ANNUAL
AUGUST 31, 1999
REPORT
[GLOBAL GRAPHIC]
TEMPLETON GLOBAL
INCOME FUND, INC.
[FRANKLIN TEMPLETON LOGO]
PAGE
[INTENTIONALLY LEFT BLANK INSIDE FRONT COVER]
PAGE
SHAREHOLDER LETTER
Your Fund's Goal: Templeton Global Income Fund seeks high current income, with a
secondary objective of capital appreciation. Under normal market conditions, the
Fund invests primarily in a portfolio of debt securities of U.S. and foreign
issuers, including emerging markets.
Dear Shareholder:
This report of Templeton Global Income Fund covers the fiscal year ended August
31, 1999, a period of significant volatility for global bond markets. During the
first part of the reporting period, many industrial economies experienced weak
growth and inflation remained benign. Bond prices rose as interest rates fell in
the U.S., Japan, and Europe and bond investors generally expected further
interest rate cuts by monetary policymakers. In February, this perception
changed with the release of stronger-than-expected economic data regarding the
U.S. economy, and global debt markets experienced a temporary sell-off. But in
March, economic weakness in Europe, Japan, and some sectors of the U.S. economy
led many investors to regain optimism about bonds.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 12 of
this report.
CONTENTS
Shareholder Letter .......... 1
Performance Summary ......... 5
Important Notice
to Shareholders ............. 6
Year 2000 Readiness Update .. 9
Financial Highlights &
Statement of Investments .... 11
Financial Statements ........ 15
Notes to Financial Statements 18
Independent Auditors' Report 21
Change in Independent
Auditor ..................... 25
[PYRAMID GRAPHIC]
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
8/31/99
[PIE CHART GRAPHIC]
Europe 37.5%
Latin America 20.6%
United States 19.1%
Canada 8.6%
Australia &
New Zealand 7.6%
Asia 3.9%
Short-Term
Investments &
Other Net Assets 2.7%
However, the continuing strength of the U.S. economy led the Federal Reserve
Board to raise domestic interest rates in June and again in August 1999, and
U.S. Treasury bond prices declined. Elsewhere, the European Central Bank, Bank
of England, and Bank of Japan lowered interest rates in response to economic
weakness, leading to higher bond prices in those regions.
During the reporting period, the J.P. Morgan Global Government Bond Index, which
tracks bonds from around the world, posted a 1.12% return, in local currency
terms. However, the weakness of the U.S. dollar versus the euro and the Japanese
yen resulted in a higher return of 3.04% in U.S. dollar terms for the index. The
J.P. Morgan U.S. Government Bond Index, which tracks U.S. Treasury securities,
posted a -0.28% return for the same period. Bond prices rose in most developing
market countries, and the J.P. Morgan Emerging Markets Bond Index Plus was up
over 30% for the reporting period.(1) Within this environment, Templeton Global
Income Fund produced a one-year cumulative total return of 11.29% in
market-price terms and a 6.75% one-year cumulative total return in net asset
value terms for the period ended August 31, 1999, as shown in the Performance
Summary on page 5.
During the twelve months under review, we attempted to maximize the Fund's
return and minimize the effects of short-term volatility by allocating
approximately 75% of total net assets to intermediate- and long-term bonds in
the developed markets and about 25% to what, in our opinion, were the
(1). Source for all indices: J.P. Morgan Securities, Inc. Performance includes
reinvested interest. An index is an unmanaged group of securities used to
measure market performance. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
2
PAGE
highest quality, most-liquid bonds available in emerging markets. Because
emerging market bonds generally outperformed bonds from developed markets, our
exposure to such debt had a positive effect on the Fund's performance.
The Fund's overall geographic distribution did not change significantly during
the reporting period. Our allocation at the end of the period to North America
was 27.7%, down somewhat from 28.5% at the beginning of the period. Our exposure
to Europe during the period fell from 42.1% on August 31, 1998, to 37.5% on
August 31, 1999. We added a 2.1% position in New Zealand, increased our Latin
American exposure 2.5%, and changed the amount of foreign exchange hedging
undertaken for our European holdings. On August 31, 1999, the Fund's net U.S.
dollar exposure was 45.5%, down from 83.7% at the beginning of the period, while
our net exposure to European currencies was 37.5%, up from 8.1%.
Looking forward, our outlook for the Fund is positive. In our opinion, global
economic growth could improve slightly in the short term, but inflation may
remain quite tame, which could be favorable for high-quality bonds. Although
debt securities from emerging markets may offer higher returns over the long
term as credit conditions in those countries generally improve, we believe such
bonds may be volatile in the interim.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our
PORTFOLIO BREAKDOWN
Based on Total Net Assets
8/31/99
Government Bonds 94.4%
Corporate Bonds 2.9%
Short-Term Investments
& Other Net Assets 2.7%
3
PAGE
investment strategies and the Fund's portfolio composition. Although past
performance is not predictive of future results, these insights may help you
understand our investment and management philosophy.
It is also important to note that there are special risks involved with global
investing related to market, currency, economic, social, political, and other
factors, in addition to the heightened risks associated with the relatively
small size and lesser liquidity of emerging markets.
We thank you for your participation in Templeton Global Income Fund and welcome
your comments or suggestions.
Sincerely,
Portfolio Management Team
Templeton Global Income Fund, Inc.
4
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PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of the Fund's operating expenses. Past distributions are not indicative of
future trends. All total returns include reinvested distributions according to
the terms specified in the Fund's dividend reinvestment and cash purchase plan,
and do not reflect any sales charges paid at inception or brokerage commissions
paid on secondary market purchases.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CHANGE 8/31/99 8/31/98
------ ------- -------
<S> <C> <C> <C>
Net Asset Value - $0.17 $7.50 $7.67
Market Price (NYSE) +$0.125 $6.5625 $6.4375
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (9/1/98 - 8/31/99)
<S> <C>
Dividend Income $ 0.6000
Long-Term Capital Gain $ 0.0050
TOTAL $ 0.6050
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
1-YEAR 5-YEAR 10-YEAR (3/17/88)
------ ------ ------- ---------
<S> <C> <C> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value 6.75% 45.48% 104.76% 129.94%
Based on change in
market price 11.29% 47.60% 85.30% 90.03%
Average Annual Total Return(2)
Based on change in
net asset value 6.75% 7.78% 7.43% 7.53%
Based on change in
market price 11.29% 8.10% 6.36% 5.76%
</TABLE>
Templeton Global Income Fund paid distributions derived from long-term capital
gains of 0.5 cents ($0.0050) per share in December, 1998. The Fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
Past performance is not predictive of future results.
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.
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 the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. Also, as
a non-diversified investment company, the Fund may invest in a relatively small
number of issuers and, as a result, be subject to greater risk of loss with
respect to its portfolio securities. You may have a gain or loss when you sell
your shares.
5
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IMPORTANT NOTICE TO SHAREHOLDERS
EURO RISK. On January 1, 1999, the European Monetary Union (EMU) introduced a
new single currency, the euro, which will replace the national currency for
participating member countries. The transition and the elimination of currency
risk among EMU countries may change the economic environment and behavior of
investors, particularly in European markets.
Because this change to a single currency is new and untested, it is not possible
to predict the impact of the euro on the business or financial condition of
European issuers which the Fund may hold in its portfolio, and their impact on
Fund performance. To the extent the Fund holds non-U.S. dollar (euro or other)
denominated securities, it will still be exposed to currency risk due to
fluctuations in those currencies versus the U.S. dollar.
YEAR 2000 ISSUE. Like all investment companies, the Fund's business operations
depend on a worldwide network of computer systems that contain date fields. Many
of the systems currently use a two-digit date field to represent the date, and
these systems must be changed or modified to enable them to distinguish the Year
1900 from the Year 2000 (commonly referred to as the Year 2000 problem.)
When the Year 2000 arrives, the Fund's operations could be adversely affected if
the computer systems used by any of the parties who service the Fund or with
which it does business are not Year 2000 ready. The Fund could experience
difficulties in effecting transactions if any of its foreign subcustodians, or
if foreign broker-dealers or foreign markets are not ready for Year 2000.
6
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When evaluating current and potential portfolio positions, Year 2000 is one of
the factors the Fund's investment manager considers. The investment manager will
rely upon public filings and other statements made by companies about their Year
2000 readiness. Issuers in countries outside the U.S., particularly in emerging
markets, may be more susceptible to Year 2000 risks and there may be less public
disclosure of these factors. The investment manager, of course, cannot audit
each company and its major suppliers to verify their Year 2000 readiness. The
Fund's ability to reduce the effects of the Year 2000 problem is also very much
dependent upon the efforts of third parties over which the Fund and its
investment manager may have no control.
If a company in which the Fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities will also be adversely
affected. A decrease in the value of one or more of the Fund's portfolio
holdings may have an impact on the Fund's performance.
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has already made most of the changes necessary to make the
computer systems that service the Fund and its shareholders Year 2000 compliant
and continues to seek reasonable assurances from all suppliers that they will be
Year 2000 compliant on a timely basis. Resources is refining a contingency plan
of procedures to follow (where feasible) in the event of the failure of any
mission critical systems. However, in an operation as complex and geographically
distributed as Resources' business, the alternatives to use of normal systems,
especially mission critical systems, or supplies of electricity or long distance
voice and data lines are limited.
7
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PORTFOLIO MANAGEMENT. Templeton Investment Counsel, Inc. (Investment Counsel),
through its Templeton Global Bond Managers division (Global Bond Managers), is
the Fund's investment manager. Together, Investment Counsel and its affiliates
manage over $222 billion in assets. Since January 1999, a team from Global Bond
Managers is responsible for the day-to-day management of the Fund.
SHARE REPURCHASE PROGRAM. 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.
8
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FRANKLIN TEMPLETON
IS READY FOR YEAR 2000
Year 2000 Readiness Disclosure as of 9/30/99
WE ARE READY!
WE'VE DONE A LOT TO PREPARE!
The enormous scope of this project encompassed practically every
computer-dependent record and process within the company. Naturally, our Y2K
plan focused first on readying "mission-critical" systems -- those that are
necessary for our core business functions. As of September 30, 1999, all our
mission-critical systems that could affect our shareholders were certified as
Y2K compliant.
Our business operations rely greatly on a complex, worldwide network of computer
systems owned and managed by third parties. We continue to work with these
outside companies and your Fund's transfer agent to confirm their preparedness
for Year 2000.
WE HAVE CONTINGENCY PLANS.
Our company recognizes that even our extensive testing cannot guarantee the
absence of difficulties associated with the Y2K transition. Therefore, we are
developing and integrating worldwide contingency plans.
9
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HOW DOES YEAR 2000 AFFECT OUR PORTFOLIO MANAGERS' INVESTMENT STRATEGIES?
All our portfolio managers recognize the importance of Year 2000 and its
potential to impact the issuers and industries in which we invest, as well as
the U.S. and world economy as a whole. As long-term investors, we seek to make
and hold investments in issuers we believe are well-managed, with good prospects
for the future. In our experience, such issuers are more likely to have
sufficient Y2K programs in place.
Franklin Templeton is confident it is well-positioned to meet the challenges of
Y2K.
Technological changes are ever-present in our industry, and we believe we have
the experience and skills necessary to realize and to react to any challenges
that may arise due to this transition. Once again, Franklin Templeton is ready
for Year 2000, and we look forward to moving into the new millennium with you.
For additional information on Franklin Templeton's Y2K efforts, check our Web
site at www.franklintempleton.com.
These statements should be considered Year 2000 Readiness Disclosures, as such
term is understood under the "Year 2000 Information and Readiness Disclosure
Act." This information is not intended as a representation or warranty and does
not create a legal obligation on the part of Franklin Resources, Inc. or its
affiliates to the recipient.
10
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TEMPLETON GLOBAL INCOME FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------
1999+ 1998 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year...................... $7.67 $8.35 $8.34 $8.00 $7.89
------------------------------------------------------------
Income from investment operations:
Net investment income.................................. .61 .60 .60 .63 .64
Net realized and unrealized gains (losses)............. (.17) (.68) .01 .31 .11
------------------------------------------------------------
Total from investment operations........................ .44 (.08) .61 .94 .75
------------------------------------------------------------
Less distributions from:
Net investment income.................................. (.60) (.60) (.60) (.41) (.64)
Net realized gains..................................... (.01) -- -- -- --
Tax return of capital.................................. -- -- -- (.19) --
------------------------------------------------------------
Total distributions..................................... (.61) (.60) (.60) (.60) (.64)
------------------------------------------------------------
Net asset value, end of year............................ $7.50 $7.67 $8.35 $8.34 $8.00
============================================================
Total Return
Based on market value per share........................ 11.29% (7.69)% 17.12% 12.75% 8.80%
Based on net asset value per share..................... 6.75% (.46)% 8.53% 13.34% 11.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)......................... $862,788 $891,785 $1,002,756 $1,004,606 $964,013
Ratios to average net assets:
Expenses............................................... .76% .74% .75% .72% .78%
Net investment income.................................. 7.70% 7.26% 7.05% 7.67% 8.19%
Portfolio turnover rate................................. 66.07% 74.55% 191.83% 112.59% 104.37%
</TABLE>
+Based on average weighted shares outstanding.
See Notes to Financial Statements.
11
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TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM SECURITIES 97.3%
ARGENTINA 5.8%
Republic of Argentina:
10.95%, 11/01/99.......................................... $ 7,030,000 $ 7,073,938
8.75%, 5/09/02............................................ 18,460,000 16,678,610
8.375%, 12/20/03.......................................... 5,510,000 5,050,259
11.00%, 10/09/06.......................................... 11,680,000 10,811,300
11.375%, 1/30/17.......................................... 3,035,000 2,678,388
Telefonica de Argentina SA (Tear), 144A, 8.375%, 10/01/00... 7,500,000 7,481,250
------------
49,773,745
------------
AUSTRALIA 3.8%
Government of Australia, 6.75%, 11/15/06.................... 24,700,000AUD 16,204,609
Queensland Treasury Corp., 6.50%, 6/14/05................... 25,315,000AUD 16,347,191
------------
32,551,800
------------
BRAZIL 2.3%
Republic of Brazil:
FRN, 5.938%, 4/15/09...................................... 14,690,000 9,768,850
Series L, cvt., FRN, 5.938%, 4/15/12...................... 10,475,000 6,023,125
FRN, 8.00%, 4/15/14....................................... 1,972,212 1,199,711
10.125%, 5/15/27.......................................... 4,550,000 3,264,625
------------
20,256,311
------------
CANADA 8.6%
Government of Canada:
10.50%, 7/01/00........................................... 37,198,000CAD 25,957,084
10.50%, 3/01/01........................................... 39,793,000CAD 28,515,917
10.00%, 5/01/02........................................... 25,710,000CAD 19,016,475
10.25%, 2/01/04........................................... 1,130,000CAD 886,780
------------
74,376,256
------------
DENMARK 1.4%
Kingdom of Denmark, 8.00%, 3/15/06........................ 73,189,000DKK 12,016,384
------------
GERMANY 9.3%
Federal Republic of Germany:
Bundesrep, 7.75%, 2/21/00................................. 59,844,158EUR 64,607,039
8.00%, 7/22/02............................................ 13,643,824EUR 15,971,957
------------
80,578,996
------------
INDIA .1%
+Essar Steel Ltd., 144A, FRN, 7.635%, 7/20/99............... 1,240,000 558,000
------------
</TABLE>
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TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM SECURITIES (CONT.)
ITALY 7.3%
Buoni Poliennali del Tesoro, 6.75%, 7/01/07................. 6,231,000EUR $ 7,296,210
Government of Italy:
10.50%, 11/01/00.......................................... 8,790,081EUR 10,022,596
10.50%, 4/01/05........................................... 33,730,000EUR 45,606,309
------------
62,925,115
------------
MEXICO 7.8%
Nacional Financiera SNC, 10.625%, 11/22/01.................. 2,500,000 2,659,375
Nacional Financiera SNC, 144A, 9.75%, 3/12/02............... 1,950,000 1,982,175
United Mexican States:
9.75%, 2/06/01............................................ 18,120,000 18,894,630
9.75%, 4/06/05............................................ 7,100,000 7,126,625
9.875%, 1/15/07........................................... 14,735,000 14,786,573
11.375%, 9/15/16.......................................... 8,355,000 8,726,798
Series A, 6.25%, 12/31/19................................. 14,925,000 10,708,688
11.50%, 5/15/26........................................... 2,000,000 2,183,500
------------
67,068,364
------------
NEW ZEALAND 3.8%
Government of New Zealand:
6.50%, 2/15/00............................................ 31,340,000NZD 16,318,236
8.00%, 11/15/06........................................... 29,503,000NZD 16,182,073
------------
32,500,309
------------
PANAMA .5%
Republic of Panama, 8.875%, 9/30/27......................... 6,070,000 4,780,125
------------
SPAIN 7.6%
Government of Spain:
12.25%, 3/25/00........................................... 27,994,483EUR 31,062,270
10.10%, 2/28/01........................................... 15,028,909EUR 17,385,435
10.15%, 1/31/06........................................... 12,536,000EUR 17,060,480
------------
65,508,185
------------
SWEDEN 3.9%
Kingdom of Sweden, 10.25%, 5/05/03.......................... 234,800,000SEK 33,395,739
------------
TURKEY 3.8%
Cellco Finance NV, 144A, 15.00%, 8/01/05.................... 9,375,000 9,826,406
Republic of Turkey:
Reg S, 9.875%, 2/23/05.................................... 4,690,000 4,379,302
Reg S, 10.00%, 9/19/07.................................... 11,100,000 10,150,950
12.375%, 6/15/09.......................................... 8,935,000 8,856,372
------------
33,213,030
------------
</TABLE>
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TEMPLETON GLOBAL INCOME FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM SECURITIES (CONT.)
UNITED KINGDOM 8.0%
United Kingdom:
8.00%, 12/07/00........................................... 27,645,000GBP $ 45,674,193
8.50%, 7/16/07............................................ 12,227,000GBP 23,248,424
------------
68,922,617
------------
UNITED STATES 19.1%
BP America Inc., 10.875%, 8/01/01........................... 10,000,000CAD 7,264,757
Fannie Mae, 5.25%, 1/15/09.................................. 15,844,000 14,130,535
U.S. Treasury Bonds:
6.375%, 8/15/27........................................... 16,910,000 16,910,000
5.25%, 11/15/28........................................... 100,143,000 86,655,040
5.25%, 2/15/29............................................ 3,400,000 2,970,750
U.S. Treasury Notes:
7.875%, 11/15/04.......................................... 34,449,000 37,172,641
------------
165,103,723
------------
VENEZUELA 4.2%
Republic of Venezuela, 9.25%, 9/15/27....................... 47,000,000 28,435,000
Venezuela Front Load Int Reduction Bond, A, FRN, 6.00%,
3/31/07................................................... 11,047,562 7,698,770
------------
36,133,770
------------
TOTAL LONG TERM SECURITIES (COST $950,771,117).............. 839,662,469
------------
SHORT TERM INVESTMENT (COST $696,000) .1%
Chase Securities Inc., 5.50%, 9/01/99, Time Deposit......... 696,000 696,000
------------
TOTAL INVESTMENTS (COST $951,467,117) 97.4%................. 840,358,469
OTHER ASSETS, LESS LIABILITIES 2.6%......................... 22,429,867
------------
TOTAL NET ASSETS 100.0%..................................... $862,788,336
============
</TABLE>
CURRENCY ABBREVIATIONS:
AUD -- Australian Dollar
CAD -- Canadian Dollar
DKK -- Danish Krone
EUR -- European Unit
GBP -- British Pound
NZD -- New Zealand Dollar
SEK -- Swedish Krona
*Securities denominated in U.S. dollars unless otherwise indicated.
+Represents defaulted bonds.
See Notes to Financial Statements.
14
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TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $951,467,117).... $ 840,358,469
Interest receivable........................................ 24,071,226
-------------
Total assets.......................................... 864,429,695
-------------
Liabilities:
Payables to affiliates..................................... 473,938
Distributions to shareholders.............................. 493,502
Funds advanced by custodian................................ 230,358
Accrued expenses........................................... 443,561
-------------
Total liabilities..................................... 1,641,359
-------------
Net assets, at value........................................ $ 862,788,336
=============
Net assets consist of:
Undistributed net investment income........................ $ 468,172
Net unrealized depreciation................................ (111,127,350)
Accumulated net realized loss.............................. (16,727,780)
Capital shares............................................. 990,175,294
-------------
Net assets, at value........................................ $ 862,788,336
=============
Net asset value per share ($862,788,336 / 115,055,400 shares
outstanding).............................................. $7.50
=============
</TABLE>
See Notes to Financial Statements.
15
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TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
<TABLE>
<S> <C> <C>
Interest Income (net of foreign taxes of $67,308)........... $ 77,136,314
Expenses:
Management fees (Note 3)................................... $ 4,659,195
Administrative fees (Note 3)............................... 1,186,839
Transfer agent fees........................................ 194,900
Custodian fees............................................. 179,700
Reports to shareholders.................................... 362,500
Registration and filing fees............................... 163,800
Professional fees.......................................... 84,400
Directors' fees and expenses............................... 34,500
Other...................................................... 19,602
------------
Total expenses........................................ 6,885,436
------------
Net investment income........................... 70,250,878
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 1,462,294
Foreign currency transactions............................. (18,941,013)
------------
Net realized loss..................................... (17,478,719)
Net unrealized appreciation/(depreciation) on:
Investments............................................... (6,575,606)
Translation of assets and liabilities denominated in
foreign currencies...................................... 3,608,844
------------
Net unrealized depreciation........................... (2,966,762)
------------
Net realized and unrealized loss............................ (20,445,481)
------------
Net increase in net assets resulting from operations........ $ 49,805,397
============
</TABLE>
See Notes to Financial Statements.
16
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TEMPLETON GLOBAL INCOME FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 70,250,878 $ 71,687,739
Net realized gain (loss) from investments and foreign
currency transactions.................................... (17,478,719) 7,250,145
Net unrealized depreciation on investments and translation
of assets and liabilities denominated in foreign
currencies............................................... (2,966,762) (90,910,885)
---------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 49,805,397 (11,973,001)
Distributions to shareholders from:
Net investment income..................................... (69,619,275) (71,533,235)
Net realized gains........................................ (581,414) --
Capital share transactions (Note 2)........................ (8,601,362) (27,464,396)
---------------------------------
Net decrease in net assets.............................. (28,996,654) (110,970,632)
Net assets:
Beginning of year.......................................... 891,784,990 1,002,755,622
---------------------------------
End of year................................................ $862,788,336 $ 891,784,990
=================================
Undistributed net investment income included in net assets:
End of year................................................ $ 468,172 $ --
=================================
</TABLE>
See Notes to Financial Statements.
17
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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 high current income, with a secondary objective of capital
appreciation. Under normal market conditions, the Fund invests primarily in a
portfolio of debt securities of U.S. and foreign issuers including emerging
markets. The following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of 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.
18
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
Distributions to shareholders are recorded on the ex-dividend date.
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 August 31, 1999, there were 200,000,000 shares authorized ($0.01 par value).
During the years ended August 31, 1999 and 1998, 1,277,400 and 3,759,800 shares
were repurchased for $8,601,362 and $27,464,396, respectively. Total shares
repurchased under the repurchase program are 5,398,000 for $38,780,028.
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>
19
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Notes to Financial Statements (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>
4. INCOME TAXES
At August 31, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $961,112,365 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 537,983
Unrealized depreciation..................................... (121,291,879)
-------------
Net unrealized depreciation................................. $(120,753,896)
=============
</TABLE>
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing treatments of wash sales.
At August 31, 1999, the Fund had deferred capital losses occurring subsequent to
October 31, 1998 of $7,000,000. For tax purposes, such losses will be reflected
in the year ending August 31, 2000.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1999 aggregated $585,114,052 and $603,681,090, respectively.
20
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Templeton Global Income Fund,
Inc. (the "Fund") at August 31, 1999, the results of its operations, the changes
in its net assets, and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements for the year ended August 31, 1998,
including financial highlights for each of the four years in the period then
ended, were audited by other independent accountants whose report dated
September 29, 1998 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
September 30, 1999
21
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
Annual Meeting of Shareholders, February 16, 1999
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
500 E. Broward Blvd., Ft. Lauderdale, Florida, on February 16, 1999. 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 auditors for the fiscal
year ending August 31, 1999; and in their discretion, to authorize the
proxyholders to vote upon such other 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: Frank J.
Crothers, John Wm. Galbraith, Edith E. Holiday, Gordon S. Macklin and
Constantine D. Tseretopoulos.* Shareholders ratified the selection of McGladrey
& Pullen, LLP, to serve as the Fund's independent auditors for the fiscal year
ending August 31, 1999. No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. The election of five (5) Directors:
<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
TERM EXPIRING 2001: FOR SHARES WITHHELD SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank J. Crothers........................................... 93,855,610 80.71% 2,599,503 2.24%
<CAPTION>
TERM EXPIRING 2002:
- -------------------
<S> <C> <C> <C> <C>
John Wm. Galbraith.......................................... 93,852,508 80.71% 2,602,605 2.24%
Edith E. Holiday............................................ 93,853,004 80.71% 2,602,109 2.24%
Gordon S. Macklin........................................... 94,014,366 80.85% 2,440,747 2.10%
Constantine D. Tseretopoulos................................ 93,810,661 80.68% 2,644,452 2.27%
</TABLE>
2. The ratification of the selection of McGladrey & Pullen, LLP, as independent
auditors of the Fund for the fiscal year ending August 31, 1999:
<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>
94,184,098.. 80.99% 1,031,132 0.89% 1,239,883 1.07% -- --
</TABLE>
*Harris J. Ashton, Nicholas F. Brady, S. Joseph Fortunato, Andrew H. Hines, Jr.,
Charles B. Johnson, Betty P. Krahmer and Fred R. Millsaps are Directors of the
Fund who are currently serving and whose terms of office continued after the
Annual Meeting of Shareholders.
22
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 that 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 charge 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.
23
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
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
1-800/416-5585.
The daily closing net asset value as of the previous business day may be
obtained when available by calling Franklin Templeton Fund Information after 7
a.m. pacific time any business day at 1-800/DIAL BEN(R) (1-800/342-5236). The
Fund's net asset value and dividends are also listed on the NASDAQ Stock Market,
Inc.'s Mutual Fund Quotation Service ("NASDAQ MFQS").
Shareholders not receiving copies of the Reports to Shareholders because their
shares are registered in the name of a broker or a custodian can request that
they 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.
24
PAGE
TEMPLETON GLOBAL INCOME FUND, INC.
CHANGE IN INDEPENDENT AUDITOR
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund. McGladrey resigned pursuant to their agreement to sell
their investment company practice to PricewaterhouseCoopers LLP (PwC). The
McGladrey partners and professionals previously serving the Fund, have joined
PwC and performed the August 31, 1999 audit.
None of the reports of McGladrey on the financial statements of the Fund,
including those of the past two fiscal years have ever contained an adverse
opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
During the period McGladrey served the Fund, including the two most recent
fiscal years and subsequent interim period, there were no disagreements with
McGladrey on any matter of accounting principle or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of McGladrey would have caused it to make
reference to the subject matter of disagreement in connection with its report.
On August 31, 1999, the Fund, with the approval of its Board of Directors and
its Audit Committee, engaged PwC as its independent auditors.
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ANNUAL REPORT
TEMPLETON GLOBAL INCOME FUND, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
1-800/416-5585
www.chasemellon.com
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. Like any investment in securities, the value of the Fund's
portfolio will be subject to the risk of loss from market, currency, economic,
political and other factors. The Fund and its investors are not protected from
such losses by the Investment Manager. Therefore, investors who cannot accept
this risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from
our service departments may be monitored, recorded and accessed. These
calls can be determined by the presence of a regular beeping tone.
TLGIM A99 10/99
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