ANNUAL REPORT - Franklin Templeton Investments
ANNUAL REPORT - Franklin Templeton Investments
ANNUAL REPORT - Franklin Templeton Investments
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FOR THE YEAR ENDED APRIL 30, 2013<br />
<strong>Templeton</strong> Growth Fund, Ltd.<br />
Annual Report
<strong>Templeton</strong> Growth Fund, Ltd.<br />
MESSAGE TO INVESTORS<br />
Dear Investor,<br />
I am pleased to present the Annual Report for <strong>Templeton</strong> Growth Fund, Ltd., containing the audited financial statements for the fiscal year<br />
ended April 30, 2013.<br />
As we look back at the last 12 months in global equity investing, it is interesting to see how things have changed in just one year. In particular,<br />
I am reminded of a sage quotation from the founder of this Fund, Sir John <strong>Templeton</strong>:<br />
People do not remain pessimistic forever.<br />
Sir John was not one to try to predict the future. However, I cannot help but think that when he was making his pronouncement, he was<br />
imagining a scenario like that of the past fiscal year. Almost 12 months ago, we were in the middle of period of less-than-encouraging<br />
market volatility worldwide, chiefly driven by the emotional reactions to economic turmoil in Europe.<br />
If we fast forward to 12 months later, economic worries in Europe flared up once again, sparked by events in Cyprus and Italy. Yet, markets<br />
behaved in a different manner in 2013. While there was some market reaction, it was mainly centred in Europe and was relatively measured.<br />
European markets and, especially, other global stock indices exhibited resilience to these short-term concerns. Instead, investors<br />
seemed more focused on improving US economic data, signals of supportive central bank policies worldwide and the fundamental<br />
strength of individual companies and their stocks.<br />
If markets are moving away from the more reactionary and impulse-driven markets of one year ago, that could be quite a meaningful shift<br />
for investors in bottom-up strategies. Accordingly, I encourage you to read the following annual report and message to shareholders, as<br />
they can give you a good idea of how your investments in this Fund are positioned in this changed environment.<br />
Thank you for your continued investment, and I wish you and your loved ones all the best this year.<br />
Sincerely,<br />
Donald F. Reed<br />
President and Chief Executive Officer<br />
<strong>Templeton</strong> Growth Fund, Ltd.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 1
<strong>Templeton</strong> Growth Fund, Ltd.<br />
MESSAGE TO SHAREHOLDERS<br />
Dear Shareholder,<br />
For the fiscal year in review the Fund delivered solid double-digit absolute returns on the back of strong stock selection<br />
across numerous regions and sectors. In our opinion, the positive impact of stock selection, as opposed to allocations or<br />
weightings, on performance highlights the advantages of our bottom-up, value-oriented investment process. While isolated<br />
stock-level weakness in a handful of sectors offset some of the relative gains found elsewhere, the overall trend during the<br />
period was one of value recognition as some of our longest-held convictions captured the bulk of relative outperformance.<br />
This was particularly notable in light of a challenging market environment. While conditions appeared to improve as the<br />
period progressed, the market still exhibited characteristics adverse to our style of investment. For example, investors preferred<br />
the perceived safety of bonds to equities during the review period, and stock market correlations—the degree to which<br />
stocks move in unison—reached record highs as equities were viewed less for their fundamentals and more as proxies for<br />
overall risk appetite.<br />
Risk appetite continued to fluctuate broadly as investor focus swung between optimism from aggressive central bank stimulus<br />
and corporate earnings strength on the one hand, and skepticism stemming from anemic economic growth, political<br />
dysfunction and fiscal imbalances on the other. Stocks entered the annual period on a weak note as a political backlash<br />
against austerity shook confidence in European stability. However, European Central Bank President Mario Draghi’s promise<br />
to do “whatever it takes” to preserve the euro restored order over the summer of 2012. Equities experienced another bout of<br />
weakness in the fall of 2012 as Hurricane Sandy ravaged the US east coast and countries representing over 50% of global<br />
gross domestic product (GDP)—including the United States, China and Japan—all underwent political election or transition<br />
cycles. Ultimately, central bank vigilance and continued corporate earnings strength combined to sustain the global equity<br />
rally through the winter and spring of 2013.<br />
The main feature of the stock market rally in these final months was its growing defensiveness. Counter-cyclical sectors like<br />
Health Care, Utilities and Consumer Staples attracted the lion’s share of investor attention. However, we view the outperformance<br />
of some our highest conviction holdings, in a market still largely in the thrall of macroeconomic trends, as an<br />
encouraging sign. In short, if our “bottom-up” investment theses can gain traction in a market still dominated by “top-down”<br />
macroeconomic forces, we remain optimistic about the portfolio’s long-term potential once the market eventually reverts<br />
back to its traditional role as value arbiter.<br />
Our investment theses that have begun to materialize span both cyclical and defensive sectors. Consumer Discretionary and<br />
Information Technology stocks led Fund returns: while these traditionally cyclical sectors were the Fund’s biggest relative<br />
overweights during the period, outperformance had little to do with allocation. Stock selection, in fact, was the performance<br />
driver. Our long-held belief that select US media companies—including cable operators like Comcast Corp. and production<br />
studios like News Corp.—would benefit from the growing demand for premium content and high-capacity broadband access<br />
came to fruition as these companies exceeded earnings expectations and rose to record levels. In Information Technology,<br />
our belief that corporate customers in uncertain times would prioritize productivity—enhancing expenditures over capacityenhancing<br />
spending also materialized, much to the benefit of firms like Accenture PLC and SAP AG. We also reaped the<br />
benefits of our contrarian Health Care sector holdings during the fiscal year and continue to diversify into undervalued biotechnology,<br />
specialty pharmaceutical and medical technology firms with attractive growth prospects.<br />
In contrast, isolated weakness among overweighted Energy holdings and even-weighted Financials and Industrials stocks<br />
detracted. Here too, we maintain a high degree of confidence in our convictions. Our integrated oil holdings are in companies<br />
positioned for above-average production growth, while our oilfield services holdings should benefit from rising demand<br />
for technical expertise in extracting hydrocarbons from challenging locations. In Financials, we expect our banks and<br />
insurers to benefit as aggressive restructuring and fundamental repair restore normalized levels of profitability to the industry.<br />
Finally, our Industrials positions offer cyclical leverage and yield opportunity at significantly more attractive valuations than<br />
those found in other economically-sensitive sectors, like Materials.<br />
2 <strong>Templeton</strong> Growth Fund, Ltd.
Despite recent market strength, considerable risks remain given ongoing fiscal imbalances, economic vulnerability and the<br />
continued politicization of financial markets. Yet, as Sir John <strong>Templeton</strong> wrote, “I never ask if the market is going to go up or<br />
down, because I don’t know, and besides it doesn’t matter. I search nation after nation for stocks, asking: ‘Where is the one<br />
that is the lowest priced in relation to what I believe it is worth’.” At <strong>Templeton</strong>, we continue to find stocks around the world<br />
that fit this criterion, with an objective of acquiring tomorrow’s earnings potential for our investors at low prices today.<br />
Regards,<br />
Lisa Myers, J.D., CFA<br />
<strong>Templeton</strong> Global Advisors Limited<br />
Lead Portfolio Manager<br />
<strong>Templeton</strong> Growth Fund, Ltd.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 3
STATEMENT OF INVESTMENTS As at April 30, 2013<br />
<strong>Templeton</strong> Growth Fund, Ltd.<br />
Shares<br />
Average<br />
Cost Fair Value<br />
(000s) (000s)<br />
LONG-TERM INVESTMENTS: 98.76%<br />
COMMON STOCKS: 97.27%<br />
United States: 45.09%<br />
Abercrombie & Fitch Co., A ............ 144,460 $ 5,527 $ 7,215<br />
Accenture PLC, A ................... 272,340 9,661 22,331<br />
ACE Ltd. ......................... 156,000 7,291 14,005<br />
American Express Co. ............... 178,570 5,697 12,304<br />
Amgen Inc. ....................... 190,790 10,770 20,022<br />
Applied Materials Inc. ............... 716,940 8,294 10,472<br />
Baker Hughes Inc. .................. 451,980 20,505 20,653<br />
Brocade Communications Systems Inc. . . 1,701,290 8,905 9,957<br />
Chesapeake Energy Corp. ............ 498,780 8,634 9,812<br />
Chevron Corp. ..................... 99,770 9,968 12,242<br />
Cisco Systems Inc. ................. 1,295,250 30,991 27,296<br />
Citigroup Inc. ..................... 552,500 16,459 25,969<br />
Comcast Corp., Special A ............. 532,850 15,142 21,090<br />
CVS Caremark Corp. ................ 413,475 15,010 24,233<br />
FedEx Corp. ...................... 142,740 11,940 13,516<br />
Forest Laboratories Inc. .............. 183,540 7,055 6,915<br />
General Electric Co. ................ 480,470 18,288 10,779<br />
Gilead Sciences Inc. ................ 363,700 7,429 18,553<br />
Halliburton Co. .................... 515,715 15,532 22,219<br />
Hewlett-Packard Co. ................ 715,680 12,697 14,844<br />
JPMorgan Chase & Co. .............. 288,090 12,864 14,214<br />
LyondellBasell Industries NV, A ......... 129,030 6,008 7,891<br />
Macy’s Inc. ....................... 359,100 10,646 16,130<br />
Medtronic Inc. .................... 322,650 13,457 15,172<br />
Merck & Co. Inc. ................... 310,920 12,061 14,721<br />
Microsoft Corp. .................... 717,160 20,928 23,905<br />
Morgan Stanley .................... 909,090 16,106 20,284<br />
National Oilwell Varco Inc. ............ 175,402 2,434 11,522<br />
Navistar International Corp. .......... 312,170 11,474 10,412<br />
News Corp., A ..................... 446,630 7,954 13,934<br />
Noble Corp. ...................... 370,261 14,378 13,983<br />
Oracle Corp. ...................... 696,980 11,883 22,994<br />
Pfizer Inc. ........................ 666,273 22,270 19,498<br />
Symantec Corp. ................... 280,770 4,333 6,870<br />
Target Corp. ...................... 201,960 8,192 14,347<br />
The Home Depot Inc. ................ 98,969 2,634 7,312<br />
The Procter & Gamble Co. ............ 175,750 11,588 13,584<br />
Time Warner Cable Inc. .............. 141,911 5,841 13,419<br />
Time Warner Inc. ................... 243,016 9,406 14,632<br />
United Parcel Service Inc., B ........... 165,343 11,895 14,296<br />
Viacom Inc., B ..................... 163,530 7,300 10,541<br />
Walgreen Co. ..................... 330,570 11,704 16,480<br />
481,151 640,568<br />
United Kingdom: 14.26%<br />
Aviva PLC ........................ 2,608,084 38,542 12,452<br />
BG Group PLC ..................... 793,600 15,691 13,443<br />
Shares<br />
Average<br />
Cost Fair Value<br />
(000s) (000s)<br />
United Kingdom: 14.26% (Continued)<br />
BPPLC .......................... 1,039,470 $ 10,115 $ 7,587<br />
GlaxoSmithKline PLC ................ 746,843 20,352 19,377<br />
HSBC Holdings PLC ................. 2,289,231 38,992 25,096<br />
International Consolidated Airlines Group<br />
SA ........................... 1,842,820 5,453 7,841<br />
Kingfisher PLC ..................... 6,006,071 24,732 29,333<br />
Lloyds Banking Group PLC ............ 26,750,190 17,397 22,730<br />
Marks & Spencer Group PLC ........... 2,553,106 15,586 16,301<br />
Royal Dutch Shell PLC, B ............. 412,321 15,129 14,537<br />
Tesco PLC ........................ 1,396,206 8,656 7,996<br />
Vodafone Group PLC ................. 8,451,175 25,516 25,928<br />
236,161 202,621<br />
Switzerland: 6.39%<br />
ABB Ltd. ......................... 710,030 12,968 16,924<br />
Credit Suisse Group AG .............. 926,952 29,327 25,962<br />
Novartis AG ....................... 220,400 14,328 16,453<br />
Roche Holding AG .................. 124,840 20,498 31,380<br />
77,121 90,719<br />
France: 5.97%<br />
Alstom SA ........................ 323,540 13,964 13,355<br />
BNP Paribas SA .................... 344,380 16,428 19,324<br />
Compagnie de Saint-Gobain ........... 168,130 6,886 6,789<br />
Sanofi ........................... 280,080 25,835 30,908<br />
Total SA, B ....................... 283,310 23,094 14,379<br />
86,207 84,755<br />
Germany: 4.43%<br />
Merck KGaA ....................... 46,540 4,700 7,117<br />
Muenchener Rueckversicherungs-<br />
Gesellschaft AG .................. 70,720 10,858 14,244<br />
SAPAG .......................... 217,830 10,496 17,457<br />
Siemens AG ....................... 229,400 21,439 24,098<br />
47,493 62,916<br />
Japan: 3.60%<br />
ITOCHU Corp. ..................... 1,334,200 14,311 16,587<br />
Nissan Motor Co. Ltd. ............... 696,650 7,418 7,300<br />
Toyota Motor Corp. ................. 466,860 22,444 27,212<br />
44,173 51,099<br />
Hong Kong: 3.08%<br />
AIA Group Ltd. .................... 3,230,050 9,158 14,424<br />
Cheung Kong (Holdings) Ltd. .......... 613,150 6,728 9,281<br />
Hutchison Whampoa Ltd. ............. 1,842,620 18,642 20,128<br />
34,528 43,833<br />
Singapore: 2.86%<br />
DBS Group Holdings Ltd. ............. 1,438,611 11,549 19,704<br />
The accompanying notes are an integral part of these financial statements.<br />
4 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
STATEMENT OF INVESTMENTS<br />
As at April 30, 2013 (Continued)<br />
Shares<br />
Average<br />
Cost Fair Value<br />
(000s) (000s)<br />
Singapore: 2.86% (Continued)<br />
Singapore Telecommunications Ltd. ..... 6,553,370 $ 15,489 $ 21,007<br />
27,038 40,711<br />
South Korea: 2.84%<br />
KB Financial Group Inc. .............. 215,170 13,222 7,073<br />
POSCO .......................... 21,550 6,836 6,188<br />
Samsung Electronics Co. Ltd. ......... 19,487 9,312 27,086<br />
29,370 40,347<br />
Netherlands: 2.55%<br />
Akzo Nobel NV ..................... 233,881 13,345 14,186<br />
ING Groep NV ...................... 2,661,217 58,891 21,998<br />
72,236 36,184<br />
Italy: 1.07%<br />
UniCredit SpA ..................... 2,907,893 78,186 15,266<br />
Taiwan: 1.04%<br />
Taiwan Semiconductor Manufacturing Co.<br />
Ltd. .......................... 3,986,282 7,522 14,842<br />
Brazil: 0.85%<br />
Vale SA, American Depositary Receipt .... 702,660 15,101 12,083<br />
Norway: 0.81%<br />
Statoil ASA ....................... 466,630 11,282 11,453<br />
China: 0.78%<br />
Shanghai Electric Group Co. Ltd. ....... 31,433,600 12,378 11,058<br />
Ireland: 0.62%<br />
CRHPLC ......................... 403,303 11,306 8,751<br />
Canada: 0.57%<br />
Talisman Energy Inc. ................ 679,940 12,065 8,078<br />
Spain: 0.46%<br />
Inditex SA ........................ 48,860 2,024 6,552<br />
Total Common Stocks: .............. 1,285,342 1,381,836<br />
Units/Shares<br />
Average<br />
Cost Fair Value<br />
(000s) (000s)<br />
INVESTMENTS IN UNDERLYING FUNDS: 0.76%<br />
<strong>Templeton</strong> China Opportunities<br />
Fund, AS .................. 947,145 9,695 10,743<br />
Total <strong>Investments</strong> In Underlying<br />
Funds: .................... 9,695 10,743<br />
Total Long-Term <strong>Investments</strong>: .... 1,310,611 1,403,026<br />
Principal Amount<br />
in Currency<br />
of Issue<br />
SHORT-TERM SECURITIES: 0.46%<br />
Bank Of Montreal, Term Deposit,<br />
0.90%, 5/1/2013 ............ 6,500,000 CAD 6,500 6,500<br />
Total Short-Term Securities: ..... 6,500 6,500<br />
Transaction costs (Note 2) ......... (2,683) —<br />
TOTAL INVESTMENTS: 99.22% . . $1,314,428 1,409,526<br />
NET UNREALIZED GAIN ON<br />
DERIVATIVES: ............... 31<br />
OTHER ASSETS, less<br />
liabilities: 0.78% ............ 11,002<br />
TOTAL NET ASSETS: 100.00% . . . $1,420,559<br />
PREFERRED STOCKS: 0.73%<br />
Petroleo Brasileiro SA, American Depositary<br />
Receipt, Preferred ................ 519,574 15,574 10,447<br />
Total Preferred Stocks: .............. 15,574 10,447<br />
The accompanying notes are an integral part of these financial statements.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 5
<strong>Templeton</strong> Growth Fund, Ltd.<br />
STATEMENT OF INVESTMENTS<br />
As at April 30, 2013 (Continued)<br />
SCHEDULE OF DERIVATIVE INSTRUMENTS (As at April 30, 2013)<br />
FORWARD FOREIGN EXCHANGE CONTRACTS<br />
Counterparty<br />
Credit<br />
Rating<br />
Settlement Date<br />
Currency<br />
to be Delivered<br />
Par Value<br />
In Canadian Dollars<br />
Currency<br />
to be Received<br />
Par Value<br />
In Canadian Dollars<br />
Contract<br />
Price<br />
Unrealized<br />
Gain (Loss)<br />
(000s) (000s) (000s) (000s) (000s)<br />
CitibankNA ........................ A May28,2013 7 CHF $ 7 7 CAD $ 7 1.0896 $ —<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 6 GBP 9 9 CAD 9 1.5714 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 40 USD 41 41 CAD 41 1.0224 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 160 CHF 174 174 CAD 174 1.0875 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 226 GBP 354 358 CAD 358 1.5841 4<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 323 EUR 429 432 CAD 433 1.3375 4<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 1,288 HKD 168 170 CAD 171 0.1320 3<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 1,366 USD 1,377 1,397 CAD 1,397 1.0227 20<br />
ROYALBANKOFSCOTLANDPLC ....... A May29,2013 6 GBP 10 10 CAD 10 1.6167 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May29,2013 14 EUR 19 19 CAD 19 1.3571 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May29,2013 45 HKD 6 6 CAD 6 0.1333 —<br />
Total Number of Contracts .........11 $31<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 4 CHF 4 4 CAD 4 1.0732 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May28,2013 9 EUR 11 11 CAD 11 1.2791 —<br />
ROYALBANKOFSCOTLANDPLC ....... A May29,2013 5 CHF 6 6 CAD 6 1.2000 —<br />
Total Number of Contracts ..........3 $—<br />
Net Unrealized Gain ................ $31<br />
The accompanying notes are an integral part of these financial statements.<br />
6 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
STATEMENTS OF NET ASSETS<br />
As at April 30, 2013 and 2012<br />
2013 2012<br />
(000s)<br />
(000s)<br />
Assets<br />
Investment in securities — at fair value $ 1,409,526 $ 1,406,682<br />
Cash<br />
Canadian 2,730 33<br />
Foreign 4,243 3,447<br />
Receivables<br />
Investment securities sold 3,973 —<br />
Capital shares sold 372 117<br />
Dividends, interest and withholding tax 6,192 6,742<br />
Refundable income taxes 286 6,518<br />
Current income taxes 766 —<br />
Unrealized gain on derivatives 31 —<br />
Other assets (Note 8) 150 —<br />
Total assets 1,428,269 1,423,539<br />
Liabilities<br />
Payables<br />
advisory fees<br />
Accrued expenses 1,411 1,837<br />
Current income taxes — 1,857<br />
Future income taxes 1,844 2,525<br />
Other liabilities (Note 9) — 198<br />
Capital shares redeemed<br />
Management and investment<br />
1,158<br />
3,297<br />
2,365<br />
3,559<br />
Total liabilities 7,710 12,341<br />
Net assets $ 1,420,559 $ 1,411,198<br />
Total net assets per series (000s)<br />
Series A $1,207,188 $1,223,281<br />
Series A Hedged 3,076 —<br />
Series F 32,561 31,050<br />
Series I 24,860 22,278<br />
Series O 152,874 134,589<br />
Number of shares outstanding (Note 3)<br />
Series A 105,344,343 126,734,454<br />
Series A Hedged 300,000 —<br />
Series F 2,544,809 2,913,019<br />
Series I 1,928,444 2,075,126<br />
Series O 9,916,904 10,629,680<br />
Net assets per share — CAD<br />
Series A $11.46 $9.65<br />
Series A Hedged 10.26 —<br />
Series F 12.80 10.66<br />
Series I 12.89 10.73<br />
Series O 15.42 12.66<br />
Net assets per share — USD<br />
Series A $11.38 $9.77<br />
Series F 12.71 10.79<br />
Series I 12.80 10.87<br />
Series O 15.31 12.82<br />
Cost of investments held (000s) $1,314,428 $1,537,334<br />
(Signed) Don Reed<br />
Director<br />
Signed on behalf of <strong>Templeton</strong> Growth Fund., Ltd.<br />
(Signed) Nevil Thomas<br />
Director<br />
The accompanying notes are an integral part of these financial statements.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 7
<strong>Templeton</strong> Growth Fund, Ltd.<br />
STATEMENTS OF OPERATIONS<br />
For the periods ended April 30, 2013 and 2012<br />
2013 2012<br />
(000s)<br />
(000s)<br />
Investment income<br />
Dividends $ 36,884 $ 45,779<br />
Interest 110 122<br />
Total investment income 36,994 45,901<br />
Expenses<br />
Management fees (Note 4(a)) 14,467 16,447<br />
Investment advisory fees (Note 4(a)) 6,723 7,627<br />
Transfer agent fees (Note 4(b)) 7,253 8,857<br />
Custodian fees 113 199<br />
Legal fees 2 11<br />
Audit fees 82 95<br />
Directors’ fees 162 196<br />
Shareholder reporting costs 343 390<br />
Independent review committee fees 1 2<br />
Registration fees 77 69<br />
Other expenses (Note 7) 1,103 1,236<br />
Total expenses 30,326 35,129<br />
Expenses waived/paid by Manager (Note 6) (329) (911)<br />
Net expenses 29,997 34,218<br />
Net investment income (loss) 6,997 11,683<br />
Realized and unrealized gain (loss) on investments and transaction costs<br />
Net realized gain (loss) on investments 7,965 3,887<br />
Net realized and/or unrealized foreign exchange gain (loss) (173) (3)<br />
Net change in unrealized appreciation (depreciation) in value of investments and<br />
derivatives 225,781 (75,766)<br />
Transaction costs (Note 11) (1,048) (398)<br />
Net gain (loss) on investments 232,525 (72,280)<br />
Net gain (loss) before taxes 239,522 (60,597)<br />
Provision for (recoverable) income taxes<br />
Current 4,374 8,193<br />
Future (682) 650<br />
Total provision for income taxes 3,692 8,843<br />
Increase (decrease) in net assets from operations $ 235,830 $ (69,440)<br />
Increase (decrease) in net assets from operations per series (000s)<br />
Series A $198,235 $ (65,153)<br />
Series A Hedged 76 —<br />
Series F 5,403 (991)<br />
Series I 4,241 (625)<br />
Series O 27,875 (2,671)<br />
Increase (decrease) in net assets from operations per share<br />
Series A 1.73 (0.46)<br />
Series A Hedged 0.25 —<br />
Series F 2.04 (0.33)<br />
Series I 2.11 (0.30)<br />
Series O 2.72 (0.23)<br />
The accompanying notes are an integral part of these financial statements.<br />
8 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
STATEMENTS OF CHANGES IN NET ASSETS<br />
For the periods ended April 30, 2013 and 2012<br />
(in 000s)<br />
All Series Series A Series A Hedged<br />
2013 2012 2013 2012 2013 2012<br />
Increase (decrease) in net assets from operations $ 235,830 $ (69,440) $ 198,235 $ (65,153) $ 76 $ —<br />
Distributions to shareholders<br />
From net investment income — (18,889) — (16,612) — —<br />
From capital gains — — — — — —<br />
From return of capital — — — — — —<br />
— (18,889) — (16,612) — —<br />
Capital share transactions<br />
Subscriptions 46,244 45,337 29,468 29,906 3,000 —<br />
Reinvestments — 18,092 — 15,925 — —<br />
Redemptions (272,713) (360,597) (243,796) (318,366) — —<br />
(226,469) (297,168) (214,328) (272,535) 3,000 —<br />
Increase (decrease) in net assets for the period 9,361 (385,497) (16,093) (354,300) 3,076 —<br />
Net assets — beginning of period 1,411,198 1,796,695 1,223,281 1,577,581 — —<br />
Net assets — end of period $ 1,420,559 $ 1,411,198 $ 1,207,188 $ 1,223,281 $ 3,076 $ —<br />
Series F Series I Series O<br />
2013 2012 2013 2012 2013 2012<br />
Increase (decrease) in net assets from operations $ 5,403 $ (991) $ 4,241 $ (625) $ 27,875 $ (2,671)<br />
Distributions to shareholders<br />
From net investment income — (367) — (254) — (1,656)<br />
From capital gains — — — — — —<br />
From return of capital — — — — — —<br />
— (367) — (254) — (1,656)<br />
Capital share transactions<br />
Subscriptions 3,619 9,062 290 518 9,867 5,851<br />
Reinvestments — 348 — 184 — 1,635<br />
Redemptions (7,511) (10,675) (1,949) (1,773) (19,457) (29,783)<br />
(3,892) (1,265) (1,659) (1,071) (9,590) (22,297)<br />
Increase (decrease) in net assets for the period 1,511 (2,623) 2,582 (1,950) 18,285 (26,624)<br />
Net assets — beginning of period 31,050 33,673 22,278 24,228 134,589 161,213<br />
Net assets — end of period $ 32,561 $ 31,050 $ 24,860 $ 22,278 $ 152,874 $ 134,589<br />
The accompanying notes are an integral part of these financial statements.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 9
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS For the periods ended April 30, 2013 and 2012<br />
1. Organization<br />
(a)<br />
Inception and Financial Reporting Dates<br />
<strong>Templeton</strong> Growth Fund, Ltd. (the “Fund”), is an open-ended mutual fund corporation incorporated under the laws of Canada on<br />
September 1, 1954, and continued under the Canada Business Corporations Act on July 20, 1979.<br />
The Fund launched Series A shares on November 29, 1954, Series F, I and O shares on November 24, 2000 and Series A Hedged<br />
on March 22, 2013. Series A Hedged seeks to provide long-term capital appreciation, while reducing the potential effects of<br />
exchange rate fluctuations between the Canadian dollar and global currencies within the Fund’s Portfolio by investing in forward<br />
contracts.<br />
The financial statements of the Fund include the Statement of <strong>Investments</strong> as at April 30, 2013, and the Statements of Net Assets as<br />
at April 30, 2013 and April 30, 2012. The Statements of Operations and Changes in Net Assets for the Fund are for the years ended<br />
April 30, 2013 and 2012.<br />
(b)<br />
Fund Events<br />
The Fund may invest up to 7.5% of its net assets in separate classes of shares in <strong>Templeton</strong> China Opportunities Fund (“TCOF”), an<br />
“Underlying Fund” and a sub-fund of <strong>Franklin</strong> <strong>Templeton</strong> Selected Markets Funds (“FTSMF”), an open-end investment company<br />
organized under the laws of Luxembourg as a Société d’investissement à Capital Variable. TCOF is managed by <strong>Templeton</strong> Investment<br />
Counsel, LLC, an affiliate of <strong>Franklin</strong> <strong>Templeton</strong> Investment Corp. (the “Manager”). TCOF’s portfolio is managed in accordance<br />
with the investment restrictions applicable to a UCITS, an undertaking for collective investment in transferable securities, which are<br />
substantially similar to those that govern the Fund in Canada. As of April 30, 2013, the Fund held 0.76% of its net assets within<br />
TCOF. The principal distributor and the administrative agent of FTSMF is an affiliate of the Manager.<br />
On March 22, 2013, the Fund commenced the offering of Series A Hedged shares, which was made available for sale on<br />
March 28, 2013.<br />
2. Summary of Significant Accounting Policies<br />
These financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). The significant<br />
accounting policies are as follows:<br />
(a)<br />
(b)<br />
Designation of financial assets and liabilities — For the purpose of measuring and recognizing financial assets and liabilities, the<br />
following designations have been made: All investments, including derivatives, if any, are initially recognized at fair value and are<br />
designated as held for trading. Accrued interest, distributions and dividends receivable, amounts receivable for capital shares<br />
sold and securities sold, and other assets are designated as loans and receivables and reported at cost or amortized cost.<br />
Amounts payable for securities purchased and capital shares redeemed, management fees payable, distributions payable,<br />
accrued expenses and other liabilities, are designated as other financial liabilities and reported at amortized cost.<br />
Valuation of investments — The CICA Handbook Section 3855, “Financial Instruments — Recognition and Measurement”,<br />
requires that the fair value of financial instruments traded in active markets be measured at bid price for long positions and<br />
closing ask price for short positions for financial statement reporting purposes (“net assets”). The Canadian Securities<br />
Administrators allow investment funds to calculate the daily net asset value for the purpose of processing shareholder<br />
transactions using the last traded price for the day as fair value of financial instruments traded in an active market, which is<br />
referred to as a “trading net asset value”. As a result, the net assets per share for financial reporting purposes may differ from<br />
the trading net asset value. This measurement difference does not affect the Fund’s shareholder transactions. The Fund’s<br />
trading net asset values are disclosed in Note 13.<br />
Securities listed on a securities exchange and those traded on the over-the-counter market are valued at the closing bid price for<br />
long positions and closing ask price for short positions on the valuation day. The Fund has procedures to determine the fair<br />
value of securities and other financial instruments for which market prices are not readily available or which may not be reliably<br />
priced. Under these fair valuation procedures, the Fund primarily employs a market-based approach which may use related or<br />
comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the<br />
10 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
2. Summary of Significant Accounting Policies (Continued)<br />
investment to determine its fair value. The Fund may also use an income-based valuation approach in which the anticipated<br />
future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or<br />
duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments,<br />
the fair values may differ significantly from the values that would have been used had an active market existed.<br />
<strong>Investments</strong> in TCOF are made in Series F1, denominated in USD, and valued at the CAD equivalent of the closing net asset<br />
value on valuation day.<br />
All security valuation techniques are periodically reviewed by the Valuation Committee of <strong>Franklin</strong> <strong>Templeton</strong> <strong>Investments</strong> Corp.,<br />
the “Manager” and are approved by the Manager.<br />
(c)<br />
Derivatives — The Fund may invest in derivatives in order to manage risk or gain exposure to various other investments or<br />
markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial<br />
investment that is smaller than would normally be required to have similar response to changes in market factors, and require or<br />
permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their<br />
obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market<br />
movements which expose the Fund to gains and losses in excess of the amounts shown on the Statements of Net Assets.<br />
Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the<br />
Statements of Operations.<br />
(i)<br />
Foreign/Forward exchange contracts — When a Fund purchases or sells foreign securities, it may enter into foreign exchange<br />
contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign<br />
exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate at<br />
a future date.<br />
A Fund may also enter into forward exchange contracts to hedge against fluctuations in foreign exchange rates. These<br />
contracts are valued as the difference between the contractual forward foreign exchange rates and the forward bid rate for<br />
currency held and forward ask rate for currency sold short at the reporting date. The unrealized gains or losses on the<br />
contracts are included in the Statements of Net Assets. Realized gains and losses and changes in unrealized gains and<br />
losses are included in the Statements of Operations.<br />
A hedging strategy is employed by the Fund that seeks to reduce, as far as possible, the influence of changes in the<br />
exchange rate between the Canadian dollar and the currencies of securities held by the Fund’s portfolio on the portion of the<br />
Fund’s net assets attributable to the Series A Hedged units outstanding. The gains or losses on and the costs of such<br />
hedging transactions will accrue solely to the Series A Hedged.<br />
(d)<br />
(e)<br />
Valuation of series — A separate net assets per share is calculated for each series of shares of the Fund. The net assets of a<br />
series is computed by calculating the series’ proportionate share of the assets and liabilities of the Fund common to all series,<br />
less the liabilities of the Fund attributable only to that series. Expenses directly attributable to a series are charged to that series.<br />
Other expenses, investment income, realized and unrealized capital and foreign exchange gains and losses are allocated<br />
proportionately to each series based upon the relative net assets of each series, with the exception of gains and losses arising<br />
from the hedging strategy, utilizing forward foreign exchange contracts, which is allocated to Series A Hedged only.<br />
Transaction costs — Transaction costs, such as brokerage commissions and forward fees, incurred on the purchase and sale of<br />
a security are charged as an expense for the period and shown as transaction costs on the Statements of Operations.<br />
<strong>Investments</strong> in Underlying Funds do not incur transaction costs on those transactions.<br />
(f)<br />
Security transactions, investment income, expenses and distributions — Security transactions are recorded on the trade date.<br />
Realized and unrealized gains or losses on security transactions are determined on an average cost basis. Interest income and<br />
estimated expenses are accrued daily. Dividend income, distributions received from TCOF and distributions to shareholders are<br />
recorded on the ex-dividend date.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 11
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
2. Summary of Significant Accounting Policies (Continued)<br />
(g)<br />
Taxes — The Fund presently qualifies as a “mutual fund corporation” as defined in the Income Tax Act (Canada) (the “Act”)<br />
and the Ontario Corporations Tax Act.<br />
As a mutual fund corporation, taxable dividends received from taxable Canadian corporations are subject to a tax of 33 1/3%.<br />
Such taxes are fully refundable upon payment of taxable dividends to its shareholders on a basis of $1 for every $3 of dividends<br />
paid. Any such tax paid is reported as an amount receivable until recovered through the payment to shareholders of dividends<br />
out of net investment income. Interest income and foreign dividends, net of applicable expenses, are taxed at full corporate rates<br />
with credits, subject to certain limitations, for foreign taxes paid.<br />
Future income tax liabilities are recorded in the financial statements due to temporary differences related to accrued foreign<br />
dividend income.<br />
For the years ended April 30, 2013 and 2012, the Fund was subject to tax at full corporate rates on 50% of its net realized capital<br />
gains. This tax can be eliminated by “capital gains redemptions” [as defined in the Act] by the Fund, or within 60 days of its<br />
financial year, by making payment to its shareholders of a capital gains dividend out of the Fund’s realized but undistributed<br />
capital gains, or by a combination of both. Where capital gains redemptions in a given year are not sufficient to eliminate this<br />
tax, it is the Fund’s policy to apply capital losses against capital gains or pay a capital gains dividend sufficient to do so. Consequently,<br />
no amount has been included for this tax in the provision for income taxes in the current or prior year.<br />
(h)<br />
Foreign currency translation — The functional currency of the Fund is CAD. Portfolio securities and other assets and liabilities<br />
denominated in foreign currencies are translated into the functional currency based on the exchange rate on the valuation date.<br />
Purchases and sales of securities and income items denominated in foreign currencies are translated into the functional<br />
currency at the exchange rate in effect on the transaction date. When an exchange rate is unavailable or unreliable, it will be<br />
determined using procedures established and accepted by the Manager of the Fund.<br />
The Fund does not separately report the effects of changes in foreign exchange rates from changes in market prices on securities<br />
held. Such changes are included in net realized and unrealized gain or loss on investments.<br />
Realized foreign exchange gains or losses arise from sales of foreign currencies, changes between the trade date and settlement<br />
date values on security and capital transactions, and the difference between the recorded amounts of foreign currency denominated<br />
dividends, interest, withholding taxes, and U.S. short-term holdings, and the functional currency equivalent of the<br />
amounts actually received or paid. These gains or losses are reported on the Statements of Operations as net realized and/or<br />
unrealized foreign exchange gain (loss).<br />
(i)<br />
(j)<br />
(k)<br />
Related party transactions — All related party transactions occur in the normal course of operations and are recorded at an<br />
amount of consideration agreed to by the parties.<br />
Increase (decrease) in net assets from operations per share — This calculation is based on the increase (decrease) in net assets<br />
from operations attributable to each series divided by the weighted average number of shares of that series outstanding during<br />
the period.<br />
Accounting estimates — The preparation of financial statements in accordance with Canadian GAAP may require the Manager to<br />
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements<br />
and the amounts of income and expense reported during the periods. Actual results may differ from those estimates.<br />
The key area where estimates and/or assumptions are applied is in the determination of fair values of financial instruments not<br />
traded on an active market as discussed in note 2(b).<br />
3. Shareholders’ Capital<br />
The authorized capital of the Fund consists of an unlimited number of common shares without nominal or par value. The Fund has<br />
one class of common shares that may be divided into an unlimited number of series. Currently, the Fund offers series of shares, designated<br />
as Series A, A Hedged, F, I, and O. The holders of common shares have the right under the Fund’s Articles to require the<br />
12 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
3. Shareholders’ Capital (Continued)<br />
Fund to repurchase their shares at their current net asset value. The Fund’s objective when managing capital is to safeguard its ability<br />
to continue as going concern in order to maintain a strong capital base to support the development of the investment activities of the<br />
Fund. In order to maintain or adjust capital structure, the level of shareholder subscriptions and redemptions is monitored relative to<br />
liquid assets. The Fund may redeem and issue new shares in accordance with the Fund’s Articles.<br />
Changes in issued capital stock are summarized as follows:<br />
Series A Series A Hedged Series F<br />
April 30, 2013 April 30, 2012 April 30, 2013 April 30, 2012 April 30, 2013 April 30, 2012<br />
Outstanding shares — beginning 126,734,454 155,696,226 — — 2,913,019 3,042,823<br />
Subscriptions 2,857,794 3,165,397 300,000 — 316,662 879,075<br />
Reinvestments — 1,658,891 — — — 33,180<br />
Redemptions (24,247,905) (33,786,060) — — (684,872) (1,042,059)<br />
Outstanding shares — ending 105,344,343 126,734,454 300,000 — 2,544,809 2,913,019<br />
Series I<br />
Series O<br />
April 30, 2013 April 30, 2012 April 30, 2013 April 30, 2012<br />
Outstanding shares — beginning 2,075,126 2,174,396 10,629,680 12,440,653<br />
Subscriptions 24,256 48,441 727,119 476,547<br />
Reinvestments — 17,395 — 132,680<br />
Redemptions (170,938) (165,106) (1,439,895) (2,420,200)<br />
Outstanding shares — ending 1,928,444 2,075,126 9,916,904 10,629,680<br />
4. Related Party Transactions<br />
(a) Investment advisory and management fees<br />
The Fund pays an investment advisory fee to <strong>Templeton</strong> Global Advisors Limited, Bahamas (the “Advisor”) computed at 1/4 of 0.50%<br />
quarterly on the average daily net assets of the Fund. The Fund pays the management fee to the Manager calculated monthly at the<br />
rate set out below on the average daily net assets of the Fund:<br />
Series A 1/12 of 1.10%<br />
Series A Hedged 1/12 of 1.40%<br />
Series F 1/12 of 0.50%<br />
Series I 1/12 of 0.60%<br />
The Series O management and administration fee is negotiated with and paid by the individual shareholder directly to the Manager.<br />
(b) Manager Holdings<br />
As at April 30, 2013, the Manager held all of the shares in Series A Hedged. No shares of the Fund were held by the Manager as at<br />
April 30, 2012.<br />
(c) Other services<br />
In addition to providing administration and other services in connection with the distribution of Fund shares, the Manager also acts as<br />
registrar and transfer agent for the Fund and is compensated by the Fund for the provision of such services.<br />
(d) Expenses absorbed or paid by the Manager<br />
Operating expenses of the Fund may be absorbed or paid by the Manager as discussed in Note 6.<br />
5. Sales Charges<br />
The sales charge incurred by shareholders of Series A shares is dependent on the purchase option selected at the time of purchase.<br />
Under the front-load sales option, a negotiable fee of up to 6% of the purchase price is payable by the Series A (including A Hedged)<br />
investors to their dealers. Under the low-load option, the Series A (including A Hedged) investors will pay a redemption fee to the<br />
Manager if they redeem their shares within three years of purchasing them. This redemption fee is based on a declining percentage<br />
<strong>Templeton</strong> Growth Fund, Ltd. 13
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
5. Sales Charges (Continued)<br />
of the original cost of the investor’s shares and how long the investor has held them, ranging from 3% to 0%. Up to 10% of an investor’s<br />
investment in Series A (including A Hedged) shares may be redeemed in each calendar year without a redemption charge.<br />
Under the deferred sales charge option, the Series A (including A Hedged) investors will pay a redemption fee to the Manager if they<br />
redeem their shares within six years of purchasing them. This redemption fee is based on a declining percentage, ranging from 6% to<br />
0%, of the original cost of the investor’s shares and how long the investor has held them. Series I shareholders negotiate a fee of up to<br />
2% with their dealers.<br />
6. Operating Expenses<br />
The operating expenses of the Fund, which include, but are not limited to, legal, audit, custodial, registrar, fund administration and<br />
the cost of financial statements and other reports, are the direct responsibility of the Fund. Brokerage commissions and taxes paid by<br />
the Fund are not included in operating expenses, but are borne by the Fund and are reflected separately in the Statements of Operations.<br />
The Manager pays certain of the operating expenses on behalf of the Fund and is then reimbursed by the Fund. The Manager<br />
may waive or absorb certain expenses of the Fund. The decision to do so is reviewed regularly and determined at the sole discretion<br />
of the Manager.<br />
The portion of the operating expenses allocated to Series O investors may be absorbed by the Manager as part of its agreement with<br />
the investors in those Series.<br />
7. Other Expenses<br />
The principal items in other expenses are rent, data communication charges and other overhead costs charged by the Manager.<br />
8. Other Assets<br />
The principal items in other assets are recoverable expenses from the Manager.<br />
9. Other Liabilities<br />
The principal item in other liabilities is Ontario capital tax liability.<br />
10. Financial Risk Management<br />
Risks arising from holding financial instruments are inherent in the Fund’s activities and are managed through a process of ongoing<br />
measurement and monitoring. These financial risks may include, among others, market risk (including market price risk, currency<br />
risk, and interest rate risk), liquidity risk and credit risk. These risks are moderated through careful selection of securities and other<br />
financial instruments within the Fund’s investment guidelines by the Advisor. The risks are measured using a method that reflects the<br />
expected impact on the results and net assets attributable to shareholders of the Fund from reasonably possible changes in the relevant<br />
risk variables. Information about these risk exposures at the reporting date and risk management policies employed are disclosed<br />
in Notes 10 (a) to (e).<br />
(a)<br />
Currency risk<br />
The Fund holds assets and liabilities denominated in currencies other than its functional currency, and is therefore exposed to currency<br />
risk as the values of such assets and liabilities will fluctuate due to changes in exchange rates.<br />
The Advisor monitors the Fund’s currency risk position, and may enter into forward exchange contracts to manage foreign exchange<br />
exposure and disclosed in the Fund’s Statement of <strong>Investments</strong>, if applicable.<br />
The table below summarizes the Fund’s exposure to currency risk, where applicable. Amounts shown are based on the carrying value<br />
of monetary and non-monetary assets, less liabilities. Where individual currencies held are less than 5% of net assets, that currency<br />
has been included in “other”. The table also illustrates the expected increase or decrease in net assets had the functional currency<br />
14 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
10. Financial Risk Management (Continued)<br />
strengthened or weakened by 5% in relation to all foreign currencies, with all other variables held constant. Actual results may differ<br />
from this sensitivity analysis and the difference could be material.<br />
April 30, 2013 April 30, 2012<br />
As % of<br />
net assets Amount<br />
As % of<br />
net assets<br />
Currency<br />
Amount<br />
(000s)<br />
(000s)<br />
CHF ........................................................ $ 91,830 6.46% — —<br />
EUR ........................................................ 215,614 15.18% 202,423 14.34%<br />
GBP ........................................................ 177,854 12.52% 198,850 14.09%<br />
HKD........................................................ 80,231 5.65% 89,573 6.35%<br />
USD ........................................................ 680,992 47.94% 670,390 47.51%<br />
Other ....................................................... 158,844 11.18% 227,696 16.13%<br />
$1,405,365 98.93% $1,388,932 98.42%<br />
Impact on net assets from 5% currency movement ................... $ 70,268 $ 69,447<br />
(b)<br />
Other price risk<br />
Other price risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate as a result of changes in market<br />
prices (other than those arising from currency risk or interest rate risk). Those changes may be caused by factors specific to the<br />
individual financial instrument or its issuer, or factors affecting a market or market segment. Other assets and liabilities are monetary<br />
items that are short-term in nature, and as such they are not subject to other price risk.<br />
The table below illustrates the expected increase or decrease in net assets if the value of the Fund’s investments had increased or<br />
decreased by 5%, with all other variables held constant. Actual results may differ from this sensitivity analysis and the difference<br />
could be material.<br />
Sensitivity on<br />
Net Assets<br />
% Impact<br />
on Net Assets<br />
(000s)<br />
April 30, 2013 .............................................................................. $70,151 4.94%<br />
April 30, 2012 .............................................................................. 69,299 4.91%<br />
(c)<br />
Interest rate risk<br />
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of interest bearing<br />
financial instruments.<br />
The Fund is not directly exposed to interest rate risk as no significant interest bearing securities (excluding overnight term deposits)<br />
were held by the Fund for the periods ended April 30, 2013 and April 30, 2012.<br />
(d)<br />
Liquidity risk<br />
Liquidity risk is the risk that the Fund will not be able to meet liabilities as they fall due. As the Fund is exposed to daily cash<br />
redemption of shares, the assets of the Fund are invested mainly in securities which are traded in active markets and can be readily<br />
disposed of. In addition, sufficient cash and cash equivalents are maintained to meet normal operating requirements. The Fund has<br />
the ability to borrow up to 5% of its net assets for the purposes of funding redemptions. The Fund has a non-committed redemption<br />
line of credit agreement with a Schedule 1 bank in Canada from which these amounts can be borrowed, if necessary. The loans are<br />
issued at prime rate and are payable on demand. There were no loans issued or outstanding as of April 30, 2013 and April 30, 2012.<br />
All liabilities held are payable upon demand or due within three months.<br />
The Fund also has a policy to purchase an illiquid asset only to the extent that immediately after purchase, the value of the illiquid<br />
securities held by the Fund does not account for more than 10% of the net assets of the Fund. Units of TCOF are considered illiquid<br />
assets and as of April 30, 2013 and April 30, 2012, they represented 0.76% and 0.74%, respectively of the net assets of the Fund.<br />
All liabilities held are payable upon demand or due within three months.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 15
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
10. Financial Risk Management (Continued)<br />
(e)<br />
Credit risk<br />
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered<br />
into with the Fund. This risk is generally lower if the issuer has a high credit rating from an independent credit rating agency, while<br />
the risk is generally higher if the issuer has a low credit rating or no credit rating. Where applicable, credit ratings have been disclosed<br />
at the end of the Statement of <strong>Investments</strong>.<br />
As at April 30, 2013 and April 30, 2012, the Fund had no significant investments in debt instruments and/or derivatives.<br />
All cash and trading transactions are carried out by banks rated A or higher by Standard & Poor’s as at April 30, 2013 and April 30,<br />
2012.<br />
(f)<br />
Fair value estimation<br />
The Fund classifies fair value measurements of investments held using a fair value hierarchy that reflects the significance of the<br />
inputs used in making the measurements. The fair value hierarchy has the following levels:<br />
• Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities<br />
• Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly<br />
(prices) or indirectly (derived from prices)<br />
• Level 3 — inputs for the asset or liability that are not based on observable market data (unobservable inputs)<br />
The determination of what constitutes “observable” requires significant judgment by the Manager. The Manager considers observable<br />
data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided<br />
by independent sources that are actively involved in the relevant market. Financial instruments that trade in markets that are not<br />
considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by<br />
observable inputs are classified within Level 2. <strong>Investments</strong> classified within Level 3 have significant unobservable inputs, as they<br />
trade infrequently. These may include private equity and corporate debt securities. As observable prices are not available for these<br />
securities, the Manager has used valuation techniques to derive the fair value.<br />
The following tables show the classification of the Fund’s financial assets and liabilities measured at fair value as at April 30, 2013<br />
and 2012.<br />
April 30, 2013 April 30, 2012<br />
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total<br />
($000s) ($000s) ($000s) ($000s) ($000s) ($000s) ($000s) ($000s)<br />
Equities — long .............................. 1,392,283 — — 1,392,283 1,375,497 — — 1,375,497<br />
<strong>Investments</strong> in underlying fund ................. — — 10,743 10,743 — — 10,485 10,485<br />
Short-term securities ......................... — 6,500 — 6,500 — 20,700 — 20,700<br />
Total <strong>Investments</strong> ............................ 1,392,283 6,500 10,743 1,409,526 1,375,497 20,700 10,485 1,406,682<br />
Derivative assets ............................. — 31 — 31 — — — —<br />
Derivative liabilities ........................... — — — — — — — —<br />
16 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
10. Financial Risk Management (Continued)<br />
There is no significant impact to the net assets of the Fund if changes are made to one or more of the significant assumptions in the<br />
current valuation model for the level 3 investment to reasonably possible alternative assumptions. A reconciliation of investments<br />
measured at fair value using unobservable inputs (Level 3) for the applicable fund is presented as follows:<br />
April 30, 2013 April 30, 2012<br />
<strong>Investments</strong> in<br />
<strong>Investments</strong> in<br />
underlying fund Total underlying fund Total<br />
($000s) ($000s) ($000s) ($000s)<br />
Opening .................................................................... 10,485 10,485 11,635 11,635<br />
Sales ...................................................................... — — — —<br />
Purchases ................................................................. — — 33 33<br />
Net transfers ................................................................ — — — —<br />
Net realized gains (losses) ..................................................... — — — —<br />
Net change in unrealized appreciation (depreciation) ................................ 258 258 (1,183) (1,183)<br />
Ending ..................................................................... 10,743 10,743 10,485 10,485<br />
Total change in unrealized appreciation (depreciation) on investments held at April 30 ...... 258 258 (1,183) (1,183)<br />
In accordance with the Fund’s valuation policy, the Fund may apply fair value adjustment factors when quoted market prices are<br />
deemed to have been affected by significant market events which exceed pre-determined thresholds. During the year, market level<br />
fair valuation was applied to the Fund where the pre-determined tolerances were exceeded, at which time the securities were classified<br />
as Level 2 and subsequently reclassified to Level 1, when the fair value adjustment factors were no longer required.<br />
As at April 30, 2013 and 2012, there were no significant market events to cause the pre-determined tolerances to be breached;<br />
hence there were no significant transfers between Level 1 and Level 2 as at that date.<br />
11. Broker Commissions<br />
Commissions paid to brokers for portfolio transactions during the years ended April 30, 2013 and 2012 amounted to $1.0 million and<br />
$0.4 million, respectively. A portion of commissions paid may include payment for goods and services that are used to assist with<br />
investment or trading decisions such as investment research, analysis and reports (“research services”). Where ascertainable, the<br />
value of the research services included in the commission paid for the years ended April 30, 2013 and 2012 amounted to<br />
$0.4 million and $0.3 million, respectively.<br />
12. Taxes<br />
(a)<br />
Capital and non-capital losses<br />
The Fund has accumulated $539 million of unused capital losses and no unused non-capital losses for income tax purposes as of<br />
April 30, 2013. Capital losses can be carried forward indefinitely and applied against future years’ capital gains.<br />
Temporary differences between the carrying value of assets and liabilities for accounting and income tax purposes give rise to future<br />
tax assets and liabilities. The most significant temporary difference is that between the reported fair market value of the investment<br />
portfolio of the Fund and its adjusted cost base (“ACB”) for income tax purposes. To the extent that the fair market value of a portfolio<br />
exceeds its ACB, a future tax liability is fully offset by the future refundable taxes available to the Fund as a mutual fund corporation.<br />
Conversely, when the ACB exceeds the portfolio’s market value, a future tax asset is generated. In such cases, a full valuation allowance<br />
is taken to offset this asset given the uncertainty that such future tax assets will ultimately be realized. Unused capital and noncapital<br />
losses disclosed above represent future tax assets to the Fund for which no benefit has been recorded in these financial<br />
statements as there is no certainty that the losses are more likely than not to be utilized in future periods.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 17
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
12. Taxes (Continued)<br />
(b) Effective tax rates<br />
The Fund’s statutory corporate tax rate on net investment income (excluding Canadian dividend income) for the year ended April 30,<br />
2013 was 39.50%: (2012 : 39.58%). The actual effective tax rate for the year ended April 30, 2013 was 1.54%: (2012 : (14.59%)).<br />
The effective tax rate includes the tax effect of income related foreign exchange gains/losses included in net realized gains/losses.<br />
2013 2012<br />
% %<br />
Statutory Tax Rate ........................................................................... 39.50 39.58<br />
Realized and Unrealized Gain (Loss) on <strong>Investments</strong> ................................................ (38.24) (47.21)<br />
Canadian Dividends .......................................................................... (0.03) 0.10<br />
Foreign Taxes (grouped) ...................................................................... 0.46 (2.67)<br />
Other ...................................................................................... (0.15) (4.39)<br />
Effective Tax Rate ............................................................................ 1.54 (14.59)<br />
13. Trading Net Asset Value<br />
As discussed in Note 2, the trading net asset value per share may differ from the GAAP net assets per share as shown in the Statements<br />
of Net Assets. The trading net asset value per share for each series is shown below, as at April 30, 2013 and April 30, 2012.<br />
April 30, 2013 April 30, 2012<br />
Series A ................................................................................... $11.46 $ 9.66<br />
Series A Hedged ............................................................................. $10.26 $ —<br />
Series F .................................................................................... $12.80 $10.67<br />
Series I .................................................................................... $12.89 $10.74<br />
Series O ................................................................................... $15.42 $12.67<br />
14. Financial Statements Presentation<br />
The amounts shown on the Statements of Net Assets and the Statements of Operations and Changes in Net Assets are rounded to<br />
the nearest thousand. As a result, balances reported may include amounts rounded to zero. Per share amounts and number of<br />
shares outstanding shown are actual amounts.<br />
15. Currency Legend<br />
Below is a list of currency abbreviations that are used throughout the financial statements.<br />
CAD Canadian Dollar GBP British pound<br />
CHF Swiss Franc HKD Hong Kong Dollar<br />
EUR euro USD United States Dollar<br />
16. Regulatory Developments<br />
International Financial Reporting Standards (IFRS)<br />
The Canadian Accounting Standards Board (“AcSB”) confirmed that effective January 1, 2011, IFRS replaced current Canadian<br />
standards and interpretations as Canadian GAAP for publicly accountable enterprises, which includes investment funds. The adoption<br />
of IFRS for investment funds will now not be mandatory until periods beginning on or after January 1, 2014. The deferral of the<br />
mandatory changeover was intended to allow the International Accounting Standard Board’s (“IASB”) proposed exemption from<br />
consolidation for investment funds to be in place prior to the adoption of IFRS by investment companies in Canada.<br />
In October 2012, the IASB approved the proposed amendments to IFRS 10, “Consolidated Financial Statements”, which define criteria<br />
for an entity to qualify as an investment entity and exempts such entity from consolidation requirements. These amendments<br />
require an investment entity to measure those subsidiaries at fair value through profit or loss in accordance with IFRS 9, “Financial<br />
Instruments” and expand disclosures to help users evaluate the nature and financial effect of its investment activities. The amendment<br />
will be effective January 1, 2014. Based on the Manager’s assessment, each of the Funds currently meet the proposed criteria<br />
for an investment entity and as such will be exempt from consolidation requirements.<br />
18 <strong>Templeton</strong> Growth Fund, Ltd.
<strong>Templeton</strong> Growth Fund, Ltd.<br />
NOTES TO FINANCIAL STATEMENTS<br />
For the periods ended April 30, 2013 and 2012 (Continued)<br />
16. Regulatory Developments (Continued)<br />
The Manager has developed a plan to meet the timetable published by the CICA for the changeover to IFRS. The key elements of the<br />
plan include an assessment of differences between Canadian GAAP and IFRS, changes required to financial statement disclosure<br />
and impact on the current process for financial reporting purposes.<br />
Based on the Manager’s assessment of the accounting differences between Canadian GAAP and IFRS, the following areas of differences<br />
were identified:<br />
(a)<br />
(b)<br />
IAS 32, “Financial Instruments: Presentation”, requires puttable instruments to be classified as a liability unless certain<br />
conditions are met. The Funds’ shareholders’ equity meets the definition of a puttable instrument. The Manager has assessed<br />
the Fund’s shareholder structure and has determined the liability treatment is the most appropriate classification.<br />
IFRS 13, “Fair Value Measurements”, was published in May 2011. The standard provides guidance on the measurement of fair<br />
value and allows for the use of closing market prices to value investments. Under Canadian GAAP the fair value of investments<br />
for financial statement reporting purposes, was required to be measured at closing bid price for long positions and closing ask<br />
price for short positions. The Manager has assessed the guidance that will apply under IFRS and has determined that the use of<br />
closing market prices is appropriate in valuing investments.<br />
A Statement of Cash Flow will be required for IFRS reporting purposes. The Manager has presently determined that the impact of<br />
IFRS will also include additional note disclosure and modifications to existing presentation. The Manager does not expect that the<br />
trading net asset value or trading net asset value per unit will be impacted by the changeover to IFRS.<br />
<strong>Templeton</strong> Growth Fund, Ltd. 19
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL <strong>REPORT</strong>ING<br />
The accompanying financial statements have been prepared by <strong>Franklin</strong> <strong>Templeton</strong> Investment Corp., (the “Manager), as Manager of<br />
<strong>Templeton</strong> Growth Fund., Ltd (the “Fund”) and are approved by the Board of Directors of the Fund.<br />
The Manager is responsible for the information and representations contained in these financial statements and the other sections of the<br />
Annual Report. The Manager also maintains appropriate processes to ensure that relevant and reliable financial information is produced.<br />
The financial statements have been prepared in accordance with accounting principles generally accepted in Canada and include certain<br />
amounts that are based on estimates and judgments. The significant accounting policies which the Manager believes are appropriate for<br />
the Fund are described in Note 2 to the financial statements. Financial information published with the Annual Report is consistent with<br />
that in the financial statements.<br />
The Board of Directors is responsible for reviewing and approving the financial statements and overseeing management’s performance of<br />
its financial reporting. The Board of Directors appoints an Audit Committee comprised of a majority of non-management Directors. The<br />
Audit Committee reviews the financial statements, adequacy of internal controls, the audit process and financial reporting with management<br />
and the external auditors. The Audit Committee reports to the Board of Directors prior to the approval of the audited financial statements<br />
for publication.<br />
PricewaterhouseCoopers LLP are the external auditors of the Fund, appointed by the shareholders. They have audited the financial statements<br />
in accordance with Canadian generally accepted auditing standards to enable them to express to the shareholders their opinion on<br />
the financial statements. Their report is set out on the following page.<br />
D.F. REED<br />
Chief Executive Officer,<br />
<strong>Templeton</strong> Growth Fund, Ltd.<br />
D.A. BUCHANAN<br />
Treasurer,<br />
<strong>Templeton</strong> Growth Fund, Ltd.<br />
20 <strong>Templeton</strong> Growth Fund, Ltd.
INDEPENDENT AUDITOR’S <strong>REPORT</strong><br />
To the shareholders of<br />
<strong>Templeton</strong> Growth Fund, Ltd. (the Fund)<br />
We have audited the accompanying financial statements of the Fund, which comprise the statement of investment portfolio as at April 30,<br />
2013, the statements of net assets as at April 30, 2013 and April 30, 2012 and the statements of operations and changes in net assets for<br />
the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory<br />
information.<br />
Management’s responsibility for the financial statements<br />
Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian generally<br />
accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial<br />
statements that are free from material misstatement, whether due to fraud or error.<br />
Auditor’s responsibility<br />
Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with<br />
Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform<br />
the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.<br />
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The<br />
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial<br />
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s<br />
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,<br />
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the<br />
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating<br />
the overall presentation of the financial statements.<br />
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.<br />
Opinion<br />
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at April 30, 2013 and<br />
April 30, 2012 and the results of its operations and the changes in its net assets for the years then ended in accordance with Canadian<br />
generally accepted accounting principles.<br />
Toronto, Ontario<br />
May 21, 2013<br />
Chartered Accountants, Licensed Public Accountants<br />
<strong>Templeton</strong> Growth Fund, Ltd. 21
<strong>Franklin</strong> <strong>Templeton</strong> <strong>Investments</strong> is one of the world’s largest publicly-traded investment<br />
management companies, delivering a truly global perspective to investors for over 60 years.<br />
With values that have withstood the test of time, <strong>Franklin</strong> <strong>Templeton</strong> <strong>Investments</strong> provides<br />
global and domestic investment advisory services to the <strong>Franklin</strong>, <strong>Templeton</strong>, Bissett and<br />
Mutual Series funds and institutional accounts, including private wealth management<br />
solutions through Fiduciary Trust Company of Canada.<br />
www.franklintempleton.ca<br />
<strong>Franklin</strong> <strong>Templeton</strong> <strong>Investments</strong> Corp.<br />
5000 Yonge Street, Suite 900<br />
Toronto, ON, M2N 0A7<br />
Client Services: 416.364.4672 Fax: 416.364.1163<br />
Client Services Toll-free: 1.800.387.0830 Toll-free Fax: 1.866.850.8241<br />
Founding Member of The Canadian Coalition for Good Governance<br />
Canadian offices:<br />
VANCOUVER • CALGARY • WINNIPEG • TORONTO<br />
OTTAWA • MONTREAL • HALIFAX<br />
NYSE: BEN<br />
IFIC<br />
A Member of The Investment Funds<br />
Institute of Canada<br />
201304253044<br />
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund<br />
investments. Please read the <strong>Franklin</strong> <strong>Templeton</strong> <strong>Investments</strong> Funds’ prospectus before investing. Mutual fund<br />
securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit<br />
insurer. There can be no assurances that the money market funds will be able to maintain their net asset value<br />
per security at a constant amount or that the full amount of your investment in the fund(s) will be returned to<br />
you. Unit/share values change frequently and past performance may not be repeated. Fiduciary Trust Company<br />
of Canada is a wholly owned subsidiary of <strong>Franklin</strong> <strong>Templeton</strong> <strong>Investments</strong> Corp.<br />
700 ARE 04/13