-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ehqmf4mUjcmO6DrYOWvBlDXVrGgI3cE02FR3fSnN2NiJdmu9pQXew8pkXccEwyLR NVl0VMzCK6AlPr9B0i7dYw== 0000950109-95-004365.txt : 19951101 0000950109-95-004365.hdr.sgml : 19951101 ACCESSION NUMBER: 0000950109-95-004365 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951031 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLETON GLOBAL INCOME FUND INC CENTRAL INDEX KEY: 0000828803 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05459 FILM NUMBER: 95585870 BUSINESS ADDRESS: STREET 1: 700 CENTRAL AVE STREET 2: P O BOX 33030 CITY: ST PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 8138238712 N-30D 1 ANNUAL REPORT Templeton Global Income Fund - -------------------------------------------------------------------------------- Your Fund's Objective: The Templeton Global Income Fund seeks current income, with capital appreciation and growth of income, by investing primarily in a portfolio of debt securities of companies, governments, and government agencies of various nations throughout the world. - -------------------------------------------------------------------------------- October 16, 1995 Dear Shareholder: We are pleased to bring you the eighth annual report of the Templeton Global Income Fund, which covers the fiscal year ended August 31, 1995. As the 12 months under review progressed, it became increasingly evident that global economic growth was slowing significantly. After increasing at an annualized rate of 5.1% in the fourth quarter of 1994, U.S. Gross Domestic Product (GDP) fell to just 2.7% in the first quarter of 1995 and further to 1.1% in the second quarter.* Concerned that the economy was slowing more than expected, the Federal Reserve Board lowered short-term interest rates in July. In Japan, economic growth was essentially flat, as GDP increased at an annualized rate of only 0.3% for the first quarter of 1995, due to the strong yen and sluggish consumer spending.** The government implemented a plan to stimulate consumer spending, but Japan's strong * Source: U.S. Commerce Dept. ** Source: Japanese Ministry of International Trade and Industry 1 currency and weak banking system appear to have prevented a resurgence of business activity. We believe that government financing is likely to increase in an effort to fund this new economic plan, thus keeping some upward pressure on Japanese interest rates. During the reporting period, the German economy was adversely affected by the strong Deutschemark and lower profit margins on foreign trade. At the same time, the strong currency alleviated pressure on wholesale prices, which helped keep inflation relatively low. In response, the Bundesbank eased monetary policy early in 1995 and again in August. Within this environment, global bond yields generally rose in the first two months of the fiscal year, but then declined until about the end of June. However, a surprising reversal took place when 30-year U.S. Treasury bond yields actually rose following the U.S. Federal Reserve's easing of monetary policy in early July. This stemmed from U.S. economic reports showing some recovery from weak second-quarter growth, which led many investors to believe that the lull in business activity would be shorter than previously expected. Other bond markets followed the U.S. trend, with prices declining at the begin- - -------------------------------------------------------------------------------- Templeton Global Income Fund Geographic Distribution on 8/31/95 Based on Total Net Assets [PIE CHART APPEARS HERE] Europe 34.7% Asia 5.5% Canada 8.2% Latin America 9.7% United States 28.4% Australia & New Zealand 13.5%
ning of the fiscal year, then rising for about seven months, before declining again in July and early August. Over the course of the fiscal year, we increased our U.S. exposure, from 11.3% of total net assets on August 31, 1994, to 28.4% on August 31, 1995, because we believed the U.S. economy was approaching the later stages of its business cycle and could benefit from possible interest-rate declines. We reduced our European exposure from 41.0% to 34.7% of total net assets, in the belief that economic strength there, particularly in Germany, was likely 2 to result in tighter monetary policies and higher interest rates. At the same time, we reduced our Australian and New Zealand positions, from 20.7% to 13.5%, because of stronger economic growth and the possibility of higher interest rates in these markets. Our current 8.2% position in Canada is unchanged from last year's 8.2% asset allocation. However, about half of the position has been hedged into U.S. dollars in light of Canadian federal budget concerns and to help offset some of the volatility associated with the provincial elections in Quebec, which are focused on a destabilizing secessionist movement. In addition, we lengthened the average maturity of the Fund's portfolio from 6.5 years on August 31, 1994 to 7.4 years on August 31, 1995. Credit quality remains an important factor in selecting our investments. The Fund's portfolio consists primarily of investment-grade securities, as rated by one of the nationally recognized rating services, or of non-rated securities we judge to be of equal quality. At the end of the fiscal year, about 71% of the securities in the Fund's portfolio were rated AA or higher, 16% were rated A or BBB, and 11% were rated below investment grade. The lower- - -------------------------------------------------------------------------------- Templeton Global Income Fund Portfolio Breakdown on 8/31/95 Based on Total Net Assets - -------------------------------------------------------------------------------- Government Bonds 85.4% - -------------------------------------------------------------------------------- Corporate Bonds 8.4% - -------------------------------------------------------------------------------- Common Stocks 0.8% - -------------------------------------------------------------------------------- Preferred Stocks 0.3% - -------------------------------------------------------------------------------- Short-Term Obligations & Other Net Assets 5.1% - --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see page 7 of this report. rated bonds represented obligations of Venezuela, Argentina, Brazil, Mexico, Columbia, Russia, and Hungary. Approximately 2% of the Fund's portfolio was held in other net assets. Looking forward, we believe that 1995's moderate growth and stable inflationary environment may persist into 1996, which should be a positive influence on interest rates. Monthly indicators of U.S. inflation continue to show that price pressures are well-contained. In our opinion, the Federal Reserve may therefore have reason to lower short-term interest rates again, which could also reverse the latest upward move in longer-term rates. Consumer 3 prices are increasing moderately in other industrialized countries, but compared with past business cycles, this upward movement remains subdued. As always, we remind you that there are special risks involved with global investing related to market, currency, economic, political, and other factors. Developing markets involve heightened risks related to these same factors, in addition to those associated with the relatively small size and lesser liquidity of these markets. In closing, we would like to mention that although Sir John Templeton has not been involved in investment management of the Templeton Funds since October 1992, we were saddened by his recent decision to step down as Chairman and Director of the U.S.-registered Templeton funds. The Fund's Board of Directors have elected John Wm. Galbraith, former vice chairman of Templeton, Galbraith & Hansberger, Ltd., to succeed him. The investment manager will continue to use the investment philosophies and principles established by Sir John. We thank you for your participation in the Templeton Global Income Fund and look forward to serving your investment needs in the years to come. Sincerely, /s/ Neil S. Devlin Neil S. Devlin Portfolio Manager Templeton Global Income Fund, Inc. 4 - -------------------------------------------------------------------------------- Performance Summary In market-price terms, the Templeton Global Income Fund produced a total return of 8.80% for the one-year period ended August 31, 1995. Based on the change in actual net asset value (in contrast to market price), total return was 11.30% for the same period. Both total return figures assume reinvestment of dividends and capital gains in accordance with the dividend reinvestment plan. During the reporting period, shareholders received income dividends totaling 63.5 cents ($0.635) per share. The Fund's closing price per share on the New York Stock Exchange (NYSE) decreased from $6.81 on August 31, 1994 to $6.75 on August 31, 1995, and the Fund's net asset value per share increased from $7.89 to $8.00 during the same period. Of course, past performance is not predictive of future results, and distributions will vary depending on income earned by the Fund. - -------------------------------------------------------------------------------- Templeton Global Income Fund Cumulative Total Returns* Periods Ended August 31, 1995
Since Inception One-Year Five-Year (03/17/88) Based on change in net asset value 11.30% 50.25% 75.92% Based on change in market price 8.80% 41.55% 39.80%
*Cumulative total return calculations assume reinvestment of all distributions at net asset value or at market price in accordance with the dividend reinvestment plan. Past performance is not predictive of future results. 5 Templeton Global Income Fund, Inc. Financial Highlights - -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the year)
YEAR ENDED AUGUST 31 ---------------------------------------------------- 1995 1994* 1993 1992 1991 -------- -------- ---------- ---------- -------- Net asset value, beginning of year $ 7.89 $ 8.57 $ 8.86 $ 8.48 $ 8.51 -------- -------- ---------- ---------- -------- Income from investment operations: Net investment income .64 .67 .79 .84 .86 Net realized and unrealized gain (loss) .11 (.75) (.36) .38 .06 -------- -------- ---------- ---------- -------- Total from investment operations .75 (.08) .43 1.22 .92 -------- -------- ---------- ---------- -------- Distributions: Dividends from net investment income (.64) (.06) (.64) (.84) (.86) Distributions from net realized gains -- (.12) (.06) -- (.09) Tax basis return of capital -- (.42) (.02) -- -- -------- -------- ---------- ---------- -------- Total distributions (.64) (.60) (.72) (.84) (.95) -------- -------- ---------- ---------- -------- Change in net asset value .11 (.68) (.29) .38 (.03) -------- -------- ---------- ---------- -------- Net asset value, end of year $ 8.00 $ 7.89 $ 8.57 $ 8.86 $ 8.48 ======== ======== ========== ========== ======== TOTAL RETURN Based on market value per share 8.80% (7.64)% (7.07)% 21.30% 24.96% Based on net asset value per share 11.30% (.15)% 5.34% 14.90% 11.70% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000) $964,013 $949,850 $1,032,770 $1,055,456 $991,042 Ratio of expenses to average net assets .78% .79% .79% .81% .82% Ratio of net investment income to average net assets 8.19% 8.17% 9.40% 9.68% 10.12% Portfolio turnover rate 104.37% 138.34% 264.61% 189.94% 257.11%
*BASED ON WEIGHTED AVERAGE SHARES OUTSTANDING. SEE NOTES TO FINANCIAL STATEMENTS. 6 Templeton Global Income Fund, Inc. Investment Portfolio, August 31, 1995 - --------------------------------------------------------------------------------
PRINCIPAL IN LOCAL CURRENCY* VALUE - ------------------------------------------------------------------------------- BONDS--CORPORATE: 8.4% - ------------------------------------------------------------------------------- 3,500,000 U.S. AXA SA, 8.50%, 10/01/98, 144a $ 2,852,500 4,250,000 U.S. Bombril SA, 8.00%, 8/26/98 3,644,375 10,000,000 British Petroleum Co. PLC, 10.875%, Can. 8/01/01 8,300,130 5,750,000 U.S. Companhia Suzano Papel, 10.25%, 10/06/01 5,405,000 5,174,662 U.S. Electricidad de Caracas, FRN, 9/30/03 2,276,851 4,750,000 Empresa Colombiana de Petroleos, 7.25%, U.S. 7/08/98 4,678,750 7,700,000 U.S. Essar Gujarat Ltd., 8.40%, 7/15/99, 144a 7,661,500 2,500,000 Henderson Capital International Ltd., U.S. 4.25%, 10/27/96 2,525,000 2,000,000 Hidroelectrica Alicura SA, 8.375%, U.S. 3/15/99, 144a 1,745,000 4,750,000 Klabin Fabricadora de Papel Celulose SA, U.S. 11.00%, 4/15/98,144a 4,779,688 10,700,000 Aus. News America Holdings, 8.625%, 02/07/14 6,593,874 4,000,000 U.S. Petroliam Nasional Bhd., 6.875%, 7/01/03 4,003,760 5,000,000 U.S. Pohang Iron & Steel, 6.625%, 7/01/03 4,868,600 5,000,000 U.S. Quantas Airways Ltd., 7.50%, 6/30/03 5,032,650 8,000,000 Telecom Argentina Stet-France SA, 8.375%, U.S. 10/18/00, 144a 7,160,000 3,000,000 U.S. Telecom Brasileiras, 10.375%, 9/09/97 3,015,000 7,500,000 Telefonica de Argentina SA, 8.375%, U.S. 10/01/00, 144a 6,675,000 ------------- TOTAL BONDS CORPORATE (cost $87,817,977) 81,217,678 - ------------------------------------------------------------------------------- BONDS--GOVERNMENT & GOVERNMENT AGENCIES: 85.4% - ------------------------------------------------------------------------------- 9,000,000 Bank Foreign Economic Affairs Russia, Ger. 7.50%, 9/27/96 6,069,482 3,000,000 U.S. Bocon Previsionales II, FRN, 4/01/01 2,388,000 23,790,000 Ger. Deutsche Bundespost, 7.75%, 10/01/04 17,051,661 14,300,000 Aus. Eurofima, 9.875%, 1/17/07 10,963,538 36,900,000 Federal Republic Germany, Bundeschatweis, Ger. 6.875%, 12/02/98 26,222,125 17,260,000 Federal Republic Germany, Bundesobl 110, Ger. 5.375%, 2/22/99 11,776,305 20,480,000 Federal Republic of Germany, Bundes, Ger. 8.00%, 1/21/02 15,093,537 58,680,000 Federal Republic of Germany, Unity, Ger. 8.75%, 8/20/01 44,829,441 Government of Denmark: 49,000,000 Den. 9.00%, 11/15/98 9,138,925 100,150,000 Den. 8.00%, 5/15/03 17,711,847 Government of France: 108,156,000 Fr. 8.50%, 3/28/00 23,051,799 101,936,000 Fr. 9.50%, 1/25/01 22,652,893 Government of Italy: 39,500,000,000 Itl. 12.00%, 10/01/95 24,129,672 9,500,000,000 Itl. 12.00%, 1/01/96 5,844,265 13,990,000,000 Itl. 12.00%, 1/01/97 8,710,629 20,750,000,000 Itl. 12.00%, 1/20/98 13,006,462 12,860,000,000 Itl. FRN, 8/01/99 7,958,776
7 Templeton Global Income Fund, Inc. Investment Portfolio, August 31, 1995 (cont.) - --------------------------------------------------------------------------------
PRINCIPAL IN LOCAL CURRENCY* VALUE - ------------------------------------------------------------------------------- BONDS--GOVERNMENT & GOVERNMENT AGENCIES (CONT.) - ------------------------------------------------------------------------------- Government of New Zealand: 15,255,000 N.Z. 6.50%, 2/15/00 $ 9,332,112 145,000 N.Z. 10.00%, 3/15/02 102,990 13,950,000 N.Z. 8.00%, 4/15/04 9,109,559 3,342,000,000 Sp. Government of Spain, 11.90%, 7/15/96 27,006,595 26,330,000 International Bank Recon/Dev., 7.125%, Ger. 4/12/05 18,193,348 94,078,000 Den. Kingdom of Denmark, 8.00%, 11/15/01 16,902,247 10,000,000 U.S. Korea Development Bank, 7.90%, 2/01/02 10,519,000 2,500,000 Nacional Financiera SNC, 10.625%, U.S. 11/22/01 2,387,500 10,000,000 U.S. National Bank of Hungary, 7.95%, 11/01/03 8,875,000 New South Wales Treasury Corp: 10,100,000 Aus. 12.00%, 12/01/01, 144a 8,754,176 18,900,000 Aus. 7.00%, 4/01/04 12,438,029 NHA Manulife: 4,108,715 Can. #96405089, 9.125%, 6/01/02 3,146,766 2,240,238 Can. #96405378, 9.25%, 8/01/02 1,709,772 5,043,361 Can. #96405386, 9.25%, 8/01/02 3,842,720 5,000,000 Philippines Development Bank, 8.00%, U.S. 7/22/98 5,062,500 77,000,000 Can. Providence of Ontario, 7.75%, 12/08/03 55,710,668 8,000,000 Province of British Columbia, 10.60%, Can. 9/05/20 7,199,553 10,000,000 Aus. Province of Quebec, 9.50%, 10/02/02 7,415,676 46,700,000 Aus. Queensland Treasury Corp., 8.00%, 5/14/03 33,130,284 18,300,000 U.S. Republic of Argentina, 8.375%, 12/20/03 13,725,000 4,000,000 U.S. Republic of Venezuela, 9.00%, 5/27/96 3,940,000 Thailand Military Bank: 100,000,000 Thai. 8.50%, 9/22/95 3,979,250 125,000,000 Thai. 7.50%, 10/02/95 4,973,065 58,000,000 Thai. 11.00%, 6/05/96 2,312,362 90,000,000 Thai. 11.125%, 6/03/96 3,591,381 57,000,000 Treasury Corp. of Victoria, 8.25%, Aus. 10/15/03 41,014,499 U.S. Treasury Bonds: 21,030,000 U.S. 10.75%, 5/15/03 26,681,813 5,425,000 U.S. 6.25%, 8/15/23 5,079,156 43,429,000 U.S. 7.625%, 2/15/25 48,389,460 U.S. Treasury Notes: 10,000 U.S. 5.125%, 4/30/98 9,803 16,800,000 U.S. 9.125%, 5/15/99 18,493,104 19,265,000 U.S. 8.00%, 8/15/99 20,589,469 6,048,000 U.S. 5.75%, 8/15/03 5,842,912 11,500,000 U.S. 7.25%, 5/15/04 12,195,405 17,950,000 U.S. 11.625%, 11/15/04 24,451,311
8 Templeton Global Income Fund, Inc. Investment Portfolio, August 31, 1995 (cont.) - --------------------------------------------------------------------------------
PRINCIPAL IN LOCAL CURRENCY* VALUE - ------------------------------------------------------------------------------ BONDS--GOVERNMENT & GOVERNMENT AGENCIES (CONT.) - ------------------------------------------------------------------------------ 51,980,000 U.S. 6.50% 05/15/05 $ 52,638,067 21,000,000 United Mexican States, 11.1875%, FRN, U.S. 7/20/97, 144a 21,446,250 14,500,000 Venezuela Front Load Interest Reduction U.S. Bond, 6.00%, 3/31/07 7,322,500 ------------ TOTAL BONDS--GOVERNMENT & GOVERNMENT AGENCIES (cost $869,804,459) 824,112,659 - ------------------------------------------------------------------------------ NUMBER OF SHARES** - ------------------------------------------------------------------------------ COMMON STOCKS: 0.8% (cost $8,477,149) - ------------------------------------------------------------------------------ 355,000 U.S. American Health Properties Inc. 7,721,250 - ------------------------------------------------------------------------------ PREFERRED STOCKS: 0.3% - ------------------------------------------------------------------------------ 91,500 Sp. Santander Finance Ltd., B, pfd. 2,150,250 35,500 American Health Properties Psychiatric U.S. Group, pfd. 576,875 ------------ TOTAL PREFERRED STOCK (cost $2,856,541) 2,727,125 - ------------------------------------------------------------------------------ PRINCIPAL IN LOCAL CURRENCY* - ------------------------------------------------------------------------------ SHORT TERM OBLIGATIONS: 2.6% - ------------------------------------------------------------------------------ 100,000,000 Thai. Bangkok Bank, 11.50%, 5/16/96 4,002,418 11,660,000 Federal Home Loan Mortgage Corp., 5.64%, U.S. 9/25/95 11,615,809 2,135,000 Federal National Mortgage Assn., 5.69%, U.S. 9/14/95 2,130,645 7,140,000 U.S. Treasury Bills, 5.33% to 5.43% with U.S. maturities to 10/26/95 7,098,966 ------------ TOTAL SHORT TERM OBLIGATIONS (cost $24,891,138) 24,847,838 - ------------------------------------------------------------------------------ TOTAL INVESTMENTS: 97.5% (cost $993,847,264) 940,626,550 UNREALIZED GAIN IN FORWARD EXCHANGE CONTRACTS: 0.1% 157,167 OTHER ASSETS, LESS LIABILITIES: 2.4% 23,229,038 ------------ TOTAL NET ASSETS: 100.0% $964,012,755 ============
*CURRENCY OF COUNTRIES INDICATED. **COUNTRY OF ORIGIN. SEE NOTES TO FINANCIAL STATEMENTS. 9 Templeton Global Income Fund, Inc. Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES August 31, 1995 Assets: Investments in securities, at value (identified cost $993,847,264) $ 940,626,550 Cash 32,656 Receivables for investment securities sold 2,127,502 Interest and dividends receivable 24,230,007 Unrealized gains in forward exchange contracts (Note 6) 2,339,434 -------------- Total assets 969,356,149 -------------- Liabilities: Payable for investment securities purchased 2,130,276 Unrealized loss in forward exchange contracts (Note 6) 2,182,267 Accrued expenses 1,030,851 -------------- Total liabilities 5,343,394 -------------- Net assets, at value $ 964,012,755 ============== Net assets consist of: Net unrealized depreciation $ (53,276,277) Accumulated net realized loss (35,069,913) Net capital paid in on shares of capital stock 1,052,358,945 -------------- Net assets, at value $ 964,012,755 ============== Shares outstanding 120,453,400 ============== Net asset value per share ($964,012,755 / 120,453,400 ) $ 8.00 ==============
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS for the year ended August 31, 1995 Investment income: (net of $1,008,802 foreign taxes withheld) Interest $83,488,426 Dividends 997,556 ----------- Total income $84,485,982 Expenses: Management fees (Note 3) 4,810,494 Administrative fees (Note 3) 1,217,096 Transfer agent fees 169,000 Custodian fees 323,500 Reports to shareholders 599,000 Audit fees 34,000 Legal fees (Note 3) 1,000 Registration and filing fees 100,500 Directors' fees and expenses 47,000 Other 24,262 ----------- Total expenses 7,325,852 ----------- Net investment income 77,160,130 Realized and unrealized gain (loss): Net realized loss on: Investments (20,188,925) Foreign currency transaction (14,394,811) ----------- (34,583,736) ----------- Net unrealized appreciation (depreciation) on: Investments 54,014,562 Foreign currency translation of other assets and liabilities (5,940,434) ----------- 48,074,128 ----------- Net realized and unrealized gain 13,490,392 ----------- Net increase in net assets resulting from operations $90,650,522 ===========
10 Templeton Global Income Fund, Inc. Financial Statements (cont.) - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS for the years ended August 31, 1995 and 1994
1995 1994 ------------ ------------- Increase (decrease) in net assets: Operations: Net investment income $ 77,160,130 $ 81,133,045 Net realized loss on investment and foreign currency transactions (34,583,736) (36,392,426) Net unrealized appreciation (depreciation) 48,074,128 (55,388,766) ------------ ------------- Net increase (decrease) in net assets resulting from operations 90,650,522 (10,648,147) Distributions to shareholders: From net investment income (76,487,909) (7,105,618) From net realized gain -- (14,852,074) Tax basis return of capital -- (50,314,348) ------------ ------------- Net increase (decrease) in net assets 14,162,613 (82,920,187) Net assets: Beginning of year 949,850,142 1,032,770,329 ------------ ------------- End of year $964,012,755 $ 949,850,142 ============ =============
SEE NOTES TO FINANCIAL STATEMENTS. 11 Templeton Global Income Fund, Inc. Notes to Financial Statements - -------------------------------------------------------------------------------- 1. SUMMARY OF ACCOUNTING POLICIES Templeton Global Income Fund, Inc. (the Fund), is registered under the Invest- ment Company Act of 1940 as a non-diversified, closed-end management investment company. The following summarizes the Fund's significant accounting policies. a. Securities Valuations: Securities, including options, listed or traded on a recognized national or foreign stock exchange or NASDAQ are valued at the last reported sales prices on the principal exchange on which the securities are traded. Over-the-counter securities and listed securities for which no sale is reported are valued at the mean between the last current bid and asked prices. Securities for which market quotations are not readily available are valued at fair value as deter- mined by management and approved in good faith by the Board of Directors. b. Foreign Exchange Contracts: The Fund enters into forward exchange contracts and currency option contracts in order to hedge against foreign exchange risks. (i)Forward Exchange Contracts: These contracts are valued daily and the Fund's equity therein, representing unrealized gain or loss on the contracts, is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations. (ii)Currency Option Contracts: Options purchased are recorded as investments; options written (sold) are accounted for as liabilities. When an option expires, 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 exercise of an option results in a cash settlement, the difference between the premium and the settlement proceeds is realized as a gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. c. Indexed Securities: The Fund may invest in debt instruments in which the principal and/or interest is dependent on another factor such as a yield curve, currency exchange rates or commodity prices. The Fund's objective in holding these securities, commonly called structured notes, is to tailor the Fund's investments to the specific risk and returns it wishes to assume while avoiding unwanted risk or change the Fund's exposure to a particular foreign exchange rate or the spread between two foreign exchange rates. d. Foreign Currency 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 from the trade date to 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 investments. Reported net realized foreign exchange gains or losses arise from sales of for- eign currencies, currency gains or losses realized between the trade and set- tlement dates on securities transactions, the differences between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at the end of the fiscal period, resulting from changes in the exchange rates. 12 Templeton Global Income Fund, Inc. Notes to Financial Statements (cont.) - -------------------------------------------------------------------------------- e. Futures contracts: The Fund enters into futures contracts and options written on futures contracts in order to hedge against risks from changes in interest rates. These futures contracts and options written on futures contracts are valued daily and the Fund's equity therein, representing unrealized gain or loss on the contract, is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations. Margin deposits of cash or securities required with respect to contracts traded on 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 occurs. f. Income Taxes: It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no provision has been made for 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 securi- ties is recorded as soon as information is available to the Fund. Interest in- come and estimated expenses are accrued daily. Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. 2. TRANSACTIONS IN SHARES OF CAPITAL STOCK As of August 31, 1995, there were 200,000,000 shares capital stock authorized ($0.01 par value). During the years ended August 31, 1995 and 1994 there were no capital share transactions. 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 0.15% per annum on the first $200 million of the Fund's aver- age daily net assets, 0.135% of the next $500 million, and 0.10% per annum of average net assets in excess of $700 million. An officer of the Fund is a partner of Dechert Price & Roads, legal counsel for the Fund, which firm received fees of $1,000 for the year ended August 31, 1995. 13 Templeton Global Income Fund, Inc. Notes to Financial Statements (cont.) - -------------------------------------------------------------------------------- 4. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (excluding short-term securities) for the year ended August 31, 1995 aggregated $873,872,207 and $880,524,120, respec- tively. The cost of securities for federal income tax purposes is $993,881,284. Realized gains and losses are reported on an identified cost basis. At August 31, 1995, the aggregate gross unrealized appreciation and deprecia- tion of portfolio securities, based on cost for federal income tax purposes, was as follows: Unrealized appreciation $ 4,919,862 Unrealized depreciation (58,174,596) ------------ Net unrealized depreciation $(53,254,734) ============
5. TAX LOSS CARRYOVERS At August 31, 1995 the Fund had tax basis capital losses of $19,800,000 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 occuring subsequent to October 31, 1994 of $14,400,000 to the year end- ing August 31, 1996. 6. FINANCIAL INSTRUMENTS During the year ended August 31, 1995, 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 trans- actions, from adverse changes in the relationship between the U.S. dollar and foreign currencies and interest rates. These instruments involve market risk in excess of the amount recognized on the Statement of Assets and Liabilities; some of these risks have been minimized by offsetting contracts. Risks arise from the possible inability of counterparties to meet the terms of their con- tracts, future movement in currency values and interest rates and contract po- sitions 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 August 31, 1995, the Fund had outstanding forward exchange contracts for the purchase and sale of currencies as set out below. These contracts are reported in the financial statements at the Fund's net equity, as measured by the dif- ference between the forward exchange rates at the reporting date and the for- ward exchange rates at the date of entry into the contract: Contracts to sell: 27,675,000 Canadian Dollars for 20,311,927 U.S. dollars, September 11, 1995 $ (296,003) 55,510,000 Canadian Dollars for 40,828,185 U.S. dollars, September 22, 1995 (501,288) 47,052,000 Deutschemarks for 31,564,542 U.S. dollars, September 28, 1995 (526,199) 95,536,000 Deutschemarks for 64,299,367 U.S. dollars, September 28, 1995 (858,777) ----------- (2,182,267) Net unrealized gain from offsetting forward exchange contracts 2,339,434 ----------- Net unrealized gain in forward exchange contracts $ 157,167 ===========
14 Templeton Global Income Fund, Inc. Notes to Financial Statements (cont.) - -------------------------------------------------------------------------------- 7. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
NET INCREASE NET GAIN (LOSS) (DECREASE) ON INVESTMENT AND IN NET ASSETS INVESTMENT NET INVESTMENT FOREIGN CURRENCY RESULTING FROM INCOME INCOME TRANSACTIONS OPERATIONS ----------------- ----------------- ------------------- ------------------- PER PER PER PER TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE ----------- ----- ----------- ----- ------------ ----- ------------ ----- 1995 For the quarter ended: November 30, 1994 $22,053,820 $.18 $20,263,289 $.17 $(13,328,875) $(.11) $ 6,934,414 $ .06 February 28, 1995 20,615,164 .17 18,773,883 .16 (10,605,466) (.09) 8,168,417 .07 May 31, 1995 21,031,187 .18 19,109,215 .16 37,642,288 .31 56,751,503 .47 August 31, 1995 20,785,811 .17 19,013,743 .15 (217,555) -- 18,796,188 .15 ----------- ---- ----------- ---- ------------ ----- ------------ ----- $84,485,982 $.70 $77,160,130 $.64 $ 13,490,392 $ .11 $ 90,650,522 $ .75 =========== ==== =========== ==== ============ ===== ============ ===== 1994 For the quarter ended: November 30, 1993 $23,389,720 $.19 $21,422,063 $.18 $(24,147,294) $(.20) $ (2,725,231) $(.02) February 28, 1994 20,883,430 .18 18,905,623 .15 3,114,837 .03 22,020,460 .18 May 31, 1994 22,868,559 .19 20,189,012 .17 (63,721,705) (.53) (43,532,693) (.36) August 31, 1994 21,814,152 .18 20,616,347 .17 (7,027,030) (.05) 13,589,317 .12 ----------- ---- ----------- ---- ------------ ----- ------------ ----- $88,955,861 $.74 $81,133,045 $.67 $(91,781,192) $(.75) $(10,648,147) $(.08) =========== ==== =========== ==== ============ ===== ============ =====
15 Templeton Global Income Fund, Inc. Independent Auditor's Report - -------------------------------------------------------------------------------- The Board of Directors and Shareholders Templeton Global Income Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Templeton Global Income Fund, Inc. as of August 31, 1995, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the respon- sibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing stan- dards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial high- lights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of Au- gust 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement pre- sentation. We believe that our audits provide a reasonable basis for our opin- ion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Tem- pleton Global Income Fund, Inc. as of August 31, 1995, the results of its oper- ations, the changes in its net assets and the financial highlights for the pe- riods indicated, in conformity with generally accepted accounting principles. /s/ Mc Gladrey & Pullen, LLP New York, New York September 29, 1995 16 Templeton Global Income Fund, Inc. - -------------------------------------------------------------------------------- DIVIDEND REINVESTMENT PLAN The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following features: .To participate in the Plan, contact Chemical Mellon Shareholder Services, Shareholder Investment Services, P.O. Box 750, Pittsburgh, PA 15230, for a Plan brochure and enrollment information. .As a participant, all divi- dends and capital gains distributions will be reinvested in shares of the Fund. .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 valua- tion 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 Fund'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 div- idends or distributions. .The participant may withdraw from the Plan without penalty at any time by written notice to Mellon Securities Trust Company. 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, Mellon Securities Trust Company will sell the participant's shares and send the proceeds, less a service fee of $2.50 and less brokerage commissions. .Whenever shares are purchased on the New York Stock Exchange, each participant will pay a pro rata portion of brokerage commissions. Brokerage commissions will be deducted from amounts to be invested. SHAREHOLDER INFORMATION Weekly comparative net asset value and market price information about Templeton Global Income Fund shares is published each Monday in The Wall Street Journal, weekly in Barron's and each Saturday in The New York Times and other newspapers in a table called "Closed-End Bond Funds." Daily market prices for the Fund's shares are published in the New York Stock Exchange Composite Transactions section of newspapers under the designation "TemplGlob." The Fund's New York Stock Exchange trading symbol is GIM. The Fund's shares are also listed and traded on the Pacific Stock Exchange. For current information about the net asset value or copies of reports, call 1- 800-292-9293. For information about dividends and shareholder accounts, call 1-800-526-0801. 17 Notes ----- Notes ----- - -------------------------------------------------------------------------------- TEMPLETON GLOBAL INCOME FUND, INC. 700 Central Avenue St. Petersburg, Florida 33701-3628 Auditors McGladrey & Pullen, LLP 555 Fifth Avenue New York, New York 10017-2416 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. - -------------------------------------------------------------------------------- TLGIM A95 10/95 [LOGO OF RECYCLED PAPER APPEARS HERE] TEMPLETON GLOBAL INCOME FUND, INC. Annual Report August 31, 1995 [LOGO OF FRANKLIN TEMPLETON APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----