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Templeton Global Bond Fund

AUGUST 31, 2011

ANNUAL REPORTAND SHAREHOLDER LETTER

A series of Templeton Income Trust

F I XED INCOME

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Franklin. Founded in 1947, Franklin is a recognized leader in fixed income investingand also brings expertise in growth- and value-style U.S. equity investing.

Templeton. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry’s oldest global fund. Today, withoffices in over 25 countries, Templeton offers investors a truly global perspective.

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Because our management groups work independently and adhere to differentinvestment approaches, Franklin, Templeton and Mutual Series funds typicallyhave distinct portfolios. That’s why our funds can be used to build trulydiversified allocation plans covering every major asset class.

At Franklin Templeton Investments, we seek to consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable,accurate and personal service that has helped us become one of the most trustednames in financial services.

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Not part of the annual report

Not part of the annual report | 1

Contents

Shareholder Letter

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Annual Report

Templeton Global Bond Fund . . 3

Performance Summary . . . . . . 10

Your Fund’s Expenses . . . . . . . 15

Financial Highlights and Statement of Investments . . . 17

Financial Statements . . . . . . . 43

Notes to Financial Statements . . . . . . . . . . . . . . 47

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . 61

Tax Designation . . . . . . . . . . . 62

Board Members and Officers . . 63

Shareholder Information . . . . . 68

Shareholder Letter . . . . . . . . 1

Dear Shareholder:

During the 12 months ended August 31, 2011, global economic expansionwas pressured by several events including natural disasters, geopolitical unrestand sovereign debt crises. Global stock markets rallied early in the period.Near period-end, however, attention focused on U.S. lawmakers’ debate andeventual compromise on the debt limit, independent credit rating agencyStandard & Poor’s downgrade of the long-term U.S. sovereign credit rating,and fears of the European debt crisis possibly spreading. Investors wereunderstandably nervous, which led to a sharp equity market sell-off in thefinal months of the fiscal year. Overall, global stock and bond markets deliv-ered positive results for the year under review.

Although the recent environment has been challenging, we remain cautiouslyoptimistic about global economies as developed countries attempt to addresstheir fiscal problems and high debt levels while emerging economies continue toshow growth. We also remain positive about securities markets given suchunderlying fundamentals as strong corporate balance sheets and robust earn-ings reports. Keep in mind we have navigated through past periods of economicuncertainty and market volatility by remaining committed to our long-termperspective and disciplined investment approach. First and foremost for us, thismeans conducting rigorous, fundamental analysis of securities with a continualemphasis on investment risk management.

Templeton Global Bond Fund’s annual report goes into greater detail aboutprevailing conditions during the period under review. In addition, you willfind Fund performance data, financial information and a discussion from theportfolio managers. Please remember all securities markets fluctuate, as domutual fund share prices.

If you would like more frequent updates, franklintempleton.com providesdaily prices, monthly performance figures, portfolio holdings and other infor-mation. You can also access your account, buy and sell shares, read timelyarticles, and find helpful financial planning tools. We hope you will takeadvantage of these online services.

Historically, patient investors have achieved rewarding results by evaluatingtheir goals, diversifying their assets globally and maintaining a disciplinedinvestment program, all hallmarks of the Templeton investment philosophydeveloped more than 50 years ago. As always, we encourage you to discussyour goals with your financial advisor who can address concerns aboutvolatility and diversification, periodically review your overall portfolio andhelp you stay focused on the long term. We firmly believe most people benefitfrom professional advice and that advice is invaluable as investors navigatechanging market environments.

We thank you for investing with Franklin Templeton, welcome your questionsand comments, and look forward to serving your investment needs in theyears ahead.

Sincerely,

Christopher J. Molumphy, CFAPresident and Chief Executive Officer – Investment ManagementTempleton Income Trust

CFA® is a trademark owned by CFA Institute.

This letter reflects our analysis and opinions as of August 31, 2011. The information is not a complete analysis ofevery aspect of any market, country, industry, security or fund. Statements of fact are from sources consideredreliable.

2 | Not part of the annual report

Annual Report | 3

Annual Report

Templeton Global Bond FundYour Fund’s Goal and Main Investments: Templeton Global Bond Fund seeks current

income with capital appreciation and growth of income. Under normal market conditions, the Fund

invests at least 80% of its net assets in “bonds.” Bonds include debt securities of any maturity, such as

bonds, notes, bills and debentures.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’sStatement of Investments (SOI). The SOI begins on page 21.

We are pleased to bring you Templeton Global Bond Fund’s annual report forthe fiscal year ended August 31, 2011.

Performance Overview

For the 12 months under review, Templeton Global Bond Fund – Class Adelivered a +10.20% cumulative total return. The Fund outperformed globalgovernment bonds as measured by its benchmark, the Citigroup WorldGovernment Bond Index (WGBI), which had cumulative total returns of

Foreign Government & Agency Securities 77.1%Municipal Bonds 2.2%Quasi-Sovereign & Corporate Bonds 1.9%Short-Term Investments & Other Net Assets 18.8%

Portfolio BreakdownBased on Total Net Assets as of 8/31/11

Performance data represent

past performance, which does

not guarantee future results.

Investment return and principal

value will fluctuate, and you may

have a gain or loss when you sell

your shares. Current performance

may differ from figures shown.

Please visit franklintempleton.comor call (800) 342-5236 for most

recent month-end performance.

4 | Annual Report

Geographic BreakdownBased on Total Net Assets as of 8/31/11

Asia Pacific

Other Europe

Americas

EMU**

Middle East & Africa

Supranational*

43.4%

12.0%

30.3%

5.9%

4.3%

1.9%

Other Net Assets2.2%

*The Fund’s supranational investments were denominated in the Mexican peso, Norwegian krone,Swedish krona and U.S. dollar.

**The Fund’s EMU investments were in Germany andIreland.

+1.13% in local currency terms and +8.20% in U.S. dollar terms for the same period.1 You can find the Fund’s long-term performance data in thePerformance Summary beginning on page 10.

Economic and Market Overview

The global economic recovery strengthened during the beginning of the Fund’sfiscal year. Emerging markets continued to lead the recovery with manyeconomies returning to or exceeding pre-crisis activity levels. Although somedeveloped economies, such as those of Australia and Scandinavia, also enjoyedrelatively strong recoveries, the G-3 (U.S., eurozone and Japan) experiencedslower growth than during recoveries from previous recessions. The divergentconditions between economies led to increasing differences in economic policiesaround the world. In most countries where recoveries were strong, monetarypolicy was tightened during the period as output gaps closed and inflationarypressures showed early signs of picking up. In contrast, in much of the devel-oped world, significant slack remained as economic growth was below trend.This prompted G-3 policymakers to maintain historically accommodative mon-etary policies. A consequence of these divergent conditions was a furtherincrease of capital flows to emerging markets. This foreign investment sup-ported their recoveries but also prompted fears of potential asset price bubbles,economic overheating and currency overvaluation. Strengthening economicrecovery was relatively favorable overall for risk assets as equity markets per-formed well and bond yields generally rose for a large part of the period.

Toward the end of the review period, softer economic reports in most advancedand some emerging economies raised concerns that the global economic recov-ery may be faltering. This led markets to seemingly price in the end of thecurrent recovery phase in the business cycle rather than a mid-cycle slowdown.Nevertheless, classic signs of overcapacity in the U.S., indicating the economyhad peaked, did not appear to be present. Little evidence existed of housing orother new asset bubbles, and corporations were restrained in hiring and capac-ity building despite strong fundamentals. This leaner corporate structure didnot help the still-weak labor market, but it also implied U.S. firms wereunlikely to have significant excess labor. Still, a soft patch in recovery was notsurprising given the amount of leverage in the system during the years leadingup to the global financial crisis. Some moderation in the trajectory of emergingeconomies’ recoveries allowed growth to approach more sustainable levels andreduced the potential for overheating.

1. Source: © 2011 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstarand/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete ortimely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use ofthis information. The index is unmanaged and includes reinvested interest. One cannot invest directly in an index, andan index is not representative of the Fund’s portfolio.

Annual Report | 5

Economic performance in Asia excluding Japan was stronger than in otherregions, even as economic activity showed signs of moderating toward theFund’s fiscal year-end. In the second quarter of 2011, real gross domestic prod-uct (GDP) growth registered annual rates of 9.5% in China, 4.0% in Malaysiaand 3.4% in South Korea.2 Asian policymakers tightened their monetary poli-cies as measures of economic slack narrowed. China tightened liquidityconditions to prevent the formation of asset bubbles and to encourage a moresustainable economic growth rate. Elsewhere in the region, policymakers hikedinterest rates 225 basis points (bps; 100 bps equal one percentage point) inIndia, 100 bps in South Korea, 50 bps in the Philippines, 25 bps in Australiaand 25 bps in Malaysia. By contrast, second quarter 2011 GDP growth was1.3% in the U.S., 1.6% in the eurozone and -1.1% in Japan.3 This led policy-makers to maintain historically low policy rates in the U.S. and Japan while theEuropean Central Bank (ECB) raised its policy rate 50 bps during the period.

Against this economic backdrop, markets absorbed several shocks during thereview period as there were various, distinct sources of market volatility.Tensions flared in the Middle East and North Africa as uprisings in Tunisia,Egypt and Libya led to the fall of long-time rulers in those countries and, inthe process, helped inspire a wave of regional unrest in several countries withautocratic rulers. A massive earthquake off the east coast of Japan triggered adestructive tsunami that struck a serious blow to the country’s economy andled to global supply-chain disruptions. Global economic activity subsequentlybegan to normalize as Japan started reconstruction and firms adjusted after thedisaster. These events led to significant short-term market volatility. Oil pricesin particular rose as Libya’s exports were impacted and fears about the poten-tial effects of unrest spreading elsewhere in the region worried the market.

Separately, concerns about the solvency of some eurozone governments resur-faced during the period as policymakers continued to struggle for a coordinatedplan to address the significant challenges faced by the more heavily indebtedeurozone countries, namely Ireland, Portugal, Greece and Spain. During theperiod, the Portuguese government became the third eurozone member to seekofficial aid from the International Monetary Fund (IMF) and European Union(EU). Although Greece was able to enact some austerity measures and agreed toimpose lower rates on private bondholders to secure additional funds from theIMF and EU, concerns persisted over the government’s large outstanding debt.The ongoing eurozone sovereign debt crisis led to periods of risk aversion, whenbond yields declined, equity markets sold off and perceived safe haven assets rallied, to alternate with periods of heightened risk appetite, when yields

2. Sources: National Bureau of Statistics (China); Department of Statistics (Malaysia); Bank of Korea (South Korea).

3. Sources: Bureau of Economic Analysis (U.S.); Eurostat (eurozone); Economic and Social Research Institute (Japan).

6 | Annual Report

increased and investors again favored risk assets. Adding to the climate of riskaversion toward period-end was an extended and confrontational debate inthe U.S. Congress regarding an increase in the U.S. debt ceiling that ultimatelycontributed to Standard & Poor’s downgrade of the long-term U.S. sovereigncredit rating.

Investment Strategy

We invest selectively in bonds around the world based upon our assessment ofchanging market, political and economic conditions. While seeking opportuni-ties, we monitor various factors including changes in interest rates, currencyexchange rates and credit risks. We seek to manage the Fund’s exposure to vari-ous currencies and may utilize forward currency exchange contracts.

Manager’s Discussion

The Fund’s total return was influenced by various factors, including interestrate developments, currency movements and exposure to sovereign debtmarkets. During the period under review, each of these sources of returnbenefited absolute results, with varying results relative to the benchmarkCitigroup WGBI.

Interest Rate Strategy

During the Fund’s fiscal year, we shortened the portfolio’s duration as manypolicymakers around the world, including in the eurozone, hiked interest ratesto limit potential inflationary pressures and concern increased over the sustain-ability of relatively accommodative U.S. monetary and fiscal policies. Byperiod-end, we generally held shorter duration positioning in Mexico givenour outlook for potential interest rate tightening there. In the U.S. and Japan,with interest rates at historically low levels, central banks supplying signifi-cant liquidity to the financial sector, and fiscal deficits that drove recordfunding needs, we saw what we viewed as limited value in those governmentbond markets. Our positioning in these countries, however, detracted fromperformance relative to the benchmark Citigroup WGBI as yields did notincrease significantly during the review period. The Fund maintained littleduration exposure in emerging markets, except in a select few countrieswhere rates were already quite high. Although Indonesia’s central bank raisedits policy rate during the period, the decline of long-term bond yields and thereturns generated by our positions there contributed to relative performance.

What is duration?

Duration is a measure of a bond’s price

sensitivity to interest rate changes. In

general, a portfolio of securities with a

lower duration can be expected to be

less sensitive to interest rate changes

than a portfolio with a higher duration.

What is a forward currencyexchange contract?

A forward currency exchange contract

is an agreement between the Fund and

a counterparty to buy or sell a foreign

currency for a specific exchange rate on

a future date.

Annual Report | 7

Currency Strategy

The Fund’s diversified currency exposure detracted from relative perform-ance. As part of the Fund’s investment strategy, the Fund used forwardcurrency exchange contracts to hedge or gain exposure to various currenciesduring the fiscal year. The U.S. dollar was broadly weaker during the periodas most economies grew at a faster pace than that of the U.S. and attractedsubstantial foreign investment. The U.S. dollar fell 10.31% during the periodversus its major trading partners.4 Dollar weakness was particularly pro-nounced early in the period as the market priced in Federal Reserve Board(Fed) Chairman Bernanke’s announcement of a second quantitative easingprogram. This dollar weakness and firming global growth supported com-modity prices, which in turn favored the currencies of several Latin Americaneconomies. The Fund benefited from its exposures to the Chilean peso,Brazilian real and Mexican peso in particular. The Brazilian real appreciated10.44% against the U.S. dollar during the fiscal year, outperforming theChilean peso, up 8.36%, and the Mexican peso, up 6.56%.5 Notably, theoutperformance of the Brazilian real and the Chilean peso coincided withinterest rate hikes aimed at limiting increasing inflationary pressure.

The Fund’s exposure to Asian currencies significantly benefited performancedespite the Fund’s large net-negative Japanese yen exposure against the U.S.dollar, through the use of forward currency exchange contracts, whichdetracted from relative results. The Japanese yen strengthened 9.81%5 againstthe U.S. dollar during the period as yields on 10-year U.S. government bondsfell 25 bps. However, the negative effect of our yen positioning was more thanoffset from currency positions elsewhere in Asia. For example, the Fund bene-fited significantly from its overweighed exposure to the Australian dollar,which appreciated 20.32% against the U.S. dollar.5 Although Chinese demandfor Australia’s exports supported the currency, Australia’s domestic economywas also a contributing factor to the currency’s strength. The Reserve Bank ofAustralia continued to tighten policy during the period after it had previouslybecome one of the world’s first developed economies to raise interest rates.Central banks in South Korea, Indonesia and the Philippines also tightenedpolicy during the period as capital flowed into these economies. The Fund’sexposure to these countries’ currencies aided performance, as did its exposureto the Indian rupee and Malaysian ringgit, which appreciated 2.15% and5.20% against the U.S. dollar.5

4. Source: Federal Reserve H10 Report.

5. Source: IDC/Exshare.

Currency Breakdown8/31/11

% of TotalNet Assets

Americas 48.6%

U.S. Dollar 34.7%

Mexican Peso 7.0%

Chilean Peso 3.6%

Brazilian Real 3.2%

Peruvian Nuevo Sol 0.1%

Asia Pacific 45.2%

South Korean Won 15.0%

Australian Dollar 11.6%

Malaysian Ringgit 11.1%

Singapore Dollar 8.0%

Philippine Peso 4.8%

Indonesian Rupiah 3.8%

Indian Rupee 3.6%

Sri Lankan Rupee 1.1%

Japanese Yen* -13.8%

Middle East & Africa 4.7%

New Israeli Shekel 3.3%

Egyptian Pound 1.4%

Europe 1.5%

Swedish Krona 12.1%

Polish Zloty 11.2%

Norwegian Krone 6.9%

British Pound 5.9%

Hungarian Forint 1.7%

Euro* -36.3%

*Holding is a negative percentage because of the Fund’sholdings of forward currency exchange contracts.

The euro strengthened against the dollar during the period as building infla-tionary pressures and the strength of large, regional economies, Germany’sin particular, led the ECB to hike policy rates ahead of the U.S. Fed. Theeuro strengthened 13.29% against the U.S. dollar during the period, and theFund’s large net-negative position, through the use of forward currencyexchange contracts, was the biggest detractor from relative performance.5

However, this negative effect was partially offset by the Fund’s exposure tosome other European currencies that appreciated against the U.S. dollar. Forexample, the Norwegian krone appreciated 17.66% against the U.S. dollar as Norway’s economy benefited from relatively strong growth and rising oilprices.5 Sweden’s currency also performed well as the krona appreciated16.54% against the dollar amid strengthening economic activity.5

Global Sovereign Debt Strategy

The Fund purchased hard currency-denominated sovereign debt that typicallycompensates for greater credit risk by offering higher yields relative to U.S.Treasury and European benchmark bonds. Although risk aversion toward theend of the period led spreads to widen between yields on high yielding sover-eign credits and the underlying “risk-free assets,” such as U.S. Treasuries,declining yields on U.S. Treasuries and high returns from these positionshelped sovereign credit exposures benefit relative performance overall. Asfinancial markets began reflecting the underlying strength of emergingeconomies, many traditional emerging markets could borrow more cheaplythan some eurozone members and, in several cases, U.S. states. U.S. dollar-denominated emerging market debt posted a +7.49% total return during theperiod as measured by the J.P. Morgan (JPM) Emerging Markets Bond Index(EMBI) Global, and sovereign interest rate credit spreads rose 28 bps duringthe period.1, 6 Regionally, Latin American sovereign debt returned +9.48%,Asian debt +5.37%, and central and eastern European debt +6.33%.6

8 | Annual Report

6. Source: J.P. Morgan Markets. Regional returns are from subindexes of the JPM EMBI Global.

Thank you for your continued participation in Templeton Global Bond Fund.We look forward to serving your future investment needs.

Michael Hasenstab, Ph.D.

Lead Portfolio Manager

Sonal Desai, Ph.DPortfolio Manager

Portfolio Management TeamTempleton Global Bond Fund

The foregoing information reflects our analysis, opinions and portfolio holdings as of August 31, 2011, the end ofthe reporting period. The way we implement our main investment strategies and the resulting portfolio holdingsmay change depending on factors such as market and economic conditions. These opinions may not be relied uponas investment advice or an offer for a particular security. The information is not a complete analysis of everyaspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reli-able, but the investment manager makes no representation or warranty as to their completeness or accuracy.Although historical performance is no guarantee of future results, these insights may help you understand ourinvestment management philosophy.

Annual Report | 9

10 | Annual Report

Performance Summary as of 8/31/11

Price and Distribution Information1

Class A (Symbol: TPINX) Change 8/31/11 8/31/10

Net Asset Value (NAV) +$0.60 $13.84 $13.24

Distributions (9/1/10–8/31/11)

Dividend Income $0.7319

Class C (Symbol: TEGBX) Change 8/31/11 8/31/10




Class R (Symbol: FGBRX) Change 8/31/11 8/31/10




Advisor Class (Symbol: TGBAX) Change 8/31/11 8/31/10




Your dividend income will vary depending on dividends or interest paid by securities in the Fund’sportfolio, adjusted for operating expenses of each class. Capital gain distributions are net profitsrealized from the sale of portfolio securities. The performance table and graphs do not reflect anytaxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or anyrealized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividendsand capital gain distributions, if any, and any unrealized gains or losses.

Annual Report | 11

Performance Summary (continued)

Performance

Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment includemaximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge infirst year only; Class R/Advisor Class: no sales charges.

Class A 1-Year 5-Year 10-Year

Cumulative Total Return2 +10.20%1 +73.99% +209.11%

Average Annual Total Return3 +5.50% +10.74% +11.46%

Value of $10,000 Investment4 $10,550 $16,657 $29,583

Avg. Ann. Total Return (9/30/11)5 -6.50% +8.89% +10.60%

Total Annual Operating Expenses6 0.93%

Class C 1-Year 5-Year 10-Year


Average Annual Total Return3 +8.75% +11.27% +11.50%




Class R 1-Year Inception (2/2/09)

Cumulative Total Return2 +10.02%1 +39.84%

Average Annual Total Return3 +10.02%1 +13.90%

Value of $10,000 Investment4 $11,002 $13,984

Avg. Ann. Total Return (9/30/11)5 -2.65% +9.92%


Advisor Class 1-Year 5-Year 10-Year


Average Annual Total Return3 +10.51%1 +12.01% +12.22%




Performance data represent past performance, which does not guarantee future results. Investment return and principalvalue will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

12 | Annual Report

Average Annual Total Return

Class A 8/31/11

1-Year +5.50%

5-Year +10.74%

10-Year +11.46%


Class C 8/31/11

1-Year +8.75%

5-Year +11.27%

10-Year +11.50%


Class A (9/1/01–8/31/11)

$0 8/11 8/098/078/058/039/01

$12,763

$21,043

$29,583

$35,000

$25,000

$15,000

$10,000

Templeton Global Bond Fund CPI7Citigroup WGBI7

Class C (9/1/01–8/31/11)

$0 8/11 8/098/078/058/039/01

$12,763

$21,043

$29,695

$35,000

$25,000

$15,000

$10,000


Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includesany current, applicable, maximum sales charge, Fund expenses, account fees and reinvested distri-butions. The unmanaged index includes reinvestment of any income or distributions. It differsfrom the Fund in composition and does not pay management fees or expenses. One cannot investdirectly in an index.

Annual Report | 13

Class R (2/2/09–8/31/11)

2/09 8/11

$15,000

8/10

$10,729

$12,244

$13,984

$10,000

$5,000



Class R 8/31/11

1-Year1 +10.02%

Since Inception (2/2/09) +13.90%


Advisor Class 8/31/11

1-Year1 +10.51%

5-Year +12.01%

10-Year +12.22%


Advisor Class (9/1/01–8/31/11)

$0 8/11 8/098/078/058/039/01

$12,763

$21,043

$31,681$35,000

$25,000

$15,000

$10,000


14 | Annual Report


Endnotes

Changes in interest rates will affect the value of the Fund’s portfolio and its share price and yield. Bond prices generally move in the oppositedirection of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Specialrisks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments indeveloping markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size andlesser liquidity. The Fund’s use of derivatives and foreign currency techniques involve special risks as such techniques may not achieve theanticipated benefits and/or may result in losses to the Fund. The Fund is also nondiversified, which involves the risk of greater price fluctuationthan a more diversified portfolio. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund isactively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectusalso includes a description of the main investment risks.

Class C: Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shareshave higher annual fees and expenses than Class A shares.

Class R: Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expensesthan Class A shares.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

1. Price and total return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the netassets of the Fund at 8/31/11 for financial reporting purposes, and as a result, the net asset asset values for shareholder transactions and the totalreturns based on those net asset values differ from the adjusted net asset values and total returns reported in the Financial Highlights.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated.

4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

5. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.

6. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly,causing total annual Fund operating expenses to become higher than the figures shown.

7. Source: © 2011 Morningstar. The Citigroup WGBI is a market capitalization-weighted index consisting of investment-grade world governmentbond markets. The Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

Annual Report | 15

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs.

• Transaction costs, including sales charges (loads) on Fund purchases; and

• Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and otherFund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help you understandthese costs and compare them with those of other mutual funds. The table assumes a $1,000investment held for the six months indicated.

Actual Fund Expenses

The first line (Actual) for each share class listed in the table provides actual account values andexpenses. The “Ending Account Value” is derived from the Fund’s actual return, which includesthe effect of Fund expenses.

You can estimate the expenses you paid during the period by following these steps. Of course,your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000.If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Expenses Paid During Period.”If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Information in the second line (Hypothetical) for each class in the table can help you compareongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period.The hypothetical “Ending Account Value” is based on the actual expense ratio for each class andan assumed 5% annual rate of return before expenses, which does not represent the Fund’s actualreturn. The figure under the heading “Expenses Paid During Period” shows the hypotheticalexpenses your account would have incurred under this scenario. You can compare this figure withthe 5% hypothetical examples that appear in shareholder reports of other funds.

16 | Annual Report

Your Fund’s Expenses (continued)

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflectany transaction costs, such as sales charges. Therefore, the second line for each class is useful incomparing ongoing costs only, and will not help you compare total costs of owning different funds.In addition, if transaction costs were included, your total costs would have been higher. Please referto the Fund prospectus for additional information on operating expenses.

Beginning Account Ending Account Expenses Paid DuringClass A Value 3/1/11 Value 8/31/11 Period* 3/1/11–8/31/11

Actual $1,000 $1,040.80 $4.58

Hypothetical (5% return before expenses) $1,000 $1,020.72 $4.53

Class C

Actual $1,000 $1,038.70 $6.63


Class R

Actual $1,000 $1,039.50 $5.86


Advisor Class

Actual $1,000 $1,042.30 $3.29


*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.89%; C: 1.29%; R: 1.14%; and Advisor: 0.64%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

Templeton Income TrustFinancial Highlights

Annual Report | The accompanying notes are an integral part of these financial statements. | 17


Year Ended August 31,Class A 2011 2010 2009 2008 2007

Per share operating performance(for a share outstanding throughout the year)

Net asset value, beginning of year . . . . . . . . . . . . . . . . . $13.24 $12.18 $11.42 $11.15 $10.78

Income from investment operationsa:

Net investment incomeb . . . . . . . . . . . . . . . . . . . . . . . 0.52 0.57 0.57 0.50 0.46

Net realized and unrealized gains (losses) . . . . . . . . . . . 0.78 1.05 1.11 0.57 0.55

Total from investment operations . . . . . . . . . . . . . . . . . . 1.30 1.62 1.68 1.07 1.01

Less distributions from:

Net investment income and net realized foreign currency gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.73) (0.56) (0.92) (0.79) (0.63)

Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (0.01) (0.01)

Total distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.73) (0.56) (0.92) (0.80) (0.64)

Redemption feesc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —d —d

Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . $13.81 $13.24 $12.18 $11.42 $11.15

Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.96% 13.57% 15.74% 9.62% 9.57%

Ratios to average net assets

Expensesf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.88% 0.91% 0.92% 0.92% 0.99%

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 3.76% 4.40% 4.99% 4.28% 4.17%

Supplemental data

Net assets, end of year (000’s) . . . . . . . . . . . . . . . . . . . $26,032,471 $17,853,083 $9,301,146 $6,695,310 $3,853,706

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . 26.41% 12.09% 65.94% 29.74% 44.33%

aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cEffective September 1, 2008, the redemption fee was eliminated.dAmount rounds to less than $0.01 per share.eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.fBenefit of expense reduction rounds to less than 0.01%.

Templeton Income TrustFinancial Highlights (continued)

18 | The accompanying notes are an integral part of these financial statements. | Annual Report


Year Ended August 31,Class C 2011 2010 2009 2008 2007


Net asset value, beginning of year . . . . . . . . . . . . . . . . . . $13.27 $12.20 $11.43 $11.17 $10.79


Net investment incomeb . . . . . . . . . . . . . . . . . . . . . . . . 0.46 0.52 0.53 0.45 0.42


Total from investment operations . . . . . . . . . . . . . . . . . . . 1.25 1.58 1.64 1.01 0.98


Net investment income and net realized foreign currency gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.68) (0.51) (0.87) (0.74) (0.59)

Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (0.01) (0.01)

Total distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.68) (0.51) (0.87) (0.75) (0.60)

Redemption feesc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —d —d

Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . $13.84 $13.27 $12.20 $11.43 $11.17

Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.59% 13.01% 15.35% 9.17% 9.22%


Expensesf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.28% 1.31% 1.32% 1.32% 1.39%

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . 3.36% 4.00% 4.59% 3.88% 3.77%

Supplemental data

Net assets, end of year (000’s) . . . . . . . . . . . . . . . . . . . . $9,270,612 $6,382,496 $2,874,696 $1,979,992 $993,769

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.41% 12.09% 65.94% 29.74% 44.33%

aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cEffective September 1, 2008, the redemption fee was eliminated.dAmount rounds to less than $0.01 per share.eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.fBenefit of expense reduction rounds to less than 0.01%.




Year Ended August 31,Class R 2011 2010 2009a


Net asset value, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.24 $12.18 $11.14

Income from investment operationsb:

Net investment incomec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46 0.53 0.33

Net realized and unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.81 1.06 1.01

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.27 1.59 1.34

Less distributions from net investment income and net realized foreign currency gains . . . . . . . . . (0.70) (0.53) (0.30)

Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.81 $13.24 $12.18

Total returnd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.78% 13.22% 12.27%

Ratios to average net assetse

Expensesf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13% 1.16% 1.17%

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.51% 4.15% 4.74%

Supplemental data

Net assets, end of year (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $126,413 $27,539 $3,339

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.41% 12.09% 65.94%

aFor the period February 2, 2009 (effective date) to August 31, 2009.bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.cBased on average daily shares outstanding.dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.eRatios are annualized for periods less than one year.fBenefit of expense reduction rounds to less than 0.01%.




Year Ended August 31,Advisor Class 2011 2010 2009 2008 2007


Net asset value, beginning of year . . . . . . . . . . . . . . . . . $13.21 $12.15 $11.39 $11.13 $10.75


Net investment incomeb . . . . . . . . . . . . . . . . . . . . . . . 0.55 0.60 0.60 0.53 0.49


Total from investment operations . . . . . . . . . . . . . . . . . . 1.33 1.65 1.70 1.08 1.05


Net investment income and net realized foreign currency gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.77) (0.59) (0.94) (0.81) (0.66)

Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (0.01) (0.01)

Total distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.77) (0.59) (0.94) (0.82) (0.67)

Redemption feesc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —d —d

Net asset value, end of year . . . . . . . . . . . . . . . . . . . . . $13.77 $13.21 $12.15 $11.39 $11.13

Total return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.27% 13.80% 15.98% 9.92% 9.97%


Expensese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.63% 0.66% 0.67% 0.67% 0.74%

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . 4.01% 4.65% 5.24% 4.53% 4.42%

Supplemental data

Net assets, end of year (000’s) . . . . . . . . . . . . . . . . . . . $27,154,629 $13,833,022 $5,021,533 $2,394,380 $1,156,962

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . 26.41% 12.09% 65.94% 29.74% 44.33%

aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cEffective September 1, 2008, the redemption fee was eliminated.dAmount rounds to less than $0.01 per share.eBenefit of expense reduction rounds to less than 0.01%.

Annual Report | 21

Templeton Income TrustStatement of Investments, August 31, 2011

Templeton Global Bond Fund Principal Amount* Value

Foreign Government and Agency Securities 77.1%Argentina 0.2%

a,b Government of Argentina, senior bond, FRN, 0.438%, 8/03/12 . . . . . . . . . . . . . . . 1,134,620,000 $ 136,965,653

Australia 9.3%Government of Australia, senior bond, 123, 5.75%, 4/15/12 . . . . . . . . . . . . . . . . . 1,209,700,000 AUD 1,307,968,095New South Wales Treasury Corp.,

6.00%, 5/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,350,455,000 AUD 1,460,896,4575.50%, 8/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,300,000 AUD 403,828,288senior note, 5.50%, 3/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312,478,000 AUD 349,311,724

Queensland Treasury Corp.,6.00%, 8/14/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,046,000 AUD 373,624,7016.00%, 9/14/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,390,000 AUD 76,312,587senior note, 6.00%, 8/21/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448,420,000 AUD 495,136,674

Western Australia Treasury Corp.,5.50%, 7/17/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 866,355,000 AUD 936,810,7428.00%, 6/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386,150,000 AUD 440,550,013

5,844,439,281

Brazil 3.2%Nota Do Tesouro Nacional,

10.00%, 1/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780,040 c BRL 486,618,85110.00%, 1/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,500 c BRL 48,025,97710.00%, 1/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930,930 c BRL 548,951,639

d Index Linked, 6.00%, 5/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,855 c BRL 63,069,955d Index Linked, 6.00%, 5/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505,029 c BRL 670,372,197d Index Linked, 6.00%, 5/15/45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,725 c BRL 180,427,627

1,997,466,246

Hungary 4.3%Government of Hungary,

5.50%, 2/12/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,577,700,000 HUF 133,361,1585.50%, 2/12/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,462,700,000 HUF 103,199,1446.00%, 1/11/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,257,000 EUR 187,848,0786.50%, 6/24/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,462,100,000 HUF 68,506,1227.50%, 11/12/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076,900,000 HUF 5,794,405A, 8.00%, 2/12/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,293,900,000 HUF 45,886,351A, 6.75%, 11/24/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,722,700,000 HUF 82,084,827A, 7.00%, 6/24/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,385,200,000 HUF 63,940,054B, 6.75%, 2/24/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,086,800,000 HUF 68,755,224D, 6.75%, 2/12/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,784,700,000 HUF 57,691,124D, 6.75%, 8/22/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,994,200,000 HUF 273,064,844E, 7.50%, 10/24/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,784,700,000 HUF 58,762,345senior note, 3.50%, 7/18/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,765,000 EUR 15,317,203senior note, 4.375%, 7/04/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,048,000 EUR 130,317,765senior note, 5.75%, 6/11/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,730,000 EUR 202,442,801senior note, 6.25%, 1/29/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,964,000 363,078,901senior note, 3.875%, 2/24/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,781,000 EUR 50,772,933senior note, 6.375%, 3/29/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720,260,000 742,768,125

2,653,591,404

22 | Annual Report

Templeton Income TrustStatement of Investments, August 31, 2011 (continued)


Foreign Government and Agency Securities (continued)Indonesia 3.8%Government of Indonesia,

FR19, 14.25%, 6/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,867,000,000 IDR $ 28,474,083FR20, 14.275%, 12/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301,008,000,000 IDR 42,063,159FR23, 11.00%, 12/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,700,000,000 IDR 1,103,115FR25, 10.00%, 10/15/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,660,000,000 IDR 1,494,535FR26, 11.00%, 10/15/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,580,000,000 IDR 19,622,335FR27, 9.50%, 6/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,210,000,000 IDR 7,216,444FR28, 10.00%, 7/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,700,000,000 IDR 14,412,416FR30, 10.75%, 5/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,655,000,000 IDR 25,821,566FR31, 11.00%, 11/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889,507,000,000 IDR 133,504,771FR32, 15.00%, 7/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150,000,000 IDR 196,506FR34, 12.80%, 6/15/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505,113,000,000 IDR 249,245,057FR35, 12.90%, 6/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798,372,000,000 IDR 133,215,314FR36, 11.50%, 9/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401,590,000,000 IDR 60,695,951FR37, 12.00%, 9/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,550,000,000 IDR 10,817,357FR39, 11.75%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556,845,000,000 IDR 87,479,069FR40, 11.00%, 9/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 710,760,000,000 IDR 107,472,811FR42, 10.25%, 7/15/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818,390,000,000 IDR 118,277,160FR43, 10.25%, 7/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319,455,000,000 IDR 45,832,592FR44, 10.00%, 9/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,824,000,000 IDR 27,941,691FR46, 9.50%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,825,220,000,000 IDR 385,806,675FR47, 10.00%, 2/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,854,867,000,000 IDR 262,272,444FR48, 9.00%, 9/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,640,000,000 IDR 45,291,420FR49, 9.00%, 9/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,360,000,000 IDR 46,431,248FR52, 10.50%, 8/15/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896,704,000,000 IDR 132,205,285

e senior bond, 144A, 8.50%, 10/12/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,448,000 116,489,373e senior bond, 144A, 6.625%, 2/17/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,920,000 23,775,416e senior bond, 144A, 7.75%, 1/17/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,746,000 178,190,465e senior note, 144A, 11.625%, 3/04/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,990,000 87,385,131

Indonesia Retail Bond,9.35%, 8/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,450,000,000 IDR 3,611,845senior bond, ORI7, 7.95%, 8/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,632,000,000 IDR 10,731,353

2,407,076,587

Iraq 0.1%Government of Iraq,

e 144A, 5.80%, 1/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,625,000 19,276,417f Reg S, 5.80%, 1/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,094,000 54,458,886

73,735,303

Ireland 1.1%Government of Ireland,

4.00%, 1/15/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,599,000 EUR 65,620,2464.60%, 4/18/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,477,000 EUR 149,353,3535.90%, 10/18/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,920,000 EUR 99,887,4694.50%, 4/18/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,969,000 EUR 32,287,4025.00%, 10/18/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,372,000 EUR 20,780,354senior bond, 4.50%, 10/18/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,257,000 EUR 45,910,312

Annual Report | 23



Foreign Government and Agency Securities (continued)Ireland (continued)Government of Ireland, (continued)

senior bond, 4.40%, 6/18/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,095,000 EUR $ 88,172,168senior bond, 5.40%, 3/13/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,226,000 EUR 182,711,612

684,722,916

Israel 0.6%Government of Israel,

5.00%, 3/31/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440,660,000 ILS 130,200,6213.50%, 9/30/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823,449,000 ILS 232,597,164

362,797,785

Lithuania 1.3%eGovernment of Lithuania, 144A,

6.75%, 1/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,330,000 374,223,4657.375%, 2/11/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,310,000 301,370,0826.125%, 3/09/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,430,000 108,801,932

784,395,479

Malaysia 3.6%Government of Malaysia, senior bond,

3.833%, 9/28/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842,390,000 MYR 282,742,8522.711%, 2/14/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663,867,000 MYR 222,810,0563.718%, 6/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,632,895,000 MYR 551,544,0882.509%, 8/27/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,080,535,000 MYR 694,667,1323.702%, 2/25/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405,910,000 MYR 137,403,0523.70%, 5/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,710,000 MYR 8,031,7050509, 3.21%, 5/31/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000,000 MYR 336,016,762

2,233,215,647

Mexico 4.1%Government of Mexico,

M, 9.00%, 6/20/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,972,200 g MXN 803,250,802M, 7.00%, 6/19/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,961,300 g MXN 360,780,567M 10, 7.25%, 12/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,100,000 g MXN 99,214,745MI, 9.50%, 12/18/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,840,700 g MXN 174,872,062MI10, 9.00%, 12/20/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,179,000 g MXN 190,001,891MI10, 8.00%, 12/19/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,687,700 g MXN 921,176,869

2,549,296,936

Norway 0.6%e Kommunalbanken AS, senior note, 144A, 2.875%, 11/02/12 . . . . . . . . . . . . . . . . 2,043,240,000 NOK 381,719,411

Peru 0.1%Government of Peru, 7.84%, 8/12/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,399,000 PEN 78,342,740

Philippines 0.7%Government of the Philippines,

5-69, 4.625%, 11/25/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,756,700,000 PHP 41,828,852senior bond, 5.75%, 2/21/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,971,250,000 PHP 143,182,754senior bond, 5.25%, 1/07/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,969,810,000 PHP 47,678,933

24 | Annual Report



Foreign Government and Agency Securities (continued)Philippines (continued)Government of the Philippines, (continued)

senior bond, 8.75%, 3/03/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,083,810,000 PHP $ 154,540,512senior bond, R3-7, 5.25%, 9/24/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570,480,000 PHP 38,118,646

425,349,697

Poland 10.8%Government of Poland,

4.75%, 4/25/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,968,646,000 PLN 1,380,761,3925.25%, 4/25/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,246,815,000 PLN 438,262,4815.00%, 10/24/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644,390,000 PLN 226,226,7865.75%, 4/25/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 987,775,000 PLN 352,486,2326.25%, 10/24/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477,140,000 PLN 174,213,1825.75%, 9/23/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495,970,000 PLN 174,090,632senior note, 6.375%, 7/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297,700,000 342,474,080Strip, 1/25/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,005,055,000 PLN 343,275,766Strip, 7/25/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,215,115,000 PLN 406,301,637Strip, 10/25/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,707,517,000 PLN 894,570,655

h Strip, 1/25/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,577,476,000 PLN 1,169,407,165Strip, 7/25/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,749,906,000 PLN 881,029,726

6,783,099,734

Qatar 0.2%e Government of Qatar, senior note, 144A, 6.55%, 4/09/19 . . . . . . . . . . . . . . . . . . . 109,850,000 133,814,327

Russia 1.4%Government of Russia,

e 144A, 7.50%, 3/31/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582,539,440 697,736,615f senior bond, Reg S, 7.50%, 3/31/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,085,225 180,962,328

878,698,943

Singapore 0.9%Government of Singapore, senior bond,

3.50%, 7/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,130,000 SGD 39,365,7222.50%, 10/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,480,000 SGD 151,915,3001.625%, 4/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410,790,000 SGD 349,324,971

540,605,993

South Africa 0.7%Government of South Africa,

5.25%, 5/16/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,958,000 EUR 47,822,2244.50%, 4/05/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,945,000 EUR 25,378,1656.875%, 5/27/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,735,000 253,516,9545.50%, 3/09/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,380,000 64,409,507senior note, 6.50%, 6/02/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,290,000 8,201,068senior note, 5.875%, 5/30/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,345,000 36,680,560

436,008,478

South Korea 14.9%Government of Korea, senior bond, 5.625%, 11/03/25 . . . . . . . . . . . . . . . . . . . . . 13,150,000 15,501,549Korea Treasury Bond,

4.75%, 12/10/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748,897,430,000 KRW 1,648,376,0524.75%, 3/10/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,349,000,000 KRW 233,016,370

Annual Report | 25



Foreign Government and Agency Securities (continued)South Korea (continued)Korea Treasury Bond, (continued)

5.25%, 3/10/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,864,170,000 KRW $ 108,698,0835.00%, 9/10/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,000,000,000 KRW 174,045,322senior bond, 4.00%, 6/10/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,455,302,570,000 KRW 2,314,493,177senior bond, 4.25%, 12/10/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,601,717,700,000 KRW 1,518,558,920senior bond, 3.75%, 6/10/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,501,512,500,000 KRW 1,416,869,538senior bond, 3.00%, 12/10/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,660,245,850,000 KRW 1,543,407,044senior bond, 3.50%, 6/10/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,240,000,000 KRW 113,872,391senior bond, 5.25%, 9/10/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000,000,000 KRW 25,893,000senior note, 7.125%, 4/16/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,120,000 208,422,204

9,321,153,650

Sri Lanka 1.0%Government of Sri Lanka,

A, 6.90%, 8/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,900,000 LKR 1,888,558A, 8.50%, 1/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,820,300,000 LKR 72,248,454A, 13.50%, 2/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,593,700,000 LKR 74,710,450A, 7.00%, 3/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935,200,000 LKR 8,336,311A, 11.25%, 7/15/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,159,500,000 LKR 228,024,560A, 11.75%, 3/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,090,000 LKR 1,670,852A, 6.50%, 7/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,195,410,000 LKR 27,388,067A, 11.00%, 8/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,208,000,000 LKR 150,365,598A, 6.40%, 8/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,857,000,000 LKR 15,488,372B, 6.60%, 6/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,700,000 LKR 5,636,953B, 11.00%, 9/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,443,800,000 LKR 34,050,408B, 6.40%, 10/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,261,500,000 LKR 10,502,845

630,311,428

i Supranational 4.3%Corporacion Andina De Fomento, 8.125%, 6/04/19 . . . . . . . . . . . . . . . . . . . . . . . 136,720,000 169,636,434European Bank for Reconstruction & Development,

1.50%, 5/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,930,000,000 SEK 303,409,8412.25%, 7/22/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814,000,000 SEK 446,707,413senior note, 2.75%, 11/09/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750,000,000 NOK 512,077,892

European Investment Bank,1.45%, 5/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700,000,000 SEK 266,366,217senior note, 5.375%, 7/16/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,452,200,000 NOK 467,021,717senior note, 4.50%, 5/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,210,000 NOK 65,127,370

Inter-American Development Bank, senior note, 7.50%, 12/05/24 . . . . . . . . . . . . . 2,473,000,000 MXN 212,315,433International Bank for Reconstruction & Development, 2.25%, 11/08/13 . . . . . . . . 860,000,000 SEK 136,811,278Nordic Investment Bank, 1.625%, 5/08/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852,000,000 SEK 133,618,068

2,713,091,663

Sweden 5.0%Government of Sweden,

5.50%, 10/08/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,349,315,000 SEK 1,373,774,0871.50%, 8/30/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,786,640,000 SEK 281,684,013

Kommuninvest I Sverige AB, senior note, 1.75%, 10/08/12 . . . . . . . . . . . . . . . . . 9,302,740,000 SEK 1,459,897,636

3,115,355,736



Foreign Government and Agency Securities (continued)Ukraine 1.2%

eGovernment of Ukraine,144A, 7.65%, 6/11/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,800,000 $ 20,457,360144A, 6.875%, 9/23/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,500,000 10,735,725144A, 6.25%, 6/17/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,600,000 132,932,000144A, 7.75%, 9/23/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,520,000 63,673,200senior bond, 144A, 6.58%, 11/21/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,500,000 40,705,538

h senior note, 144A, 4.95%, 10/13/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,540,000 EUR 50,498,016h senior note, 144A, 6.75%, 11/14/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,673,000 45,842,904senior note, 144A, 7.95%, 2/23/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,600,000 396,461,412

761,306,155

United Arab Emirates 0.2%e Emirate of Abu Dhabi, 144A, 6.75%, 4/08/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,890,000 132,305,507

United Kingdom 3.0%United Kingdom Treasury Bond, 5.00%, 3/07/12 . . . . . . . . . . . . . . . . . . . . . . . . . 497,498,000 GBP 826,525,745United Kingdom Treasury Note, 5.25%, 6/07/12 . . . . . . . . . . . . . . . . . . . . . . . . . 630,506,000 GBP 1,060,391,438

1,886,917,183

Venezuela 0.2%Government of Venezuela, 10.75%, 9/19/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,587,000 133,389,959

Vietnam 0.3%e Government of Vietnam, 144A, 6.75%, 1/29/20 . . . . . . . . . . . . . . . . . . . . . . . . . . 199,780,000 206,522,575

Total Foreign Government and Agency Securities (Cost $43,978,374,889) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,285,696,416

Quasi-Sovereign and Corporate Bonds 1.9%Canada 0.4%

e Export Development Canada, senior note, 144A, 1.625%, 5/08/12 . . . . . . . . . . . . 1,700,000,000 SEK 266,248,266

Germany 0.8%KfW Bankengruppe, 4.66%, 1/05/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,720,500,000 NOK 509,077,261

India 0.2%Export-Import Bank of India, N-01, 5.90%, 5/07/13 . . . . . . . . . . . . . . . . . . . . . . . 5,310,000,000 INR 113,929,644

South Korea 0.4%The Export-Import Bank of Korea,

senior bond, 5.125%, 3/16/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,330,000 6,794,179senior note, 8.125%, 1/21/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,645,000 42,775,336senior note, 4.625%, 2/20/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,090,000 EUR 20,828,278

e senior note, 144A, 5.25%, 2/10/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200,000 6,637,187KDICB Redemption Fund Bond, senior bond,

07-1, 5.57%, 9/14/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,400,000,000 KRW 42,503,28108-1, 5.28%, 2/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,957,000,000 KRW 5,717,298

Korea Development Bank, senior note, 8.00%, 1/23/14 . . . . . . . . . . . . . . . . . . . . 127,140,000 143,611,241

268,866,800

Ukraine 0.1%eFinancing of Infrastructure Projects State Enterprise, 144A,

h 8.375%, 11/03/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,565,4687.40%, 4/20/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,170,000 41,506,244

43,071,712

26 | Annual Report

Annual Report | 27



Total Quasi-Sovereign and Corporate Bonds (Cost $1,147,839,631) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,201,193,683

Municipal Bonds 2.2%United States and U.S. Territories 2.2%Alabama State University Revenue, General Tuition and Fee, Assured Guaranty, 5.00%, 9/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,450,000 1,547,266

Bay Area Toll Authority Toll Bridge Revenue, Build America Bonds, Series S1, 7.043%, 4/01/50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,285,000 86,506,075

Bexar County Revenue, Venue Project, Refunding, Series A, BHAC Insured, 5.25%, 8/15/47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,900,000 7,422,468

California State GO,6.65%, 3/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,765,000 41,180,1797.625%, 3/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,085,000 166,971,001Build America Bonds, 7.60%, 11/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,800,000 358,684,122Build America Bonds, Various Purpose, 7.55%, 4/01/39 . . . . . . . . . . . . . . . . . . 22,040,000 26,480,178Refunding, 5.125%, 4/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,950,000 43,065,450Refunding, 5.00%, 4/01/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,580,000 17,299,951Various Purpose, 6.00%, 4/01/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,760,000 108,598,736Various Purpose, Refunding, 5.25%, 3/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . 51,700,000 54,596,234Various Purpose, Refunding, 5.50%, 3/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . 43,400,000 45,435,460

Detroit GO, Distribution State Aid, 4.50%, 11/01/23 . . . . . . . . . . . . . . . . . . . . . . 11,775,000 12,313,942Illinois Municipal Electricity Agency Power Supply Revenue, Series A, BHAC Insured, 5.00%, 2/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,260,000 10,453,914

Kentucky State Municipal Power Agency Power System Revenue, Prairie State Project, Series A, BHAC Insured, 5.25%, 9/01/42 . . . . . . . . . . . . . . . . . . . . . . . 21,980,000 22,848,210

Los Angeles County Public Works Financing Authority Lease Revenue, Build America Bonds-Recovery Zone Economic Development, Refunding, 7.488%, 8/01/33 . . . . 55,520,000 63,503,221

Los Angeles USD, GO, Series KRY, 5.25%, 7/01/26 . . . . . . . . . . . . . . . . . . . . . . . 10,190,000 11,320,173New York City Municipal Water Finance Authority Water and Sewer System Revenue, Second General Resolution, Build America Bonds, Series CC, 5.882%, 6/15/44 . . 71,890,000 84,606,622

Philadelphia GO, Refunding, Series A, Assured Guaranty, 5.00%, 8/01/24 . . . . . . . 4,000,000 4,183,040Poway USD, GO, Election of 2008, ID No. 2007-1, Series A, zero cpn.,

8/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,485,000 2,600,2908/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,485,000 2,075,0708/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,105,000 2,216,4748/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,290,000 1,086,357

Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series C, 5.75%, 7/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,070,000 31,982,770

Puerto Rico Sales Tax FICO Sales Tax Revenue, Capital Appreciation, Refunding, Series A, AMBAC Insured, zero cpn., 8/01/47 . . . . . . . . . . . . . . . . . . . . . . . . . . 54,025,000 5,492,182

Riverside County Transportation Commission Sales Tax Revenue, Build America Bonds, Limited Tax, Series B, 6.807%, 6/01/39 . . . . . . . . . . . . . . . . . . . . . . . . . 45,720,000 55,686,503

San Mateo County Community College District GO, Election of 2001, Series C, NATL Insured, zero cpn.,

9/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,680,000 5,525,1613/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,270,000 1,439,118

Tarrant County Cultural Education Facilities Finance Corp. Revenue, Christus Health, Refunding, Series A, Assured Guaranty, 6.25%, 7/01/28 . . . . . . . . . . . . . . . . . . . 13,450,000 15,162,051

Tulare Sewer Revenue, Build America Bonds, Series B, AGMC Insured, 8.75%, 11/15/44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,685,000 31,302,793

28 | Annual Report



Municipal Bonds (continued)United States and U.S. Territories (continued)Wayne County GO, Recovery Zone Economic Development Bonds, Build America Bonds, 10.00%, 12/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,600,000 $ 45,452,128

Total Municipal Bonds (Cost $1,193,854,449) . . . . . . . . . . . . . . . . . . . 1,367,037,139

Total Investments before Short Term Investments (Cost $46,320,068,969) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,853,927,238

Short Term Investments 16.6%Foreign Government and Agency Securities 15.1%Australia 0.2%Queensland Treasury Corp., senior note, 6.50%, 4/23/12 . . . . . . . . . . . . . . . . . . . 115,340,000 AUD 125,003,368

Egypt 1.4%j Egypt Treasury Bills, 9/20/11 - 2/21/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,301,650,000 EGP 857,666,996

Hungary 0.2%j Hungary Treasury Bill, 8/22/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,984,100,000 HUF 125,225,296

Indonesia 0.0%†

j Indonesia Treasury Bills, 6/08/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,560,000,000 IDR 22,582,745

Israel 2.7%Government of Israel, 4.00%, 3/30/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,655,000 ILS 146,855,002

j Israel Treasury Bills,4/04/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,469,280,000 ILS 680,663,30410/05/11 - 5/02/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,209,820,000 ILS 890,067,877

1,717,586,183

Malaysia 6.0%j Bank Negara Malaysia Monetary Note, 1/17/12 . . . . . . . . . . . . . . . . . . . . . . . . . . 516,365,000 MYR 171,132,674jBank of Negara Monetary Note,

h 9/06/11 - 5/29/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,169,467,000 MYR 3,379,657,7224211, 1/19/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,682,000 MYR 46,668,8844311, 12/13/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,340,000 MYR 20,740,850

j Malaysia Treasury Bills, 9/06/11 - 7/27/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,295,000 MYR 112,837,406

3,731,037,536

Mexico 0.1%Government of Mexico, M, 7.50%, 6/21/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,710,800 g MXN 55,697,090

Norway 0.9%j Norway Treasury Bills, 9/21/11 - 6/20/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,155,241,000 NOK 582,752,312

Philippines 0.6%j Philippine Treasury Bills, 9/07/11 - 8/22/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,325,660,000 PHP 406,398,914

Singapore 1.4%Government of Singapore, senior bond, 2.625%, 4/01/12 . . . . . . . . . . . . . . . . . . . 536,780,000 SGD 452,078,834

j Singapore Treasury Bills, 9/29/11 - 5/02/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,780,000 SGD 420,499,408

872,578,242

Sri Lanka 0.1%j Sri Lanka Treasury Bills, 9/16/11 - 7/13/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,856,870,000 LKR 33,784,885

United Kingdom 1.5%United Kingdom Treasury Note, 3.25%, 12/07/11 . . . . . . . . . . . . . . . . . . . . . . . . 566,149,000 GBP 926,138,627

Annual Report | 29


Templeton Global Bond Fund Shares Value

Short Term Investments (continued)Total Foreign Government and Agency Securities (Cost $9,431,039,517) . . . $ 9,456,452,194

Total Investments before Money Market Funds (Cost $55,751,108,486) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,310,379,432

Money Market Funds (Cost $910,602,851) 1.5%United States 1.5%

k,l Institutional Fiduciary Trust Money Market Portfolio . . . . . . . . . . . . . . . . . . . . . . . 910,602,851 910,602,851

Total Investments (Cost $56,661,711,337) 97.8% . . . . . . . . . . . . . . . . 61,220,982,283

Other Assets, less Liabilities 2.2% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363,142,836

Net Assets 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,584,125,119

†Rounds to less than 0.1% of net assets.*The principal amount is stated in U.S. dollars unless otherwise indicated.aThe coupon rate shown represents the rate at period end.bThe principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date.cPrincipal amount is stated in 1,000 Brazilian Real Units.dRedemption price at maturity is adjusted for inflation. See Note 1(g).eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or ina public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At August 31,2011, the aggregate value of these securities was $3,838,874,036, representing 6.13% of net assets.fSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such asecurity cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from regis-tration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At August 31, 2011, the aggregate value of these securities was$235,421,214, representing 0.38% of net assets.gPrincipal amount is stated in 100 Mexican Peso Units.hA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).iA supranational organization is an entity formed by two or more central governments through international treaties.jThe security is traded on a discount basis with no stated coupon rate.kNon-income producing.lSee Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio.

At August 31, 2011, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Counter- Settlement Unrealized UnrealizedCurrency party Type Quantity Contract Amount* Date Appreciation Depreciation

Indian Rupee . . . . . . DBAB Sell 1,011,402,000 21,977,922 9/01/11 $ — $ (103,785)Indian Rupee . . . . . . DBAB Buy 1,011,402,000 20,780,810 9/01/11 1,300,898 — Japanese Yen . . . . . . JPHQ Sell 4,281,239,000 50,462,506 9/01/11 — (5,428,779)Japanese Yen . . . . . . JPHQ Buy 4,281,239,000 55,777,982 9/01/11 113,303 — Mexican Peso . . . . . . CITI Buy 2,692,480,000 223,684,385 9/08/11 — (5,717,463)Philippine Peso . . . . . HSBK Buy 4,033,000,000 94,956,677 9/15/11 42,498 — Philippine Peso . . . . . HSBK Buy 3,779,486,751 89,593,143 9/19/11 — (567,267)Indian Rupee . . . . . . DBAB Buy 2,529,955,000 51,822,102 9/26/11 3,332,292 —

30 | Annual Report



Forward Exchange Contracts (continued)


Indian Rupee . . . . . . DBAB Buy 3,537,593,000 72,432,289 9/27/11 $ 4,684,607 $ — Swedish Krona . . . . . DBAB Buy 558,474,000 60,224,518 EUR 9/28/11 1,421,958 — Indian Rupee . . . . . . DBAB Buy 2,523,790,000 53,458,801 9/29/11 1,551,448 — Indian Rupee . . . . . . JPHQ Buy 2,895,961,500 61,381,125 9/30/11 1,737,501 — Japanese Yen . . . . . . JPHQ Sell 2,117,676,000 25,279,647 9/30/11 — (2,372,734)Philippine Peso . . . . . HSBK Buy 1,977,300,000 43,760,097 9/30/11 2,812,825 — Philippine Peso . . . . . HSBK Buy 1,581,900,000 35,007,469 10/03/11 2,251,098 — Philippine Peso . . . . . DBAB Buy 2,397,810,000 53,289,404 10/04/11 3,185,732 — Philippine Peso . . . . . HSBK Buy 1,923,378,000 42,679,137 10/04/11 2,621,797 — Euro . . . . . . . . . . . . . UBSW Sell 210,255,000 287,645,660 10/05/11 — (14,325,782)Euro . . . . . . . . . . . . . DBAB Sell 67,415,000 92,199,114 10/05/11 — (4,623,339)Indian Rupee . . . . . . DBAB Buy 3,863,064,150 82,544,106 10/05/11 1,616,984 — Indian Rupee . . . . . . JPHQ Buy 2,575,440,000 55,113,204 10/05/11 995,582 — Philippine Peso . . . . . HSBK Buy 2,867,508,000 64,066,938 10/05/11 3,470,184 — Philippine Peso . . . . . DBAB Buy 2,866,814,000 64,015,676 10/05/11 3,505,101 — Euro . . . . . . . . . . . . . UBSW Sell 102,935,000 140,547,449 10/06/11 — (7,287,750)Philippine Peso . . . . . JPHQ Buy 757,343,000 16,918,573 10/06/11 918,596 — Philippine Peso . . . . . DBAB Buy 2,353,377,000 52,901,520 10/07/11 2,525,332 — Philippine Peso . . . . . JPHQ Buy 939,542,000 21,209,102 10/11/11 918,100 — Philippine Peso . . . . . CITI Buy 941,987,000 21,298,431 10/11/11 886,353 — Philippine Peso . . . . . HSBK Buy 1,886,740,000 42,543,011 10/11/11 1,891,699 — Philippine Peso . . . . . DBAB Buy 1,883,179,000 42,529,845 10/11/11 1,821,000 — Euro . . . . . . . . . . . . . UBSW Sell 102,960,000 143,262,662 10/12/11 — (4,598,720)Malaysian Ringgit . . . CITI Buy 51,709,950 16,481,259 10/12/11 808,586 — Malaysian Ringgit . . . DBAB Buy 114,331,256 36,451,859 10/12/11 1,776,175 — Philippine Peso . . . . . DBAB Buy 560,732,000 12,724,822 10/12/11 480,866 — Malaysian Ringgit . . . DBAB Buy 49,340,600 15,728,093 10/13/11 768,465 — Philippine Peso . . . . . JPHQ Buy 2,620,334,000 59,129,730 10/13/11 2,580,581 — Philippine Peso . . . . . HSBK Buy 934,950,000 21,059,804 10/13/11 958,784 — Euro . . . . . . . . . . . . . HSBK Sell 42,532,000 59,127,986 10/17/11 — (1,949,090)Philippine Peso . . . . . JPHQ Buy 1,364,880,000 31,092,785 10/17/11 1,049,529 — Euro . . . . . . . . . . . . . HSBK Sell 40,924,000 57,404,095 10/18/11 — (1,363,207)Euro . . . . . . . . . . . . . HSBK Sell 54,474,000 76,078,388 10/19/11 — (2,146,002)Philippine Peso . . . . . DBAB Buy 528,520,000 12,000,908 10/19/11 445,238 — Philippine Peso . . . . . HSBK Buy 2,027,365,000 45,949,073 10/19/11 1,793,456 — Philippine Peso . . . . . JPHQ Buy 1,060,856,000 23,908,230 10/21/11 1,073,396 — Philippine Peso . . . . . DBAB Buy 2,112,730,000 47,601,163 10/21/11 2,150,577 — Euro . . . . . . . . . . . . . JPHQ Sell 7,387,013 10,112,821 10/24/11 — (494,312)Malaysian Ringgit . . . JPHQ Buy 32,000,000 10,112,821 10/24/11 578,471 — Chilean Peso . . . . . . . CITI Buy 8,534,203,142 17,136,954 10/25/11 1,225,319 — Euro . . . . . . . . . . . . . BZWS Sell 69,060,000 96,338,700 10/26/11 — (2,823,507)Indian Rupee . . . . . . DBAB Buy 889,822,000 19,156,555 10/26/11 194,518 — Indian Rupee . . . . . . HSBK Buy 910,702,000 19,639,896 10/26/11 165,257 — Norwegian Krone . . . . BZWS Buy 583,844,000 70,730,389 EUR 10/26/11 6,923,553 —

Annual Report | 31





Philippine Peso . . . . . JPHQ Buy 1,057,945,000 23,988,595 10/26/11 $ 923,162 $ — Philippine Peso . . . . . HSBK Buy 2,027,365,000 45,897,061 10/26/11 1,841,926 — Philippine Peso . . . . . DBAB Buy 2,114,557,000 47,937,181 10/26/11 1,854,943 — Euro . . . . . . . . . . . . . DBAB Sell 175,760,000 244,823,134 10/27/11 — (7,545,220)Euro . . . . . . . . . . . . . UBSW Sell 139,330,000 194,051,858 10/27/11 — (6,007,786)Indian Rupee . . . . . . DBAB Buy 1,879,142,000 40,429,045 10/27/11 433,416 — Indian Rupee . . . . . . HSBK Buy 1,356,628,000 29,345,187 10/27/11 155,063 — Norwegian Krone . . . . BZWS Buy 583,844,000 71,173,581 EUR 10/27/11 6,282,018 — Philippine Peso . . . . . HSBK Buy 1,368,670,000 31,169,893 10/27/11 1,058,259 — Chilean Peso . . . . . . . BZWS Buy 1,883,586,000 3,718,827 10/28/11 332,180 — Chilean Peso . . . . . . . DBAB Buy 3,765,313,000 7,437,655 10/28/11 660,361 — Philippine Peso . . . . . DBAB Buy 4,077,630,000 92,848,071 10/28/11 3,167,102 — Philippine Peso . . . . . HSBK Buy 912,240,000 20,779,954 10/28/11 700,386 — Euro . . . . . . . . . . . . . DBAB Sell 22,651,000 31,048,858 10/31/11 — (1,473,569)Philippine Peso . . . . . HSBK Buy 1,781,700,000 40,520,810 10/31/11 1,431,963 — Japanese Yen . . . . . . UBSW Sell 12,949,800,000 160,524,098 11/01/11 — (8,624,948)Japanese Yen . . . . . . CITI Sell 6,474,170,000 80,261,954 11/01/11 — (4,303,033)Japanese Yen . . . . . . BZWS Sell 6,464,800,000 80,262,210 11/01/11 — (4,180,387)Euro . . . . . . . . . . . . . DBAB Sell 84,940,000 117,442,291 11/03/11 — (4,510,794)Philippine Peso . . . . . DBAB Buy 893,970,000 20,779,852 11/04/11 270,628 — Euro . . . . . . . . . . . . . DBAB Sell 65,121,000 90,796,908 11/07/11 — (2,696,621)Norwegian Krone . . . . UBSW Buy 565,378,500 68,110,506 EUR 11/07/11 7,193,268 — Japanese Yen . . . . . . CITI Sell 9,190,446,650 113,688,277 11/08/11 — (6,365,968)Japanese Yen . . . . . . BZWS Sell 9,028,069,000 111,692,057 11/10/11 — (6,243,729)Japanese Yen . . . . . . BZWS Sell 12,407,760,000 154,710,224 11/14/11 — (7,382,601)Japanese Yen . . . . . . UBSW Sell 9,153,053,700 114,117,891 11/14/11 — (5,456,015)Malaysian Ringgit . . . JPHQ Buy 338,000,000 108,025,185 11/14/11 4,763,670 — Philippine Peso . . . . . DBAB Buy 1,773,300,000 41,189,724 11/14/11 569,618 — Japanese Yen . . . . . . DBAB Sell 10,792,263,000 131,840,147 11/16/11 — (9,151,298)Japanese Yen . . . . . . JPHQ Sell 5,389,206,000 65,858,560 11/16/11 — (4,546,686)Euro . . . . . . . . . . . . . UBSW Sell 43,392,971 58,780,119 11/17/11 — (3,511,522)Japanese Yen . . . . . . BZWS Sell 13,358,646,000 162,409,225 11/17/11 — (12,111,737)Japanese Yen . . . . . . UBSW Sell 4,305,100,000 52,284,430 11/17/11 — (3,958,560)Japanese Yen . . . . . . HSBK Sell 2,816,138,000 34,068,933 11/17/11 — (2,721,855)Euro . . . . . . . . . . . . . DBAB Sell 8,448,314 11,392,214 11/18/11 — (735,402)Japanese Yen . . . . . . BZWS Sell 15,005,634,000 180,965,195 11/21/11 — (15,081,343)Mexican Peso . . . . . . HSBK Buy 531,511,160 42,587,124 11/22/11 177,470 — Norwegian Krone . . . . MSCO Buy 216,072,650 26,037,398 EUR 11/25/11 2,703,299 — Euro . . . . . . . . . . . . . DBAB Sell 178,759,903 238,664,647 11/28/11 — (17,916,878)Japanese Yen . . . . . . BOFA Sell 11,637,164,000 140,545,459 11/28/11 — (11,504,535)Norwegian Krone . . . . UBSW Buy 803,814,000 97,316,281 EUR 11/28/11 9,382,705 — Norwegian Krone . . . . MSCO Buy 333,070,000 40,059,415 EUR 11/28/11 4,267,853 — Japanese Yen . . . . . . BZWS Sell 16,955,472,000 204,751,503 11/29/11 — (16,789,467)Japanese Yen . . . . . . CITI Sell 4,208,470,000 50,851,498 11/29/11 — (4,136,563)

32 | Annual Report





Euro . . . . . . . . . . . . . DBAB Sell 52,600,000 69,484,600 11/30/11 $ — $ (6,012,637)Swedish Krona . . . . . BZWS Buy 1,266,479,512 134,947,204 EUR 11/30/11 5,039,972 — Euro . . . . . . . . . . . . . DBAB Sell 49,698,563 65,008,702 12/01/11 — (6,323,265)Euro . . . . . . . . . . . . . UBSW Sell 41,865,000 54,928,973 12/01/11 — (5,159,541)Japanese Yen . . . . . . DBAB Sell 10,434,667,000 124,682,363 12/01/11 — (11,661,470)Norwegian Krone . . . . UBSW Buy 261,350,000 31,678,788 EUR 12/01/11 2,989,752 — Philippine Peso . . . . . HSBK Buy 1,635,720,000 37,009,752 12/01/11 1,510,961 — Euro . . . . . . . . . . . . . DBAB Sell 89,200,000 116,071,500 12/02/11 — (11,955,119)Philippine Peso . . . . . HSBK Buy 5,536,323,000 126,744,420 12/05/11 3,613,510 — Chilean Peso . . . . . . . BOFA Buy 6,499,780,000 13,037,368 12/06/11 861,382 — Chilean Peso . . . . . . . DBAB Buy 8,550,080,000 17,161,943 12/06/11 1,121,049 — Euro . . . . . . . . . . . . . HSBK Sell 21,570,052 28,263,239 12/06/11 — (2,694,328)Chilean Peso . . . . . . . BOFA Buy 9,776,450,000 19,588,159 12/07/11 1,314,664 — Euro . . . . . . . . . . . . . UBSW Sell 173,474,656 231,030,077 12/07/11 — (17,939,751)Indian Rupee . . . . . . JPHQ Buy 3,689,300,000 77,718,559 12/07/11 2,202,828 — Indian Rupee . . . . . . DBAB Buy 4,607,316,000 97,036,984 12/07/11 2,771,404 — Euro . . . . . . . . . . . . . BZWS Sell 85,597,000 113,107,876 12/12/11 — (9,733,450)Norwegian Krone . . . . UBSW Buy 286,160,000 35,503,722 EUR 12/14/11 2,067,780 — Swedish Krona . . . . . UBSW Buy 433,849,000 47,050,103 EUR 12/14/11 514,972 — Euro . . . . . . . . . . . . . BZWS Sell 41,835,000 55,682,385 12/15/11 — (4,353,496)Euro . . . . . . . . . . . . . DBAB Sell 41,835,000 55,773,585 12/15/11 — (4,262,295)Norwegian Krone . . . . UBSW Buy 428,601,000 53,199,404 EUR 12/15/11 3,060,194 — Swedish Krona . . . . . UBSW Buy 433,883,000 46,787,405 EUR 12/15/11 895,048 — Malaysian Ringgit . . . JPHQ Buy 140,706,364 44,444,349 12/16/11 2,437,171 — Euro . . . . . . . . . . . . . UBSW Sell 68,795,891 91,652,638 12/19/11 — (7,069,335)Polish Zloty . . . . . . . . DBAB Buy 354,200,000 86,758,438 EUR 12/20/11 — (2,646,314)Japanese Yen . . . . . . CITI Sell 8,267,822,900 99,576,333 12/28/11 — (8,497,374)Japanese Yen . . . . . . BZWS Sell 8,237,350,750 99,258,344 12/28/11 — (8,417,043)Japanese Yen . . . . . . JPHQ Sell 8,250,436,116 100,074,429 12/28/11 — (7,772,005)Euro . . . . . . . . . . . . . DBAB Sell 130,978,200 174,600,490 1/05/12 — (13,316,595)Chilean Peso . . . . . . . MSCO Buy 24,066,765,000 47,535,815 1/09/12 3,713,115 — Chilean Peso . . . . . . . DBAB Buy 12,284,600,000 24,228,069 1/09/12 1,931,351 — Chilean Peso . . . . . . . DBAB Buy 17,261,240,000 34,043,152 1/10/12 2,709,268 — Euro . . . . . . . . . . . . . CITI Sell 62,470,000 80,805,570 1/10/12 — (8,816,306)Japanese Yen . . . . . . BZWS Sell 6,663,490,000 80,574,244 1/10/12 — (6,544,872)Japanese Yen . . . . . . UBSW Sell 3,331,470,000 40,290,130 1/10/12 — (3,265,832)Japanese Yen . . . . . . CITI Sell 3,332,090,000 40,316,644 1/10/12 — (3,247,425)Euro . . . . . . . . . . . . . UBSW Sell 143,798,000 186,135,726 1/11/12 — (20,160,092)Euro . . . . . . . . . . . . . DBAB Sell 112,242,000 145,453,285 1/11/12 — (15,571,591)Euro . . . . . . . . . . . . . BZWS Sell 21,734,000 28,123,796 1/11/12 — (3,056,285)Japanese Yen . . . . . . DBAB Sell 3,362,520,000 40,668,594 1/12/12 — (3,294,610)Japanese Yen . . . . . . HSBK Sell 3,366,120,000 40,794,037 1/12/12 — (3,216,234)Chilean Peso . . . . . . . MSCO Buy 21,679,600,000 42,722,633 1/13/12 3,420,375 — Euro . . . . . . . . . . . . . CITI Sell 192,914,073 249,345,298 1/13/12 — (27,407,232)

Annual Report | 33





Euro . . . . . . . . . . . . . UBSW Sell 52,878,633 68,382,648 1/13/12 $ — $ (7,476,491)Euro . . . . . . . . . . . . . BZWS Sell 28,201,936 36,465,103 1/13/12 — (3,993,102)Euro . . . . . . . . . . . . . JPHQ Sell 26,531,589 34,311,977 1/13/12 — (3,749,965)Japanese Yen . . . . . . UBSW Sell 10,082,050,000 122,111,937 1/13/12 — (9,707,567)Japanese Yen . . . . . . BZWS Sell 9,171,500,000 111,035,109 1/13/12 — (8,879,252)Japanese Yen . . . . . . HSBK Sell 9,240,970,000 111,961,545 1/13/12 — (8,861,114)Philippine Peso . . . . . JPHQ Buy 5,005,465,000 113,695,968 1/13/12 3,979,309 — Philippine Peso . . . . . HSBK Buy 1,130,610,000 25,705,614 1/17/12 870,069 — Euro . . . . . . . . . . . . . DBAB Sell 60,028,000 79,585,423 1/18/12 — (6,525,222)Japanese Yen . . . . . . HSBK Sell 10,034,848,500 121,924,190 1/18/12 — (9,287,797)Philippine Peso . . . . . HSBK Buy 1,463,195,000 32,847,570 1/18/12 1,544,358 — Philippine Peso . . . . . DBAB Buy 834,495,000 18,729,548 1/18/12 884,989 — Euro . . . . . . . . . . . . . CITI Sell 42,223,091 56,281,269 1/19/12 — (4,287,402)Euro . . . . . . . . . . . . . BZWS Sell 22,914,073 30,537,585 1/19/12 — (2,332,461)Philippine Peso . . . . . DBAB Buy 522,121,000 11,756,834 1/19/12 514,963 — Philippine Peso . . . . . JPHQ Buy 2,083,812,000 46,322,374 1/19/12 2,655,005 — British Pound . . . . . . DBAB Buy 20,206,640 31,985,495 1/24/12 770,474 — British Pound . . . . . . BZWS Buy 20,263,870 32,106,704 1/24/12 742,037 — British Pound . . . . . . CITI Buy 13,493,684 21,323,664 1/24/12 550,269 — Euro . . . . . . . . . . . . . DBAB Sell 70,284,000 94,732,289 1/25/12 — (6,082,634)Euro . . . . . . . . . . . . . UBSW Sell 40,540,286 54,635,738 1/25/12 — (3,514,991)British Pound . . . . . . DBAB Buy 10,675,881 16,986,928 1/26/12 318,796 — Japanese Yen . . . . . . BZWS Sell 17,569,570,000 213,585,825 1/26/12 — (16,174,378)Japanese Yen . . . . . . UBSW Sell 15,371,620,000 186,991,302 1/26/12 — (14,025,942)Japanese Yen . . . . . . DBAB Sell 13,902,366,365 169,316,157 1/26/12 — (12,487,412)Philippine Peso . . . . . HSBK Buy 2,027,365,000 45,022,541 1/26/12 2,614,843 — British Pound . . . . . . JPHQ Buy 2,686,821 4,274,732 1/27/12 80,584 — British Pound . . . . . . BZWS Buy 13,530,003 21,280,327 1/27/12 651,702 — British Pound . . . . . . MSCO Buy 8,063,299 12,693,528 1/27/12 377,017 — Chilean Peso . . . . . . . DBAB Buy 20,283,160,000 40,097,183 1/27/12 2,999,863 — Euro . . . . . . . . . . . . . CITI Sell 81,493,700 110,190,077 1/27/12 — (6,701,308)Japanese Yen . . . . . . HSBK Sell 17,605,035,074 214,800,330 1/27/12 — (15,427,034)British Pound . . . . . . JPHQ Buy 5,337,277 8,400,127 1/30/12 251,250 — Chilean Peso . . . . . . . JPHQ Buy 23,075,040,000 45,684,102 1/30/12 3,327,099 — Chilean Peso . . . . . . . DBAB Buy 46,684,780,000 93,034,635 1/30/12 6,123,466 — Euro . . . . . . . . . . . . . BZWS Sell 94,940,000 129,118,400 1/30/12 — (7,055,182)Norwegian Krone . . . . UBSW Buy 793,120,000 99,189,595 EUR 1/30/12 4,279,978 — Swedish Krona . . . . . UBSW Buy 968,454,000 107,869,081 EUR 1/30/12 — (3,161,734)British Pound . . . . . . MSCO Buy 2,633,911 4,169,745 1/31/12 99,602 — Chilean Peso . . . . . . . JPHQ Buy 24,540,000,000 49,104,552 1/31/12 3,011,854 — Chilean Peso . . . . . . . DBAB Buy 52,826,320,000 105,221,233 1/31/12 6,967,762 — Euro . . . . . . . . . . . . . DBAB Sell 63,165,000 85,904,400 1/31/12 — (4,692,887)British Pound . . . . . . MSCO Buy 10,154,231 16,006,267 2/01/12 452,688 — British Pound . . . . . . BZWS Buy 1,094,360 1,725,445 2/01/12 48,399 —

34 | Annual Report





British Pound . . . . . . CITI Buy 8,819,499 13,950,419 2/01/12 $ 345,074 $ — Euro . . . . . . . . . . . . . UBSW Sell 60,396,000 82,240,629 2/01/12 — (4,384,107)Chilean Peso . . . . . . . DBAB Buy 28,279,300,000 55,876,902 2/02/12 4,166,129 — Chilean Peso . . . . . . . MSCO Buy 17,836,352,800 35,770,000 2/02/12 2,100,410 — Chilean Peso . . . . . . . DBAB Buy 13,711,100,000 27,064,943 2/03/12 2,043,119 — Philippine Peso . . . . . DBAB Buy 2,398,000,000 53,959,182 2/03/12 2,369,142 — Philippine Peso . . . . . HSBK Buy 1,553,047,900 34,921,908 2/03/12 1,558,736 — Indian Rupee . . . . . . JPHQ Buy 792,240,000 16,429,697 2/06/12 650,484 — Indian Rupee . . . . . . HSBK Buy 1,251,285,000 25,971,046 2/06/12 1,005,848 — Philippine Peso . . . . . HSBK Buy 1,305,300,000 29,498,305 2/06/12 1,159,152 — Chilean Peso . . . . . . . DBAB Buy 12,407,800,000 25,165,399 2/07/12 1,162,971 — Indian Rupee . . . . . . HSBK Buy 541,250,000 11,245,585 2/07/12 422,499 — Philippine Peso . . . . . JPHQ Buy 930,700,000 20,961,712 2/07/12 896,681 — Singapore Dollar . . . . DBAB Buy 139,923,000 109,568,220 2/07/12 6,894,094 — Singapore Dollar . . . . HSBK Buy 139,904,000 109,567,070 2/07/12 6,879,430 — Australian Dollar . . . . UBSW Buy 81,119,301 78,665,442 2/08/12 6,477,794 — Australian Dollar . . . . MSCO Buy 81,141,704 78,898,136 2/08/12 6,268,615 — Chilean Peso . . . . . . . BZWS Buy 13,094,000,000 26,431,167 2/08/12 1,349,879 — Chilean Peso . . . . . . . DBAB Buy 19,530,500,000 39,655,838 2/08/12 1,781,287 — Chilean Peso . . . . . . . JPHQ Buy 13,008,500,000 26,293,077 2/08/12 1,306,566 — Euro . . . . . . . . . . . . . CITI Sell 80,318,000 108,502,389 2/08/12 — (6,686,881)Euro . . . . . . . . . . . . . UBSW Sell 60,237,000 81,588,005 2/08/12 — (4,801,797)Euro . . . . . . . . . . . . . HSBK Sell 12,565,000 16,980,341 2/08/12 — (1,039,943)Indian Rupee . . . . . . HSBK Buy 897,700,000 18,667,083 2/08/12 683,712 — Norwegian Krone . . . . UBSW Buy 92,347,500 11,652,975 EUR 2/08/12 342,404 — Singapore Dollar . . . . DBAB Buy 278,683,950 219,131,484 2/08/12 12,831,671 — Australian Dollar . . . . CITI Buy 51,501,000 4,086,604,350 JPY 2/09/12 597,835 — Australian Dollar . . . . BZWS Buy 51,501,000 4,084,029,300 JPY 2/09/12 631,516 — Australian Dollar . . . . DBAB Buy 51,501,000 4,088,046,378 JPY 2/09/12 578,973 — Chilean Peso . . . . . . . BZWS Buy 26,969,200,000 54,433,747 2/09/12 2,778,813 — Euro . . . . . . . . . . . . . BZWS Sell 81,618,000 110,021,064 2/09/12 — (7,031,289)Euro . . . . . . . . . . . . . HSBK Sell 61,213,000 82,319,242 2/09/12 — (5,469,305)Euro . . . . . . . . . . . . . DBAB Sell 20,394,000 27,467,455 2/09/12 — (1,780,575)Euro . . . . . . . . . . . . . JPHQ Sell 2,700,000 3,652,560 2/09/12 — (219,642)Norwegian Krone . . . . UBSW Buy 129,072,400 16,227,969 EUR 2/09/12 562,340 — Norwegian Krone . . . . DBAB Buy 184,416,000 23,192,605 EUR 2/09/12 794,260 — Polish Zloty . . . . . . . . DBAB Buy 52,182,000 13,122,595 EUR 2/09/12 — (932,820)Singapore Dollar . . . . BZWS Buy 38,999,058 30,614,870 2/09/12 1,846,879 — Chilean Peso . . . . . . . DBAB Buy 11,009,800,000 22,368,549 2/10/12 984,835 — Euro . . . . . . . . . . . . . BZWS Sell 69,341,000 94,026,396 2/10/12 — (5,417,781)Japanese Yen . . . . . . HSBK Sell 6,367,072,000 77,780,015 2/10/12 — (5,501,583)Japanese Yen . . . . . . MSCO Sell 5,856,880,500 71,676,239 2/10/12 — (4,932,030)Polish Zloty . . . . . . . . BZWS Buy 52,182,000 13,114,680 EUR 2/10/12 — (922,514)Chilean Peso . . . . . . . DBAB Buy 9,634,200,000 19,573,751 2/13/12 854,319 —

Annual Report | 35





Chilean Peso . . . . . . . BZWS Buy 16,174,200,000 32,821,023 2/13/12 $ 1,474,268 $ — Euro . . . . . . . . . . . . . UBSW Sell 140,680,000 191,011,084 2/13/12 — (10,735,777)Mexican Peso . . . . . . MSCO Buy 1,408,400,000 111,898,557 2/13/12 698,278 — Singapore Dollar . . . . HSBK Buy 139,574,800 109,602,573 2/13/12 6,587,169 — British Pound . . . . . . BZWS Buy 62,032,462 98,841,284 2/14/12 1,691,430 — Chilean Peso . . . . . . . MSCO Buy 19,976,960,000 41,092,173 2/14/12 1,261,217 — Chilean Peso . . . . . . . DBAB Buy 10,871,500,000 22,168,638 2/14/12 880,158 — Polish Zloty . . . . . . . . DBAB Buy 52,182,000 12,995,467 EUR 2/14/12 — (755,738)Singapore Dollar . . . . HSBK Buy 100,494,300 78,913,755 2/14/12 4,745,299 — Japanese Yen . . . . . . JPHQ Sell 2,230,570,000 27,175,560 2/15/12 — (2,002,540)Japanese Yen . . . . . . DBAB Sell 1,893,879,790 23,053,923 2/15/12 — (1,719,931)Mexican Peso . . . . . . MSCO Buy 710,284,000 55,949,902 2/15/12 826,186 — Chilean Peso . . . . . . . MSCO Buy 36,165,070,000 75,109,181 2/16/12 1,546,142 — Euro . . . . . . . . . . . . . JPHQ Sell 72,848,000 97,441,485 2/16/12 — (7,025,060)Euro . . . . . . . . . . . . . UBSW Sell 72,848,000 97,483,008 2/16/12 — (6,983,537)Japanese Yen . . . . . . JPHQ Sell 1,291,230,000 15,609,647 2/16/12 — (1,281,189)Euro . . . . . . . . . . . . . DBAB Sell 74,206,000 99,571,095 2/17/12 — (6,841,657)Malaysian Ringgit . . . HSBK Buy 51,597,000 16,667,851 2/17/12 479,801 — Singapore Dollar . . . . BZWS Buy 112,084,000 87,726,686 2/17/12 5,587,438 — Singapore Dollar . . . . DBAB Buy 168,234,000 131,590,104 2/17/12 8,470,995 — Singapore Dollar . . . . HSBK Buy 168,229,000 131,590,310 2/17/12 8,466,626 — Chilean Peso . . . . . . . JPHQ Buy 10,742,400,000 22,052,656 2/21/12 703,034 — Chilean Peso . . . . . . . DBAB Buy 14,257,230,000 29,481,452 2/21/12 719,724 — Euro . . . . . . . . . . . . . UBSW Sell 74,206,000 99,347,735 2/21/12 — (7,060,173)Chilean Peso . . . . . . . JPHQ Buy 18,232,450,000 37,846,290 2/22/12 770,919 — Japanese Yen . . . . . . HSBK Sell 6,688,700,000 80,718,035 2/22/12 — (6,785,885)Mexican Peso . . . . . . CITI Buy 900,635,000 71,465,923 2/22/12 487,053 — Philippine Peso . . . . . HSBK Buy 1,681,781,584 38,546,449 2/22/12 928,259 — Philippine Peso . . . . . DBAB Buy 1,680,226,800 38,510,814 2/22/12 927,401 — Chilean Peso . . . . . . . DBAB Buy 13,753,090,000 28,413,127 2/23/12 713,037 — Indian Rupee . . . . . . HSBK Buy 3,331,610,028 69,713,539 2/23/12 2,018,147 — Japanese Yen . . . . . . JPHQ Sell 6,693,900,000 80,741,813 2/23/12 — (6,831,421)Singapore Dollar . . . . DBAB Buy 220,170,000 172,240,606 2/24/12 11,090,911 — Chilean Peso . . . . . . . DBAB Buy 19,918,030,000 40,874,309 2/27/12 1,287,390 — Chilean Peso . . . . . . . CITI Buy 20,803,900,000 42,872,540 2/27/12 1,164,334 — Chilean Peso . . . . . . . MSCO Buy 22,938,650,000 47,279,126 2/27/12 1,276,502 — Euro . . . . . . . . . . . . . DBAB Sell 154,487,000 210,499,352 2/27/12 — (11,012,603)Singapore Dollar . . . . DBAB Buy 137,265,000 107,650,380 2/27/12 6,656,153 — Chilean Peso . . . . . . . MSCO Buy 22,054,300,000 44,999,592 2/28/12 1,679,600 — Chilean Peso . . . . . . . JPHQ Buy 10,953,800,000 22,561,895 2/28/12 622,452 — Chilean Peso . . . . . . . DBAB Buy 8,038,300,000 16,606,685 2/29/12 405,206 — Chilean Peso . . . . . . . BZWS Buy 20,171,200,000 41,090,242 2/29/12 1,599,164 — Euro . . . . . . . . . . . . . DBAB Sell 94,016,960 128,474,176 2/29/12 — (6,329,122)Singapore Dollar . . . . DBAB Buy 137,440,000 107,650,855 2/29/12 6,807,232 —

36 | Annual Report





Chilean Peso . . . . . . . BZWS Buy 10,100,000,000 20,545,159 3/01/12 $ 827,970 $ — Chilean Peso . . . . . . . DBAB Buy 12,395,040,000 25,239,340 3/01/12 990,440 — Euro . . . . . . . . . . . . . DBAB Sell 44,266,400 60,355,023 3/01/12 — (3,114,182)Japanese Yen . . . . . . UBSW Sell 12,728,600,000 156,574,901 3/01/12 — (9,966,482)Japanese Yen . . . . . . JPHQ Sell 9,819,200,000 120,807,087 3/01/12 — (7,667,620)Japanese Yen . . . . . . HSBK Sell 9,813,450,000 120,780,923 3/01/12 — (7,618,551)Chilean Peso . . . . . . . DBAB Buy 12,395,040,000 25,239,340 3/02/12 987,924 — Chilean Peso . . . . . . . DBAB Buy 12,092,440,000 24,638,223 3/05/12 941,394 — Euro . . . . . . . . . . . . . DBAB Sell 44,178,000 60,378,073 3/05/12 — (2,961,200)Chilean Peso . . . . . . . DBAB Buy 12,019,520,000 24,422,473 3/07/12 998,018 — Euro . . . . . . . . . . . . . DBAB Sell 46,970,000 64,877,313 3/07/12 — (2,463,239)Japanese Yen . . . . . . MSCO Sell 6,405,061,130 78,253,170 3/07/12 — (5,560,049)Euro . . . . . . . . . . . . . DBAB Sell 122,110,000 168,908,658 3/08/12 — (6,157,371)Euro . . . . . . . . . . . . . UBSW Sell 109,690,000 151,761,600 3/08/12 — (5,498,188)Euro . . . . . . . . . . . . . MSCO Sell 82,877,000 114,656,186 3/08/12 — (4,162,480)Euro . . . . . . . . . . . . . HSBK Sell 29,251,000 40,424,882 3/08/12 — (1,511,539)Chilean Peso . . . . . . . DBAB Buy 11,693,890,000 23,938,362 3/09/12 788,701 — Chilean Peso . . . . . . . MSCO Buy 12,816,000,000 26,059,374 3/12/12 1,032,633 — Euro . . . . . . . . . . . . . DBAB Sell 79,470,000 109,392,044 3/12/12 — (4,536,364)Euro . . . . . . . . . . . . . DBAB Sell 50,000,000 68,317,500 3/14/12 — (3,360,835)Chilean Peso . . . . . . . DBAB Buy 23,672,830,000 48,267,500 3/15/12 1,760,600 — Euro . . . . . . . . . . . . . DBAB Sell 103,280,000 141,808,604 3/15/12 — (6,248,304)Euro . . . . . . . . . . . . . BZWS Sell 46,920,000 64,533,768 3/15/12 — (2,728,336)Euro . . . . . . . . . . . . . DBAB Sell 112,249,000 155,302,145 3/16/12 — (5,610,239)Japanese Yen . . . . . . CITI Sell 8,777,350,000 109,251,192 3/19/12 — (5,629,782)Japanese Yen . . . . . . UBSW Sell 7,115,830,000 88,576,959 3/19/12 — (4,557,470)Japanese Yen . . . . . . MSCO Sell 5,268,400,000 65,556,717 3/19/12 — (3,397,913)Polish Zloty . . . . . . . . DBAB Buy 223,787,690 54,140,000 EUR 3/19/12 — (1,087,234)Singapore Dollar . . . . JPHQ Buy 272,823,000 213,326,296 3/19/12 13,986,740 — Singapore Dollar . . . . HSBK Buy 217,756,000 170,660,522 3/19/12 10,771,312 — Singapore Dollar . . . . DBAB Buy 190,493,600 149,328,275 3/19/12 9,388,837 — Chilean Peso . . . . . . . JPHQ Buy 10,835,800,000 21,747,717 3/21/12 1,138,565 — Euro . . . . . . . . . . . . . DBAB Sell 16,955,000 23,532,184 3/21/12 — (771,802)Singapore Dollar . . . . HSBK Buy 163,895,000 127,997,969 3/21/12 8,564,443 — Singapore Dollar . . . . DBAB Buy 205,097,300 159,994,773 3/21/12 10,898,677 — Euro . . . . . . . . . . . . . DBAB Sell 17,600,000 24,662,176 3/22/12 — (566,062)Japanese Yen . . . . . . UBSW Sell 8,566,803,330 106,060,235 3/23/12 — (6,073,247)Euro . . . . . . . . . . . . . DBAB Sell 29,745,000 41,631,399 3/26/12 — (1,003,613)British Pound . . . . . . MSCO Buy 67,509,677 107,561,143 3/29/12 1,790,475 — British Pound . . . . . . DBAB Buy 67,518,575 107,561,141 3/29/12 1,804,890 — Indian Rupee . . . . . . JPHQ Buy 2,726,995,194 57,374,189 3/29/12 1,184,605 — Indian Rupee . . . . . . DBAB Buy 1,361,160,841 28,722,533 3/29/12 506,685 — British Pound . . . . . . BZWS Buy 135,429,910 215,122,286 3/30/12 4,243,319 — Chilean Peso . . . . . . . DBAB Buy 11,405,180,000 22,851,493 3/30/12 1,216,636 —

Annual Report | 37





Indian Rupee . . . . . . JPHQ Buy 2,373,560,728 49,990,748 3/30/12 $ 974,654 $ — Norwegian Krone . . . . UBSW Buy 1,087,276,587 136,308,275 EUR 3/30/12 4,828,578 — Norwegian Krone . . . . MSCO Buy 870,418,987 109,120,186 EUR 3/30/12 3,867,477 — Norwegian Krone . . . . DBAB Buy 649,760,000 81,213,909 EUR 3/30/12 3,235,804 — British Pound . . . . . . FBCO Buy 81,213,975 129,073,370 4/02/12 2,470,010 — Chilean Peso . . . . . . . DBAB Buy 12,117,060,000 24,184,300 4/02/12 1,378,758 — Euro . . . . . . . . . . . . . DBAB Sell 44,889,000 63,057,823 4/04/12 — (1,276,576)Euro . . . . . . . . . . . . . DBAB Sell 30,084,000 42,106,770 4/05/12 — (1,008,731)Euro . . . . . . . . . . . . . HSBK Sell 133,988,000 188,255,820 4/10/12 — (3,759,767)Euro . . . . . . . . . . . . . DBAB Sell 113,621,500 160,013,868 4/10/12 — (2,814,886)Euro . . . . . . . . . . . . . UBSW Sell 66,994,000 94,069,625 4/10/12 — (1,938,168)Norwegian Krone . . . . DBAB Buy 431,600,000 54,476,378 EUR 4/10/12 1,347,850 — Indian Rupee . . . . . . DBAB Buy 1,454,986,000 31,056,265 4/11/12 157,233 — Euro . . . . . . . . . . . . . UBSW Sell 214,266,000 305,452,253 4/12/12 — (1,600,454)Indian Rupee . . . . . . DBAB Buy 3,119,992,000 66,837,875 4/13/12 84,585 — Chilean Peso . . . . . . . MSCO Buy 24,383,100,000 49,533,977 4/16/12 1,837,656 — Euro . . . . . . . . . . . . . HSBK Sell 117,406,000 168,252,190 4/16/12 12,624 — Indian Rupee . . . . . . JPHQ Buy 2,095,665,000 44,779,167 4/16/12 161,807 — Indian Rupee . . . . . . JPHQ Buy 2,057,100,000 43,693,713 4/18/12 413,623 — Indian Rupee . . . . . . DBAB Buy 725,918,000 15,369,850 4/19/12 193,763 — Indian Rupee . . . . . . JPHQ Buy 1,027,590,000 21,807,937 4/19/12 223,494 — Chilean Peso . . . . . . . MSCO Buy 21,847,300,000 44,135,960 4/20/12 1,875,534 — Japanese Yen . . . . . . UBSW Sell 6,869,100,000 83,631,826 4/20/12 — (6,326,042)Japanese Yen . . . . . . CITI Sell 6,890,100,000 83,936,555 4/20/12 — (6,296,329)Euro . . . . . . . . . . . . . DBAB Sell 107,566,000 152,082,189 4/23/12 — (2,043,376)Malaysian Ringgit . . . JPHQ Buy 19,310,000 6,329,902 4/25/12 69,473 — Indian Rupee . . . . . . DBAB Buy 1,461,225,000 31,030,474 4/26/12 281,603 — Chilean Peso . . . . . . . JPHQ Buy 13,842,935,000 28,073,281 4/27/12 1,061,153 — Euro . . . . . . . . . . . . . UBSW Sell 41,793,000 60,176,487 4/27/12 296,542 — Indian Rupee . . . . . . JPHQ Buy 1,242,694,000 26,356,182 4/27/12 271,073 — Swedish Krona . . . . . UBSW Buy 67,500,000 7,508,009 EUR 4/27/12 — (232,900)Chilean Peso . . . . . . . CITI Buy 22,313,350,000 45,865,057 4/30/12 1,083,138 — Indian Rupee . . . . . . DBAB Buy 432,942,691 9,131,885 4/30/12 142,709 — Indian Rupee . . . . . . JPHQ Buy 1,035,247,000 21,979,766 4/30/12 197,524 — Norwegian Krone . . . . DBAB Buy 1,037,200,000 131,716,299 EUR 4/30/12 1,911,064 — Norwegian Krone . . . . MSCO Buy 462,800,000 58,722,767 EUR 4/30/12 923,236 — Euro . . . . . . . . . . . . . FBCO Sell 108,089,000 158,458,474 5/07/12 3,610,758 — Euro . . . . . . . . . . . . . BZWS Sell 78,607,000 115,557,792 5/07/12 2,945,830 — Euro . . . . . . . . . . . . . DBAB Sell 127,740,000 186,832,524 5/07/12 3,832,892 — Euro . . . . . . . . . . . . . MSCO Sell 78,775,000 115,876,843 5/07/12 3,024,205 — Euro . . . . . . . . . . . . . DBAB Sell 215,068,000 310,382,150 5/09/12 2,284,635 — Euro . . . . . . . . . . . . . UBSW Sell 39,305,000 56,379,092 5/09/12 72,376 — Japanese Yen . . . . . . CITI Sell 24,962,881,000 310,587,896 5/10/12 — (16,446,354)Chilean Peso . . . . . . . MSCO Buy 11,060,000,000 22,779,231 5/11/12 467,068 —

38 | Annual Report





Euro . . . . . . . . . . . . . DBAB Sell 128,181,000 181,223,580 5/11/12 $ — $ (2,398,604)Japanese Yen . . . . . . UBSW Sell 24,829,769,000 308,866,389 5/11/12 — (16,429,949)Japanese Yen . . . . . . DBAB Sell 16,608,958,000 206,597,067 5/11/12 — (10,997,918)Euro . . . . . . . . . . . . . DBAB Sell 82,207,000 115,167,897 5/18/12 — (2,585,141)Euro . . . . . . . . . . . . . DBAB Sell 119,850,000 167,451,488 5/21/12 — (4,214,794)Euro . . . . . . . . . . . . . UBSW Sell 82,207,000 114,826,738 5/21/12 — (2,921,865)Chilean Peso . . . . . . . MSCO Buy 5,306,760,000 10,752,659 5/22/12 389,598 — Polish Zloty . . . . . . . . MSCO Buy 267,265,000 66,732,834 EUR 5/24/12 — (4,534,900)Euro . . . . . . . . . . . . . DBAB Sell 92,450,000 128,465,747 5/25/12 — (3,947,693)Chilean Peso . . . . . . . DBAB Buy 44,641,073,000 91,085,642 5/29/12 2,580,933 — Euro . . . . . . . . . . . . . DBAB Sell 107,060,000 148,996,544 5/29/12 — (4,335,220)Swedish Krona . . . . . UBSW Buy 485,000,000 53,814,147 EUR 5/29/12 — (1,551,462)Chilean Peso . . . . . . . CITI Buy 31,264,830,000 64,001,699 5/31/12 1,585,490 — Indonesian Rupiah . . . DBAB Buy 1,245,578,000,000 139,244,367 5/31/12 2,539,369 — Malaysian Ringgit . . . HSBK Buy 210,695,000 68,601,244 5/31/12 1,120,935 — Singapore Dollar . . . . DBAB Buy 127,883,000 102,965,378 5/31/12 3,782,096 — Singapore Dollar . . . . FBCO Buy 128,018,000 102,966,299 5/31/12 3,893,863 — Indian Rupee . . . . . . DBAB Buy 1,979,778,000 41,487,385 6/01/12 823,098 — Indian Rupee . . . . . . HSBK Buy 2,287,801,000 48,460,093 6/04/12 422,803 — Euro . . . . . . . . . . . . . DBAB Sell 39,411,220 56,401,003 6/06/12 — (39,042)Malaysian Ringgit . . . DBAB Buy 28,167,000 9,186,888 6/06/12 132,047 — Euro . . . . . . . . . . . . . DBAB Sell 102,043,700 146,958,235 6/07/12 825,001 — Euro . . . . . . . . . . . . . UBSW Sell 53,062,700 76,166,200 6/07/12 176,953 — Indian Rupee . . . . . . DBAB Buy 1,458,276,000 30,752,341 6/07/12 399,637 — Indonesian Rupiah . . . HSBK Buy 412,490,000,000 46,414,988 6/07/12 496,043 — Indonesian Rupiah . . . MSCO Buy 164,870,000,000 18,566,441 6/07/12 183,641 — Singapore Dollar . . . . CSFB Buy 165,273,000 134,302,779 6/07/12 3,676,213 — Singapore Dollar . . . . MSCO Buy 82,778,200 67,151,507 6/07/12 1,956,288 — Indian Rupee . . . . . . HSBK Buy 394,916,000 8,386,409 6/08/12 49,263 — Polish Zloty . . . . . . . . DBAB Buy 312,838,000 77,270,661 EUR 6/08/12 — (4,163,821)Polish Zloty . . . . . . . . CITI Buy 61,037,800 15,084,470 EUR 6/08/12 — (824,141)Euro . . . . . . . . . . . . . DBAB Sell 208,831,600 301,312,685 6/11/12 2,265,096 — Indian Rupee . . . . . . DBAB Buy 394,805,000 8,380,492 6/11/12 51,008 — Indonesian Rupiah . . . HSBK Buy 381,910,000,000 43,022,417 6/11/12 388,368 — Singapore Dollar . . . . CSFB Buy 150,260,000 122,411,405 6/11/12 3,044,848 — Singapore Dollar . . . . DBAB Buy 150,355,000 122,414,004 6/11/12 3,121,568 — Singapore Dollar . . . . GSCO Buy 175,572,500 142,817,343 6/11/12 3,773,021 — Swedish Krona . . . . . MSCO Buy 1,729,612,600 189,757,035 EUR 6/11/12 — (2,542,080)Swedish Krona . . . . . DBAB Buy 879,900,000 96,547,169 EUR 6/11/12 — (1,311,426)Euro . . . . . . . . . . . . . DBAB Sell 58,309,000 83,655,922 6/13/12 159,027 — Indian Rupee . . . . . . HSBK Buy 982,620,000 20,862,420 6/13/12 119,536 — Indonesian Rupiah . . . DBAB Buy 220,410,000,000 24,820,946 6/13/12 226,040 — Malaysian Ringgit . . . DBAB Buy 151,275,000 49,517,185 6/13/12 519,291 — Singapore Dollar . . . . CSFB Buy 109,530,000 89,150,252 6/13/12 2,303,379 —

Annual Report | 39





Swedish Krona . . . . . MSCO Buy 839,515,800 91,919,935 EUR 6/13/12 $ — $ (977,668)Swedish Krona . . . . . BZWS Buy 730,984,000 79,930,325 EUR 6/13/12 — (699,073)Euro . . . . . . . . . . . . . DBAB Sell 12,165,000 17,382,082 6/14/12 — (37,678)Malaysian Ringgit . . . CSFB Buy 418,125,000 136,933,028 6/14/12 1,363,261 — Swedish Krona . . . . . MSCO Buy 1,056,848,700 115,259,726 EUR 6/14/12 — (581,844)Indian Rupee . . . . . . DBAB Buy 988,229,000 20,932,620 6/18/12 161,599 — Swedish Krona . . . . . MSCO Buy 253,752,800 27,353,130 EUR 6/18/12 315,723 — Indian Rupee . . . . . . DBAB Buy 900,181,000 18,995,168 6/20/12 216,891 — Swedish Krona . . . . . MSCO Buy 630,587,640 67,926,953 EUR 6/20/12 846,245 — Swedish Krona . . . . . UBSW Buy 425,170,000 45,815,733 EUR 6/21/12 545,280 — Swedish Krona . . . . . MSCO Buy 844,220,000 90,950,421 EUR 6/21/12 1,113,584 — Indian Rupee . . . . . . JPHQ Buy 1,429,725,000 30,194,826 6/22/12 314,652 — Indian Rupee . . . . . . DBAB Buy 2,163,512,000 45,914,941 6/25/12 243,264 — Swedish Krona . . . . . CITI Buy 1,107,932,801 120,052,965 EUR 6/25/12 451,592 — Indian Rupee . . . . . . HSBK Buy 1,452,928,000 30,788,896 6/27/12 204,697 — Swedish Krona . . . . . DBAB Buy 677,526,000 72,941,670 EUR 6/28/12 945,251 — Malaysian Ringgit . . . JPHQ Buy 159,282,000 51,399,529 6/29/12 1,255,968 — Swedish Krona . . . . . UBSW Buy 1,104,669,000 118,794,386 EUR 6/29/12 1,726,848 — Indian Rupee . . . . . . DBAB Buy 1,436,398,000 30,825,777 7/11/12 — (215,271)Indian Rupee . . . . . . JPHQ Buy 2,310,323,000 49,795,415 7/12/12 — (564,538)Indian Rupee . . . . . . DBAB Buy 725,738,000 15,578,022 7/12/12 — (113,207)Euro . . . . . . . . . . . . . DBAB Sell 100,903,000 141,369,139 7/16/12 — (3,069,874)Euro . . . . . . . . . . . . . MSCO Sell 82,185,000 114,658,348 7/16/12 — (2,986,521)Euro . . . . . . . . . . . . . UBSW Sell 91,986,000 128,858,588 7/16/12 — (2,816,060)Euro . . . . . . . . . . . . . DBAB Sell 158,260,000 221,989,719 7/18/12 — (4,548,897)Euro . . . . . . . . . . . . . UBSW Sell 91,986,000 128,987,369 7/18/12 — (2,684,445)Euro . . . . . . . . . . . . . MSCO Sell 18,660,000 26,124,000 7/18/12 — (586,543)Euro . . . . . . . . . . . . . BZWS Sell 139,061,000 194,764,963 7/19/12 — (4,289,425)Indian Rupee . . . . . . JPHQ Buy 427,252,000 9,194,147 7/19/12 — (94,321)Euro . . . . . . . . . . . . . MSCO Sell 94,240,000 131,328,152 7/20/12 — (3,567,208)Euro . . . . . . . . . . . . . DBAB Sell 87,055,000 121,428,667 7/20/12 — (3,182,067)Malaysian Ringgit . . . DBAB Buy 5,149,000 1,685,654 7/20/12 15,257 — Euro . . . . . . . . . . . . . DBAB Sell 89,314,817 125,340,827 7/23/12 — (2,500,486)Euro . . . . . . . . . . . . . DBAB Sell 4,388,970 6,243,968 7/25/12 — (38,076)Malaysian Ringgit . . . DBAB Buy 6,261,000 2,063,748 7/25/12 4,139 — Euro . . . . . . . . . . . . . DBAB Sell 2,245,099 3,195,674 7/27/12 — (17,724)Malaysian Ringgit . . . JPHQ Buy 6,585,000 2,184,224 7/27/12 — (9,478)Euro . . . . . . . . . . . . . BZWS Sell 8,238,187 11,731,178 7/31/12 — (59,586)Malaysian Ringgit . . . HSBK Buy 31,057,000 10,435,820 7/31/12 — (180,438)Euro . . . . . . . . . . . . . DBAB Sell 67,100,000 95,137,735 8/01/12 — (896,960)Euro . . . . . . . . . . . . . BZWS Sell 4,687,826 6,643,587 8/01/12 — (65,712)Euro . . . . . . . . . . . . . BZWS Sell 16,701,109 23,810,771 8/02/12 — (91,891)Euro . . . . . . . . . . . . . DBAB Sell 5,000,000 7,133,000 8/02/12 — (23,011)Euro . . . . . . . . . . . . . MSCO Sell 8,856,901 12,473,262 8/03/12 — (202,617)

40 | Annual Report





Euro . . . . . . . . . . . . . DBAB Sell 254,839,100 360,565,917 8/06/12 $ — $ (4,144,637)Euro . . . . . . . . . . . . . BZWS Sell 168,655,506 239,592,012 8/06/12 — (1,777,712)Japanese Yen . . . . . . MSCO Sell 1,969,700,000 25,763,709 8/06/12 — (87,054)Malaysian Ringgit . . . JPHQ Buy 13,600,000 4,519,023 8/06/12 — (29,084)Australian Dollar . . . . DBAB Buy 32,678,054 33,582,583 8/07/12 114,518 — Australian Dollar . . . . MSCO Buy 87,230,602 89,553,553 8/07/12 397,285 — Australian Dollar . . . . CSFB Buy 174,500,298 179,107,106 8/08/12 817,556 — Euro . . . . . . . . . . . . . DBAB Sell 295,609,000 415,995,765 8/08/12 — (7,053,138)Euro . . . . . . . . . . . . . CITI Sell 115,434,119 162,063,731 8/08/12 — (3,135,154)Malaysian Ringgit . . . HSBK Buy 62,400,000 20,768,155 8/08/12 — (168,695)Swedish Krona . . . . . UBSW Buy 652,300,000 70,075,737 EUR 8/08/12 1,009,789 — Australian Dollar . . . . BZWS Buy 89,151,418 89,500,000 8/09/12 2,413,851 — Australian Dollar . . . . DBAB Buy 155,624,634 156,700,000 8/09/12 3,746,796 — Euro . . . . . . . . . . . . . DBAB Sell 226,679,000 321,054,988 8/09/12 — (3,344,034)Euro . . . . . . . . . . . . . CITI Sell 30,267,305 42,587,612 8/09/12 — (727,756)Malaysian Ringgit . . . JPHQ Buy 68,210,000 22,363,934 8/09/12 152,736 — Mexican Peso . . . . . . CITI Buy 1,111,900,000 89,478,131 8/09/12 — (1,833,401)Swedish Krona . . . . . UBSW Buy 891,973,049 95,770,000 EUR 8/09/12 1,453,542 — Swedish Krona . . . . . MSCO Buy 326,410,000 35,039,450 EUR 8/09/12 541,603 — Australian Dollar . . . . CSFB Buy 66,679,917 67,100,000 8/10/12 1,639,432 — Euro . . . . . . . . . . . . . DBAB Sell 171,944,000 242,890,996 8/10/12 — (3,174,432)Euro . . . . . . . . . . . . . BZWS Sell 28,000,000 39,928,000 8/10/12 — (142,209)Mexican Peso . . . . . . CITI Buy 2,825,174,000 223,684,558 8/10/12 — (1,010,161)Singapore Dollar . . . . CSFB Buy 190,826,456 156,410,000 8/10/12 3,124,996 — Australian Dollar . . . . DBAB Buy 205,940,392 201,420,000 8/13/12 10,819,892 — Australian Dollar . . . . CSFB Buy 116,042,725 111,900,000 8/13/12 7,692,351 — Euro . . . . . . . . . . . . . DBAB Sell 278,674,000 394,770,659 8/13/12 — (4,020,943)Indonesian Rupiah . . . HSBK Buy 801,600,000,000 89,529,234 8/13/12 849,599 — Malaysian Ringgit . . . DBAB Buy 481,829,000 156,659,752 8/13/12 2,373,716 — Malaysian Ringgit . . . JPHQ Buy 48,141,000 15,665,799 8/13/12 223,718 — Mexican Peso . . . . . . CITI Buy 1,155,788,000 89,519,773 8/13/12 1,555,044 — Mexican Peso . . . . . . MSCO Buy 2,377,163,000 185,753,591 8/13/12 1,564,226 — Singapore Dollar . . . . DBAB Buy 54,530,000 44,762,765 8/13/12 828,467 — Singapore Dollar . . . . CSFB Buy 190,840,000 156,657,363 8/13/12 2,899,405 — South Korean Won . . . HSBK Buy 148,661,000,000 134,279,650 8/13/12 3,751,792 — South Korean Won . . . DBAB Buy 98,884,000,000 89,520,188 8/13/12 2,293,408 — Euro . . . . . . . . . . . . . MSCO Sell 144,910,420 205,193,879 8/15/12 — (2,173,205)Euro . . . . . . . . . . . . . DBAB Sell 142,058,430 202,119,314 8/16/12 — (1,164,380)Indian Rupee . . . . . . JPHQ Buy 4,113,949,900 89,237,178 8/16/12 — (1,790,055)Indian Rupee . . . . . . HSBK Buy 3,869,965,050 83,559,292 8/17/12 — (1,304,199)Chilean Peso . . . . . . . JPHQ Buy 42,385,767,200 86,757,327 8/20/12 1,443,249 — Euro . . . . . . . . . . . . . BZWS Sell 517,960,000 744,232,276 8/20/12 3,070,420 — Euro . . . . . . . . . . . . . DBAB Sell 294,280,110 421,861,689 8/20/12 768,955 — Euro . . . . . . . . . . . . . MSCO Sell 105,221,000 150,976,352 8/20/12 413,004 —

Annual Report | 41





Euro . . . . . . . . . . . . . CSFB Sell 207,184,000 297,557,661 8/20/12 $ 1,092,918 $ —Japanese Yen . . . . . . HSBK Sell 14,880,537,750 195,090,629 8/20/12 — (261,480)Japanese Yen . . . . . . DBAB Sell 5,310,000,000 69,501,708 8/20/12 — (208,118)Japanese Yen . . . . . . JPHQ Sell 4,331,618,000 56,663,196 8/20/12 — (202,405)Japanese Yen . . . . . . UBSW Sell 8,717,091,000 114,277,543 8/20/12 — (160,667)Japanese Yen . . . . . . HSBK Sell 4,311,532,000 56,730,684 8/20/12 128,773 — Mexican Peso . . . . . . CITI Buy 1,410,000,000 111,506,524 8/20/12 — (462,695)Euro . . . . . . . . . . . . . UBSW Sell 141,425,000 201,410,416 8/22/12 — (953,782)Japanese Yen . . . . . . BZWS Sell 4,322,430,000 56,776,960 8/22/12 29,625 — Japanese Yen . . . . . . MSCO Sell 3,400,000,000 44,658,103 8/22/12 20,956 — Japanese Yen . . . . . . DBAB Sell 4,327,940,000 56,842,617 8/22/12 22,943 — Mexican Peso . . . . . . CITI Buy 906,059,000 71,465,902 8/22/12 — (121,176)Mexican Peso . . . . . . HSBK Buy 543,754,960 42,587,124 8/22/12 229,126 — Polish Zloty . . . . . . . . DBAB Buy 318,369,688 74,854,682 EUR 8/22/12 880,137 — Euro . . . . . . . . . . . . . DBAB Sell 188,527,791 269,943,518 8/23/12 183,117 — Euro . . . . . . . . . . . . . BZWS Sell 56,215,300 80,837,601 8/23/12 400,326 — Japanese Yen . . . . . . CSFB Sell 8,572,756,000 112,666,001 8/23/12 115,616 — Japanese Yen . . . . . . CITI Sell 8,636,095,000 113,692,667 8/23/12 310,714 — Japanese Yen . . . . . . DBAB Sell 4,271,575,000 56,326,109 8/23/12 245,263 — Euro . . . . . . . . . . . . . BZWS Sell 84,643,255 121,429,214 8/24/12 316,286 — Indian Rupee . . . . . . DBAB Buy 1,430,235,000 30,270,613 8/24/12 113,588 — Indian Rupee . . . . . . JPHQ Buy 5,620,000,000 119,147,818 8/24/12 244,598 — Indian Rupee . . . . . . HSBK Buy 1,650,347,000 34,966,238 8/24/12 94,067 — Japanese Yen . . . . . . JPHQ Sell 8,617,736,000 112,967,635 8/24/12 — (175,635)Philippine Peso . . . . . JPHQ Buy 2,519,000,000 59,373,036 8/24/12 — (482,044)Euro . . . . . . . . . . . . . BZWS Sell 147,623,324 212,507,699 8/27/12 1,285,720 — Euro . . . . . . . . . . . . . CITI Sell 37,756,455 54,389,306 8/27/12 366,724 — Euro . . . . . . . . . . . . . HSBK Sell 148,421,156 213,281,202 8/27/12 917,671 — Euro . . . . . . . . . . . . . MSCO Sell 38,352,012 55,270,619 8/27/12 395,903 — Euro . . . . . . . . . . . . . UBSW Sell 100,326,698 144,331,994 8/27/12 782,838 — Euro . . . . . . . . . . . . . UBSW Sell 96,279,002 138,508,898 8/27/12 751,254 — Indian Rupee . . . . . . JPHQ Buy 1,256,501,000 26,756,836 8/27/12 — (69,144)Indian Rupee . . . . . . HSBK Buy 1,265,363,000 26,842,945 8/27/12 32,973 — Japanese Yen . . . . . . BZWS Sell 12,841,448,000 168,379,309 8/27/12 — (228,071)Japanese Yen . . . . . . HSBK Sell 14,893,097,250 195,383,368 8/27/12 — (162,034)Japanese Yen . . . . . . DBAB Sell 8,644,374,000 113,753,737 8/27/12 253,666 — Japanese Yen . . . . . . JPHQ Sell 10,357,462,000 136,192,794 8/27/12 199,989 — Japanese Yen . . . . . . UBSW Sell 11,809,161,000 155,317,279 8/27/12 263,759 — Malaysian Ringgit . . . JPHQ Buy 227,033,719 75,913,238 8/27/12 — (1,014,554)Mexican Peso . . . . . . MSCO Buy 544,517,320 42,565,024 8/27/12 294,007 — Mexican Peso . . . . . . HSBK Buy 545,438,860 42,565,024 8/27/12 366,541 — Philippine Peso . . . . . HSBK Buy 2,511,000,000 59,405,238 8/27/12 — (705,621)Swedish Krona . . . . . UBSW Buy 335,000,000 36,336,027 EUR 8/27/12 — (5,831)Euro . . . . . . . . . . . . . JPHQ Sell 69,055,954 99,291,413 8/29/12 487,097 —






Euro . . . . . . . . . . . . . HSBK Sell 46,760,647 67,171,669 8/29/12 $ 267,174 $ —Euro . . . . . . . . . . . . . DBAB Sell 54,435,815 77,930,313 8/29/12 44,292 — Mexican Peso . . . . . . HSBK Buy 475,193,807 37,079,750 8/29/12 316,800 — Mexican Peso . . . . . . MSCO Buy 274,416,700 21,282,511 8/29/12 313,388 — Swedish Krona . . . . . UBSW Buy 1,007,972,000 109,478,875 EUR 8/29/12 — (238,542)Japanese Yen . . . . . . BZWS Sell 10,227,800,000 134,223,097 8/30/12 — (75,618)Japanese Yen . . . . . . JPHQ Sell 2,628,100,000 34,487,238 8/30/12 — (21,694)Malaysian Ringgit . . . HSBK Buy 186,092,504 61,917,320 8/30/12 — (531,602)Mexican Peso . . . . . . HSBK Buy 603,492,100 46,852,467 8/30/12 637,013 — Swedish Krona . . . . . UBSW Buy 1,007,011,000 109,309,199 EUR 8/30/12 — (149,190)Euro . . . . . . . . . . . . . DBAB Sell 5,711,991 8,261,253 8/31/12 88,789 — Japanese Yen . . . . . . JPHQ Sell 4,281,239,000 56,106,926 8/31/12 — (110,131)Euro . . . . . . . . . . . . . DBAB Sell 2,547,500 3,662,286 9/04/12 39,287 — Mexican Peso . . . . . . HSBK Buy 615,247,100 47,843,781 9/04/12 551,249 — Indian Rupee . . . . . . DBAB Buy 1,011,402,000 21,311,069 9/06/12 155,597 —

Unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,224,544 (1,009,376,169)

Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (414,151,625)

*In U.S. Dollars unless otherwise indicated.

At August 31, 2011, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts

Pay/Receive Fixed Expiration Unrealized UnrealizedCounterparty Floating Rate Rate Floating Rate Notional Amount* Date Appreciation Depreciation

JPHQ . . . Receive 3.963% 3-month USD BBA LIBOR 332,000,000 11/23/40 $— $(48,944,009)CITI . . . . Receive 4.368% 3-month USD BBA LIBOR 43,600,000 12/20/40 — (9,757,909)JPHQ . . . Receive 4.215% 3-month USD BBA LIBOR 234,600,000 1/11/41 — (44,932,037)CITI . . . . Receive 4.347% 3-month USD BBA LIBOR 245,400,000 2/25/41 — (52,185,767)JPHQ . . . Receive 4.349% 3-month USD BBA LIBOR 245,400,000 2/25/41 — (54,981,430)JPHQ . . . Receive 4.302% 3-month USD BBA LIBOR 184,050,000 2/28/41 — (38,396,085)JPHQ . . . Receive 4.299% 3-month USD BBA LIBOR 61,350,000 3/01/41 — (13,720,093)JPHQ . . . Receive 3.558% 3-month USD BBA LIBOR 101,430,000 3/04/21 — (12,532,804)DBAB . . . Receive 3.523% 3-month USD BBA LIBOR 471,880,000 3/28/21 — (55,694,996)

Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $(331,145,130)

*In U.S. Dollars unless otherwise indicated.

See Abbreviations on page 60.


Templeton Income TrustFinancial Statements

Statement of Assets and LiabilitiesAugust 31, 2011

Templeton GlobalBond Fund

Assets:Investments in securities:

Cost - Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55,751,108,486Cost - Sweep Money Fund (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,602,851

Total cost of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,661,711,337

Value - Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60,310,379,432Value - Sweep Money Fund (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,602,851

Total value of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,220,982,283Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,470,000Restricted cash (Note 1e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,640,000Foreign currency, at value (cost $196,038,518) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,737,593Receivables:

Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603,180,955Capital shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,544,725Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783,720,947

Due from brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895,489,000Unrealized appreciation on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,224,544Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,272

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,723,998,319

Liabilities:Payables:

Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585,586,644Capital shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,631,503Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,958,077Allocator Funds (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,996

Due to brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,650,000Unrealized depreciation on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,009,376,169Unrealized depreciation on swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,145,130Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,319,400Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,164,281

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,139,873,200

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,584,125,119

Net assets consist of:Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,881,731,891Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547,357,846Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,807,929,763Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,105,619

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,584,125,119


Templeton Income TrustFinancial Statements (continued)

Statement of Assets and Liabilities (continued)August 31, 2011


Class A:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,032,471,387

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,884,898,313

Net asset value per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.81

Maximum offering price per share (net asset value per share ÷ 95.75%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.42

Class C:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,270,611,844

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670,037,076

Net asset value and maximum offering price per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.84

Class R:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,412,896

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,153,287

Net asset value and maximum offering price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.81

Advisor Class:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,154,628,992

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,971,663,134

Net asset value and maximum offering price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.77

aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.



Statement of Operationsfor the year ended August 31, 2011


Investment income:Interest (net of foreign taxes of $59,667,088) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,342,310,319

Expenses:Management fees (Note 3a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,049,529Administrative fees (Note 3b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,412,305Distribution fees: (Note 3c)

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,438,383Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,127,567Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,696

Transfer agent fees (Note 3e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,895,893Special servicing agreement fees (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,933Custodian fees (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,516,100Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,975,911Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,006,680Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439,557Trustees’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398,600Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,277

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423,734,431Expense reductions (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,265)

Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423,731,166

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,918,579,153

Realized and unrealized gains (losses):Net realized gain (loss) from:

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,526,367Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,610,788Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,490Swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,830,192)

Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,417,311,453

Net change in unrealized appreciation (depreciation) on:Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,244,888,565Translation of other assets and liabilities denominated in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . (1,148,127,342)

Change in deferred taxes on unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,314,815)

Net change in unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095,446,408

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,512,757,861

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,431,337,014



Statements of Changes in Net Assets


Year Ended August 31, 2011 2010

Increase (decrease) in net assets:Operations:

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,918,579,153 $ 1,264,892,597Net realized gain (loss) from investments, foreign currency transactions, futures contracts

and swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,417,311,453 354,924,856Net change in unrealized appreciation (depreciation) on investments, translation of other

assets and liabilities denominated in foreign currencies and deferred taxes . . . . . . . . . . 1,095,446,408 1,551,438,466

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . 4,431,337,014 3,171,255,919

Distributions to shareholders from:Net investment income and foreign currency gains:

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,163,597,107) (616,704,173)Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (381,643,850) (192,749,237)Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,289,717) (540,139)Advisor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,111,050,070) (437,000,104)

Total distributions to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,659,580,744) (1,246,993,653)

Capital share transactions: (Note 2)Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,361,855,930 7,562,916,209Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600,223,069 3,176,661,056Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,242,397 23,599,796Advisor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,656,907,746 8,207,986,689

Total capital share transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,716,229,142 18,971,163,750

Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,487,985,412 20,895,426,016

Net assets:Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,096,139,707 17,200,713,691

End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,584,125,119 $38,096,139,707

Undistributed net investment income included in net assets:End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 547,357,846 $ 28,763,995

Annual Report | 47

Templeton Income TrustNotes to Financial Statements


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Income Trust (Trust) is registered under the Investment Company Act of 1940, asamended, (1940 Act) as an open-end investment company, consisting of three separate funds.The Templeton Global Bond Fund (Fund) is included in this report. The financial statements ofthe remaining funds in the Trust are presented separately. The Fund offers four classes of shares:Class A, Class C, Class R, and Advisor Class. Each class of shares differs by its initial sales load,contingent deferred sales charges, distribution fees, voting rights on matters affecting a singleclass and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund's investments in securities and other financial instruments are carried at fair valuedaily. Fair value is the price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants on the measurement date. Under proce-dures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricingservices, quotations from securities and financial instrument dealers, and other market sourcesto determine fair value.

Debt securities generally trade in the over-the-counter market rather than on a securitiesexchange. The Fund’s pricing services use multiple valuation techniques to determine fair value.In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. Ininstances where sufficient market activity may not exist or is limited, the pricing services alsoutilize proprietary valuation models which may consider market characteristics such as bench-mark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates,anticipated timing of principal repayments, underlying collateral, and other unique security fea-tures in order to estimate the relevant cash flows, which are then discounted to calculate the fairvalue. Securities denominated in a foreign currency are converted into their U.S. dollar equiva-lent at the foreign exchange rate in effect at the close of the NYSE on the date that the values ofthe foreign debt securities are determined. Derivative financial instruments (derivatives) listed onan exchange are valued at the official closing price of the day. Investments in open-end mutualfunds are valued at the closing net asset value.

Certain derivatives trade in the over-the-counter market. The Fund’s pricing services use varioustechniques including industry standard option pricing models and proprietary discounted cashflow models to determine the fair value of those instruments. The Fund’s net benefit or obliga-tion under the derivative contract, as measured by the fair market value of the contract, isincluded in net assets.

48 | Annual Report

Templeton Income TrustNotes to Financial Statements (continued)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

The Fund has procedures to determine the fair value of securities and other financial instru-ments for which market prices are not readily available or which may not be reliably priced.Under these procedures, the Fund primarily employs a market-based approach which may userelated or comparable assets or liabilities, recent transactions, market multiples, book values,and other relevant information for the investment to determine the fair value of the investment.The Fund may also use an income-based valuation approach in which the anticipated futurecash flows of the investment are discounted to calculate fair value. Discounts may also beapplied due to the nature or duration of any restrictions on the disposition of the investments.Due to the inherent uncertainty of valuations of such investments, the fair values may differ sig-nificantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may becompleted before the daily close of business on the NYSE. Occasionally, events occur betweenthe time at which trading in a foreign security is completed and the close of the NYSE thatmight call into question the reliability of the value of a portfolio security held by the Fund. As aresult, differences may arise between the value of the Fund’s portfolio securities as determined atthe foreign market close and the latest indications of value at the close of the NYSE. In order tominimize the potential for these differences, the investment manager monitors price movementsfollowing the close of trading in foreign stock markets through a series of country specific mar-ket proxies (such as baskets of American Depositary Receipts, futures contracts and exchangetraded funds). These price movements are measured against established trigger thresholds foreach specific market proxy to assist in determining if an event has occurred that may call intoquestion the reliability of the values of the foreign securities held by the Fund. If such an eventoccurs, the securities may be valued using fair value procedures, which may include the use ofindependent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are trans-lated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on thedate of valuation. The Fund may enter into foreign currency exchange contracts to facilitatetransactions denominated in a foreign currency. Purchases and sales of securities, income andexpense items denominated in foreign currencies are translated into U.S. dollars at the exchangerate in effect on the transaction date. Portfolio securities and assets and liabilities denominatedin foreign currencies contain risks that those currencies will decline in value relative to the U.S.dollar. Occasionally, events may impact the availability or reliability of foreign exchange ratesused to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchangerate will be valued at fair value using procedures established and approved by the Trust’s Boardof Trustees.

Annual Report | 49




b. Foreign Currency Translation (continued)

The Fund does not separately report the effect of changes in foreign exchange rates fromchanges in market prices on securities held. Such changes are included in net realized and unre-alized gain or loss from investments on the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gainsor losses realized between the trade and settlement dates on securities transactions and the dif-ference between the recorded amounts of dividends, interest, and foreign withholding taxes andthe U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreignexchange gains and losses arise from changes in foreign exchange rates on foreign denominatedassets and liabilities other than investments in securities held at the end of the reporting period.

c. Securities Purchased on a Delayed Delivery Basis

The Fund purchases securities on a delayed delivery basis, with payment and delivery scheduled fora future date. These transactions are subject to market fluctuations and are subject to the risk thatthe value at delivery may be more or less than the trade date purchase price. Although the Fundwill generally purchase these securities with the intention of holding the securities, it may sell thesecurities before the settlement date. Sufficient assets have been segregated for these securities.

d. Derivative Financial Instruments

The Fund invested in derivatives in order to manage risk or gain exposure to various other invest-ments or markets. Derivatives are financial contracts based on an underlying or notional amount,require no initial investment or an initial net investment that is smaller than would normally berequired to have a similar response to changes in market factors, and require or permit net settle-ment. Derivatives contain various risks including the potential inability of the counterparty tofulfill their obligations under the terms of the contract, the potential for an illiquid secondarymarket, and/or the potential for market movements which expose the Fund to gains or losses inexcess of the amounts shown on the Statement of Assets and Liabilities. Realized gain and lossand unrealized appreciation and depreciation on these contracts for the period are included in theStatement of Operations.

The Fund entered into financial futures contracts primarily to manage interest rate risk. A futurescontract is an agreement between the Fund and a counterparty to buy or sell an underlying finan-cial instrument for a specified price on a future date. Required initial margin deposits of cash orsecurities are pledged by the Fund. Subsequent payments, known as variation margin, are madeor received by the Fund, depending on fluctuations in the value of the underlying security. Suchvariation margin is accounted for as unrealized appreciation or depreciation until the contract isclosed, at which time the gains or losses are realized.

50 | Annual Report




d. Derivative Financial Instruments (continued)

The Fund entered into forward exchange contracts primarily to manage and/or gain exposure tocertain foreign currencies. A forward exchange contract is an agreement between the Fund and acounterparty to buy or sell a foreign currency for a specific exchange rate on a future date.Pursuant to the terms of the forward exchange contracts, cash or securities may be required tobe deposited as collateral. Unrestricted cash may be invested according to the Fund’s investmentobjectives.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. Aninterest rate swap is an agreement between the Fund and a counterparty to exchange cash flowsbased on the difference between two interest rates, applied to a notional principal amount. Overthe term of the contract, contractually required payments to be paid and to be received areaccrued daily and recorded as unrealized depreciation and appreciation until the payments aremade, at which time they are realized. Pursuant to the terms of the interest rate swap contract,cash or securities may be required to be deposited as collateral. Unrestricted cash may beinvested according to the Fund’s investment objectives.

At August 31, 2011, the Fund held $1,287,103 in United Kingdom Treasury Notes and$25,010,000 in cash as collateral for derivatives.

See Note 10 regarding other derivative information.

e. Restricted Cash

At August 31, 2011, the Fund held restricted cash in connection with investments in certainderivative securities. Restricted cash is held in a segregated account with the counterparty broker and is reflected in the Statement of Assets and Liabilities.

f. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal RevenueCode. The Fund intends to distribute to shareholders substantially all of its taxable income andnet realized gains to relieve it from federal income and excise taxes. As a result, no provision forU.S. federal income taxes is required. The Fund files U.S. income tax returns as well as taxreturns in certain other jurisdictions. The Fund records a provision for taxes in its financialstatements including penalties and interest, if any, for a tax position taken on a tax return (orexpected to be taken) when it fails to meet the more likely than not (a greater than 50% proba-bility) threshold and based on the technical merits, the tax position may not be sustained uponexamination by the tax authorities. As of August 31, 2011, and for all open tax years, the Fundhas determined that no provision for income tax is required in the Fund’s financial statements.Open tax years are those that remain subject to examination and are based on each tax jurisdic-tion statute of limitation.

Annual Report | 51




f. Income and Deferred Taxes (continued)

The Fund may be subject to foreign taxation related to income received, capital gains on the saleof securities and certain foreign currency transactions in the foreign jurisdictions in which itinvests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist inthe foreign markets in which the Fund invests. When a capital gain tax is determined to applythe Fund records an estimated deferred tax liability for unrealized gains on these securities in anamount that would be payable if the securities were disposed of on the valuation date.

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security trans-actions are determined on a specific identification basis. Interest income and estimated expensesare accrued daily. Amortization of premium and accretion of discount on debt securities areincluded in interest income. Distributions to shareholders are recorded on the ex-dividend date andare determined according to income tax regulations (tax basis). Distributable earnings determinedon a tax basis may differ from earnings recorded in accordance with accounting principles gener-ally accepted in the United States of America. These differences may be permanent or temporary.Permanent differences are reclassified among capital accounts to reflect their tax character. Thesereclassifications have no impact on net assets or the results of operations. Temporary differencesare not reclassified, as they may reverse in subsequent periods.

Realized and unrealized gains and losses and net investment income, not including class specificexpenses, are allocated daily to each class of shares based upon the relative proportion of netassets of each class. Differences in per share distributions, by class, are generally due to differ-ences in class specific expenses.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of netassets of each fund to the combined net assets of the Trust. Fund specific expenses are chargeddirectly to the fund that incurred the expense.

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in thesecurity’s interest accruals, face amount, or principal redemption value, by amounts correspon-ding to the rate of inflation as measured by an index. Any increase or decrease in the faceamount or principal redemption value will be included as interest income on the Statement ofOperations.

52 | Annual Report




h. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the financial statements andthe amounts of income and expenses during the reporting period. Actual results could differ fromthose estimates.

i. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trustagainst certain liabilities arising out of the performance of their duties to the Trust. Additionally,in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with serv-ice providers that contain general indemnification clauses. The Trust’s maximum exposure underthese arrangements is unknown as this would involve future claims that may be made against theTrust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At August 31, 2011, there were an unlimited number of shares authorized (without par value).Transactions in the Fund’s shares were as follows:

Year Ended August 31,2011 2010

Shares Amount Shares AmountClass A Shares:

Shares sold . . . . . . . . . . . . . 840,255,529 $11,527,866,250 799,365,139 $10,350,571,870Shares issued in reinvestment

of distributions . . . . . . . . . . 74,450,072 1,014,712,391 40,823,455 531,799,244Shares redeemed . . . . . . . . . (377,730,434) (5,180,722,711) (255,635,611) (3,319,454,905)

Net increase (decrease) . . . . . 536,975,167 $ 7,361,855,930 584,552,983 $ 7,562,916,209

Class C Shares:Shares sold . . . . . . . . . . . . . 263,745,825 $ 3,628,302,735 291,769,493 $ 3,777,240,661Shares issued in reinvestment

of distributions . . . . . . . . . . 20,500,080 279,873,036 10,556,027 137,864,412Shares redeemed . . . . . . . . . (95,265,928) (1,307,952,702) (56,802,787) (738,444,017)

Net increase (decrease) . . . . . 188,979,977 $ 2,600,223,069 245,522,733 $ 3,176,661,056

Class R Shares:Shares sold . . . . . . . . . . . . . 7,781,876 $ 106,990,765 2,155,822 $ 28,131,357Shares issued in reinvestment

of distributions . . . . . . . . . . 239,680 3,275,256 41,112 539,563Shares redeemed . . . . . . . . . (947,547) (13,023,624) (391,863) (5,071,124)

Net increase (decrease) . . . . . 7,074,009 $ 97,242,397 1,805,071 $ 23,599,796

Annual Report | 53



2. SHARES OF BENEFICIAL INTEREST (continued)

Year Ended August 31,2011 2010

Shares Amount Shares AmountAdvisor Class Shares:

Shares sold . . . . . . . . . . . . . 1,171,615,939 $16,034,691,481 762,279,104 $ 9,870,468,684Shares issued in reinvestment

of distributions . . . . . . . . . . 50,152,929 682,418,436 18,224,168 237,373,410Shares redeemed . . . . . . . . . (297,197,971) (4,060,202,171) (146,550,193) (1,899,855,405)

Net increase (decrease) . . . . . 924,570,897 $12,656,907,746 633,953,079 $ 8,207,986,689

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together arereferred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers and/or directors of the following subsidiaries:

Subsidiary Affiliation

Franklin Advisers, Inc. (Advisers) Investment managerFranklin Templeton Services, LLC (FT Services) Administrative managerFranklin Templeton Distributors, Inc. (Distributors) Principal underwriterFranklin Templeton Investor Services, LLC (Investor Services) Transfer agent

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assetsof the Fund as follows:

Annualized Fee Rate Net Assets

0.500% Up to and including $200 million0.450% Over $200 million, up to and including $1.3 billion0.400% Over $1.3 billion, up to and including $35 billion0.395% Over $35 billion, up to and including $50 billion0.390% Over $50 billion, up to and including $65 billion0.385% Over $65 billion, up to and including $80 billion0.380% In excess of $80 billion

b. Administrative Fees

The Funds pays an administrative fee to FT Services based on the Fund’s average daily net assetsas follows:

Annualized Fee Rate Net Assets

0.150% Up to and including $200 million0.135% Over $200 million, up to and including $700 million0.100% Over $700 million, up to and including $1.2 billion0.075% In excess of $1.2 billion

54 | Annual Report



3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for each share class, with the exception of

Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement

distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale

and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimburse-

ment distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in

subsequent periods.

In addition, under the Fund’s Class C and R compensation distribution plans, the Fund paysDistributors for costs incurred in connection with the servicing, sale and distribution of theFund’s shares up to the maximum annual plan rate for each class.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65%Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expensesof the Fund. These charges are deducted from the proceeds of sales of Fund shares prior toinvestment or from redemption proceeds prior to remittance, as applicable. Distributors hasadvised the Fund of the following commission transactions related to the sales and redemptionsof the Fund’s shares for the year:

Sales charges retained net of commissions paid to unaffiliated broker/dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,827,195

CDSC retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,171,980

e. Transfer Agent Fees

For the year ended August 31, 2011, the Fund paid transfer agent fees of $47,895,893, of which$22,249,810 was retained by Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. Duringthe year ended August 31, 2011, the custodian fees were reduced as noted in the Statement ofOperations.

Annual Report | 55



5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any.

During the year ended August 31, 2011, the Fund utilized $42,202,763 of capital loss carryforwards.

The tax character of distributions paid during the years ended August 31, 2011 and August 31,2010, was as follows:

2011 2010

Distributions paid from ordinary income . . . $2,659,580,744 $1,246,993,653

At August 31, 2011, the cost of investments, net unrealized appreciation (depreciation), undis-tributed ordinary income and undistributed long term capital gains for income tax purposeswere as follows:

Cost of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,958,505,088

Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,464,629,851Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (202,152,656)

Net unrealized appreciation (depreciation) . . . . . . . . . . . . $ 4,262,477,195

Undistributed ordinary income . . . . . . . . . . . . . . . . . . . . $ 129,344,311Undistributed long term capital gains . . . . . . . . . . . . . . . 359,425,713

Distributable earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 488,770,024

Differences between income and/or capital gains as determined on a book basis and a tax basisare primarily due to differing treatments of foreign currency transactions, bond discounts andpremiums, and tax straddles.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the year ended August 31,2011, aggregated $29,240,523,942 and $10,122,372,058, respectively.

56 | Annual Report



7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund invests in the Institutional Fiduciary Trust Money Market Portfolio (Sweep MoneyFund), an open-end investment company managed by Advisers. Management fees paid by theFund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed themanagement and administrative fees paid by the Sweep Money Fund.

8. CREDIT RISK

At August 31, 2011, the Fund had 10.36% of its portfolio invested in high yield or other securitiesrated below investment grade. These securities may be more sensitive to economic conditions caus-ing greater price volatility and are potentially subject to a greater risk of loss due to default thanhigher rated securities.

9. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associ-ated with investing in U.S. securities, such as fluctuating currency values and changing local andregional economic, political and social conditions, which may result in greater market volatility.In addition, certain foreign securities may not be as liquid as U.S. securities.

10. OTHER DERIVATIVE INFORMATION

At August 31, 2011, the Fund has invested in derivative contracts which are reflected on theStatement of Assets and Liabilities as follows:

Asset Derivatives Liability Derivatives

Derivative Contracts Not Accounted for as Statement of Assets and Fair Value Statement of Assets and Fair ValueHedging Instruments Liabilities Location Amount Liabilities Location Amount

Interest rate contracts . . . Unrealized appreciation on Unrealized depreciationswap contracts $ — on swap contracts $ 331,145,130

Foreign exchange contracts . . . . . . . . . Unrealized appreciation Unrealized depreciation

on forward exchange on forward exchange contracts 595,224,544 contracts 1,009,376,169

Annual Report | 57



10. OTHER DERIVATIVE INFORMATION (continued)

For the year ended August 31, 2011, the effect of derivative contracts on the Fund’s Statementof Operations was as follows:

Change in Unrealized

Appreciation Derivative Contracts Realized Gain (Depreciation) Not Accounted for as Statement of (Loss) for the for the Hedging Instruments Operations Locations Year Year

Interest rate contracts . . . . . . . . . Net realized gain (loss) from futures and swap contracts/ $(24,825,702) $ (331,145,088)

Net change in unrealized appreciation (depreciation) on investments

Foreign exchange contracts . . . . . . . . . Net realized gain (loss) from foreign currency transactions/

Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies 251,527,700 (1,132,919,282)

For the year ended August 31, 2011, the average month end market value of derivatives repre-sented 2.86% of average month end net assets. The average month end number of openderivative contracts for the year was 511.

See Note 1(d) regarding derivative financial instruments.

11. SPECIAL SERVICING AGREEMENT

The Fund, which is an eligible underlying investment of one or more of the Franklin TempletonFund Allocator Series Funds (Allocator Funds), participates in a Special Servicing Agreement (SSA)with the Allocator Funds and certain service providers of the Fund and the Allocator Funds. Underthe SSA, the Fund may pay a portion of the Allocator Funds’ expenses (other than any asset alloca-tion, administrative, and distribution fees) to the extent such payments are less than the amount ofthe benefits realized or expected to be realized by the Fund (e.g., due to reduced costs associated withservicing accounts) from the investment in the Fund by the Allocator Funds. The Allocator Fundsare either managed by Advisers or administered by FT Services. For the year ended August 31, 2011, the Fund was held by one or more of the Allocator Funds and the amount of expenses borneby the Fund is noted in the Statement of Operations. At August 31, 2011, 0.80% of the Fund’soutstanding shares was held by one or more of the Allocator Funds.

58 | Annual Report



12. CREDIT FACILITY

The Fund, together with other U.S. registered and foreign investment funds (collectively,Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicatedsenior unsecured credit facility totaling $750 million (Global Credit Facility) which matures onJanuary 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers fortemporary and emergency purposes, including the ability to meet future unanticipated or unusu-ally large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged onany borrowings made by the Fund and other costs incurred by the Fund, pay its share of feesand expenses incurred in connection with the implementation and maintenance of the GlobalCredit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers,including an annual commitment fee of 0.08% based upon the unused portion of the GlobalCredit Facility, which is reflected in other expenses on the Statement of Operations. During theyear ended August 31, 2011, the Fund did not use the Global Credit Facility.

13. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained fromindependent sources (observable inputs) and the Fund’s own market assumptions (unobservableinputs). These inputs are used in determining the value of the Fund’s investments and are sum-marized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associatedwith investing in those securities.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policyof recognizing the transfers as of the date of the underlying event which caused the movement.

Annual Report | 59



13. FAIR VALUE MEASUREMENTS (continued)

The following is a summary of the inputs used as of August 31, 2011, in valuing the Fund’sassets and liabilities carried at fair value:

Level 1 Level 2 Level 3 Total

Assets:Investments in Securities:

Foreign Government and Agency Securitiesa . . . . . . . . . . . . . . $ — $48,285,696,416 $ — $48,285,696,416

Quasi-Sovereign and Corporate Bondsa . . . . . . . . . . . . . . . . . — 1,201,193,683 — 1,201,193,683

Municipal Bonds . . . . . . . . . . . — 1,367,037,139 — 1,367,037,139 Short Term Investments . . . . . . 910,602,851 9,456,452,194 — 10,367,055,045

Total Investments in Securities . . . . . . . . . . . . . . $910,602,851 $60,310,379,432 $ — $61,220,982,283

Forward Exchange Contracts . . . . — 595,224,544 — 595,224,544

Liabilities:Swaps . . . . . . . . . . . . . . . . . . . . — 331,145,130 — 331,145,130Forward Exchange Contracts . . . . — 1,009,376,169 — 1,009,376,169

aFor detailed country descriptions, see the accompanying Statement of Investments.

14. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting StandardsUpdate (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to AchieveCommon Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Theamendments in the ASU will improve the comparability of fair value measurements presentedand disclosed in financial statements prepared in accordance with U.S. GAAP (GenerallyAccepted Accounting Principles) and IFRS (International Financial Reporting Standards) andinclude new guidance for certain fair value measurement principles and disclosure requirements.The ASU is effective for interim and annual periods beginning after December 15, 2011. TheFund is currently evaluating the impact, if any, of applying this provision.

15. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements anddetermined that no events have occurred that require disclosure.

60 | Annual Report



Counterparty

BOFA - Bank of America N.A.

BZWS - Barclays Bank PLC

CITI - Citibank N.A.

CSFB - Credit Suisse First Boston

DBAB - Deutsche Bank AG

FBCO - Credit Suisse International

GSCO - The Goldman Sachs Group,Inc.

HSBK - HSBC Bank PLC

JPHQ - JPMorgan Chase N.A.

MSCO - Morgan Stanley and Co. Inc.

UBSW - UBS AG

Selected Portfolio

AGMC - Assured Guaranty MunicipalCorp.

AMBAC - American Municipal BondAssurance Corp.

BHAC - Berkshire Hathaway AssuranceCorp.

FICO - Financing Corp.FRN - Floating Rate NoteGO - General ObligationID - Improvement DistrictNATL - National Public Financial

Guarantee Corp.USD - Unified/Union School District

Currency

AUD - Australian Dollar

BRL - Brazilian Real

EGP - Egyptian Pound

EUR - Euro

GBP - British Pound

HUF - Hungarian Forint

IDR - Indonesian Rupiah

ILS - New Israeli Shekel

INR - Indian Rupee

JPY - Japanese Yen

KRW - South Korean Won

LKR - Sri Lankan Rupee

MXN - Mexican Peso

MYR - Malaysian Ringgit

NOK - Norwegian Krone

PEN - Peruvian Nuevo Sol

PHP - Philippine Peso

PLN - Polish Zloty

SEK - Swedish Krona

SGD - Singapore Dollar

ABBREVIATIONS

Annual Report | 61

Templeton Income TrustReport of Independent Registered Public Accounting Firm

To the Board of Trustees of the Templeton Income Trust and Shareholders ofTempleton Global Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the statement ofinvestments, and the related statements of operations and of changes in net assets and the finan-cial highlights present fairly, in all material respects, the financial position of Templeton GlobalBond Fund (the “Fund”) at August 31, 2011, 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 financialhighlights for the periods presented, in conformity with accounting principles generally acceptedin the United States of America. These financial statements and financial highlights (hereafterreferred to as “financial statements”) are the responsibility of the Fund’s management. Ourresponsibility is to express an opinion on these financial statements based on our audits. We con-ducted our audits of these financial statements in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presen-tation. We believe that our audits, which included confirmation of securities at August 31, 2011by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, CaliforniaOctober 19, 2011

62 | Annual Report

Templeton Income TrustTax Designation (unaudited)

Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Fund designates the maxi-mum amount allowable but no less than $23,042 as interest related dividends for purposes of thetax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended August 31, 2011.

At August 31, 2011, more than 50% of the Fund’s total assets were invested in securities of for-eign issuers. In most instances, foreign taxes were withheld from income paid to the Funds onthese investments. As shown in the table below, the Funds designates to shareholders the foreignsource income and foreign taxes paid, pursuant to Section 853 of the Code. This designation willallow shareholders of record on August 12, 2011, to treat their proportionate share of foreigntaxes paid by the Funds as having been paid directly by them. The shareholder shall considerthese amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, foreign source income, andforeign qualified dividends as designated by the Fund, to Class A, Class C, Class R, and AdvisorClass shareholders of record.

Foreign Tax Paid Foreign Source Income Foreign QualifiedClass Per Share Per Share Dividends Per Share

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.0146 $0.4764 $—Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.0146 $0.4311 $—Class R . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.0146 $0.4668 $—Advisor Class . . . . . . . . . . . . . . . . . . . . . . $0.0146 $0.5046 $—

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit(assuming you held your shares in the Fund for a minimum of 16 days during the 31-day periodbeginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreigntaxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividendsattributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not beenadjusted for the rate differential applicable to such dividend income.1

Foreign Qualified Dividends Per Share (Column 3) is the amount per share of foreign sourcequalified dividends, plus any foreign taxes withheld on these dividends. These amounts repre-sent the portion of the Foreign Source Income reported to you in column 2 that were derivedfrom qualified foreign securities held by the Fund.1

In January 2012, shareholders will receive Form 1099-DIV which will include their share of taxespaid and foreign source income distributed during the calendar year 2011. The Foreign SourceIncome reported on Form 1099-DIV has not been adjusted for the rate differential on foreignsource qualified dividend income. Shareholders are advised to check with their tax advisors forinformation on the treatment of these amounts on their 2011 individual income tax returns.

1Qualified dividends are taxed at reduced long term capital gain rates. In determining the amount of foreign tax credit that may be applied againstthe U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation cal-culation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the ratedifferential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 formore information.

Annual Report | 63

Number of Portfolios inName, Year of Birth Length of Fund Complex Overseenand Address Position Time Served by Board Member* Other Directorships Held

Templeton Income TrustBoard Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, 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. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Hess Corporation (exploration andrefining of oil and gas), H.J. HeinzCompany (processed foods and alliedproducts), RTI International Metals,Inc. (manufacture and distribution oftitanium), Canadian National Railway(railroad) and White MountainsInsurance Group, Ltd. (holding company).

Edith E. Holiday (1952)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923

LeadIndependentTrustee

Trustee since2001 and LeadIndependentTrustee since2007

131

Principal Occupation During Past 5 Years:Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of theCabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and AssistantSecretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).

Bar-S Foods (meat packing company)(1981-2010).

Harris J. Ashton (1932)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923

Trustee Since 1992 131

Principal Occupation During Past 5 Years:Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, ChiefExecutive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

SLM Corporation (Sallie Mae), AresCapital Corporation (specialty financecompany) and Allied Capital Corporation(financial services) (2003-2010).

Ann Torre Bates (1958)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years:Independent strategic and financial consultant; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).

Fortis, Inc. (utility holding company)and AML Foods Limited (retail distributors).

Frank J. Crothers (1944)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years:Director and Vice Chairman, Caribbean Utilities Company, Ltd.; director of various other private business and nonprofit organizations; and formerly, Chairman, Atlantic Equipment and Power Ltd. (1977-2003).

64 | Annual Report


Principal Occupation During Past 5 Years:John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2011); and formerly, Senior Vice President –Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products) (2004-May 2011); Senior Fellow of The BrookingsInstitution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department ofJustice (2001-2003).

Boeing Capital Corporation (aircraftfinancing).

J. Michael Luttig (1954)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years: Executive Vice President, General Counsel and member of Executive Council, The Boeing Company; and formerly, Federal Appeals CourtJudge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

Emeritus Corporation (assisted living)(1999-2010) and OSI Pharmaceuticals,Inc. (pharmaceutical products)(2006-2010).

David W. Niemiec (1949)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years: Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg DillonRead (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief FinancialOfficer, Dillon, Read & Co. Inc. (1982-1997).

Hess Corporation (exploration andrefining of oil and gas).

Frank A. Olson (1932)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years:Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999)); and formerly, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).

Cbeyond, Inc. (business commun-ications provider), The SouthernCompany (energy company) and The Washington Post Company (education and media organization).

Larry D. Thompson (1945)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


NoneConstantine D. Tseretopoulos(1954)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years:Physician, Chief of Staff, owner and operator of the Lyford Cay Hospital (1987-present); director of various nonprofit organizations; and formerly, Cardiology Fellow, University of Maryland (1985-1987); and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).

El Oro Ltd (investments).Robert E. Wade (1946)300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923


Principal Occupation During Past 5 Years:Attorney at law engaged in private practice (1973-2009) and member of various boards.

Annual Report | 65

None**Charles B. Johnson (1933)One Franklin Parkway San Mateo, CA 94403-1906

Trustee,Chairman ofthe Board andVice President

Trustee, and VicePresident since1992 andChairman of theBoard since 1995

131

Principal Occupation During Past 5 Years:Chairman of the Board, Member – Office of the Chairman and Director, Franklin Resources, Inc.; and officer and/or director or trustee, asthe case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin TempletonInvestments.

None**Gregory E. Johnson (1961)One Franklin Parkway San Mateo, CA 94403-1906


Principal Occupation During Past 5 Years:Director, President and Chief Executive Officer, Franklin Resources, Inc.; and officer and/or director or trustee, as the case may be, of someof the other subsidiaries of Franklin Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.

Not ApplicableJames M. Davis (1952)One Franklin Parkway San Mateo, CA 94403-1906

ChiefComplianceOfficer andVice President– AMLCompliance

Chief ComplianceOfficer since 2004and Vice President– AML Compliancesince 2006

Not Applicable

Principal Occupation During Past 5 Years: Director, Global Compliance, Franklin Resources, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.

Not ApplicableAliya S. Gordon (1973)One Franklin ParkwaySan Mateo, CA 94403-1906

Vice President Since 2009 Not Applicable

Principal Occupation During Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin TempletonInvestments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Not ApplicableLaura F. Fergerson (1962)One Franklin ParkwaySan Mateo, CA 94403-1906

ChiefExecutiveOfficer –Finance andAdministration

Since 2009 Not Applicable

Principal Occupation During Past 5 Years:Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; andformerly, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of theinvestment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).


Interested Board Members and Officers

66 | Annual Report


Not ApplicableDavid P. Goss (1947)One Franklin Parkway San Mateo, CA 94403-1906


Principal Occupation During Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; and officer and/or director, as the case may be, of some of the othersubsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.

Not ApplicableSteven J. Gray (1955)One Franklin Parkway San Mateo, CA 94403-1906


Principal Occupation During Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 ofthe investment companies in Franklin Templeton Investments.

Not ApplicableRupert H. Johnson, Jr. (1940)One Franklin Parkway San Mateo, CA 94403-1906


Principal Occupation During Past 5 Years:Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior VicePresident, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries ofFranklin Resources, Inc. and of 25 of the investment companies in Franklin Templeton Investments.

Not ApplicableChristopher J. Molumphy (1962)One Franklin Parkway San Mateo, CA 94403-1906

President andChief ExecutiveOfficer –InvestmentManagement


Principal Occupation During Past 5 Years:Director and Executive Vice President, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer ofsome of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.

Not ApplicableMark H. Otani (1968)One Franklin ParkwaySan Mateo, CA 94403-1906

Treasurer,Chief FinancialOfficer andChiefAccountingOfficer


Principal Occupation During Past 5 Years:Director, Global Fund Accounting Operations, Franklin Templeton Investments; and officer of 14 of the investment companies in FranklinTempleton Investments.

Not ApplicableRobert C. Rosselot (1960)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

Secretary andVice President

Secretary since2004 and VicePresident since2009

Not Applicable

Principal Occupation During Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President andSecretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the South; andofficer of 45 of the investment companies in Franklin Templeton Investments.

Annual Report | 67


*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolioshave a common investment manager or affiliated investment managers.

**Charles B. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as officer and director and major shareholder ofFranklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Gregory E. Johnson is considered to be an interested person ofthe Fund under the federal securities laws due to his position as officer and director of Resources.

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively, of Gregory E. Johnson.

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includesat least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one suchfinancial expert on the Audit Committee and has designated each of Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Ms. Bates and Mr. Niemiec qualify as such an expert in view of their extensive business background and experience. Ms. Bates has served as a member of the Fund AuditCommittee since 2008. She currently serves as a director of SLM Corporation and Ares Capital Corporation and was formerly a director of Allied Capital Corporation from 2003to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated and Vice President and Treasurer of US Airways, Inc. Mr. Niemiec has served as a member ofthe Fund Audit Committee since 2005, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001. Mr. Niemiec was for-merly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, theBoard believes that Ms. Bates and Mr. Niemiec have each acquired an understanding of generally accepted accounting principles and financial statements, the general appli-cation of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth andlevel of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting andan understanding of audit committee functions. Ms. Bates and Mr. Niemiec are independent Board members as that term is defined under the applicable U.S. Securities andExchange Commission Rules and Releases.The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders maycall (800) DIAL BEN/342-5236 to request the SAI.

Not ApplicableKaren L. Skidmore (1952)One Franklin Parkway San Mateo, CA 94403-1906


Principal Occupation During Past 5 Years:Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin TempletonInvestments.

Not ApplicableCraig S. Tyle (1960)One Franklin Parkway San Mateo, CA 94403-1906


Principal Occupation During Past 5 Years:General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc.and of 45 of the investment companies in Franklin Templeton Investments; and formerly, Partner, Shearman & Sterling, LLP (2004-2005);and General Counsel, Investment Company Institute (ICI) (1997-2004).

Not ApplicableLori A. Weber (1964)300 S.E. 2nd StreetFort Lauderdale, FL 33301-1923

Vice President Since May 2011 Not Applicable

Principal Occupation During Past 5 Years:Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and AssistantSecretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

68 | Annual Report

Templeton Income TrustShareholder Information


Board Review of Investment Management Agreement

At a meeting held May 17, 2011, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreementfor Templeton Global Bond Fund (Fund). In reaching this decision, the Board took into accountinformation furnished throughout the year at regular Board meetings, as well as information pre-pared specifically in connection with the annual renewal review process. Information furnishedand discussed throughout the year included investment performance reports and related financialinformation for the Fund, as well as periodic reports on expenses, shareholder services, legal,compliance, pricing, brokerage commissions and execution and other services provided by theInvestment Manager (Manager) and its affiliates. Information furnished specifically in connectionwith the renewal process included a report for the Fund prepared by Lipper, Inc. (Lipper), anindependent organization, as well as additional material, including a Fund profitability analysisprepared by management. The Lipper report compared the Fund’s investment performance andexpenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper.The Fund profitability analysis discussed the profitability to Franklin Templeton Investmentsfrom its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additionalmaterial accompanying such profitability analysis included information on a fund-by-fund basislisting portfolio managers and other accounts they manage, as well as information on manage-ment fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts,including management’s explanation of differences where relevant and a three-year expenseanalysis with an explanation for any increase in expense ratios. Such material also included amemorandum prepared by management describing project initiatives and capital investmentsrelating to the services provided to the Fund by the Franklin Templeton Investments organization,as well as a memorandum relating to economies of scale and a comparative analysis concerningtransfer agent fees charged the Fund.

In considering such materials, the independent Trustees received assistance and advice from and metseparately with independent counsel. In approving continuance of the investment managementagreement for the Fund, the Board, including a majority of independent Trustees, determined thatthe existing management fee structure was fair and reasonable and that continuance of the invest-ment management agreement was in the best interests of the Fund and its shareholders. Whileattention was given to all information furnished, the following discusses some primary factors rele-vant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the natureand quality of the overall services provided by the Manager and its affiliates to the Fund and itsshareholders. In addition to investment performance and expenses discussed later, the Board’sopinion was based, in part, upon periodic reports furnished it showing that the investment policiesand restrictions for the Fund were consistently complied with as well as other reports periodicallyfurnished the Board covering matters such as the compliance of portfolio managers and othermanagement personnel with the code of ethics adopted throughout the Franklin Templeton fund

Annual Report | 69

Templeton Income TrustShareholder Information (continued)


Board Review of Investment Management Agreement (continued)

complex, the adherence to fair value pricing procedures established by the Board, and the accuracyof net asset value calculations. The Board also noted the extent of benefits provided Fund sharehold-ers from being part of the Franklin Templeton family of funds, including the right to exchangeinvestments between the same class of funds without a sales charge, the ability to reinvest Fund divi-dends into other funds and the right to combine holdings in other funds to obtain a reduced salescharge. Favorable consideration was given to management’s continuous efforts and expenditures inestablishing back-up systems and recovery procedures to function in the event of a natural disaster, it being noted that such systems and procedures had functioned smoothly during the Florida hurri-canes and blackouts experienced in previous years. Consideration was also given to the experience of the Fund’s portfolio management team, the number of accounts managed and general method ofcompensation. In this latter respect, the Board noted that a primary factor in management’s determi-nation of a portfolio manager’s bonus compensation was the relative investment performance of thefunds he or she managed and that a portion of such bonus was required to be invested in a predesig-nated list of funds within such person’s fund management area so as to be aligned with the interestsof shareholders. The Board also took into account the quality of transfer agent and shareholder serv-ices provided Fund shareholders by an affiliate of the Manager and the continuous enhancements to the Franklin Templeton website. Particular attention was given to management’s conservativeapproach and diligent risk management procedures, including continuous monitoring of counter-party credit risk and attention given to derivatives and other complex instruments. The Board alsotook into account, among other things, management’s efforts in establishing a global credit facilityfor the benefit of the Fund and other accounts managed by Franklin Templeton Investments to pro-vide a source of cash for temporary and emergency purposes or to meet unusual redemption requestsas well as the strong financial position of the Manager’s parent company and its commitment to themutual fund business as evidenced by its subsidization of money market funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment per-formance of the Fund in view of its importance to shareholders. While consideration was given toperformance reports and discussions with portfolio managers at Board meetings during the year,particular attention in assessing performance was given to the Lipper reports furnished for theagreement renewal. The Lipper report prepared for the Fund showed the investment performanceof its Class A shares for the one-year period ended February 28, 2011, as well as during the previ-ous 10 years ended that date in comparison to a performance universe consisting of all retail andinstitutional global income funds as selected by Lipper. The Fund’s income return, as shown insuch report, was in the second-highest quintile of such universe for the one-year period, and on anannualized basis was also in the second-highest quintile of such universe for the previous three-,five- and 10-year periods. On a comparative basis, the Lipper report showed the Fund’s totalreturn to be in the highest or best performing quintile of its Lipper performance universe for the

70 | Annual Report




one-year period, and on an annualized basis to also be in the highest quintile of such universe foreach of the previous three-, five- and 10-year periods. The Board was satisfied with such favorablecomparative performance.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the manage-ment fees and total expense ratio of the Fund compared with a group of other funds selected byLipper as constituting its appropriate Lipper expense group. Lipper expense data is based uponinformation taken from each fund’s most recent annual report, which reflects historical asset levelsthat may be quite different from those currently existing, particularly in a period of market volatility.While recognizing such inherent limitation and the fact that expense ratios generally increase asassets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs,Lipper provides information on each Fund’s contractual investment management fee in comparisonwith the contractual investment management fee that would have been charged by other fundswithin its Lipper expense group assuming they were similar in size to the Fund, as well as the actualtotal expenses of the Fund in comparison with those of its Lipper expense group. The Lipper con-tractual investment management fee analysis includes administrative charges as being part of amanagement fee, and actual total expenses, for comparative consistency, are shown by Lipper forFund Class A shares. The results of such expense comparisons showed that the contractual invest-ment fee rate and actual total expense ratio of the Fund were both below the median of its Lipperexpense group. The Board was satisfied with such comparative expenses.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized bythe Manager and its affiliates in connection with the operation of each Fund. In this respect, theBoard reviewed the Fund profitability analysis that addresses the overall profitability of FranklinTempleton’s U.S. fund business, as well as its profits in providing management and other servicesto each of the individual funds during the 12-month period ended September 30, 2010, being themost recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing theanalysis, attention was given to the methodology followed in allocating costs to the Fund, it beingrecognized that allocation methodologies are inherently subjective and various allocation method-ologies may each be reasonable while producing different results. In this respect, the Boardnoted that, while being continuously refined and reflecting changes in the Manager’s own costaccounting, the allocation methodology was consistent with that followed in profitability reportpresentations for the Fund made in prior years and that the Fund’s independent registered publicaccounting firm had been engaged by the Manager to review the reasonableness of the alloca-tion methodologies solely for use by the Fund’s Board in reference to the profitability analysis.In reviewing and discussing such analysis, management discussed with the Board its belief thatcosts incurred in establishing the infrastructure necessary for the type of mutual fund operations

Annual Report | 71




conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated tothe Fund in determining its profitability, as well as the fact that the level of profits, to a certainextent, reflected operational cost savings and efficiencies initiated by management. The Board alsotook into account management’s expenditures in improving shareholder services provided the Fund,as well as the need to meet additional regulatory and compliance requirements resulting from theSarbanes-Oxley Act and recent SEC and other regulatory requirements. In addition, the Boardconsidered a third-party study comparing the profitability of the Manager’s parent on an overallbasis to other publicly held managers broken down to show profitability from management opera-tions exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillarybenefits from fund operations, including revenues generated from transfer agent services andpotential benefits resulting from allocation of fund brokerage and the use of commission dollars topay for research. Based upon its consideration of all these factors, the Board determined that thelevel of profits realized by the Manager and its affiliates from providing services to the Fund wasnot excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized bythe Manager and its affiliates as a Fund grows larger and the extent to which this is reflected in thelevel of management fees charged. While recognizing that any precise determination is inherentlysubjective, the Board noted that based upon the Fund profitability analysis, it appears that as somefunds get larger, at some point economies of scale do result in the Manager realizing a larger profitmargin on management services provided such a fund. The Board also noted that economies of scaleare shared with a fund and its shareholders through management fee breakpoints so that as a fundgrows in size, its effective management fee rate declines. The Fund’s investment management agree-ment provides a fee at the rate of 0.50% on the first $200 million of Fund net assets; 0.45% on thenext $1.1 billion of Fund net assets; and 0.40% on net assets in excess of $1.3 billion, with addi-tional breakpoints continuing for the Fund reducing its investment management fee to 0.395%on net assets from the $35 billion to $50 billion asset level; to 0.390% on net assets from the$50 billion to $65 billion asset level; 0.385% on net assets from the $65 billion to $80 billionasset level; and to 0.380% on net assets in excess of $80 billion. The Fund is also charged a separate fee for administrative services that starts at 0.15% on the first $200 million of Fund netassets, and declines through breakpoints to a fixed rate of 0.075% after net assets reach the$1.2 billion level. At the end of 2010, the Fund’s net assets were approximately $46 billion and tothe extent economies of scale may be realized by the Manager and its affiliates, the Board believedthe schedule of fees under the investment management agreement provides a sharing of benefitswith the Fund and its shareholders.

72 | Annual Report



Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) thatthe Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders mayview the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders mayrequest copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, FortLauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are alsomade available online at franklintempleton.com and posted on the U.S. Securities and ExchangeCommission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commissionfor the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filedForm N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed andcopied at the Commission’s Public Reference Room in Washington, DC. Information regarding theoperations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

You will receive the Fund’s financial reports every six months as well as an annual updated summaryprospectus (prospectus available upon request). To reduce Fund expenses, we try to identify relatedshareholders in a household and send only one copy of the financial reports and summary prospectus.This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If youprefer not to have these documents householded, please call us at (800) 632-2301. At any time youmay view current prospectuses/summary prospectuses and financial reports on our website. If youchoose, you may receive these documents through electronic delivery.

Franklin Templeton FundsLiterature Request. To receive a summary prospectus and/or prospectus, please call us at (800) DIAL BEN/342-5236 or

visit franklintempleton.com. Investors should carefully consider a fund’s investment goals, risks, charges and expenses

before investing. The prospectus contains this and other information. Please carefully read a prospectus before investing.

To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service

departments. These calls can be identified by the presence of a regular beeping tone.

VALUEFranklin All Cap Value FundFranklin Balance Sheet Investment FundFranklin Large Cap Value FundFranklin MicroCap Value Fund1

Franklin MidCap Value FundFranklin Small Cap Value FundMutual Beacon FundMutual Quest FundMutual Recovery Fund2

Mutual Shares Fund

BLENDFranklin Focused Core Equity FundFranklin Large Cap Equity FundFranklin Rising Dividends Fund

GROWTHFranklin DynaTech FundFranklin Flex Cap Growth FundFranklin Growth FundFranklin Growth Opportunities FundFranklin Small Cap Growth FundFranklin Small-Mid Cap Growth Fund

SECTORFranklin Biotechnology Discovery FundFranklin Global Real Estate FundFranklin Gold & Precious Metals FundFranklin Natural Resources FundFranklin Real Estate Securities FundFranklin Utilities FundMutual Financial Services Fund

GLOBALFranklin World Perspectives FundMutual Global Discovery FundTempleton Global Opportunities TrustTempleton Global Smaller Companies FundTempleton Growth FundTempleton World Fund

1. The fund is closed to new investors. Existing shareholders and select retirement plans cancontinue adding to their accounts.2. The fund is a continuously offered, closed-end fund. Shares may be purchased daily; thereis no daily redemption. However, each quarter, pending board approval, the fund will authorizethe repurchase of 5%–25% of the outstanding number of shares. Investors may tender all ora portion of their shares during the tender period.3. Effective 7/1/11, Templeton Income Fund changed its name to Templeton Global BalancedFund. Additionally, the fund changed its goal and pricing structure. Under normalcircumstances, the fund will invest: at least 25% of its assets in fixed income senior securities

and at least 25% of its assets in equity securities; at least 40% of its assets in non-U.S.investments; and in issuers located in at least three different countries (including the U.S.).4. An investment in the fund is neither insured nor guaranteed by the U.S. government or byany other entity or institution.5. For investors subject to the alternative minimum tax, a small portion of fund dividends maybe taxable. Distributions of capital gains are generally taxable.6. The fund invests primarily in insured municipal securities.7. The funds of the Franklin Templeton Variable Insurance Products Trust are generally availableonly through insurance company variable contracts.

AlabamaArizonaCalifornia (4 funds)ColoradoConnecticutFloridaGeorgiaKentuckyLouisianaMarylandMassachusettsMichigan

MinnesotaMissouriNew JerseyNew York (2 funds)North CarolinaOhioOregonPennsylvaniaTennesseeVirginia

INSURANCE FUNDSFranklin Templeton Variable Insurance Products Trust7

10/11 Not part of the annual report

INTERNATIONALFranklin India Growth FundFranklin International Growth FundFranklin International Small Cap Growth FundMutual European FundMutual International FundTempleton Asian Growth FundTempleton BRIC FundTempleton China World FundTempleton Developing Markets TrustTempleton Emerging Markets Small Cap FundTempleton Foreign FundTempleton Foreign Smaller Companies FundTempleton Frontier Markets Fund

HYBRIDFranklin Balanced FundFranklin Convertible Securities FundFranklin Equity Income FundFranklin Income FundTempleton Emerging Markets Balanced FundTempleton Global Balanced Fund3

ASSET ALLOCATIONFranklin Templeton Corefolio® Allocation FundFranklin Templeton Founding Funds Allocation FundFranklin Templeton Conservative Allocation FundFranklin Templeton Growth Allocation FundFranklin Templeton Moderate Allocation FundFranklin Templeton 2015 Retirement Target FundFranklin Templeton 2025 Retirement Target FundFranklin Templeton 2035 Retirement Target FundFranklin Templeton 2045 Retirement Target FundFranklin Templeton Global Allocation Fund

FIXED INCOMEFranklin Adjustable U.S. Government Securities Fund4

Franklin Floating Rate Daily Access FundFranklin High Income Fund

Franklin Limited Maturity U.S. GovernmentSecurities Fund4

Franklin Low Duration Total Return FundFranklin Real Return FundFranklin Strategic Income FundFranklin Strategic Mortgage PortfolioFranklin Templeton Hard Currency FundFranklin Total Return FundFranklin U.S. Government Securities Fund4

Templeton Global Bond FundTempleton Global Total Return FundTempleton International Bond Fund

TAX-FREE INCOME5

NationalDouble Tax-Free Income FundFederal Tax-Free Income FundHigh Yield Tax-Free Income FundInsured Tax-Free Income Fund6

Limited-/ Intermediate-TermCalifornia Intermediate-Term Tax-Free Income FundFederal Intermediate-Term Tax-Free Income FundFederal Limited-Term Tax-Free Income FundNew York Intermediate-Term Tax-Free Income Fund

State-Specific

< GAIN FROM OUR PERSPECTIVE® >

VALUE BLEND GROWTH SECTOR GLOBAL INTERNAT IONAL HYBRID ASSET ALLOCAT ION F IXED INCOME TAX-FREE INCOME

© 2011 Franklin Templeton Investments. All rights reserved. 406 A 10/11

Annual Report and Shareholder Letter


Investment ManagerFranklin Advisers, Inc.

DistributorFranklin Templeton Distributors, Inc.(800) DIAL BEN®/342-5236franklintempleton.com

Shareholder Services(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus.Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded andaccessed. These calls can be identified by the presence of a regular beeping tone.

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