<PAGE>
Templeton
Global Governments
Income Trust
- --------------------------------------------------------------------------------
Your Fund's Objective:
The Templeton Global Governments Income Trust 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.
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April 17, 1995
Dear Shareholder:
We are pleased to bring you the semi-annual report of the Templeton Global
Governments Income Trust for the period ended February 28, 1995.
During the six months under review, global bond markets continued to experience
the volatility they exhibited in the first half of 1994. Although inflation
remained relatively subdued in the U.S., the Federal Reserve Board continued to
raise short-term interest rates. In many other countries, interest rates rose by
as much as those in the U.S., which resulted in capital losses on many
outstanding fixed-income positions. Mexico's financial crisis following the
devaluation of its peso in the latter part of 1994 caused further declines in
the value of bonds of emerging market countries. Even U.S. dollar-denominated
bonds of developing countries were negatively affected.
Despite higher interest rates, economic growth strengthened in most
industrialized countries, as recovery from the recession became more widespread.
The U.S. led the way with a Gross Domestic Product (GDP) that increased at an
annualized rate of 5.1% in the fourth quarter of 1994.* Although domestic demand
in Germany was still relatively weak, strong exports resulted in unexpectedly
robust business activity. Japan, which experienced only modest economic growth
in the past six months, was an exception to this growth trend. It may also face
several months of weaker growth as it continues to recover from the devastating
January earthquake in Kobe.
*Source: U.S. Commerce Dept.
1
<PAGE>
The Fund's portfolio turnover during the six-month period was relatively low,
due in part to actions already taken in the Spring of 1994 that shortened the
portfolio's average bond maturity and raised cash reserves. This reduced the
Fund's risk to rising interest rates, while allowing it to earn stable short-
term returns as bond yields rose worldwide. Although our turnover was low, we
did make two primary strategic changes to the portfolio. One was a general
reduction of European holdings in favor of bonds in the U.S., and the second was
a reduction in holdings of Australian and New Zealand assets.
The general reduction in European bonds was due to the advancing business cycle
in Europe and the possibility that interest rates would soon have to be raised
to fend off inflation. We reduced our holdings in Denmark (from 5.2% to zero),
Germany (from 11.2% to 8.6%), Greece (from 2.5% to zero), and Spain (from 5.2%
to 3.3%), with all the proceeds reinvested into U.S. securities.
The Fund reduced its combined Australia and New Zealand position, from 22.7% on
August 31, 1994 to 20.4% on February 28, 1995, as growth in these markets
accelerated and interest rate hikes appeared more likely. The proceeds from
these sales were also invested in the U.S. Credit quality remains an important
factor in our investment process. The Fund's portfolio consists primarily of
investment-grade securities, as rated by one of the nationally recognized rating
services, or of non-rated securities we judge to be of equal quality. At the end
of the reporting period, about 77% of the securities in the Fund's portfolio
were rated AA or better, 13% were rated A or BBB, and 6% were rated less than
investment grade. The lower-rated issues represented obligations of Mexico,
Venezuela, Argentina and Brazil. The average maturity of the Fund's portfolio on
February 28, 1995, was 7.1 years. Approximately 4% of the fund's portfolio was
held in other net assets.
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Templeton Global Governments
Income Trust
Geographic Distribution on 2/28/95
Based on Total Net Assets
[PIE CHART APPEARS HERE]
Europe 31.6%
Latin America 5.7%
Canada 9.6%
United States 29.2%
Australia &
New Zealand 20.4%
Asia 3.5%
2
<PAGE>
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Templeton Global Governments
Income Trust
Portfolio Breakdown on 2/28/95
Based on Total Net Assets
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Government Bonds 71.0%
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Corporate Bonds 13.3%
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Indexed Securities 5.2%
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Short-Term Obligations & Other Net Assets 10.5%
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see page 6 of this report.
We believe the series of events global bond markets experienced during 1994 were
unusual. Continued growth in the world economy could result in increased
investment and borrowing, which may lead to higher inflation. However, it
appears that bond markets in developed countries have already adjusted to any
likely rise in inflation or further central bank tightening of monetary policy.
Since the beginning of 1995, longer-term interest rates in the industrialized
countries have become more stable and, in some cases, have even declined.
Looking forward, we are hopeful that the major bond markets will have greater
stability this year, which may result in favorable investment opportunities for
the Fund. As always, we remind you that there are special risks involved with
global investing related to market, currency, economic, political, and other
factors.
We thank you for your participation in the Templeton Global Governments Income
Trust and look forward to serving your investment needs in the months and years
to come.
Sincerely,
/s/ Tom Wilkinson
Tom Wilkinson, CFA
Portfolio Manager
Templeton Global Governments Income Trust
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Tom W. Wilkinson, CFA, became the lead portfolio manager of Templeton Global
Governments Income Trust on April 4, 1995. Wilkinson has been with the Templeton
organization since 1985 and is vice president of the Templeton Global Bond
Managers Division of Templeton Investment Counsel, Inc. He has been a member of
the Fund's portfolio management team since September 23, 1993, and is the Senior
Portfolio Manager for Franklin Templeton's emerging markets fixed income group
with research responsibilities covering East Asia.
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3
<PAGE>
Performance Summary
During the reporting period, Templeton Global Governments Income Trust
shareholders received income distributions totaling 33.5 cents ($0.335) per
share. The Fund's closing price on the New York Stock Exchange (NYSE) increased
from $6.63 on August 31, 1994 to $6.75 on February 28, 1995, and the Fund
produced a total return of 9.15% in market-price terms for this six-month
period. The Fund's net asset value price decreased from $7.56 on August 31, 1994
to $7.36 on February 28, 1995. Based on the change in actual net asset value (in
contrast to market price), the Fund produced a total return of 1.89% for this
period.
Both total return figures assume reinvestment of dividends and capital gains in
accordance with the dividend reinvestment plan. Of course, past performance is
not indicative of future results, and distributions will vary depending on
income earned by the Fund.
- --------------------------------------------------------------------------------
Templeton Global Governments
Income Trust
Cumulative Total Returns*
Periods Ended 2/28/95
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (11/22/88)
<S> <C> <C> <C>
Based on change
in net asset value -1.52% 37.97% 46.14%
Based on change
in market price 1.33% 23.73% 25.29%
</TABLE>
*Total return calculations assume reinvestment of all distributions at net
asset value or at market price in accordance with the dividend reinvestment
plan. Past performance is not predictive of future results.
4
<PAGE>
Templeton Global Governments Income Trust
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31
FEBRUARY 28, 1995 ------------------------------------------------
(UNAUDITED) 1994+ 1993 1992 1991 1990
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 7.56 $ 8.37 $ 9.04 $ 8.54 $ 8.92 $ 8.67
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income .32 .64 .74 .84 .86 .95
Net realized and
unrealized gain (loss) (.18) (.81) (.55) .50 (.34) .23
-------- -------- -------- -------- -------- --------
Total from investment
operations .14 (.17) .19 1.34 .52 1.18
-------- -------- -------- -------- -------- --------
Distributions:
Dividends from net
investment income (.27) -- (.53) (.84) (.86) (.93)
Distributions from net
realized gains -- (.07) (.21) -- (.04) --
Amount in excess of net
investment income (.07) (.05) (.06) -- -- --
Tax basis return of
capital -- (.52) (.06) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions (.34) (.64) (.86) (.84) (.90) (.93)
-------- -------- -------- -------- -------- --------
Change in net asset
value (.20) (.81) (.67) .50 (.38) .25
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 7.36 $ 7.56 $ 8.37 $ 9.04 $ 8.54 $ 8.92
======== ======== ======== ======== ======== ========
TOTAL RETURN *
Based on market value
per share 9.15% (16.41)% (2.15)% 17.02% 25.74% 1.96%
Based on net asset value
per share 1.89% (1.71)% 2.46% 16.03% 5.74% 14.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $168,017 $172,586 $190,358 $200,814 $184,720 $188,604
Ratio of expenses to
average net assets 1.09%** 1.06% 1.05% 1.08% 1.11% 1.14%**
Ratio of net investment
income to average net
assets 8.55%** 8.04% 8.83% 9.40% 9.85% 10.90%**
Portfolio turnover rate 22.02% 134.83% 279.24% 306.92% 135.10% 112.55%
</TABLE>
* NOT ANNUALIZED IN PERIODS OF LESS THAN A YEAR.
** ANNUALIZED.
+ BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Templeton Global Governments Income Trust
Investment Portfolio, February 28, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<C> <C> <S> <C>
- -------------------------------------------------------------------------------
BONDS--GOVERNMENT & GOVERNMENT AGENCIES: 71.0%
- -------------------------------------------------------------------------------
2,800,000 Aus. Eurofima, 9.875%, 1/17/07 $ 1,988,563
550,000 U.S. Federal Home Loan Bank, 7.735%, 2/09/98 558,360
840,000 Federal Home Loan Mortgage Corp., 7.82%,
U.S. 1/27/98 854,440
1,500,000 Federal National Mortgage Assn., 7.74%,
U.S. 2/03/98 1,524,795
3,450,000 Aus. Government of Australia, 7.50%, 7/15/05 2,161,774
Government of Canada:
2,550,000 Can. 9.75%, 6/01/21 2,024,884
3,250,000 Can. 8.00%, 6/01/23 2,160,914
Government of Italy:
1,000,000,000 Itl. 12.00%, 11/01/96 601,500
3,515,000,000 Itl. 12.00%, 1/01/97 2,113,850
4,000,000,000 Itl. 12.00%, 1/20/98 2,388,722
3,100,000,000 Itl. 12.00%, 5/19/98 1,865,207
12,380,000 Ger. FRN, 7/26/99 8,467,172
3,230,000,000 Itl. FRN, 8/01/99 1,936,256
19,000,000 Neth. Government of Netherlands, zero, 1/15/23 1,343,599
18,310,000 N.Z. Government of New Zealand, 8.00%, 4/15/04 11,224,628
Government of Spain:
390,000,000 Sp. 13.45%, 4/15/96 3,140,137
296,000,000 Sp. 11.90%, 7/15/96 2,348,317
3,900,000 New South Wales Treasury Corp., 7.00%,
Aus. 4/01/04 2,343,067
8,350,000 Province of British Columbia, 9.85%,
Can. 5/01/98 6,279,953
2,100,000 U.S. Province of Nova Scotia, 8.75%, 4/01/22 2,124,318
3,000,000 Can. Province of Ontario, 8.00%, 3/11/03 2,033,012
6,000,000 Aus. Queensland Treasury Corp., 8.00%, 5/14/03 3,918,427
5,000,000 U.S. Republic of Argentina, 8.375%, 12/20/03 3,000,000
8,400,000 Ger. Republic of Portugal, 5.125%, 7/15/99 5,755,470
9,500,000 Treasury Corp. of Victoria, 8.25%,
Aus. 10/15/03 6,157,180
U.K. Treasury Bonds:
3,360,000 U.K. 7.00%, 8/06/97 5,195,040
7,000,000 U.K. 9.00%, 7/12/11 11,502,035
2,455,000 U.S. U.S. Treasury Bond, 6.25%, 8/15/23 2,089,058
U.S. Treasury Notes:
4,900,000 U.S. 8.875%, 2/15/96 5,007,163
5,000,000 U.S. 8.50%, 5/15/97 5,167,950
4,900,000 U.S. 8.75%, 10/15/97 5,118,197
5,300,000 U.S. 8.125%, 2/15/98 5,470,607
3,000,000 Venezuela Front Load Interest Reduction
U.S. Bond, 6.00%, 3/31/07 1,359,375
------------
TOTAL BONDS--GOVERNMENT & GOVERNMENT AGENCIES (cost
$131,826,809) 119,223,970
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Templeton Global Governments Income Trust
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<C> <C> <S> <C>
- -------------------------------------------------------------------------------
BONDS--CORPORATE: 13.3%
- -------------------------------------------------------------------------------
400,000 Ash Capital Finance Ltd., 9.50%, conv.,
U.K. 7/15/06 $ 348,427
2,350,000 U.S. Bombril SA, 8.00%, 8/26/98 1,891,750
2,000,000 Compania Naviera Perez Companc SA,
U.S. 8.375%, 7/30/98 1,660,000
4,749,500 Corporate Investments Ltd., 13.50%,
N.Z. conv., 6/19/95 2,613,515
1,500,000 U.S. Dine SA, 8,125%, 10/15/98 960,000
1,926,552 U.S. Electricidad de Caracas, FRN, 9/30/03 782,662
1,525,000 U.S. Essar Gujarat Ltd., FRN, 7/15/99 1,513,563
2,000,000 U.S. News America Holdings, 8.625%, 02/07/14 1,125,985
3,000,000 U.S. Quantas Airways Ltd., 7.50%, 6/30/03 2,831,370
2,500,000 Can. Rogers Cablesystems Ltd., 9.65%, 1/15/14 1,462,198
2,875,000 U.S. Telecommunications Inc., 9.65%, 10/01/03 3,009,665
3,530,000 Time Warner Entertainment Co., 7.25%,
U.S. 9/01/08 3,058,604
1,650,000 TNT Pacific Finance Ltd., 9.00%, conv.,
Aus. 7/27/98 1,099,496
------------
TOTAL BONDS--CORPORATE (cost $26,199,203) 22,357,235
- -------------------------------------------------------------------------------
INDEXED SECURITIES: 5.2%
- -------------------------------------------------------------------------------
2,000,000 U.S. Bayerishe Landesbank AG, (principal and
interest is linked to the change in the
Portuguese Escudos to U.S. Dollar
foreign exchange rate between issue date
(139.75 Escudos/U.S. Dollar) and
maturity date), 11.90%, 4/10/95 1,834,600
3,500,000 U.S. Caisse Nationale de Credit Agricole,
(principal is linked to the difference
in the one year Deutschemark swap rate
and the one year Sterling swap rate plus
85 basis points times 15), 6.65%, CD,
10/06/95 2,779,350
3,400,000 U.S. Goldman Sachs Group LP, (principal and
interest is linked to the change in the
Indonesian Rupiah to U.S. Dollar foreign
exchange rate between issue date
(2,179.25 Rupiah/U.S. Dollar) and
maturity date), 14.00%, 6/15/95 3,327,920
3,000,000 U.S. IBM Credit Corp., (principal is linked to
the change in the Japanese Yen to U.S.
Dollar foreign exchange rate between
issue date (169 Yen/U.S Dollar) and
maturity date), 10.75%, 12/04/95. 776,250
------------
TOTAL INDEXED SECURITIES (cost $11,851,215) 8,718,120
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Templeton Global Governments Income Trust
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<C> <C> <S> <C>
- -------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 6.3%
- -------------------------------------------------------------------------------
2,620,000 U.S. Federal Farm Credit Bank, 5.83%, 3/23/95 $ 2,610,542
1,000,000 U.S. Federal Home Loan Bank, 5.82%, 3/13/95 998,030
7,000,000,000 Itl. Government of Italy, 12.00%, 10/01/95 4,192,861
25,000,000 Thai. Thailand Military Bank, 7.50%, 10/02/95 980,854
1,880,000 U.S. Treasury Bills, 5.28% to 5.50% with
U.S. maturities to 4/06/95 1,874,915
------------
TOTAL SHORT TERM OBLIGATIONS (cost $11,464,111) 10,657,202
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS: 95.8% (cost $181,341,338) 160,956,527
UNREALIZED LOSS IN FORWARD EXCHANGE CONTRACTS: (0.2)% (415,210)
OTHER ASSETS, LESS LIABILITIES: 4.4% 7,475,385
------------
TOTAL NET ASSETS: 100.0% $168,016,702
============
</TABLE>
*CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Templeton Global Governments Income Trust
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost
$181,341,338) $160,956,527
Cash 97,400
Receivables:
Investment securities sold 4,724,160
Interest receivable 4,117,012
Unrealized gains in forward exchange contracts (Note 5) 18,330
------------
Total assets 169,913,429
------------
Liabilities:
Dividends payable 1,142,141
Unrealized loss in forward exchange contracts (Note 5) 433,540
Accrued expenses 321,046
------------
Total liabilities 1,896,727
------------
Net assets, at value $168,016,702
============
Net assets consists of:
Distributions in excess of net investment income $ (1,576,627)
Net unrealized depreciation (20,800,021)
Accumulated net realized loss (2,770,610)
Net capital paid in on shares of capital stock 193,163,960
------------
Net assets, at value $168,016,702
============
Shares outstanding 22,842,821
============
Net asset value per share
($168,016,702 / 22,842,821) $ 7.36
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 28, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Interest income: (net of $129,688
foreign taxes withheld) $ 8,138,206
Expenses:
Management fees (Note 3) $ 464,182
Administrative fees (Note 3) 210,879
Transfer agent fees 40,000
Custodian fees 57,000
Reports to shareholders 84,000
Audit fees 18,000
Legal fees 4,000
Registration and filing fees 19,000
Trustees' fees and expenses 17,000
Other 6,285
-----------
Total expenses 920,346
-----------
Net investment income 7,217,860
Realized and unrealized loss:
Net realized loss on:
Investments (2,254,002)
Foreign currency transaction (341,630)
-----------
(2,595,632)
-----------
Net unrealized depreciation on:
Investments (23,221)
Foreign currency translation of other assets and
liabilities (1,516,240)
-----------
(1,539,461)
-----------
Net realized and unrealized loss (4,135,093)
-----------
Net increase in net assets resulting from operations $ 3,082,767
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Templeton Global Governments Income Trust
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1995 YEAR ENDED
(UNAUDITED) AUGUST 31, 1994
----------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 7,217,860 $ 14,655,312
Net realized loss from security and for-
eign currency transactions (2,595,632) (12,025,067)
Net unrealized depreciation (1,539,461) (6,665,555)
------------ ------------
Net increase (decrease) in net assets re-
sulting from operations 3,082,767 (4,035,310)
Distributions to shareholders:
From net investment income (6,075,718) --
From net realized gain -- (1,519,191)
Amount in excess of net investment income (1,576,627) (1,142,142)
Tax return of capital -- (11,951,721)
Fund share transactions (Note 2) -- 876,886
------------ ------------
Net decrease in net assets (4,569,578) (17,771,478)
Net assets:
Beginning of year 172,586,280 190,357,758
------------ ------------
End of year $168,016,702 $172,586,280
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Global Governments Income Trust (the Fund) is a Massachusetts busi-
ness trust and a closed-end, non-diversified management investment company reg-
istered under the Investment Company Act of 1940. The following summarizes the
Fund's significant accounting policies.
a. Securities Valuations:
Securities, including options, listed or traded on a recognized national or
foreign stock exchange or NASDAQ are valued at the last reported sales prices
on the principal exchange on which the securities are traded. Over-the-counter
securities and listed securities for which no sale is reported are valued at
the mean between the last current bid and asked prices. Securities for which
market quotations are not readily available are valued at fair value as deter-
mined by management and approved in good faith by the Board of Trustees.
b. Foreign Exchange Contracts:
The Fund enters into forward exchange contracts and currency option contracts
in order to hedge against foreign exchange risks.
(i) Forward Exchange Contracts: These contracts are valued daily and the
Fund's equity therein, representing unrealized gain or loss on the contracts,
is included in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.
(ii) Currency Option Contracts: Options purchased are recorded as invest-
ments; options written (sold) are accounted for as liabilities. When an option
expires, the premium (original option value) is realized as a gain if the op-
tion was written or realized as a loss if the option was purchased. When the
exercise of an option results in a cash settlement, the difference between the
premium and the settlement proceeds is realized as a gain or loss. When securi-
ties are acquired or delivered upon exercise of an option, the acquisition cost
or sale proceeds are adjusted by the amount of the premium. When an option is
closed, the difference between the premium and the cost to close the position
is realized as a gain or loss.
c. Indexed Securities:
The Fund may invest in debt instruments in which the principal and/or interest
is dependent on another factor such as a yield curve, currency exchange rates
or commodity prices. The Fund's objective in holding these securities, commonly
called structured notes, is to tailor the Fund's investments to the specific
risk and returns it wishes to assume while avoiding unwanted risk or change the
Fund's exposure to a particular foreign exchange rate or the spread between two
foreign exchange rates.
d. Foreign Currency Translation:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into a foreign exchange contract to minimize foreign exchange risk
from the trade date to the settlement date of such transaction.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
11
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities resulting
from changes in the exchange rates.
e. Futures Contracts:
The Fund may enter into futures contracts and options written on futures con-
tracts in order to hedge against risks from changes in interest rates. These
futures contracts and options written on futures contracts are valued daily and
the Fund's equity therein, representing unrealized gain or loss on the con-
tract, is included in the Statement of Assets and Liabilities. Realized and
unrealized gains and losses are included in the Statement of Operations. Margin
deposits of cash or securities required with respect to contracts traded on ex-
changes are maintained by the Fund's custodian in a segregated account. Weekly
variation margin payments are made or received on futures as appreciation or
depreciation in the contracts occur.
f. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
federal income taxes.
g. Security Transactions, Investment Income, Distributions, and Expenses:
Security transactions are accounted for on a trade date basis. Interest income
and estimated expenses are accrued daily. Distributions to shareholders, which
are determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
As of February 28, 1995, there were an unlimited number of shares of capital
stock authorized ($0.01 par value). During the six months ended February 28,
1995, there were no capital share transactions. During the year ended August
31, 1994, 105,813 shares were issued for $876,886 from reinvested distribution.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton In-
vestment Counsel, Inc. (TICI) and Templeton Global Investors, Inc. (TGII), the
Fund's investment manager and administrative manager, respectively. The Fund
pays monthly an investment management fee to TICI equal, on an annual basis, to
0.55% of the average daily net assets of the Fund up to $200 million and 0.50%
of the average daily net assets in excess of $200 million. The Fund pays TGII
monthly a fee of 0.25% per annum on the Fund's average daily net assets. TGII
has entered into a Sub-Administrator Agreement with Dean Witter Reynolds, Inc.
through its InterCapital Division (DWR InterCapital), whereby DWR InterCapital
provides certain administrative services. For its services, the TGII pays to
InterCapital a fee equal, on an annual basis, to 0.15% of the Fund's average
net assets.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received of $4,000 for the six months ended February
28, 1995.
12
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term securities)
for the six months ended February 28, 1995 were $28,225,479 and $26,548,670,
respectively. The cost of securities for federal income tax purposes is the
same as that shown in the investment portfolio. Realized gains and losses are
reported on an identified cost basis.
At February 28, 1995, the aggregate gross unrealized appreciation and deprecia-
tion of portfolio securities, based on costs for federal income tax purposes,
was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 1,201,786
Unrealized depreciation (21,586,597)
------------
Net unrealized depreciation $(20,384,811)
============
</TABLE>
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
During the six months ended February 28, 1995, the Fund has been a party to fi-
nancial instruments with off-balance-sheet risks, primarily forward exchange
contracts, in order to minimize the risk to the Fund, with respect to its port-
folio transactions, from adverse changes in the relationship between the U.S.
dollar and foreign currencies and interest rates. These instruments involve
market risk in excess of the amount recognized on the Statement of Assets and
Liabilities; some of these risks have been minimized by offsetting contracts.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts, future movement in currency values and interest rates and con-
tract positions that are not exact offsets. The contract amount indicates the
extent of the Fund's involvement in such contracts.
Forwards: A forward exchange contract is an agreement between two parties to
exchange different currencies at a specific rate at an agreed future date.
At February 28, 1995, the Fund had outstanding forward exchange contracts for
the purchase and sale of currencies as set out below. These contracts are re-
ported 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:
<TABLE>
<S> <C>
Contracts to sell:
11,000,000 Canadian dollars for 7,894,359 U.S. dollars, March
10, 1995 $ 4,341
6,900,000 New Zealand dollars for 4,383,225 U.S. dollars,
March 10, 1995 13,989
---------
18,330
---------
Contracts to sell:
17,000,000 Deutschemarks for 11,576,123 U.S. dollars, March
7, 1995 (94,285)
5,445,000 Deutschemarks for 3,528,383 U.S. dollars, August
29, 1995 (229,845)
---------
(324,130)
Net unrealized loss from offsetting forward exchange con-
tracts (109,410)
---------
(433,540)
---------
Net unrealized loss in forward exchange contracts $(415,210)
=========
</TABLE>
13
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
6. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NET INCREASE
NET GAIN (LOSS) (DECREASE)
ON INVESTMENT AND IN NET ASSETS
INVESTMENT NET INVESTMENT FOREIGN CURRENCY RESULTING FROM
INCOME INCOME TRANSACTIONS OPERATIONS
----------------- ----------------- ------------------- ------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
----------- ----- ----------- ----- ------------ ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
For the quarter ended:
November 30, 1994 $ 4,173,392 $.18 $ 3,716,559 $.17 $ (2,514,342) $(.11) $ 1,202,217 $ .05
February 28, 1995 3,964,814 .17 3,501,301 .15 (1,620,751) (.07) 1,880,550 .09
----------- ---- ----------- ---- ------------ ----- ----------- -----
$ 8,138,206 $.35 $ 7,217,860 $.32 $ (4,135,093) $(.18) $ 3,082,767 $ .14
=========== ==== =========== ==== ============ ===== =========== =====
1994
For the quarter ended:
November 30, 1993 $ 4,313,500 $.19 $ 3,819,835 $.17 $ (5,715,538) $(.25) $(1,895,703) $(.08)
February 28, 1994 3,922,193 .17 3,431,159 .15 718,257 .03 4,149,416 .18
May 31, 1994 4,272,952 .19 3,686,359 .16 (11,611,481) (.50) (7,925,122) (.34)
August 31 , 1994 4,078,401 .18 3,717,959 .16 (2,081,860) (.09) 1,636,099 .07
----------- ---- ----------- ---- ------------ ----- ----------- -----
$16,587,046 $.73 $14,655,312 $.64 $(18,690,622) $(.81) $(4,035,310) $(.17)
=========== ==== =========== ==== ============ ===== =========== =====
</TABLE>
14
<PAGE>
Templeton Global Governments Income Trust
Annual Meeting of Shareholders, February 21, 1995
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
700 Central Avenue, St. Petersburg, Florida, on February 21, 1995. The purpose
of the meeting was to elect four trustees of the Fund and to ratify the selec-
tion of McGladrey & Pullen, LLP, as the Fund's independent public accountants
for the fiscal year ending August 31, 1995. At the meeting, the following per-
sons were elected by the shareholders to serve as trustees of the Fund: Andrew
H. Hines, Jr., Harris J. Ashton, S. Joseph Fortunato and Gordon S. Macklin. In
addition to the trustees elected at the Annual Meeting, the following persons
also serve as Trustees of the Fund: John M. Templeton, Rupert H. Johnson, Jr.,
Nicholas F. Brady, Hasso-G von Diergardt-Naglo, F. Bruce Clarke, Betty P.
Krahmer, John G. Bennett, Jr. and Fred R. Millsaps, In addition, the sharehold-
ers ratified the selection of McGladrey & Pullen, LLP, to serve as the Fund's
independent public accountants for the fiscal year ending August 31, 1995. No
other business was transacted at the Annual Meeting.
The results of the voting at the Annual Meeting are as follows:
1. Election of four (4) Trustees:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING SHARES OUTSTANDING
FOR SHARES VOTED AGAINST % ABSTAIN SHARES
---------- ----------- ------ ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew H.
Hines,
Jr. 16,094,220 70.46% 97.75% -0- -0- 370,533 1.62%
Harris J.
Ashton 16,089,891 70.44% 97.72% -0- -0- 374,862 1.64%
S. Joseph
Fortunato 16,089,955 70.44% 97.72% -0- -0- 374,798 1.64%
Gordon S.
Macklin 16,086,091 70.42% 97.70% -0- -0- 378,662 1.66%
2. Ratification of the selection of McGladrey & Pullen, LLP, as independent
public accountants of the Fund for the fiscal year ending August 31, 1995:
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING SHARES OUTSTANDING OUTSTANDING
FOR SHARES VOTED AGAINST SHARES ABSTAIN SHARES
---------- ----------- ------ ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
15,967,103 69.90% 96.98% 207,583 0.91% 290,067 1.27%
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
TEMPLETON GLOBAL
GOVERNMENTS INCOME
TRUST
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Investors should be aware that the value of investments made for the Fund may
go up as well as down and that the Investment Manager may make errors in
selecting securities for the Fund's portfolio. Like any investment in
securities, the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political and other factors. The Fund and Fund
investors are not protected from such losses by the Investment Manager.
Therefore, investors who cannot accept the risk of such losses should not
invest in shares of the Fund.
TO ENSURE THE HIGHEST QUALITY OF SERVICE, TELEPHONE CALLS TO OR FROM OUR
SERVICE DEPARTMENTS MAY BE MONITORED, RECORDED AND ACCESSED. THESE CALLS CAN BE
DETERMINED BY THE PRESENCE OF A REGULAR BEEPING TONE.
- --------------------------------------------------------------------------------
TEMPLETON
GLOBAL
GOVERNMENTS
INCOME
TRUST
Semi-Annual Report
February 28, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
[RECYCLING LOGO APPEARS HERE]
TLTGG S95 04/95