<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 governments and government agencies of various nations throughout
the world.
April 16, 1996
Dear Shareholder:
We are pleased to bring you the semi-annual report of the Templeton Global
Governments Income Trust for the period ended February 29, 1996.
The six months under review were marked by slow global economic growth, as
central banks eased monetary policy and cut benchmark interest rates.
Consequently, global bond prices rose, although the pace and magnitude of the
increases were different in each country.
In Europe, slower economic growth and lower interest rates were most beneficial
to higher-yielding bond markets such as Italy, Spain and Sweden. Declining
interest rates reduced pressure on these countries' currencies and diminished
the carrying costs of their large debt burdens. Perhaps the most important
factor affecting the performance of their bonds was the countries' efforts to
meet fiscal deficit and inflation standards required by the European Monetary
Union (EMU). Targeted to take effect in 1999, the EMU will result in a common
currency for all qualifying nations.
1
<PAGE>
In North America, the decline in short-term interest rates was particularly
pronounced in the United States. Believing that U.S. interest rates, which had
risen dramatically in 1994 and the early part of 1995, were too high, the
Federal Reserve Board lowered short-term rates twice during 1995 and again in
January 1996. Long-term yields also declined, and bond prices increased during
the period. In Canada, however, the bond market rally was not as significant
due to the September referendum on the possible secession of Quebec. Although
the province did not secede, this referendum alerted international investors to
the country's political uncertainty.
Underlying economic conditions in Pacific Rim countries were different from
conditions in the rest of the world. Despite the fact that Japan's short-term
interest rates declined during the period, its economic growth continued to
falter. In Australia and New Zealand, economic growth was among the highest of
any developed markets during the period, which led to modest currency
appreciation and tended to dampen any reduction in interest rates.
Even though interest rates were the most volatile factor in global bond markets
during the period, currency markets
- --------------------------------------------------------------------------------
Templeton Global Governments
Income Trust
Geographic Distribution of Issuer of Securities
Based on Total Net Assets
2/29/96
[PIE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Europe 32.6%
United States 27.5%
Australia & New Zealand 17.7%
Latin America 12.2%
Canada 7.9%
Asia 2.1%
</TABLE>
were also important, especially in January when the U.S. dollar began to
appreciate against most European currencies. This lessened the benefit of
rising European bond prices to U.S. investors. The main factor behind the
dollar's strength was the belief of international investors that European
economic growth would remain low because governments were cutting budget
deficits in an effort to meet EMU entry requirements.
Within this environment, we stressed two different strategies. First, we
positioned the Fund's average maturity for
2
<PAGE>
lower interest rates. Because bonds with longer maturities tend to appreciate
more than short-term bonds when interest rates decline, we maintained an average
portfolio maturity of approximately 7.5 years during the period, an average
maturity which the Fund manager believed was warranted. Second, we emphasized
investments in the United Kingdom, Sweden, Ireland, and Spain, which were well-
positioned to profit from reform in domestic finance. As of February 29, 1996,
the Fund had established positions in the United Kingdom (7.8% of total net
assets), Sweden (3.1%), and Ireland (1%). We also added 4.7% to the Fund's
Spanish position. In markets where domestic conditions became less attractive
over the six-month period, including Germany and France, we reduced our
holdings. At the end of the period, our position in Germany had declined from
14.2% to zero; in France from 4.7% to zero; and in the U.S. from 31.2% to 27.5%.
Credit quality remains an important factor in selecting the Fund's investments,
which on February 29, 1996, consisted primarily of investment-grade securities
as rated by one of the nationally recognized rating services, or of non-rated
securities we judged to be of equal quality. At the end of the period, about
78% of the debt securities
Templeton Global Governments
Income Trust
Portfolio Breakdown on 2/29/96
Based on Total Net Assets
Government Bonds 86.9%
Corporate Bonds 5.6%
Short-Term Obligations & Other Net Assets 7.5%
For a complete list of portfolio holdings, please see page 7 of this report.
in the Fund's portfolio were rated AA or higher, 10% were rated A or BBB, and
12% were rated below investment grade. The lower-rated bonds represented
obligations of Argentina, Mexico, and Brazil. Approximately 92.5% of the Fund's
portfolio was held in bonds, and the remaining 7.5% in short-term obligations
and other net assets.
Looking forward, we believe that the major fundamental trends in the global
macroeconomic environment are subdued economic activity and low inflation. In
our opinion, interest rates in this environment may decline over the long term.
Although relative economic weakness in Europe may cause the U.S. dollar to rise
in the short term, we continue to believe that the underlying fundamentals in
the U.S. economy (inadequate savings and dependence on foreign capital) may lead
to a lower
3
<PAGE>
value for the currency relative to the currencies of its major partners. As
always, we remind you that there are special risks involved with global
investing related to market, currency, economic, political, and other factors,
in addition to the heightened risks associated with the relatively small size
and lesser liquidity of developing markets.
We thank you for your participation in the Templeton Global Governments Income
Trust and welcome any comments or suggestions you may have.
Sincerely,
/s/ Thomas W. Wilkinson
Tom W. Wilkinson, CFA
Portfolio Manager
Templeton Global Governments
Income Trust
4
<PAGE>
Performance Summary
During the reporting period, Templeton Global Governments Income Trust
shareholders received income distributions of 30 cents ($0.30) per share. The
Fund's closing price on the New York Stock Exchange (NYSE) increased from $7.00
on August 31, 1995 to $7.125 on February 29, 1996, and the Fund produced a total
return of 6.07% in market-price terms for this six-month period. The Fund's net
asset value per share increased from $7.71 on August 31, 1995 to $7.91 on
February 29, 1996. Based on the change in net asset value (in contrast to
market price), the Fund delivered a total return of 6.91% for this same 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, as well as any profits realized from the sale of
securities in the portfolio.
Templeton Global Governments
Income Trust
Cumulative Total Returns*
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (11/22/88)
<S> <C> <C> <C>
Based on change
in net asset value 16.09% 37.73% 69.68%
Based on change
in market price 14.85% 27.16% 43.90%
</TABLE>
*Total return calculations assume reinvestment of distributions at net asset
value or at market price in accordance with the dividend reinvestment plan.
Past performance is not predictive of future results.
5
<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 29, 1996 ------------------------------------------------
(UNAUDITED) 1995 1994+ 1993 1992 1991
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $ 7.71 $ 7.56 $ 8.37 $ 9.04 $ 8.54 $ 8.92
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income .29 .64 .64 .74 .84 .86
Net realized and
unrealized gain (loss) .21 .15 (.81) (.55) .50 (.34)
-------- -------- -------- -------- -------- --------
Total from investment
operations .50 .79 (.17) .19 1.34 .52
-------- -------- -------- -------- -------- --------
Distributions:
Dividends from net in-
vestment income (.30) (.59) -- (.53) (.84) (.86)
Distributions from net
realized gains -- -- (.07) (.21) -- (.04)
Amount in excess of net
investment income -- (.05) (.05) (.06) -- --
Tax basis return of
capital -- -- (.52) (.06) -- --
-------- -------- -------- -------- -------- --------
Total distributions (.30) (.64) (.64) (.86) (.84) (.90)
-------- -------- -------- -------- -------- --------
Change in net asset
value .20 .15 (.81) (.67) .50 (.38)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 7.91 $ 7.71 $ 7.56 $ 8.37 $ 9.04 $ 8.54
======== ======== ======== ======== ======== ========
TOTAL RETURN*
Based on market value
per share 6.07% 15.87% (16.41)% (2.15)% 17.02% 25.74%
Based on net asset value
per share 6.91% 11.92% (1.71)% 2.46% 16.03% 5.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000) $180,657 $176,212 $172,586 $190,358 $200,814 $184,720
Ratio of expenses to av-
erage net assets .94%** 1.03% 1.06% 1.05% 1.08% 1.11%
Ratio of net investment
income to average
net assets 7.41%** 8.43% 8.04% 8.83% 9.40% 9.85%
Portfolio turnover rate 44.96% 111.03% 134.83% 279.24% 306.92% 135.10%
</TABLE>
*NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
**ANNUALIZED.
+BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Templeton Global Governments Income Trust
Investment Portfolio, February 29, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<C> <C> <S> <C>
- -------------------------------------------------------------------------------
BONDS--GOVERNMENT & GOVERNMENT AGENCIES: 86.9%
- -------------------------------------------------------------------------------
Buoni Poliennali del Tes:
3,640,000,000 Itl. 8.50%, 8/01/99 $ 2,262,152
2,340,000,000 Itl. 10.50%, 9/01/05 1,517,534
2,800,000 Aus. Eurofima, 9.875%, 1/17/07 2,236,781
427,800 U.S. Government of Brazil, 6.375%, 1/01/01 373,523
Government of Canada:
1,104,000 Can. 10.50%, 3/01/01 927,799
2,550,000 Can. 9.75%, 6/01/21 2,195,619
3,250,000 Can. 8.00%, 6/01/23 2,353,665
Government of Denmark:
9,020,000 Den. 9.00%, 11/15/98 1,721,527
18,096,000 Den. 8.00%, 5/15/03 3,342,907
Government of Italy:
3,515,000,000 Itl. 12.00%, 1/01/97 2,288,577
4,000,000,000 Itl. 12.00%, 1/20/98 2,662,435
3,230,000,000 Itl. FRN, 8/01/99 2,102,601
5,790,000,000 Itl. 10.50%, 7/15/00 3,825,231
Government of New Zealand, 6.50%,
2,965,000 N.Z. 2/15/00 1,899,293
Government of Spain:
390,000,000 Sp. 13.45%, 4/15/96 3,163,857
296,000,000 Sp. 11.90%, 7/15/96 2,413,960
396,830,000 Sp. 12.25%, 3/25/00 3,542,089
344,600,000 Sp. 11.30%, 1/15/02 3,027,447
249,900,000 Sp. 10.00%, 2/28/05 2,059,805
18,918,000 Den. Kingdom of Denmark, 8.00%, 11/15/01 3,526,055
Kingdom of Sweden:
15,000,000 Swe. 10.25%, 5/05/03 2,430,591
7,700,000 Swe. 9.00%, 4/20/09 1,141,813
New South Wales Treasury Corp.,
4,400,000 Aus. 12.00%, 12/01/01, 144A 3,887,998
New South Wales Treasury Corp.,
4,000,000 Aus. 7.00%, 4/01/04 2,742,882
Province of British Columbia, 9.85%,
8,350,000 Can. 5/01/98 6,540,128
3,000,000 Can. Province of Ontario, 8.00%, 3/11/03 2,246,747
Queensland Treasury Corp. Exch.
6,000,000 Aus. Global, 8.00%, 5/14/03 4,424,973
Republic of Argentina:
1,615,000 U.S. 10.95%, 11/01/99 1,699,788
8,420,000 U.S. 8.375%, 12/20/03 7,199,108
1,235,000 Irl. Republic of Ireland, 6.25%, 10/18/04 1,765,093
Thailand Military Bank:
20,000,000 Thai. 11.125%, 6/3/96 793,336
21,000,000 Thai. 11.00%, 6/5/96 828,838
Treasury Corp. of Victoria, 8.25%,
11,300,000 Aus. 10/15/03 8,428,375
</TABLE>
7
<PAGE>
Templeton Global Governments Income Trust
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<C> <C> <S> <C>
- ----------------------------------------------------------------------------
BONDS--GOVERNMENT & GOVERNMENT AGENCIES (CONT.)
- ----------------------------------------------------------------------------
United Kingdom:
2,165,000 U.K. 9.50%, 1/15/99 $ 3,536,194
4,905,000 U.K. 6.75%, 11/26/04 6,956,974
2,235,000 U.K. 8.5%, 7/16/07 3,527,451
U.S. Treasury Bonds:
1,170,000 U.S. 10.75%, 5/15/03 1,490,100
4,713,000 U.S. 7.625%, 2/15/25 5,335,257
U.S. Treasury Notes:
6,600,000 U.S. 8.875%, 2/15/99 7,184,694
1,600,000 U.S. 9.125%, 5/15/99 1,762,000
3,507,000 U.S. 7.75%, 11/30/99 3,746,458
5,800,000 U.S. 6.125%, 7/31/00 5,882,476
4,430,000 U.S. 5.875%, 2/15/04 4,374,625
6,073,000 U.S. 6.50%, 8/15/05 6,212,497
7,000,000 U.S. 5.875%, 11/15/05 6,856,710
United Mexican States:
3,500,000 U.S. 10.805%, FRN, 7/21/97, 144A 3,587,500
3,430,000 U.S. 9.75%, 2/06/01 3,301,375
3,000,000 U.S. Venezuela Front Load Interest Reduction
Bond, A, 3/31/07 1,676,250
------------
TOTAL BONDS--GOVERNMENT & GOVERNMENT AGENCIES (cost
$162,618,274) 157,003,088
- ----------------------------------------------------------------------------
BONDS--CORPORATE: 5.6%
- ----------------------------------------------------------------------------
1,500,000 U.S. Dine SA de CV, 8.125%, 10/15/98 1,387,500
1,873,366 U.S. Electricidad de Caracas, FRN, 9/30/03 941,366
1,525,000 U.S. Essar Gujarat Ltd., FRN, 7/15/99, 144A 1,500,219
3,000,000 U.S. Quantas Airways Ltd., 7.50%, 6/30/03 3,046,230
2,000,000 U.S. Perez Companc SA, 8.375%, 7/30/98 1,970,000
TNT Pacific Finance Ltd., 9.00%, conv.,
1,650,000 Aus. 7/27/98 1,248,729
------------
TOTAL BONDS--CORPORATE (cost $8,585,211) 10,094,044
- ----------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Templeton Global Governments Income Trust
Investment Portfolio, February 29, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY* VALUE
<C> <C> <S> <C>
- -------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 5.9%
- -------------------------------------------------------------------------------
20,000,000 Thai. Bangkok Bank, 11.50%, 5/16/96 $ 794,592
495,000 U.S. Federal Home Loan Bank, 5.26%, 4/10/96 492,179
Federal Home Loan Mortgage Corp., 5.16%
2,005,000 U.S. to 5.22% with maturities to 4/24/96 2,000,213
Federal National Mortgage Assn., 5.11%,
830,000 U.S. 3/12/96 828,689
New Zealand Treasury Bills, 8.05% to
6,251,000 N.Z. 8.36% with maturities to 12/18/96 3,994,389
14,000,000 Swe. Sweden Treasury Bill, 8.68%, 11/20/96 1,965,548
U.S. Treasury Bills, 4.74% to 4.87% with
490,000 U.S. maturities to 5/02/96 485,828
------------
TOTAL SHORT TERM OBLIGATIONS (cost $10,578,246) 10,561,438
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS: 98.4% (cost $181,781,731) 177,658,570
UNREALIZED LOSS IN FORWARD EXCHANGE CONTRACTS: (0.1)% (13,024)
OTHER ASSETS, LESS LIABILITIES: 1.7% 3,011,093
------------
TOTAL NET ASSETS: 100.0% $180,656,639
============
</TABLE>
*CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Templeton Global Governments Income Trust
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost
$181,781,731) $177,658,570
Cash 19,425
Receivables:
Investment securities sold 13,229,372
Interest 4,377,617
Unrealized gains on forward exchange contracts (Note 6) 69,967
------------
Total assets 195,354,951
------------
Liabilities:
Payables:
Investment securities purchased 13,255,099
Dividends payable 1,142,141
Unrealized loss on forward exchange contracts (Note 6) 82,991
Accrued expenses 218,081
------------
Total liabilities 14,698,312
------------
Net assets, at value $180,656,639
============
Net assets consist of:
Distributions in excess of net investment income $ (1,305,119)
Net unrealized depreciation (4,137,052)
Accumulated net realized loss (7,065,150)
Net capital paid in on shares of beneficial interest 193,163,960
------------
Net assets, at value $180,656,639
============
Shares outstanding 22,842,821
============
Net asset value per share
($180,656,639 / 22,842,821) $ 7.91
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 29, 1996 (unaudited)
<TABLE>
<S> <C> <C>
Interest income:
(net of $158,666 foreign
taxes withheld) $ 7,540,491
Expenses:
Management fees (Note 3) $ 496,591
Administrative fees (Note 3) 225,723
Transfer agent fees 20,500
Reports to shareholders 72,000
Audit fees 12,500
Registration and filing fees 16,500
Trustees' fees and expenses 2,600
Other 4,208
----------
Total expenses 850,622
-----------
Net investment income 6,689,869
Realized and unrealized
gain (loss):
Net realized loss on:
Investments (877,370)
Foreign currency transactions (518,235)
----------
(1,395,605)
----------
Net unrealized appreciation on:
Investments 5,918,794
Foreign currency
Translation of other
assets and liabilities 84,223
----------
6,003,017
----------
Net realized and unrealized gain 4,607,412
-----------
Net increase in net assets resulting from operations $11,297,281
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Templeton Global Governments Income Trust
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 29, 1996 YEAR ENDED
(UNAUDITED) AUGUST 31, 1995
----------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 6,689,869 $ 14,514,565
Net realized loss on investment and for-
eign currency transactions (1,395,605) (5,503,941)
Net unrealized appreciation 6,003,017 9,120,491
------------ ------------
Net increase in net assets resulting from
operations 11,297,281 18,131,115
Distributions to shareholders:
From net investment income (5,547,727) (13,363,049)
Amount in excess of net investment income (1,305,119) (1,142,142)
------------ ------------
Net increase in net assets 4,444,435 3,625,924
Net assets:
Beginning of period 176,212,204 172,586,280
------------ ------------
End of period $180,656,639 $176,212,204
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited)
- -------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Global Government Income Trust (the Fund) is a Massachusetts busi-
ness trust and a closed-end, non-diversified management investment company
registered under the Investment Company Act of 1940. The Fund seeks current
income with capital appreciation and growth of income, by investing primarily
in a portfolio of debt securities of governments and government agencies of
various nations throughout the world. The following summarizes the Fund's sig-
nificant accounting policies.
a. Securities Valuations:
Securities, including options, listed or traded on a recognized national or
foreign exchange or NASDAQ are valued at the last reported sales prices on the
principal exchange on which the securities are traded. Over-the-counter secu-
rities 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 mar-
ket 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 in-
cluded in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are included in the Statement of Operations.
(ii)Currency Option Contracts: Options purchased are recorded as investments;
options written (sold) are accounted for as liabilities. When an option ex-
pires, the premium (original option value) is realized as a gain if the option
was written or realized as a loss if the option was purchased. When the exer-
cise 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 secu-
rities 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 op-
tion 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, com-
monly called structured notes, is to tailor the Fund's investments to the spe-
cific 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.
12
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited) (cont.)
- -------------------------------------------------------------------------------
d. Foreign Currency Transactions:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign 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
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from invest-
ments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities at
the end of the fiscal period, resulting from changes in the exchange rates.
e. Futures Contracts:
The Fund may enter into futures contracts and options written on futures con-
tracts in order to hedge against risks from changes in currency exchange rates
or interest rates. These futures contracts and options written on futures con-
tracts are valued daily and the Fund's equity therein, representing unrealized
gain or loss on the contract, is included in the Statement of Assets and Lia-
bilities. Realized and unrealized gains and losses are included in the State-
ment of Operations. Margin deposits of cash or securities required with re-
spect to contracts traded on exchanges are maintained by the Fund's custodian
in segregated accounts. Variation margin payments are made or received on
futures on a weekly basis as appreciation or depreciation in the contracts oc-
curs.
f. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Reve-
nue Code applicable to regulated investment companies and to distribute all of
its taxable income to its shareholders. Therefore, no provision has been made
for income taxes.
g. Security Transactions, Investment Income, Distributions and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign secu-
rities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to sharehold-
ers, which are determined in accordance with income tax regulations, are re-
corded on the ex-dividend date.
h. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the report-
ing period. Actual results could differ from those estimates.
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
As of February 29, 1996, there were an unlimited number of shares of benefi-
cial interest authorized ($0.01 par value). During the six months ended Febru-
ary 29, 1996 and the year ended August 31, 1995, there were no share transac-
tions.
13
<PAGE>
Templeton Global Governments Income Trust
Notes to Financial Statements (unaudited) (cont.)
- -------------------------------------------------------------------------------
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.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
six months ended February 29, 1996 aggregated $76,527,073 and $79,628,866, re-
spectively. The cost of securities for federal income tax purposes is the same
as that shown in the investment portfolio. Realized gains and losses are re-
ported on an identified cost basis.
At February 29, 1996, the aggregate gross unrealized appreciation and depreci-
ation of portfolio securities, based on cost for federal income tax purposes,
was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 2,128,821
Unrealized depreciation (6,251,982)
-----------
Net unrealized depreciation $(4,123,161)
===========
</TABLE>
5. TAX LOSS CARRYOVERS
At August 31, 1995, the Fund had tax basis losses of $3,500,000 which may be
carried over to offset future capital gains. Such losses expire in 2003. In
addition, as required by the tax rules, the Fund has deferred currency losses
occurring subsequent to October 31, 1994 of $2,200,000 to the year ending Au-
gust 31, 1996.
6. FINANCIAL INSTRUMENTS
During the six months ended February 29, 1996, the Fund has been a party to
financial instruments with off-balance-sheet risks, primarily forward exchange
contracts, in order to minimize the risk to the Fund, with respect to its
portfolio transactions, from adverse changes in the relationship between the
U.S. dollar and foreign currencies and interest rates. These instruments in-
volve market risk in excess of the amount recognized on the Statement of As-
sets and Liabilities; some of these risks have been minimized by offsetting
contracts. Risks arise from the possible inability of counterparties to meet
the terms of their contracts, future movement in currency values and interest
rates and contract positions that are not exact offsets. The contract amount
indicates the extent of the Fund's involvement in such contracts.
Forwards: A forward exchange contract is an agreement between two parties to
exchange different currencies at a specific rate at an agreed future date.
At February 29, 1996, 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:
6,000,000,000 Italian Lira for 3,778,385 U.S. dollars,
March 18, 1996 $(82,991)
10,800,000 Deutchemarks for 7,448,276 U.S. dollars,
March 25, 1996 69,967
--------
Net unrealized loss in forward exchange contracts $(13,024)
========
</TABLE>
14
<PAGE>
Templeton Global Governments Income Trust
Annual Meeting of Shareholders, February 20, 1996
- --------------------------------------------------------------------------------
An Annual Meeting of Shareholders of the Fund was held at the Fund's offices,
700 Central Avenue, St. Petersburg, Florida, on February 20, 1996. 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, 1996. At the meeting, the following per-
sons were elected by the shareholders to serve as trustees of the Fund: John
Wm. Galbraith, Charles B. Johnson, Rupert H. Johnson, Jr. and Fred R. Millsaps.
In addition, the shareholders ratified the selection of McGladrey & Pullen,
LLP, to serve as the Fund's independent public accountants for the fiscal year
ending August 31, 1996. 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 WITHHOLD SHARES
---------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C>
Term expiring 1999:
John Wm. Galbraith 18,189,936 79.63% 98.58% 261,961 1.15%
Rupert H. Johnson, Jr. 18,203,254 79.69% 98.65% 248,643 1.09%
Fred R. Millsaps 18,243,010 79.86% 98.87% 208,887 .91%
Term expiring 1997:
Charles B. Johnson 18,212,732 79.73% 98.70% 239,165 1.05%
</TABLE>
2. Ratification of the selection of McGladrey & Pullen, LLP as independent pub-
lic accountants of the Fund for the fiscal year ending August 31, 1996:
<TABLE>
<CAPTION>
% OF % OF % OF % OF
OUTSTANDING SHARES OUTSTANDING OUTSTANDING
FOR SHARES VOTED AGAINST SHARES ABSTAIN SHARES
---------- ----------- ------ ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
18,120,029 79.32% 98.20% 61,443 .27% 270,425 1.18%
</TABLE>
15
<PAGE>
Templeton Global Governments Income Trust
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Trust offers a Dividend Reinvestment Plan (the "Plan") with the following
features: .If shares of the Fund are held in the shareholder's name, the share-
holder will automatically be a participant in the Plan unless he elects to
withdraw. If the shares are registered in the name of a broker-dealer or other
nominee (i.e., in "street name"), the broker-dealer or nominee will elect to
participate in the Plan on the shareholder's behalf unless the shareholder in-
structs them otherwise, or unless the reinvestment service is not provided by
the broker-dealer or nominee. .Participants should contact Dean Witter Trust
Company, P.O. Box 1040, Jersey City, New Jersey 07303, to receive the Plan bro-
chure. .To receive dividends or distributions in cash, the shareholder must no-
tify Dean Witter Trust Company (the "Plan Agent") or the institution in whose
name the shares are held. The Plan Agent must receive written notice within 10
business days before the record date for the distribution. .Whenever the Trust
declares dividends in either cash or common stock of the Trust, if the market
price is equal to or exceeds net asset value at the valuation date (payable
date), participants will receive the dividends entirely in stock at a price
equal to the net asset value but not less than 95% of the then current market
price of the Trust's shares. If the market price is lower than net asset value
and if dividends and/or capital gains distributions are payable only in cash,
the participant will receive shares purchased on the New York Stock Exchange.
.The automatic reinvestment of dividends and/or capital gains does not relieve
the participant of any income tax which may be payable on dividends or distri-
butions. .The participant may withdraw from the Plan without penalty at any
time by written notice to the Plan Agent. Upon withdrawal, the participant will
receive, without charge, stock certificates issued in the participant's name
for all full shares; or, if the participant's wishes, the Plan Agent will sell
the participant's shares and send the proceeds, net of any brokerage commis-
sions. A $5.00 fee is charged by the Plan Agent upon any cash withdrawal or
termination. .Whenever shares are purchased on the New York Stock Exchange,
each participant will pay a pro rata portion of brokerage commissions. Broker-
age commissions will be deducted from amounts to be invested.
16
<PAGE>
Templeton Global Governments Income Trust
- --------------------------------------------------------------------------------
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center Plaza II
Jersey City, N.J. 07311
SHAREHOLDER INFORMATION
Shares of Templeton Global Governments Income Trust are traded daily on the New
York Stock Exchange under the symbol "TGG." Information about the net asset
value and the market price is published weekly in Barron's and in the Monday
edition of the Wall Street Journal in a section called "Closed-End Bond Funds."
If any shareholder is not receiving copies of the Reports to Shareholders be-
cause shares are registered in a broker's name or in a custodian's name he or
she can request that his or her name be added to the Trust's mailing list, by
writing the Templeton Global Governments Income Trust, 700 Central Avenue, St.
Petersburg, Florida 33701.
For information about dividends and shareholders accounts, call 1-800-526-3143.
17
<PAGE>
Notes
-----
<PAGE>
THE FRANKLIN TEMPLETON GROUP
Literature Request - Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
Templeton Funds
Americas Government
Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Greater European Fund
Growth Fund
Growth and Income Fund
Income Fund
Latin America Fund
Real Estate
Securities Fund
Smaller Companies
Growth Fund
World Fund
Franklin Funds Seeking
Tax-Free Income
Federal Tax-Free
Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
High Yield Tax-Free
Income Fund
Insured Tax-Free
Income Fund***
Puerto Rico Tax-Free
Income 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**
Franklin Funds
Seeking Capital Growth
California Growth Fund
DynaTech Fund
Equity Fund
Global Health
Care Fund
Gold Fund
Growth Fund
International
Equity Fund
Japan Fund
Pacific Growth Fund
Small Cap Growth Fund
Franklin Funds Seeking
Growth and Income
Balance Sheet
Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Natural Resources Fund
Premier Return Fund
Real Estate Securities Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
Franklin Funds Seeking
High Current Income
AGE High Income Fund
Global Government
Income Fund
Investment Grade
Income Fund
U.S. Government
Securities Fund
Franklin Funds Seeking
High Current Income and
Stability of Principal
Adjustable Rate
Securities Fund
Adjustable U.S. Government
Securities Fund
Short-Intermediate U.S.
Government
Securities Fund
Franklin Funds for
Non-U.S. Investors
Tax-Advantaged High Yield
Securities Fund
Tax-Advantaged International
Bond Fund
Tax-Advantaged U.S.
Government Securities Fund
Franklin Templeton Global
Currency Funds
German Government
Bond Fund
Global Currency Fund
High Income Currency Fund
Hard Currency Fund
Franklin Money
Market Funds
Money Fund
Federal Money Fund
Tax-Exempt Money
Fund
California Tax-Exempt
Money Fund
New York Tax-Exempt
Money Fund
IFT U.S. Treasury Money
Market Portfolio
Franklin Fund for
Corporations
Corporate Qualified
Dividend Fund
Franklin Tax-Deferred
Annuity
Franklin Valuemark
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
Fund Information: 1-800/342-5236
Shareholder Services: 1-800/632-2301
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.
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and a high yield
portfolio (CA).
**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.
<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.
- --------------------------
[RECYCLING PAPER LOGO APPEARS HERE] TLTGG S96 04/96
TEMPLETON
GLOBAL
GOVERNMENTS
INCOME
TRUST
Semi-Annual Report
February 29, 1996
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
