<PAGE> 1
Templeton Global
Bond Fund
Your Fund's Objective:
The Templeton Global Bond Fund seeks current income, with capital appreciation
and growth of income, through a flexible policy of investing primarily in debt
securities of companies, governments, and government agencies of various
nations throughout the world. The Fund also may invest in preferred stock,
common stocks which pay dividends, income-producing securities convertible
into common stock of such companies, and depository receipts.
April 15, 1997
Dear Shareholder:
We are pleased to bring you this semi-annual report of the Templeton Global Bond
Fund, which covers the six months ended February 28, 1997.
During the period under review, interest rates fell in almost all global bond
markets, increasing the value of these fixed-income securities. However, at the
same time, the U.S. dollar rose against most foreign currencies, reducing
returns for U.S. holders of foreign bonds. Since these events affected markets
differently, market selection and currency management were two key factors
affecting the Fund's performance. As discussed in the Performance Summary on
page 5, the Fund provided a six-month total return of 5.14%.
During the summer of 1996, many bond investors feared that strong economic
growth, especially in the U.S., would lead to higher interest rates. However,
the U.S. Federal Reserve did not raise interest rates at its September meeting,
signaling
1
<PAGE> 2
confidence in the economy's ability to expand without significant inflation.
Reports released later indicated that U.S. economic growth had, in fact,
"slowed" during the third quarter of 1996. This boosted investors' expectations
for bonds, and from September 1 to the end of the reporting period, bond prices
rose, and the yield on the U.S. ten-year Treasury fell, from nearly 7.00% to
approximately 6.5%. (1)
Interest rates in most foreign markets also fell during the period. Attempting
to meet requirements for membership in the European Monetary Union, the French,
Italian, and Spanish governments cut their budgets aggressively, leading to an
even greater interest-rate drop in Europe than in the United States. Italian
ten-year government bond yields declined from 8.32% to 6.38%, while the
equivalent bond yields in France fell from 6.49% to 5.41%. Rates in most other
European countries decreased by a comparable amount. Japan was the only
industrial country where yields fell less than in the U.S. With short-term rates
at approximately 0.3%, Japanese monetary authorities could do little to lower
interest rates in an effort to stimulate their moribund economy.
Templeton Global Bond Fund
Geographic Distribution of Issuers of Securities
Based on Total Net Assets on 2/28/97
[PIE CHART]
<TABLE>
<S> <C>
United States Stocks 39.5%
European Stocks 33.9%
Australian &
New Zealand Stocks 11.2%
Canadian Stocks 7.5%
Latin American Stocks 4.5%
Asian Stocks 3.4%
</TABLE>
While the interest-rate environment was generally beneficial for U.S. investors
in global bonds, the foreign exchange market was decidedly less so. Because
interest rates fell by a greater amount in almost all of the industrial world
than in the United States, the value of the dollar rose. The strength of the
U.S. economy also enhanced the
1. Source: Federal Reserve Board.
2
<PAGE> 3
appeal of the dollar, and only two major currencies appreciated against it --
the British pound by 4.39% and the Canadian dollar by 0.04%. The currencies of
all other major industrial countries declined, sometimes significantly, versus
the dollar. For example, the German mark fell 12.26%, the Japanese yen 9.31%,
and the Italian lira 10.79%.
The above factors had a significant impact on the debt securities of emerging
market nations. Their higher yields were extremely attractive to investors, and
in an environment of foreign currency depreciation, their denomination in U.S.
dollars made these securities even more appealing. As a result, bond markets in
emerging market countries performed extremely well.
Responding to these conditions, we maintained the Fund at near its maximum
allowable five percent position in low grade debt (such as that issued by
emerging markets) and increased our U.S. position in an effort to reduce our
exposure to depreciating currencies. Holdings of U.S. securities grew from 29.2%
to 39.5% for the period. These purchases were funded primarily through
decreasing our European holdings: in Spain, from 9.0% to 2.8%; in Denmark, from
7.4% to 3.5%; in Italy, from 10.6% to 8.2%; and in the U.K., from 8.4% to 4.4%.
But, believing that Germany's economy represented a better prospect for meeting
investors' expectations than many of Europe's other economies, we increased our
investment in German bonds, from 3.0% at the beginning of the period, to 11.5%
at the end.
Templeton Global Bond Fund
Portfolio Breakdown on 2/28/97
Based on Total Net Assets
<TABLE>
<S> <C>
Government Bonds 84.8%
Corporate Bonds 2.8%
Common Stocks 3.1%
Preferred Stocks 1.1%
Short-Term Obligations & Other Net Assets 8.2%
</TABLE>
For a complete list of portfolio holdings, please see page 13 of this report.
Short-Term Obligations & Other Net Assets includes a 0.3% unrealized gain on
forward exchange contracts.
During the six months under review, we made extensive use of currency hedges to
increase our exposure to the U.S. dollar. By the end of the period, our total
exposure to the U.S. dollar represented 64.3% of the Fund, up from 38.7% at the
end of August 1996. We perceive further currency depreciation as a very real
risk in Europe, and will continue hedging the Fund's currency hold-
3
<PAGE> 4
ings, seeking to protect the dollar value of the portfolio. Our exposure to
interest-rate risk has remained roughly constant over the period, with the
Fund's average bond maturity remaining relatively short, at 5.1 years.
This discussion reflects the strategies we employed for the Fund during the six
months under review, and includes our opinions as of the close of the period.
Since economic and market conditions are constantly changing, our strategies,
and our evaluations, conclusions and decisions regarding portfolio holdings may
change as new circumstances arise. Although past performance of a specific
investment or sector cannot guarantee future performance, such information can
be useful in analyzing securities we purchase or sell for the Fund.
As always, we remind you that there are special risks involved with global
investing related to market, currency, economic, political, and other factors,
in addition to the heightened risks associated with the relatively small size
and lesser liquidity of developing markets.
We thank you for your participation in the Templeton Global Bond Fund and
welcome any comments or suggestions you may have.
Sincerely,
/s/ Thomas Latta
- ----------------------------
Thomas Latta
Portfolio Manager
Templeton Global Bond Fund
CELEBRATING 50 YEARS
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual
fund families, we're proud to be an innovative industry leader, providing
people like you with an opportunity to invest in companies and governments
around the globe.
In addition, we want to stress that all securities markets move both up and
down. Mixed in with the good years can be some bad years. Accordingly, mutual
fund share prices also move up and down. Every investor should expect such
fluctuations, which can be wide. When markets are going down, as well as up,
we encourage investors to maintain a long-term perspective. We thank you for
your past support and look forward to serving your investment needs in the
years ahead.
4
<PAGE> 5
PERFORMANCE SUMMARY
CLASS I
The Templeton Global Bond Fund's Class I shares provided a cumulative total
return of 5.14% for the six-month period ended February 28, 1997. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of dividends, and does not include the maximum 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 encourage
shareholders to view their investments in a similar manner. As you can see from
the table to the right, the Fund delivered a cumulative total return of more
than 133% since inception on September 18, 1986.
The price of the Fund's shares, as measured by net asset value, increased 20
cents ($0.20), from $9.76 on August 31, 1996 to $9.96 on February 28, 1997.
During this time, shareholders received distributions of 30 cents ($0.30) per
share in dividend income. Of course, past performance is not predictive of
future results, and distributions will vary depending on income earned by the
Fund, as well as any profits realized from the sale of securities in the
portfolio.
TEMPLETON GLOBAL BOND FUND
CLASS I
Periods Ended 2/28/97
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (9/18/86)
<S> <C> <C> <C>
Cumulative Total Return (1) 9.80% 45.43% 133.14%
Average Annual Total Return (2) 25.11% 6.84% 7.99%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the indicated periods, and does not include the initial sales charge. See Note
below.
2. Average annual total return represents the average annual change in value of
an investment over the indicated periods, and includes the current maximum 4.25%
sales charge. See Note below.
Note: All total return calculations assume reinvestment of dividends and capital
gains at net asset value when paid. Prior to July 1, 1992, Fund shares were
offered at a higher initial sales charge. Thus, actual total returns for
purchasers of shares during that period would have been lower than noted above.
On January 1, 1993, the Fund implemented a Rule 12b-1 plan, which affects
subsequent performance. Investment return and principal value will fluctuate
with market conditions, currencies, and the economic and political climates
where investments are made. Emerging markets involve heightened risks related to
the same factors, in addition to those associated with the relatively small size
and lesser liquidity of these markets. You may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
5
<PAGE> 6
PERFORMANCE SUMMARY
CLASS II
The Templeton Global Bond Fund's Class II shares provided a cumulative total
return of 4.82% for the six-month period ended February 28, 1997. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of dividends, and does not include sales charges. While we expect
market volatility in the short-term, we have always maintained a long-term
perspective when managing the Fund and encourage shareholders to view their
investments in a similar manner.
The price of the Fund's shares, as measured by net asset value, increased 19
cents ($0.19), from $9.77 on August 31, 1996 to $9.96 on February 28, 1997.
During this time, shareholders received distributions of 27.97 cents ($0.27.97)
per share in dividend income. Of course, past performance is not predictive of
future results, and distributions will vary depending on income earned by the
Fund, as well as any profits realized from the sale of securities in the
portfolio.
TEMPLETON GLOBAL BOND FUND
CLASS II
Periods Ended 2/28/97
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
<S> <C> <C>
Cumulative Total Return(1) 9.12% 22.14%
Average Annual Total Return(2) 7.01% 10.94%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the indicated periods and does not include the initial sales charge nor the
Contingent Deferred Sales Charge (CDSC), applicable to shares redeemed within
the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the indicated periods. It includes the 1.0% initial sales
charge and the 1.0% CDSC, applicable to shares redeemed within the first 18
months of investment. See Note below.
Note: All total return calculations assume reinvestment of dividends and capital
gains at net asset value when paid. Investment return and principal value will
fluctuate with market conditions, currencies, and the economic and political
climates where investments are made. Emerging markets involve heightened risks
related to the same factors, in addition to those associated with the relatively
small size and lesser liquidity of these markets. You may have a gain or loss
when you sell your shares. Past performance is not predictive of future results.
6
<PAGE> 7
PERFORMANCE SUMMARY
ADVISOR CLASS
The Templeton Global Bond Fund - Advisor Class Shares produced an aggregate
total return of -0.95% for the two-month period from inception on January 1,
1997 through February 28, 1997. The price of the Fund's shares, as measured by
net asset value, decreased 20 cents ($0.20), from $10.16 on January 2, 1997
(first day of commencement of sales), to $9.96 on February 28, 1997. Of course,
past performance is not predictive of future results.
TEMPLETON GLOBAL BOND FUND
ADVISOR CLASS
Period Ended 2/28/97
<TABLE>
<CAPTION>
Since
Inception
(1/1/97)
<S> <C>
Aggregate Total Return(1) -0.95%
</TABLE>
1. Aggregate total return represents the change in value of an investment over
the indicated period. Since Advisor Class shares have been in existence for less
than one year, average annual total returns are not provided.
Investment return and principal value will fluctuate with market conditions,
currencies and the economic and political climates where investments are made.
Emerging markets involve heightened risks related to the same factors, in
addition to those associated with the relatively small size and lesser liquidity
of these markets. You may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
7
<PAGE> 8
Many investors have asked us about the activities of Sir John Templeton, since
his retirement from the funds. We asked Professor Robert Herrmann to update us
on Sir John's current activities and his comments follow.
THE NEW CAREER OF
SIR JOHN TEMPLETON
[PHOTO OF SIR JOHN TEMPLETON]
By Professor
Robert Herrmann
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
Templeton funds, managed by many of the investment professionals he selected and
trained. For sentimental reasons, he allows his name to be associated with the
funds, although he knows no more about their management and holdings than any
other investor.
Sir John Templeton established the Templeton Foundation in 1987, to foster the
acquisition of spiritual information through scientific research. Working with
scientists, theologians and others, he strives toward a new science that uses
empirical and statistical scientific methods to discover and test spiritual
knowledge. A crucial ingredient in his research is what Sir John calls "humility
theology," an attitude of humility toward the Creator, combined with
receptiveness to the theological significance of current scientific discoveries.
Universal spiritual laws, or "laws of life," are among the areas of
investigation. In his recent book, Worldwide Laws of Life, Sir John compiles 200
laws and proverbs from nearly all religions, and deeply embedded in human
history. For example, the Golden Rule taught by Jesus in the Sermon on the
Mount, states "Do unto others as you would have others do unto you," and is
affirmed by all major religions as an acceptable, universal law of life. Other
books which Sir John has authored or co-authored during the past few years
include: The Humble Approach, Is God the Only Reality, Evidence of Purpose,
Who's Who in Theology and Science and The God Who Would Be Known.
With an annual budget of more than $30 million, the Templeton Foundation
sponsors 60 programs focusing on spiritual progress and the benefits of freedom.
Sir John's first sizable investment in the programs was the Templeton Prize for
Progress in Religion. A panel of nine judges gives the annual award which now
exceeds $1.2 million to individuals who have shown extraordinary originality in
furthering the world's understanding of God or spirituality.
Recipients of the prize include Professor Paul Davies, author of The Mind of
God; the Right Honorable Lord Jacobovits, former Chief Rabbi of Great Britain
and The Commonwealth; the Reverend Dr. Billy Graham, world-renowned preacher and
presidential inauguration speaker; Mr. Nikkyo Nimano, founder of the World
Conference on Religion and Peace; and Sir Sarepalli Radhakrishnan, former
President of India, and Oxford professor of Eastern Religions and Ethics.
To encourage young people's and their parents' appreciation of spiritual laws of
life, Sir John established an essay contest for teenagers in his home county of
Franklin, Tennessee. Students submit essays about the spiritual life principles
they plan to follow, and prizes are offered semiannually. In 1996, more than 800
youth participated. Twenty-six similar programs
8
<PAGE> 9
have been launched in various locations, with the support of generous local
donors.
The Foundation also sponsors a worldwide program that awards college-level
faculty who teach courses integrating science and religion. During the program's
first two years, more than 200 courses were created. The Foundation maintains an
extensive program of research and education on the health benefits of
spirituality, including prizes for medical schools providing courses on
spirituality in medicine. Lastly, the Foundation publishes a newsletter with
over 2,000 subscribers. Free subscriptions are available to Templeton
shareholders by writing to the Foundation.
To contact Sir John Templeton or receive the free newsletter subscription,
please write to:
The John Templeton Foundation
2 Radnor Corporate Center #320
100 Matsonford Road
Radnor, PA 19087
9
<PAGE> 10
TEMPLETON GLOBAL BOND FUND
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS I
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31
FEBRUARY 28, 1997 ---------------------------------------------------
(UNAUDITED) 1996 1995 1994+ 1993 1992
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.76 $ 9.32 $ 9.05 $ 9.96 $ 10.55 $ 9.81
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income .32 .69 .73 .72 .82 .83
Net realized and unrealized gain (loss) .18 .35 .17 (.91) (.35) .75
-------- -------- -------- -------- -------- --------
Total from investment operations .50 1.04 .90 (.19) .47 1.58
-------- -------- -------- -------- -------- --------
Distributions:
Dividends from net investment income (.30) (.58) (.54) (.53) (.76) (.84)
Distributions from net realized gains -- -- -- (.07) (.30) --
Tax basis return of capital -- (.02) (.09) (.12) -- --
-------- -------- -------- -------- -------- --------
Total distributions (.30) (.60) (.63) (.72) (1.06) (.84)
-------- -------- -------- -------- -------- --------
Change in net asset value .20 .44 .27 (.91) (.59) .74
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.96 $ 9.76 $ 9.32 $ 9.05 $ 9.96 $ 10.55
======== ======== ======== ======== ======== ========
TOTAL RETURN* 5.14% 11.44% 10.43% (2.01)% 5.00% 16.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $197,141 $185,596 $191,301 $205,482 $206,667 $179,799
Ratio of expenses to average net assets 1.17%** 1.13% 1.18% 1.18% 1.01% 0.98%
Ratio of net investment income to average
net assets 6.55%** 7.09% 7.99% 7.50% 8.45% 8.14%
Portfolio turnover rate 80.11% 109.40% 101.12% 139.23% 266.93% 233.93%
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED IN PERIODS OF
LESS THAN ONE YEAR.
** ANNUALIZED.
+ BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING.
10
<PAGE> 11
TEMPLETON GLOBAL BOND FUND
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED MAY 1, 1995+
FEBRUARY 28, 1997 YEAR ENDED THROUGH
(UNAUDITED) AUGUST 31, 1996 AUGUST 31, 1995
------------------ ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.77 $ 9.31 $ 9.05
------- -------- --------
Income from investment operations:
Net investment income .29 .61 .21
Net realized and unrealized gain .18 .41 .24
------- -------- --------
Total from investment operations .47 1.02 .45
------- -------- --------
Distributions:
Dividends from net investment income (.28) (.54) (.15)
Tax basis return of capital -- (.02) (.04)
------- -------- --------
Total distributions (.28) (.56) (.19)
------- -------- --------
Change in net asset value .19 .46 .26
------- -------- --------
Net asset value, end of period $ 9.96 $ 9.77 $ 9.31
======= ======== ========
TOTAL RETURN* 4.82% 11.20% 5.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $11,069 $ 6,563 $ 2,043
Ratio of expenses to average net assets 1.56%** 1.56% 1.57%**
Ratio of net investment income to average net assets 6.05%** 6.69% 7.47%**
Portfolio turnover rate 80.11% 109.40% 101.12%
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF OFFERING OF SALES.
11
<PAGE> 12
TEMPLETON GLOBAL BOND FUND
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE -- ADVISOR CLASS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 2, 1997+
THROUGH
FEBRUARY 28, 1997
(UNAUDITED)
------------------
<S> <C>
Net asset value, beginning of period $ 10.16
--------
Income from investment operations:
Net investment income 0.09
Net realized and unrealized (loss) (0.19)
--------
Total from investment operations (0.10)
--------
Distributions:
Dividends from net investment income (.10)
--------
Total distributions (.10)
--------
Change in net asset value (.20)
--------
Net asset value, end of period $ 9.96
========
TOTAL RETURN* (.95)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 1,772
Ratio of expenses to average net assets 0.87%**
Ratio of net investment income to average net assets 6.45%**
Portfolio turnover rate 80.11%
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF OFFERING OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
TEMPLETON GLOBAL BOND FUND
Investment Portfolio, February 28, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* COUNTRY ISSUE VALUE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--CORPORATE: 2.8%
- -------------------------------------------------------------------------------------------------------------------------
4,000,000 U.S. Compania Sud Americana de Vapores SA, 7.375%, 12/08/03 $ 3,890,000
2,250,000 U.S. PIV Investment Finance (Cayman) Ltd.,4.5%,conv., 12/1/00 2,041,871
------------
TOTAL BONDS--CORPORATE (cost $5,732,141) 5,931,871
- -------------------------------------------------------------------------------------------------------------------------
BONDS--GOVERNMENT & GOVERNMENT AGENCIES: 84.8%
- -------------------------------------------------------------------------------------------------------------------------
Buoni Poliennali del Tes:
2,900,000,000 Itl. 12.00%, 1/17/99 1,851,299
6,040,000,000 Itl. 10.50%, 11/1/00 3,941,149
6,725,000,000 Itl. 10.50%, 9/1/05 4,699,012
1,973,000 U.S. Essar Gujarat Ltd., 8.3375%, FRN, 7/15/99, 144A 1,908,878
20,180,000 Aus. Government of Australia, 10.00%, 10/15/02 17,547,111
Government of Canada:
8,600,000 Can. 10.50%, 7/01/00 7,330,714
6,350,000 Can. 8.50%, 4/01/02 5,226,051
4,000,000 Can. 8.00%, 6/01/23 3,259,812
Government of Denmark:
21,472,000 Dem. 8.00%, 11/15/01 3,738,049
20,769,000 Dem. 8.00%, 5/15/03 3,627,287
10,205,000,000 Itl. Government of Italy, 10.50%, 7/15/00 6,642,254
7,700,000 Nz. Government of New Zealand, 10.00%, 3/15/02 5,853,733
442,110,000 Sp. Government of Spain, 12.25%, 3/25/00 3,610,100
Kingdom of Sweden:
11,100,000 Sek. 13.00%, 6/15/01 1,894,958
33,700,000 Sek. 10.25%, 5/5/03 5,448,327
1,000,000 U.S. Pohang Iron & Steel, 6.625%, 7/1/03 977,990
2,000,000 U.S. PT Astra International, 9.75%, 4/29/01 2,120,000
940,000 U.S. Republic of Argentina, 8.375%, 12/20/03 908,275
2,500,000 Col. Republic of Colombia, 7.25%, 2/23/04 2,421,875
21,235,000 Ger. Federal Republic of Germany, 8.00%, 7/22/02 14,534,413
14,255,000 Ger. Federal Republic of Germany, Bundes, 8.00%, 1/21/02 9,690,137
5,060,000 U.K. United Kingdom, stk., 9.75%, 8/27/02 9,240,720
10,575,000 U.S. U.S. Treasury Bond, 6.375%, 8/15/02 10,565,081
U.S. Treasury Notes:
17,251,000 U.S. 6.125%, 7/31/00 17,180,909
15,420,000 U.S. 6.25%, 8/31/00 15,405,536
15,584,000 U.S. 7.25%, 8/15/04 16,260,922
2,500,000 U.S. Venezuela Front Load Interest Reduction Bond, A, 3/31/07 2,273,438
------------
TOTAL BONDS--GOVERNMENT & GOVERNMENT AGENCIES (cost $181,598,832) 178,158,030
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
TEMPLETON GLOBAL BOND FUND
Investment Portfolio, February 28, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES** COUNTRY ISSUE VALUE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS: 3.1%
- -------------------------------------------------------------------------------------------------------------------------
999,667 U.S. +Acadia Partners LP $ 1,080,540
108,000 U.S. Long Island Lighting Co. 2,484,000
333 U.S. +Penobscot Partners LP 4,675
70,000 U.S. Texas Utilities Electric Co. 2,826,250
------------
TOTAL COMMON STOCKS (cost $5,842,545) 6,395,465
- -------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 1.1% (cost $2,002,728)
- -------------------------------------------------------------------------------------------------------------------------
91,700 U.S. Santander Finance Ltd., B, pfd. 2,281,038
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL IN
LOCAL CURRENCY*
- -------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 3.0%
- -------------------------------------------------------------------------------------------------------------------------
850,000 U.S. Federal National Mortgage Association, 5.24%, 4/18/97 844,319
2,817,000 U.S. U. S. Treasury Bill, 4.95%, 6/5/97 2,780,737
2,731,223 U.S. Deutsche Bank AG, 5.375%, 3/3/97 2,730,000
------------
TOTAL SHORT TERM OBLIGATIONS (cost $6,353,366) 6,355,056
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 94.8% (cost $201,529,612) 199,121,460
UNREALIZED GAIN ON FORWARD EXCHANGE CONTRACTS: 0.3% 579,235
OTHER ASSETS, LESS LIABILITIES: 4.9% 10,281,532
------------
TOTAL NET ASSETS: 100.0% $209,982,227
============
</TABLE>
* CURRENCY OF COUNTRIES INDICATED.
** COUNTRY OF ORIGIN INDICATED.
+ NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
TEMPLETON GLOBAL BOND FUND
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $201,529,612) $199,121,460
Receivables:
Investment Securities sold 5,756,131
Fund shares sold 1,548,595
Interest and dividends 3,918,266
Unrealized gains in forward exchange
contracts (Note 5) 726,614
------------
Total assets 211,071,066
------------
Liabilities:
Payable for fund shares redeemed 347,590
Funds advanced by custodian 307,877
Unrealized loss in forward exchange
contracts (Note 5) 147,379
Accrued expenses 285,993
------------
Total liabilities 1,088,839
------------
Net assets, at value $209,982,227
============
Net assets consist of:
Undistributed net investment income $ 442,224
Net unrealized depreciation (1,989,794)
Accumulated net realized gains 308,039
Net capital paid in on shares of
beneficial interest 211,221,758
------------
Net assets, at value $209,982,227
============
Class I
Net asset value per share ($197,140,992
/ 19,798,617 shares outstanding) $ 9.96
============
Maximum offering price ($9.96 / 95.75%) $ 10.40
============
Class II
Net asset value per share ($11,068,784 /
1,110,944 shares outstanding) $ 9.96
============
Maximum offering price ($9.96 / 99.00%) $ 10.06
============
Advisor Class
Net asset value per share ($1,772,451 /
177,997 shares outstanding) $ 9.96
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 28, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Investment Income (net of $129,040
foreign taxes withheld):
Interest $7,455,970
Dividends 150,529
----------
Total income $7,606,499
Expenses:
Management fees (Note 3) 493,415
Administrative fees (Note 3) 143,912
Distribution fees (Note 3)
Class I shares 244,444
Class II shares 28,162
Transfer agent fees (Note 3) 120,000
Custodian fees 22,000
Reports to shareholders 50,000
Audit fees 18,000
Registration and filing fees 30,000
Trustees' fees and expenses 6,500
Other 11,520
----------
Total expenses 1,167,953
----------
Net investment income 6,438,546
Realized and unrealized gain
(loss):
Net realized gain on:
Investments 984,405
Foreign currency transactions 2,674,685
----------
3,659,090
----------
Net unrealized appreciation
(depreciation) on:
Investments (793,970)
Foreign currency translation
of other assets and
liabilities 373,018
----------
(420,952)
----------
Net realized and
unrealized gain 3,238,138
----------
Net increase in net assets
resulting from operations $9,676,684
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 16
TEMPLETON GLOBAL BOND FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1997 YEAR ENDED
(UNAUDITED) AUGUST 31, 1996
----------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 6,438,546 $ 13,711,029
Net realized gain (loss) from security and foreign currency transactions 3,659,090 (163,615)
Net unrealized appreciation (depreciation) (420,952) 7,528,543
------------ ------------
Net increase in net assets resulting from operations 9,676,684 21,075,957
Distributions to shareholders:
From net investment income
Class I (5,742,221) (11,385,814)
Class II (247,144) (224,274)
Advisor Class (6,957) --
Tax basis return of capital
Class I -- (377,284)
Class II -- (7,432)
Capital share transactions (Note 2)
Class I 7,935,870 (14,645,026)
Class II 4,414,168 4,379,078
Advisor Class 1,792,885 --
------------ ------------
Net increase (decrease) in net assets 17,823,285 (1,184,795)
Net assets:
Beginning of period 192,158,942 193,343,737
------------ ------------
End of period $209,982,227 $192,158,942
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 17
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Global Bond Fund (the Fund) is a separate series of Templeton Income
Trust (the Trust), a Massachusetts Business Trust, which is an open-end,
non-diversified management investment company, registered under the Investment
Company Act of 1940. The Fund seeks current income with capital appreciation and
growth of income through a flexible policy of investing in debt securities,
governments and government agencies of various nations throughout the world. The
following summarizes the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by
management and approved by the Board of Trustees.
B. FOREIGN EXCHANGE CONTRACTS:
The Fund enters into forward exchange contracts and currency option contracts in
order to hedge against foreign exchange risks.
(i) Forward Exchange Contracts: These contracts are valued daily and the Fund's
equity therein, representing unrealized gain or loss on the contracts, is
included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.
(ii) Currency Option Contracts: Options purchased are recorded as investments;
options written (sold) are accounted for as liabilities. When an option expires,
the premium (original option value) is realized as a gain if the option was
written or realized as a loss if the option was purchased. When the exercise of
an option results in a cash settlement, the difference between the premium and
the settlement proceeds is realized as a gain or loss. When securities are
acquired or delivered upon exercise of an option, the acquisition cost or sale
proceeds are adjusted by the amount of the premium. When an option is closed,
the difference between the premium and the cost to close the position is
realized as a gain or loss.
C. INDEXED SECURITIES:
The Fund may invest in debt instruments in which the principal and/or interest
is dependent on another factor such as a yield curve, currency exchange rates or
commodity prices. The Fund's objective in holding these securities, commonly
called structured notes, is to tailor the Fund's investments to the specific
risk and returns it wishes to assume while avoiding unwanted risk or change the
Fund's exposure to a particular foreign exchange rate or the spread between two
foreign exchange rates.
D. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into foreign exchange contracts to minimize foreign exchange risk between
the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest,
17
<PAGE> 18
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
and foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities resulting from changes in the
exchange rates.
E. FUTURES CONTRACTS:
The Fund may enter into futures contracts and options written on futures
contracts in order to hedge against risks from changes in interest rates. These
futures contracts and options written on futures contracts are valued daily and
the Fund's equity therein, representing unrealized gain or loss on the contract,
is included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations. Margin deposits of
cash or securities required with respect to contracts traded on exchanges are
maintained by the Fund's custodian in segregated accounts. Variation margin
payments are made or received on futures as appreciation or depreciation in the
contracts occurs.
F. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
G. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND EXPENSES:
Security transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Certain dividend income from foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
H. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Effective January 2, 1997, the Fund offers three classes of shares: Class I,
Class II and Advisor Class shares. Prior to this date, only Class I and Class II
shares were offered. Shares of each class are identical except for their initial
sales load, a contingent deferred sales charge on Class II shares, distribution
fees, and voting rights on matters affecting a single class. At February 28,
1997, there were an unlimited number of shares of beneficial interest authorized
($.01 par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
CLASS I
---------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold 3,106,827 $ 31,301,450 3,539,465 $ 34,194,502
Shares issued on reinvestment of distributions 395,860 3,974,073 841,801 8,104,725
Shares redeemed (2,719,107) (27,339,653) (5,902,799) (56,944,253)
---------- ------------ ---------- ------------
Net increase (decrease) 783,580 $ 7,935,870 (1,521,533) $(14,645,026)
========== ============ ========== ============
</TABLE>
18
<PAGE> 19
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS II
--------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Shares sold 515,427 $5,185,288 584,301 $ 5,648,608
Shares issued on reinvestment of distributions 20,722 208,421 18,544 179,041
Shares redeemed (97,165) (979,541) (150,240) (1,448,571)
------- ---------- -------- -----------
Net increase 438,984 $4,414,168 452,605 $ 4,379,078
======= ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
-------------------
FOR THE PERIOD
JANUARY 2, 1997
THROUGH
FEBRUARY 28, 1997
-------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Shares sold 179,124 $1,804,110
Shares issued on reinvestment of distributions 695 6,958
Shares redeemed (1,822) (18,183)
------- ----------
Net increase 177,997 $1,792,885
======= ==========
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also officers of Templeton Investment Counsel,
Inc. (TICI), Franklin Templeton Services, Inc. (FTSI), Franklin Templeton
Distributors, Inc. (FTD), and Franklin Templeton Investor Services, Inc. (FTIS),
the Fund's investment manager, administrative manager, principal underwriter and
transfer agent, respectively.
The Fund pays monthly an investment management fee to TICI equal, on annual
basis, to 0.50% of the average daily net assets of the Fund up to $200 million,
reduced to 0.45% of such average daily net assets in excess of $200 million and
further reduced to 0.40% of such average net assets in excess of $1.3 billion.
The Fund pays FTSI monthly its allocated share of an administrative fee of 0.15%
per annum on the first $200 million of the Trust's average daily net assets,
0.135% of the next $500 million, and 0.10% of the next $500 million and 0.075%
per annum of such average net assets in excess of $1.2 billion. For the six
months ended February 28, 1997, FTD received net commissions of $2,423 and FTIS
received fees of $120,000.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD monthly, for FTD's cost and expenses in connection with any
activity which is primarily intended to result in sales of Fund shares, subject
to a maximum of 0.25% and 0.65% per annum of the average daily net assets of
Class I and Class II shares, respectively. Under the Class I distribution plan
costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At February 28, 1997, unreimbursed expenses amounted to $6,436. Class
II shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales charges of $2,279 were paid during the six
months ended February 28, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the six
months ended February 28, 1997, aggregated $158,619,883 and $150,131,617,
respectively. The cost of securities for federal income tax purposes is
$201,531,401. Realized gains and losses are reported on an identified cost
basis.
19
<PAGE> 20
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
At February 28, 1997, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based on cost for federal income tax
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 1,961,760
Unrealized depreciation (4,371,701)
-----------
Net unrealized depreciation $(2,409,941)
===========
</TABLE>
5. FINANCIAL INSTRUMENTS
During the six months ended February 28, 1997, the Fund has been a party to
financial instruments with off-balance sheet risks, primarily forward exchange
contracts, in order to minimize the risk to the Fund, with respect to its
portfolio transactions, from adverse changes in the relationship between the
U.S. dollar and foreign currencies and interest rates. These instruments involve
market risk in excess of the amount recognized on the Statement of Assets and
Liabilities. Some of these risks have been minimized by offsetting contracts.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts, future movement in currency values and interest rates and
contract positions that are not exact offsets. The contract amount indicates the
extent of the Fund's involvement in such contracts.
Forwards: A forward exchange contract is an agreement between two parties to
exchange different currencies at a specific rate at an agreed future date.
At February 28, 1997, the Fund had outstanding forward exchange contracts for
the purchase and sale of currencies as set out below. These contracts are
reported in the financial statements at the Fund's net equity, as measured by
the difference between the forward exchange rates at the reporting date and the
forward exchange rates at the date of entry into the contract:
<TABLE>
<S> <C>
Contracts to Sell:
- ---------------
48,000,000 Deutschemark for 28,705,068 U.S. dollars, March 3, 1997 $ 52,776
9,000,000 Deutschemark for 5,346,323 U.S. dollars, March 24, 1997 1,835
--------
54,611
Unrealized gain from offsetting forward exchange contracts 672,003
--------
726,614
--------
Contracts to Sell:
- ---------------
11,019,000 Australian dollar for 8,487,219 U.S. dollars, March 13, 1997 (69,916)
Contracts to Buy:
- ---------------
26,663,000 Deutschemark for 15,876,563 U.S. dollars, March 7, 1997 (77,463)
--------
(147,379)
--------
Net unrealized gain on forward exchange contracts $579,235
========
</TABLE>
6. TAX LOSS CARRYOVERS
At August 31, 1996, the Fund had tax basis capital losses of $2,300,000 which
may be carried over to offset future capital gains. Such losses expire in 2003.
20
<PAGE> 21
NOTES
--------
<PAGE> 22
NOTES
--------
<PAGE> 23
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST - Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
<TABLE>
<CAPTION>
<S> <C>
GLOBAL GROWTH GROWTH
Franklin Global Health Care Fund Franklin Blue Chip Fund
Franklin Templeton Japan Fund Franklin California Growth Fund
Templeton Developing Markets Trust Franklin DynaTech Fund
Templeton Foreign Fund Franklin Equity Fund
Templeton Foreign Smaller Franklin Gold Fund
Companies Fund
Franklin Growth Fund
Templeton Global Infrastructure Fund
Franklin MidCap Growth Fund
Templeton Global
Opportunities Trust Franklin Small Cap Growth Fund
Templeton Global Real Estate Fund Mutual Discovery Fund
Templeton Global Smaller
Companies Fund
GROWTH AND INCOME
Templeton Greater European Fund
Franklin Asset Allocation Fund
Templeton Growth Fund
Franklin Balance Sheet
Templeton Latin America Fund Investment Fund
Templeton Pacific Growth Fund Franklin Convertible Securities Fund
Templeton World Fund Franklin Equity Income Fund
Franklin Income Fund
GLOBAL GROWTH AND INCOME
Franklin MicroCap Value Fund
Franklin Global Utilities Fund
Franklin Natural Resources Fund
Franklin Templeton German
Government Bond Fund Franklin Real Estate Securities Fund
Franklin Templeton Franklin Rising Dividends Fund
Global Currency Fund
Franklin Strategic Income Fund
Mutual European Fund
Franklin Utilities Fund
Templeton Global Bond Fund
Franklin Value Fund
Templeton Growth and Income Fund
Mutual Beacon Fund
Mutual Qualified Fund
GLOBAL INCOME Mutual Shares Fund
Franklin Global Government Templeton American Trust, Inc.
Income Fund
FUND ALLOCATOR SERIES:
Franklin Templeton Hard
Currency Fund Franklin Templeton
Conservative Target Fund
Franklin Templeton High
Income Currency Fund Franklin Templeton
Moderate Target Fund
Templeton Americas
Government Securities Fund Franklin Templeton
Growth Target Fund
INCOME FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
Franklin Adjustable Rate TAX-FREE INCOME
Securities Fund
Alabama
Franklin Adjustable U.S.
Government Securities Fund Arizona*
Franklin's AGE High Income Fund Arkansas**
Franklin Investment California*
Grade Income Fund
Colorado
Franklin Short-Intermediate U.S.
Government Securities Fund Connecticut
Franklin U.S. Government Florida*
Securities Fund
Georgia
Franklin Money Fund
Hawaii**
Franklin Federal Money Fund
Indiana
FOR NON-U.S. INVESTORS: Kentucky
Franklin Tax-Advantaged Louisiana
High Yield Securities Fund
Maryland
Franklin Tax-Advantaged
International Bond Fund Massachusetts***
Franklin Tax-Advantaged U.S. Michigan*
Government Securities Fund
Minnesota***
FOR CORPORATIONS: Missouri
Franklin Corporate Qualified New Jersey
Dividend Fund
New York*
North Carolina
FRANKLIN FUNDS SEEKING Ohio***
TAX-FREE INCOME
Oregon
Federal Intermediate-Term
Tax-Free Income Fund Pennsylvania
Federal Tax-Free Income Fund Tennessee**
High Yield Tax-Free Income Fund Texas
Insured Tax-Free Income Fund Virginia
Puerto Rico Tax-Free Income Fund Washington**
Tax-Exempt Money Fund VARIABLE ANNUITIES+
Franklin Valuemark*
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
</TABLE>
*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
ALLIANS 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.
FGF 02/97
<PAGE> 24
Templeton Global Bond Fund
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceded or accompanied by the current prospectus of the
Templeton Global Bond Fund, which contains more complete information including
charges and expenses.
Investors should be aware that the value of an investment made for the Fund may
go up as well as down and that the Investment Manager may make errors in
selecting securities for the Fund's portfolio. Like any investment in
securities, the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political, and other factors. The Fund and Fund
investors are not protected from such losses by the Investment Manager.
Therefore, investors who cannot accept the risk of such losses should not invest
in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
[GRAPHIC]
TEMPLETON
GLOBAL
BOND
FUND
Semi-Annual Report
February 28, 1997
[FRANKLIN TEMPLETON LOGO]
