<PAGE> 1
Templeton Global Income
Fund, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Auditors
McGludrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Investors should be aware that the value of investments 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.
[BACKGROUND GRAPHIC
OF WORLD GLOBE]
[RECYCLE LOGO] TLGIM A 96 10/96
TEMPLETON
GLOBAL
INCOME
FUND, INC.
Annual Report
August 31, 1996
[FRANKLIN TEMPLETON LOGO]
<PAGE> 2
TEMPLETON GLOBAL
INCOME FUND
YOUR FUND'S OBJECTIVE:
The Templeton Global Income Fund seeks current income, with capital appreciation
and growth of income, by investing primarily in a portfolio of debt securities
of companies, governments, and government agencies of various nations throughout
the world.
OCTOBER 15, 1996
Dear Shareholder:
We are pleased to bring you this annual report of the Templeton Global Income
Fund for the 12 months ended August 31, 1996. Although global bond markets were
subject to considerable interest rate and currency volatility throughout the
fiscal year, they generally performed well.
In North America, U.S. economic growth slowed during the first half of the
reporting period, but rebounded strongly during the latter half. As the U.S.
economy gained strength, interest rates rose, and the 10-year Treasury bond's
yield climbed from 6.28% on August 31, 1995 to 6.94% on August 31, 1996.
Canada's economy followed a similar growth pattern, but did not rise as
significantly, and Canadian bond yields were not as dramatically affected.
In Europe, unemployment was higher and economic growth was weaker than in the
U.S. Although the growth rate improved toward the end of the period,
1
<PAGE> 3
many investors appeared to believe that inflation was under control and that,
therefore, European Central Banks would not raise interest rates. Steady
progress toward the European Monetary Union (EMU) was an important influence on
European bond markets. Efforts to meet standards for membership in the EMU have
led to improved fiscal and monetary policies and lower interest rates in many
European countries. During the reporting period, Italy and Spain, in particular,
benefited from falling interest rates, which reduced pressure on their
currencies and diminished the carrying costs of their large debts. Consequently,
their bond markets were among the strongest in Europe.
In the Pacific Rim region, Australia's bond market strengthened due to improved
economic fundamentals and moderate inflation. Japanese debt securities rose
dramatically in price during the period, as Japanese authorities lowered
interest rates in order to stimulate domestic economic activity. These lower
interest rates, however, also lessened international demand for the Japanese yen
and it declined significantly relative to the U.S. dollar. From the perspective
of a U.S. dollar-based investor, the decline in the value of a Japanese bond due
to the depreciation of the yen was greater than its price increase. Therefore,
the net return of these bonds to dollar-based investors was unattractive
relative to returns available in most of the world's other bond markets.
- -------------------------------------------------------------------------------
TEMPLETION GLOBAL INCOME FUND
Geographic Distribution of Issuers of
Securities Based on Total Net Assets
8/31/96
[THE TABLE BELOW REPRESENTS A PIE CHART]
<TABLE>
<S> <C>
Europe 41.4%
United States 26.6%
Latin America 13.0%
Australia & New Zealand 9.2%
Canada 7.1%
Asia 2.7%
</TABLE>
Bond prices in emerging market countries were strongly influenced by improving
economic conditions in the U.S. The expanding U.S. economy fueled demand for
products of emerging market nations, which, we believe, made it easier for
emerging market debt obligations to be serviced.
In our view, another important factor affecting global bond markets was the rise
in value of the U.S. dollar. Because of increased U.S. economic activity and
sluggish European and Japanese economies, interest
2
<PAGE> 4
rates rose higher in the U.S. than in Europe or Japan. As a result, many
investors were attracted to U.S. dollar-denominated debt securities, and the
U.S. dollar rose for much of the period, which diminished the returns available
in foreign-currency bond markets.
Responding to these conditions, we adopted three strategies. First, we
positioned the Fund's average maturity in anticipation of higher U.S. interest
rates. Because we believed that interest rates would rise in the U.S., we sold
longer-maturity U.S. bonds and focused on shorter-maturities to help reduce
interest-rate risk. Second, we decreased our exposure to bonds denominated in
foreign currencies because we believed that most of these currencies were likely
to depreciate versus the U.S. dollar over the course of the period. Third, we
shifted Fund assets from Germany and France to Italy, Spain, Sweden and the
United Kingdom because we felt that the fiscal policies of these countries would
generate higher returns than those available in the German and French markets.
On August 31, 1996, approximately 95.2% of the Fund's portfolio was invested in
bonds, 1.0% in equities, and the remaining 3.8% in short-term obligations and
other net assets. The portfolio consisted primarily of investment-grade
securities as rated by one of the nationally recognized rating services, or of
non-rated securities we judged to be equivalent in quality. At the end of the
period, about 81.1% of the debt securities in the Fund's portfolio were rated AA
or higher, 2.6% were A or BBB, and 16.3% were rated below investment grade. The
lower-rated bonds represented obligations of Argentina, Brazil, Colombia,
Hungary, India, Mexico, Russia, the Philippines, and Venezuela.
TEMPLETON GLOBAL INCOME FUND
Portfolio Breakdown on 8/31/96
Based on Total Net Assets
<TABLE>
<S> <C>
Government Bonds 89.3%
Corporate Bonds 5.9%
Common Stock 0.8%
Preferred Stock 0.2%
Short-Term Obligations & Other Net Assets 3.8%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 7 OF THIS REPORT.
This discussion reflects the strategies we employed for the Fund during the 12
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
3
<PAGE> 5
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.
Looking forward, we are optimistic about global bond markets. In our opinion,
worldwide inflation levels may remain stable in the near future, and
deflationary trends in Europe and Japan may result in lower interest rates
around the world. The combination of these factors could lead to improving bond
markets in most developing countries and in European nations currently
exhibiting slow economic growth. However, it is important to remember that there
are special risks involved with global investing such as risks related to
market, currency, economic, social, political, and other factors, in addition to
the heightened risks associated with developing markets and their relatively
small size and lesser liquidity.
We thank you for your participation in the Templeton Global Income Fund and
welcome any comments or suggestions you may have.
Sincerely,
/s/ Neil S. Devlin
- ---------------------------------
Neil S. Devlin, CFA
Portfolio Manager
Templeton Global Income Fund, Inc.
4
<PAGE> 6
PERFORMANCE SUMMARY
In market-price terms, the Templeton Global Income Fund produced a total return
of 12.75% for the one-year period ended August 31, 1996. Based on the change in
actual net asset value (in contrast to market price), total return was 13.34%
for the same period. Both total return figures assume reinvestment of income
dividends in accordance with the dividend reinvestment plan.
During the reporting period, shareholders received income dividends totaling 41
cents ($0.41) per share and return of capital totaling 19 cents ($0.19) per
share. The Fund's closing price per share on the New York Stock Exchange (NYSE)
increased 25 cents, from $6.75 on August 31, 1995 to $7.00 on August 31, 1996,
and the Fund's net asset value per share increased 34 cents, from $8.00 to $8.34
during the same period. Of course, past performance is not predictive of future
results, and dividends will vary depending on income earned by the Fund, and any
profits realized from the sale of securities in the portfolio.
- -------------------------------------------------------------------------------
TEMPLETON GLOBAL INCOME FUND
Periods ended August 31, 1996
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (3/17/88)
<S> <C> <C> <C>
Cumulative Total
Return(1)
Based on change
in net asset value 13.34% 52.45% 99.39%
Based on change
in market price 12.75% 27.60% 58.00%
Average Annual Total
Return(2)
Based on change
in net asset value 13.34% 8.80% 8.50%
Based on change
in market price 12.75% 5.00% 5.60%
</TABLE>
(1). CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE
OF AN INVESTMENT OVER THE PERIODS INDICATED.
(2). AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE
OF AN INVESTMENT OVER THE PERIODS INDICATED.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDEND AND CAPITAL GAINS
DISTRIBUTIONS, EITHER AT NET ASSET VALUE OR AT MARKET PRICE ON THE REINVESTMENT
DATE, IN ACCORDANCE WITH THE DIVIDEND REINVESTMENT PLAN. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE RESULTS.
5
<PAGE> 7
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------------------------------
1996 1995 1994* 1993 1992
---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.00 $ 7.89 $ 8.57 $ 8.86 $ 8.48
-------- -------- -------- ---------- ----------
Income from investment operations:
Net investment income .63 .64 .67 .79 .84
Net realized and unrealized gain (loss) .31 .11 (.75) (.36) .38
-------- -------- -------- ---------- ----------
Total from investment operations .94 .75 (.08) .43 1.22
-------- -------- -------- ---------- ----------
Distributions:
Dividends from net investment income (.41) (.64) (.06) (.64) (.84)
Distributions from net realized gains -- -- (.12) (.06) --
Tax basis return of capital (.19) -- (.42) (.02) --
-------- -------- -------- ---------- ----------
Total distributions (.60) (.64) (.60) (.72) (.84)
-------- -------- -------- ---------- ----------
Change in net asset value .34 .11 (.68) (.29) .38
-------- -------- -------- ---------- ----------
Net asset value, end of year $ 8.34 $ 8.00 $ 7.89 $ 8.57 $ 8.86
======== ======== ======== ========== ==========
TOTAL RETURN
Based on market value per share 12.75% 8.80% (7.64)% (7.07)% 21.30%
Based on net asset value per share 13.34% 11.30% (.15)% 5.34% 14.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $1,004,606 $964,013 $949,850 $1,032,770 $1,055,456
Ratio of expenses to average net assets .72% .78% .79% .79% .81%
Ratio of net investment income to average net assets 7.67% 8.19% 8.17% 9.40% 9.68%
Portfolio turnover rate 112.59% 104.37% 138.34% 264.61% 189.94%
</TABLE>
* BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 8
TEMPLETON GLOBAL INCOME FUND, INC.
Investment Portfolio, August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
BONDS--CORPORATE: 5.9%
- -----------------------------------------------------------------------------------------------------------------------
10,000,000 Can. British Petroleum Co. PLC, 10.875%, 8/01/01 $ 8,388,936
5,750,000 U.S. Companhia Suzano Papel, 10.25%, 10/06/01 5,649,375
5,024,662 U.S. Electricidad de Caracas, FRN, 9/30/03 3,793,620
4,750,000 U.S. Empresa Colombiana de Petroleos, 7.25%, 7/08/98 4,738,125
7,700,000 U.S. Essar Gujarat Ltd., 8.537%, 7/15/99, 144A 7,449,750
2,000,000 U.S. Hidroelectrica Alicura SA, 8.375%, 3/15/99, 144A 1,925,000
4,750,000 U.S. Klabin Fabricadora de Papel Celulose SA, 11.00%, 4/15/98, 144A 4,868,750
5,000,000 U.S. Pohang Iron & Steel, 6.625%, 7/01/03 4,739,250
8,000,000 U.S. Telecom Argentina Stet-France SA, 8.375%, 10/18/00, 144A 7,660,000
3,000,000 U.S. Telecom Brasileiras, 10.375%, 9/09/97 3,066,882
7,500,000 U.S. Telefonica de Argentina SA, 8.375%, 10/01/00, 144A 7,153,125
-------------
TOTAL BONDS--CORPORATE (cost $61,394,270) 59,432,813
- -----------------------------------------------------------------------------------------------------------------------
BONDS--GOVERNMENT & GOVERNMENT AGENCIES: 89.3%
- -----------------------------------------------------------------------------------------------------------------------
9,000,000 Ger. Bank Foreign Economic Affairs Russia, 7.50%, 9/27/96 6,081,697
3,000,000 U.S. Bocon Previsionales II, FRN, 4/01/01 2,994,536
Buoni Poliennali del Tes:
44,930,000,000 Itl. 9.50%, 12/01/97 30,003,376
19,775,000,000 Itl. 8.50%, 8/01/99 13,075,824
29,225,000,000 Itl. 10.50%, 11/01/00 20,483,702
39,120,000 Dem. Federal Republic of Germany, 8.00%, 7/22/02 29,461,932
83,440,000 Aud. Government of Australia, 7.00%, 4/15/00 65,256,187
1,055,600 U.S. Government of Brazil, 6.375%, FRN, 1/01/01 1,013,376
Government of Denmark:
49,000,000 Den. 9.00%, 11/15/98 9,293,635
100,150,000 Den. 8.00%, 5/15/03 18,641,314
Government of Italy:
13,990,000,000 Itl. 12.00%, 1/01/97 9,300,131
20,750,000,000 Itl. 12.00%, 1/20/98 14,341,781
12,860,000,000 Itl. FRN, 8/01/99 8,607,653
13,355,000,000 Itl. 10.50%, 7/15/00 9,348,986
Government of Spain:
6,482,830,000 Sp. 12.25%, 3/25/00 58,600,536
1,872,700,000 Sp. 11.30%, 1/15/02 16,842,705
Kingdom of Denmark:
114,750,000 Den. 9.00%, 11/15/00 22,321,975
94,078,000 Den. 8.00%, 11/15/01 17,683,835
10,000,000 U.S. Korea Development Bank, 7.90%, 2/01/02 10,263,000
2,500,000 U.S. Nacional Financiera SNC, 10.625%, 11/22/01 2,562,500
10,000,000 U.S. National Bank of Hungary, 7.95%, 11/01/03 10,112,500
</TABLE>
7
<PAGE> 9
TEMPLETON GLOBAL INCOME FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
BONDS--GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
- -----------------------------------------------------------------------------------------------------------------------
NHA Manulife:
2,727,959 Can. #96405089, 9.125%, 6/01/02 $ 2,097,379
1,613,243 Can. #96405378, 9.25%, 8/01/02 1,245,039
2,855,362 Can. #96405386, 9.25%, 8/01/02 2,173,151
5,000,000 U.S. Philippines Development Bank, 8.00%, 7/22/98 5,087,500
77,000,000 Can. Providence of Ontario, 7.75%, 12/08/03 58,013,157
8,000,000 Can. Province of British Columbia, 10.60%, 9/05/20 7,434,724
Republic of Argentina:
7,030,000 U.S. 10.95%, 11/01/99 7,284,837
30,485,000 U.S. 8.375%, 12/20/03 25,988,462
23,575,000 U.S. 5.25%, 3/31/23 12,642,094
28,985,000 Aus. Republic of Australia, 12.00%, 11/15/01 27,160,340
6,710,000 Irl. Republic of Ireland, 6.25%, 10/18/04 10,049,396
110,700,000 Swe. Sweden Kingdom, 13.00%, 6/15/01 20,351,659
United Kingdom:
11,755,000 U.K. 12.00%, 11/20/98 20,406,393
11,805,000 U.K. 10.25%, 11/22/99 20,134,244
23,560,000 U.K. 9.50%, 10/25/04 40,589,235
39,540,000 U.S. U.S. Treasury Bonds, 6.375%, 8/15/02 38,755,526
U.S. Treasury Notes:
10,000 U.S. 5.125%, 4/30/98 9,823
105,920,000 U.S. 6.125%, 7/31/00 103,966,835
79,135,000 U.S. 6.25%, 8/31/00 77,947,975
27,731,000 U.S. United Mexican States, 9.75%, 2/6/01 27,973,646
14,500,000 U.S. Venezuela Front Load Interest Reduction Bond, 6.375%, 3/31/07 11,174,063
-------------
TOTAL BONDS--GOVERNMENT & GOVERNMENT AGENCIES (cost $896,554,743) 896,776,659
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES**
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 0.8% (cost $8,173,582)
- -----------------------------------------------------------------------------------------------------------------------
355,000 U.S. American Health Properties Inc. 7,765,625
- -----------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 0.2%
- -----------------------------------------------------------------------------------------------------------------------
35,500 U.S. American Health Properties Psychiatric Group, pfd. 488,125
91,500 Sp. Santander Finance Ltd., B, pfd. 2,150,250
-------------
TOTAL PREFERRED STOCK (cost $2,802,963) 2,638,375
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 10
TEMPLETON GLOBAL INCOME FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES** VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 1.7%
- -----------------------------------------------------------------------------------------------------------------------
2,700,000 U.S. Federal Home Loan Mortgage Corp., 5.25%, 9/25/96 $ 2,689,762
7,045,000 U.S. Federal National Mortgage Assn., 5.22% to 5.25% with maturities to 9/26/96 7,028,168
7,313,000 U.S. U.S. Treasury Bills, 5.03% to 5.12% with maturities to 12/12/96 7,290,410
-------------
TOTAL SHORT TERM OBLIGATIONS (cost $17,004,035) 17,008,340
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 97.9% (cost $985,929,593) 983,621,812
UNREALIZED GAIN IN FORWARD EXCHANGE CONTRACTS: 0.1% 113,628
OTHER ASSETS, LESS LIABILITIES: 2.0% 20,870,589
-------------
TOTAL NET ASSETS: 100.0% $1,004,606,029
==============
</TABLE>
* CURRENCY OF COUNTRIES INDICATED.
** COUNTRY OF ORIGIN.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 11
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $985,929,593) $ 983,621,812
Cash 14,449
Interest and dividends receivable 22,440,905
Unrealized gains on forward exchange
contracts (Note 6) 325,800
--------------
Total assets 1,006,402,966
--------------
Liabilities:
Payable for dividends 863,099
Unrealized loss on forward exchange
contracts (Note 6) 212,172
Accrued expenses 721,666
--------------
Total liabilities 1,796,937
--------------
Net assets, at value $1,004,606,029
==============
Net assets consist of:
Net unrealized depreciation $ (2,064,070)
Accumulated net realized loss (22,285,223)
Net capital paid in on shares of
capital stock 1,028,955,322
--------------
Net assets, at value $1,004,606,029
==============
Shares outstanding 120,453,400
==============
Net asset value per share
($1,004,606,029 / 120,453,400) $ 8.34
==============
</TABLE>
STATEMENT OF OPERATIONS
for the year ended August 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
(net of $1,637,044 foreign
taxes withheld)
Dividends $ 641,842
Interest 82,550,150
-----------
Total income $ 83,191,992
Expenses:
Management fees (Note 3) 5,060,121
Administrative fees (Note
3) 1,267,027
Transfer agent fees (Note
3) 139,000
Custodian fees 91,925
Reports to shareholders 370,000
Audit fees 42,000
Registration and filing
fees 103,000
Directors' fees and
expenses 44,000
Other 453
-----------
Total expenses 7,117,526
------------
Net investment income 76,074,466
Realized and unrealized gain (loss):
Net realized loss on:
Investments (8,131,581)
Foreign currency
transactions (6,289,778)
-----------
(14,421,359)
-----------
Net unrealized appreciation on:
Investments 50,912,933
Foreign currency
translation of other
assets and
liabilities 299,274
-----------
51,212,207
-----------
Net realized and
unrealized gain 36,790,848
------------
Net increase in net assets
resulting from operations $112,865,314
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 12
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
------------- ------------
Increase (decrease) in net assets:
Operations:
Net investment income $ 76,074,466 $ 77,160,130
Net realized loss on investment and foreign currency transactions (14,421,359) (34,583,736)
Net unrealized appreciation 51,212,207 48,074,128
------------ ------------
Net increase in net assets resulting from operations 112,865,314 90,650,522
Distributions to shareholders:
From net investment income (48,868,417) (76,487,909)
Tax basis return of capital (23,403,623) --
------------ ------------
Net increase in net assets 40,593,274 14,162,613
Net assets:
Beginning of year 964,012,755 949,850,142
------------
End of year $1,004,606,029 $964,012,755
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 13
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Global Income Fund, Inc. (the Fund) is a closed-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, by investing primarily in a portfolio of debt securities of companies,
governments, and government agencies of various nations throughout the world.
The following summarizes the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities, including options, listed or traded on a recognized national or
foreign exchange or NASDAQ are valued at the last reported sales prices on the
principal exchange on which the securities are traded. Over-the-counter
securities and listed securities for which no sale is reported are valued at the
mean between the last current bid and asked prices. Securities for which market
quotations are not readily available are valued at fair value as determined by
management and approved in good faith by the Board of Directors.
B. FOREIGN 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 a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
12
<PAGE> 14
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
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 on a weekly basis 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 of 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 a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
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 CAPITAL STOCK
As of August 31, 1996, there were 200,000,000 shares of capital stock authorized
($0.01 par value). During the years ended August 31, 1996 and 1995, there were
no share transactions.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton
Investment Counsel, Inc. (TICI), and Templeton Global Investors, Inc. (TGII),
the Fund's investment manager, and administrative manager, respectively. The
Fund pays monthly an investment management fee to TICI equal, on an annual
basis, to 0.55% of the average daily net assets of the Fund up to $200 million
and 0.50% of the average daily net assets in excess of $200 million. The Fund
pays TGII monthly a fee of 0.15% per annum on the first $200 million of the
Fund's average daily net assets, 0.135% of the next $500 million, and 0.10% of
average net assets in excess of $700 million.
13
<PAGE> 15
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1996 aggregated $1,063,391,162 and $1,057,622,184,
respectively. The cost of securities for federal income tax purposes is
$985,952,562. Realized gains and losses are reported on an identified cost
basis.
At August 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 16,217,211
Unrealized depreciation (18,547,961)
--------------
Net unrealized depreciation $ (2,330,750)
==============
</TABLE>
5. TAX LOSS CARRYOVERS
At August 31, 1996, the Fund had tax basis losses of $15,300,000 which may be
carried over to offset future capital gains. Such losses expire in 2004.
6. FINANCIAL INSTRUMENTS
During the year ended August 31, 1996, 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 August 31, 1996, 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:
Contracts to sell:
<TABLE>
<S> <C>
Net unrealized gain from offsetting forward exchange contracts $ 325,800
Net unrealized losses from offsetting forward exchange contracts (212,172)
---------
Net unrealized gain in forward exchange contracts $ 113,628
=========
</TABLE>
14
<PAGE> 16
TEMPLETON GLOBAL INCOME FUND INC.
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Global Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Global Income Fund, Inc. as of August 31,
1996, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Global Income Fund, Inc. as of August 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
[McGladrey & Pullen, LLP]
New York, New York
September 27, 1996
15
<PAGE> 17
TEMPLETON GLOBAL INCOME FUND, INC.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: --To participate in the Plan, contact Chemical Mellon Shareholder
Services, Shareholder Investment Services, P.O. Box 750, Pittsburgh, PA 15230,
for a Plan brochure and enrollment information. --As a participant, all
dividends and capital gains distributions will be reinvested in shares of the
Fund. --Whenever the Fund declares dividends in either cash or common stock of
the Fund, if the market price is equal to or exceeds net asset value at the
valuation date (payable date), participants will receive the dividends entirely
in stock at a price equal to the net asset value but not less than 95% of the
then current market price of the Fund's shares. If the market price is lower
than net asset value and if dividends and/or capital gains distributions are
payable only in cash, the participant will receive shares purchased on the New
York Stock Exchange. --The automatic reinvestment of dividends and/or capital
gains does not relieve the participant of any income tax which may be payable on
dividends or distributions. --The participant may withdraw from the Plan without
penalty at any time by written notice to Mellon Securities Trust Company. Upon
withdrawal, the participant will receive, without charge, stock certificates
issued and in the participant's name for all full shares; or, if the
participant's wishes, Mellon Securities Trust Company will sell the
participant's shares and send the proceeds, less a service fee of $2.50 and less
brokerage commissions. --Whenever shares are purchased on the New York Stock
Exchange, each participant will pay a pro rata portion of brokerage commissions.
Brokerage commissions will be deducted from amounts to be invested.
SHAREHOLDER INFORMATION
Weekly comparative net asset value and market price information about Templeton
Global Income Fund shares is published each Monday in the Wall Street Journal,
weekly in Barron's and each Saturday in The New York Times and other newspapers
in a table called "Closed-End Bond Funds." Daily market prices for the Fund's
shares are published in the New York Stock Exchange Composite Transactions
section of newspapers under the designation "TemplGlob." The Fund's New York
Stock Exchange trading symbol is GIM. The Fund's shares are also listed and
traded on the Pacific Stock Exchange.
For current information about the net asset value or copies of reports, call
1-800-292-9293.
For information about dividends and shareholder accounts, call 1-800-526-0801.
16
<PAGE> 18
NOTES
<PAGE> 19
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. To ensure the highest quality of service, telephone calls
to or from our service departments may be monitored, recorded and accessed.
These calls can be determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH INCOME
Franklin Global Health Franklin Adjustable Rate
Care Fund Securities Fund
Franklin Templeton Franklin Adjustable U.S.
Japan Fund Government Securities Fund
Templeton Developing Franklin's AGE High
Markets Trust Income Fund
Templeton Foreign Fund Franklin Investment Grade
Templeton Foreign Smaller Income Fund
Companies Fund Franklin Short-Intermediate U.S.
Templeton Global Government Securities Fund
Infrastructure Fund Franklin U.S. Government
Templeton Global Securities Fund
Opportunities Trust Franklin Money Fund
Templeton Global Franklin Federal Money Fund
Real Estate Fund
Templeton Global Smaller FOR NON-U.S. INVESTORS:
Companies Fund
Templeton Greater Franklin Tax-Advantaged
European Fund High Yield Securities Fund
Templeton Growth Fund Franklin Tax-Advantaged
Templeton Latin America International Bond Fund
Fund Franklin Tax-Advantaged U.S.
Templeton Pacific Government Securities Fund
Growth Fund
Templeton World Fund FOR CORPORATIONS:
GLOBAL GROWTH AND INCOME Franklin Corporate Qualified
Dividend Fund
Franklin Global Utilities Fund
Franklin Templeton German FRANKLIN FUNDS SEEKING
Government Bond Fund TAX-FREE INCOME
Franklin Templeton
Global Currency Fund Federal Intermediate-Term
Templeton Global Bond Fund Tax-Free Income Fund
Templeton Growth and Federal Tax-Free Income Fund
Income Fund High Yield Tax-Free
Income Fund
GLOBAL INCOME Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Franklin Global Government Income Fund
Income Fund Tax-Exempt Money Fund
Franklin Templeton Hard
Currency Fund FRANKLIN STATE-SPECIFIC
Franklin Templeton High FUNDS SEEKING
Income Currency Fund TAX-FREE INCOME
Templeton Americas
Government Securities Fund Alabama
Arizona*
GROWTH Arkansas**
California*
Franklin Blue Chip Fund Colorado
Franklin California Growth Fund Connecticut
Franklin DynaTech Fund Florida*
Franklin Equity Fund Georgia
Franklin Gold Fund Hawaii**
Franklin Growth Fund Indiana
Franklin MidCap Growth Fund Kentucky
Franklin Small Cap Growth Fund Louisiana
Maryland
GROWTH AND INCOME Massachusetts***
Michigan*
Franklin Asset Allocation Fund Minnesota***
Franklin Balance Sheet Missouri
Investment Fund New Jersey
Franklin Convertible New York*
Securities Fund North Carolina
Franklin Equity Income Fund Ohio***
Franklin Income Fund Oregon
Franklin MicroCap Value Fund Pennsylvania
Franklin Natural Resources Fund Tennessee**
Franklin Real Estate Texas
Securities Fund Virginia
Franklin Rising Dividends Fund Washington**
Franklin Strategic Income Fund
Franklin Utilities Fund VARIABLE ANNUITIES
Franklin Value Fund
Templeton American Trust, Inc. Franklin Valuemark(SM)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities. 10/96.1
