UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04450
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FRANKLIN TEMPLETON GLOBAL TRUST
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 10/31
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Date of reporting period: 10/31/04
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ITEM 1. REPORTS TO STOCKHOLDERS.
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OCTOBER 31, 2004
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A series of Franklin Templeton
Global Trust
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ANNUAL REPORT AND SHAREHOLDER LETTER
INCOME
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WANT TO RECEIVE
THIS DOCUMENT
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See inside for details.
FRANKLIN TEMPLETON
HARD CURRENCY FUND
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[LOGO OMITTED]
FRANKLIN o TEMPLETON o MUTUAL SERIES
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager structure combines the
specialized expertise of three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a recognized leader in fixed income
investing and 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, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of
value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the annual report
Contents
SHAREHOLDER LETTER ......................... 1
ANNUAL REPORT
Franklin Templeton Hard
Currency Fund .............................. 3
Performance Summary ........................ 10
Your Fund's Expenses ....................... 13
Financial Highlights and
Statement of Investments ................... 15
Financial Statements ....................... 18
Notes to Financial
Statements ................................. 21
Report of Independent
Registered Public
Accounting Firm ............................ 32
Tax Designation ............................ 33
Board Members and Officers ................. 34
Shareholder Information .................... 39
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Annual Report
Franklin Templeton
Hard Currency Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Hard Currency Fund
seeks to protect against depreciation of the U.S. dollar relative to other
currencies. The Fund seeks to achieve its goal by investing at least 80% of its
net assets in investments denominated in hard currencies (as defined in the
prospectus). The Fund normally invests in high-quality short-term money market
instruments and forward currency contracts denominated in foreign hard
currencies, which historically have experienced low inflation rates and which,
in the Investment Manager's view, follow economic policies conducive to
continual low inflation rates and currency appreciation versus the U.S. dollar
over the long term.
[SIDEBAR]
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PERFORMANCE DATA QUOTED 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.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
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This annual report for Franklin Templeton Hard Currency Fund covers the fiscal
year ended October 31, 2004.
PERFORMANCE OVERVIEW
Franklin Templeton Hard Currency Fund - Class A posted a +9.44% cumulative total
return for the 12 months under review. The Fund slightly underperformed its
benchmark, the J.P. Morgan 3 Month Global Cash Index, which posted a 10.05%
total return for the same period. 1 The Fund typically does not attempt to
directly match the composition of the index; thus the results are not directly
comparable. As of October 31, 2004, the index included 7.7% in U.S. dollars. The
Fund achieved its objective to hedge against the depreciation of the U.S. dollar
relative to other currencies and outperformed the U.S. dollar, which fell 7.28%
relative to its major U.S. trading partners; meanwhile, the Japanese yen rose
3.86% and the euro was up 10.07% versus the dollar. 2 You can find the Fund's
long-term performance data in the Performance Summary beginning on page 10.
1. Source: J.P. Morgan. The J.P. Morgan 3 Month Global Cash Index tracks total
returns of 3-month constant maturity euro-currency deposits, the only short-term
securities consistent across all markets in terms of liquidity, maturity and
credit quality. The index is unmanaged and includes reinvested distributions.
One cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.
2. Source: Federal Reserve Board. The Federal Reserve Board U.S. Trade Weighted
Major Currency Dollar Index is a weighted average of the foreign exchange values
of the U.S. dollar against a subset of currencies in the broad index that
circulate widely outside the country of issue.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 17.
Annual Report | 3
ECONOMIC AND MARKET OVERVIEW
Global growth continued to improve over the fiscal year, led by the U.S. and
Asia. Macroeconomic imbalances persisted, however, compounded by rising oil
prices. Oil surged 78% during the Fund's fiscal year, reaching more than $50 per
barrel. The sudden rise in oil prices sparked concern over the durability of
industrial economies' recovery.
In the U.S., downward pressure remained on the dollar throughout the period,
despite modest economic growth and rising U.S. interest rates, primarily due to
further weakening in the U.S. balance-of-payments position as well as concern
over future growth rates. The upswing in global demand over the period was
favorable for U.S. exports, which expanded at double-digit rates. However, the
U.S. trade and current account balances realized record deficit levels as import
volume continued to exceed exports. As the trade deficit deteriorated throughout
the fiscal year it reached a monthly level of $52 billion in September 2004,
just three months after the U.S. current account deficit deteriorated to 5.7% of
gross domestic product (GDP). 3 The current account required more than $500
billion in financing, which was primarily attained through purchases of U.S.
bonds by foreigners. U.S. interest rates began to rise over the period, as the
Federal Reserve Board raised the federal funds target rate from 1.00% to 1.75%
beginning in the summer of 2004, citing diminished risks of deflation and
imminent inflationary pressures that prompted the gradual removal of
accommodative monetary policy.
Economic growth, as measured by GDP, firmed in the 12-nation euro zone over the
period, reaching 1.9% for the 12 months ended September 30, 2004, driven by
export demand. 4 Weak domestic demand and relatively strong currency limited the
need for the European Central Bank (ECB) to begin tightening monetary policy.
Thus, the euro zone's reference rate was unchanged throughout the duration of
the Fund's fiscal year, at 2.00%. Growth among other (non-euro) European
economies proved more dynamic throughout the course of the period. While
underlying inflationary pressures remained limited in Norway and Sweden,
economic growth from June 2003 to June 2004 accelerated to annualized GDPs of
4.1% and 3.6%. 5 The lagging
[SIDEBARS]
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What is balance of payments?
Balance of payments is a record of all of a country's exports and imports of
goods and services, borrowing and lending with the rest of the world during a
particular time period. It helps a country evaluate its competitive strengths
and weaknesses and forecast the strength of its currency.
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What is a current account?
A current account is that part of the balance of payments where all of one
country's international transactions in goods, services, income and transfers
are recorded.
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3. Source: U.S. Bureau of Economic Analysis.
4. Source: Eurostat.
5. Sources:
Statistics Norway; Statistics Sweden.
4 | Annual Report
ASSET ALLOCATION BY CURRENCY
Based on Total Net Assets as of 10/31/04
[GRAPHIC OMITTED]
European Monetary Unit (euro) 23.2%
New Zealand Dollar 15.1%
Canadian Dollar 10.8%
Swedish Krona 10.2%
Australian Dollar 9.3%
Korean Won 5.8%
Thai Baht 5.3%
Norwegian Krone 4.7%
U.S. Dollar 4.2%
Danish Krone 4.0%
Indonesian Rupiah 3.4%
Swiss Franc 2.6%
Polish Zloty 1.4%
effect of past currency weakness and rising oil prices supported overall
balance-of-payment conditions in Norway, while global demand and robust
productivity supported Sweden's export strength. Norway and Sweden maintained
large current account surpluses of 13% and 7%, respectively. 6 While interest
rates fell in Norway and Sweden during the year under review, interest rates in
Poland rose 125 basis points (100 basis points equal 1.00%) over the period to
6.50%. 7 Interest rates began to adjust to strong growth conditions and some
indication of building inflationary pressures. Poland's economic growth reached
6.1% through June 2004, led by buoyant exports supported by strong demand within
the euro zone and a competitive currency. 4
Growth in Asia was characterized by strong regional growth dynamics. Robust
domestic demand and export strength bolstered balance-of-payment positions in
countries such as China and Thailand. Both countries experienced building
inflationary pressures, prompting the monetary authorities to raise interest
rates or implement administrative measures to maintain low inflation. China
raised interest rates 27 basis points to 5.58%, the country's first interest
rate increase in nine years, and Chinese authorities took measures to restrict
credit extension in certain sectors and industries. 8 The Thai central bank
raised rates twice during the period by a cumulative 50 basis points to 1.75%. 9
Similarly, interest rates moved upward in Australia and New Zealand where higher
commodity prices and continued strength in domestic demand prompted the central
banks to raise interest rates to 5.25% and 6.50%, respectively. 10 While Asia's
domestic growth conditions came to the forefront during the Fund's fiscal year
given the recent interest rate moves, the region's balance-of-payment conditions
facilitating international reserve accumulation remained intact. Despite halting
currency interventions to slow the Japanese yen's appreciation against the U.S.
dollar midway through the reporting period, Japan's foreign currency reserves
rose $212 billion, or 35%, in just 12 months. 11 Similarly, China's
international reserves rose 34% during the period and South Korea's 23%. 12
6. Sources: Statistics Norway; Sveriges Riksbank.
7. Source: National Bank of Poland.
8. Source: People's Bank of China.
9. Source: Bank of Thailand.
10. Sources: Reserve Bank of Australia; Reserve Bank of New Zealand.
11. Source: Ministry of Finance, Japan.
12. Sources: National Bureau of Statistics, China; Bank of Korea.
Annual Report | 5
INVESTMENT STRATEGY
In making investments in foreign hard currencies, we focus on countries and
markets that historically have experienced low inflation rates and, in our
opinion, follow economic policies favorable to continued low inflation rates and
currency appreciation versus the U.S. dollar over the long term.
MANAGER'S DISCUSSION
Over the fiscal year the Fund continued to act as a hedge against U.S. dollar
depreciation, and it generated excess total return beyond the extent of the
dollar's depreciation. Following two years of decline in the U.S. dollar's value
- -- largely due to the euro's marked appreciation -- we increased the Fund's
diversified holdings away from the euro and into other (non-euro) European and
certain Asian currencies with attractive growth, yield and balance-of-payment
characteristics that could support potential currency appreciation. This
positioning was consistent with an outlook for a weak U.S. dollar over the
medium term, given the pressure emerging from the U.S.'s expanding current
account deficit and sources of balance-of-payment financing. The Fund's relative
underperformance to the benchmark index was due to the Fund's reduced exposure
to the euro and lagging currency returns in parts of Asia.
By period-end, the euro remained the Fund's largest currency exposure; however,
the euro also represented the Fund's largest reduction in allocation over the
period. The euro appreciated 10.07% against the U.S. dollar, driven primarily by
dollar weakness. While inflation rates remained near the ECB's targeted maximum
level of 2.0%, lagging effects of structural reform hindered euro zone growth
prospects over the medium term, and rising oil prices pressured growth
expectations over the short term. Thus, prospects for growth and interest rate
increases as a source of potential currency strength lagged other areas of
Europe.
Outside the euro zone, European currencies generally outperformed the euro over
the fiscal year, benefiting the Fund's strategy to diversify currency exposure
within Europe, and helping offset the impact of our reduced euro exposure. The
Polish zloty returned 18.86% against the U.S. dollar over the period, the Swiss
franc 11.82%, the Norwegian krone 11.17%, the Swedish krona 10.27% and the
Danish krone 10.08%. Europe's (non-euro) economic
6 | Annual Report
growth was faster and broader in scope than the euro zone's, where growth was
limited primarily to the export sector. Poland represented a new currency
position for the Fund this reporting period. As one of 10 countries to join the
European Union (EU) in May 2004, Poland's growth benefited from increased market
share and reduced tariffs in the euro zone, and strong export growth given a
competitive currency and rising global demand. In addition, foreign direct
investment into Poland increased. Given this favorable economic backdrop, the
Fund established a position in Poland after signs of progress on fiscal reform.
The zloty also benefited from increased interest rate expectations. However, we
believed the currency remained attractive at period-end, given prospects for
continued capital inflows attracted to its higher interest rates relative to the
euro zone, as well as investment opportunities and demand driven by export
growth.
In the Americas, the Fund added exposure to the Canadian dollar, which rose
8.19% during the reporting period. The Canadian dollar was attractive given
accelerating economic growth, a growing trade current account surplus that
reached 3.5% of GDP, a sustained fiscal surplus balance and rising interest rate
expectations. 13 After reducing interest rates during the first half of the
Fund's fiscal year, Canada's central bank raised the policy rate by 50 basis
points, to 2.50%. 14 Economic growth rebounded in the period, coinciding with a
tightening labor market and rising capacity utilization. Additionally, Canada's
trade balance reached the second-highest level in three-and-a-half years, as
Canadian exports benefited from the global economic upswing and high commodity
prices.
Among the Fund's Asia-Pacific currencies, New Zealand's dollar was once again
among the best performers over the fiscal year, rising 11.49% against the U.S.
dollar and contributing to Fund performance. Notably, the Fund continued to
benefit from its lack of exposure to the Japanese yen, which rose only 3.86%
against the U.S. dollar over the 12-month period. Other Asian currencies lagged
the benchmark index's return and detracted from relative Fund performance. The
Australian dollar rose 5.45% and the Korean won 5.72%, while the Thai baht fell
2.80% and the Indonesian rupiah declined 6.48%. Even without the strong domestic
demand dynamic seen elsewhere in Asia, South Korea still reached a growth rate
of 5.5% through June 2004 largely due to external conditions. 15 South Korea's
current account surplus tripled over the period, driven by an impressive trade
balance as exports rose 33%.15 South Korea's central bank acted to stimulate
domestic growth
13. Source: STCA/Statistics Canada.
14. Source: Bank of Canada.
15. Source: Bank of Korea.
Annual Report | 7
conditions through a 25-basis-point interest rate reduction, to 3.50%. At
period-end the won appeared poised to benefit if domestic demand recovers, and
growth seemed likely to be protected in the event of any weakening in external
demand. While the Indonesian rupiah ended down for the period overall, the
currency rebounded following the conclusion of peaceful and democratic
Indonesian presidential elections. As the risk premium experienced in the run-up
to the Indonesian elections abates, there is potential for improvements in
domestic demand and the foreign investment climate necessary to support further
currency gains. Additionally, higher short-term rates generally compensated Fund
exposure to Indonesia for exchange rate volatility.
There are special considerations associated with global investing related to
market, currency, economic, social and political factors, as discussed in the
Fund's prospectus. Because a significant amount of the Fund's assets are
denominated in foreign currencies, there is potential for significant gain or
loss from currency exchange rate fluctuations. A non-diversified foreign fund
may not be appropriate for all investors and should not be considered a complete
investment program.
Thank you for your continued participation in Franklin Templeton Hard Currency
Fund. We look forward to serving your future investment needs.
[PHOTO OMITTED]
/s/ Alex Calvo
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Alex Calvo
[PHOTO OMITTED]
/s/ Michael Hasenstab
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Michael Hasenstab, Ph.D.
Portfolio Managers
Franklin Templeton Hard Currency Fund
8 | Annual Report
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Please note that although the Fund's Statement of Investments on page 17 of
this report indicates the Fund held 33.0% of its total investments in U.S.
dollar-denominated assets as of 10/31/04, its net exposure to the U.S. dollar
as of that date was only 4.2%. The difference is explained by the Fund's
holdings of forward currency exchange contracts (please see Note 7 in the
Notes to Financial Statements on page 21 of this report) calling for the
purchase of various foreign currencies in exchange for U.S. dollars at various
future dates. The combination of U.S. dollar-denominated instruments with
"long" forward currency exchange contracts creates a position economically
equivalent to a money market instrument denominated in the foreign currency
itself. Such combined positions are an appropriate strategy when the money
market for a particular foreign currency is small or relatively illiquid.
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THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF OCTOBER 31, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER 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 OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
Annual Report | 9
Performance Summary as of 10/31/04
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects the Fund's dividend income,
capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A CHANGE 10/31/04 10/31/03
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Net Asset Value (NAV) +$0.26 $9.85 $9.59
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DISTRIBUTIONS (11/1/03-10/31/04)
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Dividend Income $0.6149
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ADVISOR CLASS CHANGE 10/31/04 10/31/03
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Net Asset Value (NAV) +$0.26 $9.87 $9.61
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DISTRIBUTIONS (11/1/03-10/31/04)
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Dividend Income $0.6555
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PERFORMANCE
CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE. CUMULATIVE TOTAL RETURN EXCLUDES
SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND VALUE OF $10,000 INVESTMENT
INCLUDE MAXIMUM SALES CHARGES.
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CLASS A 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +9.44% +27.74% +14.97%
Average Annual Total Return 2 +6.99% +4.54% +1.17%
Value of $10,000 Investment 3 $10,699 $12,485 $11,239
Avg. Ann. Total Return (9/30/04) 4 +5.13% +3.85% +1.15%
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Distribution Rate5 1.00%
30-Day Standardized Yield 6 1.36%
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ADVISOR CLASS 7 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +9.89% +30.04% +18.05%
Average Annual Total Return 2 +9.89% +5.39% +1.67%
Value of $10,000 Investment 3 $10,989 $13,004 $11,805
Avg. Ann. Total Return (9/30/04) 4 +8.01% +4.68% +1.63%
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Distribution Rate 5 1.57%
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30-Day Standardized Yield 6 1.78%
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PERFORMANCE DATA QUOTED 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.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
10 | Annual Report
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes any current, applicable, maximum sales charge, Fund expenses,
account fees and reinvested distributions. The unmanaged index includes
reinvestment of any income or distributions. It differs from the Fund in
composition and does not pay management fees or expenses. One cannot invest
directly in an index.
CLASS A (11/1/94-10/31/04)
Franklin Templeton JP Morgan 3 Month
Date Hard Currency Fund - Class A Global Cash Index 8
11/94 $ 9,776 $10,000
9,548 9,757
9,660 9,838
9,781 9,969
10,056 10,142
10,788 10,583
10,817 10,665
10,708 10,644
10,858 10,790
10,766 10,959
10,122 10,602
10,364 10,855
10/95 10,430 10,975
10,233 10,890
10,299 10,998
9,985 10,765
10,132 10,968
10,084 11,008
9,852 10,888
9,791 10,954
9,819 11,019
10,137 11,233
10,100 11,283
9,827 11,158
10/96 9,805 11,287
9,679 11,269
9,576 11,247
9,080 10,769
8,913 10,599
8,967 10,683
8,748 10,452
9,076 10,646
8,957 10,594
8,577 10,262
8,647 10,385
8,794 10,548
10/97 8,994 10,738
8,738 10,529
8,578 10,358
8,602 10,322
8,687 10,426
8,373 10,314
8,494 10,530
8,445 10,492
8,324 10,447
8,338 10,487
8,513 10,511
8,894 10,982
10/98 9,392 11,237
9,059 11,082
9,423 11,267
9,151 11,138
8,915 10,876
8,824 10,833
8,687 10,794
8,605 10,710
8,504 10,657
8,807 10,974
8,743 10,939
8,854 11,093
10/99 8,798 11,037
8,623 10,786
8,633 10,836
8,316 10,653
8,195 10,521
8,401 10,585
8,035 10,205
8,129 10,275
8,382 10,594
8,118 10,340
7,930 10,134
7,884 10,050
10/00 7,618 9,784
7,760 9,940
8,094 10,529
8,027 10,480
7,912 10,358
7,586 10,004
7,644 10,127
7,499 9,904
7,411 9,893
7,625 10,127
7,897 10,457
7,984 10,441
10/01 7,906 10,399
7,857 10,401
7,768 10,353
7,541 10,136
7,601 10,204
7,708 10,322
7,947 10,604
8,225 10,983
8,504 11,461
8,454 11,380
8,474 11,446
8,545 11,499
10/02 8,626 11,571
8,707 11,642
9,147 12,109
9,357 12,372
9,473 12,474
9,515 12,594
9,663 12,872
10,107 13,435
9,979 13,303
9,820 13,057
9,724 12,917
10,173 13,612
10/03 10,269 13,727
10,526 14,066
10,910 14,663
10,853 14,548
10,910 14,561
10,828 14,548
10,499 14,149
10,590 14,370
10,560 14,353
10,515 14,272
10,663 14,418
10,942 14,725
10/04 11,239 15,106
ADVISOR CLASS (11/1/94-10/31/04) 7
Franklin Templeton
Hard Currency Fund JP Morgan 3 Month
Date - Advisor Class Global Cash Index 3
11/94 $10,000 $10,000
9,767 9,757
9,882 9,838
10,005 9,969
10,287 10,142
11,035 10,583
11,065 10,665
10,954 10,644
11,107 10,790
11,013 10,959
10,354 10,602
10,602 10,855
10/95 10,670 10,975
10,467 10,890
10,536 10,998
10,214 10,765
10,365 10,968
10,315 11,008
10,078 10,888
10,016 10,954
10,044 11,019
10,370 11,233
10,331 11,283
10,052 11,158
10/96 10,030 11,287
9,901 11,269
9,796 11,247
9,307 10,769
9,129 10,599
9,195 10,683
8,964 10,452
9,302 10,646
9,191 10,594
8,794 10,262
8,866 10,385
9,017 10,548
10/97 9,224 10,738
8,963 10,529
8,802 10,358
8,828 10,322
8,917 10,426
8,597 10,314
8,731 10,530
8,673 10,492
8,330 10,447
8,566 10,487
8,756 10,511
9,163 10,982
10/98 9,676 11,237
9,345 11,082
9,724 11,267
9,443 11,138
9,200 10,876
9,097 10,833
8,966 10,794
8,881 10,710
8,764 10,657
9,076 10,974
9,010 10,939
9,135 11,093
10/99 9,078 11,037
8,897 10,786
8,910 10,836
8,584 10,653
8,459 10,521
8,676 10,585
8,299 10,205
8,395 10,275
8,662 10,594
8,388 10,340
8,194 10,134
8,152 10,050
10/00 7,878 9,784
8,025 9,940
8,366 10,529
8,307 10,480
8,188 10,358
7,848 10,004
7,908 10,127
7,768 9,904
7,684 9,893
7,905 10,127
8,177 10,457
8,282 10,441
10/01 8,201 10,399
8,150 10,401
8,068 10,353
7,833 10,136
7,895 10,204
8,003 10,322
8,261 10,604
8,550 10,983
8,845 11,461
8,793 11,380
8,814 11,446
8,898 11,499
10/02 8,993 11,571
9,066 11,642
9,534 12,109
9,753 12,372
9,884 12,474
9,937 12,594
10,081 12,872
10,554 13,435
10,419 13,303
10,252 13,057
10,164 12,917
10,630 13,612
10/03 10,741 13,727
11,011 14,066
11,418 14,663
11,359 14,548
11,418 14,561
11,345 14,548
11,002 14,149
11,109 14,370
11,066 14,353
11,030 14,272
11,197 14,418
11,482 14,725
10/04 11,805 15,106
Annual Report | 11
Performance Summary (CONTINUED)
ENDNOTES
SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING ECONOMIC
INSTABILITY AND POLITICAL DEVELOPMENTS. THE FUND'S ASSETS ARE LARGELY INVESTED
IN FOREIGN CURRENCIES, AND THEREFORE INVOLVE POTENTIAL FOR SIGNIFICANT GAIN OR
LOSS FROM CURRENCY EXCHANGE RATE FLUCTUATIONS. THE FUND DOES NOT SEEK TO
MAINTAIN A STABLE NET ASSET VALUE AND SHOULD NOT BE CONSIDERED A SUBSTITUTE FOR
A U.S. DOLLAR MONEY MARKET FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS A: Prior to 8/3/98, these shares were offered at a higher initial
sales charge; thus actual total returns would have been lower.
ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge.
4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
5. Distribution rate is based on the sum of the respective class's last four
quarterly dividends and the maximum offering price (NAV for Advisor Class) per
share on 10/31/04.
6. Yield, calculated as required by the SEC, is based on the
earnings of the Fund's portfolio for the 30 days ended 10/31/04.
7. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or a Rule 12b-1 plan. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge, but reflecting the effect of
the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor
Class performance is used reflecting all charges and fees applicable to that
class. Since 1/2/97 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were +20.51% and +2.41%.
8. Source: J.P. Morgan. The J.P. Morgan 3 Month Global Cash Index tracks total
returns of 3-month constant maturity euro-currency deposits, the only short-term
securities consistent across all markets in terms of liquidity, maturity and
credit quality.
12 | Annual Report
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
o The following table shows ongoing costs of investing in the Fund and can
help you understand these costs and compare them with those of other mutual
funds. The table assumes a $1,000 investment held for the six months
indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the 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 compare ongoing 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 and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 13
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing 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 refer to the Fund prospectus for
additional information on operating expenses.
- -------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 4/30/04 VALUE 10/31/04 PERIOD* 4/30/04 -10/31/04
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,070.50 $6.35
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.00 $6.19
- -------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,073.00 $4.32
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.96 $4.22
- -------------------------------------------------------------------------------------------------------
*Expenses are equal to the annualized expense ratio for each class (A: 1.22% and
Advisor: 0.83%), multiplied by the average account value over the period,
multiplied by 184/366 to reflect the one-half year period.
14 | Annual Report
Franklin Templeton Global Trust
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON HARD CURRENCY FUND
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
CLASS A 2004 2003 2002 2001 2000
--------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................................... $9.59 $8.56 $8.08 $8.02 $9.52
--------------------------------------------------------
Income from investment operations:
Net investment income a ............................................. .09 .11 .09 d .31 .42
Net realized and unrealized gains (losses) .......................... .78 1.46 .63 d (.01) (1.68)
--------------------------------------------------------
Total from investment operations ..................................... .87 1.57 .72 .30 (1.26)
--------------------------------------------------------
Less distributions from:
Net investment income ............................................... (.61) (.54) (.24) (.14) --
Tax return of capital ............................................... -- -- -- (.10) (.24)
--------------------------------------------------------
Total distributions .................................................. (.61) (.54) (.24) (.24) (.24)
--------------------------------------------------------
Redemption fees ...................................................... -- c -- -- -- --
--------------------------------------------------------
Net asset value, end of year ......................................... $9.85 $9.59 $8.56 $8.08 $8.02
========================================================
Total return b ....................................................... 9.44% 19.05% 9.11% 3.78% (13.42)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ...................................... $211,098 $143,715 $50,622 $29,071 $33,580
Ratios to average net assets:
Expenses ............................................................ 1.24% 1.32% 1.50% 1.49% 1.29%
Net investment income ............................................... .95% 1.19% 1.10% d 3.78% 4.73%
Portfolio turnover rate .............................................. .00% .00% 76.27% 25.59% 54.69%
aBased on average daily shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cAmount is less than $0.001 per share.
dEffective November 2001, the Fund adopted the provisions of the AICPA Audit and
Accounting Guide for Investment Companies and began recording all paydown gains
and losses as part of investment income and amortizing all premium and discount
on fixed-income securities, as required. The effect of this change was as
follows:
Net investment income per share $(0.05)
Net realized and unrealized (gains/losses) per share 0.05
Ratio of net investment income to average net assets (.61)%
Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
Annual Report | See notes to financial statements. | 15
Franklin Templeton Global Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
ADVISOR CLASS 2004 2003 2002 2001 2000
--------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................................... $9.61 $8.58 $8.09 $8.03 $9.53
--------------------------------------------------------
Income from investment operations:
Net investment income a ............................................. .13 .14 .12 d .32 .37
Net realized and unrealized gains (losses) .......................... .79 1.46 .64 d .01 (1.61)
--------------------------------------------------------
Total from investment operations ..................................... .92 1.60 .76 .33 (1.24)
--------------------------------------------------------
Less distributions from:
Net investment income ............................................... (.66) (.57) (.27) (.17) --
Tax return of capital ............................................... -- -- -- (.10) (.26)
--------------------------------------------------------
Total distributions .................................................. (.66) (.57) (.27) (.27) (.26)
--------------------------------------------------------
Redemption fees ...................................................... -- c -- -- -- --
--------------------------------------------------------
Net asset value, end of year ......................................... $9.87 $9.61 $8.58 $8.09 $8.03
========================================================
Total return b ....................................................... 9.89% 19.45% 9.65% 4.10% (13.22)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ...................................... $22,442 $10,163 $1,724 $450 $75
Ratios to average net assets:
Expenses ............................................................ .84% .92% 1.09% 1.17% 1.06%
Net investment income ............................................... 1.35% 1.59% 1.51% d 4.00% 4.13%
Portfolio turnover rate .............................................. .00% .00% 76.27% 25.59% 54.69%
aBased on average daily shares outstanding.
bTotal return is not annualized for periods less than one year.
cAmount is less than $0.001 per share.
dEffective November 2001, the Fund adopted the provisions of the AICPA Audit and
Accounting Guide for Investment Companies and began recording all paydown gains
and losses as part of investment income and amortizing all premium and discount
on fixed-income securities, as required. The effect of this change was as
follows:
Net investment income per share $(0.05)
Net realized and unrealized (gains/losses) per share 0.05
Ratio of net investment income to average net assets (.61)%
Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
16 | See notes to financial statements. | Annual Report
Franklin Templeton Global Trust
STATEMENT OF INVESTMENTS, OCTOBER 31, 2004
- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON HARD CURRENCY FUND PRINCIPAL AMOUNT a VALUE
- -------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES 67.1%
Belgium Treasury Bill, 2.03% - 2.22%, 11/18/04 - 7/14/05 ........................ 7,950,000 EUR $ 10,129,918
Canada Treasury Bill, 2.199% - 2.800%, 1/13/05 - 8/11/05 ........................ 29,660,000 CAD 24,095,425
Denmark Treasury Bill, 2.040% - 2.135%, 11/01/04 - 2/01/05 ...................... 54,715,000 DKK 9,404,428
Dutch Treasury Bill, 1.962% - 2.054%, 12/15/04 - 1/31/05 ........................ 5,900,000 EUR 7,517,778
French Treasury Bill, 2.03%, 1/13/05 ............................................ 7,500,000 EUR 9,553,694
German Treasury Bill, 2.015% - 2.030%, 12/15/04 - 1/12/05 ....................... 6,000,000 EUR 7,651,511
Italy Treasury Bill, 1.975% - 2.045%, 2/15/05 - 3/15/05 ......................... 3,950,000 EUR 5,018,322
Kingdom of Norway, 5.75%, 11/30/04 .............................................. 25,000,000 NOK 3,940,743
New Zealand Treasury Bill, 5.95% - 6.29%, 11/10/04 - 6/22/05 .................... 50,450,000 NZD 34,162,174
Norwegian Treasury Bill, 1.590% - 1.763%, 12/15/04 - 6/15/05 .................... 44,940,000 NOK 7,042,793
Portugal Treasury Bill, 2.045% - 2.290%, 1/21/05 - 7/22/05 ...................... 9,820,000 EUR 12,393,792
Republic of Hellenic, 5.95%, 3/24/05 ............................................ 1,500,000 EUR 1,947,050
Sweden Treasury Bill, 1.96% - 2.65%, 12/15/04 - 3/16/05 ......................... 170,505,000 SEK 23,864,530
--------------
TOTAL GOVERNMENT SECURITIES (COST $150,365,763) ................................. 156,722,158
--------------
U.S. GOVERNMENT AND AGENCY SECURITIES 33.0%
Federal Home Loan Bank, 0.99%, 11/01/04 ......................................... 16,111,000 16,108,731
b U.S. Treasury Bill, 11/04/04 - 12/16/04 ......................................... 61,000,000 60,939,630
--------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $77,049,753) .................. 77,048,361
--------------
TOTAL INVESTMENTS (COST $227,415,516) 100.1% .................................... 233,770,519
NET UNREALIZED GAIN ON FORWARD EXCHANGE CONTRACTS 1.2% .......................... 2,694,130
OTHER ASSETS, LESS LIABILITIES (1.3)% ........................................... (2,924,600)
--------------
NET ASSETS 100.0% ............................................................... $233,540,049
==============
CURRENCY ABBREVIATIONS: | CAD - Canadian Dollar | DKK - Danish Krone
| EUR - Euro | NOK - Norwegian Krone
| NZD - New Zealand Dollar | SEK - Swedish Krona
aThe principal amount is stated in U.S. dollars unless otherwise indicated.
bSecurity is traded on a discount basis with a zero coupon.
Annual Report | See notes to financial statements. | 17
Franklin Templeton Global Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
--------------------
FRANKLIN TEMPLETON
HARD CURRENCY FUND
--------------------
Assets:
Investments in securities:
Cost ................................................... $227,415,516
--------------------
Value .................................................. 233,770,519
Cash .................................................... 4,048
Foreign currency, at value (cost $3,207) ................ 3,251
Receivables:
Capital shares sold .................................... 2,139,563
Interest ............................................... 274,136
Unrealized gain on forward exchange contracts (Note 7) .. 2,738,511
--------------------
Total assets ....................................... 238,930,028
--------------------
Liabilities:
Payables:
Investment securities purchased ........................ 4,729,494
Capital shares redeemed ................................ 354,159
Affiliates ............................................. 203,779
Distributions to shareholders ........................... 11,981
Unrealized loss on forward exchange contracts (Note 7) .. 44,381
Other liabilities ....................................... 46,185
--------------------
Total liabilities .................................. 5,389,979
--------------------
Net assets, at value ............................. $233,540,049
--------------------
Net assets consist of:
Undistributed net investment income ..................... $ 7,409,846
Net unrealized appreciation (depreciation) .............. 9,081,349
Accumulated net realized gain (loss) .................... (76,108)
Capital shares .......................................... 217,124,962
--------------------
Net assets, at value ............................. $233,540,049
====================
CLASS A:
Net assets, at value .................................... $211,098,301
====================
Shares outstanding ...................................... 21,425,044
====================
Net asset value per share a ............................. $ 9.85
====================
Maximum offering price per share
(net asset value per share / 97.75%) ................... $10.08
====================
ADVISOR CLASS:
Net assets, at value .................................... $ 22,441,748
====================
Shares outstanding ...................................... 2,273,896
====================
Net asset value and maximum offering price per share b .. $9.87
====================
aRedemption price is equal to net asset value less any applicable contingent
deferred sales charge and redemption fees retained by the Fund.
bRedemption price is equal to net asset value less any applicable redemption
fees retained by the Fund.
18 | See notes to financial statements. | Annual Report
Franklin Templeton Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended October 31, 2004
---------------------
FRANKLIN TEMPLETON
HARD CURRENCY FUND
---------------------
Investment income:
Interest ......................................................................... $ 4,402,843
---------------------
Expenses:
Management fees (Note 3) ......................................................... 1,301,695
Distribution fees (Note 3)
Class A ......................................................................... 722,965
Transfer agent fees (Note 3) ..................................................... 196,000
Custodian fees (Note 4) .......................................................... 36,305
Reports to shareholders .......................................................... 33,400
Registration and filing fees ..................................................... 95,300
Professional fees ................................................................ 20,200
Trustees' fees and expenses ...................................................... 4,500
Other ............................................................................ 7,000
---------------------
Total expenses .............................................................. 2,417,365
Expense reductions (Note 4) ................................................. (6,984)
---------------------
Net expenses .............................................................. 2,410,381
---------------------
Net investment income ................................................... 1,992,462
---------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ...................................................................... 7,049,143
Foreign currency transactions and forward currency contracts ..................... 2,780,143
---------------------
Net realized gain (loss) .................................................. 9,829,286
Net change in unrealized appreciation (depreciation) on:
Investments ..................................................................... 3,306,412
Translation of assets and liabilities denominated in foreign currencies and
forward currency contracts ..................................................... 1,877,254
---------------------
Net change in unrealized appreciation (depreciation) ...................... 5,183,666
---------------------
Net realized and unrealized gain (loss) ........................................... 15,012,952
---------------------
Net increase (decrease) in net assets resulting from operations ................... $17,005,414
=====================
Annual Report | See notes to financial statements. | 19
Franklin Templeton Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended October 31, 2004 and 2003
--------------------------------
FRANKLIN TEMPLETON
HARD CURRENCY FUND
--------------------------------
2004 2003
--------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 1,992,462 $ 1,156,798
Net realized gain (loss) from investments, foreign currency
transactions and forward currency contracts .......................................... 9,829,286 10,262,162
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies and forward currency contracts 5,183,666 3,305,721
--------------------------------
Net increase (decrease) in net assets resulting from operations ................... 17,005,414 14,724,681
Distributions to shareholders from:
Net investment income:
Class A .............................................................................. (10,713,947) (4,173,969)
Advisor Class ........................................................................ (1,153,864) (241,410)
--------------------------------
Total distributions to shareholders .................................................... (11,867,811) (4,415,379)
Capital share transactions (Note 2):
Class A .............................................................................. 62,608,466 83,432,955
Advisor Class ........................................................................ 11,915,116 7,788,821
--------------------------------
Total capital share transactions ....................................................... 74,523,582 91,221,776
Redemption fees ........................................................................ 1,155 --
--------------------------------
Net increase (decrease) in net assets ............................................. 79,662,340 101,531,078
Net assets:
Beginning of year ...................................................................... 153,877,709 52,346,631
--------------------------------
End of year ............................................................................ $233,540,049 $153,877,709
================================
Undistributed net investment income included in net assets:
End of year ............................................................................ $ 7,409,846 $ 8,943,181
================================
20 | See notes to financial statements. | Annual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Hard Currency Fund (the Fund) is a separate, non-diversified
series of Franklin Templeton Global Trust (the Trust), which is an open-end
investment company registered under the Investment Company Act of 1940. The Fund
seeks to protect shareholders against depreciation of the U.S. dollar relative
to other currencies by investing at least 80% of its net assets in investments
denominated in hard currencies. The Fund normally invests in high-quality,
short-term money market instruments and forward contracts denominated in foreign
hard currencies, which historically have experienced low inflation rates, and
which, in view of the Investment Manager, follow economic policies conducive to
continual low inflation rates and currency appreciation versus the U.S. dollar
over the long term.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Debt securities, other over-the-counter securities
and listed securities for which no sale is reported are valued within the range
of the latest quoted bid and asked prices by independent pricing services or
recognized dealers in such securities. Foreign securities are valued at the
close of trading of the foreign exchange or the NYSE, whichever is earlier. If
events occur that materially affect the values of securities after the prices or
foreign exchange rates are determined, but prior to 4:00 p.m. Eastern time or
the close of trading on the NYSE, whichever is earlier, or if market quotations
are deemed not readily available or reliable, the securities will be valued at
fair value. All security valuation procedures are approved by the Board of
Trustees.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the recorded
amounts of interest and foreign withholding taxes and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in foreign exchange rates on foreign denominated
assets and liabilities other than investments in securities held at the end of
the reporting period.
Annual Report | 21
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward exchange contracts to hedge against fluctuations
in foreign exchange rates. A forward exchange contract is an agreement between
two parties to exchange different currencies at an agreed upon exchange rate at
a future date. These contracts are valued daily by the Fund and any equity
therein is included in the Statement of Assets and Liabilities. Realized and
unrealized gains and losses on these contracts are included in the Statement of
Operations.
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. Realized and unrealized gains and losses
are included in the Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.
D. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under Sub Chapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Distributions to shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expense during the reporting period. Actual results could differ from those
estimates.
22 | Annual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. REDEMPTION FEES
Effective June 1, 2004, redemptions and exchanges of Fund shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital as noted in the Statement of Changes in Net Assets.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
The Fund offers two classes of shares: Class A 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 single class, and its
exchange privilege.
At October 31, 2004, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:
- -------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
2004 2003
- -------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES:
Shares sold ..................... 17,321,281 $ 165,767,959 17,061,326 $156,166,306
Shares issued in reinvestment
of distributions ................ 939,352 8,882,912 368,399 3,253,115
Shares redeemed .................(11,818,045) (112,042,405) (8,357,827) (75,986,466)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) ......... 6,442,588 $ 62,608,466 9,071,898 $ 83,432,955
=======================================================================================================
ADVISOR CLASS SHARES:
Shares sold ..................... 2,441,424 $ 23,604,422 1,171,569 $ 10,738,897
Shares issued in reinvestment
of distributions ................ 83,017 785,127 24,566 220,391
Shares redeemed ................. (1,308,073) (12,474,433) (339,659) (3,170,467)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) ......... 1,216,368 $ 11,915,116 856,476 $ 7,788,821
=======================================================================================================
Annual Report | 23
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also officers or directors of the following
entities:
- ----------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ----------------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers of 0.65% per year of the
average daily net assets of the Fund.
B. DISTRIBUTION FEES
The Fund reimburses Distributors up to 0.45% per year of the average daily net
assets of Class A for costs incurred in marketing the Fund's shares under a Rule
12b-1 plan. Under the Class A distribution plan, costs exceeding the maximum for
the current plan year cannot be reimbursed in subsequent periods.
C. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sale of the Fund's shares for the year:
Sales charges received ......................................... $94,102
Contingent deferred sales charges retained ..................... $ 6,116
D. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $196,000, of which $135,531 was paid to
Investor Services.
4. EXPENSE OFFSET ARRANGEMENT
The Trust 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. During the year ended October 31, 2004, the
custodian fees were reduced as noted in the Statement of Operations.
24 | Annual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
5. INCOME TAXES
At October 31, 2004, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:
Cost of investments ..................................... $227,535,376
-------------
Unrealized appreciation ................................. $ 6,236,932
Unrealized depreciation ................................. (1,789)
-------------
Net unrealized appreciation (depreciation) .............. $ 6,235,143
-------------
Undistributed ordinary income ........................... $ 7,528,752
Undistributed long term capital gains ................... 1,923,988
-------------
Distributable earnings .................................. $ 9,452,740
=============
The tax character of distributions paid during the years ended October 31, 2004
and 2003, was as follows:
---------------------------------------
2004 2003
---------------------------------------
Distributions paid from:
Ordinary income ...................... $ 11,867,811 $ 4,415,379
Net investment income and net realized gains differ for financial statement and
tax purposes primarily due to differing treatments of foreign currency
transactions and bond discount and premiums.
6. INVESTMENT TRANSACTIONS
There were no purchases or sales of investments (other than short-term
securities) for the year ended October 31, 2004.
7. FORWARD CURRENCY CONTRACTS
At October 31, 2004, the Fund has outstanding forward exchange contracts as set
out below. The contracts are reported in the financial statements at the Fund's
net equity, as measured by the difference between the forward exchange rates at
the reporting date and the forward exchange rates at the day of entry into the
contracts.
Annual Report | 25
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
7. FORWARD CURRENCY CONTRACTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO BUY EXCHANGE FOR DATE GAIN
- --------------------------------------------------------------------------------------------------------------
540,000,000 Korean Won ......................... U.S. $ 453,020 11/22/04 U.S. $ 28,787
1,100,000 Australian Dollar .................. 750,750 11/22/04 70,512
27,000,000,000 Indonesian Rupiah .................. 2,886,157 11/24/04 77,576
1,000,000,000 Korean Won ......................... 840,619 11/26/04 51,447
24,900,000 Australian Dollar .................. 17,262,423 12/17/04 1,283,806
365,000,000 Thailand Baht ...................... 8,848,485 12/20/04 44,703
463,600,000 Korean Won ......................... 400,000 12/29/04 12,899
7,000,000 Polish Zloty ....................... 1,878,287 1/13/05 168,100
700,000 Polish Zloty ....................... 188,496 1/18/05 16,011
1,600,000 Australian Dollar .................. 1,133,440 1/18/05 54,941
1,400,000 Canadian Dollar .................... 1,111,111 1/20/05 36,579
1,400,000,000 Korean Won ......................... 1,221,108 1/24/05 24,582
6,000,000,000 Indonesian Rupiah .................. 645,856 1/26/05 8,163
3,450,000,000 Korean Won ......................... 2,940,675 1/26/05 128,834
1,551,600 Australian Dollar .................. 1,149,999 1/28/05 1,475
22,320,000,000 Indonesian Rupiah .................. 2,349,226 2/28/05 75,203
465,840,000 Korean Won ......................... 400,000 2/28/05 14,239
19,100,000,000 Indonesian Rupiah .................. 2,006,724 3/01/05 67,724
8,380,000,000 Korean Won ......................... 7,271,150 3/17/05 178,593
6,200,000 Swiss Franc ........................ 4,924,543 3/17/05 297,536
1,833,550 Polish Zloty ....................... 500,000 3/17/05 31,893
2,100,000 Australian Dollar .................. 1,500,030 4/14/05 48,814
1,991,865 Polish Zloty ....................... 570,000 4/27/05 4,969
1,400,000 Swiss Franc ........................ 1,170,246 4/29/05 11,125
----------- ----------
U.S. $62,402,345 2,738,511
=========== ----------
Unrealized gain on forward exchange contracts U.S. $2,738,511
----------
- --------------------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO BUY EXCHANGE FOR DATE LOSS
- --------------------------------------------------------------------------------------------------------------
140,000,000 Thailand Baht ...................... U.S. $ 3,429,691 11/22/04 U.S. $ (18,718)
1,660,170 New Zealand Dollar ................. 1,150,000 1/28/05 (25,663)
----------- ----------
U.S. $ 4,579,691 (44,381)
=========== ----------
Unrealized loss on forward exchange contracts ........................................ (44,381)
----------
Net unrealized gain on forward exchange contracts .......................... U.S. $2,694,130
==========
26 | Annual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
8. REGULATORY MATTERS
GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS
A. INVESTIGATIONS
As part of various investigations by the Securities and Exchange Commission
("SEC"), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Securities Division of the Office of the
Secretary of the Commonwealth of Massachusetts, the Florida Department of
Financial Services and the Commissioner of Securities, the West Virginia
Attorney General, the Vermont Department of Banking, Insurance, Securities, and
Health Care Administration and the National Association of Securities Dealers,
Inc. ("NASD") relating to certain practices in the mutual fund industry,
including late trading, market timing and market support payments to securities
dealers who sell fund shares, Franklin Resources, Inc. and certain of its
subsidiaries (as used in this section, together, the "Company"), as well as
certain current or former executives and employees of the Company received
requests for information and/or subpoenas to testify or produce documents. The
Company and its current employees provided documents and information in response
to these requests and subpoenas. In addition, the Company has responded, and in
one instance, is currently responding to requests for similar kinds of
information from regulatory authorities in some of the foreign countries where
the Company conducts its global asset management business.
Franklin Templeton Investments Corp. ("FTIC"), a Company subsidiary and the
investment manager of Franklin Templeton's Canadian mutual funds, has been
cooperating with and responding to requests for information from the Ontario
Securities Commission (the "OSC") relating to the OSC's review of frequent
trading practices within the Canadian mutual fund industry. On December 10,
2004, FTIC received a letter indicating that the staff of the OSC is
contemplating enforcement proceedings against FTIC before the OSC. In its
letter, the OSC staff expressed the view that, over the period of February 1999
to February 2003, there were certain accounts that engaged in a frequent trading
market timing strategy in certain funds being managed by FTIC. The letter also
gave FTIC the opportunity to respond to the issues raised in the letter and to
provide the OSC staff with additional information relevant to these matters. The
Company expects to enter into discussions with the OSC staff in an effort to
resolve the issues raised in the OSC's review. The Company cannot predict the
likelihood of whether those discussions will result in a settlement, or the
terms of any such settlement.
Annual Report | 27
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
8. REGULATORY MATTERS (CONTINUED)
GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
A. INVESTIGATIONS (CONTINUED)
On December 9, 2004, the staff of the NASD informed the Company that it has made
a preliminary determination to recommend a disciplinary proceeding against
Franklin/Templeton Distributors, Inc. ("FTDI"), alleging that FTDI violated
certain NASD rules by the use of directed brokerage commissions to pay for sales
and marketing support. FTDI has also received a separate letter from the NASD
staff advising FTDI of the NASD staff's preliminary determination to recommend a
disciplinary proceeding against FTDI alleging violation of certain NASD rules
relating to FTDI's Top Producers program. The Company believes that any such
charges are unwarranted.
B. SETTLEMENTS
On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc. reached an agreement with the SEC that resolved the
issues resulting from the SEC's investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.
Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The SEC Order also requires Franklin Advisers, Inc. to, among
other things, enhance and periodically review compliance policies and
procedures.
On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to the administrative complaint filed on February 4,
2004. The administrative complaint concerned one instance of market timing that
was also a subject of the August 2, 2004 settlement that Franklin Advisers, Inc.
reached with the SEC, as described above.
28 | Annual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
8. REGULATORY MATTERS (CONTINUED)
GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
B. SETTLEMENTS (CONTINUED)
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statement of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.
On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources Inc.'s Form 8-K filing (in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing") failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.
On November 17, 2004, Franklin Resources, Inc. announced that FTDI reached an
agreement with the California Attorney General's Office ("CAGO"), resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. The Company believes that the settlement of the CAGO matter is
in the best interest of the Company and its fund shareholders. Under the terms
of the settlement, FTDI neither admitted nor denied the allegations in the
CAGO's complaint and agreed to pay $2 million to the State of California as a
civil penalty, $14 million to Franklin Templeton funds and $2 million to the
CAGO for its investigative costs.
On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Order").
Annual Report | 29
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
8. REGULATORY MATTERS (CONTINUED)
GOVERNMENTAL INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
B. SETTLEMENTS (CONTINUED)
The Company believes that the settlement of this matter is in the best interest
of the Company and its fund shareholders. Under the terms of the Order, in which
FTDI and Franklin Advisers, Inc. neither admitted nor denied the findings
contained therein, they agreed to pay the funds a penalty of $20 million and
disgorgement of $1 (one dollar). FTDI and Franklin Advisers, Inc. also agreed to
implement certain measures and undertakings relating to marketing support
payments to broker-dealers for the promotion or sale of fund shares, including
making additional disclosures in the funds' Prospectuses and Statements of
Additional Information. The Order further requires the appointment of an
independent distribution consultant, at the Company's expense, who shall develop
a plan for the distribution of the penalty and disgorgement to the funds.
OTHER LEGAL PROCEEDINGS
The Trust, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Various subsidiaries of Franklin
Resources Inc., as well as certain funds managed by those subsidiares, have also
been named in multiple lawsuits filed in state courts in Illinois. Specifically,
the lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain funds managed by Franklin
Resources, Inc. subsidiaries, resulting in alleged market timing activity. The
majority of these lawsuits duplicate, in whole or in part, the allegations
asserted in the Massachusetts administrative complaint described above. The
lawsuits are styled as class actions, or derivative actions on behalf of either
the named funds or the Company. Additionally, FTIC was recently served with a
class action market timing complaint in Quebec, Canada.
In addition, the Company, as well as certain current and former officers,
employees, and directors have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees. These lawsuits are styled
as class actions and derivative actions brought on behalf of certain funds.
30 | Annual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
8. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them. The
Company cannot predict with certainty, however, the eventual outcome of the
remaining governmental investigations or private lawsuits, nor whether they will
have a material negative impact on the Company. Public trust and confidence are
critical to the Company's business and any material loss of investor and/or
client confidence could result in a significant decline in assets under
management by the Company, which would have an adverse effect on future
financial results. If the Company finds that it bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or their shareholders whole, as appropriate. The
Company is committed to taking all appropriate actions to protect the interests
of the funds' shareholders.
Annual Report | 31
Franklin Templeton Global Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN TEMPLETON HARD CURRENCY
FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Franklin Templeton Hard
Currency Fund (the "Fund") at October 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
December 15, 2004
32 | Annual Report
Franklin Templeton Global Trust
TAX DESIGNATION (UNAUDITED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $1,923,988 as a capital gain dividend for the fiscal year ended
October 31, 2004.
Annual Report | 33
Board Members and Officers
The name, age 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. Each board member
will serve until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (83) Trustee Since 1993 113 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company).
- --------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (72) Trustee Since 1993 142 Director, Bar-S Foods
One Franklin Parkway (meat packing company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank
holding company) (until 2002); and President, Chief Executive Officer and
Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
- --------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (76) Trustee Since April 2003 49 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Member and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); and FORMERLY, member and Chairman of
the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
- --------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (72) Trustee Since 1993 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- --------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (75) Trustee Since 1993 115 Director, The California
One Franklin Parkway Center for Land Recycling
San Mateo, CA 94403-1906 (redevelopment).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company
(venture capital).
- --------------------------------------------------------------------------------------------------------------------------
34 | Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (76) Trustee Since 1993 142 Director, White Mountains
One Franklin Parkway Insurance Group, Ltd. (holding
San Mateo, CA 94403-1906 company); Martek Biosciences
Corporation; MedImmune, Inc.
(biotechnology); and
Overstock.com (Internet
services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently
known as MCI WorldCom, Inc.
and WorldCom, Inc.)
(communications services)
(1988-2002) and Spacehab, Inc.
(aerospace services)
(1994-2003).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River
Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc. (1970-1987).
- --------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Trustee and Since 1993 142 None
One Franklin Parkway Chairman
San Mateo, CA 94403-1906 of the Board
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Vice President, Franklin Templeton Distributors, Inc.;
Director, Fiduciary Trust Company International; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton
Investments.
- --------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (64) Trustee, Trustee since 125 None
One Franklin Parkway President 1993 and
San Mateo, CA 94403-1906 and Chief President and
Executive Chief Executive
Officer- Officer-
Investment Investment
Management Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services,
Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin
Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
Annual Report | 35
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice Since 1993 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief
One Franklin Parkway Compliance Since Not Applicable None
San Mateo, CA 94403-1906 Officer July 2004
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin
Resources, Inc.; and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- --------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42) Treasurer Since July 2004 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director and member of Audit and Valuation Committees, Runkel
Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment
companies in Franklin Templeton Investments (1997-2003); and Vice President,
Franklin Templeton Services, LLC (1997-2003).
- --------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice Since 1995 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice
President and Chief Financial Officer, Franklin Mutual Advisers, LLC; Executive
Vice President, Chief Financial Officer and Director, Templeton Worldwide,
Inc.; Executive Vice President and Chief Operating Officer, Templeton
Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.;
Executive Vice President, Franklin Investment Advisory Services, Inc. and
Franklin Templeton Investor Services, LLC; Chief Financial Officer, Franklin
Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies
in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (57) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President
Suite 2100 and Chief
Fort Lauderdale, Executive
FL 33394-3091 Officer-
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the
investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
36 | Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice Since 2000 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of
one of the subsidiaries of Franklin Resources, Inc.; officer of 51 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Director, Property Resources Equity
Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- --------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (57) Vice Since 2000 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President,
Templeton Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment
Advisory Services, Inc., Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin
Templeton Investor Services, LLC, Franklin Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton
Investment Counsel, LLC, and Templeton/Franklin Investment Services, Inc.; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior Advisor to the Chairman,
Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission (1986-1995);
Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until 1979).
- --------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President Since 2002 Not Applicable Director, FTI Banque,
600 Fifth Avenue - AML Arch Chemicals, Inc.
Rockefeller Center Compliance and Lingnan Foundation.
New York, NY 10020-2302
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company
International; and officer and/or director, as the case may be, of some of the
other subsidiaries of Franklin Resources, Inc. and of 48 of the investment
companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of
some of the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia)
Limited (until 2000); and Director, Templeton Asset Management Ltd. (until 1999).
- --------------------------------------------------------------------------------------------------------------------------
Annual Report | 37
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (53) Chief Financial Since May 2004 Not Applicable None
500 East Broward Blvd. Officer
Suite 2100 and Chief
Fort Lauderdale, FL Accounting
33394-3091 Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments;
Senior Vice President, Franklin Templeton Services, LLC; FORMERLY, Managing
Director, RSM McGladrey, Inc.; Partner, McGladrey & Pullen, LLP.
- --------------------------------------------------------------------------------------------------------------------------
**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 portfolios have a common investment adviser or affiliated
investment advisers.
Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Fund under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources, Inc., which
is the parent company of the Fund's adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL 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 AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE 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 MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
- --------------------------------------------------------------------------------
38 | Annual Report
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION
FRANKLIN TEMPLETON HARD CURRENCY FUND
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Annual Report | 39
This page intentionally left blank.
Literature Request
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) 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 THE 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.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet
Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government
Securities Fund 5
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 5, 6
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic
Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund
TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California 9
Colorado
Connecticut
Florida 9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 8
Michigan 8
Minnesota 8
Missouri
New Jersey
New York 9
North Carolina
Ohio 8
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products
Trust 10
1.The fund is closed to new investors. Existing shareholders can continue adding
to their accounts.
2.The fund is only open to existing shareholders and select retirement plans.
3.The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
4.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
5.An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6.Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and strategy
remained the same.
7.For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
8.Portfolio of insured municipal securities.
9.These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
10.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
11/04Not part of the annual report
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TEMPLETON
HARD CURRENCY FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The 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 and accessed. These calls can be
identified by the presence of a regular beeping tone.
412 A2004 12/04
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $39,143 for the fiscal year ended October 31, 2004 and $17,173 for the
fiscal year ended October 31, 2003.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of the their financial
statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $68 for the fiscal year ended October 31, 2004
and $0 for the fiscal year ended October 31, 2003. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended October 31,
2004 and $12,000 for the fiscal year ended October 31, 2003. The services for
which these fees were paid included a review of an ICI transfer agent survey.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were pre-approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $68 for the fiscal year ended October 31, 2004 and $12,000 for
the fiscal year ended October 31, 2003.
(h) No disclosures are required by this Item 4(h).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS.
(A) Code of Ethics
(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN TEMPLETON GLOBAL TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date December 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date December 16, 2004
By /s/Galen G. Vetter
Chief Financial Officer
Date December 16, 2004