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
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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: 4/30/08
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ITEM 1. REPORTS TO STOCKHOLDERS.
(GRAPHIC)
APRIL, 30, 2008
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
VALUE
FRANKLIN
VALUE INVESTORS TRUST
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.
(GRAPHIC)
(FRANKLIN TEMPLETON INVESTMENTS LOGO)
Franklin - Templeton - Mutual Series
Semiannual Report
Economic and Market Overview
During the six months ended April 30, 2008, the U.S. economy slowed. The housing
downturn negatively affected the overall economy by fourth quarter 2007 as
credit conditions worsened and the pace of consumer spending declined. Gross
domestic product (GDP) growth decelerated sharply and registered annualized
rates of 0.6% in the fourth quarter of 2007 and an estimated 0.9% in the first
quarter of 2008. A weaker U.S. dollar compared with many foreign currencies over
the past six months contributed to increased exports, which along with inventory
buildup, helped the fragile economy in the first quarter.
The unemployment rate increased from 4.8% at the beginning of the period to 5.0%
in April 2008.(1) Continued deterioration in consumer confidence, home prices
and the job market, as well as rising mortgage and fuel costs, plagued the
economy. Volatile oil prices reached a historical high in April, topping $119
per barrel, before retreating to $113 by period-end. For the 12 months ended
April 30, 2008, the core Consumer Price Index (CPI), which excludes food and
energy costs, rose 2.3%, which was higher than its 10-year average rate.(1)
Faced with a deepening housing contraction and stressed financial markets, the
Federal Reserve Board made several cuts to the federal funds target rate during
the period, including 225 basis points so far in 2008. For the six-month period,
the federal funds target rate fell 250 basis points from 4.50% to 2.00%. As
investors fled riskier, poorer-performing assets, U.S. Treasuries rallied, and
the 10-year Treasury note yield fell from 4.48% at the beginning of the period
to 3.77% on April 30, 2008.
1. Source: Bureau of Labor Statistics.
Semiannual Report | 3
Stock markets were volatile during the period partly due to investor concerns
about slowing economic growth. Overall, the blue chip stocks of the Dow Jones
Industrial Average were down 6.79%, while the broader Standard & Poor's 500
Index (S&P 500) declined 9.64%, and the technology-heavy NASDAQ Composite Index
fell 15.29%.(2) The energy sector performed relatively well.
Large-capitalization stocks generally outperformed small caps, and growth stocks
fared better than their value counterparts.
2. 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,
2008. 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 All Cap Value Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin All Cap Value Fund seeks
long-term total return by primarily investing in equity securities of companies
of any size that we believe are undervalued at the time of purchase and have the
potential for capital appreciation.
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 All Cap Value Fund covers the period ended
April 30, 2008.
PERFORMANCE OVERVIEW
Franklin All Cap Value Fund - Class A had a -3.62% cumulative total return for
the six months under review. The Fund performed better than its benchmark, the
Russell 3000(R) Value Index, which declined 9.97% 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. You can find more of the
Fund's performance data in the Performance Summary beginning on page 8.
INVESTMENT STRATEGY
Our goal is to invest in equity securities of companies of any size 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, or that appear to be
inexpensive measured by factors such as price relative to earnings, book value
or cash flow. 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. Source: Standard & Poor's Micropal. The Russell 3000 Value Index is market
capitalization weighted and measures performance of those Russell 3000 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 56.
Semiannual Report | 5
PORTFOLIO BREAKDOWN
Franklin All Cap Value Fund
Based on Total Net Assets as of 4/30/08
(BAR CHART)
Energy 19.4%
Capital Goods 16.5%
Retailing 12.0%
Materials 8.2%
Insurance 7.5%
Consumer Durables & Apparel 6.2%
Utilities 4.2%
Commercial Services & Supplies 3.8%
Food & Staples Retailing 3.2%
Diversified Financials 2.2%
Transportation 2.0%
Technology Hardware & Equipment 2.0%
Other 4.9%
Short-Term Investments & Other Net Assets 7.9%
MANAGER'S DISCUSSION
During the period under review, the energy sector was the most significant
contributor to Fund performance largely due to record-high oil prices. Sector
holdings that helped performance included exploration and production companies
Apache and Chesapeake Energy, contracting drilling firm Unit Corp. and oil
services company PHI. The consumer staples sector also boosted Fund performance,
largely due to food and staples retailer Wal-Mart Stores.
Detractors from performance included bond insurer Security Capital Assurance,
which suffered losses due to difficult credit market conditions, which caused
several credit rating downgrades during the period. Car rental company Dollar
Thrifty Automotive Group, a new holding, also hindered results amid weak demand
and pricing, and higher costs. Shares of Helix Energy, an oil exploration
services company, also declined in value.
The Fund experienced steady inflows during the period, and we used a portion of
the proceeds to invest in several new and existing positions. New holdings
included stocks of Nordstrom, Global Industries and Westlake Chemical, as well
as the aforementioned Dollar Thrifty. Additions to existing positions included
General Electric, Group 1 Automotive and J.C. Penney. During the period, we
liquidated our positions in Pharmaceutical Product Development, Southwest
Airlines, Tandy Brands Accessories and Patriot Coal because the shares reached
our price targets or we believed the companies' fundamentals had deteriorated.
We also reduced our positions in Apache, Lehman Brothers Holdings and Occidental
Petroleum. As of April 30, 2008, the Fund held 93 equity positions, and assets
increased from $8.97 million to $10.62 million.
6 | Semiannual Report
Thank you for your participation in Franklin All Cap Value Fund. We look forward
to serving your future investment needs.
(PHOTO OF WILLIAM J. LIPPMAN)
/s/ William J. Lippman
William J. Lippman
Co-Portfolio Manager
(PHOTO OF STEVEN B. RAINERI)
/s/ Steven B. Raineri
Steven B. Raineri
Co-Portfolio Manager
Bruce C. Baughman, CPA
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin All Cap Value Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2008, 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.
TOP 10 EQUITY HOLDINGS
Franklin All Cap Value Fund 4/30/08
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------- ----------
Wal-Mart Stores Inc. 3.2%
FOOD & STAPLES RETAILING
PHI Inc. 3.2%
ENERGY
Kelly Services Inc., A 2.7%
COMMERCIAL SERVICES & SUPPLIES
General Electric Co. 2.5%
CAPITAL GOODS
Apache Corp. 1.9%
ENERGY
ENSCO International Inc. 1.9%
ENERGY
Chesapeake Energy Corp. 1.9%
ENERGY
Unit Corp. 1.7%
ENERGY
Occidental Petroleum Corp. 1.7%
ENERGY
Brown Shoe Co. Inc. 1.6%
RETAILING
Semiannual Report | 7
Performance Summary as of 4/30/08
FRANKLIN ALL 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: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.40 $9.12 $9.52
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0531
CLASS C (SYMBOL: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.42 $9.08 $9.50
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0403
CLASS R (SYMBOL: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.41 $9.11 $9.52
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0464
ADVISOR CLASS (SYMBOL: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.40 $9.14 $9.54
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0624
8 | Semiannual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AGGREGATE 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. UNTIL AUGUST 31, 2008,
THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
CLASS A 6-MONTH INCEPTION (6/1/07)
- ------------------------------------- ------- ------------------
Cumulative Total Return(2) -3.62% -8.25%
Aggregate Total Return(3) -9.16% -13.52%
Value of $10,000 Investment(4) $9,084 $ 8,648
Aggregate Total Return (3/31/08)(5) -18.26%
Total Annual Operating Expenses(6)
Without Waiver 3.97%
With Waiver 1.25%
CLASS C 6-MONTH INCEPTION (6/1/07)
- ------------------------------------- ------- ------------------
Cumulative Total Return(2) -3.88% -8.78%
Aggregate Total Return(3) -4.84% -9.69%
Value of $10,000 Investment(4) $9,516 $ 9,031
Aggregate Total Return (3/31/08)(5) -14.56%
Total Annual Operating Expenses(6)
Without Waiver 4.62%
With Waiver 1.90%
CLASS R 6-MONTH INCEPTION (6/1/07)
- ------------------------------------- ------- ------------------
Cumulative Total Return(2) -3.80% -8.42%
Aggregate Total Return(3) -3.80% -8.42%
Value of $10,000 Investment(4) $9,620 $ 9,158
Aggregate Total Return (3/31/08)(5) -13.34%
Total Annual Operating Expenses(6)
Without Waiver 4.12%
With Waiver 1.40%
ADVISOR CLASS 6-MONTH INCEPTION (6/1/07)
- ------------------------------------- ------- ------------------
Cumulative Total Return(2) -3.51% -7.95%
Aggregate Total Return(3) -3.51% -7.95%
Value of $10,000 Investment(4) $9,649 $ 9,205
Aggregate Total Return (3/31/08)(5) -12.98%
Total Annual Operating Expenses(6)
Without Waiver 3.62%
With Waiver 0.90%
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 MANAGER AND ADMINISTRATOR HAVE CONTRACTUALLY AGREED TO LIMIT FUND EXPENSES
SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED THE AMOUNT SHOWN WITH
WAIVER (OTHER THAN CERTAIN NON-ROUTINE EXPENSES) FOR EACH SHARE CLASS UNTIL
2/28/09.
Semiannual Report | 9
Performance Summary (CONTINUED)
ENDNOTES
VALUE SECURITIES MAY NOT INCREASE IN PRICE AS ANTICIPATED OR MAY DECLINE FURTHER
IN VALUE. WHILE SMALLER AND MIDSIZE COMPANIES MAY OFFER SUBSTANTIAL
OPPORTUNITIES FOR CAPITAL GROWTH, THEY ALSO INVOLVE HEIGHTENED RISKS AND SHOULD
BE CONSIDERED SPECULATIVE. HISTORICALLY, SMALLER- AND MIDSIZE-COMPANY SECURITIES
HAVE BEEN MORE VOLATILE IN PRICE THAN LARGER COMPANY SECURITIES, ESPECIALLY OVER
THE SHORT TERM. 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. HOWEVER, THE MANAGERS CURRENTLY INTEND TO
LIMIT FOREIGN INVESTMENTS TO NO MORE THAN 15% OF THE FUND'S TOTAL ASSETS. 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. If the manager and administrator had not waived fees, 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. Aggregate total return represents the change in value of an investment over
the periods indicated. Since the Fund has existed for less than one year,
average annual total returns are not available.
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 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.
10 | Semiannual Report
Your Fund's Expenses
FRANKLIN ALL CAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
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
VALUE 11/1/07 VALUE 4/30/08 PERIOD* 11/1/07-4/30/08
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $ 963.80 $6.10
Hypothetical (5% return before expenses) $1,000 $1,018.65 $6.27
CLASS C
Actual $1,000 $ 961.20 $9.26
Hypothetical (5% return before expenses) $1,000 $1,015.42 $9.52
CLASS R
Actual $1,000 $ 962.00 $6.83
Hypothetical (5% return before expenses) $1,000 $1,017.90 $7.02
ADVISOR CLASS
Actual $1,000 $ 964.90 $4.40
Hypothetical (5% return before expenses) $1,000 $1,020.39 $4.52
* Expenses are calculated using the most recent six-month expense ratio, net
of expense waivers, annualized for each class (A: 1.25%; C: 1.90%; R:
1.40%; and Advisor: 0.90%), multiplied by the average account value over
the period, multiplied by 182/366 to reflect the one-half year period.
12 | 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.
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 Balance Sheet Investment Fund covers the
period ended April 30, 2008.
PERFORMANCE OVERVIEW
Franklin Balance Sheet Investment Fund - Class A had a -7.87% cumulative total
return for the six months under review. The Fund performed better than its
benchmark, the Russell 3000 Value Index, which declined 9.97% for the same
period.(1) The Fund also performed better than the Russell 2000(R) Value Index,
which declined 11.55%.(2) We are changing the Fund's benchmark to the Russell
3000 Value Index, which is more consistent with our investment strategy, in that
it does not target a particular market capitalization. Franklin Balance Sheet
Investment Fund has never used market capitalization as an investment criterion.
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
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 investible universe, which we derive from a proprietary database
for screening purposes. This strategy is not aimed at short-term trading
1. Source: Standard & Poor's Micropal. The Russell 3000 Value Index is market
capitalization weighted and measures performance of those Russell 3000 Index
companies with lower price-to-book ratios and lower forecasted growth values.
2. 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 indices are unmanaged and include 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 | 13
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.
PORTFOLIO BREAKDOWN
Franklin Balance Sheet Investment Fund
Based on Total Net Assets as of 4/30/08
(BAR CHART)
Insurance 20.0%
Capital Goods 11.6%
Materials 9.8%
Utilities 9.5%
Energy 7.0%
Consumer Durables & Apparel 5.8%
Transportation 5.7%
Food, Beverage & Tobacco 5.5%
Retailing 5.0%
Banks 3.7%
Other 8.1%
Short-Term Investments &
Other Net Assets 8.3%
MANAGER'S DISCUSSION
During the six months under review, we identified two new investment
opportunities: Chubb, a property and casualty insurer, and Washington Mutual, a
financial services company primarily focused on mortgage and consumer lending.
We also added to existing positions Avista, Corus Bankshares, MBIA, National
Western Life Insurance, Old Republic International, Werner Enterprises, Westlake
Chemical and Zale, among others. 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 $130 million.
Portfolio sales totaled $464 million. Sales were predominantly in response to
price appreciation. We eliminated a small position in Mesa Air Group at a loss,
and a much larger holding, Monsanto, at a substantial gain. There were also two
completed takeovers: Kellwood (apparel) and Midland (insurance). Kellwood was a
disappointment, but Midland's sale was consistent with our investment goals.
Historically, takeovers have been an important part of the Fund's investment
returns. Such activity was greatly reduced during the first half of the Fund's
2008 fiscal year compared to prior periods. We believe the falloff reflected
credit market disruptions that began with subprime mortgages early in 2007. The
various security sales generated net realized gains of $337 million, nearly all
of it long term.
Steel companies United States Steel and Nucor were among the strongest
contributors to Fund performance. Other contributors included Tecumseh Products
(compressors), KGen Power (power generation), Universal (tobacco leaf), Norfolk
Southern and Burlington Northern Santa Fe (rail transportation), Hasbro (toys
and games), D.R. Horton (homebuilding), Big Lots (discount retail), and National
Western Life Insurance.
There were more detractors from performance than contributors, especially among
financials, such as CIT Group, Freddie Mac, Prudential Financial, MBIA, E-L
Financial and PMI Group. Other detractors included Dollar Thrifty Automotive
Group (car rental), CNH Global (construction and agricultural equipment),
Exterran Holdings (gas compression), PNM Resources and Sierra Pacific Resources
(electric utilities) and Saks (retailing). The financial holdings suffered from
credit shocks created by the collapsing housing
14 | Semiannual Report
market. Most of the others named, and many more among our holdings, gave up some
of the significant gains achieved during our ownership. Unpleasant as that is,
the market reflected what we believe were conditions better suited to value
investors like ourselves than we have seen since we closed the Fund to new
investors in 2002. Largely as a consequence of these market changes, our
directors elected to reopen Franklin Balance Sheet Investment Fund to new
investors beginning on May 1, 2008. At April 30, 2008, the Fund's total net
assets were $3.8 billion with short-term investments and other net assets of
8.3%, as compared to $4.9 billion and 10.5%, respectively, on October 31, 2007.
Net shareholder redemptions were $642 million during the six-month period.
Thank you for your continued participation in Franklin Balance Sheet Investment
Fund. We look forward to serving your future investment needs.
(PHOTO OF BRUCE C. BAUGHMAN)
/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
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2008, 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.
TOP 10 EQUITY HOLDINGS
Franklin Balance Sheet Investment Fund 4/30/08
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- -------------------------------- ----------
Prudential Financial Inc. 2.3%
INSURANCE
Corn Products International Inc. 2.3%
FOOD, BEVERAGE & TOBACCO
KGen Power Corp. 2.2%
UTILITIES
Reliance Steel & Aluminum Co. 2.1%
MATERIALS
Norfolk Southern Corp. 2.0%
TRANSPORTATION
American National Insurance Co. 1.9%
INSURANCE
Old Republic International Corp. 1.9%
INSURANCE
Entergy Corp. 1.8%
UTILITIES
Sierra Pacific Resources 1.7%
UTILITIES
Trinity Industries Inc. 1.7%
CAPITAL GOODS
Semiannual Report | 15
Performance Summary as of 4/30/08
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
CLASS A (SYMBOL: FRBSX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$11.91 $57.45 $69.36
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.6729
Short-Term Capital Gain $0.0682
Long-Term Capital Gain $5.6390
TOTAL $6.3801
CLASS B (SYMBOL: FBSBX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$11.46 $56.66 $68.12
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.1062
Short-Term Capital Gain $0.0682
Long-Term Capital Gain $5.6390
TOTAL $5.8134
CLASS C (SYMBOL: FCBSX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$11.44 $56.78 $68.22
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.1000
Short-Term Capital Gain $0.0682
Long-Term Capital Gain $5.6390
TOTAL $5.8072
CLASS R (SYMBOL: FBSRX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$11.79 $57.04 $68.83
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.5130
Short-Term Capital Gain $0.0682
Long-Term Capital Gain $5.6390
TOTAL $6.2202
ADVISOR CLASS (SYMBOL: FBSAX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$12.04 $57.49 $69.53
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.8586
Short-Term Capital Gain $0.0682
Long-Term Capital Gain $5.6390
TOTAL $6.5658
16 | Semiannual Report
Performance Summary (CONTINUED)
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. UNTIL AUGUST
31, 2008, 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) -7.87% -11.66% +99.09% +135.45%
Average Annual Total Return(2) -13.16% -16.74% +13.41% +8.30%
Value of $10,000 Investment(3) $ 8,684 $ 8,326 $18,765 $ 22,190
Avg. Ann. Total Return (3/31/08)(4) -18.92% +13.43% +7.82%
Total Annual Operating Expenses(5) 0.92%
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (3/1/01)
- ------------------------------------- ------- ------- -------- ------------------
Cumulative Total Return(1) -8.22% -12.33% +61.91% +101.35%
Average Annual Total Return(2) -11.54% -15.51% +13.65% +10.26%
Value of $10,000 Investment(3) $ 8,846 $ 8,449 $18,961 $ 20,135
Avg. Ann. Total Return (3/31/08)(4) -17.71% +13.67% +9.50%
Total Annual Operating Expenses(5) 1.68%
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (3/1/01)
- ------------------------------------- ------- ------- -------- ------------------
Cumulative Total Return(1) -8.18% -12.31% +91.66% +101.53%
Average Annual Total Return(2) -9.01% -13.10% +13.90% +10.28%
Value of $10,000 Investment(3) $9,099 $ 8,690 $19,166 $ 20,153
Avg. Ann. Total Return (3/31/08)(4) -15.37% +13.91% +9.52%
Total Annual Operating Expenses(5) 1.68%
CLASS R 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/02)
- ------------------------------------- ------- -------- -------- ------------------
Cumulative Total Return(1) -8.00% -11.90% +96.44% +85.85%
Average Annual Total Return(2) -8.00% -11.90% +14.46% +10.30%
Value of $10,000 Investment(3) $9,200 $8,810 $19,644 $18,585
Avg. Ann. Total Return (3/31/08)(4) -14.18% +14.48% +9.44%
Total Annual Operating Expenses(5) 1.18%
ADVISOR CLASS(6) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- -------- -------- ---------
Cumulative Total Return(1) -7.76% -11.45% +101.49% +139.42%
Average Annual Total Return(2) -7.76% -11.45% +15.04% +9.12%
Value of $10,000 Investment(3) $9,224 $ 8,855 $ 20,149 $ 23,942
Avg. Ann. Total Return (3/31/08)(4) -13.75% +15.06% +8.64%
Total Annual Operating Expenses(5) 0.68%
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 | 17
Performance Summary (CONTINUED)
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 +116.25% and +11.37%.
18 | Semiannual Report
Your Fund's Expenses
FRANKLIN BALANCE SHEET INVESTMENT FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
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
VALUE 11/1/07 VALUE 4/30/08 PERIOD* 11/1/07-4/30/08
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $ 921.30 $4.44
Hypothetical (5% return before expenses) $1,000 $1,020.24 $4.67
CLASS B
Actual $1,000 $ 917.80 $8.06
Hypothetical (5% return before expenses) $1,000 $1,016.46 $8.47
CLASS C
Actual $1,000 $ 918.20 $8.06
Hypothetical (5% return before expenses) $1,000 $1,016.46 $8.47
CLASS R
Actual $1,000 $ 920.00 $5.68
Hypothetical (5% return before expenses) $1,000 $1,018.95 $5.97
ADVISOR CLASS
Actual $1,000 $ 922.40 $3.30
Hypothetical (5% return before expenses) $1,000 $1,021.43 $3.47
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.93%; B: 1.69%; C: 1.69%; R: 1.19%; and
Advisor: 0.69%), multiplied by the average account value over the period,
multiplied by 182/366 to reflect the one-half year period.
20 | 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, 2008.
PERFORMANCE OVERVIEW
Franklin Large Cap Value Fund - Class A had a -6.27% cumulative total return for
the six months under review. The Fund performed better than its benchmark, the
Russell 1000 Value Index, which declined 9.83% 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 longterm results. You can
find the Fund's long-term performance data in the Performance Summary beginning
on page 24.
INVESTMENT STRATEGY
We seek to invest in securities of large capitalization companies that we
believe are selling below their underlying worth and hold them until they reach
what we consider is their fair market value. Our aim is to construct a
diversified portfolio of fundamentally sound companies purchased at attractive
prices, often when they are out of favor with other investors for reasons we
believe are temporary. Portfolio securities are selected without regard to
benchmark comparisons and are based on fundamental bottom-up research focusing
on several criteria, such as low price relative to earnings, cash flow or book
value. We also consider stocks with recent sharp price declines that we believe
still have significant growth potential or that possess valuable intangibles not
reflected in the stock price.
1. The Russell 1000 Index is market capitalization weighted and measures
performance of the 1,000 largest companies in the Russell 3000 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 74.
Semiannual Report | 21
PORTFOLIO BREAKDOWN
Franklin Large Cap Value Fund
Based on Total Net Assets as of 4/30/08
(BAR CHART)
Energy 16.9%
Capital Goods 15.0%
Materials 10.1%
Insurance 7.5%
Diversified Financials 6.3%
Consumer Durables & Apparel 6.2%
Banks 5.2%
Pharmaceuticals, Biotechnology & Life Sciences 5.0%
Household & Personal Products 4.9%
Technology Hardware & Equipment 4.7%
Retailing 3.7%
Food & Staples Retailing 3.4%
Software & Services 2.2%
Other 7.1%
Short-Term Investments & Other Net Assets 1.8%
MANAGER'S DISCUSSION
During the period under review, the energy sector contributed to Fund
performance, as did the materials and consumer staples sectors.(3) Key energy
sector contributors included Apache, Devon Energy and Occidental Petroleum as
oil prices reached record highs during the period. In the materials sector,
steel products manufacturer Nucor helped performance, while in the consumer
staples sector, food and staples retailer Wal-Mart Stores performed well.
By sector, the financials sector was the biggest detractor during the period,
followed by industrials and health care.(4) Financials sector holdings that
hindered Fund returns included insurer Ambac Financial Group, diversified
financials company Citigroup, and thrifts and mortgage finance companies Freddie
Mac and Washington Mutual. In the industrials sector, capital goods conglomerate
General Electric hurt performance, while in the health care sector,
pharmaceuticals company Merck declined in value.
During the reporting period, the Fund initiated a position in retailer
Nordstrom. We also added to six existing holdings: insurer American
International Group, consumer products company Fortune Brands, retailer J.C.
Penney, Merck, Nucor and Washington Mutual.
The Fund did not fully liquidate any positions during the period; however, we
reduced several holdings either because we believed the shares were fully valued
or the companies' fundamentals had deteriorated. Significant sales included
capital goods company 3M, technology hardware and equipment manufacturer
International Business Machines, restaurant company McDonald's, and household
products manufacturer Procter & Gamble.
3. The consumer staples sector comprises food and staples retailing, and
household and personal products in the SOI.
4. The financials sector comprises banks, diversified financials and insurance
in the SOI. The industrials sector comprises capital goods and transportation in
the SOI. The health care sector comprises health care equipment and services;
and pharmaceuticals, biotechnology and life sciences in the SOI.
22 | Semiannual Report
Thank you for your continued participation in Franklin Large Cap Value Fund. We
look forward to serving your future investment needs.
(PHOTO OF WILLIAM J. LIPPMAN)
/s/ William J. Lippman
William J. Lippman
Lead Portfolio Manager
Bruce C. Baughman, CPA
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin Large Cap Value Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2008, 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.
TOP 10 EQUITY HOLDINGS
Franklin Large Cap Value Fund 4/30/08
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ------------------------------------- ----------
Illinois Tool Works Inc. 3.5%
CAPITAL GOODS
General Electric Co. 3.4%
CAPITAL GOODS
Wal-Mart Stores Inc. 3.4%
FOOD & STAPLES RETAILING
Apache Corp. 3.4%
ENERGY
Nucor Corp. 3.3%
MATERIALS
Occidental Petroleum Corp. 3.1%
ENERGY
Exxon Mobil Corp. 3.1%
ENERGY
International Business Machines Corp. 3.1%
TECHNOLOGY HARDWARE & EQUIPMENT
Praxair Inc. 3.0%
MATERIALS
United Technologies Corp. 2.8%
CAPITAL GOODS
Semiannual Report | 23
Performance Summary as of 4/30/08
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 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$2.26 $14.49 $16.75
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.2335
Short-Term Capital Gain $0.2263
Long-Term Capital Gain $0.7475
TOTAL $1.2073
CLASS B (SYMBOL: FBLCX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$2.18 $14.34 $16.52
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.1162
Short-Term Capital Gain $0.2263
Long-Term Capital Gain $0.7475
TOTAL $1.0900
CLASS C (SYMBOL: FLCVX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$2.18 $14.33 $16.51
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.1120
Short-Term Capital Gain $0.2263
Long-Term Capital Gain $0.7475
TOTAL $1.0858
CLASS R (SYMBOL: FLCRX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$2.25 $14.36 $16.61
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.2141
Short-Term Capital Gain $0.2263
Long-Term Capital Gain $0.7475
TOTAL $1.1879
ADVISOR CLASS (SYMBOL: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$2.31 $14.45 $16.76
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.2983
Short-Term Capital Gain $0.2263
Long-Term Capital Gain $0.7475
TOTAL $1.2721
24 | 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 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. UNTIL AUGUST
31, 2008, 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) -6.27% -5.14% +61.68% +79.76%
Average Annual Total Return(3) -11.65% -10.59% +8.79% +6.89%
Value of $10,000 Investment(4) $ 8,835 $ 8,941 $15,237 $16,943
Avg. Ann. Total Return (3/31/08)(5) -11.99% +9.20% +6.30%
Total Annual Operating Expenses(6) 1.38%
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ------------------------------------- ------- ------- ------- ------------------
Cumulative Total Return(2) -6.60% -5.80% +56.45% +71.00%
Average Annual Total Return(3) -10.07% -9.31% +9.08% +7.02%
Value of $10,000 Investment(4) $ 8,993 $ 9,069 $15,445 $17,100
Avg. Ann. Total Return (3/31/08)(5) -10.65% +9.51% +6.44%
Total Annual Operating Expenses(6) 2.04%
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ------------------------------------- ------- ------- ------- ------------------
Cumulative Total Return(2) -6.63% -5.83% +56.45% +70.95%
Average Annual Total Return(3) -7.50% -6.71% +9.36% +7.01%
Value of $10,000 Investment(4) $9,250 $9,329 $15,645 $17,095
Avg. Ann. Total Return (3/31/08)(5) -8.10% +9.77% +6.44%
Total Annual Operating Expenses(6) 2.03%
CLASS R 6-MONTH 1-YEAR 5-YEAR INCEPTION (8/1/02)
- ------------------------------------- ------- ------- ------- ------------------
Cumulative Total Return(2) -6.33% -5.36% +60.32% +65.24%
Average Annual Total Return(3) -6.33% -5.36% +9.90% +9.14%
Value of $10,000 Investment(4) $9,367 $ 9,464 $16,032 $16,524
Avg. Ann. Total Return (3/31/08)(5) -6.78% +10.31% +8.34%
Total Annual Operating Expenses(6) 1.54%
ADVISOR CLASS(7) 6-MONTH 1-YEAR 5-YEAR INCEPTION (6/1/00)
- ------------------------------------- ------- ------- ------- ------------------
Cumulative Total Return(2) -6.12% -4.87% +63.05% +81.29%
Average Annual Total Return(3) -6.12% -4.87% +10.27% +7.81%
Value of $10,000 Investment(4) $9,388 $ 9,513 $16,305 $18,129
Avg. Annx. Total Return (3/31/08)(5) -6.29% +10.69% +7.22%
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.
Semiannual Report | 25
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 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 +19.10% and +7.26%.
26 | Semiannual Report
Your Fund's Expenses
FRANKLIN LARGE CAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
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
VALUE 11/1/07 VALUE 4/30/08 PERIOD* 11/1/07-4/30/08
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $ 937.30 $ 6.61
Hypothetical (5% return before expenses) $1,000 $1,018.04 $ 6.89
CLASS B
Actual $1,000 $ 934.00 $ 9.96
Hypothetical (5% return before expenses) $1,000 $1,014.52 $10.38
CLASS C
Actual $1,000 $ 933.70 $ 9.95
Hypothetical (5% return before expenses) $1,000 $1,014.57 $10.36
CLASS R
Actual $1,000 $ 936.70 $ 7.57
Hypothetical (5% return before expenses) $1,000 $1,017.01 $ 7.89
ADVISOR CLASS
Actual $1,000 $ 938.80 $ 5.17
Hypothetical (5% return before expenses) $1,000 $1,019.49 $ 5.38
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 1.37%; B: 2.07%; C: 2.07%; R: 1.57%; and
Advisor: 1.07%), multiplied by the average account value over the period,
multiplied by 182/366 to reflect the one-half year period.
28 | 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.
This semiannual report for Franklin MicroCap Value Fund covers the period ended
April 30, 2008.
PERFORMANCE OVERVIEW
Franklin MicroCap Value Fund - Class A had a -14.52% cumulative total return for
the six months under review. The Fund underperformed its benchmark, the
Russell 2000 Value Index, which declined 11.55% 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 32.
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 will increase over several years. We limit purchases to companies with
market capitalizations of less than $400 million, which we define as "microcap."
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.
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 79.
Semiannual Report | 29
(BAR CHART)
PORTFOLIO BREAKDOWN
Franklin MicroCap Value Fund
Based on Total Net Assets as of 4/30/08
Capital Goods 15.4%
Food, Beverage & Tobacco 13.9%
Materials 10.1%
Commercial Services & Supplies 6.8%
Insurance 5.5%
Retailing 5.0%
Consumer Durables & Apparel 4.3%
Transportation 4.3%
Energy 3.9%
Telecommunication Services 3.5%
Banks 3.0%
Real Estate 2.6%
Food & Staples Retailing 2.5%
Other 2.9%
Short-Term Investments & Other Net Assets 16.3%
MANAGER'S DISCUSSION
On April 30, 2008, the Fund's total net assets were $397 million, and short-term
investments and other net assets stood at 16.3%, compared with total net assets
of $501 million on October 31, 2007, and short-term investments and other net
assets of 17.3%. 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 $26.2 million during
the six-month period.
We identified four new investment opportunities during the period under review:
Fred's, a discount retailer; Shoe Carnival, a footwear retailer; Spherion, a
staffing company; and WSB Holdings, a savings bank based in Maryland. We also
added to several existing positions, including Hardinge, Kohlberg Capital,
Mercer Insurance Group and P.A.M. Transportation Services. Cash deployed into
new and existing positions totaled $20.8 million during the period.
Proceeds from portfolio sales and capital distributions totaled $27.1 million,
including $3.1 million from two takeovers, Printronix and SEMCO Energy, which
were announced prior to the period under review. There were no new takeover
announcements in the Fund. By contrast, more than half of the $49.5 million in
total portfolio sales in the prior year's semiannual period was generated by
takeovers. Historically, takeovers have been an important part of the Fund's
investment returns. We believe the drop in takeovers reflects disruptions in the
credit markets that began with subprime mortgages early in 2007.
We also eliminated three other positions: Exponent, Maine & Maritimes, and
National RV Holdings. The first two represented outcomes consistent with our
expectations at time of purchase. National RV generated a substantial loss. The
balance of portfolio sales was generally in response to price appreciation,
including some that were among the strongest contributors to Fund performance
during the period under review.
Positions that contributed most positively to Fund performance during the six
months included Omega Protein (fish meal and oil), Tecumseh Products
(compressors), PHI (helicopter transportation), Northwest Pipe (steel pipe),
Smith Investment (electric motors and hot water heaters), and Central Steel &
Wire (steel service center).
There were many more detractors from performance than contributors. These
included Hardinge (machine tools), Delta Apparel (T-shirts, team uniforms and
other activewear), Duckwall-ALCO Stores (retailing), RTI International Metals
30 | Semiannual Report
(titanium), Healthcare Services Group (laundry, linen and food service for
nursing homes), Tandy Brands Accessories (fashion accessories), Beverly Hills
Bancorp (mortgage services), Bresler & Reiner (real estate development), and
Courier (book printing and publishing). Most of these detractors and many more
among our holdings gave up some of the significant gains achieved during our
ownership. Unpleasant as that is, the market reflected what we believe were
conditions better suited to value investors like ourselves than we have seen
since we closed the Fund to new investors in 2004.
Thank you for your continued participation in Franklin MicroCap Value Fund. We
look forward to serving your future investment needs.
(PHOTO OF BRUCE C. BAUGHMAN)
/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, 2008, 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.
TOP 10 EQUITY HOLDINGS
Franklin MicroCap Value Fund 4/30/08
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ------------------------------- ----------
PHI Inc. 3.9%
ENERGY
Seneca Foods Corp., A, B & pfd. 3.5%
FOOD, BEVERAGE & TOBACCO
Omega Protein Corp. 3.3%
FOOD, BEVERAGE & TOBACCO
Smithfield Foods Inc. 3.3%
FOOD, BEVERAGE & TOBACCO
Hardinge Inc. 3.3%
CAPITAL GOODS
Atlantic Tele-Network Inc. 3.2%
TELECOMMUNICATION SERVICES
American Pacific Corp. 2.9%
MATERIALS
CIRCOR International Inc. 2.6%
CAPITAL GOODS
Village Super Market Inc., A 2.5%
FOOD & STAPLES RETAILING
ACMAT Corp., A 2.4%
INSURANCE
Semiannual Report | 31
Performance Summary as of 4/30/08
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 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$11.80 $32.22 $44.02
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.4116
Long-Term Capital Gain $5.2128
TOTAL $5.6244
ADVISOR CLASS (SYMBOL: FVRMX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------- ------- --------
Net Asset Value (NAV) -$11.89 $32.25 $44.14
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.5273
Long-Term Capital Gain $5.2128
TOTAL $5.7401
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VAL UE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; ADVISOR CLASS: NO SALES CHARGES. UNTIL AUGUST 31,
2008, 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) -14.52% -15.77% +99.03% +149.15%
Average Annual Total Return(2) -19.45% -20.62% +13.41% +8.91%
Value of $10,000 Investment(3) $ 8,055 $ 7,938 $ 18,759 $ 23,484
Avg. Ann. Total Return (3/31/08)(4) -18.63% +14.03% +9.48%
Total Annual Operating Expenses(5) 1.20%
ADVISOR CLASS(6) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- ------- -------- --------
Cumulative Total Return(1) -14.43% -15.55% +100.25% +150.67%
Average Annual Total Return(2) -14.43% -15.55% +14.90% +9.63%
Value of $10,000 Investment(3) $ 8,557 $ 8,445 $ 20,025 $ 25,067
Avg. Ann. Total Return (3/31/08)(4) -13.45% +15.52% +10.19%
Total Annual Operating Expenses(5) 0.96%
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 YO UR 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.
32 | Semiannual Report
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 +14.28% and +5.50%.
Semiannual Report | 33
Your Fund's Expenses
FRANKLIN MICROCAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
34 | Semiannual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES 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
VALUE 11/1/07 VALUE 4/30/08 PERIOD* 11/1/07-4/30/08
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $ 854.80 $5.07
Hypothetical (5% return before expenses) $1,000 $1,019.39 $5.52
ADVISOR CLASS
Actual $1,000 $ 855.70 $3.97
Hypothetical (5% return before expenses) $1,000 $1,020.59 $4.32
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 1.10% and Advisor: 0.86%), multiplied by the
average account value over the period, multiplied by 182/366 to reflect the
one-half year period.
Semiannual Report | 35
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 Midcap(TM)
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, 2008.
PERFORMANCE OVERVIEW
Franklin MidCap Value Fund - Class A had a -6.36% cumulative total return for
the six months under review. The Fund performed better than its benchmark, the
Russell Midcap Value Index, which declined 9.20% 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 39.
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 87.
36 | Semiannual Report
MANAGER'S DISCUSSION
During the period under review, several energy sector holdings that performed
well were Chesapeake Energy, Peabody Energy and ENSCO International, which
benefited during the period from high energy prices. Transportation company J.B.
Hunt Transport Services also was a key contributor to performance as growth in
the company's intermodal business helped offset weak demand and high fuel costs
for traditional trucking services.
Detractors from performance included diversified financial companies CIT Group
and KKR Private Equity Investors, which were negatively affected by the recent
credit market upheaval. Capital goods manufacturers Oshkosh and Carlisle also
hindered performance due largely to fears that a weak economy could negatively
impact results. Consumer products company Fortune Brands declined in value as
its home products business was hurt by the housing market downturn and slowing
economy.
During the reporting period, we added to several existing holdings, as well as
initiated positions in four stocks we believed were attractively valued. Our new
positions were in mortgage banking company Freddie Mac, motorcycle manufacturer
Harley Davidson, department store Nordstrom and capital equipment manufacturer
Terex.
We liquidated four positions during the period, either because we believed the
stocks were fully valued or the companies' fundamentals had deteriorated. We
sold our holdings in home builder Lennar, contract resource organization
Pharmaceutical Product Development, beauty supplies distributor Sally Beauty
Holdings and Southwest Airlines.
(BAR CHART)
PORTFOLIO BREAKDOWN
Franklin MidCap Value Fund
Based on Total Net Assets as of 4/30/08
Capital Goods 15.1%
Energy 11.6%
Materials 11.5%
Consumer Durables & Apparel 7.9%
Utilities 7.3%
Food, Beverage & Tobacco 6.5%
Insurance 5.7%
Automobiles & Components 4.0%
Banks 3.4%
Retailing 3.2%
Diversified Financials 2.9%
Software & Services 2.9%
Transportation 2.5%
Health Care Equipment & Services 2.3%
Pharmaceuticals, Biotechnology & Life Sciences 2.0%
Other 2.0%
Short-Term Investments & Other Net Assets 9.2%
Semiannual Report | 37
TOP 10 EQUITY HOLDINGS
Franklin MidCap Value Fund
4/30/08
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ------------------------------- ----------
Atmos Energy Corp. 3.5%
UTILITIES
Fortune Brands Inc. 3.2%
CONSUMER DURABLES & APPAREL
DTE Energy Co. 3.1%
UTILITIES
McCormick & Co. Inc. 3.0%
FOOD, BEVERAGE & TOBACCO
SAIC Inc. 2.9%
SOFTWARE & SERVICES
Autoliv Inc. (Sweden) 2.9%
AUTOMOBILES & COMPONENTS
Overseas Shipholding Group Inc. 2.8%
ENERGY
Celanese Corp., A 2.8%
MATERIALS
Dean Foods Co. 2.6%
FOOD, BEVERAGE & TOBACCO
Embraer-Empresa Brasileira de
Aeronautica SA, ADR (Brazil) 2.6%
CAPITAL GOODS
Thank you for your continued participation in Franklin MidCap Value Fund. We
look forward to serving your future investment needs.
(PHOTO OF Sam Kerner)
/s/ Sam Kerner
Sam Kerner, CFA
Lead Portfolio Manager
Bruce C. Baughman, CPA
William J. Lippman
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin MidCap Value Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2008, 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.
38 | Semiannual Report
Performance Summary as of 4/30/08
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 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$1.03 $10.89 $11.92
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.1284
Short-Term Capital Gain $0.0278
Long-Term Capital Gain $0.1187
TOTAL $0.2749
CLASS C (SYMBOL: FMVCX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.98 $10.83 $11.81
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0597
Short-Term Capital Gain $0.0278
Long-Term Capital Gain $0.1187
TOTAL $0.2062
CLASS R (SYMBOL: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$0.99 $10.88 $11.87
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0813
Short-Term Capital Gain $0.0278
Long-Term Capital Gain $0.1187
TOTAL $0.2278
ADVISOR CLASS (SYMBOL: N/A) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$1.05 $10.94 $11.99
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.1652
Short-Term Capital Gain $0.0278
Long-Term Capital Gain $0.1187
TOTAL $0.3117
Semiannual Report | 39
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. UNTIL AUGUST 31, 2008,
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) -6.36% -9.55% +15.68%
Average Annual Total Return(3) -11.77% -14.73% +3.10%
Value of $10,000 Investment(4) $ 8,823 $ 8,527 $10,903
Avg. Ann. Total Return (3/31/08)(5) -16.38% +1.05%
Total Annual Operating Expenses(6)
Without Waiver 1.67%
With Waiver 1.40%
CLASS C 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ------------------------------------- ------- ------- ------------------
Cumulative Total Return(2) -6.58% -10.08% +13.65%
Average Annual Total Return(3) -7.49% -10.96% +4.62%
Value of $10,000 Investment(4) $9,251 $ 8,904 $11,365
Avg. Ann. Total Return (3/31/08)(5) -12.69% +2.62%
Total Annual Operating Expenses(6)
Without Waiver 2.30%
With Waiver 2.03%
CLASS R 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ------------------------------------- ------- ------- ------------------
Cumulative Total Return(2) -6.45% -9.72% +15.16%
Average Annual Total Return(3) -6.45% -9.72% +5.12%
Value of $10,000 Investment(4) $9,355 $ 9,028 $11,516
Avg. Ann. Total Return (3/31/08)(5) -11.46% +3.12%
Total Annual Operating Expenses(6)
Without Waiver 1.82%
With Waiver 1.55%
ADVISOR CLASS 6-MONTH 1-YEAR INCEPTION (7/1/05)
- ------------------------------------- ------- ------- ------------------
Cumulative Total Return(2) -6.18% -9.21% +16.93%
Average Annual Total Return(3) -6.18% -9.21% +5.68%
Value of $10,000 Investment(4) $9,382 $ 9,079 $11,693
Avg. Ann. Total Return (3/31/08)(5) -10.98% +3.63%
Total Annual Operating Expenses(6)
Without Waiver 1.32%
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 MANAGER AND ADMINISTRATOR HAVE CONTRACTUALLY AGREED TO LIMIT FUND EXPENSES
SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED THE AMOUNT SHOWN WITH
WAIVER (OTHER THAN CERTAIN NON-ROUTINE EXPENSES) FOR EACH SHARE CLASS UNTIL
2/28/09.
40 | Semiannual Report
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. If the manager and administrator had not waived fees, 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.
Semiannual Report | 41
Your Fund's Expenses
FRANKLIN MIDCAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
42 | Semiannual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES 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
VALUE 11/1/07 VALUE 4/30/08 PERIOD* 11/1/07-4/30/08
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $ 936.40 $ 6.74
Hypothetical (5% return before expenses) $1,000 $1,017.90 $ 7.02
CLASS C
Actual $1,000 $ 934.20 $ 9.76
Hypothetical (5% return before expenses) $1,000 $1,014.77 $10.17
CLASS R
Actual $1,000 $ 935.50 $ 7.46
Hypothetical (5% return before expenses) $1,000 $1,017.16 $ 7.77
ADVISOR CLASS
Actual $1,000 $ 938.20 $ 5.06
Hypothetical (5% return before expenses) $1,000 $1,019.64 $ 5.27
* Expenses are calculated using the most recent six-month expense ratio, net
of expense waivers, annualized for each class (A: 1.40%; C: 2.03%; R:
1.55%; and Advisor: 1.05%), multiplied by the average account value over
the period, multiplied by 182/366 to reflect the one-half year period.
Semiannual Report | 43
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
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.
This semiannual report for Franklin Small Cap Value Fund covers the period ended
April 30, 2008.
PERFORMANCE OVERVIEW
Franklin Small Cap Value Fund - Class A had a -7.11% cumulative total return for
the six months under review. The Fund performed better than its benchmark, the
Russell 2500(TM) Value Index, which declined 10.32% 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 47.
INVESTMENT STRATEGY
We seek to invest in small-capitalization companies that we believe are selling
below their underlying worth and hold them until they reach what we consider is
their fair market value. We seek a diversified portfolio of fundamentally sound
companies purchased at 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 fundamental bottom-up research focusing 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 we believe still have
significant growth potential or that possess valuable intangibles not
reflected in the stock price.
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 95.
44 | Semiannual Report
MANAGER'S DISCUSSION
During the period under review, energy sector holding CONSOL Energy performed
well amid record high energy prices. In the materials sector, steel-related
holdings Steel Dynamics and United States Steel helped performance.
Detractors from performance included stocks from industries negatively affected
by the housing market downturn and economic slowdown. Among decliners during the
period were bond insurer Security Capital Assurance, residential and commercial
building products manufacturer Gibraltar Industries and recreational vehicle
manufacturer Thor Industries.
During the reporting period, we invested in two new attractively valued
positions: oil and natural gas equipment manufacturer Carbo Ceramics and
retailer Saks. We also added significantly to several existing positions
including Carlisle, Group 1 Automotive and Old Republic International.
The Fund liquidated 16 positions during the period. One holding, Genlyte Group,
was acquired by Royal Philips Electronics for cash at a 52% premium to Genlyte's
share price prior to the deal's announcement in November 2007. The other
positions were sold either because we believed the shares were fully valued or
the companies' fundamentals had deteriorated.
(BAR CHART)
PORTFOLIO BREAKDOWN
Franklin Small Cap Value Fund
Based on Total Net Assets as of 4/30/08
Capital Goods 19.7%
Materials 14.9%
Energy 12.5%
Insurance 9.7%
Consumer Durables & Apparel 8.7%
Retailing 8.0%
Technology Hardware & Equipment 3.4%
Banks 3.2%
Transportation 3.0%
Automobiles & Components 2.9%
Commercial Services & Supplies 2.3%
Utilities 2.0%
Other 6.1%
Short-Term Investments & Other Net Assets 3.6%
Semiannual Report | 45
TOP 10 EQUITY HOLDINGS
Franklin Small Cap Value Fund
4/30/08
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- -------------------------------- ----------
Steel Dynamics Inc. 3.5%
MATERIALS
Reliance Steel & Aluminum Co. 2.0%
MATERIALS
Gerdau Ameristeel Corp. (Canada) 1.8%
MATERIALS
Universal Forest Products Inc. 1.7%
CAPITAL GOODS
Old Republic International Corp. 1.7%
INSURANCE
The Warnaco Group Inc. 1.6%
CONSUMER DURABLES & APPAREL
Mueller Industries Inc. 1.5%
CAPITAL GOODS
Thor Industries Inc. 1.5%
AUTOMOBILES & COMPONENTS
Regis Corp. 1.5%
CONSUMER SERVICES
Genessee & Wyoming Inc. 1.4%
TRANSPORTATION
Thank you for your continued participation in Franklin Small Cap Value Fund. We
look forward to serving your future investment needs.
(PHOTO OF WILLIAM J. LIPPMAN)
/s/ William J. Lippman
William J. Lippman
Co-Portfolio Manager
(PHOTO OF Y. DOGAN SAHIN)
/s/ Y. Dogan Sahin
Y. Dogan Sahin, CFA
Co-Portfolio Manager
Bruce C. Baughman, CPA
Margaret McGee
Donald G. Taylor, CPA
Portfolio Management Team
Franklin Small Cap Value Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF APRIL 30, 2008, 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.
46 | Semiannual Report
Performance Summary as of 4/30/08
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 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$5.30 $40.64 $45.94
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.3559
Short-Term Capital Gain $0.0763
Long-Term Capital Gain $1.5495
TOTAL $1.9817
CLASS B (SYMBOL: FBVAX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$4.95 $38.95 $43.90
DISTRIBUTIONS (11/1/07-4/30/08)
Short-Term Capital Gain $0.0763
Long-Term Capital Gain $1.5495
TOTAL $1.6258
CLASS C (SYMBOL: FRVFX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$4.93 $38.44 $43.37
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.0353
Short-Term Capital Gain $0.0763
Long-Term Capital Gain $1.5495
TOTAL $1.6611
CLASS R (SYMBOL: FVFRX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$5.27 $40.39 $45.66
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.2945
Short-Term Capital Gain $0.0763
Long-Term Capital Gain $1.5495
TOTAL $1.9203
ADVISOR CLASS (SYMBOL: FVADX) CHANGE 4/30/08 10/31/07
- ------------------------------- ------ ------- --------
Net Asset Value (NAV) -$5.48 $41.78 $47.26
DISTRIBUTIONS (11/1/07-4/30/08)
Dividend Income $0.4829
Short-Term Capital Gain $0.0763
Long-Term Capital Gain $1.5495
TOTAL $2.1087
Semiannual Report | 47
Performance Summary (CONTINUED)
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 IN VESTMENT 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. UNTIL AUGUST
31, 2008, 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) -7.11% -8.23% +106.93% +86.43%
Average Annual Total Return(2) -12.45% -13.51% +14.29% +5.80%
Value of $10,000 Investment(3) $ 8,755 $ 8,649 $ 19,501 $17,573
Avg. Ann. Total Return (3/31/08)(4) -15.27% +15.13% +5.28%
Total Annual Operating Expenses(5) 1.23%
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ------------------------------------- ------- ------- -------- ------------------
Cumulative Total Return(1) -7.49% -8.92% +99.94% +146.00%
Average Annual Total Return(2) -11.04% -12.42% +14.63% +10.13%
Value of $10,000 Investment(3) $ 8,896 $ 8,758 $19,794 $ 24,600
Avg. Ann. Total Return (3/31/08)(4) -14.16% +15.50% +9.68%
Total Annual Operating Expenses(5) 1.96%
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- ------- -------- -------
Cumulative Total Return(1) -7.45% -8.90% +100.00% +74.41%
Average Annual Total Return(2) -8.34% -9.77% +14.87% +5.72%
Value of $10,000 Investment(3) $9,166 $ 9,023 $ 20,000 $17,441
Avg. Ann. Total Return (3/31/08)(4) -11.62% +15.72% +5.20%
Total Annual Operating Expenses(5) 1.96%
CLASS R 6-MONTH 1-YEAR 5-YEAR INCEPTION (8/1/02)
- ------------------------------------- ------- ------- -------- ------------------
Cumulative Total Return(1) -7.23% -8.45% +105.01% +100.79%
Average Annual Total Return(2) -7.23% -8.45% +15.44% +12.90%
Value of $10,000 Investment(3) $9,277 $ 9,155 $ 20,501 $ 20,079
Avg. Ann. Total Return (3/31/08)(4) -10.30% +16.29% +12.19%
Total Annual Operating Expenses(5) 1.46%
ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- ------- -------- -------
Cumulative Total Return(1) -7.01% -8.00% +110.17% +92.89%
Average Annual Total Return(2) -7.01% -8.00% +16.01% +6.79%
Value of $10,000 Investment(3) $9,299 $9,200 $ 21,017 $19,289
Avg. Ann. Total Return (3/31/08)(4) -9.86% +16.87% +6.27%
Total Annual Operating Expenses(5) 0.96%
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.
48 | Semiannual Report
Performance Summary (CONTINUED)
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.
Semiannual Report | 49
Your Fund's Expenses
FRANKLIN SMALL CAP VALUE FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
50 | Semiannual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES 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
VALUE 11/1/07 VALUE 4/30/08 PERIOD* 11/1/07-4/30/08
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $ 928.90 $5.97
Hypothetical (5% return before expenses) $1,000 $1,018.67 $6.25
CLASS B
Actual $1,000 $ 925.10 $9.40
Hypothetical (5% return before expenses) $1,000 $1,015.07 $9.84
CLASS C
Actual $1,000 $ 925.50 $9.33
Hypothetical (5% return before expenses) $1,000 $1,015.17 $9.76
CLASS R
Actual $1,000 $ 927.70 $7.01
Hypothetical (5% return before expenses) $1,000 $1,017.55 $7.34
ADVISOR CLASS
Actual $1,000 $ 929.90 $4.62
Hypothetical (5% return before expenses) $1,000 $1,020.04 $4.84
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 1.24%; B: 1.96%; C: 1.95%; R: 1.46%; and
Advisor: 0.96%), multiplied by the average account value over the period,
multiplied by 182/366 to reflect the one-half year period.
Semiannual Report | 51
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN ALL CAP VALUE FUND
SIX MONTHS ENDED
APRIL 30, 2008 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2007(g)
---------------- -------------------
CLASS A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 9.52 $10.00
------ ------
Income from investment operations(a):
Net investment income(b) ........... 0.03 0.02
Net realized and unrealized gains
(losses) ........................ (0.38) (0.50)
------ ------
Total from investment operations ...... (0.35) (0.48)
------ ------
Less distributions from net investment
income ............................. (0.05) --
------ ------
Redemption fees ....................... --(e) --(e)
------ ------
Net asset value, end of period ........ $ 9.12 $ 9.52
====== ======
Total return(c) ....................... (3.62)% (4.80)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments
by affiliates ...................... 2.72% 3.91%
Expenses net of waiver and payments
by affiliates ...................... 1.25%(f) 1.25%(f)
Net investment income ................. 0.72% 0.50%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $8,399 $7,138
Portfolio turnover rate ............... 3.68% 5.38%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) For the period June 1, 2007 (commencement of operations) to October 31,
2007.
52 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN ALL CAP VALUE FUND
SIX MONTHS ENDED
APRIL 30, 2008 YEAR ENDED
CLASS C (UNAUDITED) OCTOBER 31, 2007(g)
- ------- ---------------- -------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 9.50 $10.00
------ ------
Income from investment operations(a):
Net investment income (loss)(b) .... --(e) (0.01)
Net realized and unrealized gains
(losses) ........................ (0.38) (0.49)
------ ------
Total from investment operations ...... (0.38) (0.50)
------ ------
Less distributions from net investment
income ............................. (0.04) --
------ ------
Redemption fees ....................... --(e) --(e)
------ ------
Net asset value, end of period ........ $ 9.08 $ 9.50
====== ======
Total return(c) ....................... (3.88)% (5.10)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments
by affiliates ...................... 3.37% 4.56%
Expenses net of waiver and payments
by affiliates ...................... 1.90%(f) 1.90%(f)
Net investment income (loss) .......... 0.07% (0.15)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $1,342 $ 847
Portfolio turnover rate ............... 3.68% 5.38%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) For the period June 1, 2007 (commencement of operations) to October 31,
2007.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 53
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN ALL CAP VALUE FUND
SIX MONTHS ENDED
APRIL 30, 2008 YEAR ENDED
CLASS R (UNAUDITED) OCTOBER 31, 2007(g)
- ------- ---------------- -------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 9.52 $10.00
------ ------
Income from investment operations(a):
Net investment income(b) ........... 0.03 0.02
Net realized and unrealized gains
(losses) ......................... (0.39) (0.50)
------ ------
Total from investment operations ...... (0.36) (0.48)
------ ------
Less distributions from net investment
income ............................. (0.05) --
------ ------
Redemption fees ....................... --(e) --(e)
------ ------
Net asset value, end of period ........ $ 9.11 $ 9.52
====== ======
Total return(c) ....................... (3.80)% (4.80)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments
by affiliates ...................... 2.87% 4.06%
Expenses net of waiver and payments
by affiliates ...................... 1.40%(f) 1.40%(f)
Net investment income ................. 0.57% 0.35%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $ 9 $ 10
Portfolio turnover rate ............... 3.68% 5.38%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) For the period June 1, 2007 (commencement of operations) to October 31,
2007.
54 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN ALL CAP VALUE FUND
SIX MONTHS ENDED
APRIL 30, 2008 YEAR ENDED
ADVISOR CLASS (UNAUDITED) OCTOBER 31, 2007(g)
- ------------- ---------------- -------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 9.54 $10.00
------ ------
Income from investment operations(a):
Net investment income(b) ........... 0.05 0.04
Net realized and unrealized gains
(losses) ......................... (0.39) (0.50)
------ ------
Total from investment operations ...... (0.34) (0.46)
------ ------
Less distributions from net investment
income ............................. (0.06) --
------ ------
Redemption fees ....................... --(e) --(e)
------ ------
Net asset value, end of period ........ $ 9.14 $ 9.54
====== ======
Total return(c) ....................... (3.51)% (4.60)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments
by affiliates ...................... 2.37% 3.56%
Expenses net of waiver and payments
by affiliates ...................... 0.90%(f) 0.90%(f)
Net investment income ................. 1.07% 0.85%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $ 874 $ 979
Portfolio turnover rate ............... 3.68% 5.38%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) For the period June 1, 2007 (commencement of operations) to October 31,
2007.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 55
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
FRANKLIN ALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------- -----------
COMMON STOCKS 92.1%
BANKS 1.9%
Beverly Hills Bancorp Inc. ............................... 2,600 $ 5,330
Fannie Mae................................................ 900 25,470
The PMI Group Inc. ....................................... 3,200 18,016
TrustCo Bank Corp. NY..................................... 8,450 73,769
U.S. Bancorp.............................................. 2,200 74,558
----------
197,143
----------
CAPITAL GOODS 16.5%
Brady Corp., A............................................ 4,500 152,775
Carlisle Cos. Inc. ....................................... 2,950 85,196
Dover Corp................................................ 3,300 163,251
Embraer-Empresa Brasileira de Aeronautica SA,
ADR (Brazil).... 3,200 133,376
Franklin Electric Co. Inc. ............................... 1,300 50,336
General Electric Co. ..................................... 8,000 261,600
Hardinge Inc. ............................................ 7,292 121,631
Illinois Tool Works Inc. ................................. 2,600 135,954
Kennametal Inc. .......................................... 3,100 107,787
Oshkosh Corp. ............................................ 700 28,420
Roper Industries Inc. .................................... 550 34,166
Trinity Industries Inc. .................................. 3,300 100,320
United Technologies Corp. ................................ 2,000 144,940
Universal Forest Products Inc. ........................... 4,400 152,724
Wabash National Corp. .................................... 9,700 81,286
----------
1,753,762
----------
COMMERCIAL SERVICES & SUPPLIES 3.8%
ABM Industries Inc. ...................................... 4,200 87,948
Healthcare Services Group Inc. ........................... 1,725 26,324
Kelly Services Inc., A.................................... 12,750 283,687
----------
397,959
----------
CONSUMER DURABLES & APPAREL 6.2%
Adidas AG, ADR (Germany).................................. 2,000 63,750
Brunswick Corp. .......................................... 6,600 110,088
D.R. Horton Inc. ......................................... 2,400 37,176
Fortune Brands Inc. ...................................... 2,200 148,764
Hasbro Inc. .............................................. 1,400 49,784
Leggett & Platt Inc. ..................................... 3,900 64,740
M.D.C. Holdings Inc. ..................................... 2,800 122,024
(a) Russ Berrie and Co. Inc. ................................. 4,500 63,090
----------
659,416
----------
CONSUMER SERVICES 0.3%
Hillenbrand Inc. ......................................... 1,800 34,272
----------
DIVERSIFIED FINANCIALS 2.2%
Bank of America Corp. .................................... 1,300 48,802
Citigroup Inc. ........................................... 1,000 25,270
Lehman Brothers Holdings Inc. ............................ 600 26,544
State Street Corp. ....................................... 1,800 129,852
----------
230,468
----------
56 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN ALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------- -----------
COMMON STOCKS (CONTINUED)
ENERGY 19.4%
Apache Corp. ............................................. 1,500 $ 202,020
(a) Bristow Group Inc. ....................................... 2,750 145,063
CARBO Ceramics Inc. ...................................... 2,700 128,331
Chesapeake Energy Corp. .................................. 3,850 199,045
ENSCO International Inc. ................................. 3,150 200,749
(a) Global Industries Ltd. ................................... 7,000 111,720
(a) Helix Energy Solutions Group Inc. ........................ 3,000 103,650
Occidental Petroleum Corp. ............................... 2,200 183,062
Overseas Shipholding Group Inc. .......................... 1,500 112,890
Peabody Energy Corp. ..................................... 1,400 85,582
(a) PHI Inc., non-voting ..................................... 9,000 338,130
Teekay Corp. (Bahamas) ................................... 1,500 68,460
(a) Unit Corp. ............................................... 2,900 184,179
----------
2,062,881
----------
FOOD & STAPLES RETAILING 3.2%
Wal-Mart Stores Inc. ..................................... 5,900 342,082
----------
FOOD, BEVERAGE & TOBACCO 1.9%
The Hershey Co. .......................................... 950 35,511
(a) Omega Protein Corp. ...................................... 2,400 36,000
(a) Smithfield Foods Inc. .................................... 4,700 134,796
----------
206,307
----------
HEALTH CARE EQUIPMENT & SERVICES 0.4%
Hill-Rom Holdings Inc. ................................... 1,800 45,234
----------
HOUSEHOLD & PERSONAL PRODUCTS 0.4%
The Procter & Gamble Co. ................................. 600 40,230
----------
INSURANCE 7.5%
AFLAC Inc. ............................................... 1,150 76,670
American International Group Inc. ........................ 1,500 69,300
Aspen Insurance Holdings Ltd. ............................ 1,850 48,082
Chubb Corp................................................ 2,000 105,940
IPC Holdings Ltd. ........................................ 3,500 101,885
Kansas City Life Insurance Co............................. 2,400 120,000
Old Republic International Corp. ......................... 11,300 162,155
Security Capital Assurance Ltd. .......................... 6,500 6,673
StanCorp Financial Group Inc. ............................ 2,100 107,604
----------
798,309
----------
MATERIALS 8.2%
(a) American Pacific Corp. ................................... 9,700 167,131
Bemis Co. Inc. ........................................... 3,300 86,790
Gerdau Ameristeel Corp. (Canada) ......................... 6,800 106,148
Glatfelter ............................................... 4,000 58,360
Nucor Corp. .............................................. 1,800 135,900
Praxair Inc. ............................................. 500 45,655
Steel Dynamics Inc. ...................................... 4,000 139,400
Westlake Chemical Corp.................................... 8,000 133,680
----------
873,064
----------
Semiannual Report | 57
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN ALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------- -----------
COMMON STOCKS (CONTINUED)
RETAILING 12.0%
Brown Shoe Co. Inc. ...................................... 10,100 $ 168,468
Christopher & Banks Corp. ................................ 12,400 146,940
Fred's Inc. .............................................. 13,500 149,580
Group 1 Automotive Inc. .................................. 3,500 93,380
Haverty Furniture Cos. Inc. .............................. 11,600 105,908
J.C. Penney Co. Inc. ..................................... 3,600 153,000
The Men's Wearhouse Inc. ................................. 300 7,989
Nordstrom Inc. ........................................... 4,500 158,670
(a) Pier 1 Imports Inc. ...................................... 9,500 74,100
(a) Saks Inc. ................................................ 4,180 54,382
(a) Tuesday Morning Corp. .................................... 10,100 54,944
(a) Zale Corp. ............................................... 5,400 111,888
-----------
1,279,249
-----------
TECHNOLOGY HARDWARE & EQUIPMENT 2.0%
(a) Benchmark Electronics Inc. ............................... 6,000 106,680
(a) GTSI Corp. ............................................... 12,550 100,400
-----------
207,080
-----------
TRANSPORTATION 2.0%
(a) Dollar Thrifty Automotive Group Inc. ..................... 5,500 72,545
J.B. Hunt Transport Services Inc. ........................ 700 23,779
(a) P.A.M. Transportation Services Inc. ...................... 8,200 116,768
-----------
213,092
-----------
UTILITIES 4.2%
Avista Corp. ............................................. 6,700 137,551
DTE Energy Co. ........................................... 2,450 98,759
IDACORP Inc. ............................................. 3,100 100,564
Sierra Pacific Resources.................................. 8,000 109,040
-----------
445,914
-----------
TOTAL COMMON STOCKS (COST $10,177,983).................... 9,786,462
-----------
SHORT TERM INVESTMENT (COST $817,923) 7.7%
MONEY MARKET FUND 7.7%
(b) Franklin Institutional Fiduciary Trust Money Market
Portfolio, 2.29% ......................................... 817,923 817,923
-----------
TOTAL INVESTMENTS (COST $10,995,906) 99.8%................ 10,604,385
OTHER ASSETS, LESS LIABILITIES 0.2%....................... 20,206
-----------
NET ASSETS 100.0%......................................... $10,624,591
===========
See Selected Portfolio Abbreviations on page 99.
(a) Non-income producing for the twelve months ended April 30, 2008.
(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.
58 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN BALANCE SHEET INVESTMENT FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 --------------------------------------------------------------------------
CLASS A (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- ---------- ---------- ---------- ----------- -----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .. $ 69.36 $ 69.24 $ 61.66 $ 53.95 $ 45.47 $ 37.01
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations(a):
Net investment income(b) ........... 0.42 0.73 0.77 0.34 0.33 0.13
Net realized and unrealized gains
(losses) ........................ (5.95) 4.55 9.71 8.71 8.63 8.83
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ...... (5.53) 5.28 10.48 9.05 8.96 8.96
---------- ---------- ---------- ---------- ---------- ----------
Less distributions from:
Net investment income .............. (0.67) (0.88) (0.46) (0.43) (0.17) (0.25)
Net realized gains ................. (5.71) (4.28) (2.44) (0.91) (0.31) (0.25)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ................... (6.38) (5.16) (2.90) (1.34) (0.48) (0.50)
---------- ---------- ---------- ---------- ---------- ----------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........ $ 57.45 $ 69.36 $ 69.24 $ 61.66 $ 53.95 $ 45.47
========== ========== ========== ========== ========== ==========
Total return(c) ....................... (7.87)% 7.85% 17.54% 16.93% 19.87% 24.51%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 0.93%(f) 0.90%(f) 0.90%(f) 0.91%(f) 0.91%(f) 1.00%
Net investment income ................. 1.48% 1.04% 1.17% 0.57% 0.67% 0.35%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $3,416,426 $4,228,683 $4,435,704 $4,164,516 $3,716,567 $3,031,714
Portfolio turnover rate ............... 3.42%(g) 6.40% 7.44% 3.91% 7.03% 13.36%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Excludes the value of portfolio securities delivered as a result of in-kind
redemptions. See Note 10.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 59
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -----------------------------------------------------------------
CLASS B (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- ---------- ---------- ---------- ----------- -----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 68.12 $ 68.07 $ 60.67 $ 53.13 $ 44.97 $ 36.64
------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b).... 0.20 0.20 0.26 (0.11) (0.06) (0.15)
Net realized and unrealized gains
(losses) ...................... (5.84) 4.48 9.58 8.58 8.53 8.74
------- -------- -------- -------- -------- --------
Total from investment operations ...... (5.64) 4.68 9.84 8.47 8.47 8.59
------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income .............. (0.11) (0.35) --(e) (0.02) -- (0.01)
Net realized gains ................. (5.71) (4.28) (2.44) (0.91) (0.31) (0.25)
------- -------- -------- -------- -------- --------
Total distributions ................... (5.82) (4.63) (2.44) (0.93) (0.31) (0.26)
------- -------- -------- -------- -------- --------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- -------- -------- -------- -------- --------
Net asset value, end of period ........ $ 56.66 $ 68.12 $ 68.07 $ 60.67 $ 53.13 $ 44.97
======= ======== ======== ======== ======== ========
Total return(c) ....................... (8.22)% 7.04% 16.65% 16.03% 18.94% 23.58%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.69%(f) 1.66%(f) 1.66%(f) 1.67%(f) 1.69%(f) 1.75%
Net investment income (loss) .......... 0.72% 0.28% 0.41% (0.19)% (0.11)% (0.40)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $90,225 $114,410 $127,037 $122,795 $114,891 $103,877
Portfolio turnover rate ............... 3.42%(g) 6.40% 7.44% 3.91% 7.03% 13.36%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Excludes the value of portfolio securities delivered as a result of in-kind
redemptions. See Note 10.
60 | 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 YEAR ENDED OCTOBER 31,
APRIL 30, 2008 ----------------------------------------------------------
CLASS C (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 68.22 $ 68.17 $ 60.75 $ 53.18 $ 45.01 $ 36.67
------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) .... 0.21 0.20 0.27 (0.11) (0.06) (0.15)
Net realized and unrealized gains
(losses) ........................ (5.84) 4.48 9.59 8.59 8.54 8.74
------- -------- -------- -------- -------- --------
Total from investment operations ...... (5.63) 4.68 9.86 8.48 8.48 8.59
------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income .............. (0.10) (0.35) -- -- -- --
Net realized gains ................. (5.71) (4.28) (2.44) (0.91) (0.31) (0.25)
------- -------- -------- -------- -------- --------
Total distributions ................... (5.81) (4.63) (2.44) (0.91) (0.31) (0.25)
------- -------- -------- -------- -------- --------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- -------- -------- -------- -------- --------
Net asset value, end of period ........ $ 56.78 $ 68.22 $ 68.17 $ 60.75 $ 53.18 $ 45.01
======= ======== ======== ======== ======== ========
Total return(c) ....................... (8.18)% 7.04% 16.64% 16.04% 18.95% 23.57%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.69%(f) 1.66%(f) 1.65%(f) 1.67%(f) 1.69%(f) 1.75%
Net investment income (loss) .......... 0.72% 0.28% 0.42% (0.19)% (0.11)% (0.40)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $99,293 $130,471 $139,885 $135,939 $129,399 $127,925
Portfolio turnover rate ............... 3.42%(g) 6.40% 7.44% 3.91% 7.03% 13.36%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Excludes the value of portfolio securities delivered as a result of in-kind
redemptions. See Note 10.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 61
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -------------------------------------------------------
CLASS R (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 68.83 $ 68.78 $ 61.33 $ 53.69 $ 45.30 $ 36.92
------- ------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b) ........... 0.34 0.52 0.60 0.18 0.20 0.03
Net realized and unrealized gains
(losses) ........................ (5.91) 4.55 9.65 8.67 8.59 8.82
------- ------- ------- ------- ------- -------
Total from investment operations ...... (5.57) 5.07 10.25 8.85 8.79 8.85
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income .............. (0.51) (0.74) (0.36) (0.30) (0.09) (0.22)
Net realized gains ................. (5.71) (4.28) (2.44) (0.91) (0.31) (0.25)
------- ------- ------- ------- ------- -------
Total distributions ................... (6.22) (5.02) (2.80) (1.21) (0.40) (0.47)
------- ------- ------- ------- ------- -------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- ------- ------- ------- ------- -------
Net asset value, end of period ........ $ 57.04 $ 68.83 $ 68.78 $ 61.33 $ 53.69 $ 45.30
======= ======= ======= ======= ======= =======
Total return(c) ....................... (8.00)% 7.58% 17.22% 16.62% 19.55% 24.26%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.19%(f) 1.16%(f) 1.16%(f) 1.17%(f) 1.19%(f) 1.25%
Net investment income ................. 1.22% 0.78% 0.91% 0.31% 0.39% 0.10%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $55,757 $63,802 $51,157 $30,810 $21,020 $13,336
Portfolio turnover rate ............... 3.42%(g) 6.40% 7.44% 3.91% 7.03% 13.36%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Excludes the value of portfolio securities delivered as a result of in-kind
redemptions. See Note 10.
62 | 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 YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -----------------------------------------------------------
ADVISOR CLASS (UNAUDITED) 2007 2006 2005 2004 2003
---------------- -------- -------- -------- ------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 69.53 $ 69.40 $ 61.81 $ 54.05 $ 45.54 $ 37.06
-------- -------- -------- -------- ------- --------
Income from investment operations(a):
Net investment income(b) ........... 0.51 0.88 0.93 0.46 0.44 0.23
Net realized and unrealized gains
(losses) ........................ (5.98) 4.58 9.72 8.75 8.65 8.83
-------- -------- -------- -------- ------- --------
Total from investment operations ...... (5.47) 5.46 10.65 9.21 9.09 9.06
-------- -------- -------- -------- ------- --------
Less distributions from:
Net investment income .............. (0.86) (1.05) (0.62) (0.54) (0.27) (0.33)
Net realized gains ................. (5.71) (4.28) (2.44) (0.91) (0.31) (0.25)
-------- -------- -------- -------- ------- --------
Total distributions ................... (6.57) (5.33) (3.06) (1.45) (0.58) (0.58)
-------- -------- -------- -------- ------- --------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
-------- -------- -------- -------- ------- --------
Net asset value, end of period ........ $ 57.49 $ 69.53 $ 69.40 $ 61.81 $ 54.05 $ 45.54
======== ======== ======== ======== ======= ========
Total return(c) ....................... (7.76)% 8.11% 17.82% 17.20% 20.17% 24.80%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 0.69%(f) 0.66%(f) 0.66%(f) 0.67%(f) 0.69%(f) 0.75%
Net investment income.................. 1.72% 1.28% 1.41% 0.81% 0.89% 0.60%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $164,147 $390,314 $333,372 $260,209 $26,701 $22,189
Portfolio turnover rate ............... 3.42%(g) 6.40% 7.44% 3.91% 7.03% 13.36%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Excludes the value of portfolio securities delivered as a result of in-kind
redemptions. See Note 10.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 63
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- --------------------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS 91.7%
CLOSED END MUTUAL FUNDS 1.6%
DIVERSIFIED FINANCIALS 1.6%
Apollo Investment Corp. ........................................... 206,582 $ 3,342,497
Emerging Markets Telecommunications Fund .......................... 250,000 5,812,500
H&Q Healthcare Investors .......................................... 150,000 2,311,500
John Hancock Bank and Thrift Opportunity Fund ..................... 1,650,000 9,751,500
Latin America Equity Fund Inc. .................................... 222,015 11,000,843
The Mexico Fund Inc. (Mexico) ..................................... 620,800 21,200,320
New Ireland Fund Inc. (Ireland) ................................... 135,000 2,731,050
Petroleum & Resources Corp. ....................................... 150,000 6,049,500
--------------
TOTAL CLOSED END MUTUAL FUNDS (COST $38,134,839) .................. 62,199,710
--------------
COMMON STOCKS 89.3%
AUTOMOBILES & COMPONENTS 0.7%
American Axle & Manufacturing Holdings Inc. ....................... 1,235,000 24,872,900
--------------
BANKS 3.1%
(a) Corus Bankshares Inc. ............................................. 2,210,900 16,205,897
Farmers & Merchants Bank of Long Beach ............................ 1,475 7,323,375
First Niagara Financial Group Inc. ................................ 100,000 1,443,000
Freddie Mac ....................................................... 1,700,000 42,347,000
Hudson City Bancorp Inc. .......................................... 600,000 11,478,000
(a) MGIC Investment Corp. ............................................. 735,000 9,577,050
The PMI Group Inc. ................................................ 1,325,000 7,459,750
Radian Group Inc. ................................................. 1,300,000 7,020,000
UMB Financial Corp. ............................................... 136,800 6,790,752
Washington Mutual Inc. ............................................ 750,000 9,217,500
--------------
118,862,324
--------------
CAPITAL GOODS 11.4%
A.O. Smith Corp. .................................................. 893,600 27,647,984
Applied Industrial Technologies Inc. .............................. 1,378,250 33,298,520
Armstrong World Industries Inc. ................................... 284,738 10,133,826
CNH Global NV (Netherlands) ....................................... 1,025,100 44,222,814
(b) ESCO Technologies Inc. ............................................ 1,200,800 55,909,248
(b,c) Furmanite Corp. ................................................... 2,688,600 22,745,556
Lennox International Inc. ......................................... 650,000 21,541,000
Mueller Industries Inc. ........................................... 600,000 19,422,000
Oshkosh Corp. ..................................................... 960,000 38,976,000
(b) Quanta Services Inc. .............................................. 550,000 14,597,000
(b,c) Tecumseh Products Co., A .......................................... 1,000,000 31,330,000
(b,c) Tecumseh Products Co., B .......................................... 310,000 8,521,900
Timken Co. ........................................................ 1,115,000 40,307,250
(a) Trinity Industries Inc. ........................................... 2,200,000 66,880,000
--------------
435,533,098
--------------
COMMERCIAL SERVICES & SUPPLIES 1.3%
Kelly Services Inc., A ............................................ 2,300,000 51,175,000
--------------
64 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- --------------------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
CONSUMER DURABLES & APPAREL 5.8%
D.R. Horton Inc. .................................................. 2,400,000 $ 37,176,000
(a,c) Furniture Brands International Inc. ............................... 3,400,000 46,070,000
Hasbro Inc......................................................... 1,515,000 53,873,400
Lennar Corp., A ................................................... 480,000 8,841,600
Lennar Corp., B.................................................... 48,000 804,000
M.D.C. Holdings Inc. .............................................. 693,000 30,200,940
Pulte Homes Inc.................................................... 2,600,000 33,904,000
(a) Standard Pacific Corp. ............................................ 2,500,000 12,650,000
--------------
223,519,940
--------------
CONSUMER SERVICES 1.8%
Bob Evans Farms Inc. .............................................. 323,300 9,075,031
(a,b) Vail Resorts Inc. ................................................. 1,245,000 60,793,350
--------------
69,868,381
--------------
DIVERSIFIED FINANCIALS 0.7%
(a) CIT Group Inc. .................................................... 2,300,000 25,047,000
--------------
ENERGY 7.0%
(b) Bristow Group Inc.................................................. 900,000 47,475,000
(b) Exterran Holding Inc............................................... 982,123 65,595,995
(a) Overseas Shipholding Group Inc..................................... 756,000 56,896,560
Peabody Energy Corp. .............................................. 420,000 25,674,600
(a,b) PHI Inc. .......................................................... 77,500 2,797,750
(b) PHI Inc., non-voting .............................................. 352,000 13,224,640
Teekay Corp. (Bahamas) ............................................ 1,204,000 54,950,560
--------------
266,615,105
--------------
FOOD, BEVERAGE & TOBACCO 5.5%
(b) Alliance One International Inc. ................................... 2,504,200 15,400,830
(a) Bunge Ltd. ........................................................ 182,000 20,764,380
Corn Products International Inc. .................................. 1,914,639 88,800,957
(b) Smithfield Foods Inc. ............................................. 1,418,000 40,668,240
Universal Corp. ................................................... 717,800 46,075,582
--------------
211,709,989
--------------
INSURANCE 20.0%
American National Insurance Co. ................................... 647,500 72,377,550
Aspen Insurance Holdings Ltd. ..................................... 154,300 4,010,257
Assurant Inc. ..................................................... 800,700 52,045,500
Chubb Corp. ....................................................... 230,000 12,183,100
E-L Financial Corp. Ltd. (Canada) ................................. 104,666 55,913,323
Employers Holdings Inc. ........................................... 571,900 10,911,852
FBL Financial Group Inc., A ....................................... 575,000 15,921,750
Genworth Financial Inc., A ........................................ 1,600,000 36,896,000
IPC Holdings Ltd. ................................................. 1,768,800 51,489,768
Kansas City Life Insurance Co. .................................... 299,989 14,999,450
Manulife Financial Corp. (Canada) ................................. 970,000 37,985,200
(a) MBIA Inc........................................................... 815,000 8,476,000
MetLife Inc. ...................................................... 401,000 24,400,850
Semiannual Report | 65
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- --------------------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
National Western Life Insurance Co., A ............................ 173,000 $ 43,876,260
Old Republic International Corp. .................................. 5,000,000 71,750,000
Presidential Life Corp. ........................................... 380,000 6,444,800
Principal Financial Group Inc. .................................... 225,000 12,073,500
Prudential Financial Inc. ......................................... 1,184,000 89,640,640
RLI Corp. ......................................................... 489,400 23,491,200
Selective Insurance Group Inc. .................................... 1,300,000 27,716,000
StanCorp Financial Group Inc. ..................................... 1,200,000 61,488,000
The Travelers Cos. Inc. ........................................... 575,000 28,980,000
--------------
763,071,000
--------------
MATERIALS 9.8%
(a) AbitibiBowater Inc. ............................................... 924,040 9,120,275
Ashland Inc. ...................................................... 266,546 14,132,269
MeadWestvaco Corp. ................................................ 1,525,000 40,107,500
Nucor Corp. ....................................................... 650,000 49,075,000
(b) PolyOne Corp. ..................................................... 1,375,000 10,147,500
Reliance Steel & Aluminum Co. ..................................... 1,328,000 80,715,840
Sherritt International Corp. (Canada) ............................. 3,253,500 45,389,410
(a) Texas Industries Inc. ............................................. 679,000 52,561,390
United States Steel Corp. ......................................... 310,000 47,724,500
(a) Westlake Chemical Corp. ........................................... 1,610,100 26,904,771
--------------
375,878,455
--------------
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 1.4%
(b) Watson Pharmaceuticals Inc. ....................................... 1,700,000 52,768,000
--------------
RETAILING 5.0%
(a,b) Big Lots Inc. ..................................................... 1,550,000 41,896,500
The Cato Corp., A ................................................. 450,000 7,762,500
(a,b) Charming Shoppes Inc. ............................................. 4,425,000 22,833,000
Dillard's Inc., A ................................................. 750,000 15,300,000
Fred's Inc. ....................................................... 400,000 4,432,000
(a,b) Handleman Co. ..................................................... 1,000,000 740,000
(a) Haverty Furniture Cos. Inc. ....................................... 920,000 8,399,600
(a,b) Saks Inc. ......................................................... 1,750,000 22,767,500
(a,c) Syms Corp. ........................................................ 1,430,000 21,450,000
(a,b,c) Zale Corp. ........................................................ 2,221,000 46,019,120
--------------
191,600,220
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 0.6%
(a,b) Spansion Inc., A................................................... 4,000,000 13,200,000
(b) Standard Microsystems Corp. ....................................... 369,700 10,961,605
--------------
24,161,605
--------------
TRANSPORTATION 5.7%
(b) ABX Holdings Inc. ................................................. 1,825,000 4,891,000
(b) Alaska Air Group Inc. ............................................. 1,350,600 29,010,888
Burlington Northern Santa Fe Corp. ................................ 400,000 41,020,000
(b,c) Dollar Thrifty Automotive Group Inc. .............................. 1,863,067 24,573,854
66 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN BALANCE SHEET INVESTMENT FUND SHARES VALUE
- --------------------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
TRANSPORTATION (CONTINUED)
(b) Kansas City Southern .............................................. 722,500 $ 32,570,300
Norfolk Southern Corp. ............................................ 1,289,600 76,834,368
(a) Werner Enterprises Inc. ........................................... 500,000 9,725,000
--------------
218,625,410
--------------
UTILITIES 9.5%
Atmos Energy Corp. ................................................ 933,600 25,842,048
Avista Corp. ...................................................... 600,000 12,318,000
Entergy Corp. ..................................................... 599,000 68,801,140
IDACORP Inc. ...................................................... 520,000 16,868,800
(b,c,d) KGen Power Corp., 144A ............................................ 4,400,000 85,800,000
Northeast Utilities ............................................... 1,550,000 40,796,000
PNM Resources Inc. ................................................ 1,990,000 28,835,100
Sierra Pacific Resources .......................................... 4,910,000 66,923,300
Xcel Energy Inc. .................................................. 861,000 17,908,800
--------------
364,093,188
--------------
TOTAL COMMON STOCKS (COST $2,240,647,083) ......................... 3,417,401,615
--------------
CONVERTIBLE PREFERRED STOCK (COST $24,240,000) 0.6%
BANKS 0.6%
Washington Mutual Inc., 7.75%, cvt. pfd., R ....................... 24,240 20,849,066
--------------
PRINCIPAL
AMOUNT
-----------
CORPORATE BOND (COST $5,543,685) 0.2%
CAPITAL GOODS 0.2%
Mueller Industries Inc., 6.00%, 11/01/14 .......................... $ 5,604,000 4,938,525
--------------
TOTAL LONG TERM INVESTMENTS (COST $2,308,565,607) ................. 3,505,388,916
--------------
SHARES
------------
SHORT TERM INVESTMENTS 14.3%
MONEY MARKET FUND (COST $210,904,773) 5.5%
(e) Franklin Institutional Fiduciauyst Money Tr Market
Portfolio, 2.29% ............................................... 210,904,773 210,904,773
--------------
Semiannual Report| 67
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
PRINCIPAL
FRANKLIN BALANCE SHEET INVESTMENT FUND AMOUNT VALUE
- --------------------------------------------------------------------------- ------------ --------------
SHORT TERM INVESTMENTS (CONTINUED)
(f) REPURCHASE AGREEMENT (COST $111,983,124) 2.9%
Joint Repurchase Agreement, 1.910%, 5/01/08
(Maturity Value $111,989,067) ..................................... $111,983,124 $ 111,983,124
--------------
ABN AMRO Bank, NV, New York Branch (Maturity Value $10,268,278)
Banc of America Securities LLC (Maturity Value $9,663,537)
Barclays Capital Inc. (Maturity Value $9,663,537)
BNP Paribas Securities Corp. (Maturity Value $9,663,537)
Credit Suisse Securities (USA) LLC (Maturity Value $8,053,134)
Deutsche Bank Securities Inc. (Maturity Value $9,663,537)
Goldman, Sachs & Co. (Maturity Value $9,663,537)
Greenwich Capital Markets Inc. (Maturity Value $10,871,899)
Lehman Brothers Inc. (Maturity Value $7,700,368)
Merrill Lynch Government Securities Inc.
(Maturity Value $9,663,537)
Morgan Stanley & Co. Inc. (Maturity Value $7,450,629)
UBS Securities LLC (Maturity Value $9,663,537)
Collateralized by U.S. Government Agency Securities,
1.96% - 6.375%, 5/13/08 - 2/21/13;
(g) U.S. Government Agency Discount Notes,
5/05/08 - 6/06/08 and U.S. Treasury Notes, 3.00%- 5.00%.
7/31/08 - 5/31/12
SHARES
------------
(h) INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED
SECURITIES 5.9%
MONEY MARKET FUND (COST $225,262,606) 5.9%
(i) Bank of New York Institutional Cash Reserve Fund, 2.71% ........... 225,262,606 225,262,606
--------------
TOTAL INVESTMENTS (COST $2,856,716,110) 106.0%..................... 4,053,539,419
OTHER ASSETS, LESS LIABILITIES (6.0)%.............................. (227,690,932)
--------------
NET ASSETS 100.0%.................................................. $3,825,848,487
==============
(a) A portion or all of the security is on loan as of April 30, 2008. See Note
1(e).
(b) Non-income producing for the twelve months ended April 30, 2008.
(c) See Note 9 regarding holdings of 5% voting securities.
(d) 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. These securities have been deemed liquid under
guidelines approved by the Trust's Board of Trustees. At April 30, 2008,
the value of this security was $85,800,000, representing 2.24% of net
assets.
(e) 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.
(f) See Note 1(c) regarding repurchase agreements.
(g) The security is traded on a discount basis with no stated coupon rate.
(h) See Note 1(e) regarding securities on loan.
(i) The rate shown is the annualized seven-day yield at period end.
68 | 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 YEAR ENDED OCTOBER 31,
APRIL 30, 2008 --------------------------------------------------------------
CLASS A (UNAUDITED) 2007 2006 2005 2004 2003
- --------------------------------------- ---------------- ----------- ------------ ------------ ----------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .. $ 16.75 $ 16.55 $ 14.66 $ 14.01 $ 12.40 $ 10.48
-------- ------- -------- -------- -------- -------
Income from investment operations(a):
Net investment income(b) ........... 0.09 0.21 0.20 0.13 0.08 0.07
Net realized and unrealized gains
(losses) ........................ (1.15) 1.04 2.18 0.63 1.58 1.92
-------- ------- -------- -------- -------- -------
Total from investment operations (1.06) 1.25 2.38 0.76 1.66 1.99
-------- ------- -------- -------- -------- -------
Less distributions from:
Net investment income .............. (0.23) (0.21) (0.15) (0.08) (0.05) (0.07)
Net realized gains ................. (0.97) (0.84) (0.34) (0.03) -- --
-------- ------- -------- -------- -------- -------
Total distributions ................... (1.20) (1.05) (0.49) (0.11) (0.05) (0.07)
-------- ------- -------- -------- -------- -------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
-------- ------- -------- -------- -------- -------
Net asset value, end of period ........ $ 14.49 $ 16.75 $ 16.55 $ 14.66 $ 14.01 $ 12.40
======== ======= ======== ======== ======== =======
Total return(c)........................ (6.27)% 7.82% 16.62% 5.42% 13.45% 19.08%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.37%(f) 1.34%(f) 1.33%(f) 1.29%(f) 1.31% 1.38%
Net investment income ................. 1.31% 1.25% 1.29% 0.91% 0.59% 0.60%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $130,559 $151,156 $184,225 $156,841 $127,267 $59,600
Portfolio turnover rate ............... 4.26% 22.74% 34.36% 25.33% 21.69% 27.47%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 69
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 ------------------------------------------------------
CLASS B (UNAUDITED) 2007 2006 2005 2004 2003
- --------------------------------------- ---------------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 16.52 $ 16.34 $ 14.47 $ 13.85 $ 12.29 $ 10.39
------- ------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) .... 0.04 0.10 0.10 0.04 (0.01) (0.01)
Net realized and unrealized gains
(losses) ........................ (1.13) 1.02 2.16 0.61 1.58 1.92
------- ------- ------- ------- ------- -------
Total from investment operations ...... (1.09) 1.12 2.26 0.65 1.57 1.91
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income .............. (0.12) (0.10) (0.05) --(g) (0.01) (0.01)
Net realized gains ................. (0.97) (0.84) (0.34) (0.03) -- --
------- ------- ------- ------- ------- -------
Total distributions ................... (1.09) (0.94) (0.39) (0.03) (0.01) (0.01)
------- ------- ------- ------- ------- -------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- ------- ------- ------- ------- -------
Net asset value, end of period ........ $ 14.34 $ 16.52 $ 16.34 $ 14.47 $ 13.85 $ 12.29
======= ======= ======= ======= ======= =======
Total return(c) ....................... (6.60)% 7.08% 15.90% 4.71% 12.76% 18.35%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 2.07%(f) 2.00%(f) 1.98%(f) 1.94%(f) 1.96% 2.04%
Net investment income (loss) .......... 0.61% 0.59% 0.64% 0.26% (0.06)% (0.06)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $14,635 $18,598 $22,120 $22,072 $21,794 $10,865
Portfolio turnover rate ............... 4.26% 22.74% 34.36% 25.33% 21.69% 27.47%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Includes a dividend distribution in the amount of $0.0024.
70 | 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 OCTOBER 31,
APRIL 30, 2008 ------------------------------------------------------
CLASS C (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 16.51 $ 16.34 $ 14.47 $ 13.85 $ 12.28 $ 10.39
------- ------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) .... 0.04 0.10 0.10 0.04 (0.01) (0.01)
Net realized and unrealized gains
(losses) ........................ (1.14) 1.02 2.16 0.61 1.58 1.91
------- ------- ------- ------- ------- -------
Total from investment operations ...... (1.10) 1.12 2.26 0.65 1.57 1.90
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income .............. (0.11) (0.11) (0.05) -- -- (0.01)
Net realized gains ................. (0.97) (0.84) (0.34) (0.03) -- --
------- ------- ------- ------- ------- -------
Total distributions ................... (1.08) (0.95) (0.39) (0.03) -- (0.01)
------- ------- ------- ------- ------- -------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- ------- ------- ------- ------- -------
Net asset value, end of period ........ $ 14.33 $ 16.51 $ 16.34 $ 14.47 $ 13.85 $ 12.28
======= ======= ======= ======= ======= =======
Total return(c) ....................... (6.63)% 7.07% 15.92% 4.69% 12.78% 18.35%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 2.07%(f) 1.99%(f) 1.97%(f) 1.94%(f) 1.96% 2.06%
Net investment income (loss) .......... 0.61% 0.60% 0.65% 0.26% (0.06)% (0.08)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $40,670 $52,711 $63,983 $59,929 $57,966 $32,592
Portfolio turnover rate ............... 4.26% 22.74% 34.36% 25.33% 21.69% 27.47%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 71
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -------------------------------------------------
CLASS R (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $16.61 $16.42 $14.56 $13.93 $12.34 $10.48
------ ------ ------ ------ ------ ------
Income from investment operations(a):
Net investment income(b) ........... 0.08 0.17 0.17 0.11 0.06 0.05
Net realized and unrealized gains
(losses) ........................ (1.15) 1.05 2.17 0.61 1.59 1.90
------ ------ ------ ------ ------ ------
Total from investment operations ...... (1.07) 1.22 2.34 0.72 1.65 1.95
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income .............. (0.21) (0.19) (0.14) (0.06) (0.06) (0.09)
Net realized gains ................. (0.97) (0.84) (0.34) (0.03) -- --
------ ------ ------ ------ ------ ------
Total distributions ................... (1.18) (1.03) (0.48) (0.09) (0.06) (0.09)
------ ------ ------ ------ ------ ------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------ ------ ------ ------ ------ ------
Net asset value, end of period ........ $14.36 $16.61 $16.42 $14.56 $13.93 $12.34
====== ====== ====== ====== ====== ======
Total return(c) ....................... (6.33)% 7.59% 16.46% 5.19% 13.44% 18.77%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.57%(f) 1.50%(f) 1.48%(f) 1.44%(f) 1.46% 1.54%
Net investment income ................. 1.11% 1.09% 1.14% 0.76% 0.44% 0.44%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $5,913 $7,812 $7,717 $6,896 $3,414 $ 826
Portfolio turnover rate ............... 4.26% 22.74% 34.36% 25.33% 21.69% 27.47%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
72 | 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
YEAR ENDED
SIX MONTHS ENDED OCTOBER 31,
APRIL 30, 2008 ------------------
ADVISOR CLASS (UNAUDITED) 2007 2006(g)
- ------------- ---------------- ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period ..... $16.76 $16.56 $14.63
------ ------ ------
Income from investment operations(a):
Net investment income(b) .............. 0.11 0.25 0.24
Net realized and unrealized gains
(losses) ........................... (1.15) 1.06 2.23
------ ------ ------
Total from investment operations ......... (1.04) 1.31 2.47
------ ------ ------
Less distributions from:
Net investment income ................. (0.30) (0.27) (0.20)
Net realized gains .................... (0.97) (0.84) (0.34)
------ ------ ------
Total distributions ...................... (1.27) (1.11) (0.54)
------ ------ ------
Redemption fees .......................... --(e) --(e) --(e)
------ ------ ------
Net asset value, end of period ........... $14.45 $16.76 $16.56
====== ====== ======
Total return(c) .......................... (6.12)% 8.12% 17.09%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses ................................. 1.07%(f) 1.00%(f) 0.98%(f)
Net investment income .................... 1.61% 1.59% 1.64%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ........ $3,504 $3,381 $1,989
Portfolio turnover rate .................. 4.26% 22.74% 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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(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. | 73
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
SHARES VALUE
--------- ------------
FRANKLIN LARGE CAP VALUE FUND
LONG TERM INVESTMENTS 98.2%
COMMON STOCKS 97.8%
BANKS 4.8%
Freddie Mac .............................................. 84,600 $ 2,107,386
U.S. Bancorp ............................................. 115,000 3,897,350
Wachovia Corp. ........................................... 63,000 1,836,450
Washington Mutual Inc. ................................... 130,000 1,597,700
------------
9,438,886
------------
CAPITAL GOODS 15.0%
3M Co. ................................................... 43,000 3,306,700
Dover Corp. .............................................. 102,300 5,060,781
General Electric Co. ..................................... 204,000 6,670,800
Illinois Tool Works Inc. ................................. 130,000 6,797,700
Masco Corp. .............................................. 108,000 1,966,680
United Technologies Corp. ................................ 75,000 5,435,250
------------
29,237,911
------------
CONSUMER DURABLES & APPAREL 6.2%
D.R. Horton Inc. ......................................... 335,000 5,189,150
Fortune Brands Inc. ...................................... 69,000 4,665,780
NIKE Inc., B.............................................. 34,000 2,271,200
------------
12,126,130
------------
CONSUMER SERVICES 1.7%
McDonald's Corp. ......................................... 55,000 3,276,900
------------
DIVERSIFIED FINANCIALS 6.3%
Bank of America Corp...................................... 86,000 3,228,440
The Bank of New York Mellon Corp. ........................ 85,000 3,700,050
Citigroup Inc. ........................................... 81,000 2,046,870
Lehman Brothers Holdings Inc. ............................ 24,000 1,061,760
Morgan Stanley............................................ 45,000 2,187,000
------------
12,224,120
------------
ENERGY 16.9%
Apache Corp. ............................................. 49,000 6,599,320
BP PLC, ADR (United Kingdom) ............................. 41,000 2,984,390
Chesapeake Energy Corp. .................................. 55,000 2,843,500
ConocoPhillips ........................................... 52,000 4,479,800
Devon Energy Corp. ....................................... 35,000 3,969,000
Exxon Mobil Corp. ........................................ 65,000 6,049,550
Occidental Petroleum Corp. ............................... 73,000 6,074,330
------------
32,999,890
------------
FOOD & STAPLES RETAILING 3.4%
Wal-Mart Stores Inc. ..................................... 114,000 6,609,720
------------
HEALTH CARE EQUIPMENT & SERVICES 1.6%
Becton Dickinson and Co. ................................. 34,000 3,039,600
------------
74 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN LARGE CAP VALUE FUND SHARES VALUE
- ----------------------------- --------- ------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
HOUSEHOLD & PERSONAL PRODUCTS 4.9%
Kimberly-Clark Corp. ..................................... 70,000 $ 4,479,300
The Procter & Gamble Co. ................................. 76,000 5,095,800
------------
9,575,100
------------
INSURANCE 7.5%
The Allstate Corp. ....................................... 75,000 3,777,000
Ambac Financial Group Inc. ............................... 67,000 310,210
American International Group Inc. ........................ 77,100 3,562,020
Chubb Corp. .............................................. 75,000 3,972,750
MetLife Inc. ............................................. 50,000 3,042,500
------------
14,664,480
------------
MATERIALS 10.1%
Alcoa Inc. ............................................... 92,000 3,199,760
The Dow Chemical Co. ..................................... 105,000 4,215,750
Nucor Corp. .............................................. 85,000 6,417,500
Praxair Inc. ............................................. 65,000 5,935,150
------------
19,768,160
------------
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 5.0%
Abbott Laboratories ...................................... 68,000 3,587,000
Merck & Co. Inc. ......................................... 63,500 2,415,540
Pfizer Inc. .............................................. 187,700 3,774,647
------------
9,777,187
------------
RETAILING 3.7%
J.C. Penney Co. Inc. ..................................... 70,000 2,975,000
Nordstrom Inc. ........................................... 34,000 1,198,840
(a) Office Depot Inc. ........................................ 245,000 3,106,600
------------
7,280,440
------------
SOFTWARE & SERVICES 2.2%
Microsoft Corp. .......................................... 148,000 4,220,960
------------
TECHNOLOGY HARDWARE & EQUIPMENT 4.7%
Hewlett-Packard Co. ...................................... 69,000 3,198,150
International Business Machines Corp. .................... 50,000 6,035,000
------------
9,233,150
------------
TRANSPORTATION 1.9%
Norfolk Southern Corp. ................................... 63,000 3,753,540
------------
UTILITIES 1.9%
Entergy Corp. ............................................ 32,500 3,732,950
------------
TOTAL COMMON STOCKS (COST $161,842,876) .................. 190,959,124
------------
Semiannual Report | 75
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
SHARES VALUE
--------- ------------
FRANKLIN LARGE CAP VALUE FUND
LONG TERM INVESTMENTS (CONTINUED)
CONVERTIBLE PREFERRED STOCK (COST $886,645) 0.4%
BANKS 0.4%
Washington Mutual Inc., 7.75%, cvt. pfd., R............... 1000 $ 860,110
------------
TOTAL LONG TERM INVESTMENTS (COST $162,729,521)........... 191,819,234
------------
SHORT TERM INVESTMENT (COST $4,334,921) 2.2%
MONEY MARKET FUND 2.2%
(b) Franklin Institutional Fiduciary Trust Money Market
Portfolio, 2.29%.......................................... 4,334,921 4,334,921
------------
TOTAL INVESTMENTS (COST $167,064,442) 100.4%.............. 196,154,155
OTHER ASSETS, LESS LIABILITIES (0.4)%..................... (872,287)
------------
NET ASSETS 100.0%......................................... $195,281,868
============
See Selected Portfolio Abbreviations on page 99.
(a) Non-income producing for the twelve months ended April 30, 2008.
(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.
76 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN MICROCAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 ------------------------------------------------------------
CLASS A (UNAUDITED) 2007 2006 2005 2004 2003
- --------------------------------------- ---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .. $ 44.02 $ 41.32 $ 38.15 $ 34.48 $ 30.41 $ 24.09
-------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b)..... 0.26 0.39 0.48 0.18 0.05 (0.04)
Net realized and unrealized gains
(losses)............ (6.44) 5.10 5.73 5.32 4.65 7.80
-------- -------- -------- -------- -------- --------
Total from investment operations....... (6.18) 5.49 6.21 5.50 4.70 7.76
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income............... (0.41) (0.57) (0.19) (0.05) -- --
Net realized gains.................. (5.21) (2.22) (2.85) (1.78) (0.63) (1.44)
-------- -------- -------- -------- -------- --------
Total distributions.................... (5.62) (2.79) (3.04) (1.83) (0.63) (1.44)
-------- -------- -------- -------- -------- --------
Redemption fees........................ --(e) --(e) --(e) --(e) --(e) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 32.22 $ 44.02 $ 41.32 $ 38.15 $ 34.48 $ 30.41
======== ======== ======== ======== ======== ========
Total return(c)........................ (14.52)% 13.73% 17.25% 16.45% 15.64% 33.90%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses............................... 1.10%(f) 1.08%(f) 1.11%(f) 1.10%(f) 1.12%(f) 1.23%
Net investment income (loss)........... 1.49% 0.89% 1.22% 0.48% 0.13% (0.16)%
SUPPLEMENTAL DATA
Net assets, end of period (000's)...... $342,134 $467,995 $473,837 $443,037 $418,464 $310,995
Portfolio turnover rate................ 5.79% 9.95% 6.47% 13.86% 11.38% 13.35%
(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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(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 MICROCAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 ----------------------
ADVISOR CLASS (UNAUDITED) 2007 2006(g)
- --------------------------------------- ---------------- -------- ---------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period... $ 44.14 $ 41.43 $38.28
------- ------- ------
Income from investment operations(a):
Net investment income(b)............ 0.30 0.49 0.61
Net realized and unrealized gains
(losses)......................... (6.45) 5.11 5.58
------- ------- ------
Total from investment operations....... (6.15) 5.60 6.19
------- ------- ------
Less distributions from:
Net investment income............... (0.53) (0.67) (0.19)
Net realized gains.................. (5.21) (2.22) (2.85)
------- ------- ------
Total distributions.................... (5.74) (2.89) (3.04)
------- ------- ------
Redemption fees........................ --(e) --(e) --(e)
------- ------- ------
Net asset value, end of period ........ $ 32.25 $ 44.14 $41.43
======= ======= ======
Total return(c)........................ (14.43)% 13.99% 17.56%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses............................... 0.86%(f) 0.84%(f) 0.87%(f)
Net investment income.................. 1.73% 1.13% 1.46%
SUPPLEMENTAL DATA
Net assets, end of period (000's)...... $55,254 $32,796 $ 6,298
Portfolio turnover rate................ 5.79% 9.95% 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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) For the period November 1, 2005 (effective date) to October 31, 2006.
78 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- -------------------------------------------------- ----------- ------------
LONG TERM INVESTMENTS 83.7%
COMMON STOCKS AND OTHER EQUITY
INTERESTS 80.2%
AUTOMOBILES & COMPONENTS 0.2%
(a,b) Proliance International Inc. ............. 823,800 $ 922,656
------------
BANKS 3.0%
Beverly Hills Bancorp Inc. ............... 866,488 1,776,300
(a) BFC Financial Corp., A ................... 1,000,000 1,000,000
(a,b,c) Black River BancVenture Inc. ............. 495,000 4,307,985
First Defiance Financial Corp. ........... 235,000 4,392,150
WSB Holdings Inc. ........................ 104,900 571,705
------------
12,048,140
------------
CAPITAL GOODS 15.4%
Alamo Group Inc. ......................... 108,400 2,207,024
Burnham Holdings Inc., A ................. 182,000 2,661,750
CIRCOR International Inc. ................ 211,700 10,197,589
(b) Espey Manufacturing & Electronics Corp. .. 156,000 3,237,000
(a,d) Gehl Co. ................................. 300,000 4,629,000
Gibraltar Industries Inc. ................ 356,099 3,721,235
(b) Hardinge Inc. ............................ 775,000 12,927,000
Insteel Industries Inc. .................. 100,000 1,246,000
(a,d) Ladish Co. Inc. .......................... 7,306 219,618
(a) Northwest Pipe Co. ....................... 179,500 7,632,340
Smith Investment Co. ..................... 44,600 4,114,350
(a) Sparton Corp. ............................ 394,402 1,837,913
(a) Tecumseh Products Co., A ................. 200,000 6,266,000
(a) Tecumseh Products Co., B ................. 12,799 351,845
------------
61,248,664
------------
COMMERCIAL SERVICES & SUPPLIES 6.8%
Courier Corp. ............................ 200,000 4,708,000
Ecology and Environment Inc., A .......... 212,100 2,513,385
Healthcare Services Group Inc. ........... 585,900 8,940,834
(a) Layne Christensen Co. .................... 70,000 2,986,900
(a,b) Nashua Corp. ............................. 357,930 3,647,307
(a) Spherion Corp. ........................... 850,000 4,199,000
------------
26,995,426
------------
CONSUMER DURABLES & APPAREL 4.3%
Bassett Furniture Industries Inc. ........ 132,601 1,583,256
(a) Cavalier Homes Inc. ...................... 432,000 756,000
(a) Chromcraft Revington Inc. ................ 200,000 756,000
(b) Cobra Electronics Corp. .................. 420,000 1,327,200
(b) Delta Apparel Inc. ....................... 705,000 3,102,000
(a) The Dixie Group Inc. ..................... 455,000 3,549,000
Flexsteel Industries Inc. ................ 225,000 2,504,250
(a) P & F Industries Inc., A ................. 88,400 374,816
(a,b) Rockford Corp. . ....................... 575,000 767,625
(b,d) Tandy Brands Accessories Inc. ............ 540,000 2,243,700
------------
16,963,847
------------
Semiannual Report | 79
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- -------------------------------------------------- ----------- ------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS
(CONTINUED)
DIVERSIFIED FINANCIALS 1.5%
Kohlberg Capital Corp. ................... 600,834 $ 6,032,373
------------
ENERGY 3.9%
(a,d) PHI Inc. ................................. 17,600 635,360
(a) PHI Inc., non-voting ..................... 394,499 14,821,327
------------
15,456,687
------------
FOOD & STAPLES RETAILING 2.5%
Village Super Market Inc., A ............. 214,000 10,077,260
------------
FOOD, BEVERAGE & TOBACCO 12.3%
(a) Alliance One International Inc. .......... 1,167,000 7,177,050
Griffin Land & Nurseries Inc. ............ 173,000 5,703,810
(a,d) John B. Sanfilippo & Son Inc. ............ 200,000 2,146,000
(a) Omega Protein Corp. ...................... 870,000 13,050,000
(a) Seneca Foods Corp., A .................... 256,600 5,260,300
(a) Seneca Foods Corp., B .................... 121,500 2,473,740
(a) Smithfield Foods Inc. .................... 453,600 13,009,248
------------
48,820,148
------------
INSURANCE 5.5%
(a,b) ACMAT Corp., A ........................... 392,800 9,397,740
Baldwin & Lyons Inc., B .................. 228,264 5,425,836
Mercer Insurance Group Inc. .............. 115,000 1,976,850
Safety Insurance Group Inc. .............. 51,000 1,830,900
(a) United America Indemnity Ltd. ............ 217,168 3,357,417
------------
21,988,743
------------
MATERIALS 8.2%
(a,b) American Pacific Corp. ................... 676,300 11,652,649
Central Steel and Wire Co. ............... 6,905 4,764,450
(a,b) Continental Materials Corp. .............. 109,000 2,512,450
(a) Intertape Polymer Group Inc. (Canada) .... 370,000 869,500
(a) Mercer International Inc. (Germany) ...... 761,400 5,108,994
The Monarch Cement Co. ................... 42,444 1,188,432
(a) RTI International Metals Inc. ............ 140,000 5,766,600
Schweitzer-Mauduit International Inc. .... 34,724 768,442
------------
32,631,517
------------
REAL ESTATE 2.6%
Arbor Realty Trust Inc. .................. 50,000 863,500
Arbor Realty Trust Inc. (legend shares) .. 270,000 4,662,900
Bresler & Reiner Inc. .................... 205,000 4,622,750
(a,c) LandCo Real Estate LLC,
Liquidating Trust ..................... 94,800 168,744
------------
10,317,894
------------
RETAILING 5.0%
Brown Shoe Co. Inc. ...................... 282,481 4,711,783
The Coast Distribution System Inc. ....... 66,800 354,040
(a,b) Duckwall-ALCO Stores Inc. ................ 227,500 2,648,100
Fred's Inc. .............................. 250,000 2,770,000
80 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- -------------------------------------------------- ----------- ------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND OTHER EQUITY INTERESTS
(CONTINUED)
RETAILING (CONTINUED)
(a,d) Handleman Co. ............................ 1,020,000 $ 754,800
(d) Haverty Furniture Cos. Inc. .............. 477,000 4,355,010
(a,b) S&K Famous Brands Inc. ................... 255,500 804,825
(a) Shoe Carnival Inc. ....................... 233,378 3,260,291
------------
19,658,849
------------
TECHNOLOGY HARDWARE & EQUIPMENT 1.2%
(a,c,e) Allen Organ Co., Contingent
Distribution .......................... 94,800 1,016,256
(a,b) GTSI Corp. ............................... 488,140 3,905,120
------------
4,921,376
------------
TELECOMMUNICATION SERVICES 3.5%
Atlantic Tele-Network Inc. ............... 410,000 12,763,300
North State Telecommunications Corp., B .. 13,100 997,238
------------
13,760,538
------------
TRANSPORTATION 4.3%
(a,b) International Shipholding Corp. .......... 445,000 8,459,450
(a) P.A.M. Transportation Services Inc. ...... 312,200 4,445,728
Providence and Worcester Railroad Co. .... 205,000 4,018,000
------------
16,923,178
------------
TOTAL COMMON STOCKS AND OTHER EQUITY
INTERESTS (COST $224,133,593) ......... 318,767,296
------------
CONVERTIBLE PREFERRED STOCKS 1.6%
FOOD, BEVERAGE & TOBACCO 1.6%
(a) Seneca Foods Corp., cvt.
participating pfd. .................... 200,000 4,100,000
(a) Seneca Foods Corp., cvt.
participating pfd., Series 2003 ....... 100,000 2,050,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $4,905,000) ..................... 6,150,000
------------
PRINCIPAL
AMOUNT
-----------
CONVERTIBLE BONDS
(COST $7,000,000) 1.9%
MATERIALS 1.9%
(f) Mercer International Inc.,
cvt., senior sub. note, 144A,
8.50%, 10/15/10 (Germany) ............. $ 7,000,000 7,542,500
------------
TOTAL LONG TERM INVESTMENTS
(COST $236,038,593) ................... 332,459,796
------------
Semiannual Report | 81
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN MICROCAP VALUE FUND SHARES VALUE
- -------------------------------------------------- ----------- ------------
SHORT TERM INVESTMENTS 16.9%
MONEY MARKET FUND
(COST $65,528,413) 16.5%
(g) Franklin Institutional Fiduciary
Trust Money Market Portfolio, 2.29% ... 65,528,413 $ 65,528,413
------------
(h) INVESTMENTS FROM CASH COLLATERAL
RECEIVED FOR LOANED SECURITIES 0.4%
MONEY MARKET FUND
(COST $1,683,378) 0.4%
(i) Bank of New York Institutional Cash
Reserve Fund, 2.71% ................... 1,683,378 1,683,378
------------
TOTAL INVESTMENTS
(COST $303,250,384) 100.6% ............ 399,671,587
------------
OTHER ASSETS, LESS LIABILITIES (0.6)% .... (2,283,789)
------------
NET ASSETS 100.0% ........................ $397,387,798
============
(a) Non-income producing for the twelve months ended April 30, 2008.
(b) See Note 9 regarding holdings of 5% voting securities.
(c) See Note 8 regarding restricted securities.
(d) A portion or all of the security is on loan as of April 30, 2008. See Note
1(e).
(e) Contingent distributions represent the right to receive additional
distributions, if any, during the reorganization of the underlying company.
(f) 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. These securities have been deemed liquid under
guidelines approved by the Trust's Board of Trustees. At April 30, 2008,
the value of this security was $7,542,500, representing 1.90% of net
assets.
(g) 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.
(h) See Note 1(e) regarding securities on loan.
(i) The rate shown is the annualized seven-day yield at period end.
82 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN MIDCAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -------------------------------
CLASS A (UNAUDITED) 2007 2006 2005(h)
- ------- ---------------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period.... $ 11.92 $ 11.37 $ 9.80 $ 10.00
------- ------- ------- -------
Income from investment operations(a):
Net investment income(b)............. 0.04 0.27(g) 0.04 0.01
Net realized and unrealized gains
(losses).......................... (0.80) 0.63 1.59 (0.21)
------- ------- ------- -------
Total from investment operations........ (0.76) 0.90 1.63 (0.20)
------- ------- ------- -------
Less distributions from:
Net investment income................ (0.12) (0.20) (0.06) --
Net realized gains................... (0.15) (0.15) -- --
------- ------- ------- -------
Total distributions..................... (0.27) (0.35) (0.06) --
------- ------- ------- -------
Redemption fees......................... --(e) --(e) --(e) --(e)
------- ------- ------- -------
Net asset value, end of period.......... $ 10.89 $ 11.92 $ 11.37 $ 9.80
======= ======= ======= =======
Total return(c)......................... (6.36)% 8.01% 16.70% (2.00)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments by
affiliates........................... 1.67% 1.65% 1.97% 2.57%
Expenses net of waiver and payments by
affiliates........................... 1.40%(f) 1.40%(f) 1.40%(f) 1.40%
Net investment income................... 0.66% 2.26%(g) 0.38% 0.37%
SUPPLEMENTAL DATA
Net assets, end of period (000's)....... $65,043 $72,497 $42,677 $11,804
Portfolio turnover rate................. 9.95% 12.39% 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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Net investment income per share includes approximately $0.13 per share
received in the form of a special dividend paid in connection with a
corporate spin-off. Excluding this non-recurring amount, the ratio of net
investment income to average net assets would have been 1.18%.
(h) 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. | 83
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN MIDCAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 ------------------------------
CLASS C (UNAUDITED) 2007 2006 2005(h)
- ------- ---------------- ------- ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period.... $ 11.81 $11.29 $ 9.78 $10.00
------- ------- ------ ------
Income from investment operations(a):
Net investment income (loss)(b)...... --(e) 0.20(g) (0.03) (0.01)
Net realized and unrealized gains
(losses).......................... (0.77) 0.61 1.59 (0.21)
------- ------- ------ ------
Total from investment operations........ (0.77) 0.81 1.56 (0.22)
------- ------- ------ ------
Less distributions from:
Net investment income................ (0.06) (0.14) (0.05) --
Net realized gains................... (0.15) (0.15) -- --
------- ------- ------ ------
Total distributions..................... (0.21) (0.29) (0.05) --
------- ------- ------ ------
Redemption fees......................... --(e) --(e) --(e) --(e)
------- ------- ------ ------
Net asset value, end of period.......... $ 10.83 $ 11.81 $11.29 $ 9.78
======= ======= ====== ======
Total return(c) (6.58)% 7.27% 15.95% (2.20)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments by
affiliates........................... 2.30% 2.30% 2.60% 3.22%
Expenses net of waiver and payments by
affiliates........................... 2.03%(f) 2.05%(f) 2.03%(f) 2.05%
Net investment income (loss)............ 0.03% 1.61%(g) (0.25)% (0.28)%
SUPPLEMENTAL DATA
Net assets, end of period (000's)....... $14,434 $15,103 $9,406 $3,275
Portfolio turnover rate................. 9.95% 12.39% 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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Net investment income per share includesapproximately $0.13 per share
received in the form of a special dividend paid in connection with a
corporate spin-off. Excluding this non-recurring amount, the ratio of net
investment income to average net assets would have been 0.53%.
(h) For the period July 1, 2005 (commencement of operations) to October 31,
2005.
84 | 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 OCTOBER 31,
APRIL 30, 2008 ------------------------------
CLASS R (UNAUDITED) 2007 2006 2005(h)
- ------- ---------------- ------- ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period.... $11.87 $11.35 $ 9.80 $10.00
------ ------ ------ ------
Income from investment operations(a):
Net investment income(b)............. 0.03 0.27(g) 0.02 0.01
Net realized and unrealized gains
(losses).......................... (0.79) 0.61 1.59 (0.21)
------ ------ ------ ------
Total from investment operations........ (0.76) 0.88 1.61 (0.20)
------ ------ ------ ------
Less distributions from:
Net investment income................ (0.08) (0.21) (0.06) --
Net realized gains................... (0.15) (0.15) -- --
------ ------ ------ ------
Total distributions..................... (0.23) (0.36) (0.06) --
------ ------ ------ ------
Redemption fees......................... --(e) --(e) --(e) --(e)
------ ------- ------ ------
Net asset value, end of period.......... $10.88 $11.87 $11.35 $ 9.80
====== ====== ====== ======
Total return(c)......................... (6.45)% 7.85% 16.47% (2.00)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments by
affiliates........................... 1.82% 1.80% 2.12% 2.72%
Expenses net of waiver and payments by
affiliates........................... 1.55%(f) 1.55%(f) 1.55%(f) 1.55%
Net investment income................... 0.51% 2.11%(g) 0.23% 0.22%
SUPPLEMENTAL DATA
Net assets, end of period (000's)....... $ 436 $ 690 $ 133 $ 36
Portfolio turnover rate................. 9.95% 12.39% 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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Net investment income per share includesapproximately $0.13 per share
received in the form of a special dividend paid in connection with a
corporate spin-off. Excluding this non-recurring amount, the ratio of net
investment income to average net assets would have been 1.03%.
(h) 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. | 85
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN MIDCAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -----------------------------
ADVISOR CLASS (UNAUDITED) 2007 2006 2005(h)
- ------------- ---------------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period.... $11.99 $11.42 $ 9.81 $10.00
------ ------ ------ ------
Income from investment operations(a):
Net investment income(b)............. 0.05 0.33(g) 0.08 0.03
Net realized and unrealized gains
(losses).......................... (0.79) 0.62 1.60 (0.22)
------ ------ ------ ------
Total from investment operations........ (0.74) 0.95 1.68 (0.19)
------ ------ ------ ------
Less distributions from:
Net investment income............... (0.16) (0.23) (0.07) --
Net realized gains................... (0.15) (0.15) -- --
------ ------ ------ ------
Total distributions..................... (0.31) (0.38) (0.07) --
------ ------ ------ ------
Redemption fees......................... --(e) --(e) --(e) --(e)
------ ------ ------ ------
Net asset value, end of period.......... $10.94 $11.99 $11.42 $ 9.81
====== ====== ====== ======
Total return(c)......................... (6.18)% 8.42% 17.18% (1.90)%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses before waiver and payments by
affiliates........................... 1.32% 1.30% 1.62% 2.22%
Expenses net of waiver and payments by
affiliates........................... 1.05%(f) 1.05%(f) 1.05%(f) 1.05%
Net investment income................... 1.01% 2.61%(g) 0.73% 0.72%
SUPPLEMENTAL DATA
Net assets, end of period (000's)....... $1,068 $ 1,136 $ 777 $ 434
Portfolio turnover rate................. 9.95% 12.39% 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 repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Net investment income per share includes approximately $0.13 per share
received in the form of a special dividend paid in connection with a
corporate spin-off. Excluding this non-recurring amount, the ratio of net
investment income to average net assets would have been 1.53%.
(h) For the period July 1, 2005 (commencement of operations) to October 31,
2005.
86 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
FRANKLIN MIDCAP VALUE FUND SHARES/UNITS VALUE
- ----------------------------------------------------------------- ------------ -----------
COMMON STOCKS AND OTHER EQUITY INTERESTS 90.8%
AUTOMOBILES & COMPONENTS 4.0%
Autoliv Inc. (Sweden) ....................................... 38,400 $ 2,351,616
Harley-Davidson Inc. ........................................ 23,000 879,750
-----------
3,231,366
-----------
BANKS 3.4%
Freddie Mac ................................................. 55,700 1,387,487
MGIC Investment Corp. ....................................... 23,500 306,205
The PMI Group Inc. .......................................... 33,200 186,916
PNC Financial Services Group Inc. ........................... 9,727 674,568
Radian Group Inc. ........................................... 30,700 165,780
-----------
2,720,956
-----------
CAPITAL GOODS 15.1%
Carlisle Cos. Inc. .......................................... 54,500 1,573,960
Dover Corp. ................................................. 38,400 1,899,648
Embraer-Empresa Brasileira de Aeronautica SA, ADR (Brazil)... 50,300 2,096,504
Graco Inc. .................................................. 34,700 1,436,927
Oshkosh Corp. ............................................... 49,200 1,997,520
Roper Industries Inc. ....................................... 28,500 1,770,420
(a) Terex Corp. ................................................. 8,600 599,248
W.W. Grainger Inc. .......................................... 9,700 841,087
-----------
12,215,314
-----------
CONSUMER DURABLES & APPAREL 7.9%
Fortune Brands Inc. ......................................... 38,800 2,623,656
Hasbro Inc. ................................................. 32,800 1,166,368
Leggett & Platt Inc. ........................................ 50,000 830,000
M.D.C. Holdings Inc. ........................................ 27,800 1,211,524
Pulte Homes Inc. ............................................ 26,700 348,168
(a) Timberland Co., A ........................................... 13,500 197,100
-----------
6,376,816
-----------
CONSUMER SERVICES 1.0%
(a) Hillenbrand Inc. ............................................ 42,300 805,392
-----------
DIVERSIFIED FINANCIALS 2.9%
CIT Group Inc. .............................................. 69,400 755,766
KKR Private Equity Investors LP ............................. 109,200 1,627,080
-----------
2,382,846
-----------
ENERGY 11.6%
Chesapeake Energy Corp. ..................................... 39,300 2,031,810
ENSCO International Inc. .................................... 26,396 1,682,217
(a) Helix Energy Solutions Group Inc. ........................... 39,695 1,371,462
Overseas Shipholding Group Inc. ............................. 30,300 2,280,378
Peabody Energy Corp. ........................................ 11,600 709,108
Pioneer Natural Resources Co. ............................... 7,100 409,883
Teekay Corp. (Bahamas) ...................................... 19,100 871,724
-----------
9,356,582
-----------
Semiannual Report | 87
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN MIDCAP VALUE FUND SHARES/UNITS VALUE
- ----------------------------------------------------------------- ------------ -----------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
FOOD, BEVERAGE & TOBACCO 6.5%
Bunge Ltd. .................................................. 2,994 $ 341,586
(a) Dean Foods Co. .............................................. 91,000 2,114,840
The Hershey Co. ............................................. 11,000 411,180
McCormick & Co. Inc. ........................................ 63,800 2,411,002
-----------
5,278,608
-----------
HEALTH CARE EQUIPMENT & SERVICES 2.3%
Hill-Rom Holdings Inc. ..................................... 42,300 1,06 2,999
(a) LifePoint Hospitals Inc. .................................... 26,100 786, 132
-----------
1,849,131
-----------
HOUSEHOLD & PERSONAL PRODUCTS 1.0%
Alberto-Culver Co. .......................................... 32,200 810,474
-----------
INSURANCE 5.7%
American National Insurance Co. ............................. 2,100 234,738
Arthur J. Gallagher & Co. ................................... 14,200 348,894
Cincinnati Financial Corp. .................................. 21,800 782,620
Erie Indemnity Co., A ....................................... 31,000 1,656,020
Mercury General Corp. ....................................... 3,600 179,604
Montpelier Re Holdings Ltd. (Bermuda) ....................... 8,000 132,000
Old Republic International Corp. ............................ 57,775 829,071
Protective Life Corp. ....................................... 11,000 468,820
-----------
4,631,767
-----------
MATERIALS 11.5%
Airgas Inc. ................................................. 34,100 1,641,233
Bemis Co. Inc. .............................................. 46,600 1,225,580
Cabot Corp. ................................................. 11,800 344,088
Celanese Corp., A ........................................... 50,600 2,264,350
MeadWestvaco Corp. .......................................... 35,700 938,910
Nucor Corp. ................................................. 8,600 649,300
Sigma-Aldrich Corp. ......................................... 25,100 1,431,202
United States Steel Corp. ................................... 5,400 831,330
-----------
9,325,993
-----------
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 2.0%
(a) Endo Pharmaceuticals Holdings Inc. .......................... 41,600 1,032,928
(a) Watson Pharmaceuticals Inc. ................................. 19,400 602,176
-----------
1,635,104
-----------
RETAILING 3.2%
Family Dollar Stores Inc. ................................... 20,600 440,840
J.C. Penney Co. Inc. ........................................ 24,900 1,058,250
Nordstrom Inc. .............................................. 30,700 1,082,482
-----------
2,581,572
-----------
SOFTWARE & SERVICES 2.9%
(a) SAIC Inc. ................................................... 125,300 2,380,700
-----------
88 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN MIDCAP VALUE FUND SHARES/UNITS VALUE
- ----------------------------------------------------------------- ------------ -----------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
TRANSPORTATION 2.5%
J.B. Hunt Transport Services Inc............................. 59,000 $ 2,004,230
-----------
UTILITIES 7.3%
Atmos Energy Corp. .......................................... 102,100 2,826,128
DTE Energy Co. .............................................. 62,800 2,531,468
Northeast Utilities ......................................... 22,600 594,832
-----------
5,952,428
-----------
TOTAL COMMON STOCKSAND OTHER EQUITY
INTERESTS(COST $76,607,960) 73,539,279
-----------
SHORT TERM INVESTMENT (COST $7,433,812) 9.2%
MONEY MARKET FUND 9.2%
(b) Franklin Institutional Fiduciary Trust Money Market
Portfolio, 2.29%............................................. 7,433,812 7,433,812
-----------
TOTAL INVESTMENTS (COST $84,041,772) 100.0%.................. 80,973,091
OTHER ASSETS, LESS LIABILITIES 0.0%(C)....................... 7,917
-----------
NET ASSETS 100.0%............................................ $80,981,008
===========
See Selected Portfolio Abbreviations on page 99.
(a) Non-income producing for the twelve months ended April 30, 2008.
(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.
(c) Rounds to less than 0.1% of net assets.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 89
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS
FRANKLIN SMALL CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 ------------------------------------------------------------
CLASS A (UNAUDITED) 2007 2006 2005 2004 2003
- --------------------------------------- ---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 45.94 $ 45.27 $ 39.41 $ 34.37 $ 28.19 $ 22.15
-------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b)..... 0.17 0.29 0.17 0.15 0.30 (0.02)
Net realized and unrealized gains
(losses) ......................... (3.48) 3.71 6.70 5.15 5.88 6.06
-------- -------- -------- -------- -------- --------
Total from investment operations ...... (3.31) 4.00 6.87 5.30 6.18 6.04
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income .............. (0.36) (0.28) (0.10) (0.26) -- --
Net realized gains ................. (1.63) (3.05) (0.91) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ................... (1.99) (3.33) (1.01) (0.26) -- --
-------- -------- -------- -------- -------- --------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........ $ 40.64 $ 45.94 $ 45.27 $ 39.41 $ 34.37 $ 28.19
======== ======== ======== ======== ======== ========
Total return(c) ....................... (7.11)% 9.15% 17.73% 15.46% 21.92% 27.27%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.24%(f) 1.17%(f) 1.22%(f) 1.29%(f) 1.35%(f) 1.44%
Net investment income (loss) .......... 0.88% 0.62% 0.40% 0.39% 0.95% (0.07)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $761,389 $849,226 $703,238 $486,563 $296,000 $200,181
Portfolio turnover rate ............... 8.13% 6.49% 17.39% 12.73% 17.38% 14.14%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
90 | 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 YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -------------------------------------------------------
CLASS B (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 43.90 $ 43.43 $ 38.00 $ 33.20 $ 27.41 $ 21.67
------- ------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) .... 0.03 (0.05) (0.12) (0.09) 0.09 (0.17)
Net realized and unrealized gains
(losses) ........................ (3.35) 3.57 6.46 4.97 5.70 5.91
------- ------- ------- ------- ------- -------
Total from investment operations ...... (3.32) 3.52 6.34 4.88 5.79 5.74
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income .............. -- -- -- (0.08) -- --
Net realized gains ................. (1.63) (3.05) (0.91) -- -- --
------- ------- ------- ------- ------- -------
Total distributions ................... (1.63) (3.05) (0.91) (0.08) -- --
------- ------- ------- ------- ------- -------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- ------- ------- ------- ------- -------
Net asset value, end of period ........ $ 38.95 $ 43.90 $ 43.43 $ 38.00 $ 33.20 $ 27.41
======= ======= ======= ======= ======= =======
Total return(c) ....................... (7.49)% 8.36% 16.98% 14.68% 21.12% 26.49%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.96%(f) 1.90%(f) 1.90%(f) 1.94%(f) 2.00%(f) 2.09%
Net investment income (loss) .......... 0.16% (0.11)% (0.28)% (0.26)% 0.30% (0.72)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $56,254 $71,955 $79,482 $76,575 $65,551 $47,551
Portfolio turnover rate ............... 8.13% 6.49% 17.39% 12.73% 17.38% 14.14%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 91
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -----------------------------------------------------------
CLASS C (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- -------- -------- -------- -------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 43.37 $ 42.99 $ 37.63 $ 32.86 $ 27.13 $ 21.46
-------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) .... 0.03 (0.04) (0.11) (0.09) 0.08 (0.17)
Net realized and unrealized gains
(losses) ........................ (3.29) 3.52 6.38 4.92 5.65 5.84
-------- -------- -------- -------- -------- --------
Total from investment operations ...... (3.26) 3.48 6.27 4.83 5.73 5.67
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income .............. (0.04) (0.05) -- (0.06) -- --
Net realized gains ................. (1.63) (3.05) (0.91) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ................... (1.67) (3.10) (0.91) (0.06) -- --
-------- -------- -------- -------- -------- --------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........ $ 38.44 $ 43.37 $ 42.99 $ 37.63 $ 32.86 $ 27.13
======== ======== ======== ======== ======== ========
Total return(c) ....................... (7.45)% 8.35% 16.96% 14.69% 21.12% 26.42%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 1.95%(f) 1.90%(f) 1.90%(f) 1.94%(f) 2.00%(f) 2.10%
Net investment income (loss) .......... 0.17% (0.11)% (0.28)% (0.26)% 0.30% (0.73)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $217,043 $262,339 $240,395 $186,490 $136,805 $109,353
Portfolio turnover rate .............. 8.13% 6.49% 17.39% 12.73% 17.38% 14.14%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
92 | 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 YEAR ENDED OCTOBER 31,
APRIL 30, 2008 -------------------------------------------------------
CLASS R (UNAUDITED) 2007 2006 2005 2004 2003
- ------- ---------------- -------- ------- ------- ------- ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 45.66 $ 45.07 $ 39.22 $ 34.24 $ 28.13 $22.14
-------- -------- ------- ------- ------- ------
Income from investment operations(a):
Net investment income (loss)(b) .... 0.13 0.18 0.10 0.09 0.31 (0.07)
Net realized and unrealized gains
(losses) ........................ (3.48) 3.70 6.66 5.14 5.80 6.06
-------- -------- ------- ------- ------- ------
Total from investment operations ...... (3.35) 3.88 6.76 5.23 6.11 5.99
-------- -------- ------- ------- ------- ------
Less distributions from:
Net investment income .............. (0.29) (0.24) --(g) (0.25) -- --
Net realized gains ................. (1.63) (3.05) (0.91) -- -- --
-------- -------- ------- ------- ------- ------
Total distributions ................... (1.92) (3.29) (0.91) (0.25) -- --
-------- -------- ------- ------- ------- ------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
-------- -------- ------- ------- ------- ------
Net asset value, end of period ........ $ 40.39 $ 45.66 $ 45.07 $ 39.22 $ 34.24 $28.13
======== ======== ======= ======= ======= ======
Total return(c) ....................... (7.23)% 8.89% 17.54% 15.24% 21.72% 27.06%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses............................... 1.46%(f) 1.40%(f) 1.40%(f) 1.44%(f) 1.50%(f) 1.59%
Net investment income (loss)........... 0.66% 0.39% 0.22% 0.24% 0.80% (0.22)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $115,729 $110,497 $56,811 $31,550 $24,951 $6,914
Portfolio turnover rate ............... 8.13% 6.49% 17.39% 12.73% 17.38% 14.14%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) 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) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
(g) Includes a dividend distribution in the amount of $0.0025.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 93
Franklin Value Investors Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2008 --------------------------------------------------------
ADVISOR CLASS (UNAUDITED) 2007 2006 2005 2004 2003
- ------------- ---------------- -------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $ 47.26 $ 46.46 $ 40.42 $ 35.21 $ 28.78 $ 22.53
------- ------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b) ........... 0.24 0.43 0.32 0.29 0.44 0.07
Net realized and unrealized gains
(losses) ........................ (3.61) 3.80 6.86 5.28 5.99 6.18
------- ------- ------- ------- ------- -------
Total from investment operations ...... (3.37) 4.23 7.18 5.57 6.43 6.25
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income .............. (0.48) (0.38) (0.23) (0.36) -- --
Net realized gains ................. (1.63) (3.05) (0.91) -- -- --
------- ------- ------- ------- ------- -------
Total distributions ................... (2.11) (3.43) (1.14) (0.36) -- --
------- ------- ------- ------- ------- -------
Redemption fees ....................... --(e) --(e) --(e) --(e) --(e) --
------- ------- ------- ------- ------- -------
Net asset value, end of period ........ $ 41.78 $ 47.26 $ 46.46 $ 40.42 $ 35.21 $ 28.78
======= ======= ======= ======= ======= =======
Total return(c) ....................... (7.01)% 9.43% 18.13% 15.84% 22.34% 27.74%
RATIOS TO AVERAGE NET ASSETS(d)
Expenses .............................. 0.96%(f) 0.90%(f) 0.90%(f) 0.94%(f) 1.00%(f) 1.09%
Net investment income ................. 1.16% 0.89% 0.72% 0.74% 1.30% 0.28%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $70,918 $65,753 $56,912 $37,852 $26,701 $13,089
Portfolio turnover rate ............... 8.13% 6.49% 17.39% 12.73% 17.38% 14.14%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Total return is not annualized for periods less than one year.
(d) Ratios are annualized for periods less than one year.
(e) Amount rounds to less than $0.01 per share.
(f) Benefit of expense reduction rounds to less than 0.01%.
94 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS 96.4%
COMMON STOCKS 96.3%
AUTOMOBILES & COMPONENTS 2.9%
Gentex Corp. ........................................... 188,700 $ 3,524,917
Monaco Coach Corp. ..................................... 760,700 4,815,231
Thor Industries Inc. ................................... 611,000 18,525,520
(a) Winnebago Industries Inc. .............................. 560,000 9,010,400
--------------
35,876,068
--------------
BANKS 3.2%
(a) Chemical Financial Corp. ............................... 469,355 11,395,939
(a) Corus Bankshares Inc. .................................. 691,065 5,065,507
Peoples Bancorp Inc. ................................... 183,500 4,453,545
The PMI Group Inc. ..................................... 510,000 2,871,300
(a) TrustCo Bank Corp. NY .................................. 1,750,000 15,277,500
--------------
39,063,791
--------------
CAPITAL GOODS 19.7%
A.O. Smith Corp. ....................................... 108,000 3,341,520
(a) American Woodmark Corp. ................................ 312,300 5,893,101
Apogee Enterprises Inc. ................................ 770,600 17,192,086
Brady Corp., A ......................................... 492,300 16,713,585
(a) Briggs & Stratton Corp. ................................ 344,600 5,244,812
Carlisle Cos. Inc. ..................................... 411,000 11,869,680
CIRCOR International Inc. .............................. 202,200 9,739,974
(a) CNH Global NV (Netherlands)............................ 85,000 3,666,900
(b) EMCOR Group Inc. ....................................... 171,300 4,292,778
(a) Franklin Electric Co. Inc. ............................ 256,300 9,923,936
Gibraltar Industries Inc. .............................. 1,041,500 10,883,675
Graco Inc. ............................................ 395,300 16,369,373
Kennametal Inc. ........................................ 430,000 14,951,100
Mueller Industries Inc. ................................ 580,000 18,774,600
Nordson Corp. .......................................... 140,900 8,317,327
(b) Powell Industries Inc. ................................ 107,900 4,539,353
Roper Industries Inc. .................................. 195,800 12,163,096
(a) Simpson Manufacturing Co. Inc. ......................... 353,000 9,315,670
Teleflex Inc. .......................................... 140,000 7,712,600
Timken Co. ............................................. 69,600 2,516,040
(a) Trinity Industries Inc. ................................ 241,000 7,326,400
Universal Forest Products Inc. ......................... 612,000 21,242,520
Wabash National Corp. .................................. 1,158,500 9,708,230
(a) Watts Water Technologies Inc., A ....................... 327,600 8,802,612
--------------
240,500,968
--------------
COMMERCIAL SERVICES & SUPPLIES 2.3%
ABM Industries Inc. .................................... 584,400 12,237,336
Mine Safety Appliances Co. ............................. 416,500 15,481,305
--------------
27,718,641
--------------
Semiannual Report | 95
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
CONSUMER DURABLES & APPAREL 8.7%
Bassett Furniture Industries Inc. ...................... 282,600 $ 3,374,244
Brunswick Corp. ........................................ 667,000 11,125,560
D.R. Horton Inc. ....................................... 370,400 5,737,496
(a) Ethan Allen Interiors Inc. ............................. 440,500 12,100,535
Hooker Furniture Corp. ................................. 582,900 12,223,413
(a) La-Z-Boy Inc. .......................................... 1,077,100 6,861,127
(a) M/I Homes Inc. ......................................... 577,900 9,910,985
M.D.C. Holdings Inc. ................................... 307,000 13,379,060
(b) Russ Berrie and Co. Inc. ............................... 544,600 7,635,292
(b) Timberland Co., A ...................................... 270,800 3,953,680
(b) The Warnaco Group Inc. ................................. 426,000 19,655,640
--------------
105,957,032
--------------
CONSUMER SERVICES 1.7%
Hillenbrand Inc. ....................................... 126,800 2,414,272
Regis Corp. ............................................ 618,000 18,045,600
--------------
20,459,872
--------------
ENERGY 12.5%
Arch Coal Inc. ......................................... 136,000 7,800,960
(b) Atwood Oceanics Inc. ................................... 101,500 10,220,035
(b) Bristow Group Inc. ..................................... 289,000 15,244,750
CARBO Ceramics Inc. .................................... 23,000 1,093,190
CONSOL Energy Inc. ..................................... 183,000 14,815,680
(a) General Maritime Corp. ................................. 289,300 7,559,409
(b) Global Industries Ltd. ................................. 278,520 4,445,179
(b) Helix Energy Solutions Group Inc. ...................... 393,300 13,588,515
(b) Oil States International Inc. .......................... 312,000 15,618,720
(a) Overseas Shipholding Group Inc. ........................ 185,000 13,923,100
Peabody Energy Corp. ................................... 235,000 14,365,550
Rowan Cos. Inc. ........................................ 235,800 9,193,842
Teekay Corp. (Bahamas).................................. 225,600 10,296,384
Tidewater Inc. ......................................... 84,400 5,504,568
(b) Unit Corp. ............................................. 135,000 8,573,850
--------------
152,243,732
--------------
FOOD & STAPLES RETAILING 0.8%
Casey's General Stores Inc. ............................ 465,000 10,290,450
--------------
HEALTH CARE EQUIPMENT & SERVICES 1.8%
Hill-Rom Holdings Inc. ................................. 126,800 3,186,484
STERIS Corp. ........................................... 335,000 9,282,850
West Pharmaceutical Services Inc. ...................... 205,200 9,625,932
--------------
22,095,266
--------------
INSURANCE 9.7%
American National Insurance Co. ........................ 56,800 6,349,104
Arthur J. Gallagher & Co. .............................. 299,900 7,368,543
Aspen Insurance Holdings Ltd. .......................... 644,000 16,737,560
96 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
Erie Indemnity Co., A .................................. 50,100 $ 2,676,342
IPC Holdings Ltd. ...................................... 582,000 16,942,020
Montpelier Re Holdings Ltd. (Bermuda) .................. 810,000 13,365,000
Old Republic International Corp. ....................... 1,429,000 20,506,150
Protective Life Corp. .................................. 325,000 13,851,500
RLI Corp. .............................................. 162,100 7,780,800
(a) Security Capital Assurance Ltd. ........................ 1,376,000 1,412,602
StanCorp Financial Group Inc. .......................... 225,000 11,529,000
--------------
118,518,621
--------------
MATERIALS 14.9%
(a) AbitibiBowater Inc. .................................... 233,084 2,300,539
Airgas Inc. ............................................ 289,900 13,952,887
AptarGroup Inc. ........................................ 294,700 13,011,005
Cabot Corp. ............................................ 283,200 8,258,112
Gerdau Ameristeel Corp. (Canada) ....................... 1,399,600 21,847,756
Glatfelter ............................................. 772,000 11,263,480
(b) Mercer International Inc. (Germany) .................... 465,000 3,120,150
Reliance Steel & Aluminum Co. .......................... 399,400 24,275,532
RPM International Inc. ................................. 719,000 16,033,700
Steel Dynamics Inc. .................................... 1,209,800 42,161,530
United States Steel Corp. .............................. 77,000 11,854,150
(a) Westlake Chemical Corp. ................................ 834,000 13,936,140
--------------
182,014,981
--------------
REAL ESTATE 0.4%
Arbor Realty Trust Inc. ................................ 253,500 4,377,945
--------------
RETAILING 8.0%
Brown Shoe Co. Inc. .................................... 1,001,000 16,696,680
Christopher & Banks Corp. .............................. 792,900 9,395,865
Fred's Inc. ............................................ 627,600 6,953,808
(a) Group 1 Automotive Inc. ................................ 352,000 9,391,360
(b) Gymboree Corp. ......................................... 141,800 6,128,596
(b) Hot Topic Inc. ......................................... 574,300 3,049,533
The Men's Wearhouse Inc. ............................... 323,400 8,612,142
(b) Pier 1 Imports Inc. .................................... 1,384,100 10,795,980
(b) Saks Inc. .............................................. 386,000 5,021,860
(a,b) Tuesday Morning Corp. .................................. 1,137,360 6,187,238
(b) West Marine Inc. ....................................... 795,000 3,975,000
(a,b) Zale Corp. ............................................. 583,000 12,079,760
--------------
98,287,822
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 1.3%
Cohu Inc. .............................................. 601,200 10,442,844
(a,b) OmniVision Technologies Inc. ........................... 359,800 5,771,192
--------------
16,214,036
--------------
Semiannual Report | 97
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL CAP VALUE FUND SHARES VALUE
- -------------------------------------------------------------- ------------ --------------
LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
TECHNOLOGY HARDWARE & EQUIPMENT 3.4%
(b) Avocent Corp. .......................................... 590,000 $ 11,510,900
(b) Benchmark Electronics Inc. ............................. 685,000 12,179,300
Diebold Inc. ........................................... 87,600 3,433,920
(b) Mettler-Toledo International Inc. (Switzerland)......... 150,500 4,336,630
--------------
41,460,750
--------------
TRANSPORTATION 3.0%
(b) Dollar Thrifty Automotive Group Inc. ................... 285,000 3,759,150
(b) Genesee & Wyoming Inc. ................................. 487,686 17,400,636
(b) Kansas City Southern ................................... 142,800 6,437,424
SkyWest Inc. ........................................... 486,500 9,258,095
--------------
36,855,305
--------------
UTILITIES 2.0%
Atmos Energy Corp. ..................................... 171,200 4,738,816
Energen Corp. .......................................... 175,000 11,942,000
Sierra Pacific Resources ............................... 565,300 7,705,039
--------------
24,385,855
--------------
TOTAL COMMON STOCKS (COST $1,055,385,510)............... 1,176,321,135
--------------
PRINCIPAL
AMOUNT
------------
CORPORATE BOND (COST $1,304,804) 0.1%
CAPITAL GOODS 0.1%
Mueller Industries Inc., 6.00%, 11/01/14................ $ 1,319,000 1,162,369
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,056,690,314)....... 1,177,483,504
--------------
SHARES
------------
SHORT TERM INVESTMENTS 11.9%
MONEY MARKET FUND (COST $43,527,871) 3.6%
(c) Franklin Institutional Fiduciary Trust Money Market
Portfolio, 2.29%..................................... 43,527,871 43,527,871
--------------
(d) INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED
SECURITIES 8.3%
MONEY MARKET FUND (COST $101,912,895) 8.3%
(e) Bank of New York Institutional Cash Reserve Fund,
2.71% ............................................... 101,912,895 101,912,895
--------------
TOTAL INVESTMENTS (COST $1,202,131,080) 108.3%.......... 1,322,924,270
OTHER ASSETS, LESS LIABILITIES (8.3)%................... (101,590,372)
--------------
NET ASSETS 100.0%....................................... $1,221,333,898
==============
(a) A portion or all of the security is on loan as of April 30, 2008. See Note
1(e).
(b) Non-income producing for the twelve months ended April 30, 2008.
(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) The rate shown is the annualized seven-day yield at period end.
98 | Semiannual Report
Franklin Value Investors Trust
STATEMENT OF INVESTMENTS, APRIL 30, 2008 (UNAUDITED)
SELECTED PORTFOLIO ABBREVIATION
ADR - American Depository Receipt
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 99
Franklin Value Investors Trust
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2008 (unaudited)
FRANKLIN FRANKLIN FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP
VALUE FUND INVESTMENT FUND VALUE FUND
------------ --------------- -----------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ........................ $ 10,177,983 $2,247,028,233 $162,729,521
Cost - Non-controlled affiliated issuers (Note 9) .. -- 286,799,980 --
Cost - Sweep Money Fund (Note 7) ................... 817,923 210,904,773 4,334,921
Cost - Repurchase agreements ....................... -- 111,983,124 --
------------ -------------- ------------
Total cost of investments .......................... $ 10,995,906 $2,856,716,110 $167,064,442
============ ============== ============
Value - Unaffiliated issuers ....................... $ 9,786,462 $3,444,141,092 $191,819,234
Value - Non-controlled affiliated issuers (Note 9).. -- 286,510,430 --
Value - Sweep Money Fund (Note 7) .................. 817,923 210,904,773 4,334,921
Value - Repurchase agreements ...................... -- 111,983,124 --
------------ -------------- ------------
Total value of investments(a) ...................... 10,604,385 4,053,539,419 196,154,155
Receivables:
Investment securities sold ......................... -- 15,219,026 --
Capital shares sold ................................ 46,763 2,332,328 250,733
Dividends and interest ............................. 5,615 3,320,580 201,898
Affiliates ......................................... 98,782 -- --
Offering costs ........................................ 6,582 -- --
------------ -------------- ------------
Total assets .................................... 10,762,127 4,074,411,353 196,606,786
------------ -------------- ------------
Liabilities:
Payables:
Investment securities purchased ................... 108,416 -- 821,715
Capital shares redeemed ........................... 330 18,425,202 214,295
Affiliates ........................................ 4,492 2,493,580 220,819
Professional fees ................................. 12,376 64,420 13,746
Payable upon return of securities loaned .............. -- 225,262,606 --
Accrued expenses and other liabilities ................ 11,922 2,317,058 54,343
------------ -------------- ------------
Total liabilities ............................... 137,536 248,562,866 1,324,918
------------ -------------- ------------
Net assets, at value ......................... $ 10,624,591 $3,825,848,487 $195,281,868
============ ============== ============
Net assets consist of:
Paid-in capital ....................................... $ 11,133,167 $2,165,943,038 $160,538,337
Undistributed net investment income ................... 4,696 18,436,429 419,507
Net unrealized appreciation (depreciation) ............ (391,521) 1,196,823,309 29,089,713
Accumulated net realized gain (loss) .................. (121,751) 444,645,711 5,234,311
------------ -------------- ------------
Net assets, at value ......................... $ 10,624,591 $3,825,848,487 $195,281,868
============ ============== ============
(a) Includes securities loaned ........................... $ -- $ 225,211,800 $ --
100 | 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, 2008 (unaudited)
FRANKLIN FRANKLIN FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP
VALUE FUND INVESTMENT FUND VALUE FUND
---------- --------------- ------------
CLASS A:
Net assets, at value ................................................. $8,398,908 $3,416,426,342 $130,558,515
---------- --------------- ------------
Shares outstanding ................................................... 921,142 59,466,248 9,012,059
---------- --------------- ------------
Net asset value per share(a) ......................................... $ 9.12 $ 57.45 $ 14.49
---------- --------------- ------------
Maximum offering price per share (net asset value per share/94.25%)... $ 9.68 $ 60.95 $ 15.37
---------- --------------- ------------
CLASS B:
Net assets, at value ................................................. -- $ 90,225,018 $ 14,635,435
---------- --------------- ------------
Shares outstanding ................................................... -- 1,592,375 1,020,744
---------- --------------- ------------
Net asset value and maximum offering price per share(a) .............. -- $ 56.66 $ 14.34
---------- --------------- ------------
CLASS C:
Net assets, at value ................................................. $1,342,226 $ 99,292,649 $ 40,670,426
---------- --------------- ------------
Shares outstanding ................................................... 147,836 1,748,833 2,837,594
---------- --------------- ------------
Net asset value and maximum offering price per share(a) .............. $ 9.08 $ 56.78 $ 14.33
---------- --------------- ------------
CLASS R:
Net assets, at value ................................................. $ 9,114 $ 55,757,187 $ 5,913,136
---------- --------------- ------------
Shares outstanding ................................................... 1,000 977,426 411,849
---------- --------------- ------------
Net asset value and maximum offering price per share(a) .............. $ 9.11 $ 57.04 $ 14.36
---------- --------------- ------------
ADVISOR CLASS:
Net assets, at value ................................................. $ 874,343 $ 164,147,291 $ 3,504,356
---------- --------------- ------------
Shares outstanding ................................................... 95,646 2,855,111 242,533
---------- --------------- ------------
Net asset value and maximum offering price per share(a) .............. $ 9.14 $ 57.49 $ 14.45
---------- --------------- ------------
(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. | 101
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
April 30, 2008 (unaudited)
FRANKLIN FRANKLIN FRANKLIN
MICROCAP MIDCAP SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------ ------------ --------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers.......................... $179,349,386 $ 76,607,960 $1,158,603,209
Cost - Non-controlled affiliated issuers (Note 9).... 58,372,585 -- --
Cost - Sweep Money Fund (Note 7)..................... 65,528,413 7,433,812 43,527,871
------------ ------------ --------------
Total cost of investments............................ $303,250,384 $ 84,041,772 $1,202,131,080
============ ============ ==============
Value - Unaffiliated issuers......................... $262,280,367 $ 73,539,279 $1,279,396,399
Value - Non-controlled affiliated issuers (Note 9)... 71,862,807 -- --
Value - Sweep Money Fund (Note 7).................... 65,528,413 7,433,812 43,527,871
------------ ------------ --------------
Total value of investments(a)........................ 399,671,587 80,973,091 1,322,924,270
Receivables:
Investment securities sold........................... -- 91,787 18,056
Capital shares sold.................................. 98,706 195,097 3,948,283
Dividends and interest............................... 127,543 46,062 892,377
Other................................................ 88,701 -- --
------------ ------------ --------------
Total assets...................................... 399,986,537 81,306,037 1,327,782,986
------------ ------------ --------------
Liabilities:
Payables:
Investment securities purchased...................... 13,033 -- 203,196
Capital shares redeemed.............................. 490,949 214,398 2,885,243
Affiliates........................................... 324,180 82,844 1,418,969
Payable upon return of securities loaned................ 1,683,378 -- 101,912,895
Accrued expenses and other liabilities.................. 87,199 27,787 28,785
------------ ------------ --------------
Total liabilities................................. 2,598,739 325,029 106,449,088
------------ ------------ --------------
Net assets, at value........................... $397,387,798 $ 80,981,008 $1,221,333,898
============ ============ ==============
Net assets consist of:
Paid-in capital....................................... $283,197,978 $ 82,533,842 $1,033,087,921
Undistributed net investment income................... 2,343,889 90,717 1,802,859
Net unrealized appreciation (depreciation)............ 96,421,203 (3,068,681) 120,793,190
Accumulated net realized gain (loss).................. 15,424,728 1,425,130 65,649,928
------------ ------------ --------------
Net assets, at value........................... $397,387,798 $ 80,981,008 $1,221,333,898
============ ============ ==============
(a) Includes securities loaned............................. $ 1,683,250 $ -- $ 101,890,326
102 | 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, 2008 (unaudited)
FRANKLIN FRANKLIN FRANKLIN
MICROCAP MIDCAP SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------ ----------- ------------
CLASS A:
Net assets, at value ................... $342,133,804 $65,043,340 $761,389,009
------------ ----------- ------------
Shares outstanding ..................... 10,617,697 5,973,181 18,735,703
------------ ----------- ------------
Net asset value per share(a) ........... $ 32.22 $ 10.89 $ 40.64
------------ ----------- ------------
Maximum offering price per share (net
asset value per share / 94.25%) ..... $ 34.19 $ 11.55 $ 43.12
------------ ----------- ------------
CLASS B:
Net assets, at value ................... -- -- $ 56,254,178
------------ ----------- ------------
Shares outstanding ..................... -- -- 1,444,086
------------ ----------- ------------
Net asset value and maximum offering
price per share(a) .................. -- -- $ 38.95
------------ ----------- ------------
CLASS C:
Net assets, at value ................... -- $14,433,740 $217,043,398
------------ ----------- ------------
Shares outstanding ..................... -- 1,333,302 5,646,721
------------ ----------- ------------
Net asset value and maximum offering
price per share(a) .................. -- $ 10.83 $ 38.44
------------ ----------- ------------
CLASS R:
Net assets, at value ................... -- $ 436,020 $115,728,824
------------ ----------- ------------
Shares outstanding ..................... -- 40,061 2,865,565
------------ ----------- ------------
Net asset value and maximum offering
price per share(a) .................. -- $ 10.88 $ 40.39
------------ ----------- ------------
ADVISOR CLASS:
Net assets, at value ................... $ 55,253,994 $ 1,067,908 $ 70,918,489
------------ ----------- ------------
Shares outstanding ..................... 1,713,265 97,658 1,697,304
------------ ----------- ------------
Net asset value and maximum offering
price per share(a) .................. $ 32.25 $ 10.94 $ 41.78
------------ ----------- ------------
(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. | 103
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the six months ended April 30, 2008 (unaudited)
FRANKLIN FRANKLIN FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP
VALUE FUND INVESTMENT FUND VALUE FUND
---------- --------------- ------------
Investment income:
Dividends:
Unaffiliated issuers ................ $ 77,030 $ 36,154,991 $ 2,682,758
Non-controlled affiliated issuers
(Note 9) ......................... -- 665,600 --
Sweep Money Fund (Note 7) ........... 14,161 4,053,583 --
Interest ............................... -- 2,589,837 --
Income from securities loaned .......... -- 4,863,630 14,229
--------- ------------- ------------
Total investment income ....... 91,191 48,327,641 2,696,987
--------- ------------- ------------
Expenses:
Management fees (Note 3a) .............. 24,025 8,795,241 547,568
Administrative fees (Note 3b) .......... 9,254 -- 201,360
Distribution fees: (Note 3c)
Class A ............................. 12,915 4,207,283 199,776
Class B ............................. -- 475,075 77,775
Class C ............................. 5,154 521,781 213,732
Class R ............................. 22 136,851 16,823
Transfer agent fees (Note 3e) .......... 8,925 4,534,134 251,699
Custodian fees (Note 4) ................ 63 46,626 2,099
Reports to shareholders ................ 5,140 116,105 16,930
Registration and filing fees ........... 25,716 107,539 33,564
Professional fees ...................... 12,628 66,928 12,620
Trustees' fees and expenses ............ 114 138,720 6,684
Amortization of offering costs ......... 38,646 -- --
Other .................................. 1,544 43,715 5,928
--------- ------------- ------------
Total expenses ................ 144,146 19,189,998 1,586,558
Expense reductions (Note 4) ... (49) (9,302) --
Expense waived/paid by
affiliates (Note 3f) ....... (84,379) -- --
--------- ------------- ------------
Net expenses ............... 59,718 19,180,696 1,586,558
--------- ------------- ------------
Net investment income ... 31,473 29,146,945 1,110,429
--------- ------------- ------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers(a) .......... (50,630) 442,704,838 5,265,201
Non-controlled affiliated
issuers (Note 9) .............. -- (2,021,593) --
Closed-end funds distributions ...... -- 4,635,268 --
Foreign currency transactions ....... -- (3,347) --
--------- ------------- ------------
Net realized gain
(loss) ............... (50,630) 445,315,166 5,265,201
--------- ------------- ------------
Net change in unrealized appreciation
(depreciation) on investments ....... (238,304) (887,780,250) (21,910,313)
--------- ------------- ------------
Net realized and unrealized gain (loss) ... (288,934) (442,465,084) (16,645,112)
--------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations .............. $(257,461) $(413,318,139) $(15,534,683)
========= ============= ============
(a)Amount includes gains from a redemption
in-kind (Note 10) ...................... $ -- $ 108,873,568 $ --
104 | 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, 2008 (unaudited)
FRANKLIN FRANKLIN FRANKLIN
MICROCAP MIDCAP SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------ ----------- -------------
Investment income:
Dividends:
Unaffiliated issuers ................ $ 3,170,283 $ 736,574 $ 9,840,583
Non-controlled affiliated issuers
(Note 9) ......................... 474,275 -- --
Sweep Money Fund (Note 7) ........... 1,321,994 84,528 348,668
Interest ............................... 408,012 -- 40,442
Income from securities loaned .......... 72,822 7,583 2,330,071
------------ ----------- -------------
Total investment income ....... 5,447,386 828,685 12,559,764
------------ ----------- -------------
Expenses:
Management fees (Note 3a) .............. 1,450,798 293,329 3,853,140
Administrative fees (Note 3b) .......... -- 80,422 --
Distribution fees: (Note 3c)
Class A ............................. 451,988 114,362 1,040,172
Class B ............................. -- -- 294,693
Class C ............................. -- 66,727 1,081,584
Class R ............................. -- 1,192 262,470
Transfer agent fees (Note 3e) .......... 272,295 95,892 1,618,068
Custodian fees (Note 4) ................ 3,190 776 8,259
Reports to shareholders ................ 29,657 10,556 86,598
Registration and filing fees ........... 17,589 31,835 69,880
Professional fees ...................... 16,658 11,769 19,694
Trustees' fees and expenses ............ 13,072 2,636 30,105
Other .................................. 7,535 2,610 10,939
------------ ----------- -------------
Total expenses ................ 2,262,782 712,106 8,375,602
Expense reductions (Note 4) ... (2,128) (223) (4,961)
Expenses waived/paid by
affiliates (Note 3f) ....... -- (107,609) --
------------ ----------- -------------
Net expenses ............... 2,260,654 604,274 8,370,641
------------ ----------- -------------
Net investment income ... 3,186,732 224,411 4,189,123
------------ ----------- -------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers ............. 13,982,469 1,494,773 65,629,544
Non-controlled affiliated
issuers (Note 9) .............. 1,448,900 -- --
------------ ----------- -------------
Net realized gain
(loss) ............... 15,431,369 1,494,773 65,629,544
------------ ----------- -------------
Net change in unrealized appreciation
(depreciation) on investments ....... (90,393,556) (7,568,645) (170,353,190)
------------ ----------- -------------
Net realized and unrealized gain (loss) ... (74,962,187) (6,073,872) (104,723,646)
------------ ----------- -------------
Net increase (decrease) in net assets
resulting from operations .............. $(71,775,455) $(5,849,461) $(100,534,523)
============ =========== =============
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 105
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FRANKLIN ALL CAP FRANKLIN BALANCE SHEET
VALUE FUND INVESTMENT FUND
-------------------------------------- -----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
APRIL 30, 2008 PERIOD ENDED APRIL 30, 2008 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2007(a) (UNAUDITED) OCTOBER 31, 2007
---------------- ------------------- ---------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income ................... $ 31,473 $ 12,160 $ 29,146,945 $ 53,915,942
Net realized gain (loss) from investments
and foreign currency transactions .... (50,630) (71,118) 445,315,166 392,131,570
Net change in unrealized appreciation
(depreciation) on investments ........ (238,304) (153,217) (887,780,250) (52,722,539)
----------- ---------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
operations ..................... (257,461) (212,175) (413,318,139) 393,324,973
----------- ---------- --------------- ---------------
Distributions to shareholders from:
Net investment income:
Class A .............................. (43,343) -- (39,616,281) (56,124,269)
Class B .............................. -- -- (173,444) (653,600)
Class C .............................. (4,764) -- (181,204) (719,909)
Class R .............................. (46) -- (468,985) (559,473)
Advisor Class ........................ (6,079) -- (4,626,752) (5,121,199)
Net realized gains:
Class A .............................. -- -- (335,973,611) (272,064,080)
Class B .............................. -- -- (9,320,941) (7,883,359)
Class C .............................. -- -- (10,342,932) (8,695,351)
Class R .............................. -- -- (5,217,525) (3,216,294)
Advisor Class ........................ -- -- (30,754,479) (20,887,969)
----------- ---------- --------------- ---------------
Total distributions to shareholders ..... (54,232) -- (436,676,154) (375,925,503)
----------- ---------- --------------- ---------------
Capital share transactions: (Note 2)
Class A .............................. 1,509,078 7,312,010 (90,592,986) (221,364,108)
Class B .............................. -- -- (4,828,712) (13,171,468)
Class C .............................. 517,336 862,548 (9,386,741) (9,795,929)
Class R .............................. -- 10,000 2,824,309 12,922,088
Advisor Class ........................ (62,942) 1,000,367 (149,887,671) 54,496,840
----------- ---------- --------------- ---------------
Total capital share transactions ........ 1,963,472 9,184,925 (251,871,801) (176,912,577)
----------- ---------- --------------- ---------------
Redemption fees ......................... 15 47 33,779 38,929
----------- ---------- --------------- ---------------
Net increase (decrease) in
net assets ..................... 1,651,794 8,972,797 (1,101,832,315) (159,474,178)
Net assets:
Beginning of period ..................... 8,972,797 -- 4,927,680,802 5,087,154,980
----------- ---------- --------------- ---------------
End of period ........................... $10,624,591 $8,972,797 $ 3,825,848,487 $ 4,927,680,802
=========== ========== =============== ===============
Undistributed net investment income included
in net assets:
End of period ........................... $ 4,696 $ 27,455 $ 18,436,429 $ 34,346,150
=========== ========== =============== ===============
(a) For the period June 1, 2007 (commencement of operations) to October 31,
2007.
106 | 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 LARGE CAP FRANKLIN MICROCAP
VALUE FUND VALUE FUND
----------------------------------- -----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
APRIL 30, 2008 YEAR ENDED APRIL 30, 2008 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2007 (UNAUDITED) OCTOBER 31, 2007
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income ................... $ 1,110,429 $ 2,893,123 $ 3,186,732 $ 4,658,233
Net realized gain (loss) from investments
and foreign currency transactions .... 5,265,201 13,319,606 15,431,369 58,150,672
Net change in unrealized appreciation
(depreciation) on investments ........ (21,910,313) 3,667,722 (90,393,556) 2,157,157
------------ ------------ ------------- ------------
Net increase (decrease) in net
assets resulting from
operations ..................... (15,534,683) 19,880,451 (71,775,455) 64,966,062
------------ ------------ ------------- ------------
Distributions to shareholders from:
Net investment income:
Class A .............................. (2,093,669) (2,342,258) (4,205,492) (6,348,151)
Class B .............................. (126,996) (139,377) -- --
Class C .............................. (332,068) (441,613) -- --
Class R .............................. (97,647) (88,308) -- --
Advisor Class ........................ (59,611) (49,519) (487,350) (225,219)
Net realized gains:
Class A .............................. (8,731,188) (9,229,421) (53,226,645) (24,824,164)
Class B .............................. (1,064,276) (1,118,742) --
Class C .............................. (2,886,027) (3,251,511) -- --
Class R .............................. (442,625) (394,504) -- --
Advisor Class ........................ (194,600) (154,969) (4,817,863) (747,866)
------------ ------------ ------------- ------------
Total distributions to shareholders ........ (16,028,707) (17,210,222) (62,737,350) (32,145,400)
------------ ------------ ------------- ------------
Capital share transactions: (Note 2)
Class A .............................. 134,442 (34,902,280) (2,391,149) (38,181,352)
Class B .............................. (1,488,438) (3,747,506) -- --
Class C .............................. (5,227,456) (11,758,318) -- --
Class R .............................. (809,675) (10,654) -- --
Advisor Class ........................ 578,034 1,372,280 33,498,786 26,014,141
------------ ------------ ------------- ------------
Total capital share transactions ........... (6,813,093) (49,046,478) 31,107,637 (12,167,211)
------------ ------------ ------------- ------------
Redemption fees ............................ 895 263 2,110 2,023
------------ ------------ ------------- ------------
Net increase (decrease) in
net assets ..................... (38,375,588) (46,375,986) (103,403,058) 20,655,474
Net assets:
Beginning of period ..................... 233,657,456 280,033,442 500,790,856 480,135,382
------------ ------------ ------------- ------------
End of period ........................... $195,281,868 $233,657,456 $ 397,387,798 $500,790,856
============ ============ ============= ============
Undistributed net investment income included
in net assets:
End of period ........................... $ 419,507 $ 2,019,069 $ 2,343,889 $ 3,849,999
============ ============ ============= ============
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 107
Franklin Value Investors Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FRANKLIN MIDCAP FRANKLIN SMALL CAP
VALUE FUND VALUE FUND
----------------------------------- -----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
APRIL 30, 2008 YEAR ENDED APRIL 30, 2008 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2007 (UNAUDITED) OCTOBER 31, 2007
---------------- ---------------- ---------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income ................... $ 224,411 $ 1,605,473 $ 4,189,123 $ 5,674,202
Net realized gain (loss) from investments 1,494,773 1,028,308 65,629,544 48,335,673
Net change in unrealized appreciation
(depreciation) on investments ........ (7,568,645) 1,266,035 (170,353,190) 50,133,835
----------- ----------- -------------- --------------
Net increase (decrease) in net
assets resulting from
operations ..................... (5,849,461) 3,899,816 (100,534,523) 104,143,710
----------- ----------- -------------- --------------
Distributions to shareholders from:
Net investment income:
Class A .............................. (781,237) (801,821) (6,548,827) (4,407,801)
Class C .............................. (76,158) (122,118) (206,327) (266,542)
Class R .............................. (3,051) (8,309) (727,257) (316,135)
Advisor Class ........................ (15,642) (15,315) (633,598) (505,499)
Net realized gains:
Class A .............................. (891,244) (621,341) (29,890,541) (47,916,137)
Class B .............................. -- -- (2,563,602) (5,483,021)
Class C .............................. (186,888) (132,590) (9,528,566) (17,152,546)
Class R .............................. (5,498) (6,141) (4,042,310) (4,083,147)
Advisor Class ........................ (13,872) (10,395) (2,133,159) (4,066,624)
----------- ----------- -------------- --------------
Total distributions to shareholders ........ (1,973,590) (1,718,030) (56,274,187) (84,197,452)
----------- ----------- -------------- --------------
Capital share transactions: (Note 2)
Class A .............................. (1,021,433) 28,087,583 11,092,491 134,189,399
Class B .............................. -- -- (7,401,280) (8,627,417)
Class C .............................. 574,380 5,312,924 (14,926,775) 19,329,728
Class R .............................. (208,040) 523,637 17,630,078 52,776,349
Advisor Class ........................ 33,512 325,925 11,969,578 5,308,474
----------- ----------- -------------- --------------
Total capital share transactions ........... (621,581) 34,250,069 18,364,092 202,976,533
----------- ----------- -------------- --------------
Redemption fees ............................ 56 240 7,912 11,128
----------- ----------- -------------- --------------
Net increase (decrease) in
net assets ..................... (8,444,576) 36,432,095 (138,436,706) 222,933,919
Net assets:
Beginning of period ..................... 89,425,584 52,993,489 1,359,770,604 1,136,836,685
----------- ----------- -------------- --------------
End of period ........................... $80,981,008 $89,425,584 $1,221,333,898 $1,359,770,604
=========== =========== ============== ==============
Undistributed net investment income included
in net assets:
End of period ........................... $ 90,717 $ 742,394 $ 1,802,859 $ 5,729,745
=========== =========== ============== ==============
108 | 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 (Trust) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as a diversified, open-end
investment company, consisting of six funds (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 All Cap Value Fund Franklin Balance Sheet Investment Fund
Franklin MidCap Value 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
Semiannual Report | 109
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. SECURITY VALUATION (CONTINUED)
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.
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, 2008. Repurchase agreements are valued at cost.
110 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.
E. SECURITIES LENDING
The Funds participate in a principal based security lending program and receive
a minimum guaranteed payment for their participation, and may receive additional
payments based on actual securities loaned. The fund receives 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 held in a segregated account with the Funds'
custodian on the Funds' behalf. While the funds continue to bear the market risk
with respect to securities loaned and the risk that the principal may default on
its obligations to the funds, the principal bears the risk of default by any
third party borrower.
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. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recognized as soon as the Funds are
notified of the ex-dividend date. Distributions to shareholders are recorded on
the ex-dividend date and are determined according to income tax regulations (tax
basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States of America. These differences may be permanent or temporary.
Permanent differences are reclassified among capital accounts to reflect their
tax character. These reclassifications have no impact on net assets or the
results of operations. Temporary differences are not reclassified, as they may
reverse in subsequent periods.
Semiannual Report | 111
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)
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.
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. OFFERING COSTS
Offering costs are amortized on a straight line basis over twelve months.
I. 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.
J. 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.
K. 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.
112 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At April 30, 2008, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Funds' shares were as follows:
FRANKLIN ALL CAP FRANKLIN BALANCE SHEET
VALUE FUND INVESTMENT FUND
--------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ----------- ---------------
CLASS A SHARES:
Six Months ended April 30, 2008
Shares sold....................................... 257,567 $2,265,101 3,602,133 $ 204,374,940
Shares issued in reinvestment of distributions.... 3,523 30,828 6,319,439 358,944,108
Shares redeemed................................... (89,640) (786,851) (11,424,675) (653,912,034)
------- ---------- ----------- ---------------
Net increase (decrease)........................... 171,450 $1,509,078 (1,503,103) $ (90,592,986)
======= ========= =========== ===============
Year ended October 31, 2007(a)
Shares sold....................................... 803,935 $7,832,682 10,205,917 $ 715,192,846
Shares issued in reinvestment of distributions.... -- -- 4,657,380 313,627,999
Shares redeemed................................... (54,243) (520,672) (17,958,437) (1,250,184,953)
------- ---------- ----------- ---------------
Net increase (decrease)........................... 749,692 $7,312,010 (3,095,140) $ (221,364,108)
======= ========= =========== ===============
CLASS B SHARES:
Six Months ended April 30, 2008
Shares sold....................................... 7,515 $ 420,376
Shares issued in reinvestment of distributions.... 151,839 8,530,324
Shares redeemed................................... (246,442) (13,779,412)
----------- ---------------
Net increase (decrease)........................... (87,088) $ (4,828,712)
=========== ===============
Year ended October 31, 2007
Shares sold....................................... 18,712 $ 1,292,523
Shares issued in reinvestment of distributions.... 116,332 7,745,341
Shares redeemed................................... (321,754) (22,209,332)
----------- ---------------
Net increase (decrease)........................... (186,710) $ (13,171,468)
=========== ===============
CLASS C SHARES:
Six Months ended April 30, 2008
Shares sold....................................... 74,392 $ 655,400 26,902 $ 1,509,769
Shares issued in reinvestment of distributions.... 496 4,332 169,875 9,560,562
Shares redeemed................................... (16,231) (142,396) (360,382) (20,457,072)
------- ---------- ----------- ---------------
Net increase (decrease)........................... 58,657 $ 517,336 (163,605) $ (9,386,741)
------- ---------- ----------- ---------------
Year ended October 31, 2007(a)
Shares sold....................................... 94,457 $ 912,684 63,855 $ 4,412,080
Shares issued in reinvestment of distributions.... -- -- 128,179 8,546,996
Shares redeemed................................... (5,278) (50,136) (331,729) (22,755,005)
------- ---------- ----------- ---------------
Net increase (decrease)........................... 89,179 $ 862,548 (139,695) $ (9,795,929)
======= ========= =========== ===============
Semiannual Report | 113
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN ALL CAP FRANKLIN BALANCE SHEET
VALUE FUND INVESTMENT FUND
--------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ----------- -------------
CLASS R SHARES:
Six Months ended April 30, 2008
Shares sold....................................... -- $ -- 99,879 $ 5,666,883
Shares issued in reinvestment of distributions.... -- -- 100,718 5,686,511
Shares redeemed................................... -- -- (150,082) (8,529,085)
------- ---------- ---------- -------------
Net increase (decrease)........................... -- $ -- 50,515 $ 2,824,309
======= ========== ========== =============
Year ended October 31, 2007(a)
Shares sold....................................... 1,000 $ 10,000 323,636 $ 22,820,838
Shares issued in reinvestment of distributions.... -- -- 56,372 3,775,767
Shares redeemed................................... -- -- (196,835) (13,674,517)
------- ---------- ---------- -------------
Net increase (decrease)........................... 1,000 $ 10,000 183,173 $ 12,922,088
======= ========== ========== =============
ADVISOR CLASS SHARES:
Six Months ended April 30, 2008
Shares sold....................................... 7,414 $ 65,888 1,029,898 $ 58,759,948
Shares issued in reinvestment of distributions.... 680 5,955 138,628 7,872,659
Shares redeemed in-kind (Note 10) -- -- (2,258,629) (122,508,050)
Shares redeemed................................... (15,043) (134,785) (1,668,032) (94,012,228)
------- ---------- ---------- -------------
Net increase (decrease).............................. (6,949) $ (62,942) (2,758,135) $(149,887,671)
======= ========== ========== =============
Year ended October 31, 2007(a)
Shares sold....................................... 107,349 $1,046,114 2,878,564 $ 198,925,673
Shares issued in reinvestment of distributions.... -- -- 23,747 1,599,836
Shares redeemed................................... (4,754) (45,747) (2,092,642) (146,028,669)
------- ---------- ---------- -------------
Net increase (decrease)........................... 102,595 $1,000,367 809,669 $ 54,496,840
======= ========== ========== =============
(a) For the period ended June 1, 2007 (commencement of operation) to October
31, 2007 for the Franklin All Cap Value Fund.
FRANKLIN LARGE CAP FRANKLIN MICROCAP
VALUE FUND VALUE FUND
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
CLASS A SHARES:
Six Months ended April 30, 2008
Shares sold ........................................ 866,646 $ 12,573,959 534,069 $ 18,430,302
Shares issued in reinvestment of distributions ..... 675,677 9,770,294 1,553,014 52,057,039
Shares redeemed .................................... (1,554,450) (22,209,811) (2,100,454) (72,878,490)
---------- ----------- ---------- -------------
Net increase (decrease) ............................ (12,127) $134,442 (13,371) $ (2,391,149)
========== =========== ========== =============
Year ended October 31, 2007
Shares sold ........................................ 2,011,683 $ 33,028,361 968,140 $ 42,218,982
Shares issued in reinvestment of distributions ..... 635,098 10,250,489 687,607 28,391,274
Shares redeemed .................................... (4,750,957) (78,181,130) (2,491,023) (108,791,608)
---------- ----------- ---------- -------------
Net increase (decrease) ............................ (2,104,176) $(34,902,280) (835,276) $ (38,181,352)
========== =========== ========== =============
114 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN LARGE CAP FRANKLIN MICROCAP
VALUE FUND VALUE FUND
------------------------- -----------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ------ --------
CLASS B SHARES:
Six Months ended April 30, 2008
Shares sold ...................................... 24,350 $ 351,912
Shares issued in reinvestment of distributions ... 73,708 1,057,707
Shares redeemed .................................. (203,121) (2,898,057)
---------- ------------
Net increase (decrease) .......................... (105,063) $ (1,488,438)
========== ============
Year ended October 31, 2007
Shares sold ...................................... 49,864 $ 813,952
Shares issued in reinvestment of distributions ... 70,473 1,128,274
Shares redeemed .................................. (348,441) (5,689,732)
---------- ------------
Net increase (decrease) .......................... (228,104) $ (3,747,506)
========== ============
CLASS C SHARES:
Six Months ended April 30, 2008
Shares sold ...................................... 171,011 $ 2,459,837
Shares issued in reinvestment of distributions ... 200,862 2,880,367
Shares redeemed .................................. (727,177) (10,567,660)
---------- ------------
Net increase (decrease) .......................... (355,304) $ (5,227,456)
========== ============
Year ended October 31, 2007
Shares sold ...................................... 420,592 $ 6,842,996
Shares issued in reinvestment of distributions ... 207,457 3,319,293
Shares redeemed .................................. (1,351,589) (21,920,607)
---------- ------------
Net increase (decrease) .......................... (723,540) $(11,758,318)
========== ============
CLASS R SHARES:
Six Months ended April 30, 2008
Shares sold ...................................... 59,871 $ 852,456
Shares issued in reinvestment of distributions ... 37,279 534,576
Shares redeemed .................................. (155,730) (2,196,707)
---------- ------------
Net increase (decrease) .......................... (58,580) $ (809,675)
========== ============
Year ended October 31, 2007
Shares sold ...................................... 171,390 $ 2,782,632
Shares issued in reinvestment of distributions ... 30,117 482,472
Shares redeemed .................................. (200,935) (3,275,758)
---------- ------------
Net increase (decrease) .......................... 572 $ (10,654)
========== ============
Semiannual Report | 115
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN LARGE CAP FRANKLIN MICROCAP
VALUE FUND VALUE FUND
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ------------
ADVISOR CLASS SHARES:
Six Months ended April 30, 2008
Shares sold ........................ 46,636 $ 669,088 840,497 $29,174,810
Shares issued in reinvestment
of distributions ................ 16,740 241,219 157,757 5,288,026
Shares redeemed .................... (22,592) (332,273) (28,082) (964,050)
------- ---------- ------- -----------
Net increase (decrease) ............ 40,784 $ 578,034 970,172 $33,498,786
======= ========== ======= ===========
Year ended October 31, 2007
Shares sold ........................ 122,383 $2,051,466 616,159 $27,139,357
Shares issued in reinvestment
of distributions ................ 11,958 192,523 23,334 964,134
Shares redeemed .................... (52,708) (871,709) (48,420) (2,089,350)
------- ---------- ------- -----------
Net increase (decrease) ............ 81,633 $1,372,280 591,073 $26,014,141
======= ========== ======= ===========
FRANKLIN MIDCAP FRANKLIN SMALL CAP
VALUE FUND VALUE FUND
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
CLASS A SHARES:
Six Months ended April 30, 2008
Shares sold ........................ 992,985 $ 10,740,625 2,881,832 $ 114,877,020
Shares issued in reinvestment
of distributions ................ 144,443 1,591,767 824,418 32,498,573
Shares redeemed .................... (1,246,528) (13,353,825) (3,455,125) (136,283,102)
---------- ------------ ---------- -------------
Net increase (decrease) ............ (109,100) $ (1,021,433) 251,125 $ 11,092,491
========== ============ ========== =============
Year ended October 31, 2007
Shares sold ........................ 3,183,325 $ 38,241,463 6,238,565 $ 286,883,330
Shares issued in reinvestment
of distributions ................ 110,345 1,277,790 1,069,850 47,383,669
Shares redeemed .................... (963,327) (11,431,670) (4,357,085) (200,077,600)
---------- ------------ ---------- -------------
Net increase (decrease) ............ 2,330,343 $ 28,087,583 2,951,330 $ 134,189,399
========== ============ ========== =============
CLASS B SHARES:
Six Months ended April 30, 2008
Shares sold ........................ 29,436 $ 1,125,373
Shares issued in reinvestment
of distributions ................ 63,127 2,392,512
Shares redeemed .................... (287,653) (10,919,165)
-------- -------------
Net increase (decrease) ............ (195,090) $ (7,401,280)
======== =============
Year ended October 31, 2007
Shares sold ........................ 63,827 $ 2,813,658
Shares issued in reinvestment
of distributions ................ 119,243 5,077,359
Shares redeemed .................... (374,095) (16,518,434)
-------- -------------
Net increase (decrease) ............ (191,025) $ (8,627,417)
======== =============
116 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN MIDCAP FRANKLIN SMALL CAP
VALUE FUND VALUE FUND
---------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- -------------
CLASS C SHARES:
Six Months ended April 30, 2008
Shares sold...................... 212,419 $ 2,254,137 485,892 $ 18,317,223
Shares issued in reinvestment
of distributions.............. 22,426 246,235 228,018 8,525,589
Shares redeemed.................. (179,859) (1,925,992) (1,115,791) (41,769,587)
-------- ----------- ---------- ------------
Net increase (decrease).......... 54,986 $ 574,380 (401,881) $(14,926,775)
======== =========== ========== ============
Year ended October 31, 2007
Shares sold...................... 562,097 $ 6,708,329 1,491,241 $ 64,910,723
Shares issued in reinvestment
of distributions.............. 20,476 236,293 368,482 15,502,022
Shares redeemed.................. (137,048) (1,631,698) (1,403,086) (61,083,017)
-------- ----------- ---------- ------------
Net increase (decrease).......... 445,525 $ 5,312,924 456,637 $ 19,329,728
======== =========== ========== ============
CLASS R SHARES:
Six Months ended April 30, 2008
Shares sold...................... 14,188 $ 158,855 892,366 $ 35,160,082
Shares issued in reinvestment
of distributions.............. 776 8,550 107,596 4,219,897
Shares redeemed.................. (32,986) (375,445) (554,207) (21,749,901)
-------- ----------- ---------- ------------
Net increase (decrease).......... (18,022) $ (208,040) 445,755 $ 17,630,078
======== =========== ========== ============
Year ended October 31, 2007
Shares sold...................... 85,469 $ 986,194 1,800,705 $ 82,141,499
Shares issued in reinvestment
of distributions.............. 1,220 14,089 88,779 3,915,153
Shares redeemed.................. (40,356) (476,646) (730,045) (33,280,303)
-------- ----------- ---------- ------------
Net increase (decrease).......... 46,333 $ 523,637 1,159,439 $ 52,776,349
======== =========== ========== ============
ADVISOR CLASS SHARES:
Six Months ended April 30, 2008
Shares sold...................... 6,551 $ 71,308 621,709 $ 25,024,525
Shares issued in reinvestment
of distributions.............. 2,437 26,923 53,178 2,153,708
Shares redeemed.................. (6,133) (64,719) (368,821) (15,208,655)
-------- ----------- ---------- ------------
Net increase (decrease).......... 2,855 $ 33,512 306,066 $ 11,969,578
======== =========== ========== ============
Year ended October 31, 2007
Shares sold...................... 33,091 $ 404,122 1,275,685 $ 60,553,398
Shares issued in reinvestment
of distributions.............. 2,153 25,000 91,979 4,180,443
Shares redeemed.................. (8,446) (103,197) (1,201,364) (59,425,367)
-------- ----------- ---------- ------------
Net increase (decrease).......... 26,798 $ 325,925 166,300 $ 5,308,474
======== =========== ========== ============
Semiannual Report | 117
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 All Cap Value Fund and Franklin Large Cap Value Fund each pay an
investment management fee to Advisory Services based on their respective average
daily net assets 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
Effective January 1, 2008, 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 $7.5 billion
0.440% Over $7.5 billion, up to and including $10 billion
0.430% 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
Prior to January 1, 2008, the Franklin Balance Sheet Investment Fund paid 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
118 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES (CONTINUED)
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.
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
FT Services provides administrative services to the Funds. The Franklin All Cap
Value Fund, Franklin Large Cap Value Fund and Franklin MidCap Value Fund each
pay an administrative fee to FT Services of 0.20% per year of their respective
average daily net assets. Under an agreement with Advisory Services, the
administrative fee for Franklin Balance Sheet Investment Fund, Franklin MicroCap
Value Fund and Franklin Small Cap Value Fund is paid by Advisory Services based
on each fund's 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.
Semiannual Report | 119
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
C. DISTRIBUTION FEES (CONTINUED)
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.
The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP MICROCAP MIDCAP SMALL CAP
VALUE FUND 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% -- 0.35% --
Class B ............ -- 1.00% 1.00% -- -- 1.00%
Class C ............ 1.00% 1.00% 1.00% -- 1.00% 1.00%
Class R ............ 0.50% 0.50% 0.50% -- 0.50% 0.50%
For the Franklin Large Cap Value Fund, Distributors has agreed to limit the
current rate to 0.30% per year for Class A shares through January 31, 2009.
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
ALL CAP BALANCE SHEET LARGE CAP
VALUE FUND INVESTMENT FUND VALUE FUND
---------- --------------- ----------
Sales charges retained net of commissions
paid to unaffiliated broker/dealers ...... $5,094 $13,681 $27,987
Contingent deferred sales charges retained .. $ 196 $22,939 $10,756
FRANKLIN FRANKLIN FRANKLIN
MICROCAP MIDCAP SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
---------- --------------- ----------
Sales charges retained net of commissions
paid to unaffiliated broker/dealers ...... $7,351 $26,318 $158,105
Contingent deferred sales charges retained .. $ 108 $ 2,667 $ 50,951
120 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
E. TRANSFER AGENT FEES
For the period ended April 30, 2008, 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 FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP MICROCAP MIDCAP SMALL CAP
VALUE FUND INVESTMENT FUND VALUE FUND VALUE FUND VALUE FUND VALUE FUND
---------- --------------- ---------- ---------- ---------- ----------
Transfer agent fees ... $6,068 $1,651,820 $142,791 $158,668 $53,968 $856,356
F. WAIVER AND EXPENSE REIMBURSEMENTS
FT Services and Advisory Services have agreed in advance to waive all or a
portion of their respective fees and to assume payment of other expenses through
February 28, 2009 for Franklin All Cap Value Fund and Franklin MidCap Value
Fund. Total expenses waived or paid are not subject to reimbursement by the
funds subsequent to the funds' fiscal year end. After February 28, 2009, FT
Services and Advisory Services may discontinue this waiver at any time upon
notice to the funds' Board of Trustees.
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, 2008, the
custodian fees were reduced as noted in the Statements of Operations.
5. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At October 31, 2007, the Franklin All Cap Value Fund had tax
basis capital losses of $71,121 expiring in 2015.
At April 30, 2008, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
FRANKLIN FRANKLIN FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP
VALUE FUND INVESTMENT FUND VALUE FUND
----------- --------------- -------------
Cost of investments ......................... $10,995,906 $2,857,351,105 $167,094,553
=========== ============== ============
Unrealized appreciation ..................... $ 724,163 $1,568,389,623 $ 50,484,779
Unrealized depreciation (1,115,684) (372,201,309) (21,425,177)
----------- -------------- ------------
Net unrealized appreciation (depreciation) .. $ (391,521) $1,196,188,314 $ 29,059,602
=========== ============== ============
Semiannual Report | 121
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. INCOME TAXES (CONTINUED)
FRANKLIN FRANKLIN FRANKLIN
MICROCAP MIDCAP SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------ ------------ --------------
Cost of investments ........................... $303,250,384 $ 84,110,778 $1,202,608,737
============ ============ ==============
Unrealized appreciation ....................... $134,529,389 $ 9,074,662 $ 318,916,687
Unrealized depreciation ...................... (38,108,186) (12,212,349) (198,601,154)
------------ ------------ --------------
Net unrealized appreciation (depreciation) .... $ 96,421,203 $ (3,137,687) $ 120,315,533
============ ============ ==============
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions, bond
discounts and premiums, offering costs, and pass-through entity income.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and foreign currency
transactions.
6. INVESTMENT TRANSACTIONS
Purchases and sales (excluding short term securities) for the period ended April
30, 2008, were as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ALL CAP BALANCE SHEET LARGE CAP MICROCAP MIDCAP SMALL CAP
VALUE FUND INVESTMENT FUND(a) VALUE FUND VALUE FUND VALUE FUND VALUE FUND
----------- ------------------ ----------- ----------- ----------- ------------
Purchases ......... $2,262,037 $129,709,716 $ 8,591,766 $20,785,556 $ 7,661,079 $ 96,720,645
Sales ............. $ 315,949 $463,684,469 $24,781,627 $27,119,319 $11,712,847 $142,533,430
(a) Sales of investments excludes a redemption in-kind of $122,194,190.
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (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 (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
122 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. RESTRICTED SECURITIES (CONTINUED)
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, 2008, 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., Contingent Distribution........... 9/07/06 $ 973,637 $1,016,256
495,000 Black River BancVenture Inc. ...................... 8/13/07 4,950,000 4,307,985
94,800 LandCo Real Estate LLC, Liquidating Trust.......... 9/07/06 240,792 168,744
----------
TOTAL RESTRICTED SECURITIES (1.38% of Net Assets).. $5,492,985
==========
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, 2008,
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 PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- --------------------------------------- ------------ --------- ---------- ----------- ------------ ---------- -----------
FRANKLIN BALANCE SHEET INVESTMENT FUND
NON-CONTROLLED AFFILIATES
Dollar Thrifty Automotive Group Inc. .. 1,763,067 100,000 -- 1,863,067 $ 24,573,854 $ -- $ --
Furmanite Corp. ....................... 2,783,000 -- 94,400 2,688,600 22,745,556 -- 404,530
Furniture Brands International Inc. ... 3,250,000 150,000 -- 3,400,000 46,070,000 665,600 --
KGen Power Corp., 144A ................ 4,400,000 -- -- 4,400,000 85,800,000 -- --
Syms Corp. ............................ 1,430,000 -- -- 1,430,000 21,450,000 -- --
Tecumseh Products Co., A .............. 1,085,000 -- 85,000 1,000,000 31,330,000 -- (2,426,123)
Tecumseh Products Co., B .............. 310,000 -- -- 310,000 8,521,900 -- --
Zale Corp. ............................ 1,767,600 453,400 -- 2,221,000 46,019,120 -- --
------------ -------- -----------
TOTAL AFFILIATED SECURITIES
(7.49% of Net Assets) .............. $286,510,430 $665,600 $(2,021,593)
============ ======== ===========
FRANKLIN MICROCAP VALUE FUND
NON-CONTROLLED AFFILIATES
ACMAT Corp., A ........................ 392,800 -- -- 392,800 $ 9,397,740 $ -- $ --
American Pacific Corp. ................ 676,300 -- -- 676,300 11,652,649 -- --
Black River BancVenture Inc. .......... 495,000 -- -- 495,000 4,307,985 -- --
Cobra Electronics Corp. ............... 376,300 43,700 -- 420,000 1,327,200 67,200 --
Continental Materials Corp. ........... 109,000 -- -- 109,000 2,512,450 -- --
Delta Apparel Inc. .................... 680,000 25,000 -- 705,000 3,102,000 -- --
Duckwall-ALCO Stores Inc. ............. 227,500 -- -- 227,500 2,648,100 -- --
Espey Manufacturing & Electronics
Corp. .............................. 156,000 -- -- 156,000 3,237,000 292,500 --
GTSI Corp. ............................ 488,140 -- -- 488,140 3,905,120 -- --
Hardinge Inc. ......................... 652,500 122,500 -- 775,000 12,927,000 71,375 --
Semiannual Report | 123
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES (CONTINUED)
NUMBER OF NUMBER OF
SHARES HELD SHARES HELD VALUE REALIZED
AT BEGINNING GROSS GROSS AT END AT END INVESTMENT CAPITAL
NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- --------------------------------- ------------ --------- ---------- ----------- ----------- ----------- -----------
FRANKLIN MICROCAP VALUE FUND
(CONTINUED)
NON-CONTROLLED AFFILIATES
International Shipholding Corp. . 474,800 -- 29,800 445,000 $ 8,459,450 $ -- $ 490,883
Nashua Corp. .................... 357,930 -- -- 357,930 3,647,307 -- --
Omega Protein Corp. ............. 1,000,000 -- 130,000 870,000 --(a) -- 958,017
Proliance International Inc. .... 823,800 -- -- 823,800 922,656 -- --
Rockford Corp. .................. 575,000 -- -- 575,000 767,625 -- --
S&K Famous Brands Inc. .......... 255,500 -- -- 255,500 804,825 -- --
Tandy Brands Accessories Inc. .. 540,000 -- -- 540,000 2,243,700 43,200 --
----------- -------- ----------
TOTAL AFFILIATED SECURITIES
(18.08% of Net Assets)........ $71,862,807 $474,275 $1,448,900
=========== ======== ==========
(a) As of April 30, 2008, not an affiliate.3
10. REDEMPTION IN-KIND
During the period ended April 30, 2008, the Franklin Balance Sheet Investment
Fund realized $108,876,568 of net gains resulting from a redemption in-kind in
which a shareholder redeemed fund shares for securities held by the fund rather
than for cash. Because such gains are not taxable to the fund, and are not
distributed to remaining shareholders, they have been reclassified from
accumulated net realized gains to paid-in capital.
11. NEW ACCOUNTING PRONOUNCEMENTS
The Funds adopted 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), on April 30, 2008. FIN 48
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. The Funds (excluding the
Franklin All Cap Value Fund) have reviewed the tax positions, taken on federal
income tax returns, for each of the three open tax years as of October 31, 2007,
and have determined that no provision for income tax is required in the Funds'
financial statements. The Franklin All Cap Value Fund has reviewed the tax
position as of October 31, 2007 and has determined that no provision for income
tax is required in the Franklin All Cap Value Fund's financial statements.
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 Funds believe the adoption of SFAS 157
will have no material impact on its financial statements.
124 | Semiannual Report
Franklin Value Investors Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In March 2008, FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
(SFAS 161), which expands disclosures about derivative investments and hedging
activities. SFAS 161 is effective for fiscal years beginning after November 15,
2008, and interim periods within those fiscal years. The Funds are currently
evaluating the impact, if any, of applying the various provisions of SFAS 161.
Semiannual Report | 125
Franklin Value Investors Trust
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held February 25, 2008, 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 Funds within the Trust (Fund(s))
other than the recently formed Franklin All Cap Value Fund, which did not
require an agreement renewal. 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 complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy of net asset
126 | Semiannual Report
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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
on the efficiency of its trading operations 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 predesignated 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
and the high industry ranking given to the Franklin Templeton website.
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 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
2007 and for the previous 10 years ended December 31, 2007, 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 2007 was in the lowest quintile of such performance universe and on an
annualized basis, was in the second-lowest quintile of such performance universe
for each of the previous three- and five-year periods, and in the upper half of
such universe for the previous 10-year period. In discussing such performance,
management pointed out the Fund's strategy of seeking gains through investments
in companies with low price to book values through investing in companies whose
value will grow over an anticipated holding
Semiannual Report | 127
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
period of five or more years. Management further pointed out that the Fund had
been closed to new investors since May 2002 to permit an orderly inflow of
investments in view of the scarcity of securities meeting such criteria, but
believed recent stock volatility had begun to present potential new investment
opportunities. While intending to continuously monitor future performance, the
Board felt the Fund's performance did not warrant any change in portfolio
managers or investment strategy and noted, as shown in the Lipper report, that
the Fund's total return on an annualized basis exceeded 15% for the five-year
period and 10% for the 10-year period.
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
2007 was in the second-lowest quintile of such performance universe. The Fund's
operations encompass less than 10 full years and such report showed that the
Fund's annualized total return during the previous three- and five-year periods
was in the lowest quintile of its performance universe. Neither the Board nor
management was satisfied with such performance and noted that a change had been
made in the Fund's lead portfolio manager and discussed other steps being taken
to improve performance.
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
2007 was in the upper half of such performance universe, and on an annualized
basis, was in either the highest or second-highest quintile of such performance
universe during each of the previous three-, five- and 10-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 two full years and the Lipper
report showed its 2007 total return during such years to be in the second-lowest
quintile of such universe. The Board did not find such performance to be
particularly meaningful in view of the Fund's limited period of operations and
the small size of the Fund, noting that its expenses were subsidized by
management.
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
2007 placed it in the second-highest quintile of such performance universe and
that its total return on an annualized basis was also in the second-highest
quintile of such universe for the previous three- and five-year periods and in
the lowest quintile of such performance universe for the previous 10-year
period. The Board found such performance to be acceptable.
128 | Semiannual Report
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 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 Board was satisfied with the
expenses of these Funds. The Lipper report for Franklin Large Cap Value Fund
showed its contractual investment management fee rate to be below the median of
its expense group, and its actual total expenses to be 12 basis points above the
median of such expense group. The Board found the expenses of such Fund to be
acceptable. The Lipper report for Franklin MidCap Value Fund showed its
contractual fee rate and actual total expenses in each case to be less than five
basis points above its respective Lipper expense group medians. The Board found
such expenses to be satisfactory, noting the relatively small size of Franklin
MidCap Value Fund and that its expenses were subsidized by management.
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 Fund. 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
Semiannual Report | 129
Franklin Value Investors Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
regulatory and compliance requirements resulting from the Sarbanes-Oxley Act and
recent SEC and other regulatory requirements. In addition, the Board considered
a third-party study comparing the profitability of the Manager's parent on an
overall basis as compared to other publicly held managers broken down to show
profitability from management operations exclusive of distribution expenses, as
well as profitability including distribution expenses. The Board also considered
the extent to which the Manager and its affiliates might derive ancillary
benefits from fund operations, including its interest in a joint venture entity
that financed up-front commissions paid to brokers/dealers who sold fund Class B
shares prior to February 2005, when the offering of such shares was
discontinued, as well as potential benefits resulting from allocation of fund
brokerage and the use of "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
agreement 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 $436 million at year-end has been closed to new investors, with
limited exceptions, 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 within 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.
130 | Semiannual Report
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.
Semiannual Report | 131
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(FRANKLIN TEMPLETON INVESTMENTS LOGO)
One Franklin Parkway
San Mateo, CA 94403-1906
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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.
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 Galen G. Vetter, Chief Executive Officer - Finance and Administration, and
Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura
F. Fergerson, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN VALUE INVESTORS TRUST
By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Executive Officer - Finance and Administration
Date June 26, 2008
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/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Executive Officer - Finance and Administration
Date June 26, 2008
By /S/LAURA F. FERGERSON
---------------------
Laura F. Fergerson
Chief Financial Officer and Chief Accounting Officer
Date June 26, 2008