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 811-05878
FRANKLIN VALUE INVESTORS TRUST
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(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: 4/30/07
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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APRIL 30, 2007
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Franklin Balance Sheet
Investment Fund
Franklin Large Cap
Value Fund
Franklin MicroCap
Value Fund
Franklin MidCap
Value Fund
Franklin Small Cap
Value Fund
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER
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WANT TO RECEIVE
THIS DOCUMENT
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VALUE INVESTORS TRUST
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o 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.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the semiannual report
Contents
SHAREHOLDER LETTER ........................................................ 1
SEMIANNUAL REPORT
Economic and Market Overview .............................................. 3
Franklin Balance Sheet Investment Fund .................................... 5
Franklin Large Cap Value Fund ............................................. 13
Franklin MicroCap Value Fund .............................................. 21
Franklin MidCap Value Fund ................................................ 29
Franklin Small Cap Value Fund ............................................ 37
Financial Highlights and
Statements of Investments ................................................ 45
Financial Statements ..................................................... 86
Notes to Financial Statements ............................................ 95
Meeting of Shareholders .................................................. 110
Shareholder Information .................................................. 121
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Semiannual Report
Economic and Market Overview
During the six months ended April 30, 2007, the U.S. economy advanced at a
moderate but slowing pace. Gross domestic product (GDP) grew an annualized 2.5%
in the fourth quarter of 2006 and slowed to an estimated annualized 0.6% in
2007's first quarter. Although GDP rose 3.3% in 2006 on strong domestic demand
and a healthy increase in exports, the U.S. entered 2007 with a record current
account deficit. Corporate profits and government spending generally remained
robust, but manufacturing activity indicated a downturn. The struggling housing
market grew more fragile with the abrupt unraveling of the subprime mortgage
market. This exacerbated already weak housing prices and an inventory glut in
most of the nation's residential real estate markets.
The unemployment rate increased slightly, from 4.4% to 4.5%, as overall job
growth slowed in the face of rising labor costs. 1 Jobs in vehicle manufacturing
and housing-related industries experienced declines stemming from reduced
consumer demand. Even though tight labor markets and the associated wage income
growth supported consumer spending, consumer confidence waned in March, and
large purchases, including those for vehicles and homes, dropped substantially.
Gasoline prices rose in first quarter 2007 as oil hit a six-month high due to
tight supply and high demand, refinery maintenance issues, and ongoing
geopolitical tensions in the Middle East and Africa. Overall, the core Consumer
Price Index (CPI) rose 2.3% for the 12 months ended April 30, 2007, which was
higher than the 2.2% 10-year average. 2
In its first meetings of 2007, the Federal Reserve Board (Fed) left short-term
rates at 5.25%. However, the Fed changed its stance in its March 21 statement
that communicates policy and appeared to drop its long-held tightening bias. The
Fed indicated that core inflation was somewhat elevated and remained a key
concern. Nevertheless, the markets continued to anticipate the Fed would lower
the federal funds target rate.
1. Source: Bureau of Labor Statistics.
2. Source: Bureau of Labor Statistics. Core CPI excludes food and energy
costs.
Semiannual Report | 3
U.S. investors entered 2007 cautious after more than four years of bull market
gains. The overall domestic equity market rose during the six months under
review, but was essentially flat during the first quarter of 2007 after global
stock market sell-offs in late February and mid-March. However, markets
rebounded late in the period amid generally strong corporate earnings reports.
Overall, the blue chip stocks of the Dow Jones Industrial Average appreciated
9.41%, and the broader Standard & Poor's 500 Index (S&P 500) rose 8.60%, while
the technology-heavy NASDAQ Composite Index gained 7.12% for the six months
ended April 30, 2007. 3 Utilities, materials and energy stocks performed
particularly well.
3. Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is
price weighted based on the average market price of 30 blue chip stocks of
companies that are generally industry leaders. The S&P 500 consists of 500
stocks chosen for market size, liquidity and industry group
representation. Each stock's weight in the index is proportionate to its
market value. The S&P 500 is one of the most widely used benchmarks of
U.S. equity performance. The NASDAQ Composite Index measures all NASDAQ
domestic and international based common type stocks listed on The NASDAQ
Stock Market. The index is market value weighted and includes more than
3,000 companies.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF APRIL 30,
2007. 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.
4 | Semiannual Report
Franklin Balance Sheet Investment Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Balance Sheet Investment Fund
seeks high total return, of which capital appreciation and income are
components, by investing most of its assets in equity securities of companies
that we believe are undervalued in the marketplace at the time of purchase but
that have the potential for capital appreciation.
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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 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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We are pleased to bring you Franklin Balance Sheet Investment Fund's semi-annual
report for the period ended April 30, 2007.
PERFORMANCE OVERVIEW
Franklin Balance Sheet Investment Fund - Class A posted a +12.49% cumulative
total return for the six months under review. The Fund outperformed its
benchmark, the Russell 2000(R) Value Index, which posted a +6.36% total return
for the same period. 1 Please note the Fund employs a bottom-up stock selection
process and we invest in securities without regard to benchmark comparisons.
Although this report covers a six-month period, our investment strategy aims for
long-term results. You can find the Fund's long-term performance data in the
Performance Summary beginning on page 8.
INVESTMENT STRATEGY
Our strategy is to buy shares of financially sound, well-established companies
at a low price-to-book value when we have reasonable confidence that book value
will increase over several years. Book value per share is a given company's net
worth or shareholders' equity on an accounting or "book" basis, divided by
shares outstanding. We define "low price-to-book value" as the lower two deciles
(20%) of our investable universe, which we derive from a proprietary database
for screening purposes. This strategy is not aimed at short-term trading gains,
nor do we consider the composition of any index. Rather, we try to identify
individual companies that meet our investment criteria, and we assume at
purchase that we will hold the positions for several years.
1. Source: Standard & Poor's Micropal. The Russell 2000 Value Index is market
capitalization weighted and measures performance of those Russell 2000
Index companies with lower price-to-book ratios and lower forecasted
growth values. The index is unmanaged and includes reinvested dividends.
One cannot invest directly in an index, nor is an index representative of
the Fund's portfolio.
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 50.
Semiannual Report | 5
PORTFOLIO BREAKDOWN
Franklin Balance Sheet Investment Fund
Based on Total Net Assets as of 4/30/07
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Non-Energy Minerals 8.8%
Process Industries 8.0%
Utilities 7.4%
Producer Manufacturing 7.4%
Transportation 6.2%
Life & Health Insurance 6.1%
Property-Casualty Insurance 6.0%
Finance, Rental & Leasing 5.7%
Consumer Durables 4.8%
Retail Trade 4.7%
Specialty Insurance 3.8%
Industrial Services 3.1%
Financial Conglomerates 2.7%
Consumer Non-Durables 2.4%
Other 9.0%
Short-Term Investments & Other Net Assets 13.9%
MANAGER'S DISCUSSION
During the six months under review, we identified five new investment
opportunities: Armstrong World Industries, a building products company that is a
leader in floors and ceilings and which recently emerged from a bankruptcy
brought on by asbestos claims; Employers Holdings, a workers compensation
insurance specialist; KGEN Power, an owner of independent gas fired power
generation assets; Smithfield Foods, a producer of hogs and fresh and packaged
meats; and Werner Enterprises, a truckload shipper with particular strength in
serving chain retailers. In September 2006, prior to the period under review,
Smithfield Foods entered into an agreement to acquire Premium Standard Farms,
which we already held in the Fund, in a mostly stock transaction.
We also added to existing positions Bowater, Furniture Brands International, Old
Republic International, Radian Group, Spansion, Universal and Watson
Pharmaceuticals. These companies have little in common apart from satisfying our
investment criteria. In each case we believed we were taking advantage of
negative perceptions in the market to establish or increase positions that would
produce positive results in future years. Cash deployed into new and existing
positions totaled $129 million in the six months ended April 30.
Portfolio sales totaled $197 million for the period. Sales were in response to
price appreciation and three completed buyouts: AmerUs Group, Aztar and
Intergraph. Sales generated $142 million in capital gains, all long term. All
the investments that generated these realized gains were made in accordance with
our stated investment strategy, and the outcomes were consistent with our
expectations. No positions were entirely eliminated apart from the buyouts.
Three of our holdings announced merger proposals during the period. Champps
Entertainment (upscale casual dining) received a bid from a financial buyer that
was ultimately abandoned. Two other holdings, Hanover Compressor (gas
compression) and Radian (mortgage insurance), agreed to stock mergers with
competitors, Universal Compression and MGIC, respectively, that we
coincidentally also hold in the Fund. We believe both deals, which are subject
to shareholder approval, are positive developments. Including the Smithfield
Foods/Premium Standard deal, we have three pairs of holdings involved in
strategic combinations.
Steel holdings contributed greatly to performance in the six months under
review, as they did in fiscal year 2006, among them Reliance Steel & Aluminum,
United States Steel and Chaparral Steel. Consumers of steel like CNH Global, a
manufacturer of construction and farm equipment, and Trinity Industries, a maker
of railcars, inland barges, construction products
6 | Semiannual Report
and energy equipment, were also outstanding contributors to performance. Other
contributors included Bunge and Monsanto, both involved in agri-business, and
both expected to benefit from biofuels development, Prudential Financial
(financial and retirement services), Vail Resorts (ski resorts and hotels),
Entergy (electric utility), Teekay Shipping (oil tankers), and Big Lots
(closeout retailing). As has been typical for the Fund, performance mainly came
from long-held positions. KGEN Power, a position initiated during the period
under review, was unusual in being an outstanding contributor to current
results.
There were also positions that detracted from performance, including several
that we added to during the period. Chief detractors included Alaska Air Group
(passenger airline), Charming Shoppes (plus-size women's apparel), Pulte Homes
(homebuilder), Spansion (flash memory), Tecumseh Products (compressors, gasoline
engines and electric motors), Furniture Brands International (residential
furniture), Freddie Mac (mortgage guarantor) and Old Republic International
(property-casualty, title insurance and mortgage insurance).
Thank you for your continued participation in Franklin Balance Sheet Investment
Fund. We look forward to serving your future investment needs.
[PHOTO OMITTED] /s/Bruce C. Baughman
Bruce C. Baughman, CPA
Lead Portfolio Manager
William J. Lippman
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin Balance Sheet Investment Fund
TOP 10 EQUITY HOLDINGS
Franklin Balance Sheet Investment Fund
4/30/07
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COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
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Prudential Financial Inc. 2.4%
FINANCIAL CONGLOMERATES
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CIT Group Inc. 2.3%
FINANCE, RENTAL & LEASING
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Bunge Ltd. 2.1%
PROCESS INDUSTRIES
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Reliance Steel & Aluminum Co. 2.1%
NON-ENERGY MINERALS
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Nucor Corp. 2.0%
NON-ENERGY MINERALS
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Corn Products International Inc. 2.0%
PROCESS INDUSTRIES
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Freddie Mac 1.9%
FINANCE, RENTAL & LEASING
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Trinity Industries Inc. 1.8%
PRODUCER MANUFACTURING
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United States Steel Corp. 1.8%
NON-ENERGY MINERALS
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Sierra Pacific Resources 1.6%
UTILITIES
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THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2007, 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.
Semiannual Report | 7
Performance Summary as of 4/30/07
FRANKLIN BALANCE SHEET INVESTMENT FUND
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
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CLASS A (SYMBOL: FRBSX) CHANGE 4/30/07 10/31/06
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Net Asset Value (NAV) +$3.10 $72.34 $69.24
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DISTRIBUTIONS (11/1/06-4/30/07)
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Dividend Income $0.8828
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Short-Term Capital Gain $0.0043
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Long-Term Capital Gain $4.2751
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TOTAL $5.1622
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CLASS B (SYMBOL: FBSBX) CHANGE 4/30/07 10/31/06
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Net Asset Value (NAV) +$3.25 $71.32 $68.07
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DISTRIBUTIONS (11/1/06-4/30/07)
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Dividend Income $0.3548
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Short-Term Capital Gain $0.0043
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Long-Term Capital Gain $4.2751
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TOTAL $4.6342
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CLASS C (SYMBOL: FCBSX) CHANGE 4/30/07 10/31/06
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Net Asset Value (NAV) +$3.26 $71.43 $68.17
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DISTRIBUTIONS (11/1/06-4/30/07)
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Dividend Income $0.3543
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Short-Term Capital Gain $0.0043
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Long-Term Capital Gain $4.2751
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TOTAL $4.6337
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CLASS R (SYMBOL: FBSRX) CHANGE 4/30/07 10/31/06
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Net Asset Value (NAV) +$3.10 $71.88 $68.78
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DISTRIBUTIONS (11/1/06-4/30/07)
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Dividend Income $0.7444
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Short-Term Capital Gain $0.0043
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Long-Term Capital Gain $4.2751
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TOTAL $5.0238
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8 | Semiannual Report
Performance Summary (CONTINUED)
PRICE AND DISTRIBUTION INFORMATION (CONTINUED)
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ADVISOR CLASS (SYMBOL: FBSAX) CHANGE 4/30/07 10/31/06
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Net Asset Value (NAV) +$3.03 $72.43 $69.40
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DISTRIBUTIONS (11/1/06-4/30/07)
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Dividend Income $1.0492
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Short-Term Capital Gain $0.0043
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Long-Term Capital Gain $4.2751
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TOTAL $5.3286
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PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY
CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +12.49% +13.77% +98.14% +262.94%
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Average Annual Total Return 2 +6.03% +7.22% +13.31% +13.09%
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Value of $10,000 Investment 3 $10,603 $10,722 $18,675 $34,211
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Avg. Ann. Total Return (3/31/07) 4 +5.23% +12.92% +12.68%
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Total Annual Operating Expenses 5 0.94%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (3/1/01)
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Cumulative Total Return 1 +12.07% +12.90% +90.74% +129.68%
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Average Annual Total Return 2 +8.07% +8.90% +13.55% +14.44%
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Value of $10,000 Investment 3 $10,807 $10,890 $18,874 $22,968
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Avg. Ann. Total Return (3/31/07) 4 +6.80% +13.15% +14.08%
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Total Annual Operating Expenses 5 1.70%
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CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (3/1/01)
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Cumulative Total Return 1 +12.08% +12.91% +90.73% +129.81%
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Average Annual Total Return 2 +11.08% +11.91% +13.79% +14.45%
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Value of $10,000 Investment 3 $11,108 $11,191 $19,073 $22,981
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Avg. Ann. Total Return (3/31/07) 4 +9.82% +13.40% +14.09%
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Total Annual Operating Expenses 5 1.69%
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CLASS R 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/02)
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Cumulative Total Return 1 +12.35% +13.47% +95.56% +110.96%
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Average Annual Total Return 2 +12.35% +13.47% +14.36% +15.05%
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Value of $10,000 Investment 3 $11,235 $11,347 $19,556 $21,096
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Avg. Ann. Total Return (3/31/07) 4 +11.37% +13.96% +14.63%
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Total Annual Operating Expenses 5 1.20%
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Semiannual Report | 9
Performance Summary (CONTINUED)
PERFORMANCE (CONTINUED)
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ADVISOR CLASS 6 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +12.62% +14.03% +100.48% +268.18%
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Average Annual Total Return 2 +12.62% +14.03% +14.93% +13.92%
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Value of $10,000 Investment 3 $11,262 $11,403 $20,048 $36,818
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Avg. Ann. Total Return (3/31/07) 4 +11.91% +14.53% +13.51%
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Total Annual Operating Expenses 5 0.70%
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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 1-800/342-5236.
ENDNOTES
INVESTING IN SMALLER COMPANIES INVOLVES ADDITIONAL RISKS, AS THE PRICE OF SUCH
SECURITIES CAN BE VOLATILE, PARTICULARLY OVER THE SHORT TERM. INVESTORS SHOULD
EXPECT FLUCTUATION IN THE VALUE OF THEIR INVESTMENT, ESPECIALLY OVER THE SHORT
TERM. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT
RISKS.
CLASS A: Prior to 1/2/01, these shares were offered at a lower initial
sales charge; thus actual total returns may differ.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as
described in the prospectus. These shares have higher annual
fees and expenses than Class A shares.
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. Figures are as stated in the Fund's prospectus current as of the date of
this report.
6. Effective 3/1/01, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 3/1/01, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 2/28/01, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 3/1/01
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were +144.21% and +15.59%.
10 | Semiannual Report
Your Fund's Expenses
FRANKLIN BALANCE SHEET INVESTMENT FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
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.
Semiannual Report | 11
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ----------------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 11/1/06 VALUE 4/30/07 PERIOD* 11/1/06-4/30/07
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,124.90 $4.69
- ----------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.38 $4.46
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,120.70 $8.68
- ----------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.61 $8.25
- ----------------------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,120.80 $8.62
- ----------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.20
- ----------------------------------------------------------------------------------------------------------------------------
CLASS R
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,123.50 $6.05
- ----------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.09 $5.76
- ----------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,126.20 $3.43
- ----------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.57 $3.26
- ----------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
0.89%; B: 1.65%; C: 1.64%; R: 1.15%; and Advisor: 0.65%), multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
12 | Semiannual Report
Franklin Large Cap Value Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Large Cap Value Fund seeks
long-term capital appreciation by investing at least 80% of its net assets in
large capitalization companies that we believe are undervalued. We define large
capitalization companies as those with market capitalizations that are similar
in size at the time of purchase to those in the Russell 1000(R) Index. 1
- --------------------------------------------------------------------------------
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 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
This semiannual report for Franklin Large Cap Value Fund covers the period ended
April 30, 2007.
PERFORMANCE OVERVIEW
Franklin Large Cap Value Fund - Class A posted a +6.54% cumulative total return
for the six months under review. The Fund underperformed its benchmark, the
Russell 1000 Value Index, which posted a +9.79% total return for the same
period. 2 Please note the Fund employs a bottom-up stock selection process and
we invest in securities without regard to benchmark comparisons. Although this
report covers a six-month period, our investment strategy aims for long-term
results. You can find the Fund's long-term performance data in the Performance
Summary beginning on page 16.
INVESTMENT STRATEGY
We seek to maintain a diversified portfolio of large-capitalization stocks that
are attractively valued relative to the overall market, the company's industry
group or the company's historical valuation. We purchase stocks that are out of
favor in the market for reasons we believe will prove to be temporary in nature.
We believe this contrarian approach will provide favorable returns for our
shareholders over time.
1. The Russell 1000 Index is market capitalization weighted and measures
performance of the 1,000 largest companies in the Russell 3000(R) Index,
which represent approximately 92% of total market capitalization in the
Russell 3000 Index.
2. Source: Standard & Poor's Micropal. The Russell 1000 Value Index is market
capitalization weighted and measures performance of those Russell 1000
Index companies with lower price-to-book ratios and lower forecasted
growth values. The index is unmanaged and includes reinvested dividends.
One cannot invest directly in an index, nor is an index representative of
the Fund's portfolio.
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 60.
Semiannual Report | 13
PORTFOLIO BREAKDOWN
Franklin Large Cap Value Fund
Based on Total Net Assets as of 4/30/07
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Producer Manufacturing 13.2%
Major Banks 10.2%
Energy Minerals 9.9%
Consumer Non-Durables 7.1%
Property-Casualty Insurance 5.6%
Technology Services 4.8%
Health Technology 4.4%
Process Industries 3.9%
Financial Conglomerates 3.9%
Finance, Rental & Leasing 3.6%
Investment Banks & Brokers 3.5%
Consumer Services 3.4%
Multi-Line Insurance 2.8%
Investment Managers 2.4%
Specialty Insurance 2.3%
Utilities 2.1%
Savings Banks 2.0%
Other 6.9%
Short-Term Investments & Other Net Assets 8.0%
MANAGER'S DISCUSSION
During the reporting period, pharmaceutical and medical devices company Abbott
Laboratories was the largest contributor to Fund performance. The company's
stock rose amid strong results from clinical trials for Xience, the company's
drug-eluting stent used for carotid artery disease. In addition, sales of
Abbott's arthritis drug Humira continued to grow rapidly. Diversified utility
Entergy provided the second-highest contribution to return during the period.
The stock's gain reflected solid growth in the company's nuclear power segment,
which benefited from higher pricing. The stock was also supported by a favorable
market environment for utility stocks in general. Integrated oil giant Exxon
Mobil made the third-highest contribution to performance. Exxon distinguished
itself from most of its peers in first quarter 2007 by posting higher earnings
than in the prior year despite lower oil and natural gas prices. Most other oil
companies reported lower earnings for the year's first quarter.
Freddie Mac detracted most from the Fund's returns. The stock fell in value as
earnings for the second half of 2006 were hurt by a difficult interest rate
environment as a flat yield curve narrowed net interest margins. Bank of America
was the second-largest detractor from performance. Although the company reported
solid earnings, concerns arose for many investors that increasing defaults for
subprime mortgages would lead to a general deterioration of credit conditions.
Uniform rental company Cintas had the third-largest negative impact on Fund
returns. The stock declined after the company's fiscal third quarter results
failed to meet analysts' expectations, as uniform rentals faced sales pressure.
Given our concerns about the company's future growth prospects, we sold our
Cintas position.
We initiated two positions during the period under review. Apache is an oil and
gas exploration company with a history of increasing reserves and profitability.
The company's shares traded at a lower price-to-earnings ratio than most of its
peers at period-end. The other new position is retailer Wal-Mart Stores. The
company's stock has underperformed its peer group for several years, and its
valuation became attractive to us. In addition, we believe an announced
reduction in capital expenditures and square footage growth could give the
company more financial flexibility to enhance shareholder value through share
repurchases and increased dividends.
14 | Semiannual Report
In addition to our sale of Cintas, we sold our entire positions in two other
companies during the reporting period. One was H.J. Heinz, as we believed the
shares were fully valued. We also eliminated our position in commercial printer
R.R. Donnelley & Sons due to valuation and our concerns about the unexpected
resignation of the company's chief executive officer late in the period.
Thank you for your continued participation in Franklin Large Cap Value Fund. We
look forward to serving your future investment needs.
[PHOTO OMITTED] /s/Stephen T. Madonna
Stephen T. Madonna, CFA
Lead Portfolio Manager
Bruce C. Baughman, CPA
William J. Lippman
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin Large Cap Value Fund
TOP 10 EQUITY HOLDINGS
Franklin Large Cap Value Fund
4/30/07
- -------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- -------------------------------------------------------------------------------
Citigroup Inc. 3.9%
FINANCIAL CONGLOMERATES
- -------------------------------------------------------------------------------
Exxon Mobil Corp. 3.7%
ENERGY MINERALS
- -------------------------------------------------------------------------------
General Electric Co. 3.7%
PRODUCER MANUFACTURING
- -------------------------------------------------------------------------------
Freddie Mac 3.6%
FINANCE, RENTAL & LEASING
- -------------------------------------------------------------------------------
Bank of America Corp. 3.6%
MAJOR BANKS
- -------------------------------------------------------------------------------
The Procter & Gamble Co. 3.5%
CONSUMER NON-DURABLES
- -------------------------------------------------------------------------------
Illinois Tool Works Inc. 3.4%
PRODUCER MANUFACTURING
- -------------------------------------------------------------------------------
Wachovia Corp. 3.4%
MAJOR BANKS
- -------------------------------------------------------------------------------
U.S. Bancorp 3.3%
MAJOR BANKS
- -------------------------------------------------------------------------------
International Business Machines Corp. 3.2%
TECHNOLOGY SERVICES
- -------------------------------------------------------------------------------
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2007, 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.
Semiannual Report | 15
Performance Summary as of 4/30/07
FRANKLIN LARGE CAP VALUE FUND
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: FLVAX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.00 $16.55 $16.55
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2137
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.0645
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.7767
- --------------------------------------------------------------------------------
TOTAL $1.0549
- --------------------------------------------------------------------------------
CLASS B (SYMBOL: FBLCX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.04 $16.38 $16.34
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.1048
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.0645
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.7767
- --------------------------------------------------------------------------------
TOTAL $0.9460
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: FLCVX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.03 $16.37 $16.34
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.1141
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.0645
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.7767
- --------------------------------------------------------------------------------
TOTAL $0.9553
- --------------------------------------------------------------------------------
CLASS R (SYMBOL: FLCRX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.01 $16.43 $16.42
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.1883
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.0645
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.7767
- --------------------------------------------------------------------------------
TOTAL $1.0295
- --------------------------------------------------------------------------------
16 | Semiannual Report
Performance Summary (CONTINUED)
PRICE AND DISTRIBUTION INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: N/A) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.03 $16.53 $16.56
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2688
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.0645
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.7767
- --------------------------------------------------------------------------------
TOTAL $1.1100
- --------------------------------------------------------------------------------
PERFORMANCE 1
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY
CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
- ---------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +6.54% +12.45% +48.21% +89.49%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +0.41% +5.96% +6.92% +8.75%
- ---------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $10,041 $10,596 $13,972 $17,860
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +5.48% +5.89% +8.33%
- ---------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6 1.39%
- ---------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +6.17% +11.78% +43.72% +81.54%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +2.17% +7.78% +7.22% +9.01%
- ---------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $10,217 $10,778 $14,172 $18,154
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +7.17% +6.16% +8.60%
- ---------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6 2.04%
- ---------------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +6.17% +11.77% +43.63% +81.54%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +5.17% +10.77% +7.51% +9.01%
- ---------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $10,517 $11,077 $14,363 $18,154
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +10.16% +6.48% +8.60%
- ---------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6 2.03%
- ---------------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR 3-YEAR INCEPTION (8/1/02)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +6.49% +12.30% +35.41% +74.60%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +6.49% +12.30% +10.63% +12.46%
- ---------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $10,649 $11,230 $13,541 $17,460
- ---------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +11.77% +9.00% +11.89%
- ---------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6 1.54%
- ---------------------------------------------------------------------------------------------------------------
Semiannual Report | 17
Performance Summary (CONTINUED)
PERFORMANCE 1 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------
ADVISOR CLASS 7 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ------------------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +6.70% +12.83% +49.05% +90.56%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +6.70% +12.83% +8.31% +9.78%
- ------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $10,670 $11,283 $14,905 $19,056
- ------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +12.23% +7.25% +9.36%
- ------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6 1.04%
- ------------------------------------------------------------------------------------------------------------
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 1-800/342-5236.
ENDNOTES
WHILE STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG
TERM, THEY TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORT TERM. THESE PRICE
MOVEMENTS MAY RESULT FROM FACTORS AFFECTING INDIVIDUAL COMPANIES, INDUSTRIES OR
THE SECURITIES MARKETS AS A WHOLE. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as
described in the prospectus. These shares have higher annual
fees and expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.
1. Past expense reductions by the Fund's manager increased the Fund's total
returns. If the manager had not taken this action, the Fund's total
returns would have been lower.
2. Cumulative total return represents the change in value of an investment
over the periods indicated.
3. Average annual total return represents the average annual change in value
of an investment over the periods indicated. Six-month return has not been
annualized.
4. These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
6. Figures are as stated in the Fund's prospectus current as of the date of
this report.
7. Effective 11/1/05, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 11/1/05, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 10/31/05, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 11/1/05
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were +25.20% and +16.24%.
18 | Semiannual Report
Your Fund's Expenses
FRANKLIN LARGE CAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
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.
Semiannual Report | 19
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- --------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 11/1/06 VALUE 4/30/07 PERIOD* 11/1/06-4/30/07
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,065.40 $6.86
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.15 $6.71
- --------------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,061.70 $10.12
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.98 $9.89
- --------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,061.70 $10.12
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.98 $9.89
- --------------------------------------------------------------------------------------------------------------------
CLASS R
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,064.90 $7.63
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.41 $7.45
- --------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,067.00 $5.07
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.89 $4.96
- --------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
1.34%; B: 1.98%; C: 1.98%; R: 1.49%; and Advisor: 0.99%), multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
20 | Semiannual Report
Franklin MicroCap Value Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin MicroCap Value Fund seeks high
total return, of which capital appreciation and income are components, by
investing at least 80% of its net assets in securities of companies with market
capitalizations under $400 million at the time of purchase, which we believe are
undervalued in the marketplace.
- --------------------------------------------------------------------------------
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 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin MicroCap Value Fund's semiannual report for
the period ended April 30, 2007.
PERFORMANCE OVERVIEW
Franklin MicroCap Value Fund - Class A posted a +15.40% cumulative total return
for the six months under review. The Fund outperformed its benchmark, the
Russell 2000 Value Index, which posted a +6.36% total return for the same
period. 1 Please note the Fund employs a bottom-up stock selection process and
we invest in securities without regard to benchmark comparisons. Although this
report covers a six-month period, our investment strategy aims for long-term
results. You can find the Fund's long-term performance data in the Performance
Summary beginning on page 25.
1. Source: Standard & Poor's Micropal. The Russell 2000 Value Index is market
capitalization weighted and measures performance of those Russell 2000
Index companies with lower price-to-book ratios and lower forecasted
growth values. The index is unmanaged and includes reinvested dividends.
One cannot invest directly in an index, nor is an index representative of
the Fund's portfolio.
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 64.
Semiannual Report | 21
PORTFOLIO BREAKDOWN
Franklin MicroCap Value Fund
Based on Total Net Assets as of 4/30/07
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Producer Manufacturing 19.2%
Consumer Non-Durables 14.0%
Process Industries 7.2%
Industrial Services 5.2%
Transportation 4.8%
Property-Casualty Insurance 4.5%
Retail Trade 4.4%
Consumer Durables 3.7%
Real Estate Development 2.6%
Communications 2.4%
Savings Banks 2.1%
Health Services 2.0%
Other 9.7%
Short-Term Investments & Other Net Assets 18.2%
INVESTMENT STRATEGY
Our strategy is to buy shares of financially sound, well-established companies
at a low price-to-book value, where we have reasonable confidence that book
value should increase over several years. We limit purchases to companies with
market capitalizations of less than $400 million, which we define as
"micro-cap." Book value per share is a company's net worth or shareholders'
equity on an accounting or "book" basis, divided by shares outstanding. This
strategy is not aimed at short-term trading gains, nor do we consider the
composition of any index. Rather, we try to identify individual companies that
meet our investment criteria, and we assume at purchase that we will hold the
positions for several years.
MANAGER'S DISCUSSION
On April 30, 2007, the Fund's total net assets were $534 million, and short-term
investments and other net assets stood at 18.2%, compared with total net assets
of $480 million on October 31, 2006, and short-term investments and other net
assets of 17.5%. The Fund closed to new investors (with the exception of certain
retirement accounts) in January 2004. The close does not restrict existing
shareholders from adding to or reducing their investment in the Fund, except
that once an account is reduced to zero, it may not be reopened unless the Fund
reopens. Net Fund outflows to existing shareholders were $15.6 million during
the six-month period.
We identified two new investment opportunities during the period under review:
Kohlberg Capital, a business development company and investment manager, and
Omega Protein, a producer of fish meal and fish oil for use in agriculture, pet
food and livestock feed and for human consumption. We also added to several
existing positions, including American Pacific, Burnham Holdings, Central Steel
& Wire, Cobra Electronics, Continental Materials, and Handleman. Cash deployed
into new and existing positions totaled $20.4 million during the period.
22 | Semiannual Report
Proceeds from portfolio sales totaled $49.5 million, more than half of which
came as the result of takeovers. These included Aleris International, Case
Pomeroy and Green Mountain Power, where deals announced prior to the period
closed during the period, and Merchants Group that was announced and closed
during the period. Two other deals were announced in the period and are awaiting
approvals: SEMCO Energy, a gas distribution utility, has agreed to a cash bid by
Cap Rock Energy; and OMI, a marine tanker company, has agreed to a cash purchase
by a consortium of tanker operators. The completed deals and terms of the
pending deals represent outcomes consistent with our investment expectations.
The balance of portfolio sales were generally in response to price appreciation,
including some that were among the strongest contributors to Fund performance
during the period under review. The only position eliminated, apart from
takeovers, was CoolBrands International, which we exited at a loss.
Positions that contributed most positively to Fund performance during the six
months included Hardinge (machine tools), Alliance One International (tobacco
leaf processing), RTI International Metals (titanium metal), Atlantic
Tele-Network (telecommunications), Layne Christensen (water, mineral and coal
seam gas drilling), Mercer International (paper pulp), Bresler & Reiner (real
estate development and management), and Village Super Market (grocery
retailing).
Several positions detracted from performance, including some where recent
operating results were disappointing, and a few where financial strength has
eroded since we made our initial investment, including Tecumseh Products, which
makes compressors, small gasoline engines and electric motors; Rockford, a maker
of high-performance sound systems; and Proliance International, a manufacturer
and distributor of automotive heat transfer equipment.
Semiannual Report | 23
TOP 10 EQUITY HOLDINGS
Franklin MicroCap Value Fund
4/30/07
- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
Hardinge Inc. 4.5%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Seneca Foods Corp. 3.6%
CONSUMER NON-DURABLES
- --------------------------------------------------------------------------------
RTI International Metals Inc. 3.3%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Premium Standard Farms Inc. 2.8%
CONSUMER NON-DURABLES
- --------------------------------------------------------------------------------
Atlantic Tele-Network Inc. 2.4%
COMMUNICATIONS
- --------------------------------------------------------------------------------
Delta Apparel Inc. 2.2%
CONSUMER NON-DURABLES
- --------------------------------------------------------------------------------
Alliance One International Inc. 2.1%
CONSUMER NON-DURABLES
- --------------------------------------------------------------------------------
Layne Christensen Co. 2.1%
INDUSTRIAL SERVICES
- --------------------------------------------------------------------------------
Northwest Pipe Co. 2.1%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
International Shipholding Corp. 2.1%
TRANSPORTATION
- --------------------------------------------------------------------------------
Thank you for your continued participation in Franklin MicroCap Value Fund. We
look forward to serving your future investment needs.
[PHOTO OMITTED] /s/Bruce C. Baughman
Bruce C. Baughman, CPA
Lead Portfolio Manager
William J. Lippman
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin MicroCap Value Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2007, 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.
24 | Semiannual Report
Performance Summary as of 4/30/07
FRANKLIN MICROCAP VALUE FUND
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: FRMCX) CHANGE 4/30/07 10/31/06
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.35 $44.67 $41.32
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- ----------------------------------------------------------------------------------------------------------------
Dividend Income $0.5676
- ----------------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $2.2195
- ----------------------------------------------------------------------------------------------------------------
TOTAL $2.7871
- ----------------------------------------------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: N/A) CHANGE 4/30/07 10/31/06
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.30 $44.73 $41.43
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- ----------------------------------------------------------------------------------------------------------------
Dividend Income $0.6684
- ----------------------------------------------------------------------------------------------------------------
Long-Term Capital Gain $2.2195
- ----------------------------------------------------------------------------------------------------------------
TOTAL $2.8879
- ----------------------------------------------------------------------------------------------------------------
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY
CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
- ----------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +15.40% +16.11% +109.16% +329.30%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +8.77% +9.42% +14.54% +15.00%
- ----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,877 $10,942 $19,716 $40,459
- ----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +6.82% +15.10% +14.52%
- ----------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.23%
- ----------------------------------------------------------------------------------------------------------------
ADVISOR CLASS 6 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +15.51% +16.35% +109.90% +330.83%
- ----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +15.51% +16.35% +15.99% +15.73%
- ----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,551 $11,635 $20,990 $43,083
- ----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +13.59% +16.55% +15.24%
- ----------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 0.99%
- ----------------------------------------------------------------------------------------------------------------
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 1-800/342-5236.
Semiannual Report | 25
Performance Summary (CONTINUED)
ENDNOTES
THE FUND'S ABILITY TO INVEST IN SMALLER-COMPANY SECURITIES THAT MAY HAVE LIMITED
LIQUIDITY INVOLVES ADDITIONAL RISKS SUCH AS RELATIVELY SMALL REVENUES, LIMITED
PRODUCT LINES AND SMALL MARKET SHARE. HISTORICALLY, THESE STOCKS HAVE EXHIBITED
GREATER PRICE VOLATILITY THAN LARGER-COMPANY STOCKS, ESPECIALLY OVER THE SHORT
TERM. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT
RISKS.
CLASS A: Prior to 8/3/98, these shares were offered at a lower initial
sales charge; thus actual total returns may differ.
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. Figures are as stated in the Fund's prospectus current as of the date of
this report.
6. Effective 11/1/05, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 11/1/05, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 10/31/05, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 11/1/05
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were +35.33% and +22.46%.
26 | Semiannual Report
Your Fund's Expenses
FRANKLIN MICROCAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
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.
Semiannual Report | 27
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- -----------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 11/1/06 VALUE 4/30/07 PERIOD* 11/1/06-4/30/07
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,154.00 $5.87
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.34 $5.51
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,155.10 $4.60
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.53 $4.31
- -----------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of each class (A: 1.10%
and Advisor: 0.86%), multiplied by the average account value over the
period, multiplied by 181/365 to reflect the one-half year period.
28 | Semiannual Report
Franklin MidCap Value Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin MidCap Value Fund seeks
long-term total return by investing at least 80% of net assets in securities of
mid-capitalization companies that we believe are undervalued. We define
mid-capitalization companies as those with market capitalizations that are
similar in size at the time of purchase to those in the Russell MidcapTM
Index. 1
- --------------------------------------------------------------------------------
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 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
This semiannual report for Franklin MidCap Value Fund covers the period ended
April 30, 2007.
PERFORMANCE OVERVIEW
Franklin MidCap Value Fund - Class A posted a cumulative total return of +11.82%
for the six months under review. The Fund underperformed its benchmark, the
Russell Midcap Value Index, which posted a +12.78% total return for the same
period. 2 Please note the Fund employs a bottom-up stock selection process and
we invest in securities without regard to benchmark comparisons. Although this
report covers a six-month period, our investment strategy aims for long-term
results. You can find more of the Fund's performance data in the Performance
Summary beginning on page 32.
INVESTMENT STRATEGY
Our goal is to invest in mid-capitalization companies that we determine are
currently undervalued and have the potential for capital appreciation. The Fund
purchases stocks that are out of favor in the market for reasons we believe will
prove to be temporary in nature. In addition, the Fund will invest in companies
with valuable intangibles not reflected in the stock price. This strategy is not
aimed at short-term trading gains, nor do we consider the composition of any
index. Rather, we try to identify attractively priced, financially sound
companies that meet our investment criteria, and we assume at purchase that we
will hold the positions for several years.
1. The Russell Midcap Index is market capitalization weighted and measures
performance of the 800 smallest companies in the Russell 1000 Index, which
represent approximately 26% of total market capitalization of the Russell
1000 Index.
2. Source: Standard & Poor's Micropal. The Russell Midcap Value Index is
market capitalization weighted and measures performance of those Russell
Midcap Index companies with lower price-to-book ratios and lower
forecasted growth values. The index is unmanaged and includes reinvested
dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
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 72.
Semiannual Report | 29
PORTFOLIO BREAKDOWN
Franklin MidCap Value Fund
Based on Total Net Assets as of 4/30/07
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Producer Manufacturing 10.9%
Process Industries 9.9%
Consumer Durables 9.3%
Transportation 9.2%
Consumer Non-Durables 7.9%
Utilities 6.1%
Energy Minerals 5.8%
Health Technology 4.7%
Specialty Insurance 4.5%
Property-Casualty Insurance 3.9%
Industrial Services 3.2%
Health Services 2.9%
Commercial Services 2.6%
Investment Managers 2.3%
Electronic Technology 2.2%
Retail Trade 2.0%
Other 6.7%
Short-Term Investments & Other Net Assets 5.9%
MANAGER'S DISCUSSION
During the six months under review, stocks that contributed to Fund performance
came from a variety of sectors, and the majority of the Fund's holdings produced
positive returns. For example, global industrial chemicals company Celanese,
part of the process industries sector, benefited from strong sales and debt
reduction. The company's shares appreciated significantly from our initial
purchase during the period and were the Fund's largest contributor to
performance. In the consumer non-durables sector, domestic milk producer and
distributor Dean Foods was another strong performer, as the company issued a
special dividend of $15 per share to shareholders during the period. Within the
transportation sector, trucking operator J.B. Hunt Transport Services benefited
from strong pricing and volumes in its intermodal division, and the company's
stock appreciated significantly.
Despite the Fund's positive return, holdings from various sectors hindered
performance. In particular, the Fund's sole commercial services sector holding,
SAIC, one of the nation's largest federal information technology companies,
detracted from Fund returns. Shares of Pulte Homes, a geographically diversified
homebuilder, fell during the period amid widespread home sales declines and
disappointing earnings. Shares of Southwest Airlines, a recent addition to the
Fund's portfolio and the country's largest airline, declined on fears of
weakness in domestic airline fundamentals.
The Fund experienced substantial net inflows during the period. Consistent with
our investment strategy, we used incoming cash to add to existing holdings, as
well as initiate positions in four stocks we believed were attractively valued.
Our new positions were Celanese, Southwest Airlines, domestic natural gas
producer Chesapeake Energy, and pharmaceutical contract research organization
Pharmaceutical Product Development.
We liquidated one position during the period. In line with our strategy, we sold
our Stanley Works holding, as we believed the shares were fully valued.
30 | Semiannual Report
Thank you for your continued participation in Franklin MidCap Value Fund. We
look forward to serving your future investment needs.
[PHOTO OMITTED] /s/Sam Kerner
Sam Kerner, CFA
Lead Portfolio Manager
Bruce C. Baughman, CPA
William J. Lippman
Stephen T. Madonna, CFA
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin MidCap Value Fund
TOP 10 EQUITY HOLDINGS
Franklin MidCap Value Fund
4/30/07
- ------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ------------------------------------------------------------------------------
Fortune Brands Inc. 3.9%
CONSUMER DURABLES
- ------------------------------------------------------------------------------
Peabody Energy Corp. 3.3%
ENERGY MINERALS
- ------------------------------------------------------------------------------
Southwest Airlines Co. 3.0%
TRANSPORTATION
- ------------------------------------------------------------------------------
DTE Energy Co. 2.8%
UTILITIES
- ------------------------------------------------------------------------------
Oshkosh Truck Corp. 2.7%
PRODUCER MANUFACTURING
- ------------------------------------------------------------------------------
Celanese Corp., A 2.6%
PROCESS INDUSTRIES
- ------------------------------------------------------------------------------
SAIC Inc. 2.6%
COMMERCIAL SERVICES
- ------------------------------------------------------------------------------
Dean Foods Co. 2.6%
CONSUMER NON-DURABLES
- ------------------------------------------------------------------------------
Overseas Shipholding Group Inc. 2.5%
TRANSPORTATION
- ------------------------------------------------------------------------------
Assurant Inc. 2.5%
SPECIALTY INSURANCE
- ------------------------------------------------------------------------------
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2007, 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.
Semiannual Report | 31
Performance Summary as of 4/30/07
FRANKLIN MIDCAP VALUE FUND
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: FMVAX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.97 $12.34 $11.37
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.1977
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.1532
- --------------------------------------------------------------------------------
TOTAL $0.3509
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: N/A) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.98 $12.27 $11.29
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.1411
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.1532
- --------------------------------------------------------------------------------
TOTAL $0.2943
- --------------------------------------------------------------------------------
CLASS R (SYMBOL: N/A) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.95 $12.30 $11.35
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2073
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.1532
- --------------------------------------------------------------------------------
TOTAL $0.3605
- --------------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: N/A) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.97 $12.39 $11.42
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2257
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.1532
- --------------------------------------------------------------------------------
TOTAL $0.3789
- --------------------------------------------------------------------------------
32 | Semiannual Report
Performance Summary (CONTINUED)
PERFORMANCE 1
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN
FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY CHARGE A
2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
- ---------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +11.82% +15.37% +27.89%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +5.42% +8.76% +10.74%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $10,542 $10,876 $12,054
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +5.24% +8.88%
- ---------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6
- ---------------------------------------------------------------------------------------------------
Without Waiver 2.01%
- ---------------------------------------------------------------------------------------------------
With Waiver 1.40%
CLASS C 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +11.45% +14.60% +26.39%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +10.45% +13.60% +13.65%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $11,045 $11,360 $12,639
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +10.00% +11.92%
- ---------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6
- ---------------------------------------------------------------------------------------------------
Without Waiver 2.64%
- ---------------------------------------------------------------------------------------------------
With Waiver 2.05%
- ---------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +11.75% +15.20% +27.56%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +11.75% +15.20% +14.22%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $11,175 $11,520 $12,756
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +11.60% +12.52%
- ---------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6
- ---------------------------------------------------------------------------------------------------
Without Waiver 2.16%
- ---------------------------------------------------------------------------------------------------
With Waiver 1.55%
- ---------------------------------------------------------------------------------------------------
ADVISOR CLASS 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +12.03% +15.79% +28.79%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +12.03% +15.79% +14.83%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment 4 $11,203 $11,579 $12,879
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 5 +12.10% +13.05%
- ---------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 6
- ---------------------------------------------------------------------------------------------------
Without Waiver 1.66%
- ---------------------------------------------------------------------------------------------------
With Waiver 1.05%
- ---------------------------------------------------------------------------------------------------
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 1-800/342-5236.
THE FUND'S MANAGER AND ADMINISTRATOR HAVE AGREED IN ADVANCE TO VOLUNTARILY WAIVE
OR LIMIT THEIR RESPECTIVE FEES AND TO ASSUME AS THEIR OWN EXPENSE CERTAIN
EXPENSES OTHERWISE PAYABLE BY THE FUND, THROUGH OCTOBER 31, 2007. AFTER THIS
DATE, THE FUND'S MANAGER AND ADMINISTRATOR MAY END THIS ARRANGEMENT AT ANY TIME.
Semiannual Report | 33
Performance Summary (CONTINUED)
ENDNOTES
WHILE STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG
TERM, THEY TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORT TERM. THESE PRICE
MOVEMENTS MAY RESULT FROM FACTORS AFFECTING INDIVIDUAL COMPANIES, INDUSTRIES OR
THE SECURITIES MARKET AS A WHOLE. HISTORICALLY, MIDSIZE COMPANY SECURITIES HAVE
BEEN MORE VOLATILE IN PRICE THAN LARGER COMPANY SECURITIES, ESPECIALLY OVER THE
SHORT TERM. MIDSIZE COMPANIES MAY BE MORE SUSCEPTIBLE TO PARTICULAR ECONOMIC
EVENTS OR COMPETITIVE FACTORS THAN ARE LARGER, MORE BROADLY DIVERSIFIED
COMPANIES. IN ADDITION, THE FUND MAY INVEST UP TO 25% OF ITS TOTAL ASSETS IN
FOREIGN SECURITIES, WHICH INVOLVE SPECIAL RISKS, INCLUDING CURRENCY FLUCTUATIONS
AND ECONOMIC AND POLITICAL UNCERTAINTY. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS C: These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as
described in the prospectus. These shares have higher annual
fees and expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.
1. The Fund's manager and administrator have agreed in advance to limit their
respective fees and to assume as their own expense certain expenses
otherwise payable by the Fund. If the manager and administrator had not
taken this action, the Fund's total returns would have been lower. After
10/31/07, the manager and administrator may end this arrangement at any
time, upon notice to the Fund's board.
2. Cumulative total return represents the change in value of an investment
over the periods indicated.
3. Average annual total return represents the average annual change in value
of an investment over the periods indicated. Six-month return has not been
annualized.
4. These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
6. Figures are as stated in the Fund's prospectus current as of the date of
this report.
34 | Semiannual Report
Your Fund's Expenses
FRANKLIN MIDCAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
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.
Semiannual Report | 35
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ---------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 11/1/06 VALUE 4/30/07 PERIOD* 11/1/06-4/30/07
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,118.20 $7.35
- ---------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.00
- ---------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,114.50 $10.85
- ---------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.53 $10.34
- ---------------------------------------------------------------------------------------------------------------
CLASS R
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,117.50 $8.14
- ---------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.11 $7.75
- ---------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,120.30 $5.52
- ---------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.59 $5.26
- ---------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio, net of expense
waivers, for each class (A: 1.40%; C: 2.07%; R: 1.55%; and Advisor:
1.05%), multiplied by the average account value over the period,
multiplied by 181/365 to reflect the one-half year period.
36 | Semiannual Report
Franklin Small Cap Value Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Small Cap Value Fund seeks
long-term capital appreciation by investing at least 80% of net assets in the
securities of small-capitalization companies that we believe are undervalued. We
define small-capitalization companies as those with market capitalizations less
than $3.5 billion at the time of purchase.
- --------------------------------------------------------------------------------
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 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin Small Cap Value Fund's semiannual report
for the period ended April 30, 2007.
PERFORMANCE OVERVIEW
Franklin Small Cap Value Fund - Class A posted a +10.48% cumulative total return
for the six months under review. The Fund outperformed its benchmark, the
Russell 2500(TM) Value Index, which posted a +9.72% total return for the same
period. 1 Please note the Fund employs a bottom-up stock selection process and
we invest in securities without regard to benchmark comparisons. Although this
report covers a six-month period, our investment strategy aims for long-term
results. You can find the Fund's long-term performance data in the Performance
Summary beginning on page 40.
1. Source: Standard & Poor's Micropal. The Russell 2500 Value Index is market
capitalization weighted and measures performance of those Russell 2500
Index companies with lower price-to-book ratios and lower forecasted
growth values. The index is unmanaged and includes reinvested dividends.
One cannot invest directly in an index, nor is an index representative of
the Fund's portfolio.
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 80.
Semiannual Report | 37
PORTFOLIO BREAKDOWN
Franklin Small Cap Value Fund
Based on Total Net Assets as of 4/30/07
Producer Manufacturing 21.0%
Consumer Durables 9.4%
Process Industries 7.9%
Non-Energy Minerals 7.4%
Retail Trade 6.9%
Industrial Services 5.9%
Transportation 5.2%
Property-Casualty Insurance 4.4%
Electronic Technology 3.6%
Energy Minerals 3.5%
Consumer Non-Durables 3.0%
Utilities 2.2%
Other 8.5%
Short-Term Investments & Other Net Assets 11.1%
INVESTMENT STRATEGY
We seek to invest in small-capitalization companies that we believe are selling
below their underlying worth. We manage a diversified portfolio of companies we
consider fundamentally sound, purchased at what we believe are attractive
prices, often when they are out of favor with other investors. Portfolio
securities are selected without regard to benchmark comparisons and are based on
several criteria, such as low price relative to earnings, book value or cash
flow. We also consider stocks with recent sharp price declines that have the
potential for good long-term earnings or that possess valuable intangibles not
reflected in the stock price.
MANAGER'S DISCUSSION
During the period under review, the producer manufacturing sector was the most
significant contributor to Fund performance. Within the sector, agricultural and
construction equipment manufacturer CNH Global performed well, as did consumer
durables sector holding Hooker Furniture. In the non-energy minerals sector, the
portfolio's steel holdings were notable as steel demand rose and prices hit
five-month highs in April. Reliance Steel, United States Steel, Steel Dynamics
and Gerdau AmeriSteel each produced strong returns.
Despite the Fund's positive return, several stocks negatively impacted
performance during the reporting period. The retail trade sector was the largest
detractor from Fund performance, as retailer Christopher & Banks' shares
declined largely due to fewer shoppers and bad weather, which led to lackluster
sales. In addition, homebuilder M/I Homes' shares fell as new home cancellation
rates and inventories rose. Identification systems manufacturer Brady Corp. also
hindered performance. The company's stock declined in value largely due to weak
earnings as a result of softness in its original equipment manufacturing
electronics business.
The Fund experienced significant net inflows during the period, and we used the
proceeds to initiate nine positions in stocks we considered attractively valued.
The new positions were Applied Industrial Technologies, a distributor of various
industrial components; Bemis Company, a flexible-packaging manufacturer;
Benchmark Electronics, a designer and manufacturer of electronic components;
Brunswick, a consumer recreational products manufacturer; Erie Indemnity, a life
and property-casualty insurer; Gerdau AmeriSteel, a mini-mill steel producer;
Omnivision Technologies, a semiconductor-imaging devices provider; Trinity
Industries, a transportation and construction manufacturer; and TrustCo Bank
Corp. NY, a regional bank.
38 | Semiannual Report
The Fund liquidated three positions during the period. Two were previously
announced takeovers, both at premiums to the stocks' prior day's closing prices.
The other was NBTY, which we sold because we believed the shares were fully
valued.
Takeover activity continued in the portfolio with buyout bids announced by two
Fund holdings. In March, Lone Star Technologies announced that United States
Steel made a cash bid to acquire the company at a 39% premium to the stock's
prior day's price. In April, OMI announced that it received a cash bid by
another Fund holding, Teekay Shipping, to buy the company at a 5% premium to the
stock's price prior to the announcement. We view the merger and acquisition
interest in the Fund's portfolio as a measure of confirmation of our value stock
selection.
Thank you for your continued participation in Franklin Small Cap Value Fund. We
look forward to serving your future investment needs.
[PHOTO OMITTED] /s/William J. Lippman
William J. Lippman
Lead Portfolio Manager
Bruce C. Baughman, CPA
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin Small Cap Value Fund
TOP 10 EQUITY HOLDINGS
Franklin Small Cap Value Fund
4/30/07
- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
Steel Dynamics Inc. 2.5%
NON-ENERGY MINERALS
- --------------------------------------------------------------------------------
Reliance Steel & Aluminum Co. 1.7%
NON-ENERGY MINERALS
- --------------------------------------------------------------------------------
Regis Corp. 1.4%
RETAIL TRADE
- --------------------------------------------------------------------------------
Apogee Enterprises Inc. 1.4%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Aspen Insurance Holdings Ltd. 1.3%
PROPERTY-CASUALTY INSURANCE
- --------------------------------------------------------------------------------
Mueller Industries Inc. 1.3%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Wabash National Corp. 1.3%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Mine Safety Appliances Co. 1.3%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
IPC Holdings Ltd. 1.3%
PROPERTY-CASUALTY INSURANCE
- --------------------------------------------------------------------------------
Roper Industries Inc. 1.2%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2007, 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.
Semiannual Report | 39
Performance Summary as of 4/30/07
FRANKLIN SMALL CAP VALUE FUND
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: FRVLX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.24 $46.51 $45.27
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2811
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.2075
- --------------------------------------------------------------------------------
Long-Term Capital Gain $2.8471
- --------------------------------------------------------------------------------
TOTAL $3.3357
- --------------------------------------------------------------------------------
CLASS B (SYMBOL: FBVAX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.17 $44.60 $43.43
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.2075
- --------------------------------------------------------------------------------
Long-Term Capital Gain $2.8471
- --------------------------------------------------------------------------------
TOTAL $3.0546
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: FRVFX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.08 $44.07 $42.99
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.0474
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.2075
- --------------------------------------------------------------------------------
Long-Term Capital Gain $2.8471
- --------------------------------------------------------------------------------
TOTAL $3.1020
- --------------------------------------------------------------------------------
CLASS R (SYMBOL: FVFRX) CHANGE 4/30/07 10/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.21 $46.28 $45.07
- --------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2365
- --------------------------------------------------------------------------------
Short-Term Capital Gain $0.2075
- --------------------------------------------------------------------------------
Long-Term Capital Gain $2.8471
- --------------------------------------------------------------------------------
TOTAL $3.2911
- --------------------------------------------------------------------------------
40 | Semiannual Report
Performance Summary (CONTINUED)
PRICE AND DISTRIBUTION INFORMATION (CONTINUED)
- -------------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: FVADX) CHANGE 4/30/07 10/31/06
- -------------------------------------------------------------------------------
NET ASSET VALUE (NAV) +$1.32 $47.78 $46.46
- -------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/06-4/30/07)
- -------------------------------------------------------------------------------
DIVIDEND INCOME $0.3797
- -------------------------------------------------------------------------------
SHORT-TERM CAPITAL GAIN $0.2075
- -------------------------------------------------------------------------------
LONG-TERM CAPITAL GAIN $2.8471
- -------------------------------------------------------------------------------
TOTAL $3.4343
- -------------------------------------------------------------------------------
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY
CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.48% +9.41% +77.37% +178.44%
- ---------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +4.13% +3.12% +10.82% +10.13%
- ---------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,413 $10,312 $16,714 $26,246
- ---------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +1.17% +10.83% +9.75%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.30%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.06% +8.64% +71.58% +167.45%
- ---------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +6.06% +4.64% +11.14% +12.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,606 $10,464 $16,958 $26,745
- ---------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +2.61% +11.14% +12.33%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.98%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.07% +8.63% +71.57% +160.92%
- ---------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +9.07% +7.63% +11.40% +10.07%
- ---------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,907 $10,763 $17,157 $26,092
- ---------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +5.61% +11.40% +9.69%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.98%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR 3-YEAR INCEPTION (8/1/02)
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.35% +9.18% +65.40% +119.33%
- ---------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.35% +9.18% +18.26% +18.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,035 $10,918 $16,540 $21,933
- ---------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +7.13% +16.09% +17.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.48%
- ---------------------------------------------------------------------------------------------------------------------------------
Semiannual Report | 41
Performance Summary (CONTINUED)
PERFORMANCE (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +10.61% +9.74% +80.36% +188.67%
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.61% +9.74% +12.52% +11.18%
- ---------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,061 $10,974 $18,036 $28,867
- ---------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +7.69% +12.53% +10.80%
- ---------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 0.98%
- ---------------------------------------------------------------------------------------------------------------------
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 1-800/342-5236.
ENDNOTES
THE FUND'S INVESTMENTS IN SMALLER-COMPANY STOCKS INVOLVE SPECIAL RISKS AS SUCH
STOCKS HAVE HISTORICALLY EXHIBITED GREATER PRICE VOLATILITY THAN LARGE-COMPANY
STOCKS, PARTICULARLY OVER THE SHORT TERM. IN ADDITION, SMALLER COMPANIES OFTEN
HAVE RELATIVELY SMALL REVENUES, LIMITED PRODUCT LINES AND SMALL MARKET SHARE.
THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS A: Prior to 8/3/98, these shares were offered at a lower initial
sales charge; thus actual total returns may differ.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as
described in the prospectus. These shares have higher annual
fees and expenses than Class A shares.
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. Figures are as stated in the Fund's prospectus current as of the date of
this report.
42 | Semiannual Report
Your Fund's Expenses
FRANKLIN SMALL CAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
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.
Semiannual Report | 43
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ------------------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 11/1/06 VALUE 4/30/07 PERIOD* 11/1/06-4/30/07
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,104.80 $5.85
- ------------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.24 $5.61
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,100.60 $9.74
- ------------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.52 $9.35
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,100.70 $9.74
- ------------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.52 $9.35
- ------------------------------------------------------------------------------------------------------------------------------
CLASS R
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,103.50 $7.15
- ------------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.00 $6.85
- ------------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,106.10 $4.54
- ------------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.48 $4.36
- ------------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
1.12%; B: 1.87%; C: 1.87%; R: 1.37%; and Advisor: 0.87%), multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
44 | Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN BALANCE SHEET INVESTMENT FUND
-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
-------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period $ 69.24 $ 61.66 $ 53.95 $ 45.47 $ 37.01 $ 37.21
-------------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............ 0.45 0.77 0.34 0.33 0.13 0.25
Net realized and unrealized gains
(losses) .......................... 7.81 9.71 8.71 8.63 8.83 0.87
-------------------------------------------------------------------------------------------
Total from investment operations .... 8.26 10.48 9.05 8.96 8.96 1.12
-------------------------------------------------------------------------------------------
Less distributions from:
Net investment income .............. (0.88) (0.46) (0.43) (0.17) (0.25) (0.15)
Net realized gains ................. (4.28) (2.44) (0.91) (0.31) (0.25) (1.17)
-------------------------------------------------------------------------------------------
Total distributions ................. (5.16) (2.90) (1.34) (0.48) (0.50) (1.32)
-------------------------------------------------------------------------------------------
Redemption fees ..................... -- d -- d -- d -- d -- --
-------------------------------------------------------------------------------------------
Net asset value, end of period ...... $ 72.34 $ 69.24 $ 61.66 $ 53.95 $ 45.47 $ 37.01
===========================================================================================
Total return c ...................... 12.49% 17.54% 16.93% 19.87% 24.51% 2.85%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................ 0.89% e,f 0.90% f 0.91% f 0.91% f 1.00% 0.92%
Net investment income ............... 1.30% e 1.17% 0.57% 0.67% 0.35% 0.63%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ... $4,864,317 $4,435,704 $4,164,516 $3,716,567 $3,031,714 $2,333,862
Portfolio turnover rate ............. 2.84% 7.44% 3.91% 7.03% 13.36% 10.59%
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 repurchase 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 Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 45
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 68.07 $ 60.67 $ 53.13 $ 44.97 $ 36.64 $ 37.04
--------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ....... 0.19 0.26 (0.11) (0.06) (0.15) (0.08)
Net realized and unrealized gains
(losses) ........................... 7.69 9.58 8.58 8.53 8.74 0.91
--------------------------------------------------------------------------------------
Total from investment operations ..... 7.88 9.84 8.47 8.47 8.59 0.83
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.35) -- d (0.02) -- (0.01) (0.06)
Net realized gains .................. (4.28) (2.44) (0.91) (0.31) (0.25) (1.17)
--------------------------------------------------------------------------------------
Total distributions .................. (4.63) (2.44) (0.93) (0.31) (0.26) (1.23)
--------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
--------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 71.32 $ 68.07 $ 60.67 $ 53.13 $ 44.97 $ 36.64
======================================================================================
Total return c ....................... 12.07% 16.65% 16.03% 18.94% 23.58% 2.08%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.65% e,f 1.66% f 1.67% f 1.69% f 1.75% 1.67%
Net investment income (loss) ......... 0.54% e 0.41% (0.19)% (0.11)% (0.40)% (0.12)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $132,330 $127,037 $122,795 $114,891 $103,877 $ 89,241
Portfolio turnover rate .............. 2.84% 7.44% 3.91% 7.03% 13.36% 10.59%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
46 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 68.17 $ 60.75 $ 53.18 $ 45.01 $ 36.67 $ 37.06
--------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ....... 0.19 0.27 (0.11) (0.06) (0.15) (0.08)
Net realized and unrealized gains
(losses) ........................... 7.70 9.59 8.59 8.54 8.74 0.92
--------------------------------------------------------------------------------------
Total from investment operations ..... 7.89 9.86 8.48 8.48 8.59 0.84
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.35) -- -- -- -- (0.06)
Net realized gains .................. (4.28) (2.44) (0.91) (0.31) (0.25) (1.17)
--------------------------------------------------------------------------------------
Total distributions .................. (4.63) (2.44) (0.91) (0.31) (0.25) (1.23)
--------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
--------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 71.43 $ 68.17 $ 60.75 $ 53.18 $ 45.01 $ 36.67
======================================================================================
Total return c ....................... 12.08% 16.64% 16.04% 18.95% 23.57% 2.10%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.64% e,f 1.65% f 1.67% f 1.69% f 1.75% 1.67%
Net investment income (loss) ......... 0.55% e 0.42% (0.19)% (0.11)% (0.40)% (0.12)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $147,936 $139,885 $135,939 $129,399 $127,925 $118,219
Portfolio turnover rate .............. 2.84% 7.44% 3.91% 7.03% 13.36% 10.59%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 47
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS R (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 68.78 $ 61.33 $ 53.69 $ 45.30 $ 36.92 $ 39.98
--------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............. 0.35 0.60 0.18 0.20 0.03 0.07
Net realized and unrealized gains
(losses) ........................... 7.77 9.65 8.67 8.59 8.82 (3.07)
--------------------------------------------------------------------------------------
Total from investment operations ..... 8.12 10.25 8.85 8.79 8.85 (3.00)
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.74) (0.36) (0.30) (0.09) (0.22) (0.06)
Net realized gains .................. (4.28) (2.44) (0.91) (0.31) (0.25) --
--------------------------------------------------------------------------------------
Total distributions .................. (5.02) (2.80) (1.21) (0.40) (0.47) (0.06)
--------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
--------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 71.88 $ 68.78 $ 61.33 $ 53.69 $ 45.30 $ 36.92
======================================================================================
Total return c ....................... 12.35% 17.22% 16.62% 19.55% 24.26% (7.53)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.15% e,f 1.16% f 1.17% f 1.19% f 1.25% 1.17% e
Net investment income ................ 1.04% e 0.91% 0.31% 0.39% 0.10% 0.38% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 62,676 $ 51,157 $ 30,810 $ 21,020 $ 13,336 $ 7,754
Portfolio turnover rate .............. 2.84% 7.44% 3.91% 7.03% 13.36% 10.59%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period January 1, 2002 (effective date) to October 31, 2002.
48 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 69.40 $ 61.81 $ 54.05 $ 45.54 $ 37.06 $ 37.21
--------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............. 0.53 0.93 0.46 0.44 0.23 0.31
Net realized and unrealized gains
(losses) ........................... 7.83 9.72 8.75 8.65 8.83 0.91
--------------------------------------------------------------------------------------
Total from investment operations ..... 8.36 10.65 9.21 9.09 9.06 1.22
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (1.05) (0.62) (0.54) (0.27) (0.33) (0.20)
Net realized gains .................. (4.28) (2.44) (0.91) (0.31) (0.25) (1.17)
--------------------------------------------------------------------------------------
Total distributions .................. (5.33) (3.06) (1.45) (0.58) (0.58) (1.37)
--------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
--------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 72.43 $ 69.40 $ 61.81 $ 54.05 $ 45.54 $ 37.06
======================================================================================
Total return c ....................... 12.62% 17.82% 17.20% 20.17% 24.80% 3.11%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 0.65% e,f 0.66% f 0.67% f 0.69% f 0.75% 0.67%
Net investment income ................ 1.54% e 1.41% 0.81% 0.89% 0.60% 0.88%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $385,460 $333,372 $260,209 $ 26,701 $ 22,189 $ 15,193
Portfolio turnover rate .............. 2.84% 7.44% 3.91% 7.03% 13.36% 10.59%
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 repurchase 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 Totalreturn is not annualized for periods less than one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 49
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED)
- ----------------------------------------------------------------------------------
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- ----------------------------------------------------------------------------------
LONG TERM INVESTMENTS 86.0%
CLOSED END MUTUAL FUNDS 1.3%
Apollo Investment Corp. ........................ 200,000 $ 4,394,000
a Emerging Markets Telecommunications Fund ....... 250,000 5,187,500
H&Q Healthcare Investors ....................... 150,000 2,661,000
John Hancock Bank and Thrift Opportunity Fund .. 1,650,000 15,807,000
Latin America Equity Fund Inc. ................. 222,015 10,357,000
The Mexico Fund Inc. (Mexico) .................. 620,800 24,540,223
New Ireland Fund Inc. (Ireland) ................ 135,000 4,855,950
Petroleum & Resources Corp. .................... 150,000 5,466,000
------------
TOTAL CLOSED END MUTUAL FUNDS (COST $38,030,843) 73,268,673
------------
COMMON STOCKS 84.7%
COMMERCIAL SERVICES 0.8%
Kelly Services Inc., A ......................... 1,506,800 43,245,160
------------
CONSUMER DURABLES 4.8%
D.R. Horton Inc. ............................... 2,200,000 48,796,000
b Furniture Brands International Inc. ............ 2,875,000 46,230,000
Hasbro Inc. .................................... 1,650,000 52,156,500
Lennar Corp., A ................................ 480,000 20,500,800
Lennar Corp., B ................................ 48,000 1,920,480
M.D.C. Holdings Inc. ........................... 583,300 29,899,958
Pulte Homes Inc. ............................... 2,600,000 69,940,000
------------
269,443,738
------------
CONSUMER NON-DURABLES 2.4%
a Alliance One International Inc. ................ 2,504,200 24,566,202
Kellwood Co. ................................... 786,000 22,149,480
Premium Standard Farms Inc. .................... 1,282,700 27,808,936
a Smithfield Foods Inc. .......................... 424,100 12,964,737
Universal Corp. ................................ 740,700 46,427,076
------------
133,916,431
------------
CONSUMER SERVICES 1.9%
Bob Evans Farms Inc. ........................... 323,300 11,865,110
a,b Champps Entertainment Inc. ..................... 920,000 5,023,200
a Vail Resorts Inc. .............................. 1,525,000 86,955,500
------------
103,843,810
------------
DISTRIBUTION SERVICES 0.8%
Applied Industrial Technologies Inc. ........... 1,406,250 37,785,938
Handleman Co. .................................. 1,000,000 7,500,000
------------
45,285,938
------------
ELECTRONIC TECHNOLOGY 1.7%
a ESCO Technologies Inc. ......................... 1,236,800 56,348,608
a FSI International Inc. ......................... 600,000 2,550,000
a Spansion Inc., A ............................... 2,600,000 25,532,000
a Standard Microsystems Corp. .................... 376,700 12,077,002
------------
96,507,610
------------
50 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- ----------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
ENERGY MINERALS 1.1%
Peabody Energy Corp. ........................... 1,336,000 $ 64,101,280
------------
FINANCE/RENTAL/LEASING 5.7%
CIT Group Inc. ................................. 2,195,000 130,931,750
a,b Dollar Thrifty Automotive Group Inc. ........... 1,763,067 82,652,581
Freddie Mac .................................... 1,640,000 106,239,200
------------
319,823,531
------------
FINANCIAL CONGLOMERATES 2.7%
Principal Financial Group Inc. ................. 225,000 14,285,250
Prudential Financial Inc. ...................... 1,422,000 135,090,000
------------
149,375,250
------------
HEALTH TECHNOLOGY 0.8%
a Watson Pharmaceuticals Inc. .................... 1,700,000 46,410,000
------------
INDUSTRIAL SERVICES 3.1%
a Bristow Group Inc. ............................. 900,000 33,840,000
a Hanover Compressor Co. ......................... 1,500,000 32,445,000
a PHI Inc. ....................................... 77,500 2,092,500
a PHI Inc. non-voting ............................ 152,000 4,056,880
a Quanta Services Inc. ........................... 1,100,000 30,239,000
a Universal Compression Holdings Inc. ............ 850,000 56,584,500
a,b Xanser Corp. ................................... 2,800,000 15,764,000
------------
175,021,880
------------
LIFE/HEALTH INSURANCE 6.1%
American National Insurance Co. ................ 647,500 84,511,700
FBL Financial Group Inc., A .................... 525,000 20,338,500
Genworth Financial Inc., A ..................... 1,600,000 58,384,000
Kansas City Life Insurance Co. ................. 250,220 11,274,913
Manulife Financial Corp. (Canada) .............. 1,000,000 36,110,000
MetLife Inc. ................................... 401,000 26,345,700
National Western Life Insurance Co., A ......... 150,000 40,155,000
Presidential Life Corp. ........................ 380,000 7,223,800
StanCorp Financial Group Inc. .................. 1,200,000 57,120,000
------------
341,463,613
------------
NON-ENERGY MINERALS 8.8%
Chaparral Steel Co. ............................ 875,000 61,687,500
Nucor Corp. .................................... 1,750,000 111,055,000
Reliance Steel & Aluminum Co. .................. 1,950,200 115,841,880
Sherritt International Corp. (Canada) .......... 3,253,500 43,383,908
Texas Industries Inc. .......................... 800,000 60,936,000
United States Steel Corp. ...................... 975,000 99,001,500
------------
491,905,788
------------
PROCESS INDUSTRIES 8.0%
Ashland Inc. ................................... 245,894 14,741,346
Bowater Inc. ................................... 1,624,000 35,549,360
Semiannual Report | 51
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- ----------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
PROCESS INDUSTRIES (CONTINUED)
Bunge Ltd. ..................................... 1,535,000 $116,291,600
Corn Products International Inc. ............... 2,777,600 110,604,032
MeadWestvaco Corp. ............................. 1,570,000 52,375,200
Monsanto Co. ................................... 1,276,783 75,317,429
a PolyOne Corp. .................................. 1,375,000 9,020,000
Westlake Chemical Corp. ........................ 1,046,900 30,559,011
------------
444,457,978
------------
PRODUCER MANUFACTURING 7.3%
A.O. Smith Corp. ............................... 893,600 34,046,160
American Axle & Manufacturing Holdings Inc. .... 1,225,000 34,238,750
a Armstrong World Industries Inc. ................ 209,738 10,696,638
CNH Global NV (Netherlands) .................... 1,605,000 69,480,450
Lennox International Inc. ...................... 871,000 29,448,510
Mueller Industries Inc. ........................ 600,000 19,680,000
Oshkosh Truck Corp. ............................ 960,000 53,702,400
a,b Tecumseh Products Co., A ....................... 1,085,000 11,023,600
a,b Tecumseh Products Co., B ....................... 310,000 3,174,400
Timken Co. ..................................... 1,215,000 40,070,700
Trinity Industries Inc. ........................ 2,200,000 102,080,000
------------
407,641,608
------------
PROPERTY-CASUALTY INSURANCE 6.0%
Aspen Insurance Holdings Ltd. .................. 154,300 4,090,493
E-L Financial Corp. Ltd. (Canada) .............. 104,666 69,312,109
a Employers Holdings Inc. ........................ 571,900 11,340,777
IPC Holdings Ltd. .............................. 1,773,800 53,178,524
Midland Co. .................................... 385,000 16,897,650
Old Republic International Corp. ............... 4,075,000 86,675,250
RLI Corp. ...................................... 489,400 27,254,686
Selective Insurance Group Inc. ................. 1,300,000 33,904,000
The Travelers Cos. Inc. ........................ 575,000 31,107,500
------------
333,760,989
------------
REGIONAL BANKS 0.1%
UMB Financial Corp. ............................ 186,800 7,307,616
------------
RETAIL TRADE 4.7%
a Big Lots Inc. .................................. 1,550,000 49,910,000
The Cato Corp., A .............................. 450,000 9,724,500
a Charming Shoppes Inc. .......................... 4,425,000 55,312,500
Dillard's Inc., A .............................. 874,200 30,273,546
Fred's Inc. .................................... 400,000 5,776,000
Haverty Furniture Cos. Inc. .................... 920,000 11,739,200
Saks Inc. ...................................... 1,750,000 36,645,000
a,b Syms Corp. ..................................... 1,430,000 25,153,700
a Zale Corp. ..................................... 1,422,400 39,699,184
------------
264,233,630
------------
52 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
SAVINGS BANKS 0.5%
Farmers & Merchants Bank of Long Beach ............................. 2,200 $ 14,630,000
First Niagara Financial Group Inc. ................................. 100,000 1,360,000
Hudson City Bancorp Inc. ........................................... 900,000 11,988,000
--------------
27,978,000
--------------
SPECIALTY INSURANCE 3.8%
Assurant Inc. ...................................................... 825,700 47,502,521
MBIA Inc. .......................................................... 200,000 13,912,000
MGIC Investment Corp. .............................................. 530,585 32,689,342
The PMI Group Inc. ................................................. 1,325,000 64,222,750
Radian Group Inc. .................................................. 900,000 52,299,000
--------------
210,625,613
--------------
TRANSPORTATION 6.2%
a ABX Air Inc. ....................................................... 1,825,000 11,899,000
a Alaska Air Group Inc. .............................................. 1,350,600 39,977,760
Burlington Northern Santa Fe Corp. ................................. 570,000 49,897,800
a Crowley Maritime Corp. ............................................. 4,240 12,635,200
a Kansas City Southern ............................................... 722,500 26,840,875
a Mesa Air Group Inc. ................................................ 450,000 3,042,000
Norfolk Southern Corp. ............................................. 1,358,600 72,331,864
Overseas Shipholding Group Inc. .................................... 756,000 53,524,800
Teekay Shipping Corp. (Bahamas) .................................... 1,240,000 73,966,000
Werner Enterprises Inc. ............................................ 98,328 1,859,401
--------------
345,974,700
--------------
UTILITIES 7.4%
Atmos Energy Corp. ................................................. 833,600 26,441,792
Entergy Corp. ...................................................... 687,000 77,727,180
a,b,c KGen Power Corp. 144A .............................................. 4,400,000 85,800,000
Northeast Utilities ................................................ 1,550,000 49,863,500
PNM Resources Inc. ................................................. 1,863,300 60,650,415
a Sierra Pacific Resources ........................................... 5,010,000 91,482,600
Xcel Energy Inc. ................................................... 878,000 21,151,020
--------------
413,116,507
--------------
TOTAL COMMON STOCKS (COST $2,189,241,301) .......................... 4,735,440,670
--------------
--------------
PRINCIPAL
AMOUNT
--------------
CORPORATE BOND (COST $5,536,391) 0.1%
PRODUCER MANUFACTURING 0.1%
Mueller Industries Inc., 6.00%, 11/01/14 ........................... $ 5,604,000 5,239,740
--------------
TOTAL LONG TERM INVESTMENTS (COST $2,232,808,535) .................. 4,813,949,083
--------------
--------------
SHARES
--------------
SHORT TERM INVESTMENTS 14.1%
MONEY MARKET FUND (COST $215,052,386) 3.9%
d Franklin Institutional Fiduciary Trust Money Market Portfolio, 5.01% 215,052,386 215,052,386
--------------
Semiannual Report | 53
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN BALANCE SHEET INVESTMENT FUND AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONTINUED)
e REPURCHASE AGREEMENT (COST $572,420,259) 10.2%
Joint Repurchase Agreement, 5.16%, 5/01/07 (Maturity Value $572,502,309) ......... $572,420,259 $ 572,420,259
ABN AMRO Bank, NV, New York Branch (Maturity Value $52,446,937)
Banc of America Securities LLC (Maturity Value $47,844,018)
Barclays Capital Inc. (Maturity Value $52,446,937)
Bear, Stearns & Co. Inc. (Maturity Value $36,811,897)
BNP Paribas Securities Corp. (Maturity Value $47,844,018)
Deutsche Bank Securities Inc. (Maturity Value $47,844,018)
Goldman, Sachs & Co. (Maturity Value $47,844,018)
Greenwich Capital Markets Inc. (Maturity Value $47,844,018)
Lehman Brothers Inc. (Maturity Value $43,441,475)
Merrill Lynch Government Securities Inc. (Maturity Value $47,844,018)
Morgan Stanley & Co. Inc. (Maturity Value $47,844,018)
UBS Securities LLC (Maturity Value $52,446,937)
Collateralized by U.S. Government Agency Securities, 3.00% - 6.375%,
5/15/07 - 4/02/12; f U.S. Government Agency Discount Notes, 7/06/07 - 9/27/07;
f U.S. Treasury Bill, 8/02/07; and U.S. Treasury Notes, 0.875% - 6.00%,
8/15/07 - 1/31/12
---------------
TOTAL SHORT TERM INVESTMENTS (COST $787,472,645) ................................. 787,472,645
---------------
TOTAL INVESTMENTS (COST $3,020,281,180) 100.2% ................................... 5,601,421,728
OTHER ASSETS, LESS LIABILITIES (0.2)% ............................................ (8,703,353)
---------------
NET ASSETS 100.0% ................................................................ $ 5,592,718,375
===============
a Non-income producing for the twelve months ended April 30, 2007.
b See Note 9 regarding holdings of 5% voting securities.
c Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. This security has been deemed liquid under
guidelines approved by the Trust's Board of Trustees. At April 30, 2007,
the value of this security was $85,800,000, representing 1.53% of net
assets. dSee 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.
e See Note 1(c) regarding repurchase agreements.
f The security is traded on a discount basis with no stated coupon rate.
54 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN LARGE CAP VALUE FUND
------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 16.55 $ 14.66 $ 14.01 $ 12.40 $ 10.48 $ 11.66
------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............. 0.11 0.20 0.13 0.08 0.07 0.07
Net realized and unrealized gains
(losses) ........................... 0.94 2.18 0.63 1.58 1.92 (1.08)
------------------------------------------------------------------------------------
Total from investment operations ..... 1.05 2.38 0.76 1.66 1.99 (1.01)
------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.21) (0.15) (0.08) (0.05) (0.07) (0.07)
Net realized gains .................. (0.84) (0.34) (0.03) -- -- (0.10)
------------------------------------------------------------------------------------
Total distributions .................. (1.05) (0.49) (0.11) (0.05) (0.07) (0.17)
------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 16.55 $ 16.55 $ 14.66 $ 14.01 $ 12.40 $ 10.48
====================================================================================
Total return c ....................... 6.54% 16.62% 5.42% 13.45% 19.08% (8.82)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.34% e,f 1.33% f 1.29% f 1.31% 1.38% 1.42%
Net investment income ................ 1.31% e 1.29% 0.91% 0.59% 0.60% 0.64%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $189,686 $184,225 $156,841 $127,267 $ 59,600 $ 32,825
Portfolio turnover rate .............. 6.48% 34.36% 25.33% 21.69% 27.47% 15.33%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 55
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND
------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 16.34 $ 14.47 $ 13.85 $ 12.29 $ 10.39 $ 11.58
------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...... 0.05 0.10 0.04 (0.01) (0.01) --
Net realized and unrealized gains
(losses) ........................... 0.93 2.16 0.61 1.58 1.92 (1.07)
------------------------------------------------------------------------------------
Total from investment operations ..... 0.98 2.26 0.65 1.57 1.91 (1.07)
------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.10) (0.05) -- d (0.01) (0.01) (0.02)
Net realized gains .................. (0.84) (0.34) (0.03) -- -- (0.10)
------------------------------------------------------------------------------------
Total distributions .................. (0.94) (0.39) (0.03) (0.01) (0.01) (0.12)
------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 16.38 $ 16.34 $ 14.47 $ 13.85 $ 12.29 $ 10.39
====================================================================================
Total return c ....................... 6.17% 15.90% 4.71% 12.76% 18.35% (9.38)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.98% e,f 1.98% f 1.94% f 1.96% 2.04% 2.07%
Net investment income (loss) ......... 0.67% e 0.64% 0.26% (0.06)% (0.06)% (0.01)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 20,918 $ 22,120 $ 22,072 $ 21,794 $ 10,865 $ 4,975
Portfolio turnover rate .............. 6.48% 34.36% 25.33% 21.69% 27.47% 15.33%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
56 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND
------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 16.34 $ 14.47 $ 13.85 $ 12.28 $ 10.39 $ 11.57
------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ....... 0.06 0.10 0.04 (0.01) (0.01) --
Net realized and unrealized gains
(losses) ........................... 0.92 2.16 0.61 1.58 1.91 (1.07)
------------------------------------------------------------------------------------
Total from investment operations ..... 0.98 2.26 0.65 1.57 1.90 (1.07)
------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.11) (0.05) -- -- (0.01) (0.01)
Net realized gains .................. (0.84) (0.34) (0.03) -- -- (0.10)
------------------------------------------------------------------------------------
Total distributions .................. (0.95) (0.39) (0.03) -- (0.01) (0.11)
------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 16.37 $ 16.34 $ 14.47 $ 13.85 $ 12.28 $ 10.39
====================================================================================
Total return c ....................... 6.17% 15.92% 4.69% 12.78% 18.35% (9.34)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.98% e,f 1.97% f 1.94% f 1.96% 2.06% 2.04%
Net investment income (loss) ......... 0.67% e 0.65% 0.26% (0.06)% (0.08)% 0.02%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 58,278 $ 63,983 $ 59,929 $ 57,966 $ 32,592 $ 17,738
Portfolio turnover rate .............. 6.48% 34.36% 25.33% 21.69% 27.47% 15.33%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 57
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND
------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30,
2007 YEAR ENDED OCTOBER 31,
CLASS R (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 16.42 $ 14.56 $ 13.93 $ 12.34 $ 10.48 $ 10.55
------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............. 0.09 0.17 0.11 0.06 0.05 0.01
Net realized and unrealized gains
(losses) ........................... 0.95 2.17 0.61 1.59 1.90 (0.08)
------------------------------------------------------------------------------------
Total from investment operations ..... 1.04 2.34 0.72 1.65 1.95 (0.07)
------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.19) (0.14) (0.06) (0.06) (0.09) --
Net realized gains .................. (0.84) (0.34) (0.03) -- -- --
------------------------------------------------------------------------------------
Total distributions .................. (1.03) (0.48) (0.09) (0.06) (0.09) --
------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 16.43 $ 16.42 $ 14.56 $ 13.93 $ 12.34 $ 10.48
====================================================================================
Total return c ....................... 6.49% 16.46% 5.19% 13.44% 18.77% (0.66)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.49% e,f 1.48% f 1.44% f 1.46% 1.54% 1.59% e
Net investment income ................ 1.16% e 1.14% 0.76% 0.44% 0.44% 0.47% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 7,376 $ 7,717 $ 6,896 $ 3,414 $ 826 $ 65
Portfolio turnover rate .............. 6.48% 34.36% 25.33% 21.69% 27.47% 15.33%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period August 1, 2002 (effective date) to October 31, 2002.
58 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND
--------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2007 OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2006 g
--------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $16.56 $14.63
------------------------
Income from investment operations a:
Net investment income b ...................... 0.13 0.24
Net realized and unrealized gains (losses) ... 0.95 2.23
------------------------
Total from investment operations .............. 1.08 2.47
------------------------
Less distributions from:
Net investment income ........................ (0.27) (0.20)
Net realized gains ........................... (0.84) (0.34)
------------------------
Total distributions ........................... (1.11) (0.54)
------------------------
Redemption fees ............................... -- d -- d
------------------------
Net asset value, end of period ................ $16.53 $16.56
========================
Total return c ................................ 6.70% 17.09%
RATIOS TO AVERAGE NET ASSETS
Expenses ...................................... 0.99% e,f 0.98% f
Net investment income ......................... 1.66% e 1.64%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $3,206 $1,989
Portfolio turnover rate ....................... 6.48% 34.36%
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 repurchase 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 Totalreturn is not annualized for periods less than one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period November 1, 2005 (effective date) to October 31, 2006.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 59
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
FRANKLIN LARGE CAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 92.0%
CONSUMER DURABLES 1.5%
D.R. Horton Inc. ................................. 195,000 $ 4,325,100
------------
CONSUMER NON-DURABLES 7.1%
Kimberly-Clark Corp. ............................. 104,000 7,401,680
NIKE Inc., B ..................................... 50,000 2,693,000
The Procter & Gamble Co. ......................... 150,000 9,646,500
------------
19,741,180
------------
CONSUMER SERVICES 3.4%
Gannett Co. Inc. ................................. 34,600 1,974,276
McDonald's Corp. ................................. 153,000 7,386,840
------------
9,361,116
------------
ELECTRONIC TECHNOLOGY 1.2%
Hewlett-Packard Co. .............................. 79,700 3,358,558
------------
ENERGY MINERALS 9.9%
Apache Corp. ..................................... 69,000 5,002,500
BP PLC, ADR (United Kingdom) ..................... 45,000 3,029,400
ConocoPhillips ................................... 40,800 2,829,480
ExxonMobil Corp. ................................. 130,000 10,319,400
Occidental Petroleum Corp. ....................... 130,000 6,591,000
------------
27,771,780
------------
FINANCE/RENTAL/LEASING 3.6%
Freddie Mac ...................................... 156,000 10,105,680
------------
FINANCIAL CONGLOMERATES 3.9%
Citigroup Inc. ................................... 202,000 10,831,240
------------
HEALTH TECHNOLOGY 4.4%
Abbott Laboratories .............................. 95,600 5,412,872
Becton Dickinson and Co. ......................... 52,000 4,091,880
Pfizer Inc. ...................................... 107,000 2,831,220
------------
12,335,972
------------
INVESTMENT BANKS/BROKERS 3.5%
Lehman Brothers Holdings Inc. .................... 67,000 5,043,760
Morgan Stanley ................................... 57,000 4,788,570
------------
9,832,330
------------
INVESTMENT MANAGERS 2.4%
Mellon Financial Corp. ........................... 157,000 6,740,010
------------
LIFE/HEALTH INSURANCE 1.3%
MetLife Inc. ..................................... 57,000 3,744,900
------------
MAJOR BANKS 10.2%
Bank of America Corp. ............................ 195,000 9,925,500
U.S. Bancorp ..................................... 269,000 9,240,150
Wachovia Corp. ................................... 169,000 9,386,260
------------
28,551,910
------------
MULTI-LINE INSURANCE 2.8%
American International Group Inc. ................ 109,900 7,683,109
------------
60 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------
FRANKLIN LARGE CAP VALUE FUND SHARES VALUE
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
NON-ENERGY MINERALS 1.6%
Alcoa Inc. ......................................................... 127,000 $ 4,507,230
------------
PROCESS INDUSTRIES 3.9%
The Dow Chemical Co. ............................................... 121,000 5,397,810
Praxair Inc. ....................................................... 84,478 5,453,055
------------
10,850,865
------------
PRODUCER MANUFACTURING 13.2%
3M Co. ............................................................. 96,000 7,945,920
General Electric Co. ............................................... 278,000 10,247,080
Illinois Tool Works Inc. ........................................... 184,100 9,446,171
Masco Corp. ........................................................ 108,000 2,938,680
United Technologies Corp. .......................................... 94,000 6,310,220
------------
36,888,071
------------
PROPERTY-CASUALTY INSURANCE 5.6%
The Allstate Corp. ................................................. 137,000 8,537,840
Chubb Corp. ........................................................ 133,700 7,197,071
------------
15,734,911
------------
RETAIL TRADE 1.3%
Wal-Mart Stores Inc. ............................................... 73,000 3,498,160
------------
SAVINGS BANKS 2.0%
Washington Mutual Inc. ............................................. 134,000 5,625,320
------------
SPECIALTY INSURANCE 2.3%
Ambac Financial Group Inc. ......................................... 71,100 6,526,980
------------
TECHNOLOGY SERVICES 4.8%
International Business Machines Corp. .............................. 87,000 8,892,270
Microsoft Corp. .................................................... 148,000 4,431,120
------------
13,323,390
------------
UTILITIES 2.1%
Entergy Corp. ...................................................... 53,000 5,996,420
------------
TOTAL COMMON STOCKS (COST $197,042,728) ............................ 257,334,232
------------
SHORT TERM INVESTMENT (COST $19,186,132) 6.9%
MONEY MARKET FUND 6.9%
a Franklin Institutional Fiduciary Trust Money Market Portfolio, 5.01% 19,186,132 19,186,132
------------
TOTAL INVESTMENTS (COST $216,228,860) 98.9% ........................ 276,520,364
OTHER ASSETS, LESS LIABILITIES 1.1% ................................ 2,943,213
------------
NET ASSETS 100.0% .................................................. $279,463,577
============
See Selected Portfolio Abbreviation on page 85.
a 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.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 61
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN MICROCAP VALUE FUND
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 2007 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
-------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 41.32 $ 38.15 $ 34.48 $ 30.41 $ 24.09 $ 24.64
-------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...... 0.19 0.48 0.18 0.05 (0.04) (0.01)
Net realized and unrealized gains
(losses) ........................... 5.95 5.73 5.32 4.65 7.80 0.68
-------------------------------------------------------------------------------------
Total from investment operations ..... 6.14 6.21 5.50 4.70 7.76 0.67
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.57) (0.19) (0.05) -- -- (0.08)
Net realized gains .................. (2.22) (2.85) (1.78) (0.63) (1.44) (1.14)
-------------------------------------------------------------------------------------
Total distributions .................. (2.79) (3.04) (1.83) (0.63) (1.44) (1.22)
-------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
-------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 44.67 $ 41.32 $ 38.15 $ 34.48 $ 30.41 $ 24.09
=====================================================================================
Total return c ....................... 15.40% 17.25% 16.45% 15.64% 33.90% 2.77%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.10% e,f 1.11% f 1.10% f 1.12% f 1.23% 1.18%
Net investment income (loss) ......... 0.91% e 1.22% 0.48% 0.13% (0.16)% (0.02)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $517,889 $473,837 $443,037 $418,464 $310,995 $230,562
Portfolio turnover rate .............. 4.77% 6.47% 13.86% 11.38% 13.35% 28.35%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
62 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN MICROCAP VALUE FUND
--------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2007 OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2006 g
--------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $41.43 $38.28
------------------------
Income from investment operations a:
Net investment income b ...................... 0.24 0.61
Net realized and unrealized gains (losses) ... 5.95 5.58
------------------------
Total from investment operations .............. 6.19 6.19
------------------------
Less distributions from:
Net investment income ........................ (0.67) (0.19)
Net realized gains ........................... (2.22) (2.85)
------------------------
Total distributions ........................... (2.89) (3.04)
------------------------
Redemption fees ............................... -- d -- d
------------------------
Net asset value, end of period ................ $44.73 $41.43
========================
Total return c ................................ 15.51% 17.56%
RATIOS TO AVERAGE NET ASSETS
Expenses ...................................... 0.86% e,f 0.87% f
Net investment income ......................... 1.15% e 1.46%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $16,470 $6,298
Portfolio turnover rate ....................... 4.77% 6.47%
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 repurchase 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 Totalreturn is not annualized for periods less than one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period November 1, 2005 (effective date) to October 31, 2006.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 63
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------
LONG TERM INVESTMENTS 81.8%
COMMON STOCKS 78.0%
COMMERCIAL SERVICES 1.5%
Courier Corp. ................................ 200,000 $ 7,960,000
-----------
COMMUNICATIONS 2.4%
Atlantic Tele-Network Inc. ................... 511,000 12,897,640
-----------
CONSUMER DURABLES 3.7%
a,b,c Allen Organ Co., Escrow Account .............. 94,800 1,496,892
Bassett Furniture Industries Inc. ............ 133,100 1,884,696
b Cavalier Homes Inc. .......................... 432,000 2,090,880
b Chromcraft Revington Inc. .................... 200,000 1,800,000
Cobra Electronics Corp. ...................... 206,805 2,068,050
b The Dixie Group Inc. ......................... 405,000 4,997,700
Flexsteel Industries Inc. .................... 225,000 3,321,000
b National R.V. Holdings Inc. .................. 295,000 678,500
b,d Rockford Corp. ............................... 575,000 1,230,500
-----------
19,568,218
-----------
CONSUMER NON-DURABLES 12.4%
b Alliance One International Inc. .............. 1,167,000 11,448,270
Brown Shoe Co. Inc. .......................... 282,481 7,621,337
d Delta Apparel Inc. ........................... 680,000 11,736,800
b John B. Sanfilippo & Son Inc. ................ 195,000 2,622,750
Premium Standard Farms Inc. .................. 700,000 15,176,000
b Seneca Foods Corp., A ........................ 256,600 7,243,818
b Seneca Foods Corp., B ........................ 121,500 3,523,500
d Tandy Brands Accessories Inc. ................ 540,000 6,847,200
-----------
66,219,675
-----------
DISTRIBUTION SERVICES 1.9%
The Coast Distribution System Inc. ........... 66,800 484,300
b GTSI Corp. ................................... 289,249 3,343,719
Handleman Co. ................................ 820,000 6,150,000
-----------
9,978,019
-----------
ELECTRONIC TECHNOLOGY 1.7%
d Espey Manufacturing & Electronics Corp. ...... 156,000 3,244,800
b Ladish Co. Inc. .............................. 53,000 2,154,980
Printronix Inc. .............................. 130,000 1,755,000
b Sparton Corp. ................................ 264,364 2,104,338
-----------
9,259,118
-----------
HEALTH SERVICES 2.0%
Healthcare Services Group Inc. ............... 390,600 10,936,800
-----------
INDUSTRIAL SERVICES 5.2%
Ecology and Environment Inc., A .............. 202,000 2,595,700
b Exponent Inc. ................................ 140,000 2,961,000
b Layne Christensen Co. ........................ 297,000 11,247,390
64 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
INDUSTRIAL SERVICES (CONTINUED)
b PHI Inc. ................................. 17,600 $ 475,200
b PHI Inc. non-voting ...................... 394,499 10,529,178
------------
27,808,468
------------
MUTUAL FUND 1.7%
Kohlberg Capital Corp. ................... 500,000 8,970,000
------------
NON-ENERGY MINERALS 0.9%
b,d Continental Materials Corp. .............. 109,000 3,351,750
The Monarch Cement Co. ................... 42,444 1,358,208
------------
4,709,958
------------
PROCESS INDUSTRIES 5.0%
b,d American Pacific Corp. ................... 676,300 8,047,970
b Intertape Polymer Group Inc. (Canada) .... 250,000 1,225,000
b Mercer International Inc. (Germany) ...... 761,400 9,334,764
b,d Omega Protein Corp. ...................... 1,000,000 7,090,000
Schweitzer-Mauduit International Inc. .... 34,724 953,174
------------
26,650,908
------------
PRODUCER MANUFACTURING 19.2%
Alamo Group Inc. ......................... 105,000 2,835,000
Burnham Holdings Inc., A ................. 120,000 1,986,000
Central Steel and Wire Co. ............... 6,905 4,315,628
CIRCOR International Inc. ................ 247,500 9,009,000
b Gehl Co. ................................. 300,000 8,781,000
Gibraltar Industries Inc. ................ 356,099 7,941,008
d Hardinge Inc. ............................ 872,000 24,250,320
Insteel Industries Inc. .................. 124,560 2,078,906
b,d Nashua Corp. ............................. 477,930 4,506,880
b Northwest Pipe Co. ....................... 310,000 11,082,500
b P & F Industries Inc., A ................. 6,857 95,929
b,d Proliance International Inc. ............. 823,800 3,031,584
b RTI International Metals Inc. ............ 186,000 17,534,220
Smith Investment Co. ..................... 44,600 2,876,700
b Tecumseh Products Co., A ................. 230,000 2,336,800
b Tecumseh Products Co., B ................. 12,799 131,062
------------
102,792,537
------------
PROPERTY-CASUALTY INSURANCE 4.5%
b,d ACMAT Corp., A ........................... 392,800 10,409,200
Baldwin & Lyons Inc., B .................. 228,264 5,622,142
Mercer Insurance Group Inc. .............. 25,000 466,750
Safety Insurance Group Inc. .............. 51,000 2,043,060
b United America Indemnity Ltd. ............ 217,168 5,424,857
------------
23,966,009
------------
Semiannual Report | 65
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
REAL ESTATE DEVELOPMENT 2.6%
Bresler & Reiner Inc. ............................................................ 205,000 $ 7,943,750
b Griffin Land & Nurseries Inc. .................................................... 173,000 5,916,600
a,b,c LandCo Real Estate LLC, Liquidating Trust ........................................ 94,800 240,792
-----------
14,101,142
-----------
REAL ESTATE INVESTMENT TRUST 1.5%
Arbor Realty Trust Inc. .......................................................... 270,000 8,313,300
-----------
RETAIL TRADE 4.4%
b,d Duckwall-ALCO Stores Inc. ........................................................ 227,500 8,656,375
Haverty Furniture Cos. Inc. ...................................................... 147,000 1,875,720
b,d S&K Famous Brands Inc. ........................................................... 255,500 3,385,375
Village Super Market Inc., A ..................................................... 214,000 9,428,840
-----------
23,346,310
-----------
SAVINGS BANKS 2.1%
Beverly Hills Bancorp Inc. ....................................................... 700,000 4,669,000
First Defiance Financial Corp. ................................................... 235,000 6,591,750
-----------
11,260,750
-----------
TRANSPORTATION 4.8%
b Crowley Maritime Corp. ........................................................... 2,342 6,979,160
b,d International Shipholding Corp. .................................................. 474,800 11,015,360
OMI Corp. ........................................................................ 120,000 3,488,400
Providence and Worcester Railroad Co. ............................................ 205,000 4,018,000
-----------
25,500,920
-----------
UTILITIES 0.5%
Central Vermont Public Service Corp. ............................................. 26,400 850,080
b Maine & Maritimes Corp. .......................................................... 27,800 648,017
b SEMCO Energy Inc. ................................................................ 130,000 985,400
-----------
2,483,497
-----------
TOTAL COMMON STOCKS (COST $203,144,607) .......................................... 416,723,269
-----------
CONVERTIBLE PREFERRED STOCKS 1.6%
CONSUMER NON-DURABLES 1.6%
b Seneca Foods Corp., cvt. participating pfd. ...................................... 200,000 5,646,000
b Seneca Foods Corp., cvt. participating pfd., 2003 ................................ 100,000 2,823,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $4,905,000) ............................. 8,469,000
-----------
----------------
PRINCIPAL AMOUNT
----------------
CONVERTIBLE BOND (COST $7,000,000) 2.2%
PROCESS INDUSTRIES 2.2%
e Mercer International Inc., cvt., senior sub. note, 144A, 8.50%, 10/15/10 (Germany) $ 7,000,000 12,063,660
-----------
TOTAL LONG TERM INVESTMENTS (COST $215,049,607) .................................. 437,255,929
-----------
66 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- ------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENT (COST $97,632,965) 18.3%
MONEY MARKET FUND 18.3%
f Franklin Institutional Fiduciary Trust Money Market Portfolio, 5.01% 97,632,965 $ 97,632,965
-------------
TOTAL INVESTMENTS (COST $312,682,572) 100.1% ........................ 534,888,894
OTHER ASSETS, LESS LIABILITIES (0.1)% ............................... (529,458)
-------------
NET ASSETS 100.0% ................................................... $ 534,359,436
=============
a Security has been deemed illiquid because it may not be able to be sold
within seven days. At April 30, 2007, the aggregate value of these
securities was $1,737,684 representing 0.33% of net assets.
b Non-income producing for the twelve months ended April 30, 2007.
c See Note 8 regarding restricted securities.
d See Note 9 regarding holdings of 5% voting securities.
e Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. This security has been deemed liquid under
guidelines approved by the Trust's Board of Trustees. At April 30, 2007,
the value of this security was $12,063,660, representing 2.26% of net
assets.
f 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.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 67
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN MIDCAP VALUE FUND
-------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 2007 OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 2006 2005 g
-------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $11.37 $ 9.80 $10.00
-------------------------------------------------
Income from investment operations a:
Net investment income b ........................ 0.29 0.04 0.01
Net realized and unrealized gains (losses) ..... 1.03 1.59 (0.21)
-------------------------------------------------
Total from investment operations ................ 1.32 1.63 (0.20)
-------------------------------------------------
Less distributions from:
Net investment income .......................... (0.20) (0.06) --
Net realized gains ............................. (0.15) -- --
-------------------------------------------------
Total distributions ............................. (0.35) (0.06) --
-------------------------------------------------
Redemption fees ................................. -- d -- d -- d
-------------------------------------------------
Net asset value, end of period .................. $12.34 $11.37 $ 9.80
=================================================
Total return c .................................. 11.82% 16.70% (2.00)%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates 1.73% e 1.97% 2.57% e
Expenses net of waiver and payments by affiliates 1.40% e 1.40% f 1.40% e
Net investment income ........................... 4.99% e 0.38% 0.37% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $61,320 $42,677 $11,804
Portfolio turnover rate ......................... 3.81% 10.96% --%
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 repurchase 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 Totalreturn does not reflect sales commissions or the contingent deferred
sales charge, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period July 1, 2005 (commencement of operations) to October 31,
2005.
68 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN MIDCAP VALUE FUND
---------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 2007 OCTOBER 31, OCTOBER 31,
CLASS C (UNAUDITED) 2006 2005 g
---------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $11.29 $ 9.78 $10.00
-------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ................. 0.25 (0.03) (0.01)
Net realized and unrealized gains (losses) ..... 1.02 1.59 (0.21)
-------------------------------------------------
Total from investment operations ................ 1.27 1.56 (0.22)
-------------------------------------------------
Less distributions from:
Net investment income .......................... (0.14) (0.05) --
Net realized gains ............................. (0.15) -- --
-------------------------------------------------
Total distributions ............................. (0.29) (0.05) --
-------------------------------------------------
Redemption fees ................................. -- d -- d -- d
-------------------------------------------------
Net asset value, end of period .................. $12.27 $11.29 $ 9.78
=================================================
Total return c .................................. 11.45% 15.95% (2.20)%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates 2.40% e 2.60% 3.22% e
Expenses net of waiver and payments by affiliates 2.07% e 2.03% f 2.05% e
Net investment income (loss) .................... 4.32% e (0.25)% (0.28)% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $13,156 $9,406 $3,275
Portfolio turnover rate ......................... 3.81% 10.96% --%
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 repurchase 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 Totalreturn does not reflect sales commissions or the contingent deferred
sales charge, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period July 1, 2005 (commencement of operations) to October 31,
2005.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 69
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN MIDCAP VALUE FUND
---------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 2007 OCTOBER 31, OCTOBER 31,
CLASS R (UNAUDITED) 2006 2005 g
---------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $11.35 $ 9.80 $10.00
-------------------------------------------------
Income from investment operations a:
Net investment income b ........................ 0.29 0.02 0.01
Net realized and unrealized gains (losses) ..... 1.02 1.59 (0.21)
-------------------------------------------------
Total from investment operations ................ 1.31 1.61 (0.20)
-------------------------------------------------
Less distributions from:
Net investment income .......................... (0.21) (0.06) --
Net realized gains ............................. (0.15) -- --
-------------------------------------------------
Total distributions ............................. (0.36) (0.06) --
-------------------------------------------------
Redemption fees ................................. -- d -- d -- d
-------------------------------------------------
Net asset value, end of period .................. $12.30 $11.35 $ 9.80
=================================================
Total return c .................................. 11.75% 16.47% (2.00)%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates 1.88% e 2.12% 2.72% e
Expenses net of waiver and payments by affiliates 1.55% e 1.55% f 1.55% e
Net investment income ........................... 4.84% e 0.23% 0.22% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $ 638 $ 133 $ 36
Portfolio turnover rate ......................... 3.81% 10.96% --%
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 repurchase 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 Totalreturn does not reflect sales commissions or the contingent deferred
sales charge, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period July 1, 2005 (commencement of operations) to October 31,
2005.
70 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN MIDCAP VALUE FUND
---------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 2007 OCTOBER 31, OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2006 2005 g
---------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $11.42 $ 9.81 $10.00
-------------------------------------------------
Income from investment operations a:
Net investment income b ........................ 0.32 0.08 0.03
Net realized and unrealized gains (losses) ..... 1.03 1.60 (0.22)
-------------------------------------------------
Total from investment operations ................ 1.35 1.68 (0.19)
-------------------------------------------------
Less distributions from:
Net investment income .......................... (0.23) (0.07) --
Net realized gains ............................. (0.15) -- --
-------------------------------------------------
Total distributions ............................. (0.38) (0.07) --
-------------------------------------------------
Redemption fees ................................. -- d -- d -- d
-------------------------------------------------
Net asset value, end of period .................. $12.39 $11.42 $ 9.81
=================================================
Total return c .................................. 12.03% 17.18% (1.90)%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates 1.38% e 1.62% 2.22% e
Expenses net of waiver and payments by affiliates 1.05% e 1.05% f 1.05% e
Net investment income ........................... 5.34% e 0.73% 0.72% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $1,012 $ 777 $ 434
Portfolio turnover rate ......................... 3.81% 10.96% --%
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 repurchase 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 Totalreturn is not annualized for periods less than one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period July 1, 2005 (commencement of operations) to October 31,
2005.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 71
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------------
FRANKLIN MIDCAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------------
COMMON STOCKS 94.1%
COMMERCIAL SERVICES 2.6%
a SAIC Inc. ................................................ 106,900 $1,955,201
----------
CONSUMER DURABLES 9.3%
Fortune Brands Inc. ...................................... 36,600 2,931,660
Hasbro Inc. .............................................. 32,800 1,036,808
Leggett & Platt Inc. ..................................... 28,600 672,672
Lennar Corp., A .......................................... 6,300 269,073
M.D.C. Holdings Inc. ..................................... 27,800 1,425,028
Pulte Homes Inc. ......................................... 26,700 718,230
----------
7,053,471
----------
CONSUMER NON-DURABLES 7.9%
Alberto-Culver Co. ....................................... 32,200 782,138
Dean Foods Co. ........................................... 53,600 1,952,648
The Hershey Co. .......................................... 35,000 1,923,600
McCormick & Co. Inc. ..................................... 26,700 991,104
a Timberland Co., A ........................................ 13,500 348,435
----------
5,997,925
----------
CONSUMER SERVICES 0.7%
Gannett Co. Inc. ......................................... 8,800 502,128
----------
DISTRIBUTION SERVICES 0.6%
W.W. Grainger Inc. ....................................... 5,700 470,934
----------
ELECTRONIC TECHNOLOGY 2.2%
Embraer-Empresa Brasileira de Aeronautica SA, ADR (Brazil) 35,800 1,679,378
----------
ENERGY MINERALS 5.8%
Chesapeake Energy Corp. .................................. 45,500 1,535,625
Peabody Energy Corp. ..................................... 52,800 2,533,344
Pioneer Natural Resources Co. ............................ 7,100 356,420
----------
4,425,389
----------
FINANCE/RENTAL/LEASING 1.8%
CIT Group Inc. ........................................... 22,900 1,365,985
----------
HEALTH SERVICES 2.9%
a LifePoint Hospitals Inc. ................................. 26,100 952,911
Pharmaceutical Product Development Inc. .................. 35,400 1,276,878
----------
2,229,789
----------
HEALTH TECHNOLOGY 4.7%
a Endo Pharmaceuticals Holdings Inc. ....................... 41,600 1,287,104
Hillenbrand Industries Inc. .............................. 28,700 1,755,005
a Watson Pharmaceuticals Inc. .............................. 19,400 529,620
----------
3,571,729
----------
INDUSTRIAL SERVICES 3.2%
ENSCO International Inc. ................................. 25,800 1,454,604
a Helix Energy Solutions Group Inc. ........................ 26,695 1,021,351
----------
2,475,955
----------
72 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
FRANKLIN MIDCAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE BROKERS/SERVICES 0.5%
Arthur J. Gallagher & Co. ........................... 14,200 $ 397,032
----------
INVESTMENT MANAGERS 2.3%
KKR Private Equity Investors LP (Guernsey Islands) .. 71,200 1,737,280
----------
LIFE/HEALTH INSURANCE 1.0%
American National Insurance Co. ..................... 2,100 274,092
Protective Life Corp. ............................... 11,000 515,900
----------
789,992
----------
MAJOR BANKS 0.9%
PNC Financial Services Group Inc. ................... 9,727 720,771
----------
NON-ENERGY MINERALS 1.2%
Nucor Corp. ......................................... 5,600 355,376
United States Steel Corp. ........................... 5,400 548,316
----------
903,692
----------
PROCESS INDUSTRIES 9.9%
Airgas Inc. ......................................... 9,900 441,045
Bemis Co. Inc. ...................................... 24,600 817,212
Bunge Ltd. .......................................... 19,200 1,454,592
Cabot Corp. ......................................... 11,800 534,540
Celanese Corp., A ................................... 60,500 2,006,785
MeadWestvaco Corp. .................................. 35,700 1,190,952
Sigma-Aldrich Corp. ................................. 25,100 1,056,208
----------
7,501,334
----------
PRODUCER MANUFACTURING 10.9%
Autoliv Inc. (Sweden) ............................... 23,800 1,383,970
Carlisle Cos. Inc. .................................. 28,100 1,157,158
Dover Corp. ......................................... 27,400 1,318,488
Graco Inc. .......................................... 21,200 837,400
Oshkosh Truck Corp. ................................. 36,500 2,041,810
Roper Industries Inc. ............................... 28,500 1,597,710
----------
8,336,536
----------
PROPERTY-CASUALTY INSURANCE 3.9%
Cincinnati Financial Corp. .......................... 10,600 479,544
Erie Indemnity Co., A ............................... 31,000 1,629,050
Mercury General Corp. ............................... 3,600 194,940
Montpelier Re Holdings Ltd. (Bermuda) ............... 8,000 146,080
Old Republic International Corp. .................... 23,875 507,821
----------
2,957,435
----------
RETAIL TRADE 2.0%
Dollar General Corp. ................................ 27,400 584,990
Family Dollar Stores Inc. ........................... 20,600 655,904
a Sally Beauty Holdings Inc. .......................... 32,200 316,204
----------
1,557,098
----------
Semiannual Report | 73
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ----------------------------------------------------------------------------------------------------
FRANKLIN MIDCAP VALUE FUND SHARES VALUE
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SPECIALTY INSURANCE 4.5%
Assurant Inc. ....................................................... 33,700 $ 1,938,761
MGIC Investment Corp. ............................................... 8,200 505,202
The PMI Group Inc. .................................................. 10,400 504,088
Radian Group Inc. ................................................... 8,500 493,935
-----------
3,441,986
-----------
TRANSPORTATION 9.2%
J.B. Hunt Transport Services Inc. ................................... 59,000 1,596,540
Overseas Shipholding Group Inc. ..................................... 27,400 1,939,920
Southwest Airlines Co. .............................................. 161,400 2,316,090
Teekay Shipping Corp. (Bahamas) ..................................... 19,100 1,139,315
-----------
6,991,865
-----------
UTILITIES 6.1%
Atmos Energy Corp. .................................................. 56,100 1,779,492
DTE Energy Co. ...................................................... 41,800 2,114,662
Northeast Utilities ................................................. 22,600 727,042
-----------
4,621,196
-----------
TOTAL COMMON STOCKS (COST $63,405,600) .............................. 71,684,101
-----------
SHORT TERM INVESTMENT (COST $4,530,949) 6.0%
MONEY MARKET FUND 6.0%
b Franklin Institutional Fiduciary Trust Money Market Portfolio, 5.01% 4,530,949 4,530,949
-----------
TOTAL INVESTMENTS (COST $67,936,549) 100.1% ......................... 76,215,050
OTHER ASSETS, LESS LIABILITIES (0.1)% ............................... (89,783)
-----------
NET ASSETS 100.0% ................................................... $76,125,267
===========
See Selected Portfolio Abbreviation on page 85.
a Non-income producing for the twelve months ended April 30, 2007.
b 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.
74 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN SMALL CAP VALUE FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 2007 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 45.27 $ 39.41 $ 34.37 $ 28.19 $ 22.15 $ 22.49
-----------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...... 0.14 0.17 0.15 0.30 (0.02) 0.02
Net realized and unrealized gains
(losses) ........................... 4.44 6.70 5.15 5.88 6.06 (0.33)
-----------------------------------------------------------------------------------
Total from investment operations ..... 4.58 6.87 5.30 6.18 6.04 (0.31)
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.28) (0.10) (0.26) -- -- --
Net realized gains .................. (3.05) (0.91) -- -- -- --
Tax return of capital ............... -- -- -- -- -- (0.03)
-----------------------------------------------------------------------------------
Total distributions .................. (3.33) (1.01) (0.26) -- -- (0.03)
-----------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ....... $ 46.52 $ 45.27 $ 39.41 $ 34.37 $ 28.19 $ 22.15
===================================================================================
Total return c ....................... 10.48% 17.73% 15.46% 21.92% 27.27% (1.41)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.12% e,f 1.22% f 1.29% f 1.35% f 1.44% 1.37%
Net investment income (loss) ......... 0.64% e 0.40% 0.39% 0.95% (0.07)% 0.09%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $837,037 $703,238 $486,563 $296,000 $200,181 $140,202
Portfolio turnover rate .............. 3.13% 17.39% 12.73% 17.38% 14.14% 12.74%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 75
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 2007 YEAR ENDED OCTOBER 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 43.43 $ 38.00 $ 33.20 $ 27.41 $ 21.67 $ 22.13
-----------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...... (0.02) (0.12) (0.09) 0.09 (0.17) (0.14)
Net realized and unrealized gains
(losses) ........................... 4.24 6.46 4.97 5.70 5.91 (0.32)
-----------------------------------------------------------------------------------
Total from investment operations ..... 4.22 6.34 4.88 5.79 5.74 (0.46)
-----------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... -- -- (0.08) -- -- --
Net realized gains .................. (3.05) (0.91) -- -- -- --
-----------------------------------------------------------------------------------
Total distributions .................. (3.05) (0.91) (0.08) -- -- --
-----------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ....... $ 44.60 $ 43.43 $ 38.00 $ 33.20 $ 27.41 $ 21.67
===================================================================================
Total return c ....................... 10.06% 16.98% 14.68% 21.12% 26.49% (2.08)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.87% e,f 1.90% f 1.94% f 2.00% f 2.09% 2.02%
Net investment income (loss) ......... (0.11)% e (0.28)% (0.26)% 0.30% (0.72)% (0.56)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 80,664 $ 79,482 $ 76,575 $ 65,551 $ 47,551 $ 29,535
Portfolio turnover rate .............. 3.13% 17.39% 12.73% 17.38% 14.14% 12.74%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
76 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 2007 YEAR ENDED OCTOBER 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 42.99 $ 37.63 $ 32.86 $ 27.13 $ 21.46 $ 21.90
--------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...... (0.02) (0.11) (0.09) 0.08 (0.17) (0.13)
Net realized and unrealized gains
(losses) ........................... 4.20 6.38 4.92 5.65 5.84 (0.31)
--------------------------------------------------------------------------------------
Total from investment operations ..... 4.18 6.27 4.83 5.73 5.67 (0.44)
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.05) -- (0.06) -- -- --
Net realized gains .................. (3.05) (0.91) -- -- -- --
--------------------------------------------------------------------------------------
Total distributions .................. (3.10) (0.91) (0.06) -- -- --
--------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
--------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 44.07 $ 42.99 $ 37.63 $ 32.86 $ 27.13 $ 21.46
======================================================================================
Total return c ....................... 10.07% 16.96% 14.69% 21.12% 26.42% (2.01)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.87% e,f 1.90% f 1.94% f 2.00% f 2.10% 1.99%
Net investment income (loss) ......... (0.11)% e (0.28)% (0.26)% 0.30% (0.73)% (0.53)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $275,032 $240,395 $186,490 $136,805 $109,353 $ 81,186
Portfolio turnover rate .............. 3.13% 17.39% 12.73% 17.38% 14.14% 12.74%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 77
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND
-----------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 2007 YEAR ENDED OCTOBER 31,
CLASS R (UNAUDITED) 2006 2005 2004 2003 2002
-----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 45.07 $ 39.22 $ 34.24 $ 28.13 $ 22.14 $ 23.34
-----------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...... 0.09 0.10 0.09 0.31 (0.07) (0.04)
Net realized and unrealized gains
(losses) ........................... 4.41 6.66 5.14 5.80 6.06 (1.16)
-----------------------------------------------------------------------------------------
Total from investment operations ..... 4.50 6.76 5.23 6.11 5.99 (1.20)
-----------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.24) -- d (0.25) -- -- --
Net realized gains .................. (3.05) (0.91) -- -- -- --
-----------------------------------------------------------------------------------------
Total distributions .................. (3.29) (0.91) (0.25) -- -- --
-----------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
-----------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 46.28 $ 45.07 $ 39.22 $ 34.24 $ 28.13 $ 22.14
=========================================================================================
Total return c ....................... 10.35% 17.54% 15.24% 21.72% 27.06% (5.14)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 1.37% e,f 1.40% f 1.44% f 1.50% f 1.59% 1.52% e
Net investment income (loss) ......... 0.39% e 0.22% 0.24% 0.80% (0.22)% (0.06)% e
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 91,085 $ 56,811 $ 31,550 $ 24,951 $ 6,914 $ 1,097
Portfolio turnover rate .............. 3.13% 17.39% 12.73% 17.38% 14.14% 12.74%
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 repurchase 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 Totalreturn does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
g For the period August 1, 2002 (effective date) to October 31, 2002.
78 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, 2007 YEAR ENDED OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2006 2005 2004 2003 2002
---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 46.46 $ 40.42 $ 35.21 $ 28.78 $ 22.53 $ 22.82
---------------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............. 0.21 0.32 0.29 0.44 0.07 0.10
Net realized and unrealized gains
(losses) ........................... 4.55 6.86 5.28 5.99 6.18 (0.34)
---------------------------------------------------------------------------------------
Total from investment operations ..... 4.76 7.18 5.57 6.43 6.25 (0.24)
---------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............... (0.38) (0.23) (0.36) -- -- --
Net realized gains .................. (3.05) (0.91) -- -- -- --
Tax return of capital ............... -- -- -- -- -- (0.05)
---------------------------------------------------------------------------------------
Total distributions .................. (3.43) (1.14) (0.36) -- -- (0.05)
---------------------------------------------------------------------------------------
Redemption fees ...................... -- d -- d -- d -- d -- --
---------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 47.79 $ 46.46 $ 40.42 $ 35.21 $ 28.78 $ 22.53
=======================================================================================
Total return c ....................... 10.61% 18.13% 15.84% 22.34% 27.74% (1.07)%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................. 0.87% e,f 0.90% f 0.94% f 1.00% f 1.09% 1.02%
Net investment income ................ 0.89% e 0.72% 0.74% 1.30% 0.28% 0.44%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $ 81,488 $ 56,912 $ 37,852 $ 26,701 $ 13,089 $ 9,586
Portfolio turnover rate .............. 3.13% 17.39% 12.73% 17.38% 14.14% 12.74%
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 repurchase 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 Totalreturn is not annualized for periods less than one year.
d Amount rounds to less than $0.01 per share.
e Annualized.
f Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 79
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED)
- ---------------------------------------------------------------------------------
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- ---------------------------------------------------------------------------------
LONG TERM INVESTMENTS 88.9%
COMMON STOCKS 88.8%
COMMERCIAL SERVICES 0.9%
ABM Industries Inc. .............................. 454,067 $ 12,777,445
------------
CONSUMER DURABLES 9.4%
Bassett Furniture Industries Inc. ................ 284,000 4,021,440
Briggs & Stratton Corp. .......................... 356,500 10,577,355
Brunswick Corp. .................................. 187,000 6,126,120
D.R. Horton Inc. ................................. 75,000 1,663,500
Ethan Allen Interiors Inc. ....................... 283,000 9,989,900
Hooker Furniture Corp. ........................... 615,000 13,548,450
a La-Z-Boy Inc. .................................... 767,000 8,966,230
M/I Homes Inc. ................................... 510,000 15,162,300
M.D.C. Holdings Inc. ............................. 123,600 6,335,736
Monaco Coach Corp. ............................... 787,500 12,072,375
b Russ Berrie and Co. Inc. ......................... 544,600 8,185,338
Thor Industries Inc. ............................. 418,500 16,668,855
Winnebago Industries Inc. ........................ 469,000 15,036,140
------------
128,353,739
------------
CONSUMER NON-DURABLES 3.0%
b Alliance One International Inc. .................. 221,700 2,174,877
Brown Shoe Co. Inc. .............................. 506,250 13,658,625
Lancaster Colony Corp. ........................... 60,000 2,533,800
b Timberland Co., A ................................ 286,500 7,394,565
b The Warnaco Group Inc. ........................... 539,000 15,242,920
------------
41,004,787
------------
CONSUMER SERVICES 0.2%
Bob Evans Farms Inc. ............................. 63,400 2,326,780
------------
DISTRIBUTION SERVICES 0.1%
Applied Industrial Technologies Inc. ............. 49,799 1,338,099
------------
ELECTRONIC TECHNOLOGY 3.6%
b Avocent Corp. .................................... 590,000 16,525,900
b Benchmark Electronics Inc. ....................... 397,000 8,408,460
Cohu Inc. ........................................ 620,000 12,759,600
Diebold Inc. ..................................... 95,000 4,528,650
b OmniVision Technologies Inc. ..................... 531,000 7,179,120
------------
49,401,730
------------
ENERGY MINERALS 3.5%
Arch Coal Inc. ................................... 263,600 9,508,052
CONSOL Energy Inc. ............................... 310,000 12,979,700
Peabody Energy Corp. ............................. 277,200 13,300,056
Pioneer Natural Resources Co. .................... 90,000 4,518,000
b Unit Corp. ....................................... 135,000 7,715,250
------------
48,021,058
------------
80 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
FINANCE/RENTAL/LEASING 0.5%
b Dollar Thrifty Automotive Group Inc. ............. 140,000 $ 6,563,200
-----------
HEALTH SERVICES 0.4%
Pharmaceutical Product Development Inc. .......... 141,500 5,103,905
-----------
HEALTH TECHNOLOGY 1.6%
b Adams Respiratory Therapeutics Inc. .............. 12,600 472,626
STERIS Corp. ..................................... 401,600 10,264,896
West Pharmaceutical Services Inc. ................ 226,700 11,282,859
-----------
22,020,381
-----------
INDUSTRIAL SERVICES 5.9%
b Atwood Oceanics Inc. ............................. 105,000 6,604,500
b Bristow Group Inc. ............................... 304,800 11,460,480
b EMCOR Group Inc. ................................. 110,000 6,895,900
ENSCO International Inc. ......................... 69,000 3,890,220
b Global Industries Ltd. ........................... 295,000 6,124,200
b Helix Energy Solutions Group Inc. ................ 400,000 15,304,000
b Lone Star Technologies Inc. ...................... 166,600 11,063,906
b Oil States International Inc. .................... 312,000 10,586,160
Rowan Cos. Inc. .................................. 235,800 8,639,712
-----------
80,569,078
-----------
INSURANCE BROKERS/SERVICES 0.6%
Arthur J. Gallagher & Co. ........................ 310,000 8,667,600
-----------
LIFE/HEALTH INSURANCE 1.8%
American National Insurance Co. .................. 56,800 7,413,536
Presidential Life Corp. .......................... 65,000 1,235,650
Protective Life Corp. ............................ 212,000 9,942,800
StanCorp Financial Group Inc. .................... 123,000 5,854,800
-----------
24,446,786
-----------
NON-ENERGY MINERALS 7.4%
Gerdau Ameristeel Corp. (Canada) ................. 1,321,000 16,248,300
Reliance Steel & Aluminum Co. .................... 399,400 23,724,360
Steel Dynamics Inc. .............................. 774,400 34,313,664
United States Steel Corp. ........................ 99,000 10,052,460
Universal Forest Products Inc. ................... 355,400 16,511,884
-----------
100,850,668
-----------
PROCESS INDUSTRIES 7.9%
Airgas Inc. ...................................... 295,600 13,168,980
AptarGroup Inc. .................................. 162,000 11,866,500
Bemis Co. Inc. ................................... 189,000 6,278,580
Bowater Inc. ..................................... 371,700 8,136,513
Bunge Ltd. ....................................... 174,000 13,182,240
Cabot Corp. ...................................... 283,200 12,828,960
Glatfelter ....................................... 521,600 7,797,920
Semiannual Report | 81
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
PROCESS INDUSTRIES (CONTINUED)
b Mercer International Inc. (Germany) ............... 465,000 $ 5,700,900
RPM International Inc. ............................ 692,400 14,727,348
Westlake Chemical Corp. ........................... 458,800 13,392,372
------------
107,080,313
------------
PRODUCER MANUFACTURING 20.9%
A.O. Smith Corp. .................................. 115,500 4,400,550
American Woodmark Corp. ........................... 312,300 10,777,473
Apogee Enterprises Inc. ........................... 783,000 18,854,640
b Astec Industries Inc. ............................. 70,100 2,853,070
Baldor Electric Co. ............................... 500 19,695
Brady Corp., A .................................... 500,000 16,430,000
Carlisle Cos. Inc. ................................ 219,600 9,043,128
CIRCOR International Inc. ......................... 254,300 9,256,520
CNH Global NV (Netherlands) ....................... 174,000 7,532,460
b Genlyte Group Inc. ................................ 120,000 9,361,200
Gentex Corp. ...................................... 188,700 3,358,860
Gibraltar Industries Inc. ......................... 692,000 15,431,600
Graco Inc. ........................................ 395,300 15,614,350
Kennametal Inc. ................................... 215,000 15,170,400
b Mettler-Toledo International Inc. (Switzerland) ... 165,000 16,107,300
Mine Safety Appliances Co. ........................ 417,200 17,584,980
Mueller Industries Inc. ........................... 548,900 18,003,920
Nordson Corp. ..................................... 134,500 6,164,135
b Powell Industries Inc. ............................ 107,900 3,397,771
Roper Industries Inc. ............................. 300,000 16,818,000
Simpson Manufacturing Co. Inc. .................... 115,600 3,718,852
Superior Industries International Inc. ............ 370,000 8,454,500
Teleflex Inc. ..................................... 174,500 12,534,335
Timken Co. ........................................ 69,600 2,295,408
Trinity Industries Inc. ........................... 241,000 11,182,400
Wabash National Corp. ............................. 1,150,500 17,901,780
Watts Water Technologies Inc., A .................. 337,000 13,648,500
------------
285,915,827
------------
PROPERTY-CASUALTY INSURANCE 4.4%
Aspen Insurance Holdings Ltd. ..................... 682,000 18,079,820
Erie Indemnity Co., A ............................. 3,400 178,670
IPC Holdings Ltd. ................................. 582,000 17,448,360
Montpelier Re Holdings Ltd. (Bermuda) ............. 864,700 15,789,422
RLI Corp. ......................................... 162,100 9,027,349
------------
60,523,621
------------
REAL ESTATE INVESTMENT TRUST 0.6%
Arbor Realty Trust Inc. ........................... 253,500 7,805,265
------------
REGIONAL BANKS 1.4%
Chemical Financial Corp. .......................... 182,455 4,877,022
Peoples Bancorp Inc. .............................. 194,700 4,877,235
TrustCo Bank Corp. NY ............................. 975,000 8,940,750
------------
18,695,007
------------
82 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
RETAIL TRADE 6.9%
Casey's General Stores Inc. ........................................ 628,500 $ 15,806,775
Christopher & Banks Corp. .......................................... 445,700 7,715,067
Dillard's Inc., A .................................................. 49,400 1,710,722
b Gymboree Corp. ..................................................... 149,500 5,707,910
b Hot Topic Inc. ..................................................... 574,300 6,483,847
The Men's Wearhouse Inc. ........................................... 168,000 7,269,360
Pier 1 Imports Inc. ................................................ 523,500 3,952,425
Regis Corp. ........................................................ 514,000 19,650,220
Tuesday Morning Corp. .............................................. 954,960 13,331,242
b West Marine Inc. ................................................... 795,000 11,686,500
b Zale Corp. ......................................................... 46,200 1,289,442
--------------
94,603,510
--------------
SAVINGS BANKS 0.2%
First Indiana Corp. ................................................ 118,750 2,306,125
--------------
SPECIALTY INSURANCE 0.2%
The PMI Group Inc. ................................................. 60,000 2,908,200
--------------
TRANSPORTATION 5.2%
b Genesee & Wyoming Inc. ............................................. 487,600 13,257,844
b Kansas City Southern ............................................... 150,500 5,591,075
OMI Corp. .......................................................... 301,600 8,767,512
Overseas Shipholding Group Inc. .................................... 185,000 13,098,000
SkyWest Inc. ....................................................... 406,300 11,055,423
Teekay Shipping Corp. (Bahamas) .................................... 225,600 13,457,040
Tidewater Inc. ..................................................... 90,000 5,688,900
--------------
70,915,794
--------------
UTILITIES 2.2%
Atmos Energy Corp. ................................................. 171,200 5,430,464
Energen Corp. ...................................................... 264,100 14,802,805
b Sierra Pacific Resources ........................................... 540,700 9,873,182
--------------
30,106,451
--------------
TOTAL COMMON STOCKS (COST $870,094,100) ............................ 1,212,305,369
--------------
----------------
PRINCIPAL AMOUNT
----------------
CORPORATE BOND (COST $1,303,087) 0.1%
PRODUCER MANUFACTURING 0.1%
Mueller Industries Inc., 6.00%, 11/01/14 ........................... $ 1,319,000 1,233,265
--------------
TOTAL LONG TERM INVESTMENTS (COST $871,397,187) .................... 1,213,538,634
--------------
--------------
SHARES
--------------
SHORT TERM INVESTMENTS 11.6%
MONEY MARKET FUND (COST $151,341,069) 11.1%
c Franklin Institutional Fiduciary Trust Money Market Portfolio, 5.01% 151,341,069 151,341,069
--------------
Semiannual Report | 83
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN SMALL CAP VALUE FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONTINUED)
d INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED SECURITIES 0.5%
e REPURCHASE AGREEMENTS 0.5%
Banc of America Securities LLC, 5.24%, 5/01/07 (Maturity Value $1,500,218)
Collateralized by U.S. Government Agency Securities, 5.00%, 6/01/35 - 7/01/35 ......... $1,500,000 $ 1,500,000
Barclays Capital Inc., 5.24%, 5/01/07 (Maturity Value $1,500,218)
Collateralized by U.S. Government Agency Securities, 3.50% - 15.00%,
5/01/07 - 5/01/47 .................................................................... 1,500,000 1,500,000
Deutsche Bank Securities Inc., 5.24%, 5/01/07 (Maturity Value $1,500,218)
Collateralized by U.S. Government Agency Securities, 4.50% - 9.50%,
6/01/17 - 4/01/37 .................................................................... 1,500,000 1,500,000
Merrill Lynch Government Securities Inc., 5.20%, 5/01/07 (Maturity Value $1,500,217)
Collateralized by U.S. Government Agency Securities, 2.50% - 7.375%, 5/15/07 - 8/06/38;
and f U.S. Government Agency Discount Notes, 5/15/07 - 6/09/33 ....................... 1,500,000 1,500,000
Morgan Stanley & Co. Inc., 5.25%, 5/01/07 (Maturity Value $1,656,242)
Collateralized by U.S. Government Agency Securities, 2.75% - 6.875%, 5/15/07 - 4/16/37;
and f U.S. Government Agency Discount Note, 6/05/28 .................................. 1,656,000 1,656,000
---------------
TOTAL INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED SECURITIES
(COST $7,656,000) ..................................................................... 7,656,000
---------------
TOTAL INVESTMENTS (COST $1,030,394,256) 100.5% .......................................... 1,372,535,703
OTHER ASSETS, LESS LIABILITIES (0.5)% ................................................... (7,229,124)
---------------
NET ASSETS 100.0% ....................................................................... $ 1,365,306,579
===============
a A portion or all of the security is on loan as of April 30, 2007. See Note
1(e).
b Non-income producing for the twelve months ended April 30, 2007.
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.
d See Note 1(e) regarding securities on loan.
e See Note 1(c) regarding repurchase agreements.
f The security is traded on a discount basis with no stated coupon rate.
84 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2007 (UNAUDITED)
SELECTED PORTFOLIO ABBREVIATION
ADR - American Depository Receipt
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 85
Franklin Value Investors Trust
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2007 (unaudited)
--------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP
INVESTMENT FUND VALUE FUND VALUE FUND
--------------------------------------------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ...................... $1,979,553,522 $ 197,042,728 $ 161,743,455
Cost - Non-controlled affiliated issuers (Note 9) 253,255,013 -- 53,306,152
Cost - Sweep Money Fund (Note 7) ................. 215,052,386 19,186,132 97,632,965
Cost - Repurchase agreements ..................... 572,420,259 -- --
-------------------------------------------------
Total cost of investments ........................ $3,020,281,180 $ 216,228,860 $ 312,682,572
=================================================
Value - Unaffiliated issuers ..................... $4,539,127,602 $ 257,334,232 $ 330,451,815
Value - Non-controlled affiliated issuers (Note 9) 274,821,481 -- 106,804,114
Value - Sweep Money Fund (Note 7) ................ 215,052,386 19,186,132 97,632,965
Value - Repurchase agreements .................... 572,420,259 -- --
-------------------------------------------------
Total value of investments ....................... 5,601,421,728 276,520,364 534,888,894
Receivables:
Investment securities sold ....................... -- 3,649,945 --
Capital shares sold .............................. 6,670,941 388,919 585,880
Dividends and interest ........................... 2,690,279 245,655 95,347
-------------------------------------------------
Total assets ............................... 5,610,782,948 280,804,883 535,570,121
-------------------------------------------------
Liabilities:
Payables:
Investment securities purchased .................. -- -- 20,070
Capital shares redeemed .......................... 12,094,897 859,621 650,895
Affiliates ....................................... 3,539,230 314,442 434,291
Unaffiliated transfer agent fees ................. 2,326,154 104,576 42,682
Accrued expenses and other liabilities ............ 104,292 62,667 62,747
-------------------------------------------------
Total liabilities .......................... 18,064,573 1,341,306 1,210,685
-------------------------------------------------
Net assets, at value ..................... $5,592,718,375 $ 279,463,577 $ 534,359,436
=================================================
Net assets consist of:
Paid-in capital ................................... $2,851,645,754 $ 215,525,570 $ 277,967,257
Undistributed net investment income ............... 13,512,218 681,151 1,515,167
Net unrealized appreciation (depreciation) ........ 2,581,140,548 60,291,504 222,206,322
Accumulated net realized gain (loss) .............. 146,419,855 2,965,352 32,670,690
-------------------------------------------------
Net assets, at value ..................... $5,592,718,375 $ 279,463,577 $ 534,359,436
=================================================
86 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
April 30, 2007 (unaudited)
--------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP
INVESTMENT FUND VALUE FUND VALUE FUND
--------------------------------------------------
CLASS A:
Net assets, at value ................................................ $4,864,316,553 $ 189,686,158 $ 517,889,344
==================================================
Shares outstanding .................................................. 67,242,421 11,458,752 11,593,053
==================================================
Net asset value per share a ......................................... $ 72.34 $ 16.55 $ 44.67
==================================================
Maximum offering price per share (net asset value per share / 94.25%) $ 76.75 $ 17.56 $ 47.40
==================================================
CLASS B:
Net assets, at value ................................................ $ 132,330,054 $ 20,918,293 --
==================================================
Shares outstanding .................................................. 1,855,343 1,276,946 --
==================================================
Net asset value and maximum offering price per share a .............. $ 71.32 $ 16.38 --
==================================================
CLASS C:
Net assets, at value ................................................ $ 147,935,502 $ 58,277,866 --
==================================================
Shares outstanding .................................................. 2,071,089 3,559,689 --
==================================================
Net asset value and maximum offering price per share a .............. $ 71.43 $ 16.37 --
==================================================
CLASS R:
Net assets, at value ................................................ $ 62,675,830 $ 7,375,540 --
==================================================
Shares outstanding .................................................. 871,891 448,999 --
==================================================
Net asset value and maximum offering price per share a .............. $ 71.88 $ 16.43 --
==================================================
ADVISOR CLASS:
Net assets, at value ................................................ $ 385,460,436 $ 3,205,720 $ 16,470,092
==================================================
Shares outstanding .................................................. 5,321,522 193,876 368,198
==================================================
Net asset value and maximum offering price per share a .............. $ 72.43 $ 16.53 $ 44.73
==================================================
a Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 87
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
April 30, 2007 (unaudited)
-----------------------------
FRANKLIN FRANKLIN
MIDCAP SMALL CAP
VALUE FUND VALUE FUND
-----------------------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................................. $63,405,600 $ 871,397,187
Cost - Sweep Money Fund (Note 7) ............................................ 4,530,949 151,341,069
Cost - Repurchase agreements ................................................ -- 7,656,000
-----------------------------
Total cost of investments ................................................... $67,936,549 $ 1,030,394,256
=============================
Value - Unaffiliated issuersa ............................................... $71,684,101 $ 1,213,538,634
Value - Sweep Money Fund (Note 7) ........................................... 4,530,949 151,341,069
Value - Repurchase agreements ............................................... -- 7,656,000
-----------------------------
Total value of investments .................................................. 76,215,050 1,372,535,703
Receivables:
Capital shares sold ......................................................... 574,919 5,484,778
Dividends and interest ...................................................... 17,709 410,280
-----------------------------
Total assets .......................................................... 76,807,678 1,378,430,761
-----------------------------
Liabilities:
Payables:
Investment securities purchased ............................................. 491,993 869,483
Capital shares redeemed ..................................................... 37,737 2,742,561
Affiliates .................................................................. 77,015 1,332,850
Unaffiliated transfer agent fees ............................................ 28,551 470,709
Payable upon return of securities loaned ..................................... -- 7,656,000
Accrued expenses and other liabilities ....................................... 47,115 52,579
-----------------------------
Total liabilities ..................................................... 682,411 13,124,182
-----------------------------
Net assets, at value ................................................ $76,125,267 $ 1,365,306,579
=============================
Net assets consist of:
Paid-in capital .............................................................. $66,654,292 $ 1,002,763,547
Undistributed net investment income (distributions in excess of net investment
income) .................................................................... 677,030 (940,619)
Net unrealized appreciation (depreciation) ................................... 8,278,501 342,141,447
Accumulated net realized gain (loss) ......................................... 515,444 21,342,204
-----------------------------
Net assets, at value ................................................ $76,125,267 $ 1,365,306,579
=============================
a The Franklin Small Cap Value Fund includes $7,160,125 of securities
loaned.
88 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
April 30, 2007 (unaudited)
---------------------------------
FRANKLIN FRANKLIN
MIDCAP SMALL CAP
VALUE FUND VALUE FUND
---------------------------------
CLASS A:
Net assets, at value ................................................ $ 61,319,748 $ 837,037,161
=================================
Shares outstanding .................................................. 4,968,083 17,994,484
=================================
Net asset value per share b ......................................... $ 12.34 $ 46.52
=================================
Maximum offering price per share (net asset value per share / 94.25%) $ 13.09 $ 49.36
=================================
CLASS B:
Net assets, at value ................................................ -- $ 80,664,228
=================================
Shares outstanding .................................................. -- 1,808,420
=================================
Net asset value and maximum offering price per share b .............. -- $ 44.60
=================================
CLASS C:
Net assets, at value ................................................ $ 13,155,631 $ 275,031,777
=================================
Shares outstanding .................................................. 1,071,883 6,240,390
=================================
Net asset value and maximum offering price per share b .............. $ 12.27 $ 44.07
=================================
CLASS R:
Net assets, at value ................................................ $ 637,881 $ 91,085,303
=================================
Shares outstanding .................................................. 51,841 1,967,935
=================================
Net asset value and maximum offering price per share b .............. $ 12.30 $ 46.28
=================================
ADVISOR CLASS:
Net assets, at value ................................................ $ 1,012,007 $ 81,488,110
=================================
Shares outstanding .................................................. 81,676 1,705,243
=================================
Net asset value and maximum offering price per share b .............. $ 12.39 $ 47.79
=================================
b Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 89
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the six months ended April 30, 2007 (unaudited)
-------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP
INVESTMENT FUND VALUE FUND VALUE FUND
-------------------------------------------------
Investment income:
Dividends:
Unaffiliated issuers ........................................ $ 36,695,606 $ 3,275,348 $ 2,390,933
-------------------------------------------------
Non-controlled affiliated issuers (Note 9) .................. 888,000 -- 353,324
Sweep Money Fund (Note 7) ................................... 4,626,012 475,299 2,036,563
Interest ..................................................... 15,676,798 -- 295,731
-------------------------------------------------
Total investment income ............................... 57,886,416 3,750,647 5,076,551
-------------------------------------------------
Expenses:
Management fees (Note 3a) .................................... 11,670,833 732,204 1,764,477
Administrative fees (Note 3b) ................................ -- 278,493 --
Distribution fees: (Note 3c)
Class A ..................................................... 5,462,699 325,314 582,694
Class B ..................................................... 643,230 107,126 --
Class C ..................................................... 708,634 298,892 --
Class R ..................................................... 139,699 19,722 --
Transfer agent fees (Note 3e) ................................ 5,105,216 312,859 291,126
Custodian fees (Note 4) ...................................... 49,754 2,440 3,808
Reports to shareholders ...................................... 124,382 24,921 37,344
Registration and filing fees ................................. 136,678 61,941 31,848
Professional fees ............................................ 61,017 17,833 20,023
Trustees' fees and expenses .................................. 138,371 7,334 12,999
Other ........................................................ 58,331 5,152 7,721
-------------------------------------------------
Total expenses ........................................ 24,298,844 2,194,231 2,752,040
Expense reductions (Note 4) ........................... (7,642) -- (2,011)
-------------------------------------------------
Net expenses ........................................ 24,291,202 2,194,231 2,750,029
-------------------------------------------------
Net investment income .............................. 33,595,214 1,556,416 2,326,522
-------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments
Unaffiliated issuers ...................................... 142,230,298 2,997,131 29,992,717
Non-controlled affiliated issuers (Note 9) ................ -- -- 2,785,019
Closed-end funds distributions .............................. 4,862,277 -- --
Foreign currency transactions ............................... (4,392) -- 2,879
-------------------------------------------------
Net realized gain (loss) ........................... 147,088,183 2,997,131 32,780,615
-------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments ................................................. 443,814,450 12,959,200 37,548,720
-------------------------------------------------
Net realized and unrealized gain (loss) ....................... 590,902,633 15,956,331 70,329,335
-------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 624,497,847 $ 17,512,747 $ 72,655,857
=================================================
90 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS (CONTINUED)
for the six months ended April 30, 2007 (unaudited)
------------------------------
FRANKLIN FRANKLIN
MIDCAP SMALL CAP
VALUE FUND VALUE FUND
------------------------------
Investment income:
Dividends:
Unaffiliated issuers ............................................. $ 2,017,161 $ 7,360,835
Sweep Money Fund (Note 7) ........................................ -- 3,202,099
Interest .......................................................... -- 40,390
Income from securities loaned - net ............................... -- 498,251
------------------------------
Total investment income .................................... 2,017,161 11,101,575
------------------------------
Expenses:
Management fees (Note 3a) ......................................... 232,100 3,800,654
Administrative fees (Note 3b) ..................................... 62,989 --
Distribution fees: (Note 3c)
Class A .......................................................... 88,825 969,562
Class B .......................................................... -- 400,105
Class C .......................................................... 55,980 1,274,733
Class R .......................................................... 1,299 179,769
Transfer agent fees (Note 3e) ..................................... 79,567 1,520,076
Custodian fees (Note 4) ........................................... 544 8,310
Reports to shareholders ........................................... 4,316 124,869
Registration and filing fees ...................................... 49,030 83,071
Professional fees ................................................. 16,842 20,983
Trustees' fees and expenses ....................................... 323 28,635
Other ............................................................. 1,219 7,407
------------------------------
Total expenses ............................................. 593,034 8,418,174
Expense reductions (Note 4) ................................ -- (1,044)
Expenses waived/paid by affiliates (Note 3f) ............... (116,236) --
------------------------------
Net expenses ............................................. 476,798 8,417,130
------------------------------
Net investment income ................................... 1,540,363 2,684,445
------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ...................................................... 515,565 17,819,176
Foreign currency transactions .................................... 84 --
------------------------------
Net realized gain (loss) ................................ 515,649 17,819,176
------------------------------
Net change in unrealized appreciation (depreciation) on investments 5,044,572 101,128,902
------------------------------
Net realized and unrealized gain (loss) ............................ 5,560,221 118,948,078
------------------------------
Net increase (decrease) in net assets resulting from operations .... $ 7,100,584 $ 121,632,523
==============================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 91
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------
FRANKLIN BALANCE SHEET FRANKLIN LARGE CAP
INVESTMENT FUND VALUE FUND
------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
APRIL 30, 2007 YEAR ENDED APRIL 30, 2007 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2006 (UNAUDITED) OCTOBER 31, 2006
------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ....................... $ 33,595,214 $ 56,588,037 $ 1,556,416 $ 2,836,282
Net realized gain (loss) from investments and
foreign currency transactions ............. 147,088,183 312,874,727 2,997,131 14,289,026
Net change in unrealized appreciation
(depreciation) on investments ............. 443,814,450 420,475,081 12,959,200 22,244,595
------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............. 624,497,847 789,937,845 17,512,747 39,369,903
------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................... (56,124,264) (30,134,369) (2,343,978) (1,623,294)
Class B ................................... (653,600) (4,205) (139,377) (74,198)
Class C ................................... (719,909) -- (441,103) (209,593)
Class R ................................... (559,473) (183,104) (88,308) (67,705)
Advisor Class ............................. (5,121,199) (2,639,091) (49,520) (10,120)
Net realized gains:
Class A ................................... (272,064,080) (158,162,988) (9,229,422) (3,686,581)
Class B ................................... (7,883,359) (4,885,995) (1,118,742) (516,819)
Class C ................................... (8,695,351) (5,405,726) (3,251,510) (1,402,885)
Class R ................................... (3,216,294) (1,240,439) (394,504) (163,054)
Advisor Class ............................. (20,887,969) (10,370,636) (154,968) (17,076)
------------------------------------------------------------------------
Total distributions to shareholders .......... (375,925,498) (213,026,553) (17,211,432) (7,771,325)
------------------------------------------------------------------------
Capital share transactions: (Note 2)
Class A ................................... 212,593,260 (235,516,707) 5,210,501 6,751,040
Class B ................................... (1,018,381) (10,438,738) (1,243,759) (2,604,940)
Class C ................................... 1,104,264 (12,361,198) (5,722,720) (3,219,669)
Class R ................................... 8,744,566 15,618,374 (361,703) (51,703)
Advisor Class ............................. 35,559,354 38,650,520 1,246,330 1,818,426
------------------------------------------------------------------------
Total capital share transactions ............. 256,983,063 (204,047,749) (871,351) 2,693,154
------------------------------------------------------------------------
Redemption fees .............................. 7,983 21,619 171 3,521
------------------------------------------------------------------------
Net increase (decrease) in net assets .... 505,563,395 372,885,162 (569,865) 34,295,253
Net assets:
Beginning of period .......................... 5,087,154,980 4,714,269,818 280,033,442 245,738,189
------------------------------------------------------------------------
End of period ................................ $ 5,592,718,375 $ 5,087,154,980 $ 279,463,577 $ 280,033,442
========================================================================
Undistributed net investment income included
in net assets:
End of period ............................... $ 13,512,218 $ 43,095,449 $ 681,151 $ 2,187,021
========================================================================
92 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
------------------------------------------------------------------------
FRANKLIN FRANKLIN
MICROCAP VALUE FUND MIDCAP VALUE FUND
------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
APRIL 30, 2007 YEAR ENDED APRIL 30, 2007 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2006 (UNAUDITED) OCTOBER 31, 2006
------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ....................... $ 2,326,522 $ 5,761,801 $ 1,540,363 $ 92,441
Net realized gain (loss) from investments and
foreign currency transactions ............. 32,780,615 25,575,122 515,649 770,294
Net change in unrealized appreciation
(depreciation) on investments ............. 37,548,720 42,049,166 5,044,572 3,712,790
----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ........... 72,655,857 73,386,089 7,100,584 4,575,525
----------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................... (6,348,394) (2,139,633) (801,821) (92,384)
Class C ................................... -- -- (122,118) (18,177)
Class R ................................... -- -- (8,309) (232)
Advisor Class ............................. (225,219) (17,879) (15,314) (3,626)
Net realized gains:
Class A ................................... (24,824,163) (32,120,419) (621,341) --
Class C ................................... -- -- (132,590) --
Class R ................................... -- -- (6,141) --
Advisor Class ............................. (747,866) (268,393) (10,395) --
----------------------------------------------------------------------
Total distributions to shareholders ......... (32,145,642) (34,546,324) (1,718,029) (114,419)
----------------------------------------------------------------------
Capital share transactions: (Note 2)
Class A ................................... 4,244,981 (7,634,691) 14,341,055 27,314,789
Class C ................................... -- -- 2,792,618 5,323,696
Class R ................................... -- -- 452,494 87,880
Advisor Class ............................. 9,466,939 5,888,410 162,923 256,474
----------------------------------------------------------------------
Total capital share transactions ............ 13,711,920 (1,746,281) 17,749,090 32,982,839
----------------------------------------------------------------------
Redemption fees ............................. 1,919 5,344 133 789
----------------------------------------------------------------------
Net increase (decrease) in net assets . 54,224,054 37,098,828 23,131,778 37,444,734
Net assets:
Beginning of period ......................... 480,135,382 443,036,554 52,993,489 15,548,755
----------------------------------------------------------------------
End of period ............................... $ 534,359,436 $ 480,135,382 $ 76,125,267 $ 52,993,489
======================================================================
Undistributed net investment income included
in net assets:
End of period ............................. $ 1,515,167 $ 5,762,258 $ 677,030 $ 84,229
======================================================================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 93
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
------------------------------------
FRANKLIN
SMALL CAP VALUE FUND
------------------------------------
SIX MONTHS ENDED
APRIL 30, 2007 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2006
------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 2,684,445 $ 2,053,699
Net realized gain (loss) from investments and foreign currency transactions ........ 17,819,176 82,385,315
Net change in unrealized appreciation (depreciation) on investments ................ 101,128,902 66,605,357
----------------------------------
Net increase (decrease) in net assets resulting from operations .............. 121,632,523 151,044,371
----------------------------------
Distributions to shareholders from:
Net investment income:
Class A .......................................................................... (4,409,490) (1,249,291)
Class C .......................................................................... (266,171) --
Class R .......................................................................... (316,135) (2,137)
Advisor Class .................................................................... (505,499) (230,228)
Net realized gains:
Class A .......................................................................... (47,916,137) (11,713,986)
Class B .......................................................................... (5,483,021) (1,831,922)
Class C .......................................................................... (17,152,546) (4,598,215)
Class R .......................................................................... (4,083,146) (777,290)
Advisor Class .................................................................... (4,066,623) (909,171)
----------------------------------
Total distributions to shareholders ................................................. (84,198,768) (21,312,240)
----------------------------------
Capital share transactions: (Note 2)
Class A .......................................................................... 110,267,585 137,426,230
Class B .......................................................................... (1,076,839) (7,760,789)
Class C .......................................................................... 27,531,085 26,073,793
Class R .......................................................................... 31,717,045 19,764,560
Advisor Class .................................................................... 22,594,823 12,562,742
----------------------------------
Total capital share transactions .................................................... 191,033,699 188,066,536
----------------------------------
Redemption fees ..................................................................... 2,440 8,660
----------------------------------
Net increase (decrease) in net assets ........................................ 228,469,894 317,807,327
Net assets:
Beginning of period ................................................................. 1,136,836,685 819,029,358
----------------------------------
End of period ....................................................................... $ 1,365,306,579 $ 1,136,836,685
==================================
Undistributed net investment income (distributions in excess of net investment income)
included in net assets:
End of period ...................................................................... $ (940,619) $ 1,872,513
==================================
94 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Value Investors Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended, (the 1940 Act) as a diversified, open-end
investment company, consisting of five funds (the Funds). The classes of shares
offered within each of the Funds are indicated below. 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.
- -------------------------------------------------------------------------------------------------------------
CLASS A, CLASS C, CLASS A, CLASS B, CLASS C,
CLASS A & ADVISOR CLASS CLASS R & ADVISOR CLASS CLASS R & ADVISOR CLASS
- -------------------------------------------------------------------------------------------------------------
Franklin MicroCap Value Fund Franklin MidCap Value Fund Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin Small Cap Value Fund
The following summarizes the Funds' 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.
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 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. The investment manager monitors price movements
following the close of trading in foreign stock markets through a series of
country specific market proxies (such as baskets of American Depository
Receipts, futures contracts and exchange traded funds). These price movements
are measured against established trigger thresholds for each specific market
proxy to assist in determining if an event has occurred. 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.
Semiannual Report | 95
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Funds do 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. REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements. Repurchase agreements are
accounted for as a loan by the fund to the seller, collateralized by securities
which are delivered to the fund's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the funds, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. The
Funds may also enter into joint repurchase agreements whereby their uninvested
cash balance is deposited into a joint cash account with other funds managed by
the investment manager or an affiliate of the investment manager and is used to
invest in one or more repurchase agreements. The value and face amount of the
joint repurchase agreement are allocated to the funds based on their pro-rata
interest. All repurchase agreements held by the funds at period end had been
entered into on April 30, 2007. Repurchase agreements are valued at cost.
D. FOREIGN CURRENCY CONTRACTS
When the Funds purchase or sell foreign securities they 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 on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
96 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. FOREIGN CURRENCY CONTRACTS (CONTINUED)
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.
E. SECURITIES LENDING
The Funds may loan securities to certain brokers through a securities lending
agent for which they receive initial cash collateral against the loaned
securities in an amount equal to at least 102% of the market value of the loaned
securities. Collateral is maintained over the life of the loan in an amount not
less than 100% of the market value of loaned securities, as determined at the
close of fund business each day; any additional collateral required due to
changes in security values is delivered to the fund on the next business day.
The collateral is invested in short term instruments as noted in the Statement
of Investments. The fund receives interest income from the investment of cash
collateral, adjusted by lender fees and broker rebates. The fund bears the risk
of loss with respect to the investment of the collateral and the securities
loaned. The securities lending agent has agreed to indemnify the fund in the
case of default of any securities borrower. At April 30, 2007, only the Franklin
Small Cap Value Fund had securities on loan.
F. INCOME TAXES
No provision has been made for U.S. income taxes because it is each 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.
G. 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. 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. 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.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
Semiannual Report | 97
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.
H. 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.
I. REDEMPTION FEES
A short term trading redemption fee will be imposed, with some exceptions, on
any fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Funds and accounted for as an addition to paid-in
capital.
J. 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, 2007, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Funds' shares were as follows:
-------------------------------------------------------------
FRANKLIN BALANCE FRANKLIN LARGE CAP
SHEET INVESTMENT FUND VALUE FUND
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
CLASS A SHARES:
Six months ended April 30, 2007
Shares sold .................. 6,139,517 $ 426,814,312 1,227,732 $ 19,993,182
Shares issued in reinvestment
of distributions ............ 4,657,380 313,627,994 635,205 10,252,208
Shares redeemed .............. (7,618,967) (527,849,046) (1,532,547) (25,034,889)
-------------------------------------------------------------
Net increase (decrease) ...... 3,177,930 $ 212,593,260 330,390 $ 5,210,501
=============================================================
98 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
-------------------------------------------------------------
FRANKLIN BALANCE FRANKLIN LARGE CAP
SHEET INVESTMENT FUND VALUE FUND
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
CLASS A SHARES: (CONTINUED)
Year ended October 31, 2006
Shares sold .................. 12,891,805 $ 845,679,287 2,814,004 $ 43,496,209
Shares issued in reinvestment
of distributions ............ 2,866,520 178,326,273 315,567 4,720,880
Shares redeemed .............. (19,232,574) (1,259,522,267) (2,697,428) (41,466,049)
-------------------------------------------------------------
Net increase (decrease) ...... (3,474,249) $ (235,516,707) 432,143 $ 6,751,040
=============================================================
CLASS B SHARES:
Six months ended April 30, 2007
Shares sold .................. 11,243 $ 766,997 27,605 $ 448,505
Shares issued in reinvestment
of distributions ............ 116,331 7,745,341 70,473 1,128,274
Shares redeemed .............. (138,404) (9,530,719) (175,043) (2,820,538)
-------------------------------------------------------------
Net increase (decrease) ...... (10,830) $ (1,018,381) (76,965) $ (1,243,759)
=============================================================
Year ended October 31, 2006
Shares sold .................. 23,446 $ 1,520,327 147,257 $ 2,254,773
Shares issued in reinvestment
of distributions ............ 73,065 4,498,614 34,956 519,099
Shares redeemed .............. (254,183) (16,457,679) (353,458) (5,378,812)
-------------------------------------------------------------
Net increase (decrease) ...... (157,672) $ (10,438,738) (171,245) $ (2,604,940)
=============================================================
CLASS C SHARES:
Six months ended April 30, 2007
Shares sold .................. 42,216 $ 2,899,369 244,590 $ 3,946,487
Shares issued in reinvestment
of distributions ............ 128,179 8,546,996 207,425 3,318,783
Shares redeemed .............. (151,439) (10,342,101) (808,764) (12,987,990)
-------------------------------------------------------------
Net increase (decrease) ...... 18,956 $ 1,104,264 (356,749) $ (5,722,720)
=============================================================
Year ended October 31, 2006
Shares sold .................. 84,896 $ 5,511,020 836,352 $ 12,933,004
Shares issued in reinvestment
of distributions ............ 80,627 4,970,581 98,108 1,456,901
Shares redeemed .............. (351,032) (22,842,799) (1,159,282) (17,609,574)
-------------------------------------------------------------
Net increase (decrease) ...... (185,509) $ (12,361,198) (224,822) $ (3,219,669)
=============================================================
CLASS R SHARES:
Six months ended April 30, 2007
Shares sold .................. 126,226 $ 8,739,908 96,195 $ 1,543,836
Shares issued in reinvestment
of distributions ............ 56,372 3,775,767 30,117 482,472
Shares redeemed .............. (54,445) (3,771,109) (147,170) (2,388,011)
-------------------------------------------------------------
Net increase (decrease) ...... 128,153 $ 8,744,566 (20,858) $ (361,703)
=============================================================
Year ended October 31, 2006
Shares sold .................. 368,266 $ 24,000,456 188,951 $ 2,898,064
Shares issued in reinvestment
of distributions ............ 22,961 1,422,195 15,529 230,759
Shares redeemed .............. (149,863) (9,804,277) (208,144) (3,180,526)
-------------------------------------------------------------
Net increase (decrease) ...... 241,364 $ 15,618,374 (3,664) $ (51,703)
=============================================================
Semiannual Report | 99
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
-------------------------------------------------------------
FRANKLIN BALANCE FRANKLIN LARGE CAP
SHEET INVESTMENT FUND VALUE FUND
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
ADVISOR CLASS SHARES:
Six months ended April 30, 2007
Shares sold .................. 1,287,357 $ 89,043,603 85,406 $ 1,435,300
Shares issued in reinvestment
of distributions ............ 23,747 1,599,836 11,958 192,523
Shares redeemed .............. (793,159) (55,084,085) (23,604) (381,493)
-------------------------------------------------------------
Net increase (decrease) ...... 517,945 $ 35,559,354 73,760 $ 1,246,330
=============================================================
Year ended October 31, 2006 a
Shares sold .................. 2,723,265 $ 178,515,659 143,524 $ 2,203,695
Shares issued in reinvestment
of distributions ............ 10,335 643,072 1,774 26,469
Shares redeemed .............. (2,140,148) (140,508,211) (25,182) (411,738)
-------------------------------------------------------------
Net increase (decrease) ...... 593,452 $ 38,650,520 120,116 1,818,426
=============================================================
-------------------------------------------------------------
FRANKLIN MICROCAP FRANKLIN MIDCAP
VALUE FUND VALUE FUND
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
CLASS A SHARES:
Six months ended April 30, 2007
Shares sold .................. 636,874 $ 27,383,244 1,539,861 $ 18,148,705
Shares issued in reinvestment
of distributions ............ 687,612 28,391,517 110,345 1,277,790
Shares redeemed .............. (1,197,777) (51,529,780) (434,061) (5,085,440)
-------------------------------------------------------------
Net increase (decrease) ...... 126,709 $ 4,244,981 1,216,145 $ 14,341,055
=============================================================
Year ended October 31, 2006
Shares sold .................. 1,265,501 $ 50,308,408 2,900,257 $ 31,140,083
Shares issued in reinvestment
of distributions ............ 845,219 31,146,329 7,469 77,315
Shares redeemed .............. (2,257,232) (89,089,428) (360,030) (3,902,609)
-------------------------------------------------------------
Net increase (decrease) ...... (146,512) $ (7,634,691) 2,547,696 $ 27,314,789
=============================================================
CLASS C SHARES:
Six months ended April 30, 2007
Shares sold .................. 275,114 $ 3,213,406
Shares issued in reinvestment
of distributions ............ 20,476 236,293
Shares redeemed .............. (56,498) (657,081)
------------------------------
Net increase (decrease) ...... 239,092 $ 2,792,618
==============================
Year ended October 31, 2006
Shares sold .................. 599,713 $ 6,423,322
Shares issued in reinvestment
of distributions ............ 1,602 16,568
Shares redeemed .............. (103,336) (1,116,194)
------------------------------
Net increase (decrease) ...... 497,979 $ 5,323,696
==============================
100 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
-------------------------------------------------------------
FRANKLIN MICROCAP FRANKLIN MIDCAP
VALUE FUND VALUE FUND
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
CLASS R SHARES:
Six months ended April 30, 2007
Shares sold .................. 74,562 $ 857,454
Shares issued in reinvestment
of distributions ............ 1,220 14,089
Shares redeemed .............. (35,691) (419,049)
------------------------------
Net increase (decrease) ...... 40,091 $ 452,494
==============================
Year ended October 31, 2006
Shares sold .................. 10,104 $ 110,266
Shares issued in reinvestment
of distributions ............ 17 174
Shares redeemed .............. (2,041) (22,560)
------------------------------
Net increase (decrease) ...... 8,080 $ 87,880
==============================
ADVISOR CLASS SHARES:
Six months ended April 30, 2007
Shares sold .................. 222,630 $ 9,757,038 12,435 $ 148,684
Shares issued in reinvestment
of distributions ............ 23,333 964,134 2,153 25,000
Shares redeemed .............. (29,785) (1,254,233) (917) (10,761)
-------------------------------------------------------------
Net increase (decrease) ...... 216,178 $ 9,466,939 13,671 $ 162,923
=============================================================
Year ended October 31, 2006 a
Shares sold .................. 192,966 $ 7,492,655 27,657 $ 298,445
Shares issued in reinvestment
of distributions ............ 7,745 285,477 336 3,482
Shares redeemed .............. (48,691) (1,889,722) (4,173) (45,453)
-------------------------------------------------------------
Net increase (decrease) ...... 152,020 $ 5,888,410 23,820 $ 256,474
=============================================================
a For the period November 1, 2005 (effective date) to October 31, 2006 for
the Franklin Large Cap Value Fund and the Franklin MicroCap Value Fund.
----------------------------
FRANKLIN SMALL CAP
VALUE FUND
----------------------------
SHARES AMOUNT
----------------------------
CLASS A SHARES:
Six months ended April 30, 2007
Shares sold .................................. 3,184,416 $ 144,131,155
Shares issued in reinvestment of distributions 1,069,889 47,385,359
Shares redeemed .............................. (1,793,069) (81,248,929)
----------------------------
Net increase (decrease) ...................... 2,461,236 $ 110,267,585
============================
Year ended October 31, 2006
Shares sold .................................. 6,027,552 $ 260,324,245
Shares issued in reinvestment of distributions 291,303 11,850,223
Shares redeemed .............................. (3,130,472) (134,748,238)
----------------------------
Net increase (decrease) ...................... 3,188,383 $ 137,426,230
============================
Semiannual Report | 101
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
-------------------------
FRANKLIN SMALL CAP
VALUE FUND
-------------------------
SHARES AMOUNT
-------------------------
CLASS B SHARES:
Six months ended April 30, 2007
Shares sold .................................. 38,617 $ 1,690,018
Shares issued in reinvestment of distributions 119,243 5,077,359
Shares redeemed .............................. (179,641) (7,844,216)
-------------------------
Net increase (decrease) ...................... (21,781) $ (1,076,839)
=========================
Year ended October 31, 2006
Shares sold .................................. 129,249 $ 5,415,513
Shares issued in reinvestment of distributions 43,570 1,710,113
Shares redeemed .............................. (357,625) (14,886,415)
-------------------------
Net increase (decrease) ...................... (184,806) $ (7,760,789)
=========================
CLASS C SHARES:
Six months ended April 30, 2007
Shares sold .................................. 856,473 $ 36,842,320
Shares issued in reinvestment of distributions 368,473 15,501,651
Shares redeemed .............................. (576,521) (24,812,886)
-------------------------
Net increase (decrease) ...................... 648,425 $ 27,531,085
=========================
Year ended October 31, 2006
Shares sold .................................. 1,576,345 $ 64,957,367
Shares issued in reinvestment of distributions 105,445 4,097,599
Shares redeemed .............................. (1,045,944) (42,981,173)
-------------------------
Net increase (decrease) ...................... 635,846 $ 26,073,793
=========================
CLASS R SHARES:
Six months ended April 30, 2007
Shares sold .................................. 907,499 $ 40,724,586
Shares issued in reinvestment of distributions 88,779 3,915,153
Shares redeemed .............................. (288,714) (12,922,694)
-------------------------
Net increase (decrease) ...................... 707,564 $ 31,717,045
=========================
Year ended October 31, 2006
Shares sold .................................. 845,521 $ 36,449,462
Shares issued in reinvestment of distributions 17,017 690,435
Shares redeemed .............................. (406,551) (17,375,337)
-------------------------
Net increase (decrease) ...................... 455,987 $ 19,764,560
=========================
ADVISOR CLASS SHARES:
Six months ended April 30, 2007
Shares sold .................................. 555,822 $ 26,149,085
Shares issued in reinvestment of distributions 91,979 4,180,443
Shares redeemed .............................. (167,496) (7,734,705)
-------------------------
Net increase (decrease) ...................... 480,305 $ 22,594,823
=========================
Year ended October 31, 2006
Shares sold .................................. 705,180 $ 30,889,448
Shares issued in reinvestment of distributions 13,043 542,985
Shares redeemed .............................. (429,816) (18,869,691)
-------------------------
Net increase (decrease) ...................... 288,407 $ 12,562,742
=========================
102 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 Advisory Services, LLC (Advisory Services) 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 Franklin Balance Sheet Investment Fund pays an investment management fee to
Advisory Services based on the average daily net assets of the fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% In excess of $15 billion
The Franklin Large Cap Value Fund pays an investment management fee to Advisory
Services based on the average daily net assets of the fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.550% Up to and including $500 million
0.450% Over $500 million, up to and including $1 billion
0.400% Over $1 billion, up to and including $1.5 billion
0.350% Over $1.5 billion, up to and including $6.5 billion
0.325% Over $6.5 billion, up to and including $11.5 billion
0.300% Over $11.5 billion, up to and including $16.5 billion
0.290% Over $16.5 billion, up to and including $19 billion
0.280% Over $19 billion, up to and including $21.5 billion
0.270% In excess of $21.5 billion
The Franklin MicroCap Value Fund pays an investment management fee to Advisory
Services of 0.75% per year of the average daily net assets of the fund.
Semiannual Report | 103
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES (CONTINUED)
The Franklin MidCap Value Fund pays an investment management fee to Advisory
Services based on the average daily net assets of the fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.750% Up to and including $500 million
0.650% Over $500 million, up to and including $1 billion
0.600% Over $1 billion, up to and including $1.5 billion
0.550% Over $1.5 billion, up to and including $6.5 billion
0.525% Over $6.5 billion, up to and including $11.5 billion
0.500% Over $11.5 billion, up to and including $16.5 billion
0.490% Over $16.5 billion, up to and including $19 billion
0.480% Over $19 billion, up to and including $21.5 billion
0.470% In excess of $21.5 billion
The Franklin Small Cap Value Fund pays an investment management fee to Advisory
Services based on the average daily net assets of the fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.750% Up to and including $500 million
0.625% Over $500 million, up to and including $1 billion
0.500% In excess of $1 billion
B. ADMINISTRATIVE FEES
The Franklin Large Cap Value Fund and the Franklin MidCap Value Fund pay an
administrative fee to FT Services of 0.20% per year of the average daily net
assets of each of the funds.
Under an agreement with Advisory Services, FT Services provides administrative
services to the Franklin Balance Sheet Investment Fund, the Franklin MicroCap
Value Fund and the Franklin Small Cap Value Fund. The fee is paid by Advisory
Services based on average daily net assets, and is not an additional expense of
the funds.
C. DISTRIBUTION FEES
The Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the funds' Class A reimbursement distribution plans, the
funds reimburse Distributors for costs incurred in connection with the
servicing, sale and distribution of each fund's shares up to the maximum annual
plan rate. Under the Class A reimbursement distribution plans, costs exceeding
the maximum for the current plan year cannot be reimbursed in subsequent
periods.
In addition, under the funds' compensation distribution plans, the funds pay
Distributors for costs incurred in connection with the servicing, sale and
distribution of each fund's shares up to the maximum annual plan rate for each
class.
104 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
C. DISTRIBUTION FEES (CONTINUED)
The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
------------------------------------------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP MIDCAP SMALL CAP
INVESTMENT FUND VALUE FUND VALUE FUND VALUE FUND VALUE FUND
------------------------------------------------------------------------------------
Reimbursement Plans:
Class A ............ 0.25% -- 0.25% -- 0.35%
Compensation Plans:
Class A ............ -- 0.35% -- 0.35% --
Class B ............ 1.00% 1.00% -- -- 1.00%
Class C ............ 1.00% 1.00% -- 1.00% 1.00%
Class R ............ 0.50% 0.50% -- 0.50% 0.50%
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Funds of the following commission transactions
related to the sales and redemptions of the Funds' shares for the period:
---------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP
INVESTMENT FUND VALUE FUND VALUE FUND
---------------------------------------------
Sales charges retained net of commissions paid to unaffiliated
broker/dealers .............................................. $29,792 $49,501 $15,935
Contingent deferred sales charges retained ................... $44,167 $16,242 $ 3,117
-----------------------------
FRANKLIN FRANKLIN
MIDCAP SMALL CAP
VALUE FUND VALUE FUND
-----------------------------
Sales charges retained net of commissions paid to unaffiliated
broker/dealers .............................................. $ 59,862 $275,757
Contingent deferred sales charges retained ................... $ 802 $ 53,655
E. TRANSFER AGENT FEES
For the period ended April 30, 2007, the Funds paid transfer agent fees as noted
in the Statements of Operations of which the following amounts were retained by
Investor Services:
---------------------------------------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP MIDCAP SMALL CAP
INVESTMENT FUND VALUE FUND VALUE FUND VALUE FUND VALUE FUND
---------------------------------------------------------------------------------
Transfer agent fees ... $1,862,651 $ 164,404 $ 185,481 $ 37,632 $ 770,497
Semiannual Report | 105
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
F. WAIVER AND EXPENSE REIMBURSEMENTS
FT Services agreed in advance to voluntarily waive administrative fees for the
Franklin MidCap Value Fund. Additionally, Advisory Services agreed in advance to
voluntarily waive management fees for the Franklin MidCap Value Fund. Total
expenses waived by FT Services and Advisory Services are not subject to
reimbursement by the fund subsequent to the fund's fiscal year end.
4. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an arrangement with their custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Funds' custodian expenses. During the period ended April 30, 2007, the
custodian fees were reduced as noted in the Statements of Operations.
5. INCOME TAXES
At April 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
-------------------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP
INVESTMENT FUND VALUE FUND VALUE FUND
-------------------------------------------------------------
Cost of investments ...................... $ 3,020,923,469 $ 216,258,970 $ 312,682,572
=============================================================
Unrealized appreciation .................. $ 2,669,047,392 $ 60,694,026 $ 231,179,653
Unrealized depreciation .................. (88,549,133) (432,632) (8,973,331)
-------------------------------------------------------------
Net unrealized appreciation (depreciation) $ 2,580,498,259 $ 60,261,394 $ 222,206,322
=============================================================
--------------------------------------
FRANKLIN FRANKLIN
MIDCAP SMALL CAP
VALUE FUND VALUE FUND
--------------------------------------
Cost of investments ...................... $ 67,936,549 $ 1,030,547,493
======================================
Unrealized appreciation .................. $ 9,684,416 $ 388,474,603
Unrealized depreciation .................. (1,405,915) (46,486,393)
--------------------------------------
Net unrealized appreciation (depreciation) $ 8,278,501 $ 341,988,210
======================================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions and partnership
agreements.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and foreign currency
transactions.
106 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. INVESTMENT TRANSACTIONS
Purchases and sales (excluding short term securities) for the period ended April
30, 2007, were as follows:
-------------------------------------------------------------------------------------
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
BALANCE SHEET LARGE CAP MICROCAP MIDCAP SMALL CAP
INVESTMENT FUND VALUE FUND VALUE FUND VALUE FUND VALUE FUND
-------------------------------------------------------------------------------------
Purchases .............. $129,035,940 $16,831,104 $20,421,672 $17,109,804 $107,444,469
Sales .................. $197,415,710 $27,986,020 $49,524,221 $ 2,326,635 $ 34,914,804
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers, Inc. (an affiliate of the investment manager). Management
fees paid by the Funds 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. RESTRICTED SECURITIES
The Funds may invest in securities that are restricted under the Securities Act
of 1933 (the 1933 Act) or which are subject to legal, contractual, or other
agreed upon restrictions on resale. Restricted securities are often purchased in
private placement transactions, and cannot be sold without prior registration
unless the sale is pursuant to an exemption under the 1933 Act. Disposal of
these securities may require greater effort and expense, and prompt sale at an
acceptable price may be difficult. The Funds may have registration rights for
restricted securities. The issuer generally incurs all registration costs.
At April 30, 2007, the Franklin MicroCap Value Fund held investments in
restricted securities, excluding 144A securities deemed to be liquid, valued in
accordance with procedures approved by the fund's Board of Trustees as
reflecting fair value, as follows:
- -------------------------------------------------------------------------------------------------------------------------
ACQUISITION
SHARES ISSUER DATE COST VALUE
- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN MICROCAP VALUE FUND
94,800 Allen Organ Co., Escrow Account ................ 9/07/06 $1,544,292 $1,496,892
94,800 LandCo Real Estate LLC,
Liquidating Trust ............................ 9/07/06 240,792 240,792
----------
TOTAL RESTRICTED SECURITIES (0.33% of Net Assets) $1,737,684
==========
Semiannual Report | 107
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The 1940 Act defines "affiliated companies" to include investments in portfolio
companies in which a fund owns 5% or more of the outstanding voting securities.
Investments in "affiliated companies" for the Franklin Balance Sheet Investment
Fund and the Franklin MicroCap Value Fund for the period ended April 30, 2007
were as shown below.
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES HELD SHARES HELD VALUE REALIZED
AT BEGINNING GROSS GROSS AT END AT END INVESTMENT CAPITAL
NAME OF ISSUER OF YEAR ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN BALANCE SHEET INVESTMENT FUND
NON-CONTROLLED AFFILIATES
Champps Entertainment Inc. .............. 920,000 -- -- 920,000 $ 5,023,200 $ -- $ --
Dollar Thrifty Automotive Group Inc. .... 1,763,067 -- -- 1,763,067 82,652,581 -- --
Furniture Brands International Inc. ..... 2,675,000 200,000 -- 2,875,000 46,230,000 888,000 --
KGen Power Corp. 144A ................... -- 4,400,000 -- 4,400,000 85,800,000 -- --
Syms Corp. .............................. 1,430,000 -- -- 1,430,000 25,153,700 -- --
Tecumesh Products Co., A ................ 1,085,000 -- -- 1,085,000 11,023,600 -- --
Tecumesh Products Co., B ................ 310,000 -- -- 310,000 3,174,400 -- --
Xanser Corp. ............................ 2,800,000 -- -- 2,800,000 15,764,000 -- --
---------------------------------------
TOTAL NON-CONTROLLED AFFILIATES (4.91% of Net Assets) ..................................... $274,821,481 $ 888,000 $ --
=======================================
FRANKLIN MICROCAP VALUE FUND
NON-CONTROLLED AFFILIATES
ACMAT Corp., A .......................... 392,800 -- -- 392,800 $ 10,409,200 $ -- $ --
American Pacific Corp. .................. 610,000 66,300 -- 676,300 8,047,970 -- --
Continental Materials Corp. ............. 99,500 9,500 -- 109,000 3,351,750 -- --
Delta Apparel Inc. ...................... 680,000 -- -- 680,000 11,736,800 68,000 --
Duckwall-ALCO Stores Inc. ............... 230,000 -- 2,500 227,500 8,656,375 -- 67,878
Espey Manufacturing & Electronics Corp. . 156,000 -- -- 156,000 3,244,800 43,680 --
Hardinge Inc. ........................... 900,991 -- 28,991 872,000 24,250,320 89,310 374,683
International Shipholding Corp. ......... 474,800 -- -- 474,800 11,015,360 -- --
Merchants Group Inc. .................... 160,800 -- 160,800 -- -- 115,884 2,342,458
Nashua Corp. ............................ 477,930 -- -- 477,930 4,506,880 -- --
Omega Protein Corp. ..................... -- 1,000,000 -- 1,000,000 7,090,000 -- --
Proliance International Inc. ............ 823,800 -- -- 823,800 3,031,584 -- --
Rockford Corp. .......................... 575,000 -- -- 575,000 1,230,500 -- --
S&K Famous Brands Inc. .................. 255,500 -- -- 255,500 3,385,375 -- --
Tandy Brands Accessories Inc. ........... 540,000 -- -- 540,000 6,847,200 36,450 --
---------------------------------------
TOTAL NON-CONTROLLED AFFILIATES (19.99% of Net Assets) ................................... $106,804,114 $ 353,324 $ 2,785,019
=======================================
10. REGULATORY AND LITIGATION MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.
108 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. REGULATORY AND LITIGATION MATTERS (CONTINUED)
On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Following the public comment
period, and once the SEC approves the final plan of distribution, disbursements
of settlement monies will be made promptly to individuals who were shareholders
of the designated funds during the relevant period, in accordance with the terms
and conditions of the settlement and plan.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.
11. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Funds
are currently evaluating the impact, if any, of applying the various provisions
of FIN 48.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Trust believes the adoption of SFAS 157
will have no material impact on its financial statements.
Semiannual Report | 109
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007
A Special Meeting of Shareholders of the Trust was held at the Trust's offices,
One Franklin Parkway, San Mateo, California on March 21, 2007 and reconvened on
April 11, 2007, May 11, 2007 and May 18, 2007. The purpose of the meeting was to
elect Trustees of the Trust and to vote on the following Proposals and
Sub-Proposals: to approve an Agreement and Plan of Reorganization that provides
for the reorganization of the Trust into a Delaware statutory trust; to approve
amendments to certain of Franklin Balance Sheet Investment Fund's, Franklin
Large Cap Value Fund's, Franklin MicroCap Value Fund's, Franklin MidCap Value
Fund's and Franklin Small Cap Value Fund's (each, a "Fund") fundamental
investment restrictions (including several Sub-Proposals); and to approve the
elimination of certain of the Funds' fundamental investment restrictions. At the
meeting, the following persons were elected by the shareholders to serve as
Independent Trustees of the Trust: Frank T. Crohn, Burton J. Greenwald, Charles
Rubens II, Leonard Rubin and Robert E. Wade. William J. Lippman was elected by
the shareholders to serve as an Interested Trustee. Shareholders also approved
the Amended and Restated Agreement and Declaration of Trust, amendments to
certain of the Funds' fundamental investment restrictions (including several
Sub-Proposals), and the elimination of certain of the Funds' fundamental
investment restrictions. No other business was transacted at the meeting.
The results of the voting at the meeting are as follows: Proposal 1. The
election of Trustees:
- -------------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
NAME FOR SHARES SHARES WITHHELD SHARES SHARES
- -------------------------------------------------------------------------------------------------------------------
Frank T. Crohn .... 72,735,845.929 51.781% 96.478% 2,655,316.593 1.890% 3.522%
Burton J. Greenwald 72,748,199.021 51.790% 96.494% 2,642,963.501 1.881% 3.506%
Charles Rubens II . 72,724,900.288 51.773% 96.463% 2,666,262.234 1.898% 3.537%
Leonard Rubin ..... 72,717,499,641 51.768% 96.454% 2,673,662.881 1.903% 3.546%
Robert E. Wade .... 72,972,410.997 51.949% 96.792% 2,418,751.525 1.722% 3.208%
William J. Lippman 72,664,862.468 51.730% 96.384% 2,726,300.054 1.941% 3.616%
Proposal 2. To approve an Agreement and Plan of Reorganization that provides for
the reorganization of the Trust into a Delaware statutory trust:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND ......................... SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ..................................... 38,183,822.102 49.101% 83.760%
Against ................................. 2,028,404.384 2.608% 4.450%
Abstain ................................. 761,673.624 0.979% 1.670%
Broker Non-votes ........................ 4,613,575.000 5.933% 10.120%
- --------------------------------------------------------------------------------
TOTAL ................................... 45,587,475.110 58.621% 100.000%
110 | Semiannual Report
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 2. To approve an Agreement and Plan of Reorganization that provides for
the reorganization of the Trust into a Delaware statutory trust: (CONTINUED)
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,666,652.337 49.433% 72.178%
Against ..................... 192,833.589 1.100% 1.606%
Abstain ..................... 626,893.985 3.575% 5.221%
Broker Non-votes ............ 2,520,932.000 14.379% 20.995%
- --------------------------------------------------------------------------------
TOTAL ....................... 12,007,311.911 68.487% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 5,845,677.435 47.987% 76.012%
Against ..................... 126,993.024 1.042% 1.652%
Abstain ..................... 227,940.598 1.871% 2.963%
Broker Non-votes ............ 1,489,921.000 12.231% 19.373%
- --------------------------------------------------------------------------------
TOTAL ....................... 7,690,532.057 63.131% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MIDCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 2,715,415.563 51.892% 71.285%
Against ..................... 59,942.127 1.145% 1.574%
Abstain ..................... 157,130.840 3.003% 4.125%
Broker Non-votes ............ 876,762.000 16.755% 23.016%
- --------------------------------------------------------------------------------
Total ....................... 3,809,250.530 72.795% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 12,178,612.128 43.878% 69.162%
Against ..................... 287,186.915 1.035% 1.631%
Abstain ..................... 853,645.482 3.076% 4.848%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
Semiannual Report | 111
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals):
(a) To amend the Fund's fundamental investment restriction regarding borrowing:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 31,352,844.279 40.317% 78.633%
Against ..................... 996,395.268 1.281% 2.499%
Abstain ..................... 1,623,398.842 2.087% 4.072%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,193,912.271 46.736% 69.702%
Against ..................... 297,864.934 1.699% 2.534%
Abstain ..................... 599,626.277 3.420% 5.101%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,643,782.750 38.120% 67.431%
Against ..................... 177,081.912 1.454% 2.571%
Abstain ..................... 205,990.503 1.691% 2.992%
Broker Non-votes ............ 1,859,779.000 15.267% 27.006%
- --------------------------------------------------------------------------------
Total ....................... 6,886,634.165 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 11,950,494.884 43.057% 67.867%
Against ..................... 512,097.492 1.845% 2.908%
Abstain ..................... 856,852.149 3.087% 4.866%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
112 | Semiannual Report
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(b) To amend the Fund's fundamental investment restriction regarding
underwriting:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 32,735,949.576 42.095% 82.102%
Against ..................... 648,365.909 0.834% 1.626%
Abstain ..................... 588,322.904 0.756% 1.476%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,668,702.622 38.325% 67.793%
Against ..................... 145,972.056 1.198% 2.119%
Abstain ..................... 212,180.487 1.742% 3.082%
Broker Non-votes ............ 1,859,779.000 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.165 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 12,037,020.253 43.368% 68.358%
Against ..................... 416,050.396 1.499% 2.363%
Abstain ..................... 866,373.876 3.122% 4.920%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
(c) To amend the Fund's fundamental investment restriction regarding lending:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 32,264,642.608 41.489% 80.920%
Against ..................... 1,000,733.294 1.287% 2.509%
Abstain ..................... 707,262.487 0.909% 1.775%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
Semiannual Report | 113
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(c) To amend the Fund's fundamental investment restriction regarding lending:
(CONTINUED)
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,222,447.821 46.899% 69.945%
Against ..................... 272,524.679 1.555% 2.318%
Abstain ..................... 596,430.982 3.401% 5.074%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,644,799.678 38.129% 67.446%
Against ..................... 166,247.044 1.364% 2.414%
Abstain ..................... 215,808.443 1.772% 3.134%
Broker Non-votes ............ 1,859,779.678 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.843 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MIDCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 2,665,794.425 50.943% 70.125%
Against ..................... 100,936.048 1.929% 2.656%
Abstain ..................... 157,898.731 3.017% 4.153%
Broker Non-votes ............ 876,842.000 16.756% 23.066%
- --------------------------------------------------------------------------------
TOTAL ....................... 3,801,471.204 72.645% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 11,998,286.265 43.229% 68.138%
Against ..................... 458,613.249 1.652% 2.605%
Abstain ..................... 862,545.011 3.108% 4.898%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
114 | Semiannual Report
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(d) To amend the Fund's fundamental investment restriction regarding investments
in real estate:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 30,026,636.352 38.611% 75.307%
Against ..................... 3,366,392.507 4.329% 8.443%
Abstain ..................... 579,609.530 0.745% 1.454%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,232,815.734 46.958% 70.033%
Against ..................... 249,490.800 1.423% 2.122%
Abstain ..................... 609,096.948 3.474% 5.182%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,680,393.051 38.421% 67.963%
Against ..................... 164,989.653 1.354% 2.396%
Abstain ..................... 181,472.461 1.490% 2.635%
Broker Non-votes ............ 1,859,779.000 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.165 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MIDCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 2,679,528.301 51.205% 70.486%
Against ..................... 89,263.538 1.706% 2.348%
Abstain ..................... 155,837.365 2.978% 4.100%
Broker Non-votes ............ 876,842.000 16.756% 23.066%
- --------------------------------------------------------------------------------
TOTAL ....................... 3,801,471.204 72.645% 100.000%
Semiannual Report | 115
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(d) To amend the Fund's fundamental investment restriction regarding investments
in real estate: (CONTINUED)
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 12,057,285.302 43.441% 68.473%
Against ..................... 411,351.696 1.482% 2.336%
Abstain ..................... 850,807.527 3.066% 4.832%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
(e) To amend the Fund's fundamental investment restriction regarding investments
in commodities:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 29,960,061.656 38.526% 75.140%
Against ..................... 3,423,837.715 4.402% 8.587%
Abstain ..................... 588,739.018 0.757% 1.477%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,200,576.422 46.774% 69.759%
Against ..................... 274,240.475 1.565% 2.333%
Abstain ..................... 616,586.585 3.516% 5.245%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,637,965.638 38.073% 67.347%
Against ..................... 184,332.593 1.513% 2.677%
Abstain ..................... 204,556.934 1.679% 2.970%
Broker Non-votes ............ 1,859,779.000 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.165 56.532% 100.000%
116 | Semiannual Report
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(e) To amend the Fund's fundamental investment restriction regarding investments
in commodities: (CONTINUED)
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MIDCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 2,668,891.080 51.002% 70.207%
Against ..................... 99,801.480 1.907% 2.625%
Abstain ..................... 155,936.644 2.980% 4.102%
Broker Non-votes ............ 876,842.000 16.756% 23.066%
- --------------------------------------------------------------------------------
TOTAL ....................... 3,801,471.204 72.645% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 11,967,761.739 43.119% 67.965%
Against ..................... 478,272.368 1.723% 2.716%
Abstain ..................... 873,410.418 3.147% 4.960%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
(f) To amend the Fund's fundamental investment restriction regarding issuing
senior securities:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 31,459,629.504 40.454% 78.901%
Against ..................... 898,231.798 1.155% 2.252%
Abstain ..................... 1,614,777.087 2.076% 4.051%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,209,852.495 46.827% 69.838%
Against ..................... 240,016.354 1.369% 2.041%
Abstain ..................... 641,534.633 3.659% 5.458%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
Semiannual Report | 117
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(f) To amend the Fund's fundamental investment restriction regarding issuing
senior securities: (CONTINUED)
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,678,864.521 38.408% 67.941%
Against ..................... 148,551.920 1.220% 2.157%
Abstain ..................... 199,438.724 1.637% 2.896%
Broker Non-votes ............ 1,859,779.000 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.165 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 12,028,125.662 43.336% 68.308%
Against ..................... 415,935.075 1.499% 2.362%
Abstain ..................... 875,383.788 3.154% 4.971%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
(g) To amend the Fund's fundamental investment restriction regarding industry
concentration:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 31,723,751.635 40.794% 79.564%
Against ..................... 768,932.117 0.988% 1.929%
Abstain ..................... 1,479,954.637 1.903% 3.711%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,209,852.495 46.827% 69.838%
Against ..................... 240,016.354 1.369% 2.041%
Abstain ..................... 641,534.633 3.659% 5.458%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
118 | Semiannual Report
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes seven Sub-Proposals): (CONTINUED)
(g) To amend the Fund's fundamental investment restriction regarding industry
concentration: (CONTINUED)
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,678,864.521 38.408% 67.941%
Against ..................... 148,551.920 1.220% 2.157%
Abstain ..................... 199,438.724 1.637% 2.896%
Broker Non-votes ............ 1,859,779.000 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.165 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 12,028,125.662 43.336% 68.308%
Against ..................... 415,935.075 1.499% 2.362%
Abstain ..................... 875,383.788 3.154% 4.971%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
(h) To amend the Fund's fundamental investment restriction regarding
diversification of investments:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 31,758,969.389 40.839% 79.652%
Against ..................... 633,643.887 0.815% 1.590%
Abstain ..................... 1,580,025.113 2.031% 3.962%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN LARGE CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 8,245,422.197 47.030% 70.141%
Against ..................... 255,184.653 1.456% 2.171%
Abstain ..................... 590,796.632 3.369% 5.025%
Broker Non-votes ............ 2,664,229.000 15.196% 22.663%
- --------------------------------------------------------------------------------
TOTAL ....................... 11,755,632.482 67.051% 100.000%
Semiannual Report | 119
Franklin Value Investors Trust
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (CONTINUED)
Proposal 4. To approve the elimination of certain of the Fund's fundamental
investment restrictions:
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN BALANCE SHEET OUTSTANDING VOTED
INVESTMENT FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 32,310,987.561 41.549% 81.037%
Against ..................... 1,079,374.370 1.388% 2.707%
Abstain ..................... 582,276.458 0.748% 1.460%
Broker Non-votes ............ 5,899,330.000 7.586% 14.796%
- --------------------------------------------------------------------------------
TOTAL ....................... 39,871,968.389 51.271% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN MICROCAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 4,621,240.149 37.935% 67.104%
Against ..................... 200,783.858 1.649% 2.916%
Abstain ..................... 204,831.158 1.681% 2.974%
Broker Non-votes ............ 1,859,779.00 15.267% 27.006%
- --------------------------------------------------------------------------------
TOTAL ....................... 6,886,634.165 56.532% 100.000%
- --------------------------------------------------------------------------------
% OF % OF
FRANKLIN SMALL CAP OUTSTANDING VOTED
VALUE FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ......................... 11,954,763.615 43.072% 67.891%
Against ..................... 520,559.204 1.876% 2.956%
Abstain ..................... 844,121.706 3.041% 4.794%
Broker Non-votes ............ 4,289,281.000 15.454% 24.359%
- --------------------------------------------------------------------------------
TOTAL ....................... 17,608,725.525 63.443% 100.000%
120 | Semiannual Report
Franklin Value Investors Trust
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held February 28, 2007, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for each of the five Funds within the Trust
("Fund(s)"). 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 each 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 each Fund prepared by Lipper,
Inc. ("Lipper"), an independent organization, as well as a Fund profitability
analysis report prepared by management. The Lipper reports compared each 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 Funds 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 each Fund as shown
in such Lipper report.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
management agreements for all Funds were considered at the same Board meeting,
the Board dealt with each Fund separately. In approving continuance of the
investment management agreement for each 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 each 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 SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Funds and their shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
each 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
Semiannual Report | 121
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 each
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 pre-designated list of
funds within such person's fund management area so as to be aligned with the
interests of Fund shareholders. In this respect, the Board after making
inquiries of management, received assurances that bonus composition was not
unduly influenced by one-year or short-term performance but was based primarily
on longer periods consistent with the interests of long-term 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,
the high industry ranking given to the Franklin Templeton website, and the
firsthand experience of individual Board members who deal with the shareholder
services department in their capacities as shareholders in one or more of the
various Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of each Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the
agreement renewals. The Lipper reports prepared for each individual Fund showed
the investment performance of its Class A shares in comparison to a performance
universe selected by Lipper. Comparative performance for each Fund was shown for
2006 and for the previous 10 years ended December 31, 2006, for those Funds that
had been in existence for such length of time and for lesser periods for other
Funds depending on when their operations commenced. The following summarizes the
performance results for each of the Funds and the Board's view of such
performance.
FRANKLIN BALANCE SHEET INVESTMENT FUND - The performance universe for this Fund
consisted of the Fund and all retail and institutional mid-cap value funds as
selected by Lipper. The Lipper report comparison showed the Fund's total return
during 2006 was in the second-highest quintile of such
122 | Semiannual Report
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
performance universe. The report further showed that the Fund's total return on
an annualized basis was in the highest quintile of such performance universe for
each of the previous three-, five-and ten-year periods. The Board was satisfied
with such performance.
FRANKLIN LARGE CAP VALUE FUND - The performance universe for this Fund consisted
of the Fund and all retail and institutional large-cap value funds as selected
by Lipper. The Lipper report comparison showed the Fund's total return during
2006 was in the second-lowest quintile of such performance universe. The Fund's
operations encompass five full years and such report showed that the Fund's
annualized total return during such period was in the upper half of such
universe. The Board was satisfied with such performance, noting that the Fund
had a total return of 15.95% in 2006 as shown in such Lipper report.
FRANKLIN MICROCAP VALUE FUND - The performance universe for this Fund consisted
of the Fund and all retail and institutional small-cap value funds as selected
by Lipper. The Lipper report comparison showed the Fund's total return during
2006 was in the second-highest quintile of such performance universe, and on an
annualized basis was in the highest or second-highest quintile of such
performance universe during each of the previous three-, five- and ten-year
periods. The Board was satisfied with such performance.
FRANKLIN MIDCAP VALUE FUND - The performance universe for this Fund consisted of
the Fund and all retail and institutional mid-cap value funds as selected by
Lipper. The Fund has only been in existence for one full year and the Lipper
report showed its 2006 total return to be in the second-lowest quintile of such
universe. The Board found such performance to be acceptable, noting the small
size of the Fund, the fact that its expenses were subsidized by management fee
waivers, and that it had a total return of nearly 14% during 2006 as shown in
the Lipper report.
FRANKLIN SMALL CAP VALUE FUND - The performance universe for this Fund consisted
of the Fund and all retail and institutional small-cap value funds as selected
by Lipper. The Lipper report comparison showed that the Fund's total return for
2006 placed it in the upper half of such performance universe and that its total
return on an annualized basis was in the highest quintile of such universe for
the previous three-year period, the upper half of such universe for the previous
five-year period, and was in the lowest quintile of such performance universe
for the previous ten-year period. The Board was satisfied with such performance,
noting that the Fund had an annualized total return in excess of 10% for the
ten-year period.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of each Fund compared with those of a
group of other funds selected by Lipper as constituting its appropriate Lipper
expense group. Prior to making such comparison, the Board relied upon a survey
showing that the scope of management advisory services covered under the Fund's
investment management agreement was similar to those provided by fund managers
to other mutual fund groups. In reviewing comparative costs, emphasis was given
to each
Semiannual Report | 123
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
Fund's contractual investment management fee in comparison with the contractual
investment management fee that would have been 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 expense
group. The Lipper contractual investment management fee comparison includes
within such fee any separate administrative fees, and the Lipper actual total
expenses, for comparative consistency, are shown by Lipper for fund Class A
shares. Such expense comparisons in the case of each of Franklin Balance Sheet
Investment Fund, Franklin MicroCap Value Fund, and Franklin Small Cap Value Fund
showed both their contractual investment management fees and their total
expenses to be in the least expensive quintiles of their respective Lipper
expense groups. The Lipper reports for Franklin Large Cap Value Fund and
Franklin MidCap Value Fund showed their contractual investment management fee
rates to be in the second most expensive quintiles of their expense groups, and
their actual total expenses to be, respectively, in the most expensive and
second most expensive quintiles of their expense groups. The Board was satisfied
with the management fees and total expenses of each Fund in comparison to its
expense group as shown in the Lipper reports, noting the relatively small size
of Franklin Large Cap Value Fund and Franklin MidCap Value Fund, the fact that
their total expenses in both cases were within 10 basis points of the median of
their Lipper expense groups, and management's subsidization of expenses for
Franklin MidCap Value Fund.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
each 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
each of the individual funds. Specific attention was given to the methodology
followed in allocating costs to each 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 cost allocation methodology was consistent
with that followed in profitability report presentations for the Funds made in
prior years and that the Funds' 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 Funds' 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 each 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 Funds, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC requirements. In addition, the Board
considered a third-party study comparing the profitability of the Manager's
parent on an overall basis as compared to other publicly held managers broken
down to show
124 | Semiannual Report
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 "soft" 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
each 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 Funds grow 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 Board also noted that
economies of scale are shared with each Fund and its shareholders through
management fee breakpoints so that as a Fund grows in size, its effective
management fee rate declines. The fee structure under the investment management
agreements for each of Franklin Balance Sheet Investment Fund, Franklin Large
Cap Value Fund and Franklin Small Cap Value Fund contained breakpoints that
continued to asset levels that exceed the present size of these Funds. In view
of such structure and the favorable fee and expense comparisons of these Funds
within their respective Lipper expense groups, the Board believed that to the
extent economies of scale may be realized by the Manager of these Funds and its
affiliates, that there was a sharing of benefits with each of these Funds and
their shareholders. The fee structure of Franklin MidCap Value Fund contains
breakpoints, and the Board felt in view of management's expense subsidy that no
economies of scale are realized in its operation of this Fund. The fee structure
under the investment management agreement for Franklin MicroCap Value Fund
provides a flat fee of 0.75% at all asset levels. In discussing the absence of
breakpoints with the independent Trustees, management pointed out that this Fund
invests only in domestic and foreign securities with a market capitalization of
less than $400 million that are believed to be undervalued. Management stated
its belief that such limited investment option did not permit the Fund to
achieve the type of economies of scale that might benefit other funds from
increases in size and also pointed out that the Fund, whose asset size was
approximately $500 million at year-end, has been closed to new investors, with
the exception of certain retirement accounts since January 14, 2004. Management
also expressed its view that this fee was low for this type of a fund and
pointed out the favorable comparison of fees and expenses with its Lipper
expense group. The independent Trustees acknowledged that management's
explanation provided a reasonable basis for believing the flat fee rate under
the investment management agreement was fair and that in the current
circumstances, management was not benefiting from any meaningful economies of
scale in its management of this Fund.
Semiannual Report | 125
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
PROXY VOTING POLICIES AND PROCEDURES
The Trust 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 1-954/527-7678 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.
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
1-800/SEC-0330.
126 | Semiannual Report
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Literature Request
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON FUNDS
INTERNATIONAL
Mutual European 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 1
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II 2
Franklin Small-Mid Cap Growth Fund
VALUE
Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(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
INCOME
Franklin Adjustable U.S. Government
Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 4
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 4
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME 6
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama Michigan 7
Arizona Minnesota 7
California 8 Missouri
Colorado New Jersey
Connecticut New York 8
Florida 8 North Carolina
Georgia Ohio 7
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 7 Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 9
1. The fund is open only to existing shareholders and select retirement
plans.
2. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
3. The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
4. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.
6. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
7. The fund invests primarily in insured municipal securities.
8. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
05/07
Not part of the semiannual report
[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN VALUE INVESTORS TRUST
INVESTMENT MANAGER
Franklin Advisory Services, LLC
One Parker Plaza
Ninth Floor
Fort Lee, NJ 07024
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
FVIT S2007 06/07
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 Frank T. Crohn 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 Jimmy D. Gambill, Chief Executive Officer - Finance and
Administration, and Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration,
and Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN VALUE INVESTORS TRUST
By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date June 27, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date June 27, 2007
By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date June 27, 2007