 100.0%..................................... $12,025,083,624
---------------
---------------
</TABLE>
*Non-income producing.
**Securities traded in U.S. dollars.
+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,
1998, were $363,727,562.
++Includes securities of twelve new holding companies deemed received in
conjunction with the "split-up" of Telecomunicacoes Brasileiras SA (Telebras).
+++Receipts of Telebras stock represent a basket of twelve new holding companies
to be received in conjunction with the "split-up" of Telecomunicacoes
Brasileiras SA (Telebras).
See Notes to Financial Statements.
31
TEMPLETON GROWTH FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities, at value (cost
$13,942,422,201).......................................... $12,069,248,009
Receivables:
Investment securities sold................................ 6,564,732
Capital shares sold....................................... 14,887,373
Dividends and interest.................................... 43,079,342
---------------
Total assets........................................... 12,133,779,456
---------------
Liabilities:
Payables:
Investment securities purchased........................... 45,702,869
Capital shares redeemed................................... 47,390,000
To affiliates............................................. 12,629,800
Funds advanced by custodian................................ 340,423
Accrued liabilities........................................ 2,632,740
---------------
Total liabilities...................................... 108,695,832
---------------
Net assets, at value........................................ $12,025,083,624
---------------
---------------
Net assets consist of:
Undistributed net investment income........................ $ 268,936,336
Net unrealized depreciation................................ (1,873,174,192)
Accumulated net realized gain.............................. 1,445,822,503
Capital shares............................................. 12,183,498,977
---------------
Net assets, at value........................................ $12,025,083,624
---------------
---------------
CLASS I:
Net asset value per share ($11,116,564,018 / 662,531,683
shares outstanding)...................................... $16.78
---------------
---------------
Maximum offering price per share ($16.78 / 94.25%)......... $17.80
---------------
---------------
CLASS II:
Net asset value per share ($872,218,980 / 52,878,215 shares
outstanding)*............................................ $16.49
---------------
---------------
Maximum offering price per share ($16.49 / 99.00%)......... $16.66
---------------
---------------
ADVISOR CLASS:
Net asset value and maximum offering price per share
($36,300,626 / 2,160,456 shares outstanding)............. $16.80
---------------
---------------
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
32
TEMPLETON GROWTH FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $27,208,792)
Dividends.................................................. $ 312,010,645
Interest................................................... 200,283,993
--------------
Total investment income............................... $ 512,294,638
Expenses:
Management fees (Note 3)................................... 86,332,815
Administrative fees (Note 3)............................... 11,225,977
Distribution fees (Note 3)
Class I................................................... 32,554,592
Class II.................................................. 9,490,143
Transfer agent fees (Note 3)............................... 13,062,513
Custodian fees............................................. 2,328,928
Reports to shareholders.................................... 3,100,000
Registration and filing fees............................... 1,432,500
Professional fees.......................................... 157,307
Directors' fees and expenses............................... 153,000
Other...................................................... 415,491
--------------
Total expenses........................................ 160,253,266
---------------
Net investment income........................... 352,041,372
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 1,803,793,777
Foreign currency transactions............................. (8,898,389)
--------------
Net realized gain..................................... 1,794,895,388
Net unrealized depreciation on investments............ (3,948,921,534)
---------------
Net realized and unrealized loss............................ (2,154,026,146)
---------------
Net decrease in net assets resulting from operations........ $(1,801,984,774)
---------------
---------------
</TABLE>
See Notes to Financial Statements.
33
TEMPLETON GROWTH FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 352,041,372 $ 299,645,065
Net realized gain from investments and foreign currency
transactions............................................ 1,794,895,388 1,454,846,690
Net unrealized appreciation (depreciation) on
investments............................................. (3,948,921,534) 835,123,789
----------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ (1,801,984,774) 2,589,615,544
Distributions to shareholders from:
Net investment income:
Class I.................................................. (309,635,887) (224,233,853)
Class II................................................. (16,109,670) (6,799,222)
Advisor Class............................................ (846,245) --
Net realized gains:
Class I.................................................. (1,624,126,003) (372,774,314)
Class II................................................. (109,111,611) (13,998,148)
Advisor Class............................................ (4,067,274) --
Capital share transactions (Note 2):
Class I.................................................. 2,570,690,896 1,795,361,405
Class II................................................. 389,245,855 388,966,140
Advisor Class............................................ 17,030,051 27,036,800
----------------------------------
Net increase (decrease) in net assets................... (888,914,662) 4,183,174,352
Net assets:
Beginning of year.......................................... 12,913,998,286 8,730,823,934
----------------------------------
End of year................................................ $12,025,083,624 $12,913,998,286
----------------------------------
----------------------------------
Undistributed net investment income included in net assets:
End of year................................................ $ 268,936,336 $ 243,486,766
----------------------------------
----------------------------------
</TABLE>
See Notes to Financial Statements.
34
TEMPLETON GROWTH FUND, INC.
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Growth Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. The Fund
seeks long-term capital growth through a flexible policy of investing in the
equity and debt securities of companies and governments of any nation. The
following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as
35
TEMPLETON GROWTH FUND, INC.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS (CONT.)
information is available to the Fund. Interest income and estimated expenses are
accrued daily. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
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. CAPITAL STOCK
The Fund offers three classes of shares: Class I, Class II and Advisor Class
shares. The shares differ by their initial sales load, distribution fees, voting
rights on matters affecting a single class of shares and the exchange privilege
of each class.
At August 31, 1998, there were 1.8 billion shares authorized ($0.01 par value)
of which 1.2 billion, 400 million, and 200 million were designated Class I
shares, Class II shares and Advisor Class shares, respectively. Transactions in
the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------
1998 1997
-----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS I SHARES:
Shares sold....................................... 162,377,765 $ 3,342,332,950 116,375,056 $ 2,413,664,953
Shares issued on reinvestment of distributions.... 84,313,094 1,737,946,375 28,725,892 533,837,608
Shares redeemed................................... (123,878,907) (2,509,588,429) (55,979,411) (1,152,141,156)
-----------------------------------------------------------------------
Net increase...................................... 122,811,952 $ 2,570,690,896 89,121,537 $ 1,795,361,405
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
36
TEMPLETON GROWTH FUND, INC.
Notes to Financial Statements (continued)
2. CAPITAL STOCK (CONT.)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
1998 1997
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS II SHARES:
Shares sold.............................................. 21,887,098 $ 446,684,900 19,727,633 $406,674,814
Shares issued on reinvestment of distributions........... 5,371,460 109,391,107 977,215 18,004,847
Shares redeemed.......................................... (8,429,791) (166,830,152) (1,736,615) (35,713,521)
--------------------------------------------------------------
Net increase............................................. 18,828,767 $ 389,245,855 18,968,233 $388,966,140
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------------------------
1998 1997*
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold.............................................. 1,306,769 $ 26,289,488 1,386,033 $ 28,617,159
Shares issued on reinvestment of distributions........... 235,380 4,848,120 -- --
Shares redeemed.......................................... (694,766) (14,107,557) (72,960) (1,580,359)
--------------------------------------------------------------
Net increase............................................. 847,383 $ 17,030,051 1,313,073 $ 27,036,800
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
*Effective date of Advisor Class share was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Global
Advisors Ltd. (TGAL), Franklin Templeton Services, Inc. (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors) and Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund's investment manager,
administrative manager, principal underwriter and transfer agent, respectively.
The Fund pays an investment management fee to TGAL based on the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.75% First $200 million
0.675% Over $200 million, up to and including $1.3 billion
0.60% Over $1.3 billion
</TABLE>
37
TEMPLETON GROWTH FUND, INC.
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
The Fund pays an administrative fee to FT Services based on the Fund's average
daily net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>
The Fund reimburses Distributors up to 0.25% and 1.00% per year of the average
daily net assets of Class I and Class II shares, respectively, for costs
incurred in marketing the Fund's Class I and Class II shares. Under the Class I
distribution plan, costs exceeding the maximum may be reimbursed in subsequent
periods. At August 31, 1998, there were no unreimbursed costs. Distributors
received net commissions from sales of Fund shares, and received contingent
deferred sales charges for the period of $4,661,855 and $474,453, respectively.
Legal fees of $96,132 were paid to a law firm in which a partner is an officer
of the Fund.
4. INCOME TAXES
At August 31, 1998, the net unrealized depreciation based on the cost of
investments for income tax purposes of $13,945,283,035 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $ 826,462,684
Unrealized depreciation.................................... (2,702,497,710)
---------------
Net unrealized depreciation................................ $(1,876,035,026)
---------------
---------------
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1998 aggregated $7,140,301,074 and $5,590,440,851,
respectively.
38
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 statement of investments, of Templeton Growth Fund, Inc. as of August 31,
1998, 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, 1998, 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, 1998, 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.
[McGladrey & Pullen, LLP]
New York, New York
September 29, 1998
39
TEMPLETON GROWTH FUND, INC.
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates the following amounts as capital gain dividends for the fiscal year
ended August 31, 1998:
<TABLE>
<S> <C>
28% Rate Gain.............................................. $ 116,868,640
20% Rate Gain.............................................. 1,405,957,643
--------------
Total...................................................... $1,522,826,283
==============
</TABLE>
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
12.44% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 1998.
40
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, 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
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund*
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona**
Arkansas***
California**
Colorado
Connecticut
Florida**
Georgia
Hawaii***
Indiana
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan**
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
Washington***
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*These funds are now closed to new accounts, with the exception of retirement
plan accounts.
**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.
++Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
09/98
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
1-800/DIAL BEN(R)
www.franklin-templeton.com
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current prospectus of
Templeton Growth Fund, Inc. which contains more complete information including
risk factors, 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.
[LOGO] Printed on recycled paper
101 A98 10/98
