SEMI ANNUAL
REPORT
[PHOTO OF SCALE ON A MAP]
TEMPLETON GLOBAL BOND FUND
FEBRUARY 29, 2000
[FRANKLIN TEMPLETON LOGO]
[FRANKLIN TEMPLETON 50 YEAR SEAL]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
- -------------------------------------------------------------------------------
WE'RE ON THE WEB --
Now you can access online information about your fund, including this
shareholder report. Find our Web site at WWW.FRANKLINTEMPLETON.COM, your online
resource for fund literature, prices and performance, investor information and
around-the-clock account services.
- -------------------------------------------------------------------------------
SHAREHOLDER LETTER
- -------------------------------------------------------------------------------
YOUR FUND'S GOAL: TEMPLETON GLOBAL BOND FUND SEEKS CURRENT INCOME WITH CAPITAL
APPRECIATION AND GROWTH OF INCOME. UNDER NORMAL MARKET CONDITIONS, THE FUND
INVESTS PRIMARILY IN THE DEBT SECURITIES OF COMPANIES, GOVERNMENTS AND
GOVERNMENT AGENCIES LOCATED ANYWHERE IN THE WORLD, INCLUDING EMERGING MARKETS.
- -------------------------------------------------------------------------------
Dear Shareholder:
This report of Templeton Global Bond Fund covers the six months ended February
29, 2000. During this period, many European economies grew significantly, growth
in Japan was better than expected, and the U.S. economy continued to expand at a
blistering pace. This economic growth increased global inflationary pressures
and led to a tighter monetary policy by many central banks. In the U.S., the
Federal Reserve Board (the Fed) increased interest rates by 75 basis points, and
most European countries also experienced rising interest rates. Believing that
most industrial economies might experience further interest rate increases, many
investors deserted the bond markets of developed countries,
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), a complete listing of
the Fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 11.
CONTENTS
Shareholder Letter 1
Performance Summary 6
Financial Highlights &
Statement of Investments 8
Financial Statements 15
Notes to Financial
Statements 18
[FUND CATEGORY GRAPHIC]
Global
Growth
Growth & Income
Income
Tax-Free Income
[GEOGRAPHIC DISTRIBUTION PIE CHART]
Based on Total Net Assets
2/29/00
Europe 41.7%
Latin America 15.9%
United States 14.0%
Canada 9.4%
Asia 6.2%
Australia & New Zealand 5.4%
Short-Term Investments & Other Net Assets 7.4%
and bond prices in these countries, especially the U.S., dropped in value.
However, many emerging market bond prices rose during the period, largely as a
result of increasing commodity prices, which improved export revenues and, thus,
the repayment capacity of issuer countries. Despite uncertainty stemming from
the implementation of Venezuela's new constitution, the value of Venezuelan debt
rose largely due to the recovery in oil prices. Brazilian bonds rebounded
following that nation's currency crisis in January 1999, as a result of official
external financial support from the International Monetary Fund and foreign
governments, as well as implementation of economic measures designed to
stabilize Brazil's fiscal situation.
During the six months under review, the U.S. dollar strengthened against most
major currencies, rising 1.56% against the British pound and 9.58% versus the
euro. Other dollar-bloc countries' currencies posted mixed results against the
U.S. dollar, with the Canadian dollar falling 2.88% and the Australian and New
Zealand dollars rising 3.71% and 5.93%, respectively. Among major emerging
market currencies, the
2
Brazilian real and South Korean won strengthened against the U.S. dollar,
appreciating 7.95% and 4.18%, while the Mexican peso fell 0.15% versus the U.S.
dollar.
Within this environment, Templeton Global Bond Fund -- Class A posted a -0.14%
cumulative total return for the six months ended February 29, 2000, as shown in
the Performance Summary on page 6. The Fund's benchmark, the Salomon Brothers
World Government Bond Index, posted a -2.64% return for the same six-month
period. Also, the J.P. Morgan U.S. Government Bond Index, which measures and
tracks U.S. Treasury securities, and the J.P. Morgan Global Government Bond
Index, which measures and tracks bonds from around the world, posted returns of
1.85% and -2.63%, respectively, for the same period.(1)
During the reporting period, we attempted to meet the Fund's objective by
allocating 80.7% of total net assets to intermediate- and long-term bonds in
developed markets, with the remaining assets invested in what we believed were
the highest quality and most liquid bonds in emerging markets. In our opinion,
this combination of investments offered the opportunity for higher long-term
returns at the cost of modestly higher short-term volatility. The Fund's
allocation to emerging market debt overall added positively to its performance
during the period, as emerging market bonds generally outperformed higher
quality industrial market debt.
1. Source: Standard & Poor's Micropal. Indices are measured in U.S. dollars and
include reinvested interest. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
PORTFOLIO BREAKDOWN
Based on Total Net Assets
2/29/00
-----------------------------
Government Bonds 85.4%
Corporate Bonds 6.7%
Warrants 0.5%
Short-Term Investments
& Other Net Assets 7.4%
3
The Fund's geographic allocation changed during the period. Exposure to European
countries decreased slightly, from 43.0% at the beginning of the period to 41.7%
at the end, while exposure to the dollar-bloc countries of Australia and New
Zealand was down from 7.7% to 5.4%. The allocation to North America decreased by
8.6%, and the proceeds were reinvested in emerging market debt. At the end of
the period, emerging market debt represented 22.0% of the Fund's total net
assets, up from 10.0% at the beginning.
Looking forward, we are optimistic about prospects for global bond markets and
Templeton Global Bond Fund. Because we anticipate slowing growth in the U.S.
economy, our long-term outlook for the euro, relative to the U.S. dollar,
remains positive. In our opinion, such a slowdown could coincide with Euroland
economic recovery, potentially leading to a stronger euro versus the U.S.
dollar. On the other hand, our outlook for the Japanese yen is slightly
negative. We believe the Japanese economy cannot afford a strong yen over the
medium to long term because a strong currency translates into a loss of export
competitiveness, which would weaken Japan's export-driven economy. As always, we
will monitor global markets closely and manage the Fund's portfolio in an effort
to take advantage of potential opportunities as they arise.
4
It is important to note that there are special risks involved with global
investing related to market, currency, economic, social, political, and other
factors, in addition to the heightened risks associated with the relatively
small size and lesser liquidity of emerging markets. These special risks and
other considerations are discussed in the Fund's prospectus.
We look forward to continuing to serve your investment needs, and we welcome
your comments or suggestions.
Portfolio Management Team
Templeton Global Bond Fund
This discussion reflects our views, opinions and portfolio holdings as of
February 29, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
5
CLASS A:
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, Fund shares were offered at a higher initial sales charge. Thus, actual
total returns would have been lower. On January 1, 1993, the Fund implemented a
Rule 12b-1 plan, which affects subsequent performance.
CLASS C:
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
ADVISOR CLASS:
No initial sales charge or Rule 12b-1 fees and are available to a limited class
of investors.
SIX-MONTH PERFORMANCE SUMMARY AS OF 2/29/00
Six-month total returns does not include sales charges. Distributions will vary
based on earnings of the Fund's portfolio and any profits realized from the sale
of the portfolio's securities, as well as the level of operating expenses for
each share class. Past distributions are not indicative of future trends. All
total returns include reinvested distributions at net asset value.
<TABLE>
<CAPTION>
CLASS A
<S> <C> <C>
Six-Month Total Return -0.14%
Net Asset Value (NAV) $8.49 (2/29/00) $8.81 (8/31/99)
Change in NAV -$0.32
Distributions (9/1/99 - 2/29/00) Dividend Income $0.3000
Long-Term Capital Gain $0.0090
====================================
TOTAL $0.3090
</TABLE>
<TABLE>
<CAPTION>
CLASS C
<S> <C> <C>
Six-Month Total Return -0.38%
Net Asset Value (NAV) $8.50 (2/29/00) $8.82 (8/31/99)
Change in NAV -$0.32
Distributions (9/1/99 - 2/29/00) Dividend Income $0.2787
Long-Term Capital Gain $0.0090
====================================
TOTAL $0.2877
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
<S> <C> <C>
Six-Month Total Return -0.11%
Net Asset Value (NAV) $8.48 (2/29/00) $8.81 (8/31/99)
Change in NAV -$0.33
Distributions (9/1/99 - 2/29/00) Dividend Income $0.3126
Long-Term Capital Gain $0.0090
====================================
TOTAL $0.3216
</TABLE>
Past performance does not guarantee future results.
6
ADDITIONAL PERFORMANCE
AS OF 3/31/00
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (9/18/86)
- ------- ------ ------ ------- ---------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -1.19% 31.45% 90.16% 143.12%
Average Annual Total Return(2) -5.39% 4.70% 6.18% 6.45%
Value of $10,000 Investment(3) $9,461 $12,580 $18,215 $23,287
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/1/95)
- ------- ------ ------ --------
<S> <C> <C> <C>
Cumulative Total Return(1) -1.58% 4.09% 25.95%
Average Annual Total Return(2) -3.45% 1.01% 4.59%
Value of $10,000 Investment(3) $9,655 $10,305 $12,471
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(4) 1-YEAR 5-YEAR 10-YEAR (9/18/86)
- ---------------- ------ ------ ------- ---------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -1.05% 33.17% 92.65% 146.30%
Average Annual Total Return(2) -1.05% 5.90% 6.78% 6.89%
Value of $10,000 Investment(3) $9,895 $13,317 $19,265 $24,630
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, applicable,
maximum sales charge(s) for that class.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
4. On January 2, 1997, the Fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable only to that class.
Since January 2, 1997 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were 2.98% and 0.94%, respectively.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. Also, as
a non-diversified series of an investment company, the Fund may invest in a
relatively small number of issuers and, as a result, be subject to greater risk
of loss with respect to its portfolio securities. You may have a gain or loss
when you sell your shares.
For updated performance figures, please see "Prices and Performance" on the
Internet at www.franklintempleton.com, or call Franklin Templeton at
1-800/342-5236.
Past performance does not guarantee future results.
7
TEMPLETON GLOBAL BOND FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 --------------------------------------------------------
(UNAUDITED)+ 1999+ 1998 1997 1996 1995
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the
period)
Net asset value, beginning of period...... $8.81 $9.49 $9.82 $9.76 $9.32 $9.05
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income.................... .30 .58 .60 .63 .69 .73
Net realized and unrealized gains
(losses)............................... (.31) (.66) (.32) .03 .35 .17
-----------------------------------------------------------------------------
Total from investment operations.......... (.01) (.08) .28 .66 1.04 .90
-----------------------------------------------------------------------------
Less distributions from:
Net investment income.................... (.30) (.55) (.55) (.60) (.58) (.54)
Net realized gains....................... (.01) (.05) (.06) -- -- --
Tax return of capital.................... -- -- -- -- (.02) (.09)
-----------------------------------------------------------------------------
Total distributions....................... (.31) (.60) (.61) (.60) (.60) (.63)
-----------------------------------------------------------------------------
Net asset value, end of period............ $8.49 $8.81 $9.49 $9.82 $9.76 $9.32
=============================================================================
Total Return*............................. (.14)% (1.02)% 2.82% 6.87% 11.44% 10.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)......... $140,148 $146,753 $189,898 $198,131 $185,596 $191,301
Ratios to average net assets:
Expenses................................. 1.22%** 1.22% 1.17% 1.15% 1.13% 1.18%
Net investment income.................... 6.85%** 6.20% 6.12% 6.41% 7.09% 7.99%
Portfolio turnover rate................... 49.87% 74.60% 75.95% 166.69% 109.40% 101.12%
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
+Based on average weighted shares outstanding.
8
TEMPLETON GLOBAL BOND FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 ---------------------------------------------------
(UNAUDITED)++ 1999++ 1998 1997 1996 1995+
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the
period)
Net asset value, beginning of period......... $8.82 $9.50 $9.83 $9.77 $9.31 $9.05
------------------------------------------------------------------------
Income from investment operations:
Net investment income....................... .28 .54 .56 .57 .61 .21
Net realized and unrealized gains
(losses).................................. (.31) (.66) (.32) .05 .41 .24
------------------------------------------------------------------------
Total from investment operations............. (.03) (.12) .24 .62 1.02 .45
------------------------------------------------------------------------
Less distributions from:
Net investment income....................... (.28) (.51) (.51) (.56) (.54) (.15)
Net realized gains.......................... (.01) (.05) (.06) -- -- --
Tax return of capital....................... -- -- -- -- (.02) (.04)
------------------------------------------------------------------------
Total distributions.......................... (.29) (.56) (.57) (.56) (.56) (.19)
------------------------------------------------------------------------
Net asset value, end of period............... $8.50 $8.82 $9.50 $9.83 $9.77 $9.31
========================================================================
Total Return*................................ (.38)% (1.41)% 2.46% 6.44% 11.20% 5.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)............ $14,464 $17,386 $20,404 $16,629 $6,563 $2,043
Ratios to average net assets:
Expenses.................................... 1.63%** 1.62% 1.56% 1.54% 1.56% 1.57%**
Net investment income....................... 6.44%** 5.80% 5.73% 5.96% 6.69% 7.47%**
Portfolio turnover rate...................... 49.87% 74.60% 75.95% 166.69% 109.40% 101.12%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
+For the period May 1, 1995 (effective date) to August 31, 1995.
++Based on average weighted shares outstanding.
9
TEMPLETON GLOBAL BOND FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
-------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 ----------------------------------
(UNAUDITED)++ 1999++ 1998 1997+
-------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period....................... $8.81 $9.49 $9.82 $10.16
-------------------------------------------------------
Income from investment operations:
Net investment income..................................... .30 .61 .62 .42
Net realized and unrealized losses........................ (.31) (.67) (.32) (.34)
-------------------------------------------------------
Total from investment operations........................... (.01) (.06) .30 .08
-------------------------------------------------------
Less distributions from:
Net investment income..................................... (.31) (.57) (.57) (.42)
Net realized gains........................................ (.01) (.05) (.06) --
-------------------------------------------------------
Total distributions........................................ (.32) (.62) (.63) (.42)
-------------------------------------------------------
Net asset value, end of period............................. $8.48 $8.81 $9.49 $9.82
=======================================================
Total Return*.............................................. (.11)% (.77)% 3.08% .80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's).......................... $439 $1,261 $11,330 $12,742
Ratios to average net assets:
Expenses.................................................. .98%** .97% .91% .88%**
Net investment income..................................... 7.02%** 6.42% 6.38% 6.76%**
Portfolio turnover rate.................................... 49.87% 74.60% 75.95% 166.69%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period January 2, 1997 (effective date) to August 31, 1997.
++Based on average weighted shares outstanding.
See Notes to Financial Statements.
10
TEMPLETON GLOBAL BOND FUND
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM INVESTMENTS 92.6%
ARGENTINA 6.1%
Perez Companc SA, 144A, 8.125%, 7/15/07..................... $5,000,000 $ 4,412,500
Republic of Argentina:
9.25%, 2/23/01............................................. 555,000 556,804
8.875%, 5/09/02............................................ 4,125,000 3,955,875
11.00%, 10/09/06........................................... 225,000 222,188
11.375%, 1/30/17........................................... 200,000 197,625
9.75%, 9/19/27............................................. 150,000 132,750
------------
9,477,742
------------
AUSTRALIA 3.3%
Government of Australia, 10.00%, 10/15/07................... 2,263,000 AUD 1,661,625
Queensland Treasury Corp., 6.50%, 6/14/05................... 5,796,000 AUD 3,503,133
------------
5,164,758
------------
BRAZIL 2.1%
Republic of Brazil:
12.75%, 1/15/00............................................ 500,000 490,625
8.875%, 11/05/01........................................... 250,000 250,625
11.625%, 4/15/04........................................... 300,000 297,375
9.375%, 4/07/08............................................ 800,000 688,500
14.50%, 10/15/09........................................... 765,000 826,965
Series L, cvt., FRN, 7.00%, 4/15/12........................ 310,000 230,756
10.125%, 5/15/27........................................... 600,000 485,100
------------
3,269,946
------------
CANADA 9.4%
Government of Canada:
10.50%, 7/01/00............................................ 9,000,000 CAD 6,304,280
10.50%, 3/01/01............................................ 6,235,000 CAD 4,490,317
10.00%, 5/01/02............................................ 5,135,000 CAD 3,812,711
------------
14,607,308
------------
COLOMBIA 1.7%
Republic of Colombia, 7.25%, 2/23/04........................ 2,950,000 2,640,250
------------
DENMARK 2.3%
Kingdom of Denmark:
9.00%, 11/15/00............................................ 6,605,000 DKK 882,108
8.00%, 3/15/06............................................. 18,589,000 DKK 2,689,001
------------
3,571,109
------------
FRANCE 4.7%
Government of France, 8.25%, 2/27/04........................ 6,748,000 EUR 7,243,759
------------
</TABLE>
11
TEMPLETON GLOBAL BOND FUND
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
GERMANY 2.9%
Federal Republic of Germany, 8.00%, 7/22/02................. 4,399,667 EUR $ 4,544,361
------------
INDIA .1%
+*Essar Steel Ltd., Reg. S, FRN, 7.635%, 7/20/99............ 315,000 217,350
------------
INDONESIA .5%
*P.T. Astra International, wts., 12/31/03................... 1,880,582 IDR 703,635
------------
ITALY 7.3%
Buoni Poliennali del Tesoro:
10.50%, 7/15/00............................................ 655,899 EUR 645,928
6.75%, 7/01/07............................................. 1,243,000 EUR 1,280,708
Government of Italy:
10.50%, 11/01/00........................................... 1,823,090 EUR 1,828,548
10.50%, 4/01/05............................................ 6,476,000 EUR 7,645,706
------------
11,400,890
------------
JAMAICA .6%
Government of Jamaica, Reg S, 9.625%, 7/02/02............... 905,000 877,850
------------
MEXICO 3.4%
Bepensa SA, 144A, 9.75%, 9/30/04............................ 230,000 211,600
Cemex SA, 144A, 10.75%, 7/15/00............................. 65,000 65,975
Petroleos Mexicanos (PEMEX), 9.375%, 12/02/08............... 250,000 256,563
Protexa Construcciones SA de CV, 144A, 12.125%, 7/24/02..... 55,352 42,898
United Mexican States:
9.75%, 4/06/05............................................. 1,800,000 1,878,750
8.625%, 3/12/08............................................ 540,000 535,680
11.375%, 9/15/16........................................... 1,560,000 1,854,450
6.25%, 12/31/19............................................ 490,000 399,044
------------
5,244,960
------------
NETHERLANDS 2.9%
Government of Netherlands, 7.75%, 3/01/05................... 2,779,000 EUR 2,967,916
Astra Overseas Finance NV, Reg S, FRN:
Series I, 6.688%, 12/31/01................................. 300,000 258,000
Series II, 6.688%, 6/30/05................................. 1,013,000 709,100
Series III, zero coupon, 6/30/06........................... 1,311,000 517,845
------------
4,452,861
------------
NEW ZEALAND 2.1%
Government of New Zealand, 8.00%, 11/15/06.................. 6,437,000 NZD 3,271,723
------------
PANAMA
Republic of Panama, FRN, 7.00%, 5/10/02..................... 30,770 30,539
------------
</TABLE>
12
TEMPLETON GLOBAL BOND FUND
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
SOUTH KOREA 4.4%
Hanvit Bank, 144A, 12.75%, 3/01/10.......................... $1,660,000 $ 1,705,484
Korea Development, 7.125%, 4/22/04.......................... 2,000,000 1,935,200
Republic of Korea, 8.875%, 4/15/08.......................... 3,000,000 3,125,625
------------
6,766,309
------------
SPAIN 7.8%
Government of Spain:
12.25%, 3/25/00............................................ 5,725,902 EUR 5,539,355
10.10%, 2/28/01............................................ 3,142,692 EUR 3,197,184
10.15%, 1/31/06............................................ 2,849,000 EUR 3,388,963
------------
12,125,502
------------
SWEDEN 4.3%
Kingdom of Sweden, 10.25%, 5/05/03.......................... 51,400,000 SEK 6,638,178
------------
TRINIDAD AND TOBAGO
SEI Holdings IX Inc., 144A, 11.00%, 11/30/00................ 30,000 30,000
------------
TURKEY 1.2%
Republic of Turkey:
12.375%, 6/15/09........................................... 1,610,000 1,722,700
11.875%, 1/15/30........................................... 90,000 94,022
------------
1,816,722
------------
UNITED KINGDOM 9.5%
United Kingdom:
8.00%, 12/07/00............................................ 5,825,000 GBP 9,308,781
8.50%, 7/16/07............................................. 2,976,000 GBP 5,414,539
------------
14,723,320
------------
UNITED STATES 14.0%
++*Acadia Partners LP....................................... 999,667 33,689
++*Penobscot Partners LP.................................... 333 2,515
U.S. Treasury Bonds:
6.375%, 08/15/27........................................... 4,935,000 4,961,220
5.25%, 11/15/28............................................ 6,030,000 5,197,106
U.S. Treasury Notes:
5.875%, 11/15/04........................................... 4,380,000 4,254,075
7.875%, 11/15/04........................................... 6,273,000 6,574,888
6.125%, 8/15/07............................................ 723,000 700,633
------------
21,724,126
------------
</TABLE>
13
TEMPLETON GLOBAL BOND FUND
STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT** VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
VENEZUELA 2.0%
Republic of Venezuela:
FRN, 7.00%, 12/18/07....................................... $ 190,475 $ 158,928
Reg S, 9.125%, 6/18/07..................................... 400,000 322,000
9.25%, 9/15/27............................................. 1,625,000 1,100,937
Venezuela Front Load Interest Reduction Bond, FRN, 6.875%,
3/31/07................................................... 1,785,700 1,491,060
------------
3,072,925
------------
TOTAL LONG TERM INVESTMENTS (COST $165,417,301)............. 143,616,123
------------
SHORT TERM INVESTMENTS 7.4%
Den Denske Bank, 5.812%, 3/01/00, Time Deposit.............. 5,400,000 5,400,000
Deutsche Bank, 5.810%, 3/01/00, Time Deposit................ 6,000,000 6,000,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $11,400,000)............. 11,400,000
------------
TOTAL INVESTMENTS (COST $176,817,301) 100.0%................ 155,016,123
OTHER ASSETS, LESS LIABILITIES.............................. 35,306
------------
TOTAL NET ASSETS 100.0%..................................... $155,051,429
============
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C> <C>
AUD -- Australian Dollar
CAD -- Canadian Dollar
DKK -- Danish Krone
EUR -- European Unit
GBP -- Great British Pound
IDR -- Indonesia Rupah
NZD -- New Zealand Dollar
SEK -- Swedish Krona
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars unless otherwise indicated.
+Represents defaulted bonds.
++Securities represent equity investments.
See Notes to Financial Statements.
14
TEMPLETON GLOBAL BOND FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $176,817,301).... $155,016,123
Cash....................................................... 14,048
Receivables:
Fund shares sold.......................................... 109,567
Interest.................................................. 3,985,918
------------
Total assets.......................................... 159,125,656
------------
Liabilities:
Payables:
Investment securities purchased........................... 3,081,627
Fund shares redeemed...................................... 680,689
To affiliates............................................. 153,594
Accrued expenses........................................... 158,317
------------
Total liabilities..................................... 4,074,227
------------
Net assets, at value........................................ $155,051,429
============
Net assets consist of:
Distributions in excess of net investment income........... $ (9,441)
Net unrealized depreciation................................ (21,933,977)
Accumulated net realized loss.............................. (10,967,647)
Beneficial shares.......................................... 187,962,494
------------
Net assets, at value........................................ $155,051,429
============
CLASS A:
Net asset value per share ($140,148,338 / 16,509,887 shares
outstanding)............................................. $8.49
============
Maximum offering price per share ($8.49 / 95.75%).......... $8.87
============
CLASS C:
Net asset value per share ($14,464,506 / 1,701,971 shares
outstanding)*............................................. $8.50
============
Maximum offering price per share ($8.50 / 99.00%).......... $8.59
============
ADVISOR CLASS:
Net asset value and maximum offering price per share
($438,585 / 51,717 shares outstanding)................... $8.48
============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
15
TEMPLETON GLOBAL BOND FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
Interest income............................................. $ 6,625,746
Expenses:
Management fees (Note 4)................................... 410,175
Administrative fees (Note 4)............................... 123,052
Distribution fees (Note 4)
Class A................................................... 180,726
Class C................................................... 52,581
Transfer agent fees (Note 4)............................... 127,800
Custodian fees............................................. 15,400
Reports to shareholders.................................... 43,800
Registration and filing fees............................... 27,400
Professional fees.......................................... 31,000
Trustees' fees and expenses................................ 22,900
Other...................................................... 688
------------
Total expenses........................................ 1,035,522
------------
Net investment income........................... 5,590,224
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... (11,224,276)
Foreign currency transactions............................. 104,275
------------
Net realized loss..................................... (11,120,001)
Net unrealized appreciation (depreciation) on:
Investments............................................... 3,765,131
Translation of assets and liabilities denominated in
foreign currencies...................................... (122,145)
------------
Net unrealized appreciation........................... 3,642,986
------------
Net realized and unrealized loss............................ (7,477,015)
------------
Net decrease in net assets resulting from operations........ $ (1,886,791)
============
</TABLE>
See Notes to Financial Statements.
16
TEMPLETON GLOBAL BOND FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29, 2000 YEAR ENDED
(UNAUDITED) AUGUST 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 5,590,224 $ 12,022,661
Net realized gain (loss) from investments and foreign
currency transactions.................................... (11,120,001) 19,329
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated in
foreign currencies....................................... 3,642,986 (13,157,946)
---------------------------------------
Net decrease in net assets resulting from operations.... (1,886,791) (1,115,956)
Distributions to shareholders from:
Net investment income:
Class A.................................................. (5,047,845) (10,143,914)
Class C.................................................. (490,800) (1,108,554)
Advisor Class............................................ (14,065) (179,587)
In excess of net investment income:
Class A.................................................. -- --
Class C.................................................. (26,237) --
Advisor Class............................................ (20,718) --
Net realized gains:
Class A.................................................. (153,017) (835,181)
Class C.................................................. (17,062) (98,495)
Advisor Class............................................ (1,224) (7,158)
Capital share transactions (Note 3):
Class A.................................................. 430,716 (31,043,022)
Class C.................................................. (2,332,279) (1,555,156)
Advisor Class............................................ (789,374) (10,144,875)
---------------------------------------
Net decrease in net assets.............................. (10,348,696) (56,231,898)
Net assets:
Beginning of period........................................ 165,400,125 221,632,023
---------------------------------------
End of period.............................................. $155,051,429 $165,400,125
=======================================
Distributions in excess of net investment income included in
net assets:
End of period.............................................. $ (9,441) $ --
=======================================
</TABLE>
See Notes to Financial Statements.
17
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Global Bond Fund (the Fund), is a separate, non-diversified series of
Templeton Income Trust (the Trust), which is an open-end investment company
registered under the Investment Company Act of 1940. The Fund seeks current
income with capital appreciation and growth of income. Under normal market
conditions, the Fund invests primarily in the debt securities of companies,
governments and government agencies located anywhere in the world including
emerging markets. The following summarizes the Fund's significant accounting
policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Distributions to shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
18
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. FORWARD EXCHANGE CONTRACTS:
The Fund may enter into forward exchange contracts to hedge against foreign
exchange risks. These contracts are valued daily and the Fund's equity therein
is included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. MERGER WITH TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND
On October 21, 1999, the Fund acquired all of the net assets of the Templeton
Americas Government Securities Fund pursuant to a plan of reorganization
approved by the Templeton Americas Government Securities Fund's shareholders.
The merger was accomplished by a tax-free exchange of 1,947,905 shares (valued
at $8.78 per share) for the net assets of the Templeton Americas Government
Securities Fund, which aggregated $17,102,608, including $(1,480,591) of
unrealized depreciation. The combined net assets of the Fund immediately after
the merger were $176,515,833.
3. BENEFICIAL SHARES
The Fund offers three classes of shares: Class A, Class C, and Advisor Class
shares. Effective January 1, 1999, Class I and Class II shares were renamed
Class A and Class C, respectively. The shares differ by their initial sales
load, distribution fees, voting rights on matters affecting a single class of
shares and the exchange privilege of each class.
At February 29, 2000, there were an unlimited number of shares of beneficial
interest authorized ($.01 par value). Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold.............................................. 3,253,097 $ 31,072,748 7,334,312 $ 69,058,663
Shares issued on reinvestment of distributions........... 431,444 3,733,024 859,601 8,035,267
Shares issued on merger.................................. 1,947,905 15,622,017 -- --
Shares redeemed.......................................... (5,771,604) (49,997,073) (11,546,052) (108,136,952)
---------------------------------------------------------------
Net decrease............................................. (139,158) $ 430,716 (3,352,139) $ (31,043,022)
===============================================================
</TABLE>
19
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited) (continued)
3. BENEFICIAL SHARES (CONT.)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Shares sold.............................................. 228,296 $ 1,993,280 561,727 $ 5,324,535
Shares issued on reinvestment of distributions........... 51,303 444,505 111,143 1,040,014
Shares redeemed.......................................... (548,544) (4,770,064) (849,404) (7,919,705)
---------------------------------------------------------------
Net decrease............................................. (268,945) $ (2,332,279) (176,534) $ (1,555,156)
===============================================================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
ADVISOR CLASS SHARES:
Shares sold.............................................. 12,933 $ 112,158 223,677 $ 2,157,693
Shares issued on reinvestment of distributions........... 2,485 21,601 8,389 78,938
Shares redeemed.......................................... (106,882) (923,133) (1,282,907) (12,381,506)
---------------------------------------------------------------
Net decrease............................................. (91,464) $ (789,374) (1,050,841) $ (10,144,875)
===============================================================
</TABLE>
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers of Templeton Investment Counsel,
Inc. (TICI), Franklin Templeton Services, Inc. (FT Services), Franklin/Templeton
Distributors, Inc. (Distributors) and Franklin/Templeton Investor Services, Inc.
(Investor Services), the Fund's investment manager, administrative manager,
principal underwriter and transfer agent, respectively.
The Fund pays an investment management fee to TICI based on the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.50% First $200 million
0.45% Over $200 million, up to and including $1.3 billion
0.40% Over $1.3 billion
</TABLE>
20
TEMPLETON GLOBAL BOND FUND
Notes to Financial Statements (unaudited) (continued)
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
The Fund pays its allocated share of an administrative fee to FT Services based
on the Trust's aggregate average daily net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- --------------------------------------
<S> <C>
0.15% First $200 million
0.135% Next $500 million
0.10% Next $500 million
0.075% Over $1.2 billion
</TABLE>
The Fund reimburses Distributors for costs incurred in marketing the Fund's
shares up to 0.25% and 0.65% per year of the average daily net assets of Class A
and Class C shares, respectively. Under the Class A distribution plan, costs
exceeding the maximum may be reimbursed in subsequent periods. At February 29,
2000, unreimbursed costs were $197,153. Distributors received net commissions on
sales of the Fund's shares and received contingent deferred sales charges for
the year of $2,086 and $1,956, respectively.
5. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At February 29, 2000, the net unrealized depreciation
based on the cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 865,224
Unrealized depreciation..................................... (22,666,402)
------------
Net unrealized depreciation................................. $(21,801,178)
============
</TABLE>
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 29, 2000 aggregated $77,807,202 and $104,050,293,
respectively.
21
SEMIANNUAL REPORT
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
1-800/DIAL BEN(R)
www.franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Templeton Global Bond
Fund prospectus, which contains more complete information including risk
factors, charges and expenses. Like any investment in securities, the value of
the Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political and other factors. The Fund and its investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
[RECYCLE LOGO] PRINTED ON RECYCLED PAPER
406 500 04/00
