SEMI ANNUAL REPORT
FEBRUARY 28, 1998
TEMPLETON GLOBAL INCOME FUND, INC.
[FRANKLIN TEMPLETON LOGO]
PAGE
[CELEBRATING 50 YEARS LOGO]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and to expect that mixed in with the good
years can be some bad years. It's important to 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.
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently he devotes all of his time and efforts to the John
Templeton Foundation. A major portion of his assets remain invested in the
Templeton funds, which are managed by many of the investment professionals he
selected and trained.
[PHOTO OF NEIL S. DEVLIN APREAR HERE]
NEIL S. DEVLIN
Portfolio Manager
Templeton Global Income Fund, Inc.
PAGE
SHAREHOLDER LETTER
Your Fund's Objective: Templeton Global Income Fund seeks high current income,
with a secondary objective of capital appreciation, by investing primarily in a
portfolio of debt securities of U.S. and foreign issuers.
Dear Shareholder:
We are pleased to bring you this semi-annual report of Templeton Global Income
Fund, which covers the period ended February 28, 1998. Global fixed-income
performance for the six months under review was influenced by low inflation
readings in almost all markets, and by a flight to high quality assets as the
Asian currency crises caused many investors to reduce their emerging market
holdings and seek safe harbor in bond markets like those of the United States.
Despite accelerating economic growth, interest rates declined in many of the
world's markets, and bonds provided investors with attractive returns for the
period under review. In the U.S., as the risk of inflation continued to decline,
ten-year Treasury note yields fell from 6.30% at the beginning of the period to
about 5.57% at the end, with a resulting 4.66% rise in value of such
You may find a complete listing of the Fund's portfolio holdings beginning on
page 8 of this report.
CONTENTS
Shareholder Letter ........ 1
Performance Summary ....... 5
Financial Highlights &
Statement of Investments .. 7
Financial Statements ...... 12
Notes to Financial
Statements ................ 15
FUND CATEGORY
[PYRAMID GRAPH]
PAGE
GEOGRAPHIC DISTRIBUTION
BASED ON TOTAL NET ASSETS
2/28/98
[PIE CHART]
<TABLE>
<S> <C>
EUROPE 36.2%
UNITED STATES 20.9%
LATIN AMERICA 22.2%
CANADA 8.6%
AUSTRALIA & NEW ZEALAND 5.7%
ASIA 0.6%
SHORT-TERM INVESTMENTS &
OTHER NET ASSETS 5.8%
</TABLE>
notes. Other markets also experienced significant declines in yield and a
corresponding appreciation in bond value.
Influenced by declining inflation in Europe, yields on ten-year German
government bonds fell during the period from 5.69% to 4.95%, with bond values
appreciating 3.43%.* The resurgence in value of European currencies relative to
the U.S. dollar also benefited bonds by contributing to declining interest rates
in Europe. However, although bonds generally provided positive returns, there
were industrial and emerging market countries where bonds did not fare as well.
Within this environment, the Fund delivered a six-month total return of 4.98% in
market-price terms and 4.14% in terms of net asset value, as discussed in the
Performance Summary on page 5.
Reacting to the depreciation of the U.S. dollar near the beginning of the period
and believing that it would likely rebound, we reduced the Fund's exposure to
non-U.S. currencies. We increased our use of hedges during the period,
specifically against European and Australian currencies and our net exposure
fell from 28.9% of total net assets to 23.3% for European currencies and from
3.9% to less than 2% for Australian currencies. In fact, the U.S. dollar
recovered against many other currencies by the end of the period, and our use of
hedges helped protect the portfolio from declines in value of our foreign
currency-denominated holdings.
In December 1997 and January 1998, we increased the Fund's interest-rate
sensitivity by purchasing bonds with longer maturities because we believed
interest rates of many countries would decline in the near term. We lengthened
the Fund's average maturity from
* Source: Bloomberg. Change in value is measured in U.S. dollars and represents
price appreciation only.
2
PAGE
5.5 years at the beginning of the period to 7.0 years at the end, primarily with
our U.S., German, and Italian holdings.
We believe that the future for global bond markets will be affected by the
ultimate impact of the Asian crises on other industrialized economies. Will the
crises cause growth to slow significantly in industrial markets? Will domestic
demand in non-Asian markets offset the impact of slower growth in Asia? Will the
risk of higher inflation resulting from low unemployment in many countries be
reduced by slower growth in Asia? The answers to these questions should affect
the course for interest rates over the balance of 1998. In our opinion, the
impact of the Asian crises on U.S. economic growth should be relatively small.
It could even be beneficial from an inflation perspective, resulting in stable
or modestly declining U.S. interest rates. However, improved growth rates in
Europe during the year could lead to somewhat higher interest rates there. But
the creation of a common European currency, which is scheduled to be introduced
in January 1999, will be the focus for most markets and may help to keep
European interest rates relatively low, at least for the first half of 1998.
We also believe the U.S. dollar's value will probably be an important factor in
global financial markets. The strength of the U.S. economy, the persistent
weakness of the Japanese economy, and relatively low European interest rates may
help to keep the dollar's value firm in the intermediate term. Eventually,
however, slower Asian growth coupled with stronger European growth may cause a
weakening U.S. dollar.
This discussion reflects the strategies we employed for the Fund during the six
months under review, and includes our opinions as of the close of the period.
Because economic and market conditions are constantly changing, our strategies
and our evaluations, conclusions and decisions regarding portfolio holdings may
change as new
PORTFOLIO BREAKDOWN
BASED ON TOTAL NET ASSETS
2/28/98
<TABLE>
<S> <C>
GOVERNMENT BONDS 89.7%
CORPORATE BONDS 4.3%
COMMON STOCKS 0.2%
SHORT-TERM INVESTMENTS
& OTHER NET ASSETS 5.8%
</TABLE>
For a complete list of portfolio holdings, please see page 8 of this report.
3
PAGE
circumstances arise. All figures shown are as of February 28, 1998, 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 the 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 emerging markets.
We thank you for your participation in 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.
On February 21, 1997, the Board of Directors 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 4.98% cumulative
total return for the six-month period ended February 28, 1998. Based on the
change in net asset value (in contrast to market price), the Fund delivered a
4.14% cumulative total return 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 6.25 cents ($0.0625) per share, from $7.5625 on August 31,
1997, to $7.6250 on February 28, 1998, while the net asset value increased 1
cent ($0.01), from $8.35 to $8.36.
Templeton Global Income Fund shareholders received income distributions of 30.0
cents ($0.3000) per share during the period. Distributions will vary depending
on income earned by the Fund and any profits realized from the sale 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
TEMPLETON GLOBAL INCOME FUND
Periods ended 2/28/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (3/17/88)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1)
Based on change in net asset value 6.05% 46.30% 117.49%
Based on change in market price 5.82% 37.72% 94.27%
Average Annual Total Return(2)
Based on change in net asset value 6.05% 7.91% 8.12%
Based on change in market price 5.82% 6.61% 6.90%
</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. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, currency volatility, and
the economic, social, and political climates of countries where investments are
made. Emerging markets involve heightened risks related to the same factors, in
addition to those associated with their relatively small size and lesser
liquidity. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
6
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1998 --------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994+ 1993
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout
the period)
Net asset value, beginning of
period................................ $8.35 $8.34 $8.00 $7.89 $8.57 $8.86
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income................ .29 .60 .63 .64 .67 .79
Net realized and unrealized gain
(loss)............................. .02 .01 .31 .11 (.75) (.36)
-----------------------------------------------------------------------------------
Total from investment operations...... .31 .61 .94 .75 (.08) .43
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income................ (.30) (.60) (.41) (.64) (.06) (.64)
Net realized gains................... -- -- -- -- (.12) (.06)
Tax return of capital................ -- -- (.19) -- (.42) (.02)
-----------------------------------------------------------------------------------
Total distributions................... (.30) (.60) (.60) (.64) (.60) (.72)
-----------------------------------------------------------------------------------
Net asset value, end of period........ $8.36 $8.35 $8.34 $8.00 $7.89 $8.57
===================================================================================
Total Return*
Based on market value per share...... 4.98% 17.12% 12.75% 8.80% (7.64)% (7.07)%
Based on net asset value per share... 4.14% 8.53% 13.34% 11.30% (0.15)% 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)..... $999,728 $1,002,756 $1,004,606 $964,013 $949,850 $1,032,770
Ratios to average net assets:
Expenses............................. .81%** .75% .72% .78% .79% .79%
Net investment income................ 7.10%** 7.05% 7.67% 8.19% 8.17% 9.40%
Portfolio turnover rate............... 43.62% 191.83% 112.59% 104.37% 138.34% 264.61%
</TABLE>
*Total return is not annualized.
**Annualized.
+Based on weighted average shares outstanding.
See Notes to Financial Statements.
7
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
BONDS 94.0%
ARGENTINA 6.4%
Republic of Argentina:
10.95%, 11/01/99.......................................... $ 7,030,000 $ 7,443,012
8.75%, 5/09/02............................................ 5,050,000 4,933,850
8.375%, 12/20/03.......................................... 20,690,000 20,586,550
11.00%, 10/09/06.......................................... 1,500,000 1,687,500
11.375%, 1/30/17.......................................... 3,035,000 3,454,209
9.75%, 9/19/27............................................ 9,575,000 9,539,094
Telecom Argentina Stet-France SA, 144A, 8.375%, 10/18/00.... 8,000,000 8,260,000
Telefonica de Argentina SA, 144A, 8.375%, 10/01/00.......... 7,500,000 7,650,000
------------
63,554,215
------------
AUSTRALIA 3.9%
Government of Australia, 10.00%, 10/15/02................... 49,168,000AUD 39,321,416
------------
BRAZIL 5.5%
Companhia Suzano Papel, 10.25%, 10/06/01.................... 5,750,000 5,656,563
Government of Brazil:
6.563%, 4/15/09........................................... 14,690,000 12,100,888
FRN, 6.75%, 4/15/12....................................... 19,475,000 15,044,437
FRN, 6.938%, 4/15/12...................................... 1,000,000 772,500
10.125%, 5/15/27.......................................... 11,550,000 11,203,500
Republic of Brazil, 8.00%, 4/15/14.......................... 12,143,784 10,000,175
------------
54,778,063
------------
CANADA 8.6%
Government of Canada:
10.50%, 7/01/00........................................... 39,858,000CAD 31,211,061
10.50%, 3/01/01........................................... 39,793,000CAD 31,963,572
10.00%, 5/01/02........................................... 25,710,000CAD 21,191,760
10.25%, 2/01/04........................................... 1,130,000CAD 988,001
NHA Manulife Pool:
#96405089, 9.125%, 6/01/02................................ 802,863CAD 578,998
#96405378, 9.25%, 8/01/02................................. 333,332CAD 240,669
#96405386, 9.25%, 8/01/02................................. 463,418CAD 334,755
------------
86,508,816
------------
COLOMBIA .5%
Empresa Colombiana de Petroleos, 144A, 7.25%, 7/08/98....... 4,750,000 4,797,500
------------
DENMARK 1.7%
Government of Denmark, 8.00%, 5/15/03....................... 78,725,000DKK 13,038,088
Kingdom of Denmark, 9.00%, 11/15/00......................... 23,811,000DKK 3,839,117
------------
16,877,205
------------
</TABLE>
8
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
BONDS (CONT.)
GERMANY 8.6%
Federal Republic of Germany:
Bundesrep, 7.75%, 2/21/00................................. 117,045,000DEM $ 69,138,464
8.00%, 7/22/02............................................ 26,685,000DEM 16,777,884
------------
85,916,348
------------
INDIA .1%
Essar Steel Ltd., 144A, FRN, 8.275%, 7/15/99................ 1,240,000 1,072,600
------------
ITALY 6.7%
Buoni Poliennali del Tes:
12.00%, 1/17/99........................................... 14,535,000,000ITL 8,547,225
10.50%, 11/01/00.......................................... 17,020,000,000ITL 10,843,590
10.50%, 9/01/05........................................... 64,010,000,000ITL 47,381,258
------------
66,772,073
------------
MEXICO 6.1%
Nacional Financiera SNC, 10.625%, 11/22/01.................. 2,500,000 2,693,750
United Mexican States:
9.75%, 2/06/01............................................ 18,120,000 19,297,800
9.875%, 1/15/07........................................... 14,735,000 16,061,150
11.375%, 9/15/16.......................................... 8,355,000 9,942,450
6.25%, 12/31/19........................................... 14,925,000 12,602,297
------------
60,597,447
------------
NEW ZEALAND 1.8%
Government of New Zealand, 6.50%, 2/15/00................... 31,340,000NZD 17,960,314
------------
PANAMA .6%
Republic of Panama, 8.875%, 9/30/27......................... 6,070,000 5,997,919
------------
PHILIPPINES .5%
Philippines Development Bank, 8.00%, 7/22/98................ 5,000,000 4,981,250
------------
SPAIN 7.3%
Government of Spain:
12.25%, 3/25/00........................................... 4,657,890,000ESP 34,932,660
10.10%, 2/28/01........................................... 2,500,600,000ESP 18,815,494
10.90%, 8/30/03........................................... 2,290,680,000ESP 19,228,064
------------
72,976,218
------------
SWEDEN 5.9%
Kingdom of Sweden:
13.00%, 6/15/01........................................... 83,300,000SEK 12,872,316
10.25%, 5/05/03........................................... 234,800,000SEK 35,991,463
8.00%, 8/15/07............................................ 66,600,000SEK 9,871,721
------------
58,735,500
------------
</TABLE>
9
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
BONDS (CONT.)
UNITED KINGDOM 6.0%
British Petroleum Co. Plc., 10.875%, 8/01/01................ $ 10,000,000 $ 8,074,477
United Kingdom:
8.00%, 12/07/00........................................... 27,645,000GBP 47,082,307
stk., 7.00%, 11/06/01..................................... 3,010,000GBP 5,042,660
------------
60,199,444
------------
UNITED STATES 20.7%
U.S. Treasury Bond, 6.375%, 8/15/02......................... 32,590,000 33,577,901
U.S. Treasury Notes:
5.125%, 4/30/98........................................... 10,000 9,997
6.625%, 4/30/02........................................... 35,050,000 36,364,410
7.25%, 8/15/04............................................ 50,022,000 54,320,791
6.125%, 8/15/07........................................... 54,299,000 55,995,898
6.125%, 11/15/27.......................................... 26,498,000 27,251,550
------------
207,520,547
------------
VENEZUELA 3.1%
Republic of Venezuela, 9.25%, 9/15/27....................... 21,093,000 18,878,235
Venezuela Front Load Interest Reduction Bond, FRN, 6.75%,
3/31/07................................................... 13,119,034 11,741,535
------------
30,619,770
------------
TOTAL BONDS (COST $958,060,658)............................. 939,186,645
------------
<CAPTION>
SHARES
-----
<S> <C> <C>
PREFERRED STOCK (COST $1,998,360) .2%
Santander Finance Ltd., B, pfd. ............................ 91,500 2,379,000
------------
PRINCIPAL
AMOUNT*
-------
SHORT TERM INVESTMENT (COST $5,000,000) .5%
Federal Farm Credit Banks, 5.62%, 4/01/98................... $ 5,000,000 4,999,890
------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT (COST
$965,059,018)............................................. 946,565,535
------------
</TABLE>
10
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TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
a REPURCHASE AGREEMENT 2.9%
Barclays de Zoete Wedd Sec Inc., 5.625%, 3/02/98 (Maturity
Value $28,637,418)
(COST $28,624,000) Collaterized by U.S. Treasury Note..... $ 28,624,000 $ 28,624,000
------------
TOTAL INVESTMENTS (COST $993,683,018) 97.6%................. 975,189,535
NET EQUITY IN FORWARD CONTRACTS (.1%)....................... (593,859)
OTHER ASSETS, LESS LIABILITIES 2.5%......................... 25,132,285
------------
TOTAL NET ASSETS 100.0%..................................... $999,727,961
============
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
AUD -- Australian Dollar
CAD -- Canadian Dollar
DEM -- German Mark
DKK -- Danisk Krone
ESP -- Spanish Peseta
GBP -- British Pound
ITL -- Italian Lira
NZD -- New Zealand Dollar
SEK -- Swedish Krona
</TABLE>
*Securities traded in U.S. dollars unless otherwise indicated.
a At February 28, 1998, all repurchase agreements held by the Fund had been
entered into on that date.
See Notes to Financial Statements.
11
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $965,059,018).... $ 946,565,535
Repurchase agreement, at value and cost.................... 28,624,000
Cash....................................................... 823
Receivables from dividends and interest.................... 27,084,770
Unrealized gain on forward exchange contracts (Note 6)..... 1,115,844
--------------
Total assets.......................................... 1,003,390,972
--------------
Liabilities:
Payable to affiliates...................................... 485,473
Distributions to shareholders.............................. 700,845
Unrealized loss on forward exchange contracts (Note 6)..... 1,709,703
Other liabilities.......................................... 766,990
--------------
Total liabilities..................................... 3,663,011
--------------
Net assets, at value........................................ $ 999,727,961
==============
Net assets consist of:
Distributions in excess of net investment income........... $ (1,145,933)
Net unrealized depreciation................................ (19,394,585)
Accumulated net realized loss.............................. (2,347,780)
Capital shares............................................. 1,022,616,259
--------------
Net assets, at value........................................ $ 999,727,961
==============
Net asset value per share ($999,727,961 / 119,610,900
shares outstanding)....................................... $8.36
==============
</TABLE>
See Notes to Financial Statements.
12
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $35,673)
Dividends.................................................. $ 106,617
Interest................................................... 39,044,849
-----------
Total investment income............................... $39,151,466
Expenses:
Management fees (Note 3)................................... 2,524,442
Administrative fees (Note 3)............................... 630,642
Transfer agent fees........................................ 72,000
Custodian fees............................................. 117,674
Reports to shareholders.................................... 228,000
Registration and filing fees............................... 103,000
Professional fees (Note 3)................................. 307,828
Directors' fees and expenses............................... 30,000
Other...................................................... 8,660
-----------
Total expenses........................................ 4,022,246
-----------
Net investment income........................... 35,129,220
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... (4,636,387)
Foreign currency transactions............................. 8,211,506
-----------
Net realized gain...................................... 3,575,119
Net unrealized appreciation (depreciation) on:
Investments............................................... 1,868,764
Translation of assets and liabilities denominated in
foreign currencies...................................... (4,013,646)
-----------
Net unrealized depreciation............................ (2,144,882)
-----------
Net realized and unrealized gain............................ 1,430,237
-----------
Net increase in net assets resulting from operations........ $36,559,457
===========
</TABLE>
See Notes to Financial Statements.
13
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1998 YEAR ENDED
(UNAUDITED) AUGUST 31, 1997
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 35,129,220 $ 71,910,332
Net realized gain from investments and foreign currency
transactions............................................ 3,575,119 16,362,324
Net unrealized depreciation on investments and translation
of assets and liabilities denominated in foreign
currencies............................................... (2,144,882) (15,185,633)
---------------------------------------
Net increase in net assets resulting from operations.... 36,559,457 73,087,023
Distributions to shareholders from:
Net investment income..................................... (35,129,220) (71,910,332)
In excess of net investment income........................ (833,105) (312,828)
Capital share transactions (Note 2)........................ (3,624,793) (2,714,270)
---------------------------------------
Net decrease in net assets.............................. (3,027,661) (1,850,407)
Net assets:
Beginning of period........................................ 1,002,755,622 1,004,606,029
---------------------------------------
End of period.............................................. $ 999,727,961 $1,002,755,622
=======================================
Distributions in excess of net investment income included in
net assets:
End of period.............................................. $ (1,145,933) $ (312,828)
=======================================
</TABLE>
See Notes to Financial Statements.
14
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Global Income Fund (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 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.
15
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (unaudited) (continued)
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 STOCK
On February 21, 1997, the Board of Directors 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 February 28, 1998, there were 200,000,000 shares authorized ($0.01 par
value). During the year ended February 28, 1998, 481,700 shares were repurchased
for $3,624,793. During the year ended August 31, 1997, 360,800 shares were
repurchased for $2,714,270.
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton
Investment Counsel, 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
- ---------------------------------------
<S> <C>
0.55% First $200 million
0.50% Over $200 million
</TABLE>
16
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
The Fund pays an administrative fee to FT Services based on the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million
</TABLE>
Included in professional fees are legal fees of $132,781 that were paid to a law
firm in which a partner is an officer of the Fund.
4. INCOME TAXES
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At February 28, 1998, the net unrealized depreciation
based on cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 13,763,256
Unrealized depreciation..................................... (32,256,739)
------------
Net unrealized depreciation................................. $(18,493,483)
============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1998 aggregated $365,201,541 and $351,551,562,
respectively.
6. 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 February
28, 1998, the Fund had outstanding forward exchange contracts for the purchase
and 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 date of entry into the contract.
17
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (unaudited) (continued)
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONT.)
As of February 28, 1998, the Fund had the following forward exchange contracts
outstanding:
<TABLE>
<CAPTION>
IN SETTLEMENT UNREALIZED
CONTRACTS TO SELL: EXCHANGE FOR DATE GAIN/(LOSS
- ---------------------------------------------------------------------- ---------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
98,298,000 Deutsche Marks............................................ U.S. $ 54,681,998 3/25/98 U.S. $ 404,838
23,571,250 Deutsche Marks............................................ 13,044,411 4/6/98 19,649
47,142,500 Deutsche Marks............................................ 26,091,709 4/7/98 40,631
------------ -----------
U.S. $ 93,818,118 465,118
============
Net unrealized gain on offsetting forward exchange contracts...... 650,726
-----------
Unrealized gain on forward exchange contracts................... 1,115,844
-----------
CONTRACTS TO SELL:
- ------------------
9,000,000 Australian Dollars........................................ U.S. $ 5,924,970 3/20/98 U.S. $ (187,204)
20,250,000 Australian Dollars........................................ 13,492,575 4/2/98 (263,327)
15,170,000 Canadian Dollars.......................................... 10,636,955 3/20/98 (27,151)
32,106,000 Canadian Dollars.......................................... 22,082,067 4/2/98 (494,341)
7,700,000 Canadian Dollars.......................................... 5,320,252 4/3/98 (94,371)
47,142,500 Deutsche Marks............................................ 25,902,473 3/23/98 (124,960)
8,300,000 New Zealand Dollars....................................... 4,672,900 3/12/98 (174,179)
9,300,000 New Zealand Dollars....................................... 5,413,530 3/17/98 (15,168)
4,150,000 New Zealand Dollars....................................... 2,399,115 3/23/98 (22,102)
------------ -----------
U.S. $ 95,844,837 (1,402,803)
============
Net unrealized loss on offsetting forward exchange contracts...... (306,900)
-----------
Unrealized loss on forward exchange contracts................... (1,709,703)
-----------
Net unrealized loss on forward exchange contracts............. U.S. $ (593,859)
===========
</TABLE>
18
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Annual Meeting of Shareholders, February 17, 1998
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 East Broward Boulevard, Ft. Lauderdale, Florida, on February 17, 1998. The
purpose of the meeting was to elect three Directors of the Fund, to ratify the
selection of McGladrey & Pullen, LLP, as the Fund's independent auditors for the
fiscal year ending August 31, 1998, and in their discretion, to authorize the
proxyholders to vote upon other such matters that may legally come before the
meeting or any adjournment of the meeting. At the meeting, the following persons
were elected by the shareholders to serve as Directors of the Fund: Betty P.
Krahmer, Charles B. Johnson and Fred R. Millsaps.* The shareholders ratified the
selection of McGladrey & Pullen, LLP, to serve as the Fund's independent
auditors for the fiscal year ending August 31, 1998. No other business was
transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of three (3) Directors for the term set forth below:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2001: FOR SHARES WITHHELD SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Betty P. Krahmer............................................ 97,045,114 81.12% 2,025,273 1.69%
Charles B. Johnson.......................................... 97,195,690 81.25% 1,874,697 1.57%
Fred R. Millsaps............................................ 97,054,478 81.13% 2,015,909 1.68%
</TABLE>
2. The ratification or rejection of the selection of McGladrey & Pullen, LLP, as
independent auditors for the Fund for the fiscal year ending August 31, 1998:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING OUTSTANDING OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAIN SHARES
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
97,150,937 81.21% 563,048 0.47% 1,356,402 1.13%
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, S. Joseph Fortunato, John Wm. Galbraith,
Andrew H. Hines, Jr., Edith E. Holiday and Gordon S. Macklin are Directors of
the Fund who are currently serving and whose terms of office continued after the
Annual Meeting of Shareholders.
19
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund offers a Dividend Reinvestment and Cash Purchase 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, 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 or 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. -- A participant has the option of
submitting additional payments to Mellon Securities Trust Company (the "Plan
Agent"), in any amounts of at least $100, up to a maximum of $5,000 per month,
for the purchase of Fund shares for his or her account. These payments shall be
made by check or money order payable to "Mellon Securities Trust Co." and sent
to ChaseMellon Shareholder Services, Investor Services, P.O. Box 382009,
Pittsburgh, PA 15250-8009, Attn: Templeton Global Income Fund, Inc. The Plan
Agent shall apply such payments (less a $5.00 service charge and less a pro rata
share of trading fees) to purchases of Fund shares in 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 the Plan Agent sent to ChaseMellon Shareholder
Services, Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938.
Upon withdrawal, the participant will receive, without charge, stock
certificates issued in the participant's name for all full shares held by the
Plan Agent; or, if the participant wishes, the Plan Agent 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 when available by calling Franklin Templeton Fund Information 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
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)
* These funds are now closed to new accounts, with the exception of retirement
accounts.
** 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.
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
Chase Mellon Shareholder Services
450 West 33rd Street
New York, NY 10001
1-800/416-5585
FUND INFORMATION
1-800/342-5236
Investors should be aware that the value of investments made for the Fund may go
down as well as up, 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 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.
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