-----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, KeeG2bqTjd+3RzfXRg3hu9oNsSp3431Shou15l878oCZ9jD/qty4ink6AiCEBjZq Hu9xqoK7Hw1X3jFFwFIg/w== 0000841191-00-000004.txt : 20000505 0000841191-00-000004.hdr.sgml : 20000505 ACCESSION NUMBER: 0000841191-00-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST CENTRAL INDEX KEY: 0000841191 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 226459035 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05677 FILM NUMBER: 619247 BUSINESS ADDRESS: STREET 1: 500 E BROWARD BLVD STREET 2: STE 2100 CITY: FT LAUDERDALE STATE: FL ZIP: 33394 BUSINESS PHONE: 6503126505 MAIL ADDRESS: STREET 1: FRANKLIN RESOURCES INC LEGAL/COMPLIANCE STREET 2: 901 MARINERS ISLAND BLVD 6TH FL CITY: SAN MATEO STATE: CA ZIP: 94404 N-30D 1 SEMIANNUAL REPORT DTD 2/29/00 SEMI ANNUAL REPORT FEBRUARY 29, 2000 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST [FRANKLIN TEMPLETON LOGO] SHAREHOLDER LETTER - -------------------------------------------------------------------------------- Your Trust's Goal: Templeton Global Governments Income Trust seeks a high level of current income consistent with preservation of capital. Under normal market conditions, the Trust invests primarily in a portfolio of debt securities issued or guaranteed by governments, government agencies, and other government entities of various nations throughout the world, including emerging markets. - -------------------------------------------------------------------------------- Dear Shareholder: This report of Templeton Global Governments Income Trust covers the six months ended February 29, 2000. During this period, many European economies grew significantly, growth in Japan was better than expected, and the U.S. economy continued to expand at a blistering pace. This economic growth increased global inflationary pressures and led to a tighter monetary policy by many central banks. In the U.S., the Federal Reserve Board (the Fed) increased interest rates by 75 basis points, and most European countries also experienced rising interest rates. Believing that most industrial economies might experience further interest CONTENTS Shareholder Letter .................................................... 1 Important Notice to Shareholders .......................................................... 5 Performance Summary ................................................... 6 Financial Highlights & Statement of Investments .............................................. 7 Financial Statements .................................................. 11 Notes to Financial Statements ............................................................ 14 [PYRAMID GRAPHIC] All portfolio holdings mentioned in the report are listed by their complete legal titles in the Trust's Statement of Investments (SOI), a complete listing of the Trust's portfolio holdings, including dollar value and number of shares or principal amount. The SOI begins on page 8. [PIE CHART GRAPHIC] Europe 40.2% Latin America 20.4% Asia 9.6% United States 9.2% Canada 9.1% Australia & New Zealand 5.6% Short-Termn Investments & Other Net Assets 5.9% rate increases, many investors deserted bond markets of developed countries, and bond prices in these countries, especially the U.S., dropped in value. However, many emerging market bond prices rose during the period, largely as a result of increasing commodity prices, which improved export revenues and, thus, the repayment capacity of issuer countries. Despite uncertainty stemming from the implementation of Venezuela's new constitution, the value of Venezuelan debt rose largely due to the recovery in oil prices. Brazilian bonds rebounded following that nation's currency crisis in January 1999, as a result of official external financial support from the International Monetary Fund and foreign governments, as well as implementation of economic measures designed to stabilize Brazil's fiscal situation. During the six months under review, the U.S. dollar strengthened against most major currencies, rising 1.56% against the British pound and 9.58% versus the euro. Other dollar-bloc countries' currencies posted mixed results against the U.S. dollar, with the Canadian dollar falling 2.88% and the Australian and New Zealand dollars increasing 3.71% and 5.93%, respectively. Among major emerging market currencies, the Brazilian real and South Korean won strengthened against the U.S. dollar, appreciating 7.95% and 4.18%, while the Mexican peso fell 0.15% versus the U.S. dollar. Within this environment, Templeton Global Governments Income Trust posted a 0.85% cumulative total return based on market value, and a 2.30% cumulative total return based on net asset value, for the six months ended February 29, 2000, as shown in the Performance Summary on page 6. The 2 J.P. Morgan U.S. Government Bond Index and the J.P. Morgan Global Government Bond Index posted returns of 1.85% and -2.63%, respectively, for the same period.(1) During the reporting period, we attempted to maximize the Trust's return by allocating approximately 64% of total net assets to intermediate- and long-term bonds in developed markets, with the remaining assets invested in what we believed were the highest quality and most liquid bonds in emerging markets. In our opinion, this combination of investments offered the opportunity for higher long-term returns at the cost of modestly higher short-term volatility. The Trust's allocation to emerging market debt added positively to its performance during the period, as emerging market bonds generally outperformed higher quality industrial market securities. The Trust's geographic allocation remained relatively stable during the period. Exposure to European and dollar-bloc countries fell slightly to 40.2% and 5.6% at the end of the period, down from 41.9% and 7.7%, respectively. The Trust's allocation to North America was decreased by 3.6%, and Asian exposure increased 3.7%. At the end of the period, emerging market debt represented 30.0% of the Trust's total net assets, up from 26.3% at the beginning. Looking forward, we are optimistic about prospects for global bond markets and Templeton Global Governments Income Trust. Because we expect slowing growth in the U.S. economy, our long-term outlook for the euro, relative to the U.S. dollar, PORTFOLIO BREAKDOWN Based on Total Net Assets 2/29/00 - ----------------------------------------- Government Bonds 91.6% Corporate Bonds 2.5% Short-Term Investments & Other Net Assets 5.9% 1. Sources for all indices: J.P. Morgan Securities, Inc. The J.P. Morgan U.S. Government Bond Index measures and tracks U.S. Treasury securities. The J.P. Morgan Global Government Bond Index measures and tracks bonds from around the world. Indexes are measured in U.S. dollars and include reinvested interest. One cannot invest directly in an index, nor is an index representative of the Trust's portfolio. 3 remains positive. In our opinion, such a slowdown could coincide with Euroland economic recovery, potentially leading to a stronger euro versus the U.S. dollar. On the other hand, our outlook for the Japanese yen is slightly negative. We believe the Japanese economy cannot afford a strong yen over the medium to long term because a strong currency translates into a loss of export competitiveness, which would weaken Japan's export-driven economy. As always, we will monitor global markets closely and manage the Trust's portfolio in an effort to take advantage of potential opportunities as they arise. It is important to note that special risks are involved with global investing related to market, currency, economic, social, political and other factors, in addition to the heightened risks associated with the relatively small size and lesser liquidity of emerging markets. We look forward to continuing to serve your investment needs, and we welcome your comments or suggestions. Portfolio Management Team Templeton Global Governments Income Trust This discussion reflects our views, opinions and portfolio holdings as of February 29, 2000, the end of the reporting period. The information provided is not a complete analysis of every aspect of any country, industry, security or the Trust. Our strategies and the Trust'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. 4 IMPORTANT NOTICE TO SHAREHOLDERS EURO RISK. On January 1, 1999, the European Economic and Monetary Union (EMU) introduced a new single currency called the euro. By July 1, 2002, the euro, which will be implemented in stages, will have replaced the national currencies of the following member countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Currently, the exchange rate of the currencies of each of these countries is fixed to the euro. The euro trades on currency exchanges and is available for non-cash transactions. The participating countries currently issue sovereign debt exclusively in euro. By July 1, 2002, euro-denominated bills and coins will replace the bills and coins of the above countries. The new European Central Bank has control over each country's monetary policies. Therefore, the participating countries no longer control their own monetary policies by directing independent interest rates for their currencies. The national governments of each of the participating countries, however, has retained the authority to set its own tax and spending policies and public debt levels. The change to the euro as a single currency is new and untested. It is uncertain how eleven different economies will adjust to a unified monetary system and the loss of exchange rate flexibility. In the first six months of the euro's existence, the exchange rates of the euro versus many of the world's major currencies steadily declined. In this environment, U.S. and other foreign investors experienced erosion of their investment returns on their euro-denominated securities. It is not possible to predict the impact of the euro on currency values or on the business or financial condition of European countries and issuers and issuers in other regions whose securities the Trust may hold, or the impact, if any, on Trust performance. The transition and the elimination of currency risk among EMU countries may change the economic environment and behavior of investors, particularly in European markets. The Trust's non-U.S. dollar (euro or other) denominated investments will still be exposed to currency risk due to fluctuations among those currencies and versus the U.S. dollar. While the implementation of the euro could have a negative effect on the Trust, the Trust's manager and its affiliated service providers are taking steps they believe are reasonably designed to address the euro issue. SHARE REPURCHASE PROGRAM. On February 21, 1997, the Board of Trustees of the Trust authorized management to implement an open-market share repurchase program pursuant to which the Trust from time to time at the discretion of management may purchase up to an aggregate of 2 million shares of the Trust's shares of beneficial interest (approximately 10% of the shares outstanding on February 18, 1997) in open-market transactions. This authorization remains in effect. 5 SIX-MONTH PERFORMANCE SUMMARY AS OF 2/29/00 Distributions will vary based on earnings of the Trust's portfolio and any profits realized from the sale of the portfolio's securities, as well as the level of the Trust's operating expenses. Past distributions are not indicative of future trends. All total returns include reinvested distributions according to the terms specified in the Trust's dividend reinvestment plan, and do not reflect any sales charges paid at inception or brokerage commissions paid on secondary market purchases. PERFORMANCE
Six-Month Total Return 2.30% (Based on change in Net Asset Value) 0.85% (Based on change in Market Price) Net Asset Value (NAV) $6.85 (2/29/00) $7.04 (8/31/99) Change in NAV -$0.19 Market Price (NYSE) $5.875 (2/29/00) $6.125 (8/31/99) Change in Market Price -$0.25 Distributions (9/1/99 - 2/29/00) Dividend Income $0.30
ADDITIONAL PERFORMANCE AS OF 3/31/00
INCEPTION 1-YEAR 5-YEAR 10-YEAR (11/22/88) Cumulative Total Return(1) Based on change in net asset value 1.44% 37.15% 90.14% 102.34% Based on change in market price -2.28% 33.88% 67.02% 65.89% Average Annual Total Return(2) Based on change in net asset value 1.44% 6.52% 6.64% 6.40% Based on change in market price -2.28% 6.01% 5.26% 4.56%
1. Cumulative total return represents the change in value of an investment over the periods indicated. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Since markets can go down as well as up, investment return and principal value will fluctuate with market conditions, currency volatility, and the economic, social and political climates of countries where the Trust 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 Trust may invest in a relatively small number of issuers and, as a result, be subject to greater risks 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 at 1-800/342-5236. Past performance does not guarantee future results. 6 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Financial Highlights
SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 29, 2000 -------------------------------------------------------- (UNAUDITED)+ 1999+ 1998 1997 1996 1995 ----------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period) Net asset value, beginning of period...... $7.04 $7.25 $7.98 $8.01 $7.71 $7.56 ----------------------------------------------------------------------------- Income from investment operations: Net investment income.................... .27 .56 .55 .56 .60 .64 Net realized and unrealized gains (losses)................................. (.16) (.17) (.68) .01 .30 .15 ----------------------------------------------------------------------------- Total from investment operations.......... .11 .39 (.13) .57 .90 .79 ----------------------------------------------------------------------------- Less distributions from: Net investment income.................... (.30) (.60) (.45) (.56) (.35) (.59) In excess of net investment income....... -- -- -- -- -- (.05) Net realized gains....................... -- -- (.02) (.01) -- -- In excess of net realized gains.......... -- -- -- (.02) -- -- Tax return of capital.................... -- -- (.13) (.01) (.25) -- ----------------------------------------------------------------------------- Total distributions....................... (.30) (.60) (.60) (.60) (.60) (.64) ----------------------------------------------------------------------------- Net asset value, end of period............ $6.85 $7.04 $7.25 $7.98 $8.01 $7.71 ============================================================================= Total Return* Based on market value per share.......... .85% 10.49% (13.02)% 15.01% 10.66% 15.87% Based on net asset value per share....... 2.30% 6.19% (1.41)% 7.95% 12.95% 11.92% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's)......... $155,175 $159,448 $164,196 $182,223 $183,011 $176,212 Ratios to average net assets: Expenses................................. .96%** 1.02% 1.02% .97% .96% 1.03% Net investment income.................... 7.83%** 7.51% 6.98% 6.90% 7.50% 8.43% Portfolio turnover rate................... 28.15% 55.00% 52.28% 197.82% 116.55% 111.03%
*Total return is not annualized. **Annualized. +Based on average weighted shares outstanding. See Notes to Financial Statements. 7 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED)
PRINCIPAL AMOUNT** VALUE - ------------------------------------------------------------------------------------------------ LONG TERM SECURITIES 94.1% ARGENTINA 5.3% Republic of Argentina: 8.375%, 12/20/03.......................................... $ 1,550,000 $ 1,439,562 11.00%, 10/09/06.......................................... 3,500,000 3,456,250 11.75%, 4/07/09........................................... 1,225,000 1,241,231 11.375%, 1/30/17.......................................... 480,000 474,300 9.75%, 9/19/27............................................ 1,791,000 1,585,035 ------------ 8,196,378 ------------ AUSTRALIA 3.8% Government of Australia, 10.00%, 10/15/07................... 4,044,000 AUD 2,969,339 Queensland Treasury Corp., 6.50%, 6/14/05................... 4,943,000 AUD 2,987,575 ------------ 5,956,914 ------------ BRAZIL 6.2% Republic of Brazil: 12.75%, 1/15/00........................................... 1,000,000 981,250 8.875%, 11/05/01.......................................... 485,000 486,212 FRN, 7.00%, 4/15/09....................................... 4,085,000 3,362,466 14.50%, 10/15/09.......................................... 640,000 691,840 Series L, cvt., FRN, 7.00%, 4/15/12....................... 4,275,000 3,182,203 10.125%, 5/15/27.......................................... 1,100,000 889,350 ------------ 9,593,321 ------------ CANADA 9.1% Government of Canada: 10.50%, 7/01/00........................................... 7,000,000 CAD 4,903,329 10.50%, 3/01/01........................................... 8,324,000 CAD 5,994,771 10.00%, 5/01/02........................................... 4,310,000 CAD 3,200,153 ------------ 14,098,253 ------------ DENMARK 1.7% Kingdom of Denmark: 9.00%, 11/15/00........................................... 4,815,000 DKK 643,051 8.00%, 3/15/06............................................ 13,331,000 DKK 1,928,402 ------------ 2,571,453 ------------ GERMANY 13.2% European Economic Community, 6.50%, 3/10/00................. 11,478,503 EUR 11,053,152 Federal Republic of Germany, 8.00%, 7/22/02................. 9,162,351 EUR 9,463,678 ------------ 20,516,830 ------------ INDIA .1% +*Essar Steel Ltd., 144A, FRN, 7.635%, 7/20/99.............. 255,000 175,950 ------------
8 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
PRINCIPAL AMOUNT** VALUE - ------------------------------------------------------------------------------------------------ LONG TERM SECURITIES (CONT.) ITALY 5.8% Buoni Poliennali del Tesoro: 10.50%, 7/15/00........................................... 4,960,560 EUR $ 4,885,150 10.50%, 11/01/00.......................................... 1,497,722 EUR 1,502,207 10.50%, 4/01/05........................................... 1,228,000 EUR 1,449,804 6.75%, 7/01/07............................................ 1,142,000 EUR 1,176,644 ------------ 9,013,805 ------------ MEXICO 3.0% United Mexican States: 9.75%, 4/06/05............................................ 560,000 584,500 9.875%, 1/15/07........................................... 2,030,000 2,128,963 11.375%, 9/15/16.......................................... 1,600,000 1,902,000 ------------ 4,615,463 ------------ NETHERLANDS 1.3% Cellco Finance NV, 15.00%, 8/01/05.......................... 1,875,000 2,076,750 ------------ NEW ZEALAND 1.8% Government of New Zealand, 8.00%, 11/15/06.................. 5,420,000 NZD 2,754,814 ------------ PANAMA .5% Republic of Panama, 8.875%, 9/30/27......................... 960,000 826,800 ------------ SOUTH KOREA 2.7% Hanvit Bank, 144A, 12.75%, 3/01/10.......................... 1,650,000 1,695,210 Republic of Korea, 8.875%, 4/15/08.......................... 2,360,000 2,458,825 ------------ 4,154,035 ------------ SPAIN 6.8% Government of Spain: 12.25%, 3/25/00........................................... 5,115,394 EUR 4,948,737 10.10%, 2/28/01........................................... 2,738,211 EUR 2,785,689 10.15%, 1/31/06........................................... 2,320,000 EUR 2,759,703 ------------ 10,494,129 ------------ SWEDEN 4.1% Kingdom of Sweden: 13.00%, 6/15/01........................................... 5,000,000 SEK 626,667 10.25%, 5/05/03........................................... 44,500,000 SEK 5,747,061 ------------ 6,373,728 ------------
9 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST STATEMENT OF INVESTMENTS, FEBRUARY 29, 2000 (UNAUDITED) (CONT.)
PRINCIPAL AMOUNT** VALUE - ------------------------------------------------------------------------------------------------ LONG TERM SECURITIES (CONT.) TURKEY 6.8% Republic of Turkey: Reg S, 9.875%, 2/23/05.................................... $ 825,000 $ 814,688 Reg S, 10.00%, 9/19/07.................................... 5,280,000 5,121,600 12.375%, 6/15/09.......................................... 4,080,000 4,365,600 11.875%, 1/15/30.......................................... 330,000 344,747 ------------ 10,646,635 ------------ UNITED KINGDOM 7.3% United Kingdom: 8.00%, 12/07/00........................................... 5,115,000 GBP 8,174,149 8.50%, 7/16/07............................................ 1,714,000 GBP 3,118,455 ------------ 11,292,604 ------------ UNITED STATES 9.2% Fannie Mae, 5.25%, 1/15/09.................................. 5,435,000 4,722,972 U.S. Treasury Bonds: 5.25%, 11/15/28........................................... 5,408,000 4,661,020 5.25%, 2/15/29............................................ 2,420,000 2,088,007 U.S. Treasury Notes: 7.25%, 8/15/04............................................ 850,000 869,391 5.875%, 11/15/04.......................................... 1,940,000 1,884,225 ------------ 14,225,615 ------------ VENEZUELA 5.4% Republic of Venezuela, 9.25%, 9/15/27....................... 9,850,000 6,673,375 Venezuela Front Load Interest Reduction Bond, A, FRN, 6.875%, 3/31/07........................................... 2,142,840 1,789,271 ------------ 8,462,646 ------------ TOTAL LONG TERM SECURITIES (COST $168,036,399).............. 146,046,123 ------------ SHORT TERM INVESTMENTS (COST $5,260,000) 3.4% Deutsche Bank AG, 5.81%, 3/01/00, Time Deposit.............. 5,260,000 5,260,000 ------------ TOTAL INVESTMENTS (COST $173,296,399) 97.5%................. 151,306,123 OTHER ASSETS, LESS LIABILITIES 2.5%......................... 3,869,202 ------------ TOTAL NET ASSETS 100.0%..................................... $155,175,325 ============
CURRENCY ABBREVIATIONS: AUD -- Australian Dollar CAD -- Canadian Dollar DKK -- Danish Krone EUR -- European Unit GBP -- British Pound NZD -- New Zealand Dollar SEK -- Swedish Krona
*Non-income producing. **Securities denominated in U.S. dollars unless otherwise indicated. +Represents defaulted bonds. See Notes to Financial Statements. 10 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Financial Statements STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 (UNAUDITED) Assets: Investments in securities, at value (cost $173,296,399).... $151,306,123 Cash....................................................... 552 Interest receivable........................................ 5,281,676 ------------ Total assets.......................................... 156,588,351 ------------ Liabilities: Payable to affiliates...................................... 120,255 Distributions to shareholders.............................. 1,132,141 Accrued expenses........................................... 160,630 ------------ Total liabilities..................................... 1,413,026 ------------ Net assets, at value........................................ $155,175,325 ============ Net assets consist of: Distributions in excess of net investment income........... $ (1,727,445) Net unrealized depreciation................................ (22,170,434) Accumulated net realized loss.............................. (3,929,402) Beneficial shares.......................................... 183,002,606 ------------ Net assets, at value........................................ $155,175,325 ============ Net asset value per share ($155,175,325 / 22,642,821 shares outstanding).............................................. $6.85 ============
See Notes to Financial Statements. 11 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Financial Statements (continued) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 (UNAUDITED) Interest Income............................................. $ 6,956,994 Expenses: Management fees (Note 3)................................... 435,480 Administrative fees (Note 3)............................... 197,945 Transfer agent fees........................................ 34,700 Custodian fees............................................. 17,100 Reports to shareholders.................................... 35,000 Professional fees.......................................... 16,700 Trustees' fees and expenses................................ 20,200 Other...................................................... 2,327 ----------- Total expenses........................................ 759,452 ----------- Net investment income........................... 6,197,542 ----------- Realized and unrealized gains (losses): Net realized loss from: Investments............................................... (3,928,515) Foreign currency transactions........................... (40,950) ----------- Net realized loss..................................... (3,969,465) Net unrealized appreciation (depreciation) on: Investments............................................... 470,131 Translation of assets and liabilities denominated in foreign currencies........................................ (177,954) ----------- Net unrealized appreciation........................... 292,177 ----------- Net realized and unrealized loss............................ (3,677,288) ----------- Net increase in net assets resulting from operations........ $ 2,520,254 ===========
See Notes to Financial Statements. 12 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Financial Statements (continued) STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED (UNAUDITED) AUGUST 31, 1999 --------------------------------------- Increase (decrease) in net assets: Operations: Net investment income..................................... $ 6,197,542 $ 12,642,152 Net realized gain (loss) from investments and foreign currency transactions................................... (3,969,465) 716,186 Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies...................................... 292,177 (4,520,692) --------------------------------------- Net increase in net assets resulting from operations.... 2,520,254 8,837,646 Distributions to shareholders from net investment income... (6,792,846) (13,585,693) --------------------------------------- Net decrease in net assets.............................. (4,272,592) (4,748,047) Net assets: Beginning of period........................................ 159,447,917 164,195,964 --------------------------------------- End of period.............................................. $155,175,325 $159,447,917 ======================================= Distributions in excess of net investment income included in net assets: End of period.............................................. $ (1,727,445) $ (1,132,141) =======================================
See Notes to Financial Statements. 13 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Notes to Financial Statements (unaudited) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Templeton Global Governments Income Trust (the Fund) is registered under the Investment Company Act of 1940 as a closed-end, non-diversified investment company. The Fund seeks a high level of current income consistent with preservation of capital. Under normal market conditions, the Fund invests primarily in a portfolio of debt securities issued or guaranteed by governments, government agencies, and other government entities of various nations throughout the world, 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 Trustees. b. FOREIGN CURRENCY TRANSLATION: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign securities it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the recorded amounts of interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign currency denominated assets and liabilities other than investments in securities held at the end of the reporting period. c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. 14 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Notes to Financial Statements (unaudited) (continued) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.) d. FORWARD EXCHANGE CONTRACTS: The Fund may enter into forward exchange contracts to hedge against foreign exchange risks. These contracts are valued daily and the Fund's equity therein is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations. e. ACCOUNTING ESTIMATES: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expense during the reporting period. Actual results could differ from those estimates. 2. BENEFICIAL SHARES At February 29, 2000, there were an unlimited number of shares authorized ($0.01 par value). During the six months ended February 29, 2000 and year ended August 31, 1999, there were no share transactions; all reinvested distributions were satisfied with previously issued shares purchased in the open market. Total shares repurchased under the repurchase program are 200,000 for $1,408,863. 3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Certain officers of the Fund are also officers or directors of Templeton Investment Counsel, Inc. (TICI) and Franklin Templeton Services, Inc. (FT Services), the Fund's investment manager and administrative manager, respectively. The Fund pays an investment management fee to TICI based on the average daily net assets of the Fund as follows:
ANNUALIZED FEE RATE AVERAGE DAILY NET ASSETS - ----------------------------------------- 0.55% First $200 million 0.50% Over $200 million
The Fund pays an administrative fee to FT Services of 0.25% per year of the Fund's average daily net assets. FT Services has entered into a Sub-Administrator Agreement with Dean Witter Reynolds, Inc. through its InterCapital Division (DWR InterCapital), whereby DWR InterCapital provides certain administrative services. FT Services pays DWR InterCapital a fee equal, on an annual basis, to 0.15% of the Fund's average daily net assets. 15 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Notes to Financial Statements (unaudited) (continued) 4. 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. The cost of securities for income tax purposes is the same as that shown in the Statement of Investments. At February 29, 2000, the net unrealized depreciation based on the cost of investments for income tax purposes was as follows: Unrealized appreciation..................................... $ 969,796 Unrealized depreciation..................................... (22,960,072) ------------ Net unrealized depreciation................................. $(21,990,276) ============
5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the period ended February 29, 2000 aggregated $42,785,810 and $49,378,140, respectively. 16 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Annual Meeting of Shareholders, March 7, 2000 An Annual Meeting of Shareholders of the Trust was held at the Trust's offices, 500 E. Broward Blvd., Ft. Lauderdale, Florida, on March 7, 2000. The purpose of the meeting was to elect four Trustees of the Trust; to ratify the selection of PricewaterhouseCoopers LLP, as the Trust's independent auditors for the fiscal year ending August 31, 2000; and to authorize the proxyholders, in their discretion, to vote upon such other matters that may properly come before the meeting or any adjournments of the meeting. At the meeting, the following persons were elected by the shareholders to serve as Trustees of the Trust: Nicholas F. Brady, Edith E. Holiday, Charles B. Johnson and Betty P. Krahmer.* Shareholders also ratified the selection of PricewaterhouseCoopers LLP, to serve as the Trust's independent auditors for the fiscal year ending August 31, 2000. No other business was transacted at the meeting. The results of the voting at the Annual Meeting are as follows: 1. The election of four (4) Trustees:
% OF % OF % OF OUTSTANDING VOTED OUTSTANDING TERM EXPIRING 2003: FOR SHARES SHARES WITHHELD SHARES - --------------------------------------------------------------------------------------------------------------------------- Nicholas F. Brady.................................. 17,067,754 75.38% 99.21% 135,893 0.60% Edith E. Holiday................................... 17,069,698 75.39% 99.22% 133,949 0.59% Charles B. Johnson................................. 17,070,333 75.39% 99.23% 133,314 0.59% Betty P. Krahmer................................... 17,059,322 75.34% 99.16% 144,325 0.64%
2. The ratification of the selection of PricewaterhouseCoopers LLP as independent auditors of the Trust for the fiscal year ending August 31, 2000:
% OF % OF % OF % OF % OF OUTSTANDING VOTED OUTSTANDING OUTSTANDING BROKER OUTSTANDING FOR SHARES SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES - ---------------------------------------------------------------------------------------------------------- 17,033,827.. 75.23% 99.01% 47,580 0.21% 122,240 0.54% -- --
3. The transaction of any other business that may properly come before the meeting or any adjournments thereof:
% OF % OF % OF % OF % OF OUTSTANDING VOTED OUTSTANDING OUTSTANDING BROKER OUTSTANDING FOR SHARES SHARES AGAINST SHARES ABSTAIN SHARES NON-VOTES SHARES - ---------------------------------------------------------------------------------------------------------- 16,822,021.. 74.30% 97.78% 147,870 0.65% 233,756 1.03% -- --
*Harris J. Ashton, Frank J. Crothers, S. Joseph Fortunato, John Wm. Galbraith, Andrew H. Hines, Jr., Rupert H. Johnson, Jr., Gordon S. Macklin, Fred R. Millsaps and Constantine D. Tseretopoulos are Trustees of the Trust who are currently serving and whose terms of office continued after the Annual Meeting of Shareholders. 17 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST Dividend Reinvestment Plan The Trust offers a Dividend Reinvestment Plan (the "Plan") with the following features: If shares of the Trust are held in the shareholder's name, the shareholder will automatically be a participant in the Plan unless he elects to withdraw. If the shares are registered in the name of a broker-dealer or other nominee (i.e., in "street name"), the broker-dealer or nominee will elect to participate in the Plan on the shareholder's behalf unless the shareholder instructs them otherwise, or unless the reinvestment service is not provided by the broker-dealer or nominee. Participants should contact Morgan Stanley Dean Witter Trust(FSB), P.O. Box 1040, Jersey City, New Jersey 07303, to receive the Plan brochure. To receive dividends or distributions in cash, the shareholder must notify Morgan Stanley Dean Witter Trust(FSB) (the "Plan Agent") at the address above or the institution in whose name the shares are held. The Plan Agent must receive written notice within 10 business days before the record date for the distribution. Whenever the Trust declares dividends in either cash or shares of beneficial interest of the Trust, 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 Trust'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. 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. 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. 18 TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST SHAREHOLDER INFORMATION Shares of Templeton Global Governments Income Trust are traded daily on the New York Stock Exchange under the symbol "TGG." Information about the net asset value and the market price is published 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 Trust's shares are published in the New York Stock Exchange Composite Transactions section of newspapers. For current information about dividends and shareholder accounts, call 1-800/869-NEWS (1-800/869-6397). 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 Trust's mailing list, by writing Templeton Global Governments Income Trust, 100 Fountain Parkway P.O. Box 33030, St. Petersburg, FL 33733-8030. 19 SEMIANNUAL REPORT TEMPLETON GLOBAL GOVERNMENTS INCOME TRUST 100 Fountain Parkway P.O. Box 33030 St. Petersburg, Florida 33733-8030 TRANSFER AGENT Morgan Stanley Dean Witter Trust(FSB) Harborside Financial Center, Plaza 2 Jersey City, New Jersey 07311 1-800/869-NEWS FUND INFORMATION 1-800/342-5236 Investors should be aware that the value of investments made for the Trust may go down as well as up. Like any investment in securities, the value of the Trust's portfolio will be subject to the risk of loss from market, currency, economic, political and other factors. The Trust 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 Trust. 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. TLTGG S00 04/00 [RECYCLE LOGO] Printed on recycled paper -----END PRIVACY-ENHANCED MESSAGE-----