UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04450
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FRANKLIN TEMPLETON GLOBAL TRUST
---------------------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, 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: 4/30/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
APRIL 30, 2009
SEMIANNUAL REPORT
AND SHAREHOLDER LETTER
A series of Franklin Templeton Global Trust
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(GRAPHIC)
FIXED INCOME
FRANKLIN TEMPLETON
HARD CURRENCY FUND
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FRANKLIN - TEMPLETON - MUTUAL SERIES
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
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 offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
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, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the semiannual report
Contents
SHAREHOLDER LETTER................................... 1
SEMIANNUAL REPORT
Franklin Templeton Hard Currency Fund................ 3
Performance Summary.................................. 8
Your Fund's Expenses................................. 10
Financial Highlights and Statement of Investments.... 12
Financial Statements................................. 15
Notes to Financial Statements........................ 18
Shareholder Information.............................. 28
Shareholder Letter
Dear Shareholder:
During the six months ended April 30, 2009, global economies experienced a
significant slowdown that began in 2008 with the U.S. subprime mortgage and
credit crises. Despite coordinated efforts by many governments to address
spreading liquidity and credit problems, deteriorating economic conditions and
mounting uncertainty contributed to significant market volatility. The U.S.
dollar lost value compared with the currencies of the U.S.'s major trading
partners. This difficult environment is bound to provoke great concern; however,
we believe it is important to put short-term market developments in perspective.
Keep in mind that as daunting as current conditions may be, we have navigated
through other periods of high market volatility, including the global stock
markets' severe declines of 1987 and the bursting of the technology bubble in
2000. We remain committed to our long-term perspective and our disciplined
investment philosophy. Therefore, we view recent declines as potential
opportunities to find bargains that we believe may be well positioned to become
eventual winners. Although conditions remain challenging, our experience gives
us reason to be optimistic about possible future market stabilization and
recovery.
In the enclosed semiannual report for Franklin Templeton Hard Currency Fund, the
portfolio manager discusses market conditions, investment management decisions
and Fund performance during the period under review. You will also find
performance data and financial information. Please remember that all securities
markets fluctuate, as do mutual fund share prices.
If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, read timely articles, and
find helpful financial planning tools. We hope you will take advantage of these
online services.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the semiannual report | 1
Although market conditions are constantly changing, we remain committed to our
disciplined strategy as we manage the Fund, keeping in mind the trust you have
placed in us. As always, we recommend investors consult their financial advisors
and review their portfolios to design a long-term strategy and portfolio
allocation that meet their individual needs, goals and risk tolerance. We firmly
believe that most people benefit from professional advice, and that advice is
invaluable as investors navigate changing market conditions.
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
President and Chief Executive Officer --
Investment Management
Franklin Templeton Global Trust
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF APRIL 30, 2009. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.
2 | Not part of the semiannual report
Semiannual 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 mainly in high-quality short-term money
market instruments and forward currency contracts denominated in foreign hard
currencies. The Fund focuses on countries and markets that historically have
experienced low inflation rates and that, 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.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
This semiannual report for Franklin Templeton Hard Currency Fund covers the
period ended April 30, 2009.
PERFORMANCE OVERVIEW
Franklin Templeton Hard Currency Fund - Class A had a -0.46% cumulative total
return for the six months under review. The Fund underperformed its benchmark,
the J.P. Morgan (JPM) 3 Month Global Cash Index, which had a +4.88% 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. The
Fund performed better than the U.S. dollar, which fell 1.45% relative to major
U.S. trading partners during the period.(2) The dollar appreciated 0.04% versus
the Japanese yen but declined 4.31% versus the euro.(3) You can find the Fund's
long-term performance data in the Performance Summary beginning on page 8.
(1.) Source: J.P. Morgan. The JPM 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 H10 Report.
(3.) Source: Exshare (via Compustat via Factset).
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 14.
Semiannual Report | 3
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.
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.
ECONOMIC AND MARKET OVERVIEW
The six months under review was characterized by an intensified credit crunch
following Lehman Brothers' collapse and as the economic impact of credit market
paralysis spread throughout the world. Although during the period many
investible securities reached multi-year lows and economic indicators
deteriorated, some signs near period-end suggested the worst may be over.
In the U.S., economic conditions remained difficult. Gross domestic product
(GDP) contracted at annualized rates of 6.3% in fourth quarter 2008 and an
estimated 5.7% in first quarter 2009. Unemployment rose to 8.9% in April 2009
from 6.6% in October 2008. Additionally, little evidence indicated housing
sector stabilization, and industrial production declined. With weak economic
activity and low energy prices, the inflation rate in April was an annualized
- -0.7%. Although global demand for U.S. products fell, the weak domestic demand
environment and low oil prices allowed the trade deficit to narrow
significantly. The U.S. policy response to the ongoing crisis continued as the
government increased its stakes in major financial institutions, boosted fiscal
spending and implemented asset purchase programs. The government increased the
Troubled Asset Relief Program (TARP), implemented the Term Asset-Backed
Securities Loan Facility (TALF), expanded existing asset purchases, made new
purchases of government bonds, introduced the Public-Private Investment Program
(PPIP), and changed mark-to-market accounting rules.
The eurozone continued monetary easing as fourth quarter 2008 and first quarter
2009 GDP contracted 1.4% and 4.6% compared with the same quarters a year earlier
(year-over-year).(4) The labor market also weakened rapidly with the
unemployment rate rising from 7.8% in October 2008 to 9.2% in April 2009.(4)
However, eurozone budget deficits were expected to widen to only 6% of GDP, less
than the double-digit rates expected for the U.S.(5) Largely reflecting an
energy price decline, inflation in the eurozone dropped to just 0.6% in April,
well below the European Central Bank's (ECB's) 2% definition of price
stability.(4) However, core inflation, which excludes volatile food and energy
costs, remained relatively stable at 1.7% in April.(4) Eurozone governments
proposed various fiscal stimulus packages across the region, complemented by
existing automatic stabilizers present in European social benefit programs.
However, European policy authorities remained hesitant to implement aggressive
fiscal spending given the European Monetary Union's institutional constraints
and concerns about the euro's integrity and any effects on medium-term
inflation. ECB policy makers echoed these concerns and were reluctant to
increase the money supply, as the U.S.
(4.) Source: Eurostat.
(5.) European Commission.
4 | Semiannual Report
Federal Reserve Board (Fed) and the U.K.'s Bank of England did, given a lack of
consensus on deflationary risks. Additionally, the eurozone faced increased
worries about certain smaller countries' ability to finance budget deficits and
meet debt obligations. Given the risk an intra-monetary union default would pose
to all members, the larger countries expressed assurances that alternatives
would be found to avoid such a situation.
By the end of first quarter 2009, Asia began to show signs the economic slowdown
could be bottoming and headed toward a recovery. Fiscal stimuli in the larger
developing countries, especially China, helped other Asian economies pull
through. Recent increases in Chinese purchasing manager indexes, South Korean
industrial production figures and Asian exports were consistent with an
early-stage recovery pattern. Additionally, Asian current accounts mostly
improved, especially among oil importers such as South Korea and Thailand.
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 against the U.S. dollar over the long term.
MANAGER'S DISCUSSION
The U.S. dollar fell 1.45% relative to its major trading partners for the
six-month reporting period.(2) During the beginning of the period, increased
risk aversion led to a flight to quality as investors favored U.S. assets.
Furthermore, the deleveraging process increased demand for U.S. dollars to repay
loans, especially in emerging markets. However, toward period-end, risk appetite
rebounded and the U.S. dollar depreciated. We were less favorable on the euro
than the dollar because we thought aggressive U.S. policy response may mean a
faster U.S. economic recovery. However, we maintained positions in some
economies that underperformed in the severe market dislocations that occurred
during the period.
ASIA
During the period, the Fund benefited from its exposure to several Asian
currencies that toward period-end corrected from large sell-offs at the
beginning of the financial crisis. Based on our analysis, these sell-offs were
principally driven by market momentum rather than fundamentals. For example, in
the second three months of the period, the South Korean won appreciated 7.53%,
the Malaysian ringgit 1.33%, and the Indonesian rupiah 7.51%, following declines
of 6.43%, 1.57%, and 4.22%, respectively, in the first three months.(3)
CURRENCY BREAKDOWN
4/30/09
% OF TOTAL
NET ASSETS
----------
ASIA PACIFIC 43.2%
Japanese Yen 24.5%
Indonesian Rupiah 5.4%
Malaysian Ringgit 3.8%
Chinese Yuan 3.8%
South Korean Won 2.6%
Australian Dollar 2.5%
Kazakhstani Tenge 0.6%
AMERICAS 30.6%
U.S. Dollar 28.2%
Mexican Peso 2.4%
EUROPE 26.2%
Swedish Krona 15.5%
Swiss Franc 7.0%
Polish Zloty 1.9%
Norwegian Krone 1.7%
Euro 0.1%
Semiannual Report | 5
WHAT IS A CARRY TRADE?
Carry trade is a strategy in which an investor sells a certain currency with a
relatively low interest rate and uses the funds to purchase a different
currency yielding a higher interest rate . A trader using this strategy attempts
to capture the difference between the rates.
The Fund's fundamentals-focused, medium-term approach allowed us to capitalize
on this dynamic, especially in South Korea where we added exposure following
most of the sell-off. We observed a different dynamic in the Japanese yen, which
depreciated 0.04% against the U.S. dollar during the reporting period.(3) Early
in the period, increased risk aversion benefited the yen as domestic investors
repatriated their international investments and carry trades unwound. However,
during the last half of the period, investors focused more on the country's poor
economic performance and the yen depreciated. GDP contracted 4.3% year-over-year
in fourth quarter 2008 due to subdued consumption and weak external demand.(6)
Japan's trade balance worsened as its main export sector, machinery, was
negatively impacted by the global recession. We maintained significant exposure
to the yen throughout the period, seeking to benefit from deleveraging,
declining interest rate differentials and a current account surplus. However, as
explained above, our strategy generated mixed results.
EUROPE
European currencies experienced mixed performance against the U.S. dollar. The
euro appreciated 4.50% versus the U.S. dollar during the period, trading largely
in line with risk appetite.(3) The euro's strong return hurt the Fund's relative
performance because we favored the currencies of countries we believed were
likely to suffer less from deleveraging and had better valuations. Other than
the euro, the market did not differentiate much among currencies as fears
surrounding a hard landing in some eastern European countries spread throughout
non-euro Europe. Thus, the Fund's performance was hurt by its exposures to the
Swedish krona and the Polish zloty. The Swedish krona depreciated 3.23% during
the period despite a strong rebound in the final two months while the Polish
zloty depreciated 16.73% as the market priced it closer to its neighbors that
ran higher fiscal and current account deficits.(3) Lastly, the Fund maintained
exposure to the Swiss franc for many of the same reasons as the Japanese yen.
Switzerland, a net creditor country, provided positive returns for the Fund
during the period as interest rate differentials fell and loans taken in francs
were repaid.
AMERICAS
Although U.S. Fed policy may have averted a deeper financial crisis, toward
period-end we began to position the Fund for challenges the U.S. dollar may face
from a historically large fiscal and monetary expansion. In addition to a
greater supply of U.S. dollars, the U.S. will have to tackle its fiscal deficit
in the future, either through higher taxes, private savings, higher productivity
or inflation. We think such developments could limit prospects for
currency-supportive, strong relative growth in the medium term. During the
period, however, we
(6.) Source: Economic & Social Research Institute.
6 | Semiannual Report
maintained a substantial U.S. dollar exposure as we sought to benefit from the
deleveraging process, which we believe is not over. Furthermore, our dollar
exposure was high because we lacked what we viewed as attractive opportunities
in other currencies due to widespread vulnerability throughout the developed
world such as those found in the British pound and euro. Still, extreme
financial market volatility led to dislocated valuations, which predominantly
drove returns toward period-end. Seeking to benefit from this trend, we added
exposure to the Mexican peso, which appreciated 3.59% in the second half of the
period.(3) Although the Mexican economy is closely tied to that of the U.S. and
could likely be one of the most adversely affected by the financial crisis,
valuations reached levels more indicative of a sovereign default than an
economic recession. The peso fell to all-time lows against the dollar, weakening
beyond levels seen during the mid-1990s crisis when the government needed to be
bailed out by the U.S., despite significant improvement to economic policy and
fundamentals since then. The Fund sought to take advantage of the situation by
building a position against market momentum that could benefit when markets
normalize.
Thank you for your continued participation in Franklin Templeton Hard Currency
Fund. We look forward to serving your future investment needs.
(PHOTO OF MICHAEL HASENSTAB)
/s/ Michael Hasenstab
Michael Hasenstab, Ph.D.
Portfolio Manager
Franklin Templeton Hard Currency Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2009, 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 INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
Please note that although the Fund's Statement of Investments on page 14 of this
report indicates the Fund held 56.6% of its total investments in U.S.
dollar-denominated assets as of 4/30/09, its net exposure to the U.S. dollar as
of that date was only 28.2%. The difference is explained by the Fund's holdings
of forward currency exchange contracts (please see Note 8 in the Notes to
Financial Statements on page 24 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.
Semiannual Report | 7
Performance Summary as of 4/30/09
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 does not reflect any taxes that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: ICPHX) CHANGE 4/30/09 10/31/08
- ----------------------- ------ ------- --------
Net Asset Value (NAV) -$0.28 $8.85 $9.13
DISTRIBUTIONS (11/1/08-4/30/09)
Dividend Income $0.2436
ADVISOR CLASS (SYMBOL: ICHHX) CHANGE 4/30/09 10/31/08
- ----------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.27 $8.88 $9.15
DISTRIBUTIONS (11/1/08-4/30/09)
Dividend Income $0.2508
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 2.25%
MAXIMUM INITIAL SALES CHARGE; ADVISOR CLASS: NO SALES CHARGES.
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- ------- -------
Cumulative Total Return(1) -0.46% -8.27% +24.90% +50.95%
Average Annual Total Return(2) -2.70% -10.34% +4.08% +3.97%
Value of $10,000 Investment(3) $9,730 $ 8,966 $12,213 $14,754
Avg. Ann. Total Return (3/31/09)(4) -12.69% +3.13% +3.65%
Distribution Rate(5) 0.97%
30-Day Standardized Yield(6) -0.51%
Total Annual Operating Expenses(7) 1.09%
ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------- ------- ------- ------- -------
Cumulative Total Return(1) -0.27% -7.93% +26.90% +55.72%
Average Annual Total Return(2) -0.27% -7.93% +4.88% +4.53%
Value of $10,000 Investment(3) $9,973 $ 9,207 $12,690 $15,572
Avg. Ann. Total Return (3/31/09)(4) -10.36% +3.93% +4.22%
Distribution Rate(5) 1.39%
30-Day Standardized Yield(6) -0.23%
Total Annual Operating Expenses(7) 0.79%
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND
PERFORMANCE" AT franklintempleton.com OR CALL (800) 342-5236.
8 | Semiannual Report
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.
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.
(2.) Average annual total return represents the average annual change in value
of an investment over the periods indicated. Six-month return has not been
annualized.
(3.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(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 4/30/09.
(6.) Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/09.
(7.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
Semiannual Report | 9
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you 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 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.
10 | Semiannual Report
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.
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 11/1/08 VALUE 4/30/09 PERIOD* 11/1/08-4/30/09
- ------- ----------------- -------------- -----------------------
Actual $1,000 $ 995.40 $4.45
Hypothetical (5% return before expenses) $1,000 $1,020.33 $4.51
ADVISOR CLASS
Actual $1,000 $ 997.30 $3.07
Hypothetical (5% return before expenses) $1,000 $1,021.72 $3.11
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.90% and Advisor: 0.62%), multiplied by the
average account value over the period, multiplied by 181/365 to reflect the
one-half year period.
Semiannual Report | 11
Franklin Templeton Global Trust
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON HARD CURRENCY FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2009 ------------------------------------------------------------
CLASS A (UNAUDITED) 2008 2007 2006 2005 2004
- ------- ---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 9.13 $ 10.16 $ 9.39 $ 9.34 $ 9.85 $ 9.59
-------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) ............ --(c) 0.10 0.28 0.24 0.15 0.09
Net realized and unrealized gains
(losses) ................................ (0.04) (0.45) 0.84 0.47 (0.12) 0.78
-------- -------- -------- -------- -------- --------
Total from investment operations .............. (0.04) (0.35) 1.12 0.71 0.03 0.87
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income and net realized
foreign currency gains .................. (0.24) (0.68) (0.35) (0.66) (0.46) (0.61)
Net realized gains ......................... -- -- -- -- (0.08) --
-------- -------- -------- -------- -------- --------
Total distributions ........................... (0.24) (0.68) (0.35) (0.66) (0.54) (0.61)
-------- -------- -------- -------- -------- --------
Redemption fees(d) ............................ -- --(c) --(c) --(c) --(c) --(c)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................ $ 8.85 $ 9.13 $ 10.16 $ 9.39 $ 9.34 $ 9.85
======== ======== ======== ======== ======== ========
Total return(e) ............................... (0.46)% (3.57)% 12.31% 8.06% 0.17% 9.44%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(g) ................................... 0.90% 1.09% 1.09% 1.13% 1.19% 1.24%
Net investment income (loss) .................. (0.02)% 1.07% 2.97% 2.58% 1.54% 0.95%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $365,278 $479,764 $323,255 $322,449 $190,163 $211,098
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Amount rounds to less than $0.01 per share.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
(g) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
12 | Semiannual Report
Franklin Templeton Global Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2009 ----------------------------------------------------
ADVISOR CLASS (UNAUDITED) 2008 2007 2006 2005 2004
- ------------- ---------------- -------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 9.15 $ 10.18 $ 9.41 $ 9.36 $ 9.87 $ 9.61
-------- -------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b) ................... 0.01 0.14 0.31 0.27 0.18 0.13
Net realized and unrealized gains
(losses) ................................ (0.03) (0.46) 0.84 0.47 (0.12) 0.79
-------- -------- ------- ------- ------- -------
Total from investment operations .............. (0.02) (0.32) 1.15 0.74 0.06 0.92
-------- -------- ------- ------- ------- -------
Less distributions from:
Net investment income and net realized
foreign currency gains ..................... (0.25) (0.71) (0.38) (0.69) (0.49) (0.66)
Net realized gains ......................... -- -- -- -- (0.08) --
-------- -------- ------- ------- ------- -------
Total distributions ........................... (0.25) (0.71) (0.38) (0.69) (0.57) (0.66)
-------- -------- ------- ------- ------- -------
Redemption fees(c) ............................ -- --(d) --(d) --(d) --(d) --(d)
-------- -------- ------- ------- ------- -------
Net asset value, end of period ................ $ 8.88 $ 9.15 $ 10.18 $ 9.41 $ 9.36 $ 9.87
======== ======== ======= ======= ======= =======
Total return(e) ............................... (0.27)% (3.28)% 12.60% 8.35% 0.50% 9.89%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(g) ................................... 0.62% 0.78% 0.84% 0.83% 0.83% 0.84%
Net investment income ......................... 0.26% 1.38% 3.22% 2.88% 1.89% 1.35%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $101,495 $110,247 $89,942 $40,912 $17,532 $22,442
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Effective September 1, 2008, the redemption fee was eliminated.
(d) Amount rounds to less than $0.01 per share.
(e) Total return is not annualized for periods less than one year.
(f) Ratios are annualized for periods less than one year.
(g) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 13
Franklin Templeton Global Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2009 (UNAUDITED)
FRANKLIN TEMPLETON HARD CURRENCY FUND PRINCIPAL AMOUNT(a) VALUE
------------------------------------- ------------------- ------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 44.3%
Government of Austria, 1, 3.00%, 8/21/09 ................................. 10,000,000 CHF $ 8,814,919
Government of Japan,
1.40%, 6/22/09 ........................................................ 2,350,000,000 JPY 23,867,655
258, 1.00%, 7/15/09 ................................................... 2,350,000,000 JPY 23,867,488
Government of Norway, 5.50%, 5/15/09 ..................................... 52,350,000 NOK 7,977,627
Government of Sweden, 4.00%, 12/01/09 .................................... 225,000,000 SEK 28,532,171
Inter-American Development Bank, 1.90%, 7/08/09 .......................... 1,973,000,000 JPY 20,051,838
KfW Bankengruppe, 2.05%, 9/21/09 ......................................... 4,570,000,000 JPY 46,590,228
Queensland Treasury Corp., 6.00%, 7/14/09 ................................ 13,500,000 AUD 9,865,160
(b) Sweden Treasury Bill, 7/15/09 ............................................ 300,000,000 SEK 37,246,681
------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $206,616,540) ....... 206,813,767
------------
U.S. GOVERNMENT AND AGENCY SECURITIES (COST $199,999,444) 42.9%
(b) FHLB, 5/01/09 ............................................................ 200,000,000 199,999,444
------------
TOTAL INVESTMENTS BEFORE MONEY MARKET FUNDS (COST $406,615,984) .......... 406,813,211
------------
SHARES
-------------------
MONEY MARKET FUNDS (COST $64,071,770) 13.7%
(c) Franklin Institutional Fiduciary Trust Money Market Portfolio, 0.04% ..... 64,071,770 64,071,770
------------
TOTAL INVESTMENTS (COST $470,687,754) 100.9% ............................. 470,884,981
NET UNREALIZED APPRECIATION (DEPRECIATION) ON FORWARD EXCHANGE
CONTRACTS (2.7)% ...................................................... (12,583,554)
OTHER ASSETS, LESS LIABILITIES 1.8% ...................................... 8,472,382
------------
NET ASSETS 100.0% ........................................................ $466,773,809
============
See Abbreviations on page 27.
(a) The principal amount is stated in U.S. dollars unless otherwise indicated.
(b) The security is traded on a discount basis with no stated coupon rate.
(c) See Note 7 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio. The rate shown is the annualized seven-day
yield at period end.
The accompanying notes are an integral part of these financial statements.
14 | Semiannual Report
Franklin Templeton Global Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2009 (unaudited)
FRANKLIN
TEMPLETON
HARD CURRENCY
FUND
-------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers .......................................... $406,615,984
Cost - Sweep Money Fund (Note 7) ..................................... 64,071,770
------------
Total cost of investments ............................................ $470,687,754
============
Value - Unaffiliated issuers ......................................... $406,813,211
Value - Sweep Money Fund (Note 7) .................................... 64,071,770
------------
Total value of investments ........................................... 470,884,981
Cash .................................................................... 334
Foreign currency, at value (cost $7,416,397) ............................ 6,627,129
Receivables:
Capital shares sold .................................................. 1,282,731
Interest ............................................................. 2,128,902
Unrealized appreciation on forward exchange contracts (Note 8) .......... 3,988,369
Other assets ............................................................ 1,120
------------
Total assets ...................................................... 484,913,566
------------
Liabilities:
Payables:
Capital shares redeemed .............................................. 1,205,480
Affiliates ........................................................... 289,125
Unrealized depreciation on forward exchange contracts (Note 8) .......... 16,571,923
Accrued expenses and other liabilities .................................. 73,229
------------
Total liabilities ................................................. 18,139,757
------------
Net assets, at value ........................................... $466,773,809
============
Net assets consist of:
Paid-in capital ...................................................... $513,936,103
Undistributed net investment income .................................. 8,450,034
Net unrealized appreciation (depreciation) ........................... (13,186,699)
Accumulated net realized gain (loss) ................................. (42,425,629)
------------
Net assets, at value ........................................... $466,773,809
============
CLASS A:
Net assets, at value .................................................... $365,278,433
============
Shares outstanding ...................................................... 41,257,209
============
Net asset value per share(a) ............................................ $ 8.85
============
Maximum offering price per share (net asset value per share / 97.75%) ... $ 9.05
============
ADVISOR CLASS:
Net assets, at value .................................................... $101,495,376
============
Shares outstanding ...................................................... 11,430,544
============
Net asset value and maximum offering price per share .................... $ 8.88
============
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 15
Franklin Templeton Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months April 30, 2009 (unaudited)
FRANKLIN
TEMPLETON
HARD CURRENCY
FUND
-------------
Investment income:
Dividends from Sweep Money Fund (Note 7) ............................................ $ 478,734
Interest ............................................................................ 1,852,309
------------
Total investment income ....................................................... 2,331,043
------------
Expenses:
Management fees (Note 3a) ........................................................... 1,293,458
Distribution fees: (Note 3c)
Class A .......................................................................... 590,061
Transfer agent fees (Note 3e) ....................................................... 193,991
Custodian fees (Note 4) ............................................................. 24,885
Reports to shareholders ............................................................. 34,879
Registration and filing fees ........................................................ 45,442
Professional fees ................................................................... 25,506
Trustees' fees and expenses ......................................................... 17,314
Other ............................................................................... 8,215
------------
Total expenses ................................................................ 2,233,751
Expense reductions (Note 4) ................................................... (9,808)
------------
Net expenses ............................................................... 2,223,943
------------
Net investment income ................................................... 107,100
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ...................................................................... (25,422,890)
Foreign currency transactions .................................................... (14,679,389)
------------
Net realized gain (loss) ................................................ (40,102,279)
------------
Net change in unrealized appreciation (depreciation) on:
Investments ...................................................................... 26,668,872
Translation of other assets and liabilities denominated in foreign currencies .... 12,187,638
------------
Net change in unrealized appreciation (depreciation) .................... 38,856,510
------------
Net realized and unrealized gain (loss) ................................................ (1,245,769)
------------
Net increase (decrease) in net assets resulting from operations ........................ $ (1,138,669)
============
The accompanying notes are an integral part of these financial statements.
16 | Semiannual Report
Franklin Templeton Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FRANKLIN TEMPLETON
HARD CURRENCY FUND
-----------------------------------
SIX MONTHS ENDED
APRIL 30, 2009 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2008
---------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 107,100 $ 6,721,294
Net realized gain (loss) from investments
and foreign currency transactions ..... (40,102,279) 33,671,624
Net change in unrealized appreciation
(depreciation) on investments and
translation of other assets and
liabilities denominated in foreign
currencies ............................ 38,856,510 (72,335,267)
------------- ------------
Net increase (decrease) in net assets
resulting from operations .......... (1,138,669) (31,942,349)
------------- ------------
Distributions to shareholders from net
investment income and net realized foreign
currency gains:
Class A ............................... (12,785,510) (24,946,669)
Advisor Class ......................... (3,048,251) (7,360,551)
------------- ------------
Total distributions to shareholders ......... (15,833,761) (32,307,220)
------------- ------------
Capital share transactions: (Note 2)
Class A ............................... (100,783,122) 207,656,432
Advisor Class ......................... (5,481,977) 33,402,153
------------- ------------
Total capital share transactions ............ (106,265,099) 241,058,585
------------- ------------
Redemption fees ............................. -- 4,548
------------- ------------
Net increase (decrease) in net
assets .......................... (123,237,529) 176,813,564
Net assets:
Beginning of period ......................... 590,011,338 413,197,774
------------- ------------
End of period ............................... $ 466,773,809 $590,011,338
============= ============
Undistributed net investment income included in
net assets:
End of period ............................... $ 8,450,034 $ 24,176,695
============= ============
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 17
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Global Trust (Trust) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of one fund, the Franklin Templeton Hard Currency Fund (Fund). 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.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.
Government securities generally trade in the over-the-counter market rather than
on a securities exchange. The Trust may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Trust's pricing services may use valuation models or matrix pricing which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers, or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, option adjusted spread models, prepayment projections, interest
rate spreads and yield curves, to determine current value.
Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the
18 | Semiannual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. SECURITY VALUATION (CONTINUED)
time at which trading in a security is completed and the close of the NYSE that
might call into question the availability (including the reliability) of the
value of a portfolio security held by the Fund. If such an event occurs, the
securities may be valued using fair value procedures, which may include the use
of independent pricing services. All security valuation procedures are approved
by the Trust's 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. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Trust's Board of Trustees.
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 dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
The Fund may also enter into forward exchange contracts to hedge against
fluctuations in foreign exchange rates or to gain exposure to certain foreign
currencies. These contracts are valued daily by the Fund and the unrealized
appreciation or depreciation on the contracts, as measured
Semiannual Report | 19
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FOREIGN CURRENCY CONTRACTS (CONTINUED)
by the difference between the contractual forward foreign exchange rates and the
forward rates at the reporting date, are included in the Statement of Assets and
Liabilities. Realized and unrealized gains and losses on these contracts 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, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.
D. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of April 30, 2009, and has
determined that no provision for income tax is required in the Fund's financial
statements.
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.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividend income is recorded on the ex-dividend date. Distributions to
shareholders are recorded on the ex-dividend date and are determined according
to income tax regulations (tax basis). Distributable earnings determined on a
tax basis may differ from earnings recorded in accordance with accounting
principles generally accepted in the United States of America. These differences
may be permanent or temporary. Permanent differences are reclassified among
capital accounts to reflect their tax character. These reclassifications have no
impact on net assets or the results of operations. Temporary differences are not
reclassified, as they may reverse in subsequent periods.
Realized and unrealized gains and losses and net investment income, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.
20 | Semiannual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
A short term trading redemption fee was imposed, with some exceptions, on any
fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the fund and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. Currently, the Trust expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At April 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares were as follows:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2009 OCTOBER 31, 2008
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
CLASS A SHARES:
Shares sold ......................... 11,675,200 $ 104,683,897 49,620,090 $ 485,804,936
Shares issued in reinvestment of
distributions .................... 669,338 6,064,199 1,803,679 17,049,806
Shares redeemed ..................... (23,663,101) (211,531,218) (30,657,256) (295,198,310)
----------- ------------- ----------- -------------
Net increase (decrease) ............. (11,318,563) $(100,783,122) 20,766,513 $ 207,656,432
=========== ============= =========== =============
ADVISOR CLASS SHARES:
Shares sold ......................... 2,687,302 $ 24,279,561 10,017,916 $ 98,876,758
Shares issued in reinvestment of
distributions .................... 283,675 2,575,771 601,584 5,709,332
Shares redeemed ..................... (3,594,522) (32,337,309) (7,399,133) (71,183,937)
----------- ------------- ----------- -------------
Net increase (decrease) ............. (623,545) $ (5,481,977) 3,220,367 $ 33,402,153
=========== ============= =========== =============
Semiannual Report | 21
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the following
subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- -----------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative 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. ADMINISTRATIVE FEES
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
C. DISTRIBUTION FEES
The Fund's Board of Trustees has adopted a reimbursement distribution plan for
Class A pursuant to Rule 12b-1 under the 1940 Act, under which the Fund
reimburses Distributors for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to 0.45% per year of its average
daily net assets. Effective February 1, 2009, the Board of Trustees has set the
current rate at 0.30% per year for Class A shares until further notice and
approval by the Board. Costs exceeding the maximum for the current plan year
cannot be reimbursed in subsequent periods.
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:
Sales charges retained net of commissions paid to unaffiliated
broker/dealers ............................................ $18,953
Contingent deferred sales charges retained ................... $11,852
E. TRANSFER AGENT FEES
For the period ended April 30, 2009, the Fund paid transfer agent fees of
$193,991, of which $123,183 was retained by Investor Services.
22 | Semiannual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended April 30, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At October 31, 2008, the capital loss carryforwards were as
follows:
Capital loss carryforwards expiring in:
2013................................... $2,133,269
2014................................... 190,081
----------
$2,323,350
==========
At April 30, 2009, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ................... $471,318,968
------------
Unrealized appreciation ............... $ 5,572,650
Unrealized depreciation ............... (6,006,637)
------------
Net unrealized appreciation
(depreciation) ..................... $ (433,987)
============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of tax straddles, foreign currency transactions, and
bond discounts and premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions and bond
discounts and premiums.
Due to realized losses on foreign currency transactions, a portion of the
distribution paid for the period ending April 30, 2009 may be determined to be a
return of capital for federal income tax purposes as of the Fund's fiscal year
end of October 31, 2009.
6. INVESTMENT TRANSACTIONS
There were no purchases or sales of investments (other than short term
securities) for the period ended April 30, 2009.
Semiannual Report | 23
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management and administrative
fees paid by the Sweep Money Fund.
8. FORWARD EXCHANGE CONTRACTS
At April 30, 2009, the Fund had the following forward exchange contracts
outstanding:
CONTRACT SETTLEMENT UNREALIZED UNREALIZED
AMOUNT DATE APPRECIATION DEPRECIATION
------------ ---------- ------------ ------------
CONTRACTS TO BUY
4,537,463 Swiss Franc ............ $ 3,749,039 5/26/09 $ 227,489 $ --
4,568,615 Swiss Franc ............ 4,415,827 6/05/09 -- (411,333)
2,514,355 Poland Zloty ........... 827,635 6/10/09 -- (78,306)
436,320,000 Kazakhstani Tenge ...... 3,511,630 6/26/09 -- (644,309)
6,900,000 Poland Zloty ........... 3,166,590 6/30/09 -- (1,112,754)
2,750,000 Swiss Franc ............ 2,684,446 6/30/09 -- (272,940)
1,800,000 Poland Zloty ........... 861,038 7/20/09 -- (325,786)
208,055,500,000 Indonesian Rupiah ...... 21,500,000 7/29/09 -- (2,266,767)
115,616,100 Malaysian Ringgit ...... 35,800,000 7/29/09 -- (3,398,655)
67,360,000,000 Indonesian Rupiah ...... 6,926,478 9/04/09 -- (749,416)
4,402,925 Poland Zloty ........... 1,852,966 9/04/09 -- (546,281)
121,407,000 Chinese Yuan ........... 17,697,813 9/23/09 214,548 --
2,200,000 Australian Dollar ...... 1,439,900 11/17/09 139,596 --
2,700,000 Poland Zloty ........... 872,657 11/24/09 -- (73,769)
6,000,000 Malaysian Ringgit ...... 1,635,992 12/14/09 44,524 --
10,146,672 Swiss Franc ............ 8,893,568 1/22/10 42,358 --
7,000,000 Poland Zloty ........... 2,046,963 1/25/10 20,434 --
3,297,000,000 South Korean Won ....... 2,424,265 2/12/10 184,245 --
5,000,000 Swiss Franc ............ 4,324,885 3/04/10 83,574 --
4,800,000 Poland Zloty ........... 1,371,429 3/17/10 44,675 --
11,778,110,000 South Korean Won ....... 8,770,000 4/01/10 565,505 --
165,419,010 Mexican Peso ........... 11,070,000 4/05/10 317,744 --
CONTRACTS TO SELL
57,800,000 Malaysian Ringgit ...... 15,840,824 7/29/09 -- (357,592)
Unrealized appreciation (depreciation) on offsetting forward exchange
contracts 2,103,677 (6,334,015)
---------- ------------
Unrealized appreciation (depreciation) on forward exchange
contracts ....................................................... 3,988,369 (16,571,923)
---------- ------------
Net unrealized appreciation (depreciation) on forward exchange
contracts .................................................... $(12,583,554)
============
24 | Semiannual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
9. CONCENTRATION OF RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.
10. CREDIT FACILITY
Effective January 23, 2009, the Fund, together with other U.S. registered and
foreign investment funds managed by Franklin Templeton Investments
(individually, "Borrower"; collectively "Borrowers"), entered into a joint
syndicated senior unsecured credit facility totaling $725 million (Global Credit
Facility) to provide a source of funds to the Borrowers for temporary and
emergency purposes, including the ability to meet future unanticipated or
unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to
interest charged on any borrowings made by the Fund and other costs incurred by
the Fund, pay its share of fees and expenses incurred in connection with the
implementation and maintenance of the Global Credit Facility, based upon its
relative share of the aggregate net assets of all of the Borrowers, including an
annual commitment fee based upon the unused portion of the Global Credit
Facility. During the period, the Fund incurred commitment fees of $411 of its
pro rata portion of the Global Credit Facility, which is reflected in Other
expenses on the Statement of Operations. During the period ended April 30, 2009,
the Fund did not utilize the Global Credit Facility.
11. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on November 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Fund's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
Semiannual Report | 25
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
11. FAIR VALUE MEASUREMENTS (CONTINUED)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
The following is a summary of the inputs used as of April 30, 2009, in valuing
the Fund's assets and liabilities carried at fair value:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
----------- ------------ ------- ------------
ASSETS:
Investments in Securities $64,071,770 $406,813,211 $-- $470,884,981
Other Financial Instruments(a) -- 3,988,369 -- 3,988,369
LIABILITIES:
Other Financial Instruments(a) -- 16,571,923 -- 16,571,923
(a) Other financial instruments may include unrealized appreciation or
depreciation on forward exchange contracts.
12. NEW ACCOUNTING PRONOUNCEMENTS
In March 2008, FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
(SFAS 161), which expands disclosures about derivative investments and hedging
activities. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008. The Trust believes applying the various provisions of
SFAS 161 will not have a material impact on its financial statements.
In April 2009, FASB issued FASB Staff Position FSP FAS 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP
FAS 157-4), which provides additional guidance when the volume and level of
activity for the asset or liability measured at fair value have significantly
decreased. Additionally, FSP FAS 157-4 amends SFAS 157, expanding disclosure
requirements by reporting entities surrounding the major categories of assets
and liabilities carried at fair value. FSP FAS 157-4 is effective for interim
and annual periods ending after June 15, 2009. The Trust is currently evaluating
the impact, if any, of applying FSP FAS 157-4.
In May 2009, the Financial Accounting Standards Board (FASB) issued Statement
No. 165, "subsequent Events", which is intended to establish general standards
of accounting for and disclosure of events that occur after the balance sheet
date but before the statements are issued or are available to be issued. FASB
165 is effective for interim or annual financial periods ending after June 15,
2009, the adoption of FASB 165 will not have a material impact on the financial
statements.
26 | Semiannual Report
Franklin Templeton Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
ABBREVIATIONS
CURRENCY
AUD - Australian Dollar
CHF - Swiss Francs
JPY - Japanese Yen
NOK - Norwegian Krone
SEK - Swedish Krona
SELECTED PORTFOLIO
FHLB - Federal Home Loan Bank
Semiannual Report | 27
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION
FRANKLIN TEMPLETON HARD CURRENCY FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held February 24, 2009, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for Franklin Templeton Hard Currency Fund
(Fund). In reaching this decision, the Board took into account information
furnished throughout the year at regular Board meetings, as well as information
prepared specifically in connection with the annual renewal review process.
Information furnished and discussed throughout the year included investment
performance reports and related financial information for the Fund, as well as
periodic reports on shareholder services, legal, compliance, pricing, brokerage
commissions and execution and other services provided by the Investment Manager
(Manager) and its affiliates. Information furnished specifically in connection
with the renewal process included a report for the Fund prepared by Lipper, Inc.
(Lipper), an independent organization, as well as additional material, including
a Fund profitability analysis report prepared by management. The Lipper report
compared the Fund's investment performance and expenses with those of other
mutual funds deemed comparable to the Fund as selected by Lipper. The Fund
profitability analysis report discussed the profitability to Franklin Templeton
Investments from its overall U.S. fund operations, as well as on an individual
fund-by-fund basis. Included with such profitability analysis report was
information on a fund-by-fund basis listing portfolio managers and other
accounts they manage, as well as information on management fees charged by the
Manager and its affiliates including management's explanation of differences
where relevant and a three-year expense analysis with an explanation for any
increase in expense ratios. Additional material accompanying such report was a
memorandum prepared by management describing project initiatives and capital
investments relating to the services provided to the Fund by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale and a comparative analysis concerning transfer agent fees
charged the Fund. Such material also discussed some of the actions taken by
management in coping with problems arising out of the past year's financial
upheaval.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's
28 | Semiannual Report
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
opinion was based, in part, upon periodic reports furnished it showing that the
investment policies and restrictions for the Fund were consistently complied
with as well as other reports periodically furnished the Board covering matters
such as the compliance of portfolio managers and other management personnel with
the code of ethics adopted throughout the Franklin Templeton fund complex, the
adherence to fair value pricing procedures established by the Board, and the
accuracy of net asset value calculations. The Board also noted the extent of
benefits provided Fund shareholders from being part of the Franklin Templeton
family of funds, including the right to exchange investments between the same
class of funds without a sales charge, the ability to reinvest Fund dividends
into other funds and the right to combine holdings in other funds to obtain a
reduced sales charge. Favorable consideration was given to management's
continuous efforts and expenditures in establishing back-up systems and recovery
procedures to function in the event of a natural disaster, it being noted that
such systems and procedures had functioned smoothly during the Florida
hurricanes and blackouts experienced in recent years. Among other factors taken
into account by the Board were the Manager's best execution trading policies,
including a favorable report by an independent portfolio trading analytical
firm. Consideration was also given to the experience of the Fund's portfolio
management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of a portfolio manager's bonus compensation was the
relative investment performance of the funds he or she managed and that a
portion of such bonus was required to be invested in a predesignated list of
funds within such person's fund management area so as to be aligned with the
interests of Fund shareholders. The Board also took into account the quality of
transfer agent and shareholder services provided Fund shareholders by an
affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties, and the continuous enhancements to and
high industry ranking given the Franklin Templeton website. Particular attention
was given to the overall performance and actions taken by the Manager and its
affiliates in response to problems arising out of the market turmoil and
financial crisis experienced during the past year. In this respect, the Board
noted that management's independent credit analysis and diligent risk management
procedures had minimized exposure of funds within the Franklin Templeton complex
to subprime mortgages and that its continuous monitoring of counterparty credit
risk had limited fund exposure to firms experiencing financial difficulties like
Bear Stearns and AIG. The same type of conservative approach and attention to
risk had also prevented any structured investment products or other volatile
instruments from being held in the portfolios of any of the money market funds
within the Franklin Templeton complex, including the sweep money fund utilized
by many of the funds as part of their cash management. The Board also took into
account, among other things, management's efforts in establishing a $725 million
global credit facility for the benefit of the funds and other accounts managed
by Franklin Templeton Investments to provide a source of cash for temporary and
emergency purposes or to meet unusual redemption requests as well as the
Semiannual Report | 29
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
strong financial position of the Manager's parent company and its commitment to
the mutual fund business. The Board also noted that during the past year
Franklin Templeton Investments, like many other fund managers, had announced a
hiring freeze and implemented employee reductions, and the Board discussed with
management the nature of such reductions and steps being taken to minimize any
negative impact on the nature and quality of services being provided the Fund.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. In assessing
such performance, consideration was given to the Fund's performance as set forth
in the Lipper report furnished for the agreement renewal. The Lipper report
prepared for the Fund showed the investment performance of its Class A shares
during 2008, as well as for the previous 10 years ended December 31, 2008, in
comparison to a performance universe consisting of all retail and institutional
international income funds as selected by Lipper. The Lipper report showed the
Fund's income return during 2008 was in the second-lowest quintile of its
performance universe, and on an annualized basis was in the second-highest
quintile of such universe for the previous three- and five-year periods and in
the middle quintile for the previous 10-year period. The Fund's total return
during 2008 placed it in the second-lowest quintile of such universe as shown in
the Lipper report and its total return on an annualized basis during the
previous three- and five-year periods was in the second-highest quintile of such
universe, and during the previous 10-year period was in the second-lowest
quintile of such universe. The investment objective of this Fund is to provide a
hedge against the U.S. dollar and the Fund's prospectus restriction requires it
keep the weighted maturity of its investments to less than 120 days, which
differs from many of the international funds in its performance universe. In
discussing 2008 performance, management noted such objective and restrictions
and pointed out the strength of the U.S. dollar during such period. The Board
believed the Fund's recent Lipper report on performance largely reflected its
investment objective and restrictions and that no change in portfolio management
or investment strategy was warranted.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group
under the Lipper report. Lipper expense data is based upon historical
information taken from each fund's most recent annual report and, as a result of
the severe decline in mutual fund industry assets during the last quarter of
2008, is based on asset levels that are higher than the level currently existing
for most funds. While recognizing the limitations inherent in Lipper's
methodology and recognizing that current expense ratios may increase as assets
decline, the Board believed that the independent analysis conducted by Lipper
remained an appropriate measure of comparative expenses. In reviewing
comparative costs, Lipper provides information on the Fund's contractual
investment management fee in comparison with the contractual investment
management fee that would have been
30 | Semiannual Report
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
charged by other funds within its Lipper expense group assuming they were
similar in size to the Fund, as well as the actual total expenses of the Fund in
comparison with those of its peer group. The Lipper contractual investment
management fee analysis considers administrative charges to be part of
management fees, and total expenses, for comparative consistency, are shown by
Lipper for Fund Class A shares. The results of such expense comparisons showed
that the contractual investment management fee rate for the Fund was at the
median for its Lipper expense group, and its actual total expense rate was in
the second least expensive quintile of such group. The Board was satisfied with
the management fee and total expenses of the Fund in comparison to its Lipper
expense group.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this into account in assessing the significance of the Fund profitability
analysis, the Board recognized such analysis was made at a given point in time
and that the decline in assets and effect on profitability would be reflected in
the profitability analysis covering Franklin Resources' 2009 fiscal year period.
In reviewing the analysis, attention was given to the methodology followed in
allocating costs to the Fund, it being recognized that allocation methodologies
are inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC and other regulatory requirements. In
addition, the Board considered a third-party
Semiannual Report | 31
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
study comparing the profitability of the Manager's parent on an overall basis as
compared to other publicly held managers broken down to show profitability from
management operations exclusive of distribution expenses, as well as
profitability including distribution expenses. The Board also considered the
extent to which the Manager and its affiliates might derive ancillary benefits
from fund operations, including its interest in a joint venture entity that
financed up-front commissions paid to brokers/dealers who sold fund Class B
shares prior to February 2005 when the offering of such shares was discontinued,
as well as potential benefits resulting from allocation of fund brokerage and
the use of commission dollars to pay for research. Based upon its consideration
of all these factors, the Board determined that the level of profits realized by
the Manager and its affiliates from providing services to the Fund was not
excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The fee structure under the
Fund's investment management agreement provides for a management fee of 0.65% at
all asset levels. In considering the need for breakpoints, management expressed
the view that such fee schedule is low for this type of fund and anticipates
economies of scale that may exist as the Fund grows to a larger size. In support
of this position, management pointed out the Fund's favorable fee and expense
comparison within its Lipper expense group. At December 31, 2008, the Fund had
net assets of approximately $607 million, and the Board accepted management's
position but intends to monitor future growth in Fund assets and the
appropriateness of adding investment management fee breakpoints.
PROXY VOTING POLICIES AND PROCEDURES
The Trust's investment manager has established Proxy Voting Policies and
Procedures (Policies) that the Trust uses to determine how to vote proxies
relating to portfolio securities. Shareholders may view the Trust'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 (954) 527-7678 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 Trust's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
32 | Semiannual Report
Franklin Templeton Global Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN TEMPLETON HARD CURRENCY FUND
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. 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 (800)
SEC-0330.
Semiannual Report | 33
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Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(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.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(3)
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(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(4)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust(8)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) 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.
(3.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(4.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(5.) The fund invests primarily in insured municipal securities.
(6.) These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.
(7.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.
(8.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
04/09 Not part of the semiannual report
(FRANKLIN TEMPLETON INVESTMENTS (R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TEMPLETON
HARD CURRENCY FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(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 S2009 06/09
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 12(a)(1), 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 John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. 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 11. 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 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting 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/Laura F. Fergerson
------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date June 25, 2009
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/Laura F. Fergerson
-------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date June 25, 2009
By /S/Gaston Gardey
---------------------
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date June 25, 2009