N-30D 1 tlgim2002a.txt GLOBAL INCOME FUND ANNUAL REPORT PE 8/31/02 Annual Report AUGUST 31, 2002 [PHOTO OMITTED] TEMPLETON GLOBAL INCOME FUND, INC. [LOGO OMITTED] FRANKLIN[R] TEMPLETON[R] INVESTMENTS CONTENTS Shareholder Letter .......... 1 Performance Summary ......... 8 Important Notice to Shareholders ............. 9 Financial Highlights & Statement of Investments ....11 Financial Statements ........15 Notes to Financial Statements ........18 Independent Auditors' Report ............22 Board Members and Officers ................26 FUND CATEGORY [GRAPHIC OF PYRAMID OMITTED] Global Growth Growth & Income Income Tax-Free Income 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 AT LEAST 80% OF ITS NET ASSETS IN INCOME-PRODUCING SECURITIES, INCLUDING DEBT SECURITIES OF U.S. AND FOREIGN ISSUERS, INCLUDING EMERGING MARKETS. -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to bring you Templeton Global Income Fund's annual report covering the fiscal year ended August 31, 2002. As the 12 months under review began, the U.S. was experiencing decelerating economic growth and appeared to be on the edge of entering a recession when the events of September 11 shocked the world and negatively affected the economy. The Federal Reserve Board (the Fed) instituted a series of interest rates cuts to provide additional liquidity to the economy. The federal funds target rate decreased from 3.50% at the beginning of the reporting period to 1.75% in December 2001, where it remained throughout the balance of the Fund's fiscal year. The U.S. led a slowdown in overall global economic growth, which influenced most major central bank officials around the world to ease monetary policy as well. Largely as a result, global bond markets generally posted positive returns, and the J.P. Morgan Global Government Bond Index (JPM GGBI) rose 6.38% in local currency terms during the period. In U.S.-dollar terms, the JPM GGBI generated a total return of The dollar value, number of shares or principal amount, and complete legal titles of all portfolio holdings are listed in the Fund's Statement of Investments (SOI). The SOI begins on page 12. 10.06% as most major foreign currencies appreciated versus the U.S. dollar due to concerns of a slower-than-expected economic recovery and reduced appetite for U.S. securities.(1) Typical for an economic recovery cycle's early stages, first quarter 2002 economic growth was led by supply side growth, as companies rebuilt inventories. Although second quarter 2002 growth moderated from the first quarter, consumer spending remained strong, driven in part by auto and housing sales, as many consumers took advantage of low interest rates and attractive financing. Given excess economic capacity, indicated by relatively low capacity utilization and employment rates, U.S. corporations seemed hesitant to commit to new business investment and remained constrained by domestic demand. This slower-than-expected economic recovery, coupled with accounting and corporate governance scandals, led U.S. securities markets to significantly decline during the reporting period. Reflecting the relative attractiveness of non-U.S.-dollar assets within international markets, the U.S. dollar reached parity with the euro for the first time in more than two years. Favorable inflationary pressures allowed the Fed to maintain low interest rates to help offset, to some degree, the negative effects on consumption resulting from the loss of wealth due to stock market declines. Economic activity among European economies generally followed that of the U.S. Overall European economic growth was constrained during the period due to low domestic demand, while a slower global economy and a stronger euro reduced export growth. However, the stronger currency helped curb inflationary pressures, and we believe an easing in inflation indicators could allow European Central Bank policymakers to remain flexible in administering monetary policy. 1. Source: J.P. Morgan. The unmanaged JPM GGBI tracks total returns of government bonds in developed countries globally. The bonds included in the index are weighted according to their market capitalization. The index is unhedged, expressed in terms of $US and includes reinvested interest. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. "... THE U.S. DOLLAR REACHED PARITY WITH THE EURO FOR THE FIRST TIME IN MORE THAN TWO YEARS." 2 As mentioned earlier, monetary easing on the part of most central banks resulted in positive bond market performance, characterized by downward shifts of bond yields across maturities. U.S. Treasury bonds generated a return of 9.40% during the reporting period and were one of the better performing assets. European bonds were also strong, returning 6.98% in local currency terms, with the U.K. generating a 7.29% return and the European Monetary Union countries delivering a return of 7.05%. In Asia, Japanese bonds returned 2.54% in local currency terms as the economy continued to experience deflation, hampered by ineffective monetary policy and uncertainties about an economic recovery. The bond markets of the dollar-bloc countries, namely Australia, Canada and New Zealand, generated positive returns of 4.88%, 7.71% and 7.76%, respectively.(1) Economic uncertainty during the year under review, combined with a series of corporate accounting scandals and ongoing geopolitical tension, increased investor risk aversion, which was reflected in the poor performance of major equity markets and wider yield spreads for risk-bearing fixed income asset classes such as high yield bonds. For the 12 months under review, the Nasdaq Com-posite Index, Standard & Poor's 500 Composite Index (S&P 500) and Dow Jones Industrial Average each declined, posting returns of -26.35%, -17.99% and -11.26%, respectively.(2) High yield credit risk premiums, as measured by the CS First Boston High Yield Index, rose from 8.24% at the beginning of the period to 9.68% at its close.(3) Lower interest rates in developed economies generally benefit emerging market borrowers, as financing costs fall and posi- 2. Source: Standard & Poor's Micropal. The Nasdaq Composite Index measures all domestic and international common stocks listed on the Nasdaq Stock Market. The index is market value-weighted and includes over 4,000 companies. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. Each stock's weight in the index is proportionate to its market value. The S&P 500 is one of the most widely used benchmarks of U.S. equity performance. The Dow Jones Industrial Average, calculated by Wilshire Associates Inc., is price-weighted based on the average market price of 30 blue chip stocks of companies that are generally industry leaders. The indexes are unmanaged and include reinvested dividends. 3. Source: CSFB.com. The CS First Boston High Yield Index is a trader-priced portfolio constructed to mirror the high yield debt market. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. -------------------------------------------------------------------------------- WELCOME TO OUR NEW SHAREHOLDERS WHO JOINED THE FUND DURING THE PERIOD AS A RESULT OF THE REORGANIZATION OF TEMPLETON GLOBAL GOVERN-MENTS INCOME TRUST. -------------------------------------------------------------------------------- 3 tive capital flows result as investors seek higher returns outside developed countries. Despite the greater investor risk aversion for other asset classes, the interest rate spread on the J.P. Morgan Emerging Markets Bond Index Global (JPM EMBIG) remained relatively unchanged. After experiencing significant gains through the first five months of 2002, emerging market bond performance, as measured by the JPM EMBIG, declined during the 12-month period under review largely as a result of the index's weightings and the performance of highly leveraged countries that experienced difficulties in servicing their debt levels after their economies began to struggle. During the year under review, performance within the emerging market bond universe, as measured by JPM EMBIG, diverged significantly by region. In particular, Argentina's banking crisis and economic contraction negatively impacted regional trade partners, such as Uruguay, and both countries deferred payments on external debt during the period. In addition, the contagion also affected Brazil and impacted bond prices there, and the Latin America region as a whole had a return of -13.38% in U.S. dollar terms. Elsewhere, positive underlying fundamental trends in European and Asian emerging markets supported bond prices, and the regions returned 30.41% and 15.92% in U.S. dollar terms. Overall, the JPM EMBIG returned -0.03% for the 12-month period ended August 31, 2002.(4) Despite Latin America's adverse developments, we believe it is important to underscore the emerging market region's significant progress in economic reform and debt dynamics. The Eastern European and Asian regions outperformed the JPM EMBIG, driven by positive macroeconomic fundamentals, sustainable 4. Source: J.P. Morgan. The JPM EMBIG tracks total returns for U.S. dollar-denominated debt instruments issued by emerging markets sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. The index includes reinvested interest. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. GEOGRAPHIC DISTRIBUTION BASED ON TOTAL NET ASSETS 8/31/02 [PIE CHART OMITTED] EUROPE 60.7% LATIN AMERICA 14.9% AUSTRALIA & NEW ZEALAND 9.9% ASIA 6.7% CANADA 2.3% SHORT-TERM INVESTMENTS & OTHER NET ASSETS 5.5% 4 debt levels and positive trade conditions. In particular, ongoing political and structural reforms in Russia contributed to a positive investment climate, as evidenced by increased capital flows and a return of capital to the country. The strength in the balance of payments from capital flows and relatively stronger oil prices during the period, combined with prudent fiscal management, contributed to a significant build-up of reserves. Russia was recognized as a market economy by the U.S. government during the past year and Standard & Poor's rating agency upgraded the country's sovereign debt rating from B+ to BB- during the period, reflecting Russia's progress in economic reforms and fiscal management and supported by relatively strong oil prices. Asia benefited, in part, from improving domestic demand and strong inter-regional trade flows. Relatively low interest rates and favorable inflationary trends supported underlying fundamentals in the region. Although speculation exists over the Philippines' fiscal discipline, export strength and low interest rates continued to support bond prices there. Malaysia provided investors with a relatively safe haven from volatility in other emerging markets regions after improving the banking system through increased lending growth and a reduction in non-producing loans. PORTFOLIO NOTES Within this environment, Templeton Global Income Fund posted a 21.32% cumulative total return in market price terms and a 12.76% cumulative total return in net asset value terms for the 12-month period ended August 31, 2002, as shown in the Performance Summary on page 8. The JPM GGBI, which measures and tracks bonds from around the world, posted a 10.06% cumulative total return in U.S. dollar terms for the same one-year period.(1) We attempted to maximize the Fund's return by allocating approximately 85% of its total net assets to intermediate-term bonds in the industrial markets and about 15% of its total net assets to what we believe were high quality 5 and liquid emerging market bonds. The Fund's managers believed that this combination of bonds offered the opportunity for higher long-term returns at the cost of modestly higher short-term volatility. The Fund's overall allocations, as measured by the percent of total net assets, notably changed during the period. The allocations to North America and Europe stood at 2.3% and 60.7% on August 31, 2002, compared with 19.2% and 42.7% at the beginning of the fiscal year. In North America, we eliminated the U.S. allocation by the end of the period, from 16.8% at the beginning, reflecting the Fund's strategic positioning on the U.S. dollar. We reinvested proceeds from the sales primarily in Europe and the dollar-bloc countries. The Fund's European holdings also changed during the period. We increased the allocations to Germany, France and the Netherlands to 10.9%, 7.8% and 4.4%, respectively, while also increasing exposure to the U.K. and Spain. In emerging markets, we had no exposure to Argentina, eliminated exposure to Brazil and took profits in Turkey. We increased the Fund's allocation to Eastern Europe, particularly Russia, initiated positions in Poland and the Philippines, and we increased exposure to Mexico. We believe our emerging market positions will continue to offer attractive opportunities for the portfolio over the longer term. OUTLOOK Looking forward, we remain optimistic in the near term for the global bond markets' prospects given constrained economic growth, favorable inflationary trends and accommodative monetary policy at the major central banks. We also remain positive on non-U.S.-dollar assets, particularly within the dollar-bloc countries. For emerging market bonds, we hold a positive outlook in the intermediate to longer term, supported by favorable underlying trends in developing European and Asian countries. However, we remain cautious in the short term due to increased economic and political volatility, particularly in Brazil. PORTFOLIO BREAKDOWN Based on Total Net Assets 8/31/02 Government Bonds 86.0% Corporate Bonds 8.5% Short-Term Investments & Other Net Assets 5.5% 6 It is important to note that global investing involves special risks 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. Investing in any emerging market security means accepting a certain amount of volatility that can arise from such factors as high levels of inflation, deflation or currency devaluation. In fact, short-term volatility in these markets, and declines exceeding 50%, are not uncommon. We look forward to serving your investment needs, and we welcome your comments and suggestions. Portfolio Management Team Templeton Global Income Fund -------------------------------------------------------------------------------- This discussion reflects our views, opinions and portfolio holdings as of August 31, 2002, the end of the reporting period. The information provided is not a complete analysis of every aspect of any country, industry, security or the Fund. Our strategies and the Fund's portfolio composition will change depending on market and economic conditions. Although historical performance is no guarantee of future results, these insights may help you understand our investment and management philosophy. -------------------------------------------------------------------------------- 7 PERFORMANCE SUMMARY AS OF 8/31/02 DISTRIBUTIONS AND RETURNS 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. 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. THE PERFORMANCE TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE SALE OF FUND SHARES. PRICE AND DISTRIBUTION INFORMATION CHANGE 8/31/02 8/31/01 -------------------------------------------------------------------------------- Net Asset Value (NAV) +$0.30 $7.29 $6.99 Market Price (NYSE) +$0.80 $7.35 $6.55 DISTRIBUTIONS (9/1/01-8/31/02) Dividend Income $.34 Return of Capital $.20 ---- Total $.54 PERFORMANCE 1-YEAR 5-YEAR 10-YEAR ------------------------------------------------------------------------- Cumulative Total Return(1) Based on change in net asset value 12.76% 34.19% 93.42% Based on change in market price 21.32% 49.37% 84.01% Average Annual Total Return(1) Based on change in net asset value 12.76% 6.06% 6.82% Based on change in market price 21.32% 8.36% 6.29% 1. Total return calculations represent the cumulative and average annual changes in value of an investment over the periods indicated. -------------------------------------------------------------------------------- Ongoing market volatility can dramatically change the Fund's short-term performance; current results may differ. 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. -------------------------------------------------------------------------------- For updated performance figures, please call Franklin Templeton Investments at 1-800/342-5236. Past performance does not guarantee future results. 8 IMPORTANT NOTICE TO SHAREHOLDERS -------------------------------------------------------------------------------- REORGANIZATION OF TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST. On August 1, 2002, shareholders of Templeton Global Governments Income Trust ("Global Governments Income Trust") approved a proposal providing for the reorganization of Global Governments Income Trust into Templeton Global Income Fund, Inc. ("Global Income Fund"). The reorganization involved Global Income Fund's acquisition of substantially all of the assets of Global Governments Income Trust in exchange for shares of Global Income Fund and the distribution of shares of Global Income Fund to holders of shares of beneficial interest of Global Governments Income Trust as a part of the liquidation and dissolution of Global Governments Income Trust. The tax-free reorganization was effective as of the close of business on August 30, 2002. NAMES RULE. The U.S. Securities and Exchange Commission adopted new Rule 35d-1 under the Investment Company Act of 1940, as amended (the "Names Rule"), requiring a fund with a name suggesting a focus in a particular type of investment, in a particular industry, or in a particular geographic region, to invest, under normal circumstances, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the type of investment, industry or geographic region suggested by its name. Consistent with the Names Rule, the Fund's Board of Directors adopted a non-fundamental investment policy to invest, under normal circumstances, at least 80% of the Fund's net assets in income-producing securities. In accordance with the Names Rule, the Fund has also adopted a non-fundamental policy to provide shareholders with 60 days' advance notice of any change to the foregoing 80% -------------------------------------------------------------------------------- 9 -------------------------------------------------------------------------------- investment policy. The Fund's fundamental investment policy to invest at least 65% of its total assets in at least three different countries (one of which may be in the United States) in one or more of the following investments: (i) debt securities that are issued or guaranteed as to interest and principal by the U.S. government, its agencies, authorities or instrumentalities ("U.S. Government securities"); (ii) debt obligations issued or guaranteed by a foreign sovereign government or one of its agencies or political subdivisions; (iii) debt obligations issued or guaranteed by supra-national organizations, which are chartered to promote economic development and are supported by various governments and governmental entities; (iv) U.S. and foreign corporate debt securities and preferred equity securities, including those debt securities which may have equity features such as conversion or exchange rights, or which carry warrants to purchase common stock or other equity interests; and (v) debt obligations of U.S. or foreign banks, savings and loan associations and bank holding companies remains the same. SHARE REPURCHASE PROGRAM. The Board of Directors of the Fund previously authorized an open-market share repurchase program pursuant to which the Fund may purchase, from time to time, shares of the Fund's common stock in open-market transactions, at the discretion of management. This authorization remains in effect. -------------------------------------------------------------------------------- 10 TEMPLETON GLOBAL INCOME FUND, INC. Financial Highlights
YEAR ENDED AUGUST 31, ------------------------------------------------- 2002 2001 2000 1999 1998 ------------------------------------------------- PER SHARE OPERATING PERFORMANCE+ (for a share outstanding throughout the year) Net asset value, beginning of year ..................... $6.99 $7.06 $7.50 $7.67 $8.35 ------------------------------------------------- Income from investment operations: Net investment income ................................. .45(b) .56 .60 .61 .60 Net realized and unrealized gains (losses) ............ .39(b) (.11) (.46) (.18) (.71) ------------------------------------------------- Total from investment operations ....................... .84 .45 .14 .43 (.11) Capital share repurchases .............................. -- .03 .02 .01 .03 ------------------------------------------------- Less distributions from: Net investment income ................................. (.34) (.31) (.60) (.60) (.60) Net realized gains .................................... -- -- -- (.01) -- Tax return of capital ................................. (.20) (.24) -- -- -- ------------------------------------------------- Total distributions .................................... (.54) (.55) (.60) (.61) (.60) ------------------------------------------------- Net asset value, end of year ........................... $7.29 $6.99 $7.06 $7.50 $7.67 ------------------------------------------------- Market value, end of year(a) ........................... $7.3500 $6.5500 $6.1875 $6.5625 $6.4375 Total return (based on market value per share) ......... 21.32% 15.44% 3.97% 11.29% (7.69)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) ........................ $944,602 $763,696 $797,122 $862,788 $891,785 Ratios to average net assets: Expenses .............................................. .75% .75% .75% .76% .74% Net investment income ................................. 6.28%(b) 8.11% 8.12% 7.70% 7.26% Portfolio turnover rate ................................ 82.31% 66.27% 110.36% 66.07% 74.55% + Based on average weighted shares outstanding effective year ended August 31, 1999. a Based on the last sale on the New York Stock Exchange. b The November 2000, revised AICPA Audit and Accounting Guide of Investment Companies was implemented September 1, 2001, resulting in a (decrease) increase of $(.09) and $.09 to net investment income and net realized and unrealized gains per share, respectively, and a decrease of (1.32)% to the ratio of net investment income to average net assets for the year ended August 31, 2002.
See notes to financial statements. 11 TEMPLETON GLOBAL INCOME FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002
PRINCIPAL AMOUNT* VALUE -------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS 94.5% AUSTRALIA 4.5% Government of Australia, 10.00%, 10/15/07 ................................. 24,748,000 AUD $ 16,379,338 New South Wales Treasury Corp.: 6.50%, 5/01/06 ........................................................... 9,381,000 AUD 5,331,323 8.00%, 3/01/08 ........................................................... 6,200,000 AUD 3,766,799 Queensland Treasury Corp., 6.50%, 6/14/05 ................................. 30,258,000 AUD 17,145,611 ------------ 42,623,071 ------------ BELGIUM 4.9% Kingdom of Belgium: 4.75%, 9/28/06 ........................................................... 11,400,000 EUR 11,504,689 8.50%, 10/01/07 .......................................................... 22,818,000 EUR 26,696,487 5.00%, 9/28/12 ........................................................... 8,340,000 EUR 8,330,349 ------------ 46,531,525 ------------ BULGARIA 1.0% Republic of Bulgaria, Reg S, 8.25%, 1/15/15 ............................... 9,320,000 9,657,850 ------------ CANADA 2.3% Government of Canada: 10.25%, 2/01/04 .......................................................... 1,130,000 CAD 792,807 6.00%, 6/01/11 ........................................................... 30,363,000 CAD 20,781,722 ------------ 21,574,529 ------------ DENMARK 3.1% Kingdom of Denmark: 4.00%, 11/15/04 .......................................................... 15,570,000 DKK 2,061,139 8.00%, 3/15/06 ........................................................... 86,520,000 DKK 12,831,533 6.00%, 11/15/11 .......................................................... 31,400,000 DKK 4,498,215 5.00%, 11/15/13 .......................................................... 75,940,000 DKK 10,096,982 ------------ 29,487,869 ------------ ECUADOR .4% Republic of Ecuador, Reg S, 12.00%, 11/15/12 .............................. 6,200,000 3,596,000 ------------ FRANCE 7.8% Government of France: 8.25%, 2/27/04 ........................................................... 46,400,000 EUR 48,635,180 3.50%, 7/12/04 ........................................................... 2,000,000 EUR 1,961,029 8.50%, 10/25/08 .......................................................... 18,215,000 EUR 21,911,304 French Treasury Note, 4.75%, 7/12/07 ...................................... 1,200,000 EUR 1,211,792 ------------ 73,719,305 ------------ GERMANY 10.9% Bundesrepublik Deutschland, 5.00%, 1/04/12 ................................ 15,930,000 EUR 16,149,028 Federal Republic of Germany: 4.00%, 6/25/04 ........................................................... 4,580,000 EUR 4,533,826 4.00%, 2/16/07 ........................................................... 37,670,000 EUR 36,968,860 6.00%, 7/04/07 ........................................................... 42,923,000 EUR 45,737,864 ------------ 103,389,578 ------------
12 TEMPLETON GLOBAL INCOME FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.)
PRINCIPAL AMOUNT* VALUE -------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) HONG KONG .2% Government of Hong Kong, 5.92%, 12/05/11 .................................. 10,800,000 HKD $ 1,557,841 ------------ ITALY 7.3% Buoni Poliennali del Tesoro: 8.75%, 7/01/06 ........................................................... 13,512,000 EUR 15,492,937 6.75%, 7/01/07 ........................................................... 7,373,000 EUR 8,050,661 Government of Italy: 10.50%, 4/01/05 .......................................................... 34,958,000 EUR 39,871,483 10.50%, 9/01/05 .......................................................... 3,395,000 EUR 3,954,419 5.00%, 5/01/08 ........................................................... 1,573,000 EUR 1,596,942 ------------ 68,966,442 ------------ MEXICO 7.7% United Mexican States: 8.625%, 3/12/08 .......................................................... 23,535,000 25,929,686 11.375%, 9/15/16 ......................................................... 36,757,000 46,515,984 ------------ 72,445,670 ------------ NETHERLANDS 4.4% Cellco Finance NV, 15.00%, 8/01/05 ........................................ 13,835,000 13,143,250 Government of Netherlands: 7.75%, 3/01/05 ........................................................... 17,753,000 EUR 19,066,090 5.75%, 2/15/07 ........................................................... 9,269,000 EUR 9,711,870 ------------ 41,921,210 ------------ NEW ZEALAND 5.4% Government of New Zealand: 8.00%, 11/15/06 .......................................................... 34,323,000 NZD 17,186,294 7.00%, 7/15/09 ........................................................... 69,080,000 NZD 33,638,715 ------------ 50,825,009 ------------ NORWAY .8% Kingdom of Norway, 5.75%, 11/30/04 ........................................ 56,020,000 NOK 7,329,365 ------------ PANAMA .7% Republic of Panama, 8.875%, 9/30/27 ....................................... 7,030,000 6,678,500 ------------ PERU .9% Republic of Peru, FRN, 3.25%, 3/07/17 ..................................... 11,880,000 8,345,700 ------------ PHILIPPINES 6.5% Republic of Philippines, 10.625%, 3/16/25 ................................. 59,285,000 61,691,971 ------------ POLAND 2.0% Republic of Poland, FRN, 6.00%, 10/27/14 .................................. 18,502,400 18,707,832 ------------ RUSSIA 5.0% Federation of Russia: 12.75%, 6/24/28 .......................................................... 2,893,000 3,480,855 Reg S, 11.00%, 7/24/18 ................................................... 40,506,000 43,692,283 ------------ 47,173,138 ------------
13 TEMPLETON GLOBAL INCOME FUND, INC. STATEMENT OF INVESTMENTS, AUGUST 31, 2002 (CONT.)
PRINCIPAL AMOUNT* VALUE -------------------------------------------------------------------------------------------------------------- LONG TERM INVESTMENTS (CONT.) SPAIN 5.0% Government of Spain: 10.15%, 1/31/06 .......................................................... 14,856,000 EUR $ 17,433,596 8.80%, 4/30/06 ........................................................... 13,342,000 EUR 15,214,588 4.80%, 10/31/06 .......................................................... 6,200,000 EUR 6,269,133 5.00%, 7/30/12 ........................................................... 8,600,000 EUR 8,601,856 ------------ 47,519,173 ------------ SWEDEN 5.1% Kingdom of Sweden: 10.25%, 5/05/03 .......................................................... 279,300,000 SEK 30,851,799 5.00%, 1/15/04 ........................................................... 7,800,000 SEK 835,903 3.50%, 4/20/06 ........................................................... 25,640,000 SEK 2,624,917 5.50%, 10/08/12 .......................................................... 129,210,000 SEK 14,231,406 ------------ 48,544,025 ------------ UKRAINE .7% Republic of Ukraine, 11.00%, 3/15/07 ...................................... 6,042,210 6,234,316 ------------ UNITED KINGDOM 2.7% United Kingdom, 8.50%, 7/16/07 ............................................ 13,941,000 GBP 25,263,952 ------------ VENEZUELA 5.2% Republic of Venezuela, 9.25%, 9/15/27 ..................................... 70,205,000 48,687,168 ------------ TOTAL LONG TERM INVESTMENTS (COST $900,426,185) ........................... 892,471,039 ------------ SHARES ----------- SHORT TERM INVESTMENTS 2.5% aFranklin Institutional Fiduciary Trust Money Market Portfolio ............. 18,229,638 18,229,638 PRINCIPAL AMOUNT ---------- New Zealand Treasury Bill, 5.76%, 10/09/02 ................................ 11,660,000 NZD 5,416,436 ------------ TOTAL SHORT TERM INVESTMENTS (COST $23,766,606) ........................... 23,646,074 ------------ TOTAL INVESTMENTS (COST $924,192,791) 97.0% ............................... 916,117,113 OTHER ASSETS, LESS LIABILITIES 3.0% ....................................... 28,485,016 ------------ TOTAL NET ASSETS 100.0% ................................................... $944,602,129 ============ CURRENCY ABBREVIATIONS: AUD-- Australian Dollar CAD-- Canadian Dollar DKK-- Danish Krone EUR-- European Unit GBP-- British Pound HKD-- Hong Kong Dollar NOK-- Norwegian Krone NZD-- New Zealand Dollar SEK-- Swedish Krona * Securities denominated in U.S. dollars unless otherwise indicated. a The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed by Franklin Advisers Inc., an affiliate of Franklin Resources Inc.
See notes to financial statements. 14 TEMPLETON GLOBAL INCOME FUND, INC. Financial Statements
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2002 Assets: Investments in securities, at value (cost $924,192,791) ................................. $ 916,117,113 Cash .................................................................................... 580,617 Foreign currency, at value (cost $147,879) .............................................. 147,827 Receivables: Investment securities sold ............................................................. 160,704 Dividends and interest ................................................................. 28,649,100 ------------- Total assets ....................................................................... 945,655,361 ------------- Liabilities: Payables: To affiliates .......................................................................... 522,547 Accrued expenses ........................................................................ 530,685 ------------- Total liabilities .................................................................. 1,053,232 ------------- Net assets, at value ..................................................................... $ 944,602,129 ============= Net assets consist of: Undistributed net investment income ..................................................... $ (32,328,223) Net unrealized depreciation ............................................................. (7,602,228) Accumulated net realized loss ........................................................... (86,783,095) Capital shares .......................................................................... 1,071,315,675 ------------- Net assets, at value ..................................................................... $ 944,602,129 ============= Net asset value per share ($944,602,129 / 129,506,502 shares outstanding) ................ $7.29 =============
See notes to financial statements. 15 TEMPLETON GLOBAL INCOME FUND, INC. Financial Statements (CONTINUED)
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2002 Investment Income: Dividends .................................................................. $ 550,093 Interest ................................................................... 54,054,521 ----------- Total investment income ............................................... $54,604,614 Expenses: Management fees (Note 3) ................................................... 3,883,432 Administrative fees (Note 3) ............................................... 1,049,469 Transfer agent fees ........................................................ 368,900 Custodian fees ............................................................. 160,300 Registration and filing fees ............................................... 133,350 Professional fees .......................................................... 136,400 Directors' fees and expenses ............................................... 63,250 Other ...................................................................... 26,600 ----------- Total expenses ........................................................ 5,821,701 ----------- Net investment income ............................................ 48,782,913 ----------- Realized and unrealized gains (losses): Net realized gain (loss) from: Investments ............................................................... (9,470,004) Foreign currency transactions ............................................. 93,376 ----------- Net realized loss ..................................................... (9,376,628) Net unrealized appreciation (depreciation) on: Investments ............................................................... 52,773,009 Translation of assets and liabilities denominated in foreign currencies ... (54,474) ----------- Net unrealized appreciation ........................................... 52,718,535 ----------- Net realized and unrealized gain ............................................ 43,341,907 ----------- Net increase in net assets resulting from operations ........................ $92,124,820 ===========
See notes to financial statements. 16 TEMPLETON GLOBAL INCOME FUND, INC. Financial Statements (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001 2002 2001 --------------------------- Increase (decrease) in net assets: Operations: Net investment income ..................................................... $ 48,782,913 $ 61,904,968 Net realized loss from investments and foreign currency transactions ...... (9,376,628) (36,525,270) Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies ................. 52,718,535 24,082,089 --------------------------- Net increase in net assets resulting from operations .................. 92,124,820 49,461,787 Distributions to shareholders from: Net investment income ...................................................... (37,684,878) (34,203,437) Tax return of capital ...................................................... (21,310,810) (26,322,100) --------------------------- Total distributions to shareholders ......................................... (58,995,688) (60,525,537) Capital share transactions (Notes 2 and 6) .................................. 147,777,226 (22,362,140) Net increase (decrease) in net assets ................................. 180,906,358 (33,425,890) Net assets: Beginning of year .......................................................... 763,695,771 797,121,661 --------------------------- End of year ................................................................ $944,602,129 $763,695,771 =========================== Undistributed net investment income included in net assets: End of year ................................................................ $(32,328,223) $ (334,526) ===========================
See notes to financial statements. 17 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. 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 denominated assets and liabilities other than investments in securities held at the end of the reporting period. C. FOREIGN CURRENCY CONTRACTS When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations. The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts. 18 TEMPLETON GLOBAL INCOME FUND, INC. Notes to Financial Statements (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.) D. 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. E. 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. Bond discount and premium is amortized on a yield to maturity basis. Distributions to shareholders are recorded on the ex-dividend date. F. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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. G. AUDIT GUIDE In November 2000, a revised AICPA Audit and Accounting Guide, Audits of Investment Companies, was issued, and is effective for fiscal years beginning after December 15, 2000. The revised Guide requires the Fund to amortize all premiums and discounts on fixed-income securities. Such amortization is included in net investment income but did not impact the net assets or the distributions of the Fund. Prior to September 1, 2001, premiums on fixed income securities were included in realized gains and losses. The cumulative effect of this accounting change resulted in a reduction of $26,413,205 in the recorded cost of investments and a corresponding increase in net unrealized appreciation. The effect of this change for the year ended August 31, 2002 was to decrease net investment income by $10,251,795, increase unrealized appreciation by $1,651,331, and decrease realized losses by $8,600,464. The Statement of Changes in Net Assets and the Financial Highlights for prior periods have not been restated to reflect this change in accounting policy. 2. CAPITAL STOCK The Board of Directors of the Fund previously authorized an open-market share repurchase program pursuant to which the Fund may purchase, from time to time, shares of the Fund's common stock in open-market transactions, at the discretion of management. This authorization remains in effect. 19 TEMPLETON GLOBAL INCOME FUND, INC. Notes to Financial Statements (CONTINUED) 2. CAPITAL STOCK (CONT.) At August 31, 2002, there were 200 million shares authorized ($0.01 par value). During the year ended August 31, 2002, 91,899 shares were issued for $669,002 from reinvested distributions. Share repurchase transactions were as follows:
YEAR ENDED ---------------------------- 2002 2001 ------------------------------------------------------------------------------------------------------------- Shares repurchased ................................................................ -- 3,683,700 Amount repurchased ................................................................ -- $22,362,140 Weighted average discount of market price to net assets value of shares repurchased -- 11%
Through August 31, 2002, the Fund had repurchased a total of 11,210,400 shares. 3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Certain officers of the Fund are also officers or directors of Franklin Advisers, Inc. (Advisers) and Franklin Templeton Services, LLC (FT Services), the Fund's investment manager and administrative manager, respectively. The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows: ANNUALIZED FEE RATE AVERAGE DAILY NET ASSETS --------------------------------------------------------------------- 0.55% First $200 million 0.50% Over $200 million Management fees were reduced on assets invested in the Franklin Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund) in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund pays an administrative fee to FT Services based on the average daily net assets of the Fund as follows: ANNUALIZED FEE RATE AVERAGE DAILY NET ASSETS --------------------------------------------------------------------- 0.15% First $200 million 0.135% Over $200 million, up to and including $700 million 0.10% Over $700 million 4. INCOME TAXES At August 31, 2002, the cost of investments and net unrealized depreciation for income tax purposes were as follows: Cost of investments ..................... $ 959,919,805 -------------- Unrealized appreciation ................. 27,536,537 Unrealized depreciation ................. (71,339,229) -------------- Net unrealized depreciation ............. $ (43,802,692) ============== 20 TEMPLETON GLOBAL INCOME FUND, INC. Notes to Financial Statements (CONTINUED) 4. INCOME TAXES (CONT.) The tax character of distributions paid during the year ended August 31, 2002, was the same for financial statements and tax purposes. Net investment income and net realized capital gains differ for financial statement and tax purposes primarily due to differing treatments of wash sales, losses realized subsequent to October 31 on the sale of securities and foreign currencies, and bond discounts and premiums. At August 31, 2002, the Fund had tax basis capital losses including $9,690,318 from the merged Templeton Global Governments Income Trust which may be carried over to offset future capital gains, subject to certain limitations. Such losses expire as follows: Capital loss carryovers expiring in: 2007 ............................. $ 134,135 2008 ............................. 11,539,262 2009 ............................. 22,567,406 2010 ............................. 27,371,582 ----------- $61,612,385 =========== At August 31, 2002, the Fund had deferred capital and currency losses occurring subsequent to October 31, 2001 of $14,188,028 and $7,583,891, respectively. For tax purposes, such losses will be reflected in the year ending August 31, 2003. 5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the year ended August 31, 2002 aggregated $610,397,199 and $610,351,756, respectively. 6. MERGER On August 30, 2002, the Fund acquired the net assets of the Templeton Global Governments Income Trust, an affiliate of the Fund, pursuant to a plan of reorganization approved by Templeton Global Income Fund, Inc. shareholders. The merger was accomplished by a tax-free exchange of 20,171,603 shares of the Fund (valued at $7.29 per share) for the net assets of the Templeton Global Governments Income Trust, Inc. which aggregated $147,108,224, including $328,685 of unrealized appreciation. The combined net assets of the Fund immediately after the merger were $944,602,129. 21 TEMPLETON GLOBAL INCOME FUND, INC. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Templeton Global Income Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of 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, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. 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 audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, 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 audits, which included confirmation of securities at August 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. The financial highlights for the year ended August 31, 1998 were audited by other independent accountants whose report dated September 29, 1998 expressed an unqualified opinion on those financial statements. PricewaterhouseCoopers LLP San Francisco, California September 25, 2002 22 TEMPLETON GLOBAL INCOME FUND, INC. Annual Meeting of Shareholders, March 4, 2002 An Annual Meeting of Shareholders of the Fund was held at the Fund's offices, 500 E. Broward Blvd., Ft. Lauderdale, Florida, on March 4, 2002. The purpose of the meeting was to elect three Directors of the Fund. At the meeting, the following persons were elected by the shareholders to serve as Directors of the Fund: Edith E. Holiday, Gordon S. Macklin and Constantine D. Tseretopoulos.* No other business was transacted at the meeting. The results of the voting at the Annual Meeting are as follows: The election of three (3) Directors:
% OF % OF % OF % OF OUTSTANDING VOTED OUTSTANDING VOTED TERM EXPIRING 2005: FOR SHARES SHARES WITHHELD SHARES SHARES -------------------------------------------------------------------------------------------------------------- Edith E. Holiday ............ 99,161,674 90.77% 98.29% 1,729,302 1.58% 1.71% Gordon S. Macklin ........... 99,225,748 90.83% 98.35% 1,665,228 1.52% 1.65% Constantine D. Tseretopoulos 99,022,561 90.64% 98.15% 1,868,415 1.71% 1.85%
* HARRIS J. ASHTON, NICHOLAS F. BRADY, FRANK J. CROTHERS, 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. 23 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; Mellon 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 Mellon 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 on 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 Mellon 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. 24 TEMPLETON GLOBAL INCOME FUND, INC. TRANSFER AGENT Mellon Investor Services LLC 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 1-800-416-5585 www.melloninvestor.com SHAREHOLDER INFORMATION Shares of Templeton Global Income Fund, Inc. are traded 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 distributions and shareholder accounts, call 1-800/416-5585. Registered shareholders can now access their Fund account on-line with INVESTOR SERVICEDIRECT[SERVICEMARK]. For information go to Mellon Investor Services' web site at https://www.melloninvestor.com and follow the instructions. 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. 25 BOARD MEMBERS AND OFFICERS The name, age and address of the officers and board members, as well as their affiliations, positions held with the Fund, principal occupations during the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Each board member will serve until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- HARRIS J. ASHTON (70) Director Since 1992 132 Director, Bar-S Foods (meat packing company). 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998). ----------------------------------------------------------------------------------------------------------------------------------- FRANK J. CROTHERS (58) Director Since 1999 16 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Chairman, Caribbean Electric Utility Services Corporation and Atlantic Equipment & Power Ltd.; Vice Chairman, Caribbean Utilities Co. Ltd.; Director and President, Provo Power Company Ltd.; and director of various other business and nonprofit organizations. ----------------------------------------------------------------------------------------------------------------------------------- S. JOSEPH FORTUNATO (70) Director Since 1992 133 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Member of the law firm of Pitney, Hardin, Kipp & Szuch. ----------------------------------------------------------------------------------------------------------------------------------- ANDREW H. HINES, JR. (79) Director Since 1990 27 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Consultant, Triangle Consulting Group; and Executive-in-Residence, Eckerd College (1991-present); and FORMERLY, Chairman and Director, Precise Power Corporation (1990-1997); Director, Checkers Drive-In Restaurant, Inc. (1994-1997); and Chairman of the Board and Chief Executive Officer, Florida Progress Corporation (holding company in the energy area) (1982-1990) and director of various of its subsidiaries. -----------------------------------------------------------------------------------------------------------------------------------
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NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- EDITH E. HOLIDAY (50) Director Since 1996 81 Director, Amerada Hess Corporation (exploration 500 East Broward Blvd. and refining of oil and gas); Hercules Suite 2100 Incorporated (chemicals, fibers and resins); Ft. Lauderdale, FL 33394-3091 Beverly Enterprises, Inc. (health care); H.J. Heinz Company (processed foods and allied products); RTI International Metals, Inc. (manufacture and distribution of titanium); and Canadian National Railway (railroad). PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various companies; and FORMERLY, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989). ----------------------------------------------------------------------------------------------------------------------------------- BETTY P. KRAHMER (73) Director Since 1990 21 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director or trustee of various civic associations; and FORMERLY, Economic Analyst, U.S. government. ----------------------------------------------------------------------------------------------------------------------------------- GORDON S. MACKLIN (74) Director Since 1993 132 Director, White Mountains Insurance Group, Ltd. 500 East Broward Blvd. (holding company); Martek Biosciences Corporation; Suite 2100 WorldCom, Inc. (communications services); Ft. Lauderdale, FL 33394-3091 MedImmune, Inc. (biotechnology); Overstock.com (Internet services); and Spacehab, Inc. (aerospace services). PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation (financial services) (until 1998) and Hambrecht & Quist Group (investment banking) (until 1992); and President, National Association of Securities Dealers, Inc. (until 1987). ----------------------------------------------------------------------------------------------------------------------------------- FRED R. MILLSAPS (73) Director Since 1990 27 None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Director of various business and nonprofit organizations; and manager of personal investments (1978-present); and FORMERLY, Chairman and Chief Executive Officer, Landmark Banking Corporation (1969-1978); Financial Vice President, Florida Power and Light (1965-1969); and Vice President, Federal Reserve Bank of Atlanta (1958-1965). ----------------------------------------------------------------------------------------------------------------------------------- CONSTANTINE D. Director Since 1999 17 None TSERETOPOULOS (48) 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Physician, Lyford Cay Hospital (1987-present); and director of various nonprofit organizations; and FORMERLY, Cardiology Fellow, University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985). -----------------------------------------------------------------------------------------------------------------------------------
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INTERESTED BOARD MEMBERS AND OFFICERS NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- **NICHOLAS F. BRADY (72) Director Since 1993 62 Director, Amerada Hess Corporation 500 East Broward Blvd. (exploration and refining of oil and Suite 2100 gas); C2, Inc. (operating and investment Ft. Lauderdale, FL 33394-3091 business); and H.J. Heinz Company (processed foods and allied products). PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Chairman, Templeton Emerging Markets Investment Trust PLC, Darby Overseas Investments, Ltd. and Darby Emerging Markets Investments LDC (investment firms) (1994-present); Director, Templeton Capital Advisors Ltd. and Franklin Templeton Investment Fund; and formerly, Secretary of the United States Department of the Treasury (1988-1993); Chairman of the Board, Dillon, Read & Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April 1982-December 1982). ----------------------------------------------------------------------------------------------------------------------------------- **CHARLES B. JOHNSON (69) Director, Director and 132 None One Franklin Parkway Chairman of Vice President San Mateo, CA 94403-1906 the Board and since 1992 and Vice President Chairman of the Board since 1995 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.; and officer of 47 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- HARMON E. BURNS (57) Vice President Since 1996 Not None One Franklin Parkway Applicable San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 50 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- JEFFERY A. EVERETT (38) Vice President Since 2001 Not None PO Box N-7759 Applicable Lyford Cay, Nassau, Bahamas PRINCIPAL OCCUPATION DURING PAST 5 YEARS: President and Director, Templeton Global Advisors Limited; officer of 17 of the investment companies in Franklin Templeton Investments; and FORMERLY, Investment Officer, First Pennsylvania Investment Research (until 1989). ----------------------------------------------------------------------------------------------------------------------------------- MARTIN L. FLANAGAN (42) Vice President Since 1989 Not None One Franklin Parkway Applicable San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: President, Member - Office of the President, Chief Financial Officer and Chief Operating Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and Chief Operating Officer, Templeton Investment Counsel, LLC; Executive Vice President and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments. -----------------------------------------------------------------------------------------------------------------------------------
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NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- DAVID P. GOSS (55) Vice President Since 2000 Not None One Franklin Parkway and Assistant Applicable San Mateo, CA 94403-1906 Secretary PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Associate General Counsel, Franklin Resources, Inc.; President, Chief Executive Officer and Director, Property Resources, Inc. and Franklin Properties, Inc.; officer and/or director of some of the other subsidiaries of Franklin Resources, Inc.; officer of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000). ----------------------------------------------------------------------------------------------------------------------------------- BARBARA J. GREEN (54) Vice President Vice President Not None One Franklin Parkway and Secretary since 2000 Applicable San Mateo, CA 94403-1906 and Secretary since 1996 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice President and Deputy General Counsel, Franklin Resources, Inc.; and Senior Vice President, Templeton Worldwide, Inc. and officer of one of the other subsidiaries of Franklin Resources, Inc., and of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, Securities and Exchange Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until 1979). ----------------------------------------------------------------------------------------------------------------------------------- CHARLES E. JOHNSON (46) Vice President Since 1996 Not None One Franklin Parkway Applicable San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: President, Member - Office of the President and Director, Franklin Resources, Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President and Director, Templeton Worldwide, Inc. and Franklin Advisers, Inc.; Chairman of the Board, President and Director, Franklin Investment Advisory Services, Inc.; and officer and/or director of some of the other subsidiaries of Franklin Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- RUPERT H. JOHNSON, JR. (62) Vice President Since 1996 Not None One Franklin Parkway Applicable San Mateo, CA 94403-1906 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 50 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- JOHN R. KAY (62) Vice President Since 1994 Not None 500 East Broward Blvd. Applicable Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin Templeton Distributors, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of one of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc. -----------------------------------------------------------------------------------------------------------------------------------
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NUMBER OF PORTFOLIOS IN FUND LENGTH OF COMPLEX OVERSEEN NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD ----------------------------------------------------------------------------------------------------------------------------------- MICHAEL O. MAGDOL (65) Vice President Since May Not Applicable Director, FTI Banque, Arch Chemicals, Inc. and 600 5th Avenue - AML 2002 Lingnan Foundation Rockefeller Center Compliance New York, NY 10048-0772 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; officer and/or director, as the case may be of some of the other subsidiaries of Franklin Resources, Inc.; and officer of 40 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- GREGORY E. MCGOWAN (52) President Since 1996 Not Applicable None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Executive Vice President, Templeton Investment Counsel, LLC; Executive Vice President-International Development, Chief International General Counsel and Director, Templeton Worldwide, Inc.; Executive Vice President, General Counsel and Director, Templeton International, Inc.; Executive Vice President and Secretary, Templeton Global Advisors Limited; officer of three of the investment companies in Franklin Templeton Investments; and FORMERLY, Senior Attorney, Securities and Exchange Commission. ----------------------------------------------------------------------------------------------------------------------------------- BRUCE S. ROSENBERG (40) Treasurer Since 2000 Not Applicable None 500 East Broward Blvd. Suite 2100 Ft. Lauderdale, FL 33394-3091 PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Vice President, Franklin Templeton Services, LLC; and officer of some of the subsidiaries of Franklin Resources, Inc. and of 18 of the investment companies in Franklin Templeton Investments. ----------------------------------------------------------------------------------------------------------------------------------- MURRAY L. SIMPSON (65) Vice President Since 2000 Not Applicable None One Franklin Parkway and Assistant San Mateo, CA 94403-1906 Secretary PRINCIPAL OCCUPATION DURING PAST 5 YEARS: Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director of some of the subsidiaries of Franklin Resources, Inc.; officer of 52 of the investment companies in Franklin Templeton Investments; and FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director, Templeton Asset Management Ltd. (until 1999). ----------------------------------------------------------------------------------------------------------------------------------- *We base the number of portfolios on each separate series of the U.S. registered investment companies comprising the Franklin Templeton Investments fund complex. These portfolios have a common investment adviser or affiliated investment advisers. **Charles B. Johnson is considered an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Franklin Resources, Inc., which is the parent company of the Fund's adviser and distributor. Nicholas F. Brady is considered an interested person of the Fund under the federal securities laws due to his business affiliations with Franklin Resources, Inc. and Templeton Global Advisors Limited. Mr. Brady and Franklin Resources, Inc. are both limited partners of Darby Overseas Partners, L.P. (Darby Overseas). Mr. Brady is Chairman and shareholder of Darby Overseas Investments, Ltd., which is the corporate general partner of Darby Overseas. In addition, Darby Overseas and Templeton Global Advisors Limited are limited partners of Darby Emerging Markets Fund, L.P. (DEMF). Mr. Brady serves as Chairman of the corporate general partner of DEMF, and Darby Overseas and its general partner own 100% of the stock of the general partner of DEMF. Resources also is an investor in Darby Technology Ventures Group, LLC (DTV) in which Darby Overseas is a significant investor and for which Darby Overseas has the right to appoint a majority of the directors. Templeton Global Advisors Limited also is a limited partner in Darby-BBVA Latin America Private Equity Fund, L.P. (DBVA), a private equity fund in which Darby Overseas is a significant investor, and the general partner of which Darby Overseas controls jointly with an unaffiliated third party. Mr. Brady is also a director of Templeton Capital Advisors Ltd. (TCAL), which serves as investment manager to certain unregistered funds. TCAL and Templeton Global Advisors Limited are both indirect subsidiaries of Franklin Resources, Inc. Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively, of Charles E. Johnson.
30 This page intentionally left blank. This page intentionally left blank. LITERATURE REQUEST For a brochure and prospectus, which contain more complete information, including charges and expenses, call Franklin Templeton Investments at 1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before investing or sending money. To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be determined by the presence of a regular beeping tone. FRANKLIN TEMPLETON INVESTMENTS GLOBAL GROWTH Franklin Global Aggressive Growth Fund Franklin Global Growth Fund Franklin Global Health Care Fund Mutual Discovery Fund Templeton Developing Markets Trust Templeton Foreign Fund Templeton Foreign Smaller Companies Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund Templeton International (Ex EM) Fund Templeton Latin America Fund Templeton Pacific Growth Fund Templeton World Fund GLOBAL GROWTH & INCOME Franklin Global Communications Fund Mutual European Fund Templeton Global Bond Fund GLOBAL INCOME Franklin Templeton Hard Currency Fund GROWTH Franklin Aggressive Growth Fund Franklin Biotechnology Discovery Fund Franklin Blue Chip Fund Franklin Capital Growth Fund(1) Franklin DynaTech Fund Franklin Flex Cap Growth Fund(2) Franklin Gold and Precious Metals Fund Franklin Growth Fund Franklin Large Cap Growth Fund Franklin Small-Mid Cap Growth Fund Franklin Technology Fund GROWTH & INCOME Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Income Fund Franklin Large Cap Value Fund Franklin Natural Resources Fund Franklin Real Estate Securities Fund Franklin Rising Dividends Fund Franklin Small Cap Value Fund Franklin Utilities Fund Mutual Beacon Fund Mutual Financial Services Fund Mutual Qualified Fund Mutual Shares Fund FUND ALLOCATOR SERIES Franklin Templeton Conservative Target Fund Franklin Templeton Growth Target Fund Franklin Templeton Moderate Target Fund INCOME Franklin Adjustable U.S. Government Securities Fund(3) Franklin's AGE High Income Fund Franklin Floating Rate Daily Access Fund Franklin Floating Rate Trust(4) Franklin Short-Intermediate U.S. Government Securities Fund(3) Franklin Strategic Income Fund Franklin Total Return Fund Franklin U.S. Government Securities Fund(3) Franklin Federal Money Fund(3,5) Franklin Money Fund(3,5) TAX-FREE INCOME(6) Double Tax-Free Income Fund Federal Intermediate-Term Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund(7) Tax-Exempt Money Fund(3,5) STATE-SPECIFIC TAX-FREE INCOME(6) Alabama Arizona California(8) Colorado Connecticut Florida(8) Georgia Kentucky Louisiana Maryland Massachusetts(7) Michigan(7) Minnesota(7) Missouri New Jersey New York(8) North Carolina Ohio(7) Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust(9) 1. Formerly Franklin Growth and Income Fund. Effective 5/1/02, the fund's name changed; investment goal and strategy remained the same. 2. Formerly Franklin California Growth Fund. Effective 9/1/02, the fund's name changed and its investment criteria was modified to invest a majority of its net assets in California companies, as opposed to at least 80% of net assets. 3. An investment in the fund is neither insured nor guaranteed by the U.S. government or by any other entity or institution. 4. The fund is a continuously offered, closed-end fund. Shares may be purchased daily; there is no daily redemption. However, each quarter, pending board approval, the fund will authorize the repurchase of 5%-25% of the outstanding number of shares. Investors may tender all or a portion of their shares during the tender period. 5. No assurance exists that the fund's $1.00 per share price will be maintained. It is possible to lose money by investing in the fund. 6. For investors subject to the alternative minimum tax, a small portion of these dividends may be taxable. Distributions of capital gains are generally taxable. 7. Portfolio of insured municipal securities. 8. These funds are available in two or more variations, including long-term portfolios, portfolios of insured securities, a high-yield portfolio (CA) and intermediate-term and money market portfolios (CA and NY). 9. The funds of the Franklin Templeton Variable Insurance Products Trust are generally only available as investment options in variable annuity or variable life insurance contracts. 09/02 [LOGO OMITTED] FRANKLIN TEMPLETON INVESTMENTS 100 Fountain Parkway P.O. Box 33030 St. Petersburg, FL 33733-8030 ANNUAL REPORT TEMPLETON GLOBAL INCOME FUND, INC. AUDITORS PricewaterhouseCoopers LLP 333 Market Street San Francisco, CA 94105 TRANSFER AGENT Mellon Investor Services LLC 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 1-800/416-5585 www.melloninvestor.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 identified by the presence of a regular beeping tone. [LOGO OMITTED] Printed on recycled paper TLGIM A2002 10/02