Annual
Report
AUGUST 31, 1997
TEMPLETON GLOBAL
INCOME FUND
[LOGO]
FRANKLIN TEMPLETON
<PAGE>
[SEAL]
[PHOTO]
NEIL S. DEVLIN
Portfolio Manager
Templeton Global Income 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.
<PAGE>
SHAREHOLDER LETTER
CONTENTS
Shareholder Letter ....................................................... 1
Performance Summary ...................................................... 5
Financial Highlights and
Statement of Investments ................................................. 7
Financial Statements ..................................................... 11
Notes to Financial
Statements ............................................................... 14
Independent Auditor's
Report ................................................................... 18
FUND CATEGORY
[GRAPHIC]
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.
Dear Shareholder:
We are pleased to bring you this annual report of the Templeton Global Income
Fund, which covers the 12 months ended August 31, 1997. The Fund delivered a
one-year total return of 17.12% in market-price terms and 8.53% in terms of net
asset value, as discussed in the Performance Summary on page 5.
Global bond markets finished the reporting period with mixed results, after
experiencing severe volatility along the way. For example, during the period,
10-year U.S. Treasury bond yields fell from almost 7% to near 6%, rose again
towards 7%, and then fell once more to near 6%, with each rise or fall in yield
resulting in about a 7% change in bond value. This volatility was primarily due
to fears of inflation and higher interest rates in the U.S., the appreciation of
the U.S. dollar relative to most other currencies, and the struggle in Europe to
establish a common currency.
Because the U.S. was experiencing a degree of economic growth historically
associated with rising inflation, the U.S. Federal Reserve Board raised the
federal funds rate .25%, from 5.25% to
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
8/31/97
<S> <C>
Europe 37.8%
Latin America 20.8%
United States 20.3%
Canada 9.1%
Australia 3.9%
Asia 0.8%
Short-Term Obligations
& Other Net Assets 7.3%
</TABLE>
5.5%, in March 1997. Growth then slowed modestly in the second quarter of the
year before accelerating again in July.
Activity in the U.S. had a significant influence on foreign bond and currency
markets. At the beginning of the reporting period, European interest rates were
at relatively low levels, with many markets experiencing short-term rates
considerably lower than U.S. rates. With higher rates possible in the U.S.,
foreign investors began purchasing U.S. dollar assets and the dollar began a
long, steady appreciation against most foreign currencies. During the period,
the U.S. dollar appreciated 22% against the German mark, from 1.48 to 1.81 marks
to the dollar. This meant that the value of German bond holdings in the Fund
declined by 22% in U.S.-dollar terms.
However, the decline in many foreign currencies relative to the U.S. dollar was
not exclusively the result of events in the United States. Domestic conditions
in Europe, particularly events surrounding the formation of a common European
currency, also were contributing factors. In attempting to meet requirements for
membership in the European Monetary Union, the French, Italian, and Spanish
governments cut their budgets aggressively, leading to declines in European
interest rates and depreciation of most European currencies relative to the U.S.
dollar. Although prospects for a common currency generally improved during the
period under review, a heightened sense of uncertainty remained, and many
European currencies experienced significant volatility as the process unfolded.
Responding to the appreciation of the U.S. dollar, we reduced the Fund's
holdings in European bonds by selling modest amounts of assets from Denmark,
Italy, Spain, and the United Kingdom. At the beginning of the reporting period,
the Fund had invested 41.4% of its total net assets in European holdings; by the
end, this was down to 37.8%. We invested much of the proceeds from the sale of
our European holdings in U.S. Treasury
2
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO BREAKDOWN
Based on Total Net Assets
8/31/97
- --------------------------------------------------------------------------------
<S> <C>
Government Bonds 87.9%
Corporate Bonds 4.6%
Preferred Stocks 0.2%
Short-Term Obligations
and Other Net Assets 7.3%
</TABLE>
For a complete listing of portfolio holdings, please see page 8 of this report.
and dollar-denominated securities of Latin American emerging market countries.
We also shifted assets out of other U.S. dollar-denominated holdings, such as
Australia, into Latin America, and our holdings of Latin American securities
increased, during the period, from 13% to 20.8% of total net assets, with the
largest increases occurring in our Brazilian and Mexican holdings. In seeking to
preserve the value of our remaining European bond holdings, we increased the use
of currency hedges, and the Fund's exposure to European currencies fell from
about 40% on August 31, 1996, to 37% on August 31, 1997.
The Fund had an average maturity of 5.5 years at the end of the period as
compared with 5.3 years at the beginning. During the period, we slightly reduced
the average maturity of our holdings from industrial countries while modestly
increasing the average maturity of Latin American holdings.
In our opinion, the greatest risk to bond values is expanding economic growth,
not only in the U.S., but also in Japan, Europe, and emerging markets. Should
this trend continue, we believe global bond markets could become more volatile
over the intermediate term because such growth could increase the risk that
certain key resources, particularly labor, may become scarce, leading to wage
and price increases. Because central banks generally raise interest rates in an
effort to slow growth to non-inflationary levels, this scenario could result in
increasing interest rates and declining bond prices. However, controlled rises
in interest rates before inflation occurs could lead to greater long-term global
financial stability.
Regarding global currencies, we believe that the U.S. dollar's fundamentals at
the end of the reporting period continued to support its value against
currencies of most European countries experiencing high labor costs and high
unemployment. Should this situation continue, we would expect to maintain our
emphasis on U.S. dollar-denominated assets.
3
<PAGE>
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.
Because economic and market conditions are constantly changing, our strategies,
and our evaluations, conclusions, and decisions regarding portfolio holdings may
change as new circumstances arise. All figures shown are as of August 31, 1997,
and the Fund's holdings can be expected to change with market developments and
management of the portfolio. 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, social, 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 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
On February 21, 1997, the Board of Trustees of the Fund authorized management to
implement an open-market share repurchase program pursuant to which the Fund
from time to time at the discretion of management may purchase up to an
aggregate of 12 million shares of the Fund's Common Stock (approximately 10% of
the shares outstanding on February 18, 1997) in open-market transactions. This
authorization remains in effect.
4
<PAGE>
PERFORMANCE SUMMARY
In market-price terms, Templeton Global Income Fund produced a total return of
17.12% for the one-year period ended August 31, 1997. Based on the change in net
asset value (in contrast to market price), the Fund delivered a total return of
8.53% for the same period. Both total return figures assume reinvestment of
dividends and capital gains in accordance with the dividend reinvestment plan.
During the reporting period, the Fund's closing price on the New York Stock
Exchange increased 56.25 cents ($0.5625) per share, from $7.00 on August 31,
1996, to $7.5625 on August 31, 1997, while the net asset value increased 1.0
cent ($0.01), from $8.34 to $8.35.
Templeton Global Income Fund shareholders received income distributions of 60.0
cents ($0.60) per share. Distributions will vary depending on income earned by
the Fund and any profits realized from sales of securities in the portfolio, as
well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
5
<PAGE>
<TABLE>
<CAPTION>
TEMPLETON GLOBAL INCOME FUND
Periods ended 8/31/97
SINCE
INCEPTION
1-YEAR 5-YEAR (3/17/88)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change in net asset value 8.53% 44.00% 116.40%
Based on change in market price 17.12% 23.32% 85.05%
Average Annual Total Return(2)
Based on change in net asset value 8.53% 7.57% 8.50%
Based on change in market price 17.12% 4.28% 6.72%
</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 distributions at net asset value or at
market price on the reinvestment date, in accordance with the dividend
reinvestment plan and do not reflect sales charges that would have been paid at
inception or brokerage commissions that would have been paid on secondary market
purchases. Investment return and principal value will fluctuate with market
conditions, currency volatility, and the economic, social, and political
climates of the countries 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
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------------------------------------------------
1997 1996 1995 1994+ 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year............... $8.34 $8.00 $7.89 $8.57 $8.86
--------------------------------------------------------------------------
Income from investment operations:
Net investment income........................... .60 .63 .64 .67 .79
Net realized and unrealized gains (losses)...... .01 .31 .11 (.75) (.36)
--------------------------------------------------------------------------
Total from investment operations................. .61 .94 .75 (.08) .43
--------------------------------------------------------------------------
Less distributions:
Dividends from net investment income............ (.60) (.41) (.64) (.06) (.64)
Distributions from net realized gains........... -- -- -- (.12) (.06)
Tax basis return of capital..................... -- (.19) -- (.42) (.02)
--------------------------------------------------------------------------
Total distributions.............................. (.60) (.60) (.64) (.60) (.72)
--------------------------------------------------------------------------
Net asset value, end of year..................... $8.35 $8.34 $8.00 $7.89 $8.57
==========================================================================
TOTAL RETURN
Based on market value per share................ 17.12% 12.75% 8.80% (7.64)% (7.07)%
Based on net asset value per share............. 8.53% 13.34% 11.30% (.15)% 5.34%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's).................. $1,002,756 $1,004,606 $964,013 $949,850 $1,032,770
Ratios to average net assets:
Expenses........................................ .75% .72% .78% .79% .79%
Net investment income........................... 7.05% 7.67% 8.19% 8.17% 9.40%
Portfolio turnover rate.......................... 191.83% 112.59% 104.37% 138.34% 264.61%
</TABLE>
+Based on weighted average shares outstanding.
See notes to financial statements.
7
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS 92.5%
ARGENTINA 5.9%
Republic of Argentina:
10.95%, 11/01/99.................................................. $ 7,030,000 $ 7,618,762
8.75%, 5/09/02.................................................... 5,050,000 5,095,450
8.375%, 12/20/03.................................................. 20,690,000 20,534,825
11.00%, 10/09/06.................................................. 1,500,000 1,707,750
11.375%, 1/30/17.................................................. 2,710,000 3,163,925
5.25%, 3/31/23, VRN, L............................................ 7,000,000 5,160,309
Telecom Argentina Stet-France SA, 144A, 8.375%, 10/18/00.............. 8,000,000 8,230,000
Telefonica de Argentina SA, 144A, 8.375%, 10/01/00.................... 7,500,000 7,687,500
--------------
59,198,521
--------------
AUSTRALIA 3.9%
Government of Australia, 10.00%, 10/15/02............................. 45,975,000 AUD 39,638,598
--------------
BRAZIL 6.2%
Brazil C-Bond, 8.00%, 4/15/14......................................... 11,934,923 9,872,150
Government of Brazil:
8.875%, 11/05/01.................................................. 16,325,000 16,814,750
6.562%, 4/15/09................................................... 14,690,000 12,954,744
6.937%, 4/15/12................................................... 1,000,000 829,062
6.937%, 4/15/12, conv., FRN, L.................................... 1,925,000 1,595,944
10.125%, 5/15/27.................................................. 11,550,000 11,246,235
Companhia Suzano Papel, 10.25%, 10/06/01.............................. 5,750,000 5,951,250
Telecom Brasileiras, 10.375%, 9/09/97................................. 3,000,000 3,080,625
--------------
62,344,760
--------------
CANADA 9.1%
Government of Canada:
10.50%, 7/01/00................................................... 39,858,000 CAD 32,792,740
10.50%, 3/01/01................................................... 39,793,000 CAD 33,460,400
10.00%, 5/01/02................................................... 25,710,000 CAD 21,939,657
10.25%, 2/01/04................................................... 1,130,000 CAD 1,009,817
NHA Manulife Pool:
#96405089, 9.125%, 6/01/02........................................ 970,579 CAD 724,059
#96405386, 9.25%, 8/01/02......................................... 865,317 CAD 646,612
#96405378, 9.25%, 8/01/02......................................... 539,274 CAD 402,718
--------------
90,976,003
--------------
COLOMBIA 0.5%
Empresa Colombiana de Petroleos, 144A, 7.25%, 7/8/98.................. 4,750,000 4,773,750
--------------
DENMARK 3.7%
Government of Denmark, 8.00%, 5/15/03................................. 78,725,000 DKK 12,837,850
Kingdom of Denmark, 9.00%, 11/15/00................................... 149,550,000 DKK 24,352,632
--------------
37,190,482
--------------
</TABLE>
8
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
GERMANY 8.7%
Federal Republic of Germany:
7.75%, 2/21/00, Bundesrep......................................... $ 117,045,000 DEM $ 70,168,656
8.00%, 7/22/02.................................................... 26,685,000 DEM 16,744,080
--------------
86,912,736
--------------
INDIA 0.3%
Essar Gujarat Ltd., 144A, 8.497%, 7/15/99, FRN........................ 3,035,000 2,928,775
--------------
ITALY 9.5%
Buoni Poliennali Del Tes:
12.00%, 1/17/99................................................... 14,535,000,000 ITL 8,787,935
10.50%, 11/01/00.................................................. 17,020,000,000 ITL 10,768,552
10.00%, 8/01/03................................................... 42,630,000,000 ITL 28,157,605
7.75%, 11/01/06................................................... 15,885,000,000 ITL 9,618,548
Government of Italy, 10.50%, 7/15/00.................................. 60,255,000,000 ITL 37,805,921
--------------
95,138,561
--------------
MEXICO 5.4%
Nacional Financiera SNC, 10.625%, 11/22/01............................ 2,500,000 2,743,750
United Mexican States:
9.75%, 2/06/01.................................................... 16,325,000 17,324,906
9.875%, 1/15/07................................................... 11,700,000 12,372,750
6.25%, 12/31/19................................................... 14,925,000 11,958,656
11.375%, 9/15/16.................................................. 8,355,000 9,712,688
--------------
54,112,750
--------------
PANAMA 0.6%
Republic of Panama, 144A, 7.875%, 2/13/02............................. 6,050,000 6,027,312
--------------
PHILIPPINES 0.5%
Philippines Development Bank, 8.00%, 7/22/98.......................... 5,000,000 5,037,500
--------------
SPAIN 6.3%
Government of Spain:
12.25%, 3/25/00................................................... 4,657,890,000 ESP 35,540,783
10.10%, 2/28/01................................................... 2,500,600,000 ESP 18,804,538
10.90%, 8/30/03................................................... 1,093,130,000 ESP 8,952,593
--------------
63,297,914
--------------
SWEDEN 3.5%
Kingdom of Sweden, 10.25%, 5/05/03.................................... 112,900,000 SEK 17,134,360
Sweden Kingdom:
13.00%, 6/15/01................................................... 58,900,000 SEK 9,290,018
8.00%, 8/15/07.................................................... 66,600,000 SEK 9,297,402
--------------
35,721,780
--------------
UNITED KINGDOM 5.9%
British Petroleum Co. Plc., 10.875%, 8/01/01.......................... 10,000,000 CAD 8,413,584
</TABLE>
9
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1997 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
UNITED KINGDOM (CONT.)
United Kingdom:
8.00%, 12/07/00................................................... $ 27,645,000 GBP $ 45,932,972
7.00%, 11/06/01, stk.............................................. 3,010,000 GBP 4,868,587
--------------
59,215,143
--------------
UNITED STATES 20.3%
U.S. Treasury Bond, 6.375%, 8/15/02................................... 39,540,000 39,811,877
U.S. Treasury Note:
6.25%, 8/31/00.................................................... 53,159,000 53,391,624
6.625%, 4/30/02................................................... 56,770,000 57,657,088
5.125%, 4/30/98................................................... 10,000 9,969
7.25%, 8/15/04.................................................... 50,022,000 52,570,021
--------------
203,440,579
--------------
VENEZUELA 2.2%
Venezuela Front Load Interest Reduction Bond, A, 3/31/07.............. 13,809,524 12,955,059
Republic of Venezuela, A, 6.75%, 3/31/20.............................. 10,625,000 8,715,815
--------------
21,670,874
--------------
TOTAL BONDS (COST $948,295,514)....................................... 927,626,038
--------------
PREFERRED STOCK 0.2% (COST $1,998,360)
Santander Finance Ltd., B, pfd........................................ 91,500 2,304,656
--------------
SHORT TERM OBLIGATIONS 4.7%
Deutsche Bank AG, 5.63%, 9/02/97...................................... 38,087,000 38,087,000
Federal National Mortgage Assoc., 5.34 to 5.68% with maturities to
10/07/97............................................................ 8,725,000 8,724,103
--------------
TOTAL SHORT TERM OBLIGATIONS (COST $46,810,170)....................... 46,811,103
--------------
TOTAL INVESTMENTS 97.4% (COST $997,104,044)........................... 976,741,797
NET EQUITY IN FORWARD CONTRACTS 0.3%.................................. 3,266,263
OTHER ASSETS, LESS LIABILITIES 2.3%................................... 22,747,562
--------------
TOTAL NET ASSETS 100.0%............................................... $1,002,755,622
==============
</TABLE>
CURRENCY ABBREVIATIONS:
AUD -- Australia
CAD -- Canada
DEM -- Germany
DKK -- Denmark
ESP -- Spain
GBP -- United Kingdom
ITL -- Italy
SEK -- Sweden
*Securities traded in U.S. dollars unless otherwise indicated.
See notes to financial statements.
10
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $997,104,044)............................ $ 976,741,797
Cash............................................................................... 914
Receivables:
Interest and dividends............................................................ 24,299,641
Unrealized gain on forward exchange contracts (Note 5)............................ 14,070,263
------------
Total assets................................................................... 1,015,112,615
------------
Liabilities:
Dividends payable.................................................................. 704,959
Unrealized loss on forward exchange contracts (Note 5)............................. 10,804,000
Accrued expenses................................................................... 848,034
------------
Total liabilities.............................................................. 12,356,993
------------
Net assets, at value........................................................... $1,002,755,622
============
Net assets consist of:
Distribution in excess of net investment income.................................... $ (312,828)
Net unrealized depreciation........................................................ (17,249,703)
Accumulated net realized loss...................................................... (5,922,899)
Capital shares..................................................................... 1,026,241,052
------------
Net assets, at value........................................................... $1,002,755,622
============
Net asset value per share ($1,002,755,622 / 120,092,600 shares outstanding)......... $8.35
============
</TABLE>
See notes to financial statements.
11
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997
<TABLE>
<S> <C> <C>
Investment income:
(net of $862,809 foreign taxes withheld)
Dividends............................................................... $ 311,420
Interest................................................................ 79,227,849
------------
Total Investment Income............................................. $79,539,269
Expenses:
Management fees (Note 3)................................................ 5,199,883
Administrative fees (Note 3)............................................ 1,294,977
Transfer agent fees..................................................... 142,700
Custodian fees.......................................................... 214,013
Reports to shareholders................................................. 538,810
Registration and filing fees............................................ 90,680
Professional fees (Note 3).............................................. 55,350
Directors' fees and expenses............................................ 79,200
Other................................................................... 13,324
------------
Total expenses...................................................... 7,628,937
------------
Net investment income............................................... 71,910,332
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................................ (3,294,846)
Foreign currency transactions.......................................... 19,657,170
------------
Net realized gain....................................................... 16,362,324
Net unrealized appreciation (depreciation) on:
Investments............................................................ (18,054,466)
Translation of assets and liabilities denominated in foreign
currencies........................................................... 2,868,833
------------
Net unrealized depreciation............................................. (15,185,633)
------------
Net realized and unrealized gain......................................... 1,176,691
------------
Net increase in net assets resulting from operations..................... $73,087,023
============
</TABLE>
See notes to financial statements.
12
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............................................. $ 71,910,332 $ 76,074,466
Net realized gain (loss) from investments and foreign currency
transactions.................................................... 16,362,324 (14,421,359)
Net unrealized appreciation (depreciation) on investments and
translation of other assets and liabilities denominated in
foreign currencies.............................................. (15,185,633) 51,212,207
-----------------------------------
Net increase in net assets resulting from operations.......... 73,087,023 112,865,314
Distributions to shareholders from:
Net investment income............................................. (71,910,332) (48,868,417)
In excess of net investment income................................ (312,828) --
Tax basis return of capital....................................... -- (23,403,623)
Capital share transactions (Note 2)................................ (2,714,270) --
-----------------------------------
Net increase (decrease) in net assets......................... (1,850,407) 40,593,274
Net assets:
Beginning of year.................................................. 1,004,606,029 964,012,755
-----------------------------------
End of year........................................................ $1,002,755,622 $1,004,606,029
===================================
Accumulated distributions in excess of net investment income
included in net assets:
Beginning of year.................................................. $ -- $ --
===================================
End of year........................................................ $ (312,828) $ --
===================================
</TABLE>
See notes to financial statements.
13
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Global Income Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end, non-diversified investment company. 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. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
14
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (cont.)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. 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.
f. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL SHARES
On February 21, 1997, the Board of Trustees of the Fund authorized management to
implement an open-market share repurchase program pursuant to which the Fund
from time to time at the discretion of management may purchase up to an
aggregate of 12 million shares of the Fund's Common Stock.
At August 31, 1997, there were 200,000,000 shares authorized ($0.01 par value).
During the year ended August 31, 1997, 360,800 shares were repurchased for
$2,714,270. During the year ended August 31, 1996 there were no share
transactions.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton
Investment Councel, Inc. (TICI), and Franklin Templeton Services, Inc. (FT
Services), the Fund's investment manager, and administrative manager,
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
--------------------------------------
<C> <S>
0.55% First $200 million
0.50% Over $200 million
</TABLE>
15
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (cont.)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
The Fund pays an administrative fee to FT Services based on the Fund's average
daily net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE-DAILY NET ASSETS
------------------------------------------------------------------
<C> <S>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million
</TABLE>
During the year ended August 31, 1997, legal fees of $12,502 were paid to a law
firm in which an officer of the Fund is a partner.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period ended August 31, 1997 aggregated $1,796,993,101 and $1,805,623,031,
respectively.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Fund has been a party to financial instruments with off-balance-sheet risk,
primarily forward exchange contracts, in order to minimize the impact on the
Fund 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.
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,
1997, the Fund has outstanding forward exchange contracts for the sale of
currencies as set out below. The 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 day of entry into the contract.
<TABLE>
<S> <C>
Contracts to sell:
Net unrealized gain from offsetting forward exchange contracts.................................. $ 14,070,263
Net unrealized loss from offsetting forward exchange contracts.................................. (10,804,000)
------------
Net unrealized gain in forward exchange contracts............................................. $ 3,266,263
============
</TABLE>
16
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (cont.)
6. INCOME TAXES
At August 31, 1997, the Fund had tax basis capital losses of $6,244,709 which
may be carried over to offset future capital gains. Such losses expire in 2004.
The cost of securities for income tax purposes is the same as that shown in the
investment portfolio. At August 31, 1997, the net unrealized depreciation based
on the cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation............ $ 9,287,299
Unrealized depreciation............ (29,649,546)
--------------
Net unrealized depreciation........ $(20,362,247)
==============
</TABLE>
17
<PAGE>
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 statement of investments, of Templeton Global Income Fund, Inc. as of August
31, 1997, 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, 1997, by correspondence with the custodian. 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, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
New York, New York
September 26, 1997
18
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
Annual Meeting of Shareholders, March 25, 1997
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on March 25, 1997. The purpose of
the meeting was to elect five Directors of the Fund, to ratify the selection of
McGladrey & Pullen, LLP, as the Fund's independent public accountants for the
fiscal year ending August 31, 1997, to consider a shareholder proposal
requesting that the Board of Directors consider, and submit to shareholders for
approval, a proposal to amend the Fund's Articles of Incorporation to convert
the Fund to an open-end investment company and in their discretion, to authorize
the proxyholders to vote upon such other matters which may legally come before
the meeting or any other adjournment thereof. At the meeting, the following
persons were elected by the shareholders to serve as Directors of the Fund:
Harris J. Ashton, Nicholas F. Brady, S. Joseph Fortunato, Andrew H. Hines, Jr.
and Edith E. Holiday. The shareholders ratified the selection of McGladrey &
Pullen, LLP, to serve as the Fund's independent public accountants for the
fiscal year ending August 31, 1997. The proposal requesting that the Board of
Directors consider, and submit to shareholders for approval, a proposal to amend
the Fund's Articles of Incorporation to convert the Fund to an open-end
investment company was rejected by shareholders. No other business was
transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. Election of five (5) Directors for the terms set forth below:
<TABLE>
<CAPTION>
% OF OUTSTANDING % OF OUTSTANDING
TERM EXPIRING 2000: FOR SHARES WITHHELD SHARES
- ---------------------- ----------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C>
Harris J. Ashton 92,520,905 76.81% 4,210,876 3.50%
Nicholas F. Brady 92,372,504 76.69% 4,359,277 3.62%
S. Joseph Fortunato 92,476,377 76.77% 4,255,404 3.54%
Andrew H. Hines, Jr. 92,388,224 76.70% 4,343,557 3.61%
</TABLE>
<TABLE>
<CAPTION>
TERM EXPIRING 1999:
- ----------------------
<S> <C> <C> <C> <C>
Edith E. Holiday 92,206,578 76.55% 4,525,203 3.76%
</TABLE>
2. Ratification of the selection of McGladrey & Pullen, LLP, as independent
public accountants of the Fund for the fiscal year ending August 31, 1997:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
- ----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
93,713,601 77.80% 1,228,178 1.02% 1,790,002 1.49%
</TABLE>
3. Rejection of the proposal requesting that the Board of Directors consider,
and submit to shareholders for approval, a proposal to amend the Fund's
Articles of Incorporation to convert the Fund to an open-end investment
company.
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING BROKER OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES
- ----------- ----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
21,417,997 17.78% 39,726,838 32.99% 3,734,294 3.10% 31,852,652 26.44%
</TABLE>
19
<PAGE>
TEMPLETON GLOBAL INCOME FUND, INC.
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: -- Shareholders must affirmatively elect to participate in the Plan;
Stock dividends and capital gains distributions will be reinvested
automatically; ChaseMellon Shareholder Services, Investor Services, P.O. Box
3338, South Hackensack, NJ 07606-1938 will provide additional Plan information
upon request. -- 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), the participant 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 or otherwise on the open market. -- 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 (the "Plan Agent") at the address
above. Upon withdrawal, the participant will receive, without charge, stock
certificates issued in the participant's name for all full shares; or, if the
participant wishes, Mellon Securities Trust Company will sell the participant's
shares and send the proceeds, less a service fee of $5.00 and less trading fees.
- -- Whenever shares are purchased on the New York Stock Exchange or otherwise on
the open market, each participant will pay a pro rata portion of trading fees.
Trading fees will be deducted from amounts to be invested.
SHAREHOLDER INFORMATION
Shares of Templeton Global Income Fund, Inc. are traded daily on the New York
Stock Exchange under the symbol "GIM". The Fund's shares are also listed and
traded on the Pacific Exchange. Information about the net asset value and the
market price is published each Monday in the Wall Street Journal, weekly in
Barron's and each Saturday in The New York Times and other newspapers. Daily
market prices for the Fund's shares are published in the New York Stock Exchange
Composite Transactions section of newspapers.
For current information about dividends and shareholder accounts, call
1-800-292-9293.
The daily closing net asset value as of the previous business day may be
obtained by calling Franklin Templeton's Fund Information Department after 10
a.m. Eastern Time any business day at 1-800-DIAL-BEN (1-800-342-5236).
If any shareholder is not receiving copies of the Reports to Shareholders
because shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Global Income Fund, Inc., 100 Fountain Parkway, P.O.
Box 33030, St. Petersburg, FL 33733-8030.
20
<PAGE>
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
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global
Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton Global
Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High Income
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
For Corporations
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
+ Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
09/97.1
<PAGE>
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current prospectus for the
Templeton Global Income Fund, which contains more complete information including
risk factors, charges and expenses. 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, as well as investment decisions by the
Investment Manager, which will not always be profitable or wise. 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.
TLGIM A97 10/97 [LOGO] PRINTED ON RECYCLED PAPER
