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 811-10157
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FRANKLIN GLOBAL TRUST
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 07/31
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Date of reporting period: 1/31/05
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
[LOGO OMITTED]
FGT FUNDS
---------------------
Fiduciary Large Capitalization Growth and Income Fund
Cusip 353533870
Fiduciary Small Capitalization Equity Fund
Cusip 353533862
Fiduciary European Smaller Companies Fund
Cusip 353533854
This report is intended for the Funds' shareholders. It may not be distributed
to prospective investors in the Funds unless it is preceded or accompanied by a
current prospectus. To receive a free copy of the prospectus, talk to your
financial advisor or call us at 1-800/845-4514.
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.
Investment Manager
Fiduciary International, Inc.
600 5th Avenue
New York, NY 10020-2302
Distributor
Franklin/Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906
FGT1 S2005 03/05
[LOGO OMITTED]
Contents
SEMIANNUAL REPORT
President's Message .............................. 1
Fiduciary Large Capitalization
Growth and Income Fund ........................... 2
Fiduciary Small Capitalization Equity Fund ....... 8
Fiduciary European Smaller Companies Fund ........ 14
Financial Highlights and
Statements of Investments ........................ 19
Financial Statements ............................. 32
Notes to Financial Statements .................... 37
Tax Designation .................................. 47
Shareholder Information .......................... 49
Semiannual Report
President's Message
Dear Shareholder:
I am pleased to present the enclosed Franklin Global Trust Funds' semiannual
report covering the period ended January 31, 2005. In each Fund report, the
portfolio managers discuss market conditions and Fund performance. A complete
list of each Fund's holdings, as well as the financial statements, is included
in the semiannual report.
/s/ Rupert H. Johnson, Jr.
- --------------------------
Rupert H. Johnson, Jr.
President and Chief Executive Officer - Investment Management
Franklin Global Trust
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Semiannual Report| 1
Fiduciary Large Capitalization
Growth and Income Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Fiduciary Large Capitalization Growth and
Income Fund seeks long-term growth of principal and income through investing at
least 80% of its net assets in large capitalization companies with market
capitalizations of more than $5 billion, or that are within the top 50% of the
Russell 1000[R] Index, at the time of purchase. The Fund invests mainly in
dividend-paying stocks the manager believes will approximate the dividend yield
of companies in the Standard & Poor's 500 Composite Index (S&P 500). 1
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.
This semiannual report for Fiduciary Large Capitalization Growth and Income Fund
covers the period ended January 31, 2005.
PERFORMANCE OVERVIEW
Fiduciary Large Capitalization Growth and Income Fund delivered a +6.12% total
return for the six months ended January 31, 2005. The Fund underperformed its
benchmark, the S&P 500, which returned 8.15% during the same period. 2
ECONOMIC AND MARKET OVERVIEW
During the six months ended January 31, 2005, the domestic economy expanded
steadily across most industries, sectors and regions. Gross domestic product
(GDP) rose at annualized rates of 4.0% and 3.8% during the third and fourth
quarters of 2004. Major contributors to GDP during fourth quarter 2004 were
personal spending, capital equipment spending, inventory investment and
government spending. However, the trade deficit dragged on economic growth as
the real deficit widened to an annualized $631.9 billion in fourth quarter 2004,
from $583.2 billion in the third quarter. 3
1. The Russell 1000 Index is market capitalization weighted and measures
performance of the 1,000 largest companies in the Russell 3000[R] Index, which
represent approximately 92% of total market capitalization of the Russell 3000
Index. 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.
2. Source: Standard & Poor's Micropal. Please see footnote 1 for a description
of the S&P 500. 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.
3. Source: Bureau of Economic Analysis.
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 20.
2 |Semiannual Report
The labor market firmed and unemployment dropped from 5.5% to 5.2% during the
reporting period. 4 An improving business and employment environment contributed
to increased consumer confidence. However, consumers still held an uncertain
outlook for future income and business conditions.
The core inflation rate rose to 2.3% for the 12 months ended January 31, 2005.
Including volatile food and energy costs, the inflation rate was 3.0%. Aiming to
keep inflation tame, the Federal Reserve Board (Fed) raised the federal funds
target rate from 1.25% to 2.25%, the highest level in more than three years. The
Fed said it will respond to changes in economic prospects as needed to fulfill
its obligation to maintain price stability.
Despite a generally robust economy and improving corporate fundamentals,
investors had to digest a wide range of information during the six-month period,
including rising inflation, the dollar's value, a contentious presidential
election and ongoing concerns about terrorism, war and reconstruction in Iraq.
Disappointing earnings from a number of blue chip companies applied downward
pressure, but initial public offering (IPO) activity was strong, and investor
sentiment improved later in the period despite the mixed signals. After U.S.
elections concluded, the markets enjoyed a strong rally. The blue chip stocks of
the Dow Jones Industrial Average gained 4.57% for the period under review, while
the broader S&P 500 rose 8.15%, and the technology-heavy NASDAQ Composite Index
increased 9.60%. 5
INVESTMENT STRATEGY
We are research driven, fundamental investors, pursuing a blend of growth and
value strategies. We use a top-down analysis of macroeconomic trends, market
sectors (with some attention to the sector weightings in the Fund's comparative
index) and industries combined with a bottom-up analysis of individual
securities. In selecting investments for the Fund, we look for companies we
believe are positioned for growth in revenues, earnings or assets, and are
selling at reasonable prices. We employ a thematic approach to identify sectors
that may benefit from longer dynamic growth. Within these sectors, we consider
the basic financial and operating strength and quality of a company and company
management. The Fund, from time to time, may have significant positions in
particular sectors such as technology or industrials. We also seek to identify
companies that we believe are temporarily out of favor with investors, but have
a good intermediate- or long-term outlook.
4. Source: Bureau of Labor Statistics.
5. 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. Please see footnote 1 for a description of
the S&P 500. The NASDAQ Composite Index measures all domestic and international
common stocks listed on The NASDAQ Stock Market. The index is market value
weighted and includes over 3,000 companies.
Semiannual Report| 3
PORTFOLIO BREAKDOWN
Fiduciary Large Capitalization
Growth and Income Fund
1/31/05
- ----------------------------------------
% OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ----------------------------------------
Aerospace & Defense 8.0%
Oil & Gas 7.8%
Biotechnology 7.6%
Insurance 6.6%
Communications Equipment 6.1%
Industrial Conglomerates 5.7%
Food Products 5.6%
Electric Utilities 5.5%
Hotels, Restaurants & Leisure 5.4%
Energy Equipment & Services 4.5%
Pharmaceuticals 4.4%
Semiconductors & Semiconductor
Equipment 4.3%
Software 4.0%
Road & Rail 2.4%
Machinery 2.3%
Commercial Services & Supplies 2.3%
Media 2.3%
IT Services 2.1%
Computers & Peripherals 2.1%
Air Freight & Logistics 2.1%
Diversified Financial Services 2.1%
Capital Markets 1.9%
Short-Term Investments
& Other Net Assets 4.9%
MANAGER'S DISCUSSION
During the six-month reporting period, Fund holdings that generated notable
returns included Archer Daniels Midland, Duke Energy and Symantec. Archer
Daniels Midland, one of the world's largest agricultural processors, appreciated
58% and contributed to Fund performance. Despite the still high corn and energy
costs, it delivered stronger earnings than estimated for its second fiscal
quarter. Leading North American energy marketer Duke Energy recovered from the
collapsed power and gas trading business, posting profits that exceeded internal
targets and met Wall Street expectations. Showing strength at its natural gas
field services unit and its franchised electric segment, Duke Energy rose 28%
during the period. In addition, the global information security leader Symantec
aided Fund performance. Its proposed merger with storage and backup program
specialist Veritas Software to form a more diversified firm was initially well
received by some analysts but was later met with broader sentiment of
uncertainty and skepticism, and we sold it by period-end.
In general, if the value of the U.S. dollar increases compared with a foreign
currency, an investment traded in that foreign currency will decrease in value
because it will be worth fewer U.S. dollars. This can have a negative effect on
Fund performance. Conversely, when the U.S. dollar weakens in relation to a
foreign currency, an investment traded in that foreign currency will increase in
value, which can contribute to Fund performance. The U.S. dollar fell
approximately 11% versus the euro from the beginning of the period until
December 31, 2004, and then recovered approximately 4% through period-end. 6 The
pattern was similar for the Swiss franc and the British pound, the three
currencies affecting the Fund. The currencies positively affected the return of
the non-U.S. dollar equities. On January 31, 2005, these equities represented a
portion of the Fund's total net assets. However, one cannot expect the same
result in future periods.
Several holdings had negative returns during the period and hampered Fund
performance. Merck, facing bad news reports including the Vioxx withdrawal and
ruling on the Fosamax patent, was the most significant underperformer, dropping
37%. Cisco, the leading supplier of data networking equipment, also declined 14%
due to rising inventories and slowing growth in its core routers and switches
businesses. Another detractor was American International Group, the world's
largest insurance underwriter, with shares down 6%. The company settled its case
with regulators during this reporting period; however, it received widespread
adverse attention amid allegations that it had engaged in illegal commission
arrangements with major brokers.
6. Source: USD-EUR Composite (NY).
4 |Semiannual Report
Thank you for your continued participation in Fiduciary Large Capitalization
Growth and Income Fund. We look forward to serving your future investment needs.
/s/S. Mackintosh Pulsifer
- -------------------------
S. Mackintosh Pulsifer
Vice President of Fiduciary and Senior VP of Fiduciary Trust
/s/Carl Scaturo
- ---------------
Carl Scaturo
Vice President of Fiduciary and Senior VP of Fiduciary Trust
Fiduciary Large Capitalization Growth and Income Fund
- -------------------------------------------------------------------------------
MAIN RISKS
- -------------------------------------------------------------------------------
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. The Fund may invest in stocks
of foreign companies, which involve special risks, including currency
fluctuations and economic as well as political uncertainty. The Fund's
portfolio includes technology stocks, a sector that has been one of the most
volatile and involves special risks. The Fund's prospectus also includes a
description of the main investment risks.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
Semiannual Report| 5
Your Fund's Expenses
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
6 |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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,061.20 $5.25
Hypothetical (5% return before expenses) $1,000 $1,020.11 $5.14
*Expenses are equal to the annualized expense ratio of 1.01%, multiplied by the
average account value over the period, multiplied by 184/365 to reflect the
one-half year period.
Semiannual Report| 7
Fiduciary Small Capitalization Equity Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Fiduciary Small Capitalization Equity
Fund seeks growth of principal through investing at least 80% of its net assets
in marketable equity and equity-related securities of small capitalization
companies with market capitalizations not exceeding $1.5 billion or the highest
market capitalization in the Russell 2000[R] Index, whichever is greater, at the
time of purchase. 1
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.
This semiannual report for Fiduciary Small Capitalization Equity Fund covers the
period ended January 31, 2005.
PERFORMANCE OVERVIEW
Fiduciary Small Capitalization Equity Fund delivered a +10.03% total return for
the six months ended January 31, 2005. The Fund underperformed its benchmark,
the Russell 2000 Growth Index, which had a 13.48% total return during the same
period. 2
ECONOMIC AND MARKET OVERVIEW
During the six months ended January 31, 2005, the domestic economy expanded
steadily across most industries, sectors and regions. Gross domestic product
(GDP) rose at annualized rates of 4.0% and 3.8% during the third and fourth
quarters of 2004. Major contributors to GDP during fourth quarter 2004 were
personal spending, capital equipment spending, inventory investment and
government spending. However, the trade deficit dragged on economic growth as
the real deficit widened to an annualized $631.9 billion in fourth quarter 2004,
from $583.2 billion in the third quarter. 3
The labor market firmed and unemployment dropped from 5.5% to 5.2% during the
reporting period. 4 An improving business and employment environment contributed
to increased consumer confidence. However, consumers still held an uncertain
outlook for future income and business conditions.
1. The Russell 2000 Index is market capitalization weighted and measures
performance of the 2,000 smallest companies in the Russell 3000 Index, which
represent approximately 8% of total market capitalization of the Russell 3000
Index.
2. Source: Standard & Poor's Micropal. The Russell 2000 Growth Index is market
capitalization weighted and measures performance of those Russell 2000 Index
companies with higher price-to-book ratios and higher 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.
3. Source: Bureau of Economic Analysis.
4. Source: Bureau of Labor Statistics.
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 24.
8 |Semiannual Report
The core inflation rate rose to 2.3% for the 12 months ended January 31, 2005.
Including volatile food and energy costs, the inflation rate was 3.0%. Aiming to
keep inflation tame, the Federal Reserve Board (Fed) raised the federal funds
target rate from 1.25% to 2.25%, the highest level in more than three years. The
Fed said it will respond to changes in economic prospects as needed to fulfill
its obligation to maintain price stability.
Despite a generally robust economy and improving corporate fundamentals,
investors had to digest a wide range of information during the six-month period,
including rising inflation, the dollar's value, a contentious presidential
election and ongoing concerns about terrorism, war and reconstruction in Iraq.
Disappointing earnings from a number of blue chip companies applied downward
pressure, but initial public offering (IPO) activity was strong, and investor
sentiment improved later in the period despite the mixed signals. After U.S.
elections concluded, the markets enjoyed a strong rally. The blue chip stocks of
the Dow Jones Industrial Average gained 4.57% for the period under review, while
the broader Standard & Poor's 500 Composite Index (S&P 500) rose 8.15%, and the
technology-heavy NASDAQ Composite Index increased 9.60%. 5
For the period under review, small cap stocks outperformed their large cap
counterparts. Small cap companies as measured by the Russell 2000 Index gained
13.88% for the six months ended January 31, 2005, topping large cap companies as
measured by the Russell 1000 Index, which rose 8.92%. 6 Performance varied by
investment style, with the Russell 2000 Growth Index increasing 13.48%, compared
with the 14.24% return for the Russell 2000 Value Index. 7 Within the Russell
2000 Growth Index, the energy and materials sectors posted the strongest gains,
led by companies in the oil and gas and chemicals industries. Telecommunication
services and consumer staples also posted solid gains, driven by strong
performance in the wireless telecommunication services and household products
industries. Utilities and information technology were the poorest performing
sectors, especially the multi-utilities and unregulated power industry and the
electronic equipment and instruments industry.
5. Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is price
weighted based on the average market price of 30 blue chips 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 domestic and international common stocks listed on The NASDAQ
Stock Market. The index is market value weighted and includes over 3,000
companies.
6. Source: Standard & Poor's Micropal. Please see footnote 1 for a
description of the Russell 2000 Index. The Russell 1000 Index is market
capitalization weighted and measures performance of the 1,000 largest companies
in the Russell 3000 Index, which represents approximately 92% of total market
capitalization of the Russell 3000 Index.
7. Source: Standard & Poor's Micropal. Please see footnote 2 for a description
of the Russell 2000 Growth Index. The Russell 2000 Value Index is market
capitalization weighted and measures those Russell 2000 Index companies with
lower price-to-book ratios and lower forecasted growth values.
Semiannual Report| 9
PORTFOLIO BREAKDOWN
Fiduciary Small Capitalization Equity Fund
1/31/05
- -----------------------------------------------------
% OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- -----------------------------------------------------
Health Care Providers & Services 12.0%
Semiconductors & Semiconductor
Equipment 6.4%
Capital Markets 5.9%
Internet Software & Services 4.7%
Machinery 4.3%
Software 4.2%
Pharmaceuticals 4.1%
Oil & Gas 4.1%
Aerospace & Defense 3.9%
Biotechnology 3.8%
Leisure Equipment & Products 3.7%
Commercial Banks 3.5%
Hotels, Restaurants & Leisure 3.3%
Electronic Equipment & Instruments 3.1%
Health Care Equipment & Supplies 3.0%
Commercial Services & Supplies 2.9%
Communications Equipment 2.5%
Specialty Retail 2.0%
Other 17.9%
Short-Term Investments
& Other Net Assets 4.7%
INVESTMENT STRATEGY
Our U.S. small cap growth equity process is based on the application of a
disciplined bottom-up methodology. We believe that a diversified small cap
equity portfolio focused on companies we regard as having significant earnings
growth potential, managed within a disciplined framework of active sector
selection and valuation analysis, can provide long-term capital appreciation. We
seek companies that possess a relatively high rate of return on invested capital
and may offer the potential for accelerating earnings growth as they can offer
an opportunity to participate in new products, services and technologies.
MANAGER'S DISCUSSION
During the six months under review, the Fund's performance benefited relative to
the Russell 2000 Growth Index from stock selection in the industrials sector. 8
In particular, contributors to performance included Aviall, an aerospace
aftermarket provider; Commercial Vehicle Group, a supplier of various car and
truck interior products; consulting firm Charles River Associates; and mining
equipment manufacturer Joy Global. Stock selection in the materials sector also
helped the Fund's relative performance. 9 Our three positions in the sector,
Quanex, Massey Energy and Minerals Technologies, each posted strong returns.
Detracting from relative performance was stock selection in the information
technology sector. 10 Specifically, our holdings in United Online, Micrel,
Cognex and new position PalmSource fell in value during the period, hindering
overall performance versus the index. The health care sector hurt relative
overall performance as we were overweighted relative to the index in Pediatrix
Medical, which underperformed amid an adverse shift in its revenue mix. 11 Our
choice of energy sector stocks also detracted from performance, due in part to
the fall in oil prices from their peak of $56 per barrel during the reporting
period. 12
8. The industrials sector comprises aerospace and defense, commercial services
and supplies, machinery, and road and rail in the SOI.
9. The materials sector comprises metals and mining in the SOI.
10. The information technology sector comprises communications equipment,
electronic equipment and instruments, Internet software and services, IT
services, semiconductors and semiconductor equipment, and software in the SOI.
11. The health care sector comprises biotechnology, health care equipment and
supplies, health care providers and services, and pharmaceuticals in the SOI.
12. The energy sector comprises energy equipment and services, and oil and gas
in the SOI.
10 |Semiannual Report
Thank you for your continued participation in Fiduciary Small Capitalization
Equity Fund. We look forward to serving your future investment needs.
/s/John P. Callaghan
- --------------------
John P. Callaghan
Vice President of Fiduciary and Senior VP of Fiduciary Trust
/s/Alison J. Schatz, CFA
- ------------------------
Alison J. Schatz, CFA
Portfolio Manager of Fiduciary and Senior VP of Fiduciary Trust
Fiduciary Small Capitalization Equity Fund
- -------------------------------------------------------------------------------
MAIN RISKS
- -------------------------------------------------------------------------------
The Fund's investments in small-company stocks involve certain risks as such
stocks have exhibited greater price volatility than larger-company stocks,
particularly over the short term. The Fund's portfolio includes technology
stocks, a sector that has been one of the most volatile and involves special
risks. The Fund may invest in stocks of foreign companies, which involve
special risks, including currency fluctuations and economic as well as
political uncertainty. The Fund's prospectus also includes a description of
the main investment risks.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
Semiannual Report| 11
Your Fund's Expenses
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period." IF EXPENSES PAID DURING PERIOD WERE $7.50,
THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
12 |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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,100.30 $6.72
Hypothetical (5% return before expenses) $1,000 $1,018.80 $6.46
*Expenses are equal to the annualized expense ratio of 1.27%, multiplied by the
average account value over the period, multiplied by 184/365 to reflect the
one-half year period.
Semiannual Report| 13
Fiduciary European Smaller Companies Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Fiduciary European Smaller Companies Fund
seeks long-term growth of principal by investing at least 80% of its net assets
in a diversified portfolio of marketable equity and equity-related securities of
smaller European companies. Smaller European companies are defined as those with
market capitalizations between $100 million and $5 billion or the equivalent in
local currencies at the time of purchase, and that are organized under the laws
of or have a principal office in a country in Europe, or whose securities are
listed or traded principally in Europe.
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.
This semiannual report for Fiduciary European Smaller Companies Fund covers the
period ended January 31, 2005.
PERFORMANCE OVERVIEW
Fiduciary European Smaller Companies Fund delivered a +21.29% total return for
the six months ended January 31, 2005. The Fund underperformed its benchmark,
the HSBC Smaller European Companies Index, which had a 27.91% total return
during the same period. 1
ECONOMIC AND MARKET OVERVIEW
Economic growth across Europe was generally positive during the six months under
review, though it was more subdued than other regions of the world. Regional
growth trends were supported by the European corporate sector's reasonable top
line growth and sustainable margins.
European equity markets performed well during the six months under review, with
stocks of small capitalization companies generally outperforming those of their
large capitalization peers. Among small capitalization stocks, investments in
growth style companies, as a group, lagged their value-oriented counterparts.
Within the HSBC Smaller European Companies Index, a measure of small
capitalization stock performance in developed European countries, the energy and
utilities sectors posted the strongest gains, led by companies in the energy
equipment and services industry, and the multi-utilities and unregulated power
industry. Telecommunication services and industrials stocks also posted solid
1. Source: Standard & Poor's Micropal. The HSBC Smaller European Companies Index
comprises about 1,500 companies in Europe having market capitalizations in a
similar range to that used by the Fund. The index composition is updated
quarterly. 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 29.
14 |Semiannual Report
gains, driven by strong performance in the wireless telecommunication services
and marine industries. Information technology and consumer staples were the
poorest performing sectors, especially the household products and semiconductors
and semiconductor equipment industries.
INVESTMENT STRATEGY
Our European small cap equity investment process aims to produce a portfolio of
securities of dynamic companies operating in sectors that offer attractive
growth potential as a result of secular changes. We use a disciplined investment
approach, based on fundamental analysis and valuation, in selecting securities
based on their perceived potential for growth. Our team of research analysts is
dedicated to the identification of smaller companies that have, in their
opinion, the potential to provide above-average performance.
MANAGER'S DISCUSSION
The Fund's performance relative to the HSBC Smaller European Companies Index was
helped most by our strong stock selection within the industrials sector. 2 For
example, our holdings in Kingspan Group, an Irish construction products
manufacturer; Andritz, an Austrian paper and steel machinery company; Techem, a
German energy and water measuring company; and Grafton Group, an Irish
do-it-yourself retailer, all rose in value and helped boost the Fund's total
return.
In general, if the value of the U.S. dollar increases compared with a foreign
currency, an investment traded in that foreign currency will decrease in value
because it will be worth fewer U.S. dollars. This can have a negative effect on
Fund performance. Conversely, when the U.S. dollar weakens in relation to a
foreign currency, an investment traded in that foreign currency will increase
in value, which can contribute to Fund performance. For the six months ended
January 31, 2005, the U.S. dollar declined in value relative to most non-U.S.
currencies. The Fund's performance was positively affected by the portfolio's
predominant investment in securities with non-U.S. currency exposure due to the
U.S. dollar's decrease in value during the period. However, one cannot expect
the same result in future periods.
GEOGRAPHIC DISTRIBUTION
Fiduciary European Smaller Companies Fund
1/31/05
- ---------------------------------------------
% OF TOTAL
COUNTRY NET ASSETS
- ---------------------------------------------
U.K. 20.4%
Germany 15.5%
Norway 8.6%
France 8.2%
Sweden 7.5%
Switzerland 7.5%
Ireland 7.4%
Denmark 5.0%
Finland 3.8%
Austria 3.8%
Greece 3.3%
Italy 3.0%
Netherlands 1.7%
Short-Term Investments
& Other Net Assets 4.3%
2. The industrials sector comprises building products, commercial services and
supplies, construction and engineering, distributors, industrial conglomerates,
machinery, road and rail, and trading companies in the SOI.
Semiannual Report| 15
- -------------------------------------------------------------------------------
MAIN RISKS
- -------------------------------------------------------------------------------
The Fund may invest in stocks of foreign companies, which involve special
risks, including currency fluctuations and economic as well as political
uncertainty. The Fund's investments in smaller- company stocks involve certain
risks as such stocks have exhibited greater price volatility than
larger-company stocks, particularly over the short term. By having significant
investments in particular sectors from time to time, the Fund's performance
will be more affected by any adverse economic, business or other sector
developments than a fund that always invests in a wider variety of sectors.
The Fund's prospectus also includes a description of the main investment
risks.
There were some detractors from relative performance versus the benchmark index.
Our results were hindered most by our holdings in the consumer discretionary
sector. 3 Two examples that we sold by period-end were Pace Micro Technology, a
U.K.-based digital receivers/decoder manufacturer, and Mothercare, a U.K.
multiline retailer. Several portfolio holdings in the information technology
sector also dampened the Fund's relative performance, including Temenos Group, a
Swiss financial software company; Freenet, a German Internet services provider;
and Lastminute.com, a U.K.-based last-minute travel provider. 4 We sold Freenet
and Lastminute.com during the period.
Thank you for your continued participation in Fiduciary European Smaller
Companies Fund. We look forward to serving your future investment needs.
/s/Margaret S. Lindsay
- ----------------------
Margaret S. Lindsay
Vice President of Fiduciary and Executive VP of Fiduciary Trust
/s/Pratik M. Patel
- ------------------
Pratik M. Patel
Portfolio Manager of Fiduciary and VP of Fiduciary Trust
/s/Alexandre Oltramare
- ----------------------
Alexandre Oltramare
Assistant Vice President of Fiduciary
Fiduciary European Smaller Companies Fund
3. The consumer discretionary sector comprises automobiles; auto components;
hotels, restaurants and leisure; household durables; leisure equipment and
products; media; specialty retail; and textiles, apparel and luxury goods in the
SOI.
4. The information technology sector comprises software, IT services, office
electronics, communications equipment, Internet software and services, and
electronic equipment and instruments in the SOI.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
16 |Semiannual Report
Your Fund's Expenses
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period." IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 =
$64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Semiannual Report| 17
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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- ---------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,212.90 $8.59
Hypothetical (5% return before expenses) $1,000 $1,017.44 $7.83
*Expenses are equal to the annualized expense ratio of 1.54%, multiplied by the
average account value over the period, multiplied by 184/365 to reflect the
one-half year period.
18 |Semiannual Report
Franklin Global Trust
FINANCIAL HIGHLIGHTS A
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2005 YEAR ENDED JULY 31, YEAR ENDED NOVEMBER 30,
(UNAUDITED) 2004 2003E 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $6.77 $5.91 $5.65 $7.21 $9.63 $11.39
------------------------------------------------------------------------------
Income from investment operations:
Net investment income b ...................... .03 .03 .03 .04 .04 .03
Net realized and unrealized gains (losses) ... .39 .90 .27 (1.19) (.81) (.22)
------------------------------------------------------------------------------
Total from investment operations .............. .42 .93 .30 (1.15) (.77) (.19)
------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.04) (.03) (.04) (.05) (.04) (.03)
Net realized gains ........................... (.36) (.04) -- (.36) (1.61) (1.54)
------------------------------------------------------------------------------
Total distributions ........................... (.40) (.07) (.04) (.41) (1.65) (1.57)
------------------------------------------------------------------------------
Net asset value, end of period ................ $6.79 $6.77 $5.91 $5.65 $7.21 $ 9.63
==============================================================================
Total returnc ................................. 6.12% 15.78% 5.30% (16.93)% f (9.22)% (1.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $87,616 $82,921 $70,684 $60,904 $74,634 $87,052
Ratios to average net assets:
Expenses ..................................... 1.01% d 1.02% 1.21% d 1.10% 1.09% 1.02%
Expenses net of waiver and payments
by affiliate ................................. 1.01% d .98% 1.03% d 1.03% 1.03% .97%
Net investment income ........................ .89% d .43% .77% d .73% .61% .28%
Portfolio turnover rate ....................... 15.68% 48.04% 33.02% 64.46% 37.59% 8.74%
a Financial highlights presented reflect historical financial information from
Fiduciary Trust International (FTI)--Large Capitalization Growth and Income
Fund as a result of a merger on July 24, 2003.
b Based on average daily shares outstanding effective with year ended November
30, 2000.
c Total return is not annualized for periods less than one year.
d Annualized.
e For the period December 1, 2002 to July 31, 2003.
f The Fund's advisor fully reimbursed the Fund for a loss on a transaction not
meeting the Fund's investment guidelines, which otherwise would have reduced
total return by .15%.
Semiannual Report | See notes to financial statements.| 19
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 95.1%
AEROSPACE & DEFENSE 8.0%
Honeywell International Inc. ........................................................... 80,000 $ 2,878,400
Northrop Grumman Corp. ................................................................. 40,000 2,075,200
United Technologies Corp. .............................................................. 20,000 2,013,600
------------
6,967,200
------------
AIR FREIGHT & LOGISTICS 2.1%
United Parcel Service Inc., B .......................................................... 25,000 1,867,000
------------
BIOTECHNOLOGY 7.6%
a Amgen Inc. ............................................................................. 32,000 1,991,680
a Biogen Idec Inc. ....................................................................... 32,000 2,078,720
a Genentech Inc. ......................................................................... 55,100 2,628,821
------------
6,699,221
------------
CAPITAL MARKETS 1.9%
Bank of New York Co. Inc. .............................................................. 57,000 1,693,470
------------
COMMERCIAL SERVICES & SUPPLIES 2.3%
Manpower Inc. .......................................................................... 42,000 2,043,300
------------
COMMUNICATIONS EQUIPMENT 6.1%
a Alcatel SA (France) .................................................................... 125,000 1,793,604
a Cisco Systems Inc. ..................................................................... 100,000 1,804,000
a Corning Inc. ........................................................................... 157,000 1,717,580
------------
5,315,184
------------
COMPUTERS & PERIPHERALS 2.1%
International Business Machines Corp. .................................................. 20,000 1,868,400
------------
DIVERSIFIED FINANCIAL SERVICES 2.1%
Citigroup Inc. ......................................................................... 37,000 1,814,850
------------
ELECTRIC UTILITIES 5.5%
Duke Energy Corp. ...................................................................... 95,000 2,545,050
FPL Group Inc. ......................................................................... 30,000 2,299,200
------------
4,844,250
------------
ENERGY EQUIPMENT & SERVICES 4.5%
BJ Services Co. ........................................................................ 40,000 1,922,000
a Nabors Industries Ltd. (Bermuda) ....................................................... 40,000 2,016,000
------------
3,938,000
------------
FOOD PRODUCTS 5.6%
Archer Daniels Midland Co. ............................................................. 115,000 2,783,000
Nestle SA (Switzerland) ................................................................ 8,000 2,098,890
------------
4,881,890
------------
20 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
HOTELS RESTAURANTS & LEISURE 5.4%
Carnival Corp. ......................................................................... 42,000 $ 2,419,200
McDonald's Corp. ....................................................................... 70,000 2,267,300
------------
4,686,500
------------
INDUSTRIAL CONGLOMERATES 5.7%
General Electric Co. ................................................................... 60,000 2,167,800
Tyco International Ltd. ................................................................ 77,000 2,782,780
------------
4,950,580
------------
INSURANCE 6.6%
Hartford Financial Services Group Inc. ................................................. 31,000 2,085,990
Montpelier Re Holdings Ltd. (Bermuda) .................................................. 49,000 1,835,050
Willis Group Holdings Ltd. ............................................................. 48,000 1,856,640
------------
5,777,680
------------
IT SERVICES 2.1%
First Data Corp. ....................................................................... 46,000 1,874,040
------------
MACHINERY 2.3%
Eaton Corp. ............................................................................ 30,100 2,046,499
------------
MEDIA 2.3%
a Time Warner Inc. ....................................................................... 110,000 1,980,000
------------
OIL & GAS 7.8%
BP PLC, ADR (United Kingdom) ........................................................... 41,000 2,444,420
ConocoPhillips ......................................................................... 21,000 1,948,590
ExxonMobil Corp. ....................................................................... 47,000 2,425,200
------------
6,818,210
------------
PHARMACEUTICALS 4.4%
Johnson & Johnson ...................................................................... 34,000 2,199,800
Merck & Co. Inc. ....................................................................... 60,000 1,683,000
------------
3,882,800
------------
ROAD & RAIL 2.4%
Union Pacific Corp. .................................................................... 35,000 2,086,000
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.3%
Analog Devices Inc. .................................................................... 50,000 1,794,500
Intel Corp. ............................................................................ 88,000 1,975,600
------------
3,770,100
------------
Semiannual Report| 21
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SOFTWARE 4.0%
Microsoft Corp. ........................................................................ 70,000 $ 1,839,600
SAP AG (Germany) ....................................................................... 11,000 1,704,526
------------
3,544,126
------------
TOTAL COMMON STOCKS (COST $62,620,659) 83,349,300
------------
SHORT TERM INVESTMENT (COST $4,340,397) 5.0%
MONEY FUND
b Franklin Institutional Fiduciary Trust Money Market Portfolio .......................... 4,340,397 4,340,397
------------
TOTAL INVESTMENTS (COST $66,961,056) 100.1% 87,689,697
OTHER ASSETS, LESS LIABILITIES (.1)% (73,324)
------------
NET ASSETS 100.0% $ 87,616,373
============
See Portfolio Abbreviations on page 31.
a Non-income producing.
b See Note 7 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
22 | See notes to financial statements.|Semiannual Report
Franklin Global Trust
FINANCIAL HIGHLIGHTS A
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND
----------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2005 YEAR ENDED JULY 31, YEAR ENDED NOVEMBER 30,
(UNAUDITED) 2004 2003E 2002 2001 2000
----------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $14.86 $14.25 $12.48 $18.71 $21.00 $20.81
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) b ................. (.08) (.16) (.07) (.15) (.13) (.15)
Net realized and unrealized gains (losses) ..... 1.57 .77 1.84 (4.37) (2.16) 2.25
----------------------------------------------------------------------------
Total from investment operations ................ 1.49 .61 1.77 (4.52) (2.29) 2.10
----------------------------------------------------------------------------
Less distributions from net realized gains ...... -- -- -- (1.71) -- (1.91)
----------------------------------------------------------------------------
Net asset value, end of period .................. $16.35 $14.86 $14.25 $12.48 $18.71 $21.00
============================================================================
Total return c .................................. 10.03% 4.28% 14.18% (26.65)% (10.90)% 10.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $55,441 $62,786 $61,026 $59,882 $97,660 $109,385
Ratios to average net assets:
Expenses ....................................... 1.27% d 1.27% 1.43% d 1.34% 1.32% 1.29%
Expenses net of waiver and payments
by affiliate .................................. 1.27% d 1.26% 1.30% d 1.30% 1.30% 1.27%
Net investment income (loss) ................... (1.05)% d (1.01)% (.89)% d (1.01)% (.67)% (.68)%
Portfolio turnover rate ......................... 55.66% 130.22% 92.58% 178.05% 111.67% 90.01%
a Financial highlights presented reflect historical financial information from
Fiduciary Trust International (FTI)--Small Capitalization Equity Fund as a
result of a merger on July 24, 2003.
b Based on average daily shares outstanding effective with year ended November
30, 2001.
c Total return is not annualized for periods less than one year.
d Annualized.
e For the period December 1, 2002 to July 31, 2003.
Semiannual Report | See notes to financial statements. | 23
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 95.3%
AEROSPACE & DEFENSE 3.9%
a Aviall Inc. .................................................................................. 35,800 $ 1,031,398
EDO Corp. .................................................................................... 35,000 1,118,250
------------
2,149,648
------------
BIOTECHNOLOGY 3.8%
a Alkermes Inc. ................................................................................ 53,200 674,044
a Cell Genesys Inc. ............................................................................ 119,900 839,300
a Telik Inc. ................................................................................... 32,400 616,248
------------
2,129,592
------------
CAPITAL MARKETS 5.9%
a Affiliated Managers Group Inc. ............................................................... 11,350 719,703
a GFI Group Inc. ............................................................................... 22,300 585,152
Greenhill & Co. Inc. ......................................................................... 19,400 575,404
a Piper Jaffray Cos. Inc. ...................................................................... 18,600 736,188
a Tradestation Group Inc. ...................................................................... 104,700 638,670
------------
3,255,117
------------
CHEMICALS 1.8%
Minerals Technologies Inc. ................................................................... 16,000 999,680
------------
COMMERCIAL BANKS 3.5%
a Community Bancorp Inc. ....................................................................... 3,500 98,070
G B & T Bancshares Inc. ...................................................................... 17,700 424,623
a Signature Bank ............................................................................... 18,300 556,869
Texas Regional Bancshares Inc., A ............................................................ 27,190 841,395
------------
1,920,957
------------
COMMERCIAL SERVICES & SUPPLIES 2.9%
a Charles River Associates Inc. ................................................................ 18,300 795,318
a FTI Consulting Inc. .......................................................................... 41,900 812,860
------------
1,608,178
------------
COMMUNICATIONS EQUIPMENT 2.5%
a F5 Networks Inc. ............................................................................. 17,200 824,568
a Packeteer Inc. ............................................................................... 38,500 561,330
------------
1,385,898
------------
CONSTRUCTION & ENGINEERING 1.9%
a Dycom Industries Inc. ........................................................................ 19,200 521,664
a URS Corp. .................................................................................... 19,100 538,811
------------
1,060,475
------------
CONSUMER FINANCE .1%
a Dollar Financial Group Inc. .................................................................. 4,400 70,400
------------
24 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
DISTRIBUTORS 1.6%
a Brightpoint Inc. ............................................................................. 49,900 $ 893,709
------------
DIVERSIFIED FINANCIAL SERVICES 1.5%
a Eurobancshares Inc. .......................................................................... 23,300 434,079
Financial Federal Corp. ...................................................................... 11,600 400,200
------------
834,279
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 1.0%
a Commonwealth Telephone Enterprises Inc. ...................................................... 11,800 564,512
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 3.1%
BEI Technologies Inc. ........................................................................ 34,000 958,460
a Newport Corp. ................................................................................ 59,200 769,600
------------
1,728,060
------------
ENERGY EQUIPMENT & SERVICES 1.3%
a Universal Compression Holdings Inc. .......................................................... 18,000 700,560
------------
FOOD & STAPLES RETAILING 1.0%
a United Natural Foods Inc. .................................................................... 17,700 559,497
------------
HEALTH CARE EQUIPMENT & SUPPLIES 3.0%
a Advanced Neuromodulation Systems Inc. ........................................................ 23,900 944,289
a ResMed Inc. .................................................................................. 14,500 743,850
------------
1,688,139
------------
HEALTH CARE PROVIDERS & SERVICES 12.0%
a American Healthways Inc. ..................................................................... 23,100 720,258
a AMERIGROUP Corp. ............................................................................. 23,600 970,196
a Dendrite International Inc. .................................................................. 64,200 1,161,378
a Pediatrix Medical Group Inc. ................................................................. 18,300 1,222,257
a Rotech Healthcare Inc. ....................................................................... 18,300 488,610
a Sunrise Senior Living Inc. ................................................................... 30,100 1,379,483
a United Surgical Partners International Inc. .................................................. 18,200 716,898
------------
6,659,080
------------
HOTELS RESTAURANTS & LEISURE 3.3%
a RARE Hospitality International Inc. .......................................................... 17,500 551,250
a Shuffle Master Inc. .......................................................................... 21,825 635,544
a Vail Resorts Inc. ............................................................................ 27,300 654,381
------------
1,841,175
------------
INSURANCE 1.1%
a Seabright Insurance Holdings ................................................................. 53,400 635,460
------------
Semiannual Report | 25
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
INTERNET SOFTWARE & SERVICES 4.7%
a Kintera Inc. ................................................................................. 18,700 $ 135,575
a Retek Inc. ................................................................................... 92,200 579,016
a Secure Computing Corp. ....................................................................... 84,900 804,852
a United Online Inc. ........................................................................... 56,800 612,304
a webMethods Inc. .............................................................................. 79,700 458,275
------------
2,590,022
------------
IT SERVICES 1.9%
a CACI International Inc., A ................................................................... 10,200 531,930
a Tier Technologies Inc., B .................................................................... 63,700 529,347
------------
1,061,277
------------
LEISURE EQUIPMENT & PRODUCTS 3.7%
a K2 Inc. ...................................................................................... 50,300 707,218
a Marinemax Inc. ............................................................................... 20,400 641,784
a Marvel Enterprises Inc. ...................................................................... 39,550 706,363
------------
2,055,365
------------
MACHINERY 4.3%
Albany International Corp., A ................................................................ 1,500 51,225
Bucyrus International Inc. ................................................................... 15,600 572,520
a Commercial Vehicle Group Inc. ................................................................ 52,400 995,600
Wabtec Corp. ................................................................................. 39,900 743,736
------------
2,363,081
------------
MEDIA 1.0%
a Lions Gate Entertainment Corp. (Canada) ...................................................... 52,600 524,948
------------
METALS & MINING 1.1%
Massey Energy Co. ............................................................................ 15,600 591,708
------------
OIL & GAS 4.1%
a Brigham Exploration Co. ...................................................................... 87,100 750,802
a Forest Oil Corp. ............................................................................. 19,900 670,431
OMI Corp. .................................................................................... 48,800 854,000
------------
2,275,233
------------
PHARMACEUTICALS 4.1%
a Able Laboratories Inc. ....................................................................... 66,500 1,485,610
a Nektar Therapeutics .......................................................................... 47,200 795,320
------------
2,280,930
------------
ROAD & RAIL 1.8%
a Genesee & Wyoming Inc. ....................................................................... 21,900 553,194
Heartland Express Inc. ....................................................................... 21,750 461,970
------------
1,015,164
------------
26 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 6.4%
a ANADIGICS Inc. ............................................................................... 179,000 $ 533,420
a ATMI Inc. .................................................................................... 40,400 918,292
Cognex Corp. ................................................................................. 27,800 725,858
a Micrel Inc. .................................................................................. 99,000 855,360
a Microtune Inc. ............................................................................... 107,300 495,726
------------
3,528,656
------------
SOFTWARE 4.2%
a Ascential Software Corp. ..................................................................... 41,000 586,710
a Embarcadero Technologies Inc. ................................................................ 72,300 566,832
a Majesco Hldgs Inc. ........................................................................... 36,800 436,080
a PalmSource Inc. .............................................................................. 22,300 230,582
a RSA Security Inc. ............................................................................ 29,800 524,778
------------
2,344,982
------------
SPECIALTY RETAIL 2.0%
a Aeropostale Inc. ............................................................................. 19,650 546,074
a New York & Co. Inc. .......................................................................... 33,100 579,250
------------
1,125,324
------------
TEXTILES, APPAREL & LUXURY GOODS .8%
a Deckers Outdoor Corp. ........................................................................ 10,800 418,716
------------
TOTAL COMMON STOCKS (COST $46,035,684) ....................................................... 52,859,822
------------
SHORT TERM INVESTMENT (COST $2,714) .0%C
MONEY FUND
b Franklin Institutional Fiduciary Trust Money Market Portfolio ................................ 2,714 2,714
------------
TOTAL INVESTMENTS (COST $46,038,398) 95.3% ................................................... 52,862,536
OTHER ASSETS, LESS LIABILITIES 4.7% .......................................................... 2,578,332
------------
NET ASSETS 100.0% ............................................................................ $ 55,440,868
------------
a Non-income producing.
b See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
c Rounds to less than .05% of net assets.
Semiannual Report|See notes to financial statements. | 27
Franklin Global Trust
FINANCIAL HIGHLIGHTS A
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND
----------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, NOVEMBER 30,
(UNAUDITED) 2004 2003 E 2002 2001 F
----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........................ $8.10 $6.22 $5.27 $6.89 $10.00
----------------------------------------------------------------
Income from investment operations:
Net investment income (loss) b ............................. (.03) .02 .08 (.01) (.02)
Net realized and unrealized gains (losses) ................. 1.75 1.95 .88 (1.61) (3.09)
----------------------------------------------------------------
Total from investment operations ............................ 1.72 1.97 .96 (1.62) (3.11)
----------------------------------------------------------------
Less distributions from net investment income ............... (.01) (.09) (.01) -- --
----------------------------------------------------------------
Net asset value, end of period .............................. $9.81 $8.10 $6.22 $5.27 $ 6.89
================================================================
Total return c .............................................. 21.29% 31.61% 18.20% (23.51)% (31.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................... $19,179 $15,834 $12,996 $14,970 $14,495
Ratios to average net assets:
Expenses before expense reduction .......................... 1.54% d 1.54% 1.84% d 1.61% 2.62% d
Expenses net of waiver and payments by affiliate ........... 1.54% d 1.38% 1.20% d 1.20% 1.20% d
Expenses net of waiver and payments by affiliate and
expense reduction ......................................... 1.53% d 1.38% 1.20% d 1.20% 1.20% d
Net investment income (loss) ............................... (.76)% d .24% 2.18% d (.14)% (.28)% d
Portfolio turnover rate ..................................... 62.13% 98.92% 87.83% 131.90% 82.43%
a Financial highlights presented reflect historical financial information from
Fiduciary Trust International (FTI)--European Smaller Companies Fund as a
result of a merger on July 24, 2003.
b Based on average daily shares outstanding.
c Total return is not annualized for periods less than one year.
d Annualized.
e For the period December 1, 2002 to July 31, 2003.
f For the period January 2, 2001 (effective date) to November 30, 2001.
28 | See notes to financial statements.|Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 93.9%
AUSTRIA 3.8%
Andritz AG ....................................... Machinery 5,080 $ 398,887
Mayr-Melnhof Karton AG ........................... Containers & Packaging 1,961 322,476
------------
721,363
------------
DENMARK 5.0%
a Almindelig Brand AS .............................. Consumer Finance 7,880 288,410
Bang & Olufsen AS, B ............................. Household Durables 4,208 282,604
DSV De Sammenslut Vognmaend AS, B ................ Road & Rail 5,390 384,639
------------
955,653
------------
FINLAND 3.8%
Nokian Renkaat OYJ ............................... Auto Components 2,445 352,549
a YIT-Yhtyma OYJ ................................... Construction & Engineering 15,090 377,098
------------
729,647
------------
FRANCE 8.2%
a Alten ............................................ IT Services 13,910 341,899
a Axalto International SAS ......................... Electronic Equipment & Instruments 11,300 328,407
Beneteau ......................................... Leisure Equipment & Products 3,862 322,123
Neopost SA ....................................... Office Electronics 4,915 379,205
a Seche Environnement .............................. Commercial Services & Supplies 1,268 94,277
a TRIGANO .......................................... Automobiles 1,260 114,536
------------
1,580,447
------------
GERMANY 13.7%
AWD Holding AG ................................... Capital Markets 8,005 320,801
a Centrotec Sustainable AG ......................... Chemicals 6,022 195,028
Krones AG ........................................ Machinery 3,160 371,263
MPC Muenchmeyer Petersen Capital AG .............. Capital Markets 2,170 162,444
a Pfleiderer AG .................................... Paper & Forest Products 16,060 208,884
Puma AG .......................................... Textiles, Apparel & Luxury Goods 1,140 280,056
Rheinmetall AG ................................... Industrial Conglomerates 6,785 349,989
a Techem AG ........................................ Commercial Services & Supplies 11,140 482,732
United Internet AG ............................... Internet Software & Services 9,628 249,449
------------
2,620,646
------------
GREECE 3.3%
Germanos SA ...................................... Specialty Retail 8,631 267,037
Hellenic Duty Free Shops SA ...................... Specialty Retail 9,090 175,092
Hellenic Duty Free Shops SA, 144A ................ Specialty Retail 10,400 200,326
------------
642,455
------------
IRELAND 7.4%
a Eircom Group PLC ................................. Diversified Telecommunication Services 119,180 288,899
a Grafton Group PLC ................................ Trading Companies & Distributors 32,118 394,720
Semiannual Report | 29
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
IRELAND (CONT.)
IAWS Group PLC ................................... Food Products 22,301 $ 353,126
Kingspan Group PLC ............................... Building Products 39,199 383,658
------------
1,420,403
------------
ITALY 3.0%
Amplifon SpA ..................................... Health Care Equipment & Supplies 3,550 180,019
a Azimut Holding SpA ............................... Capital Markets 16,850 94,428
Brembo SpA ....................................... Auto Components 750 6,148
Hera SpA ......................................... Electric Utilities 95,995 287,118
------------
567,713
------------
NETHERLANDS 1.7%
IHC Caland NV .................................... Energy Equipment & Services 5,150 324,916
------------
NORWAY 8.6%
a ABG Sundal Collier ASA ........................... Capital Markets 357,640 376,428
Aktiv Kapital ASA ................................ Capital Markets 17,810 330,146
Ekornes ASA ...................................... Household Durables 12,245 282,772
Tandberg ASA ..................................... Communications Equipment 20,150 218,416
a Tandberg Television ASA .......................... Communications Equipment 43,805 450,740
------------
1,658,502
------------
SWEDEN 7.5%
a Elekta AB, B ..................................... Health Care Equipment & Supplies 11,290 350,436
a Lundin Petroleum AB .............................. Oil & Gas 7,000 44,456
Nobia AB ......................................... Household Durables 23,560 385,865
a Telelogic AB ..................................... Software 127,090 287,225
a Transcom Worldwide SA, B ......................... Commercial Services & Supplies 70,990 369,618
------------
1,437,600
------------
SWITZERLAND 7.5%
Kaba Holding AG .................................. Machinery 1,105 341,015
a Leica Geosystems AG .............................. Electronic Equipment & Instruments 1,180 352,254
Phonak Holding AG ................................ Health Care Equipment & Supplies 8,770 294,988
a Sika AG .......................................... Chemicals 357 229,354
a Temenos Group AG ................................. Software 1,225 8,354
a Temenos Group AG, 144A ........................... Software 31,030 211,616
------------
1,437,581
------------
UNITED KINGDOM 20.4%
a Atkins WS PLC .................................... Commercial Services & Supplies 20,956 281,632
Bodycote International PLC ....................... Machinery 110,358 372,080
a Charter PLC ...................................... Machinery 60,972 287,972
Future PLC ....................................... Media 90,290 134,778
Greene King PLC .................................. Hotels Restaurants & Leisure 11,432 276,912
Intermediate Capital Group PLC ................... Consumer Finance 14,831 319,577
30 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
UNITED KINGDOM (CONT.)
Laird Group PLC .................................. Electronic Equipment & Instruments 45,610 $ 283,715
McBride PLC ...................................... Household Products 111,840 311,772
Michael Page International PLC ................... Commercial Services & Supplies 79,976 288,098
Mitie Group PLC .................................. Commercial Services & Supplies 114,162 359,101
Taylor Nelson Sofres PLC ......................... Media 79,920 337,949
Whatman PLC ...................................... Chemicals 82,550 397,660
Wolverhampton & Dudley Breweries PLC ............. Beverages 13,191 267,343
------------
3,918,589
------------
TOTAL COMMON STOCKS (COST $13,308,989) ........... 18,015,515
------------
PREFERRED STOCK (COST $248,967) 1.8%
GERMANY
Hugo Boss AG, pfd. ............................... Textiles, Apparel & Luxury Goods 10,382 339,207
------------
TOTAL LONG TERM INVESTMENTS (COST $13,557,956) 18,354,722
------------
SHORT TERM INVESTMENT (COST $325,051) 1.7%
MONEY FUND
b Franklin Institutional Fiduciary Trust Money
Market Portfolio ................................. Money Fund 325,051 325,051
------------
TOTAL INVESTMENTS (COST $13,883,007) 97.4% ....... 18,679,773
OTHER ASSETS, LESS LIABILITIES 2.6% .............. 498,959
------------
NET ASSETS 100.0% $ .............................. 19,178,732
------------
PORTFOLIO ABBREVIATIONS | ADR - American Depository Receipt
a Non-income producing.
b See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
Semiannual Report | See notes to financial statements. | 31
Franklin Global Trust
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
January 31, 2005 (unaudited)
-------------------------------------------
FIDUCIARY FIDUCIARY
LARGE FIDUCIARY EUROPEAN
CAPITALIZATION SMALL SMALLER
GROWTH AND CAPITALIZATION COMPANIES
INCOME FUND EQUITY FUND FUND
-------------------------------------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................................... $ 62,620,659 $ 46,035,684 $ 13,557,956
Cost - Sweep Money Fund (Note 7) .......................................... 4,340,397 2,714 325,051
-------------------------------------------
Total cost of investments ................................................. 66,961,056 46,038,398 13,883,007
===========================================
Value - Unaffiliated issuers .............................................. 83,349,300 52,859,822 18,354,722
Value - Sweep Money Fund (Note 7) ......................................... 4,340,397 2,714 325,051
-------------------------------------------
Total value of investments ................................................ 87,689,697 52,862,536 18,679,773
-------------------------------------------
Cash ....................................................................... -- -- 350,612
Receivables:
Investment securities sold ................................................ -- 2,997,319 299,064
Capital shares sold ....................................................... -- -- 88,500
Dividends ................................................................. 19,100 1,345 24,910
-------------------------------------------
Total assets .......................................................... 87,708,797 55,861,200 19,442,859
-------------------------------------------
Liabilities:
Payables:
Investment securities purchased ........................................... -- 158,045 224,195
Funds advanced by custodian ............................................... -- 190,732 --
Capital shares redeemed ................................................... 6,709 5,500 --
Affiliates ................................................................ 67,693 55,790 20,157
Professional fees ......................................................... 12,807 7,458 13,553
Registration and filing fees .............................................. 5,169 2,768 4,298
Other liabilities .......................................................... 46 39 1,924
-------------------------------------------
Total liabilities ..................................................... 92,424 420,332 264,127
-------------------------------------------
Net assets, at value ................................................. $ 87,616,373 $ 55,440,868 $ 19,178,732
===========================================
Net assets consist of:
Undistributed net investment income (distributions in excess of net
investment income) ........................................................ $ (53,524) $ -- $ --
Undistributed net investment loss .......................................... -- (302,877) (68,328)
Net unrealized appreciation (depreciation) ................................. 20,728,641 6,824,138 4,799,095
Accumulated net realized gain (loss) ....................................... 2,087,891 (9,430,323) (6,990,358)
Capital shares ............................................................. 64,853,365 58,349,930 21,438,323
-------------------------------------------
Net assets, at value ................................................. $ 87,616,373 $ 55,440,868 $ 19,178,732
===========================================
Shares outstanding .......................................................... 12,911,754 3,391,646 1,954,530
===========================================
Net asset value and maximum offering price per share a ...................... $6.79 $16.35 $9.81
===========================================
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
32 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the six months ended January 31, 2005 (unaudited)
-------------------------------------------
FIDUCIARY FIDUCIARY
LARGE FIDUCIARY EUROPEAN
CAPITALIZATION SMALL SMALLER
GROWTH AND CAPITALIZATION COMPANIES
INCOME FUND EQUITY FUND FUND
-------------------------------------------
Investment income:
Dividends: (net of foreign taxes) a
Unaffiliated issuers ...................................................... $ 803,894 $ 52,920 $ 65,784
Sweep Money Fund (Note 7) ................................................. 14,916 10,759 2,436
-------------------------------------------
Total investment income ............................................... 818,810 63,679 68,220
-------------------------------------------
Expenses:
Management fees (Note 3) ................................................... 318,165 286,304 88,552
Administrative fees (Note 3) ............................................... 85,781 57,747 17,825
Transfer agent fees (Note 3) ............................................... 547 1,089 949
Custodian fees (Note 4) .................................................... 2,965 1,961 4,520
Reports to shareholders .................................................... 5,516 4,618 2,316
Registration and filing fees ............................................... 13,382 8,540 10,126
Professional fees .......................................................... 7,506 4,472 10,340
Other ...................................................................... 1,779 1,825 3,070
-------------------------------------------
Total expenses ........................................................ 435,641 366,556 137,698
Expense reductions (Note 4) ........................................... (6) -- (1,162)
-------------------------------------------
Net expenses ......................................................... 435,635 366,556 136,536
-------------------------------------------
Net investment income (loss) ........................................ 383,175 (302,877) (68,316)
-------------------------------------------
Realized and unrealized gains (losses): Net realized gain (loss) from:
Investments ............................................................... 3,130,032 737,808 1,149,074
Foreign currency transactions ............................................. 3,433 -- 6,189
-------------------------------------------
Net realized gain (loss) ............................................. 3,133,465 737,808 1,155,263
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... 1,604,808 4,945,341 2,387,907
Translation of assets and liabilities denominated in foreign currencies ... -- -- 592
-------------------------------------------
Net change in unrealized appreciation (depreciation) ................. 1,604,808 4,945,341 2,388,499
-------------------------------------------
Net realized and unrealized gain (loss) ..................................... 4,738,273 5,683,149 3,543,762
-------------------------------------------
Net increase (decrease) in net assets resulting from operations ............. $ 5,121,448 $ 5,380,272 $ 3,475,446
===========================================
a Foreign taxes withheld on dividends $11,430 $ -- $7,720
Semiannual Report|See notes to financial statements. | 33
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS for the six months ended January 31, 2005
(unaudited) and the year ended July 31, 2004
--------------------------------
FIDUCIARY LARGE CAPITALIZATION
GROWTH AND INCOME FUND
--------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, 2004
--------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................... $ 383,175 $ 355,676
Net realized gain (loss) from investments and foreign currency transactions ............. 3,133,465 3,918,098
Net change in unrealized appreciation (depreciation) on investments ..................... 1,604,808 7,336,223
--------------------------------
Net increase (decrease) in net assets resulting from operations .................... 5,121,448 11,609,997
Distributions to shareholders from:
Net investment income ................................................................... (501,516) (329,516)
Net realized gains ...................................................................... (4,439,717) (523,650)
--------------------------------
Total distributions to shareholders ...................................................... (4,941,233) (853,166)
Capital share transactions (Note 2) ...................................................... 4,515,154 1,479,699
--------------------------------
Net increase (decrease) in net assets .............................................. 4,695,369 12,236,530
Net assets:
Beginning of period ...................................................................... 82,921,004 70,684,474
--------------------------------
End of period ............................................................................ $ 87,616,373 $ 82,921,004
===============================
Undistributed net investment income (distributions in excess of net investment
income) included in net assets:
End of period ........................................................................... $ (53,524) $ 64,817
===============================
34 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) for the six months ended January
31, 2005 (unaudited) and the year ended July 31, 2004
--------------------------------
FIDUCIARY SMALL CAPITALIZATION
EQUITY FUND
--------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, 2004
--------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ............................................................ $ (302,877) $ (737,917)
Net realized gain (loss) from investments ............................................... 737,808 12,597,601
Net change in unrealized appreciation (depreciation) on investments ..................... 4,945,341 (9,124,411)
--------------------------------
Net increase (decrease) in net assets resulting from operations .................... 5,380,272 2,735,273
Capital share transactions (Note 2) ...................................................... (12,725,864) (974,561)
--------------------------------
Net increase (decrease) in net assets .............................................. (7,345,592) 1,760,712
Net assets:
Beginning of period ...................................................................... 62,786,460 61,025,748
===============================
End of period ............................................................................ $ 55,440,868 $ 62,786,460
Undistributed net investment loss included in net assets:
End of period ............................................................................ $ (302,877) $ --
===============================
Semiannual Report | See notes to financial statements. | 35
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) for the six months ended January
31, 2005 (unaudited) and the year ended July 31, 2004
--------------------------------
FIDUCIARY EUROPEAN
SMALLER COMPANIES FUND
--------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, 2004
--------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ............................................................ $ (68,316) $ 37,790
Net realized gain (loss) from investments and foreign currency transactions ............. 1,155,263 3,361,441
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies ............................... 2,388,499 253,715
--------------------------------
Net increase (decrease) in net assets resulting from operations ..................... 3,475,446 3,652,946
Distributions to shareholders from net investment income ................................. (28,876) (167,068)
Capital share transactions (Note 2) ...................................................... (101,386) (648,656)
--------------------------------
Net increase (decrease) in net assets ............................................... 3,345,184 2,837,222
Net assets:
Beginning of period ...................................................................... 15,833,548 12,996,326
--------------------------------
End of period ............................................................................ $ 19,178,732 $ 15,833,548
================================
Undistributed net investment loss included in net assets:
End of period ............................................................................ $ (68,328) $ 28,864
================================
36 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Global Trust (the Trust) is registered under the Investment Company Act
of 1940 as an open-end investment company, consisting of seven separate series.
All funds included in this report (the Funds) are diversified. The financial
statements of the remaining funds in the series are presented separately. The
investment objectives of the Funds included in this report are:
- -------------------------------------------------------------------------------------------------------
GROWTH GROWTH AND INCOME
- -------------------------------------------------------------------------------------------------------
Fiduciary European Smaller Companies Fund Fiduciary Large Capitalization Growth and Income Fund
Fiduciary Small Capitalization Equity 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. 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. 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 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. Some 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. 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. 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.
Semiannual Report | 37
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. FOREIGN CURRENCY TRANSLATION (CONTINUED)
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
Statements of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. FOREIGN CURRENCY CONTRACTS
When the Funds purchase or sell foreign securities they may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statements of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.
D. INCOME TAXES
No provision has been made for U.S. income taxes because each fund's policy is
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
38 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. 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. Other expenses are
charged to each fund on a specific identification basis.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
Effective June 1, 2004, redemptions and exchanges of the Funds' shares held five
trading days or less may be subject to the Funds' redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Funds and accounted for as
additional paid-in capital. There were no redemption fees for the period.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liability 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. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2005, there were an unlimited number of shares authorized (no par
value). Transactions in the Funds' shares were as follows:
---------------------------------------------------------
FIDUCIARY FIDUCIARY
LARGE CAPITALIZATION SMALL CAPITALIZATION
GROWTH AND INCOME FUND EQUITY FUND
---------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
Six months ended January 31, 2005
Shares sold ............................... 627,177 $ 4,353,900 83,486 $ 1,365,576
Shares issued in reinvestment
of distributions ......................... 635,793 4,405,964 -- --
Shares redeemed ........................... (607,986) (4,244,710) (915,931) (14,091,440)
---------------------------------------------------------
Net increase (decrease) 654,984 $ 4,515,154 (832,445) $(12,725,864)
=========================================================
Semiannual Report | 39
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
-----------------------------------------------------------
FIDUCIARY FIDUCIARY
LARGE CAPITALIZATION SMALL CAPITALIZATION
GROWTH AND INCOME FUND EQUITY FUND
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
Year ended July 31, 2004
Shares sold ............................. 1,618,139 $ 10,306,976 694,405 $ 11,021,742
Shares issued in reinvestment
of distributions ....................... 81,290 520,223 -- --
Shares redeemed ......................... (1,395,581) (9,347,500) (752,503) (11,996,303)
-----------------------------------------------------------
Net increase (decrease) ................. 303,848 $ 1,479,699 (58,098) $ (974,561)
===========================================================
-------------------------
FIDUCIARY
EUROPEAN SMALLER
COMPANIES FUND
-------------------------
SHARES AMOUNT
-------------------------
Six months ended January 31, 2005
Shares sold ............................. 213,321 $ 1,872,212
Shares issued in reinvestment
of distributions ....................... 85 805
Shares redeemed ......................... (214,240) (1,974,403)
-------------------------
Net increase (decrease) ................. (834) $ (101,386)
=========================
Year ended July 31, 2004
Shares sold ............................. 405,453 $ 3,376,394
Shares issued in reinvestment
of distributions ....................... 1,116 9,063
Shares redeemed ......................... (540,673) (4,034,113)
-------------------------
Net increase (decrease) ................. (134,104) $ (648,656)
=========================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers and/or directors of
the following entities:
- -------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- -------------------------------------------------------------------------------------------
Fiduciary International Inc. (Fiduciary) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Templeton Franklin Investment Services Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent
40 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES
The Funds pay an investment management fee to Fiduciary based on the average
daily net assets of each fund as follows:
- ------------------------------------------------------------------------
ANNUALIZED
FEE RATE
- ------------------------------------------------------------------------
Fiduciary Large Capitalization Growth and Income Fund .75%
Fiduciary Small Capitalization Equity Fund 1.00%
Fiduciary European Smaller Companies Fund 1.00%
B. ADMINISTRATIVE FEES
The Funds pay an administrative fee to FT Services of .20% per year of the
average daily net assets of each fund.
C. DISTRIBUTION FEES
The Funds reimburse Distributors up to .25% per year of their average daily net
assets for costs incurred in marketing the Funds' shares under a Rule 12b-1
plan. No payments were made by the Funds for the period ended January 31, 2005.
D. TRANSFER AGENT FEES
The Funds paid transfer agent fees as noted in the Statements of Operations of
which the following amounts were paid to Investor Services:
----------------------------------------------
FIDUCIARY
LARGE FIDUCIARY FIDUCIARY
CAPITALIZATION SMALL EUROPEAN
GROWTH AND CAPITALIZATION SMALLER
INCOME FUND EQUITY FUND COMPANIES FUND
----------------------------------------------
$253 $521 $626
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 January 31, 2005, the
custodian fees were reduced as noted in the Statements of Operations.
Semiannual Report | 41
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. INCOME TAXES
At July 31, 2004, the following funds had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:
-------------------------------
FIDUCIARY FIDUCIARY
SMALL EUROPEAN
CAPITALIZATION SMALLER
EQUITY FUND COMPANIES FUND
-------------------------------
Capital loss carryovers expiring in:
2009 ......................................... $ -- $ 1,509,077
2010 ......................................... 9,673,832 6,556,559
2011 ......................................... -- 11,932
-------------------------------
$ 9,673,832 $ 8,077,568
===============================
At July 31, 2004, the Fiduciary Large Capitalization Growth and Income Fund and
the Fiduciary European Smaller Companies Fund had deferred currency losses
occurring subsequent to October 31, 2003 of $4,912 and $19,100, respectively.
For tax purposes, such losses will be reflected in the year ending July 31,
2005.
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatment of foreign currency transactions.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and foreign currency
transactions.
At January 31, 2005, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes were as follows:
---------------------------------------------
FIDUCIARY FIDUCIARY
LARGE FIDUCIARY EUROPEAN
CAPITALIZATION SMALL SMALLER
GROWTH AND CAPITALIZATION COMPANIES
INCOME FUND EQUITY FUND FUND
---------------------------------------------
Cost of investments .................................... $ 66,961,056 $ 46,570,579 $ 13,889,400
=============================================
Unrealized appreciation ................................ $ 21,370,434 $ 9,208,338 $ 4,801,558
Unrealized depreciation ................................ (641,793) (2,916,381) (11,185)
---------------------------------------------
Net unrealized appreciation (depreciation) ............. $ 20,728,641 $ 6,291,957 $ 4,790,373
=============================================
42 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
period ended January 31, 2005, were as follows:
--------------------------------------------
FIDUCIARY FIDUCIARY
LARGE FIDUCIARY EUROPEAN
CAPITALIZATION SMALL SMALLER
GROWTH AND CAPITALIZATION COMPANIES
INCOME FUND EQUITY FUND FUND
--------------------------------------------
Purchases $ 13,023,397 $ 31,456,219 $ 10,571,945
Sales $ 13,981,040 $ 45,426,479 $ 10,798,383
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc. (an affiliate of the investment manager). Management fees
paid by the Funds are reduced on assets invested in the Sweep Money Fund, in an
amount not to exceed the management fees paid by the Sweep Money Fund.
8. REGULATORY MATTERS
INVESTIGATIONS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.
SETTLEMENTS
Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
Semiannual Report | 43
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.
Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The Order also required Franklin Advisers, Inc. to, among other
things, enhance and periodically review compliance policies and procedures.
On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.
On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing, in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing", failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.
44 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
On November 17, 2004, Franklin Resources, Inc. announced that Franklin/Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.
On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Second Order").
Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.
The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The IDC has
substantially completed preparation of these distribution plans. The CAGO has
approved the distribution plan pertaining to the distribution of the monies owed
under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies are expected to be disbursed promptly.
The SEC has not yet approved the distribution plan pertaining to the Second
Order. When approved, disbursements of settlement monies under the SEC's Second
Order will be made promptly in accordance with the terms and conditions of that
order.
Semiannual Report | 45
8. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS
The Trust, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority of these lawsuits duplicate, in whole or in part, the
allegations asserted in the February 4, 2004 Massachusetts administrative
complaint and the findings in the SEC's August 2, 2004 Order, as described
above. The lawsuits are styled as class actions, or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.
In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.
The Company and fund management strongly believes that the claims made in each
of the lawsuits identified above are without merit and intends to vigorously
defend against them. The Company cannot predict with certainty, however, the
eventual outcome of the remaining governmental investigations or private
lawsuits, nor whether they will have a material negative impact on the Company.
Public trust and confidence are critical to the Company's business and any
material loss of investor and/or client confidence could result in a significant
decline in assets under management by the Company, which would have an adverse
effect on the Company's future financial results. If the Company finds that it
bears responsibility for any unlawful or inappropriate conduct that caused
losses to the Trust, it is committed to making the Trust or their shareholders
whole, as appropriate. The Company is committed to taking all appropriate
actions to protect the interests of its funds' shareholders.
46 | Semiannual Report
Franklin Global Trust
TAX DESIGNATION (UNAUDITED)
At July 31, 2004, more than 50% of the Fiduciary European Smaller Companies
Fund's total assets were invested in securities of foreign issuers. In most
instances, foreign taxes were withheld from dividends paid to the fund on these
investments. As shown in the table below, the fund hereby designates to
shareholders the foreign source income and foreign taxes paid, pursuant to
Section 853 of the Internal Revenue Code (Code). This designation will allow
shareholders of record on December 14, 2004, to treat their proportionate share
of foreign taxes paid by the fund as having been paid directly by them. The
shareholder shall consider these amounts as foreign taxes paid in the tax year
in which they receive the fund distribution.
The following table provides a detailed analysis by country, of foreign tax
paid, foreign source income, foreign qualified dividends and adjusted foreign
source income as designated by the fund shareholders. As a service to individual
shareholders filing Form 1116, "Adjusted Foreign Source Income per Share" in
column 4 below reports foreign source income with the required adjustments to
foreign source qualified dividends. This information is provided to simplify
your reporting of foreign source income for line 1 of Form 1116.
- ---------------------------------------------------------------------------------------------------
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- ---------------------------------------------------------------------------------------------------
Austria $0.0006 $0.0010 $0.0010 $0.0004
Denmark 0.0021 0.0036 0.0036 0.0015
Finland 0.0010 0.0017 0.0017 0.0007
France 0.0012 0.0024 0.0023 0.0011
Germany 0.0019 0.0034 0.0022 0.0021
Greece -- 0.0019 0.0019 0.0008
Ireland -- 0.0004 0.0004 0.0002
Italy 0.0023 0.0043 0.0043 0.0018
Netherlands 0.0002 0.0004 0.0004 0.0002
Norway 0.0025 0.0043 0.0043 0.0018
Spain 0.0013 0.0023 0.0023 0.0010
Sweden 0.0011 0.0019 0.0019 0.0008
Switzerland 0.0011 0.0018 0.0018 0.0008
United Kingdom 0.0026 0.0065 0.0064 0.0028
- ---------------------------------------------------------------------------------------------------
TOTAL $0.0179 $0.0359 $0.0345 $0.0160
===================================================================================================
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you,
as a tax credit or deduction (assuming you held your shares in the fund for a
minimum of 16 days during the 30-day period beginning 15 days before the
ex-dividend date of the fund's distribution to which the foreign taxes relate).
Foreign Source Income Per Share (Column 2) is the amount per share of income
dividends paid to you that is attributable to foreign securities held by the
fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends without adjustment for the lower U.S.
tax rates. Generally, this is the foreign source income to be reported by
certain trusts and corporate shareholders.
Semiannual Report | 47
Franklin Global Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
Foreign Qualified Dividends Per Share (Column 3) is the amount per share of
foreign source qualified dividends the fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the fund. If you are an individual shareholder who
does not meet the qualified dividend holding period requirements, you may find
this information helpful to calculate the foreign source income adjustment
needed to complete line 1 of Form 1116.
Adjusted Foreign Source Income Per Share (Column 4) is the adjusted amount per
share of foreign source income the fund paid to you. These amounts reflect the
Foreign Source Income reported in column 2 adjusted for the tax rate
differential on foreign source qualified dividends that may be required for
certain individual shareholders pursuant to Code 904(b)(2)(B). If you are an
individual shareholder who meets the qualified dividend holding period
requirements, generally, these Adjusted Foreign Source Income amounts may be
reported directly on line 1 of Form 1116 without additional adjustment.
In January 2005, shareholders received Form 1099-DIV which included their share
of taxes paid and foreign source income distributed during the calendar year
2004. The Foreign Source Income reported on Form 1099-DIV was reduced to take
into account the tax rate differential on foreign source qualified dividend
income pursuant to Code 904(b)(2)(B). Shareholders are advised to check with
their tax advisors for information on the treatment of these amounts on their
2004 individual income tax returns.
48 | Semiannual Report
Franklin Global Trust
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the most recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Semiannual Report | 49
[GRAPHIC OMITTED]
[LOGO OMITTED]
SEMIANNUAL REPORT
JANUARY 31, 2005
[LOGO OMITTED]
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Fiduciary Core Fixed Income Fund ................................. 2
Fiduciary Core Plus Fixed Income Fund ............................ 9
Financial Highlights and Statements of Investments ............... 16
Financial Statements ............................................. 26
Notes to Financial Statements .................................... 29
Shareholder Information .......................................... 40
-------------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
-------------------------------------------------------
Semiannual Report | 1
Semiannual Report
Fiduciary Core Fixed Income Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: The Fund seeks total return by investing
predominantly in debt securities of varying maturities. The Fund invests mainly
in investment-grade U.S. dollar denominated debt securities of U.S. issuers,
with a focus on U.S. government securities, mortgage and asset-backed
securities, and corporate debt securities.
[SIDEBAR]
-------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR MOST RECENT MONTH-END
PERFORMANCE.
-------------------------------------------------------------------------------
[/SIDEBAR]
This semiannual report for the Fiduciary Core Fixed Income Fund (the "Fund")
covers the six-month period ended January 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 3.76% cumulative total return for the period ended January 31,
2005. The Fund underperformed its benchmark, the Lehman Brothers U.S. Aggregate
Index (Lehman Aggregate) 1, which returned 3.81% during the same period.
ECONOMIC AND MARKET OVERVIEW
Despite economic indicators that were mostly positive, bonds performed
reasonably well for the period ending January 31, 2005. Employment growth again
reached respectable levels in August after a lull earlier in the summer.
However, non-farm payroll numbers continued to show volatility throughout the
remainder of the period, as a pattern of better than expected labor market
figures followed by disappointing figures persisted. Nevertheless, the
employment picture continued to improve.
Despite decent employment growth, economic reports during the third quarter of
2004 showed softer retail sales, industrial production, and durable goods
orders, as well as a decline in consumer confidence. Later in the year, many of
these numbers rebounded and it became evident that the resilient consumer
continued to keep the economic recovery in tact. This was despite the fact that
1. Source: Standard & Poor's Micropal. Lehman Brothers U.S. Aggregate Index
represents securities that are SEC registered, taxable and dollar-denominated.
The index covers the U.S. investment-grade fixed-rate bond market, with index
components for government and corporate securities, mortgage pass-through
securities and asset-backed securities. All issues included must have at least
one year to final maturity and must be investment-grade (Baa3 or better) by
Moody's Investor Services. They must also be dollar-denominated and
non-convertible. Total return includes price appreciation/depreciation and
income as a percentage of the original investment. The index is rebalanced
monthly by market capitalization. The index is unmanaged and includes reinvested
distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL VALUE, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 17.
2 | Semiannual Report
oil prices continued their steady march upward, reaching $50 a barrel for the
first time in history during the fourth quarter of 2004 before tapering off at
the end of the year. Despite high oil prices, inflationary concerns that
surfaced during the second quarter eased. Headline inflation stabilized and core
inflation, which excludes food and energy, was also benign.
As was widely anticipated by the markets, the Federal Open Market Committee
raised its target for the federal funds rate by 25 basis points on four separate
occasions to end the period at 2.25%. The 10-year Treasury, which began the
period at 4.5%, rallied 3 basis points to end the period at 4.14%. More
significant, however, was the substantial flattening of the yield curve. The
two-year Treasury rose 61 basis points to end the quarter at 3.29%, while yields
in the long end of the curve rallied, as evidenced by yield on the 30-year
Treasury falling 61 basis points to 4.59%. This price action seems to indicate
that the Federal Reserve Board is successfully reigning in expectations of a
rise in inflation and it also appears to explain why the 10-year Treasury has
been trading in a relatively narrow range. After a period of very easy monetary
policy, the Fed is now removing the accommodation successfully.
INVESTMENT STRATEGY
The Fund's manager allocates its investments among the various types of debt
securities available in its core investments, based on its assessment of the
U.S. market, industry and issuer conditions, and the opportunities presented
within the various sectors. The manager uses a top-down/bottom-up selection
process and relies on both internal and external research to identify individual
securities. The credit research process focuses on bottom-up credit selection
that relies on the manager's independent investment analysis to evaluate the
credit-worthiness of the issuer. The manager considers a variety of factors,
including the issuer's historical balance sheets, income and cash flow
statements, as well as projected earnings and the need for future borrowings.
MANAGER'S DISCUSSION
The portfolio benefited from a barbelled yield curve structure that we
implemented in anticipation of a flattening yield curve. We were underweighted
in the intermediate section of the yield curve for the entire reporting period.
However, much of the gains earned through our yield curve positioning were given
back due to our below benchmark duration. We had anticipated rising interest
rates, and therefore, the portfolio's duration was roughly 10% less than that of
the index for most of the reporting period. This detracted from performance as
the bond market rallied.
[SIDEBAR]
PORTFOLIO CHARACTERISTICS
Fiduciary Core Fixed Income Fund
As a Percentage of Total Net Assets
As of 1/31/05
- ------------------------------------
Effective Duration 3.90
- ------------------------------------
Yield-To-Maturity 4.33
- ------------------------------------
Average Maturity 6.17
- ------------------------------------
Average Quality AAA
- ------------------------------------
[/SIDEBAR]
Semiannual Report | 3
[BAR CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
INDUSTRY BREAKDOWN
Fiduciary Core Fixed Income Fund
Based on Total Net Assets as of 1/31/05
Mortgage-Backed Securities 34.2%
U.S. Government and Agency Securities 15.4%
Diversified Financial Services 5.6%
Thrifts & Mortgage Finance 5.4%
Diversified Telecommunication Services 3.7%
Electric Utilities 3.1%
Finance 2.4%
Foreign Government and Agency Securities 2.2%
Communications Equipment 2.2%
Media 1.5%
Consumer Finance 1.3%
Oil & Gas 1.2%
Municipal Bonds 1.2%
Other 3.9%
Short Term Investment & Other Net Assets 16.7%
The portfolio's sector allocation did not have a significant impact on
performance. According to the Lehman Brothers U.S. Aggregate Index, spread
sectors responded favorably to the improved U.S. economic picture, as all spread
sectors outperformed Treasuries. In the investment grade universe, credit was
the best performing sector, earning 144 basis points of excess return versus
comparable Treasuries during the period despite a trend of corporate shareholder
friendly behavior. Strong fundamentals, such as generally robust corporate
earnings, and solid technical factors, including strong foreign support, low
issuance and a general demand for yield, supported the sector's performance. The
portfolio had a relatively large overweight in investment grade corporate bonds,
with a focus on lower rated issuers. This strategy proved beneficial as lower
rated corporate bonds outperformed higher quality corporates.
Despite tight valuations, spreads in the mortgage sector continued to compress
as strong demand and low volatility persisted. Mortgages slightly lagged the
credit sector, outperforming duration adjusted Treasuries by 117 basis points
during the period. The portfolio's allocation to the mortgage sector detracted
from performance, as the portfolio's positioning was underweight to neutral
during the reporting period. The portfolio was also underweight the agency
sector for the entire reporting period. Agencies lagged other spread sectors,
but still managed to earn an excess return of 62 basis points. This was largely
due to a sell-off during the second half of 2004 that was caused by accounting
irregularities that were uncovered at Fannie Mae.
4 | Semiannual Report
CONCLUSION
We thank you for your continued participation and look forward to serving your
investment needs.
Sincerely,
[PHOTO OMITTED]
/s/Michael Materasso
- --------------------
Michael Materasso
Vice President of Fiduciary International, Inc. (Fiduciary)
Executive Vice President of Fiduciary Trust Company International
(Fiduciary Trust)
[PHOTO OMITTED]
/s/Michael Rohwetter
- --------------------
Michael Rohwetter
Vice President of Fiduciary
Senior Vice President of Fiduciary Trust
[PHOTO OMITTED]
/s/Warren Keyser
- ----------------
Warren Keyser
Vice President of Fiduciary
Senior Vice President of Fiduciary Trust
[SIDEBAR]
TOP 10 HOLDINGS
Fiduciary Core Fixed Income Fund
As of 1/31/05
- -----------------------------------------------------------
% OF TOTAL
NET ASSETS
- -----------------------------------------------------------
FNMA 19.8%
MORTGAGE-BACKED SECURITIES/FINANCE
- -----------------------------------------------------------
FHLMC 15.7%
MORTGAGE-BACKED SECURITIES
- -----------------------------------------------------------
U.S. Treasury Bond 9.7%
U.S. GOVERNMENT AND AGENCY SECURITIES
- -----------------------------------------------------------
U.S. Treasury Inflation Index Bond 3.8%
U.S. GOVERNMENT AND AGENCY SECURITIES
- -----------------------------------------------------------
Core Investment Grade Bond Trust I3.6%
DIVERSIFIED FINANCIAL SERVICES
- -----------------------------------------------------------
Washington Mutual Inc. 3.2%
THRIFTS AND MORTGAGE FINANCE
- -----------------------------------------------------------
Centaur Funding Corp. 2.2%
COMMUNICATIONS EQUIPMENT
- -----------------------------------------------------------
U.S. Treasury Note 1.9%
U.S. GOVERNMENT AND AGENCY SECURITIES
- -----------------------------------------------------------
Consumers Energy Co. 1.7%
ELECTRIC UTILITIES
- -----------------------------------------------------------
TCI Communications Inc. 1.5%
MEDIA
- -----------------------------------------------------------
[/SIDEBAR]
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
Semiannual Report | 5
Performance Summary as of 1/31/05
FIDUCIARY CORE FIXED INCOME 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 and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PERFORMANCE 1
- ----------------------------------------------------------------------------------------------------------------
ANNUALIZED CUMULATIVE
SINCE SINCE
INCEPTION 2 INCEPTION 3
6-MONTH 1-YEAR (8/29/03) (8/29/03)
- ----------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE FIXED INCOME FUND 3.76% 3.46% 5.46% 7.87%
- ----------------------------------------------------------------------------------------------------------------
LEHMAN BROTHERS U.S. AGGREGATE INDEX 4 3.81% 4.16% 5.66% 8.11%
- ----------------------------------------------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT 5 $10,376 $10,346 NA $10,787
- ----------------------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR CURRENT PERFORMANCE.
INTEREST RATE MOVEMENTS MAY AFFECT THE FUND'S SHARE PRICE AND YIELD. BOND
PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. THE RISKS ASSOCIATED WITH HIGHER-YIELDING,
LOWER-RATED SECURITIES INCLUDE HIGHER RISK OF DEFAULT AND LOSS OF PRINCIPAL. THE
FUND'S INVESTMENTS IN FOREIGN COMPANIES, INCLUDING EMERGING MARKETS, CAN INVOLVE
SPECIAL RISKS INCLUDING CURRENCY VOLATILITY AND POLITICAL, ECONOMIC AND
REGULATORY UNCERTAINTY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE
MAIN INVESTMENT RISKS.
ENDNOTES
1. For periods prior to January 31, 2005, the manager and administrator agreed
in advance to waive or reduce their respective fees and to assume as their own
expenses certain expenses otherwise payable by the Fund so that total Fund
annual operating expenses did not exceed 0.45%. Without this waiver or
reduction, total return would have been lower. After January 31, 2005, the
manager and administrator may end this arrangement at any time upon notice to
the Fund's Board of Trustees.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
3. Cumulative total return represents the change in value of an investment over
the periods indicated.
4. Source: Standard & Poor's Micropal. See page 2 for a description of the
Lehman Brothers U.S. Aggregate Index.
5. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
6 | Semiannual Report
Your Fund's Expenses
FIDUCIARY CORE FIXED INCOME FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases, if
applicable, and redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, if applicable, 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) of the table below provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period were $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 | 7
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, IF APPLICABLE. Therefore, the second line of the table 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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- --------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,037.60 $2.31
- --------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.94 $2.29
- --------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 0.45%, net of
expense waivers, which includes the net expenses incurred by the Portfolio,
multiplied by the average account value over the period, multiplied by 184/365
to reflect the one-half year period.
8 | Semiannual Report
Fiduciary Core Plus Fixed Income Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: The Fund seeks total return by investing
predominantly in debt securities of varying maturities. The Fund will normally
invest about 70% of its net assets in core sectors of investment grade U.S.
dollar-denominated debt securities of U.S. issuers, with a focus on U.S.
government securities, mortgage and asset-backed securities, and corporate debt
securities.
[SIDEBAR]
-------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR MOST RECENT MONTH-END
PERFORMANCE.
-------------------------------------------------------------------------------
[/SIDEBAR]
We are pleased to bring you the Fiduciary Core Plus Fixed Income Fund (the
"Fund") semiannual report covering the six-month period ended January 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 4.10% total return for the period ended January 31, 2005. The
Fund outperformed its benchmark, the Lehman Brothers U.S. Aggregate Index
(Lehman Aggregate) 1, which returned 3.81% during the same period.
ECONOMIC AND MARKET OVERVIEW
Despite economic indicators that were mostly positive, bonds performed
reasonably well for the period ending January 31, 2005. Employment growth again
reached respectable levels in August after a lull earlier in the summer.
However, non-farm payroll numbers continued to show volatility throughout the
remainder of the period, as a pattern of better than expected labor market
figures followed by disappointing figures persisted. Nevertheless, the
employment picture continued to improve.
Despite decent employment growth, economic reports during the third quarter of
2004 showed softer retail sales, industrial production, and durable goods
orders, as well as a decline in consumer confidence. Later in the year, many of
these numbers rebounded and it became evident that the resilient consumer
continued to keep the economic recovery in tact. This was despite the fact that
oil prices continued their steady march upward, reaching $50 a barrel for the
1. Source: Standard & Poor's Micropal. Lehman Brothers U.S. Aggregate Index
represents securities that are SEC registered, taxable and dollar-denominated.
The index covers the U.S. investment-grade fixed-rate bond market, with index
components for government and corporate securities, mortgage pass-through
securities and asset-backed securities. All issues included must have at least
one year to final maturity and must be investment-grade (Baa3 or better) by
Moody's Investor Services. They must also be dollar-denominated and
non-convertible. Total return includes price appreciation/depreciation and
income as a percentage of the original investment. The index is rebalanced
monthly by market capitalization. The index is unmanaged and includes reinvested
distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL VALUE, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 21.
Semiannual Report | 9
[SIDEBAR]
PORTFOLIO CHARACTERISTICS
Fiduciary Core Plus Fixed Income Fund
As a Percentage of Total Net Assets
As of 1/31/05
- ------------------------------------
Effective Duration 4.33
- ------------------------------------
Yield-To-Maturity 4.45
- ------------------------------------
Average Maturity 6.82
- ------------------------------------
Average Quality AA+
- ------------------------------------
[/SIDEBAR]
first time in history during the fourth quarter of 2004 before tapering off at
the end of the year. Despite high oil prices, inflationary concerns that
surfaced during the second quarter eased. Headline inflation stabilized and core
inflation, which excludes food and energy, was also benign.
As was widely anticipated by the markets, the Federal Open Market Committee
raised its target for the federal funds rate by 25 basis points on four separate
occasions to end the period at 2.25%. The 10-year Treasury, which began the
period at 4.5%, rallied 3 basis points to end the period at 4.14%. More
significant, however, was the substantial flattening of the yield curve. The
two-year Treasury rose 61 basis points to end the quarter at 3.29%, while yields
in the long end of the curve rallied, as evidenced by yield on the 30-year
Treasury falling 61 basis points to 4.59%. This price action seems to indicate
that the Federal Reserve Board is successfully reigning in expectations of a
rise in inflation and it also appears to explain why the 10-year Treasury has
been trading in a relatively narrow range. After a period of very easy monetary
policy, the Fed is now removing the accommodation successfully.
INVESTMENT STRATEGY
The Fund's manager allocates its investments among the various types of debt
securities available in its core investments, based on its assessment of the
U.S. market, industry and issuer conditions, and the opportunities presented
within the various sectors. The manager also evaluates opportunities in the
non-core investments and the relative value decision of investing away from the
benchmark sectors. Each foreign market is evaluated in its local currency terms,
as well as on a currency-hedged basis, in order to identify opportunities in
both government and non-government sectors.
The manager uses a top-down/bottom-up selection process and relies on both
internal and external research to identify individual securities. The credit
research process focuses on bottom-up credit selection that relies on the
manager's independent investment analysis to evaluate the credit-worthiness of
the issuer. The manager considers a variety of factors, including the issuer's
historical balance sheets, income and cash flow statements, as well as projected
earnings and the need for future borrowings.
MANAGER'S DISCUSSION
The portfolio benefited from a barbelled yield curve structure that we
implemented in anticipation of a flattening yield curve. We were underweighted
in the intermediate section of the yield curve for the entire reporting period.
However, much of the gains earned through our yield curve positioning were given
back
10 | Semiannual Report
due to our below benchmark duration. We had anticipated rising interest rates,
and therefore, the portfolio's duration was roughly 10% less than that of the
index for most of the reporting period. This detracted from performance as the
bond market rallied.
The portfolio's sector allocation contributed positively to performance.
According to the Lehman Brothers U.S. Aggregate Index, spread sectors responded
favorably to the improved U.S. economic picture, as all spread sectors
outperformed Treasuries. In the investment grade universe, credit was the best
performing sector, earning 144 basis points of excess return versus comparable
Treasuries during the period despite a trend of corporate shareholder friendly
behavior. Strong fundamentals, such as generally robust corporate earnings, and
solid technical factors, including strong foreign support, low issuance and a
general demand for yield, supported the sector's performance. The portfolio had
a neutral to overweight position in investment grade corporate bonds, with a
focus on lower rated issuers for the period. This strategy proved beneficial as
lower rated corporate bonds outperformed higher quality corporates.
Despite tight valuations, spreads in the mortgage sector continued to compress
as strong demand and low volatility persisted. Mortgages slightly lagged the
credit sector, outperforming duration adjusted Treasuries by 117 basis points
during the period. The portfolio's allocation to the mortgage sector detracted
from performance, as the portfolio's positioning was underweight to neutral
during the reporting period. The portfolio was also underweight the agency
sector for the entire reporting period. Agencies lagged other spread sectors,
but still managed to earn an excess return of 62 basis points. This was largely
due to a sell-off during the second half of 2004 that was caused by accounting
irregularities that were uncovered at Fannie Mae.
Concerning the plus sectors, high yield continued its strong run posting a
quarterly excess return of 519 basis points versus duration adjusted Treasuries.
This was primarily due to investors increasing their demand for yield in the
environment of low volatility, coupled with positive credit fundamentals, as the
majority of issuers reported earnings that met or exceeded expectations. The
passing of the U.S. Presidential election and generally positive economic data
helped set the stage for strong performance through year-end for high yield. The
portfolio benefited from a moderate exposure to high yield corporate bonds.
European government bonds slightly outperformed U.S. bonds on a hedged basis as
weak European economic data and a stronger euro increased concern for Europe's
near-term economic growth. The portfolio's exposure to European bonds was
largely on an unhedged basis and the strong euro caused European bonds to
significantly outperform U.S. bonds on an unhedged basis.
[BAR CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
INDUSTRY BREAKDOWN
Fiduciary Core Plus Fixed Income Fund
Based on Total Net Assets as of 1/31/05
Mortgage-Backed Securities 30.1%
U.S. Government and Agency Securities 12.2%
Foreign Government and Agency Securities 11.3%
Diversified Financial Services 10.3%
Thrifts & Mortgage Finance 3.6%
Electric Utilities 3.3%
Media 3.1%
Finance 2.5%
Capital Markets 2.3%
Diversified Telecommunication Services 2.2%
Communications Equipment 2.0%
Municipal Bond Securities 1.4%
Oil & Gas 1.0%
Consumer Finance 1.0%
Other 6.1%
Short Term Invetment & Other Net Assets 7.3%%
Semiannual Report | 11
[SIDEBAR]
TOP 10 HOLDINGS
Fiduciary Core Plus Fixed Income Fund
As of 1/31/05
- ------------------------------------------------------------
% OF TOTAL
NET ASSETS
- ------------------------------------------------------------
FNMA 17.9%
MORTGAGE-BACKED SECURITIES/FINANCE
- ------------------------------------------------------------
FHLMC 13.0%
MORTGAGE-BACKED SECURITIES
- ------------------------------------------------------------
Federal Republic of Germany 6.7%
FOREIGN GOVERNMENT AND AGENCY SECURITIES
- ------------------------------------------------------------
SLM Student Loan Trust 5.0%
DIVERSIFIED FINANCIAL SERVICES
- ------------------------------------------------------------
U.S. Treasury Bond 4.7%
U.S. GOVERNMENT AND AGENCY SECURITIES
- ------------------------------------------------------------
U.S. Treasury Inflation Index Bond 3.9%
U.S. GOVERNMENT AND AGENCY SECURITIES
- ------------------------------------------------------------
U.S. Treasury Note 3.6%
U.S. GOVERNMENT AND AGENCY SECURITIES
- ------------------------------------------------------------
Fleet Credit Card Master Trust 3.3%
DIVERSIFIED FINANCIAL SERVICES
- ------------------------------------------------------------
Export-Import Bank Japan 2.1%
FOREIGN GOVERNMENT AND AGENCY SECURITIES
- ------------------------------------------------------------
Aries Vermogen 2.1%
CAPITAL MARKETS
- ------------------------------------------------------------
[/SIDEBAR]
CONCLUSION
We thank you for your continued participation and look forward to serving your
investment needs.
Sincerely,
[PHOTO OMITTED]
/s/Michael Materasso
- --------------------
Michael Materasso
Vice President of Fiduciary International, Inc. (Fiduciary)
Executive Vice President of Fiduciary Trust Company International
(Fiduciary Trust)
[PHOTO OMITTED]
/s/Michael Rohwetter
- --------------------
Michael Rohwetter
Vice President of Fiduciary
Senior Vice President of Fiduciary Trust
[PHOTO OMITTED]
/s/Warren Keyser
- ----------------
Warren Keyser
Vice President of Fiduciary
Senior Vice President of Fiduciary Trust
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
12 | Semiannual Report
Performance Summary as of 1/31/05
FIDUCIARY CORE PLUS FIXED INCOME 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 and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PERFORMANCE 1
- -------------------------------------------------------------------------------------------------
ANNUALIZED CUMULATIVE
SINCE SINCE
INCEPTION 2 INCEPTION 3
- -------------------------------------------------------------------------------------------------
6-MONTH 1-YEAR (8/04/03) (8/04/03)
- -------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND 4.10% 4.91% 7.46% 11.35%
- -------------------------------------------------------------------------------------------------
LEHMAN BROTHERS U.S. AGGREGATE INDEX 4 3.81% 4.16% 5.77% 8.74%
- -------------------------------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT 5 $10,410 $10,491 NA $11,135
- -------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR CURRENT PERFORMANCE.
INTEREST RATE MOVEMENTS MAY AFFECT THE FUND'S SHARE PRICE AND YIELD. BOND
PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. THE RISKS ASSOCIATED WITH HIGHER-YIELDING,
LOWER-RATED SECURITIES INCLUDE HIGHER RISK OF DEFAULT AND LOSS OF PRINCIPAL. THE
FUND'S INVESTMENTS IN FOREIGN COMPANIES, INCLUDING EMERGING MARKETS, CAN INVOLVE
SPECIAL RISKS INCLUDING CURRENCY VOLATILITY AND POLITICAL, ECONOMIC AND
REGULATORY UNCERTAINTY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE
MAIN INVESTMENT RISKS.
ENDNOTES
1. For periods prior to January 31, 2005, the manager and administrator agreed
in advance to waive or reduce their respective fees and to assume as their own
expenses certain expenses otherwise payable by the Fund so that total Fund
annual operating expenses did not exceed 0.43%. Without this waiver or
reduction, total return would have been lower. After January 31, 2005, the
manager and administrator may end this arrangement at any time upon notice to
the Fund's Board of Trustees.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
3. Cumulative total return represents the change in value of an investment over
the periods indicated.
4. Source: Standard & Poor's Micropal. See page 9 for a description of the
Lehman Brothers U.S. Aggregate Index.
5. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
Semiannual Report | 13
Your Fund's Expenses
FIDUCIARY CORE PLUS FIXED INCOME FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases, if
applicable, and redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, if applicable, 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) of the table below provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period were $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.
14 | 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, IF APPLICABLE. Therefore, the second line of the table 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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- --------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,041.00 $2.21
- --------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,023.04 $2.19
- --------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 0.43%, net of
expense waivers, which includes the net expenses incurred by the Portfolio,
multiplied by the average account value over the period, multiplied by 184/365
to reflect the one-half year period.
Semiannual Report | 15
Franklin Global Trust
FINANCIAL HIGHLIGHTS
FIDUCIARY CORE FIXED INCOME FUND
---------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 2005 JULY 31,
(UNAUDITED) 2004E
---------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $ 9.97 $10.00
---------------------------------
Income from investment operations:
Net investment income a ................................. .16 .26
Net realized and unrealized gains (losses) .............. .21 .13
---------------------------------
Total from investment operations ......................... .37 .39
---------------------------------
Less distributions from:
Net investment income ................................... (.26) (.39)
Net realized gains ...................................... (.03) (.03)
---------------------------------
Total distributions ...................................... (.29) (.42)
---------------------------------
Net asset value, end of period ........................... $10.05 $ 9.97
=================================
Total return b ........................................... 3.76% 3.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................ $16,334 $17,543
Ratios to average net assets:
Expenses c .............................................. .75% .99%
Expenses net of waiver and payments by affiliate c ...... .45% .45%
Net investment income c ................................. 3.07% 2.76%
Portfolio turnover rate .................................. 256.78% 459.82%
Portfolio turnover rate excluding mortgage dollar rolls d 172.91% 259.85%
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
d See Note 1(e) regarding mortgage dollar rolls.
e For the period August 29, 2003 (commencement of operations) to July 31, 2004.
16 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 17.7%
AEROSPACE & DEFENSE .7%
BF Goodrich, 6.80%, 2/01/18 .......................................... United States $ 100,000 $ 111,317
------------
AIRLINES .1%
Delta Air Lines Inc., senior note, 6.718%, 7/02/24 ................... United States 20,769 22,002
------------
CAPITAL MARKETS 1.0%
Goldman Sachs Group Inc., 5.125%, 1/15/15 ............................ United States 160,000 162,287
------------
CONSUMER FINANCE 1.3%
Ford Motor Credit Co., 5.70%, 1/15/10 ................................ United States 165,000 164,670
General Motors Acceptance Corp., 6.75%, 12/01/14 ..................... United States 55,000 54,019
------------
218,689
------------
DIVERSIFIED FINANCIAL SERVICES 4.2%
Core Investment Grade Bond Trust I, 4.727%, 11/30/07 ................. United States 575,000 585,773
HSBC Capital Funding LP, 4.61%, Perpetual ............................ Jersey Islands 110,000 107,851
------------
693,624
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 3.7%
Ameritech Capital Funding Corp., 6.25%, 5/18/09 ...................... United States 205,000 218,909
France Telecom SA, senior note, 9.25%, 3/01/31 ....................... France 100,000 139,442
Hutchison Whampoa International Ltd., senior note, 144A, 5.45%,
11/24/10 ........................................................... Hong Kong 100,000 104,044
Sprint Capital Corp., 6.90%, 5/01/19 ................................. United States 125,000 141,331
------------
603,726
------------
ELECTRIC UTILITIES 3.1%
Consumers Energy Co., C, 4.25%, 4/15/08 .............................. United States 270,000 271,640
Southern California Edison Co., 8.00%, 2/15/07 ....................... United States 174,000 188,327
System Energy Resources Inc., 144A, 5.129%, 1/15/14 .................. United States 53,934 53,839
------------
513,806
------------
ENERGY EQUIPMENT & SERVICES 1.0%
Halliburton Co., 8.75%, 2/15/21 ...................................... United States 115,000 155,150
------------
MACHINERY .3%
Harsco Corp., senior note, 5.125%, 9/15/13 ........................... United States 40,000 40,751
------------
MEDIA 1.5%
TCI Communications Inc., 8.75%, 8/01/15 .............................. United States 185,000 238,040
------------
METALS & MINING .8%
Glencore Funding LLC, 144A, 6.00%, 4/15/14 ........................... United States 130,000 126,507
------------
TOTAL CORPORATE BONDS (COST $2,821,474) .............................. 2,885,899
------------
Semiannual Report | 17
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 34.2%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) ADJUSTABLE RATE 8.9%
FHLMC, Cap 10.121%, Margin 2.25% + CMT, Resets Annually, 5.123%,
9/01/04 ............................................................ United States $ 1,443,422 $ 1,449,510
------------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED RATE 6.8%
FHLMC 30 Year, 6.00%, 5/01/34 ........................................ United States 676,733 699,419
FHLMC 30 Year, 6.00%, 1/01/35 ........................................ United States 400,000 413,420
------------
1,112,839
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE 17.4%
a FNMA 30 Year, 6.00%, 2/01/29 ......................................... United States 1,423,000 1,469,691
a FNMA 30 Year, 5.50%, 2/15/33 ......................................... United States 120,000 122,213
a FNMA 30 Year, 5.00%, 2/01/34 ......................................... United States 327,000 326,284
FNMA 30 Year, 6.50%, 10/01/34 ........................................ United States 879,127 920,141
------------
2,838,329
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 1.1%
GNMA 30 Year, 6.00% 4/20/34 .......................................... United States 182,953 190,206
------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $5,600,763) ................... 5,590,884
------------
ASSET-BACKED SECURITIES 8.0%
DIVERSIFIED FINANCIAL SERVICES 1.4%
SLM Student Loan Trust, 2004-9, A2, FRN, 2.72%, 10/25/12 ............. United States 225,000 225,103
------------
OIL & GAS 1.2%
Gazprom International SA, 144A, 7.201%, 2/01/20 ...................... Russia 170,000 180,625
Gazprom International SA, Reg S, 7.201%, 2/01/20 ..................... Russia 20,000 21,250
------------
201,875
------------
THRIFTS & MORTGAGE FINANCE 5.4%
Bear Stearns Adjustable Rate Mortgage Trust, 2004-4, A1B, 3.517%,
6/25/34 ............................................................ United States 191,120 191,322
Countrywide Asset-Backed Certificates, 2004-SD3, A1, 144A, 2.238%,
9/25/34 ............................................................ United States 110,386 110,679
CS First Boston Mortgage Securities Corp., 2004-1, 5A1, 5.50%,
2/25/19 ............................................................ United States 56,157 56,747
Washington Mutual Inc., 2004-AR2, A, 2.574%, 4/25/44 ................. United States 324,195 327,920
Washington Mutual Inc., 2004-AR9, A2, 2.468%, 8/25/34 ................ United States 192,846 192,449
------------
879,117
------------
TOTAL ASSET-BACKED SECURITIES (COST $1,292,668) ...................... 1,306,095
------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 2.2%
Russian Federation, Reg S, 12.75%, 6/24/28 ........................... Russia 124,000 208,642
United Mexican States, 4.625%, 10/08/08 .............................. Mexico 155,000 156,744
------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $350,581) ....... 365,386
------------
18 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES 15.4%
U.S. Treasury Bond, 7.25%, 8/15/22 ................................... United States $ 680,000 $ 895,448
U.S. Treasury Bond, 5.375%, 2/15/31 .................................. United States 612,000 684,795
b U.S. Treasury Inflation Index Bond, 1.75%, 1/15/15 ................... United States 627,169 626,043
U.S. Treasury Note, 6.00%, 8/15/09 ................................... United States 280,000 307,431
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $2,467,995) ........ 2,513,717
------------
MUNICIPAL BOND (COST $188,158) 1.2%
Tobacco Settlement Financing Corp. Revenue, 6.375%, 6/01/32 .......... United States 200,000 199,848
------------
------------------
SHARES
------------------
PREFERRED STOCKS 4.6%
COMMUNICATIONS EQUIPMENT 2.2%
Centaur Funding Corp., 9.08%, pfd., B, 144A .......................... United States 263 354,228
------------
FINANCE 2.4%
Fannie Mae, 7.00%, pfd. .............................................. United States 6,968 395,434
------------
TOTAL PREFERRED STOCKS (COST $713,417) ............................... 749,662
------------
TOTAL LONG TERM INVESTMENTS (COST $13,435,056) ....................... 13,611,491
------------
------------------
PRINCIPAL AMOUNT
------------------
SHORT TERM INVESTMENTS 26.1%
U.S. GOVERNMENT AND AGENCY SECURITIES 13.5%
FHLB, 7.125%, 2/15/05 ................................................ United States $ 800,000 801,372
c FNMA, 2/07/05 ........................................................ United States 600,000 599,764
FNMA, 7.125%, 2/15/05 ................................................ United States 800,000 801,363
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $2,202,779) ........ 2,202,499
------------
TOTAL INVESTMENTS BEFORE MONEY FUND (COST $15,637,835) ............... 15,813,990
------------
------------------
SHARES
------------------
MONEY FUND (COST $2,056,780) 12.6%
d Franklin Institutional Fiduciary Trust Money Market Portfolio ........ United States 2,056,780 2,056,780
------------
TOTAL INVESTMENTS (COST $17,694,615) 109.4% .......................... 17,870,770
OTHER ASSETS, LESS LIABILITIES (9.4)% ................................ (1,536,524)
------------
NET ASSETS 100.0% .................................................... $16,334,246
============
See Portfolio Abbreviations on page 25.
a See Note 1(c) regarding securities purchased on a to-be-announced basis.
b Principal amount of security is adjusted for inflation.
c Security is traded on a discount basis with no stated coupon rate.
d See Note 7 regarding investments in Franklin Institutional Fiduciary Trust
Money Market Portfolio.
Semiannual Report | See notes to financial statements. | 19
Franklin Global Trust
FINANCIAL HIGHLIGHTS
FIDUCIARY CORE PLUS FIXED INCOME FUND
---------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 2005 JULY 31,
(UNAUDITED) 2004 E
---------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $10.32 $10.00
---------------------------------
Income from investment operations:
Net investment income a ................................. .18 .28 f
Net realized and unrealized gains (losses) .............. .24 .41 f
---------------------------------
Total from investment operations ......................... .42 .69
---------------------------------
Less distributions from:
Net investment income ................................... (.22) (.30)
Net realized gains ...................................... -- (.07)
---------------------------------
Total distributions ...................................... (.22) (.37)
---------------------------------
Net asset value, end of period ........................... $10.52 $10.32
=================================
Total return b ........................................... 4.10% 6.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................ $73,940 $54,132
Ratios to average net assets:
Expenses c .............................................. .58% .84%
Expenses net of waiver and payments by affiliate c ...... .43% .43%
Net investment income c ................................. 3.36% 2.76%
Portfolio turnover rate .................................. 259.21% 426.29%
Portfolio turnover rate excluding mortgage dollar rolls d 195.53% 222.53%
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
d See Note 1(e) regarding mortgage dollar rolls.
e For the period August 4, 2003 (commencement of operations) to July 31, 2004.
f The amount shown for a share outstanding throughout the period does not
correlate with the aggregate net gains on investments for that period, because
of the timing of sales and repurchase of the Fund shares in relation to
fluctuating market value of the investments of the Fund.
20 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT E VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 20.4%
AIRLINES .4%
Delta Air Lines Inc., senior note, 6.718%, 7/02/24 .................. United States $ 257,535 $ 272,829
------------
AUTOMOBILES .2%
General Motors Corp., 8.375%, 7/05/33 ............................... United States 117,000 EUR 159,320
------------
CAPITAL MARKETS 2.3%
Aries Vermogen, Reg S, 9.60%, 10/25/14 .............................. United States 1,250,000 1,550,000
General Electric Capital Corp., FRN, 2.04%, 9/18/06 ................. United States 120,000 120,287
------------
1,670,287
------------
CHEMICALS .4%
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13 ......... United States 275,000 325,875
------------
CONSUMER FINANCE 1.0%
Ford Motor Credit Co., 5.70%, 1/15/10 ............................... United States 750,000 748,500
------------
CONTAINERS & PACKAGING .5%
Owens-Brockway Glass Container Inc., senior note, 144A, 6.75%,
12/01/14 .......................................................... United States 345,000 346,725
------------
DIVERSIFIED FINANCIAL SERVICES 2.3%
Core Investment Grade Bond Trust I, 4.727%, 11/30/07 ................ United States 1,070,000 1,090,047
HSBC Capital Funding LP, 4.61%, Perpetual ........................... Jersey Islands 620,000 607,888
------------
1,697,935
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.2%
France Telecom SA, senior note, 9.25%, 3/01/31 ...................... France 465,000 648,404
Qwest Corp., senior note, 144A, 7.875%, 9/01/11 ..................... United States 250,000 268,750
Sprint Capital Corp., 6.90%, 5/01/19 ................................ United States 645,000 729,267
------------
1,646,421
------------
ELECTRIC UTILITIES 3.3%
CMS Energy Corp., senior note, 7.50%, 1/15/09 ....................... United States 150,000 159,562
Consumers Energy Co., C, 4.25%, 4/15/08 ............................. United States 750,000 754,556
Elektrownia Turow BV, 9.75%, 3/14/11 ................................ Netherlands 295,000 EUR 411,949
Texas Genco LLC, senior note, 144A, 6.875%, 12/15/14 ................ United States 500,000 520,000
Texas New Mexico Power Co., senior note, 6.125%, 6/01/08 ............ United States 225,000 231,191
TXU Corp., 144A, 6.55%, 11/15/34 .................................... United States 380,000 386,272
------------
2,463,530
------------
ENERGY EQUIPMENT & SERVICES .9%
Halliburton Co., 8.75%, 2/15/21 ..................................... United States 465,000 627,347
------------
FOOD PRODUCTS .5%
Smithfield Foods Inc., senior note, 7.00%, 8/01/11 .................. United States 350,000 374,062
------------
HEALTH CARE PROVIDERS & SERVICES .4%
Medco Health Solutions Inc., senior note, 7.25%, 8/15/13 ............ United States 255,000 288,680
------------
Semiannual Report | 21
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT E VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
HOTELS RESTAURANTS & LEISURE .6%
Park Place Entertainment Corp., senior sub. note, 8.125%, 5/15/11 ... United States $ 175,000 $ 201,250
Royal Caribbean Cruises Ltd., senior note, 8.75%, 2/02/11 ........... United States 230,000 270,825
------------
472,075
------------
HOUSEHOLD DURABLES .1%
D.R. Horton Inc., senior note, 7.875%, 8/15/11 ...................... United States 35,000 40,400
------------
MACHINERY .4%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 ............ United States 250,000 274,375
------------
MEDIA 3.1%
Cox Communications Inc., 7.125%, 10/01/12 ........................... United States 635,000 716,297
EchoStar DBS Corp., senior note, 5.75%, 10/01/08 .................... United States 45,000 45,562
Emmis Operating Co., senior sub. note, 6.875%, 5/15/12 .............. United States 130,000 133,900
Medianews Group Inc., senior sub. note, 6.875%, 10/01/13 ............ United States 275,000 275,000
TCI Communications Inc., 8.75%, 8/01/15 ............................. United States 875,000 1,125,863
------------
2,296,622
------------
METALS & MINING .9%
Alrosa Finance SA, 144A, 8.875%, 11/17/14 ........................... Luxembourg 180,000 186,867
Glencore Funding LLC, 144A, 6.00%, 4/15/14 .......................... United States 495,000 481,699
------------
668,566
------------
OFFICE ELECTRONICS .4%
Xerox Corp., senior note, 6.875%, 8/15/11 ........................... United States 300,000 318,000
------------
OIL & GAS .1%
Chesapeake Energy Corp., senior note, 144A, 6.375%, 6/15/15 ......... United States 90,000 92,250
------------
PAPER & FOREST PRODUCTS .4%
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13 ................. United States 225,000 260,156
------------
TOTAL CORPORATE BONDS (COST $14,491,720) ............................ 15,043,955
------------
MORTGAGE-BACKED SECURITIES 30.1%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) ADJUSTABLE RATE 3.5%
FHLMC, Cap 10.123%, Margin 2.75% + CMT, Resets Annually, 5.123%,
9/01/34 ........................................................... United States 2,545,495 2,556,230
------------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED RATE 9.5%
FHLMC 30 Year, 6.00%, 9/01/34 ....................................... United States 6,807,229 7,035,423
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE 15.4%
a FNMA 30 Year, 6.00% 2/01/29 ......................................... United States 2,485,000 2,566,538
FNMA 30 Year, 6.50%, 8/01/31 ........................................ United States 25,456 26,666
FNMA 30 Year, 6.50%, 11/01/32 ....................................... United States 30,264 31,695
a FNMA 30 Year, 5.50%, 2/01/33 ........................................ United States 1,010,000 1,028,622
a FNMA 30 Year, 5.00%, 2/01/34 ........................................ United States 3,322,000 3,314,731
a FNMA 30 Year, 5.50%, 3/15/34 ........................................ United States 2,910,000 2,955,469
FNMA 30 Year, 6.50%, 10/01/34 ....................................... United States 1,386,486 1,451,171
------------
11,374,892
------------
22 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT E VALUE
- ---------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES (CONT.)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 1.7%
GNMA|SF 30 Year, 6.00% 3/20/34 ...................................... United States $ 555,405 $ 577,422
GNMA|SF 30 Year, 6.00% 4/20/34 ...................................... United States 676,928 703,762
------------
1,281,184
------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $22,234,020) 22,247,729
------------
ASSET-BACKED SECURITIES 12.8%
CONSUMER FINANCE 0%F
WFS Financial Owner Trust, 2002-4, A3B, 1.43%, 8/20/07 .............. United States 29,758 29,773
------------
DIVERSIFIED FINANCIAL SERVICES 8.3%
Fleet Credit Card Master Trust, 2002-B, A, 2.62%, 4/15/10 ........... United States 2,430,000 2,438,468
SLM Student Loan Trust, 2002-3, A4, 1.80%, 10/25/16 ................. United States 790,000 794,015
SLM Student Loan Trust, 2003-6, A2, 1.55%, 3/15/11 .................. United States 84,057 84,105
SLM Student Loan Trust, 2004-6, A2, 1.62%, 1/25/13 .................. United States 2,500,000 2,504,227
SLM Student Loan Trust, 2004-9, A2, 2.72%, 10/25/12 ................. United States 300,000 300,136
------------
6,120,951
------------
OIL & GAS .9%
Gazprom International SA, 144A, 7.201%, 2/01/20 ..................... Russia 510,000 541,875
Gazprom International SA, Reg S, 7.201%, 2/01/20 .................... Russia 130,000 138,125
------------
680,000
------------
THRIFTS & MORTGAGE FINANCE 3.6%
Bear Stearns Adjustable Rate Mortgage Trust, 2004-4, A1B, 3.517%,
6/25/34 ........................................................... United States 659,034 659,732
Countrywide Asset-Backed Certificates, 2004-SD3, A1, 144A, 2.238%,
9/25/34 ........................................................... United States 55,193 55,339
FNMA, 1997-9, B, 6.499%, 10/25/22 ................................... United States 416,791 417,781
Impac Secured Assets Common Owner Trust, 2003-2, A1, 5.50%,
8/25/33 ........................................................... United States 434,305 431,443
Master Alternative Loans Trust, 2003-3, 1A1, 6.50%, 5/25/33 ......... United States 206,861 210,667
Master Alternative Loans Trust, 2003-7, 6A1, 6.50%, 12/25/33 ........ United States 331,895 339,112
Washington Mutual Inc., 2004-AR2, A, 2.574%, 4/25/44 ................ United States 418,041 422,844
Washington Mutual Inc., 2004-AR9, A2, 2.468%, 8/25/34 ............... United States 108,695 108,471
------------
2,645,389
------------
TOTAL ASSET-BACKED SECURITIES (COST $9,435,160) 9,476,113
------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 11.3%
Export-Import Bank Japan, 2.875%, 7/28/05 ........................... Japan 160,000,000 JPY 1,565,420
Federal Republic of Germany, 5.25%, 1/04/11 ......................... Germany 1,005,000 EUR 1,461,114
Federal Republic of Germany, 5.50%, 1/04/31 ......................... Germany 2,170,000 EUR 3,491,808
Government of Mexico, 9.00%, 12/20/12 ............................... Mexico 75,600g MXN 655,161
Kingdom of Spain, 4.75%, 3/14/05 .................................... Spain 50,000,000 JPY 485,069
Mexican Udibonos, 3.50%, 12/19/13 ................................... Mexico 88,008g MXN 715,750
------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $8,203,593) .... 8,374,322
------------
Semiannual Report | 23
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY PRINCIPAL AMOUNT E VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES 12.2%
U.S. Treasury Bond, 7.25%, 8/15/22 .................................. United States $1,489,000 $ 1,960,769
U.S. Treasury Bond, 5.375%, 2/15/31 ................................. United States 1,329,000 1,487,079
b U.S. Treasury Inflation Index Bond, 1.75%, 1/15/15 .................. United States 2,917,788 2,912,547
U.S. Treasury Note, 6.25%, 2/15/07 .................................. United States 2,500,000 2,646,290
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $8,935,788) 9,006,685
------------
MUNICIPAL BOND SECURITIES 1.4%
Badger Tobacco Asset Securitization Corp. Revenue, Asset-Backed,
6.125%, 6/01/27 ................................................... United States 50,000 50,214
Northern TOB Securitization Corp., Alaska TOB Settlement Revenue,
Asset-Backed Bonds, 4.75%, 6/01/15 ................................ United States 115,000 114,391
Tobacco Settlement Financing Corp. Revenue, 4.375%, 6/01/19 ......... United States 300,000 299,709
Tobacco Settlement Financing Corp. Revenue, 6.375%, 6/01/32 ......... United States 85,000 84,935
Tobacco Settlement Revenue Management Authority Settlement Revenue,
Series B, 6.375%, 5/15/28 ......................................... United States 440,000 439,947
------------
TOTAL MUNICIPAL BOND SECURITIES (COST $938,739) ..................... 989,196
------------
--------------------
SHARES
--------------------
PREFERRED STOCKS 4.5%
COMMUNICATIONS EQUIPMENT 2.0%
Centaur Funding Corp., 9.08%, pfd., B, 144A ......................... United States 1,102 1,484,256
------------
FINANCE 2.5%
Fannie Mae, 7.00%, pfd. ............................................. United States 32,513 1,845,113
------------
TOTAL PREFERRED STOCKS (COST $3,239,480) ............................ 3,329,369
------------
TOTAL LONG TERM INVESTMENTS (COST $67,478,500) ...................... 68,467,369
------------
--------------------
PRINCIPAL AMOUNT E
--------------------
SHORT TERM INVESTMENTS 18.2%
U.S. GOVERNMENT AND AGENCY SECURITIES 10.5%
FHLB, 7.125%, 2/15/05 ............................................... United States $2,700,000 2,704,631
c FNMA, 2/07/05 ....................................................... United States 1,500,000 1,499,410
FNMA, 7.125%, 2/15/05 ............................................... United States 2,700,000 2,704,598
U.S. Treasury Note, 1.625%, 4/30/05 ................................. United States 893,000 891,327
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $7,800,544) ....... 7,799,966
------------
TOTAL INVESTMENTS BEFORE MONEY FUND (COST $75,279,044) .............. 76,267,335
------------
24 | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONT.)
MONEY FUND (COST $5,721,538) 7.7%
d Franklin Institutional Fiduciary Trust Money Market Portfolio ....... United States 5,721,538 $ 5,721,538
------------
TOTAL INVESTMENTS (COST $81,000,582) 110.9% ......................... 81,988,873
NET UNREALIZED GAIN ON FORWARD EXCHANGE CONTRACTS 0% f .............. 16,734
OTHER ASSETS, LESS LIABILITIES (10.9)% .............................. (8,065,719)
------------
NET ASSETS 100.0% ................................................... $73,939,888
============
CURRENCY ABBREVIATIONS:
EUR - Euro
JPY - Japanese Yen
MXN - Mexican Peso
PORTFOLIO ABBREVIATIONS:
CMT - 1 Year Constant Treasury Index
FHLB - Federal Home Loan Bank
FRN - Floating Rate Note
SF - Single Family
TOB - Tobacco
a See Note 1(c) regarding securities purchased on a to-be-announced basis.
b Principal amount of security is adjusted for inflation.
c Security is traded on a discount basis with no stated coupon rate.
d See Note 7 regarding investments in Franklin Institutional Fiduciary Trust
Money Market Portfolio.
e The principal amount is stated in U.S. dollars unless otherwise indicated.
f Rounds to less than .05% of net assets.
g Principal amount is stated in $100.00 Peso units.
Semiannual Report | See notes to financial statements. | 25
Franklin Global Trust
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
January 31, 2005 (unaudited)
-----------------------------
FIDUCIARY FIDUCIARY
CORE FIXED CORE PLUS FIXED
INCOME FUND INCOME FUND
-----------------------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers .......................... $15,637,835 $75,279,044
Cost - Sweep Money Fund (Note 7) ..................... 2,056,780 5,721,538
-----------------------------
Total cost of investments ............................ 17,694,615 81,000,582
=============================
Value - Unaffiliated issuers ......................... 15,813,990 76,267,335
Value - Sweep Money Fund (Note 7) .................... 2,056,780 5,721,538
-----------------------------
Total value of investments ........................... 17,870,770 81,988,873
-----------------------------
Receivables:
Investment securities sold ........................... 270,593 2,068,390
Interest ............................................. 188,622 843,615
Unrealized gain on forward exchange contracts (Note 8) -- 47,102
-----------------------------
Total assets ..................................... 18,329,985 84,947,980
-----------------------------
Liabilities:
Payables:
Investment securities purchased ...................... 1,967,446 10,949,370
Capital shares redeemed .............................. 12,950 --
Affiliates ........................................... 2,253 21,066
Unrealized loss on forward exchange contracts (Note 8) -- 30,368
Other liabilities ..................................... 13,090 7,288
-----------------------------
Total liabilities ................................ 1,995,739 11,008,092
-----------------------------
Net assets, at value ............................ $16,334,246 $73,939,888
=============================
Net assets consist of:
Distributions in excess of net investment income ...... $ (130,272) $ (286,859)
Net unrealized appreciation (depreciation) ............ 176,155 990,191
Accumulated net realized gain (loss) .................. 115,780 388,000
Capital shares ........................................ 16,172,583 72,848,556
-----------------------------
Net assets, at value ............................ $16,334,246 $73,939,888
=============================
Shares outstanding ..................................... 1,625,946 7,031,492
=============================
Net asset value and maximum offering price per share a . $10.05 $10.52
=============================
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
26 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the six months ended January 31, 2005 (unaudited)
------------------------------
FIDUCIARY CORE FIDUCIARY CORE
FIXED INCOME PLUS FIXED
FUND INCOME FUND
------------------------------
Investment income:
Dividends:
Unaffiliated issuers ................................................... $ 12,211 $ 35,453
Sweep Money Fund (Note 7) .............................................. 9,215 26,517
Interest ................................................................ 311,315 1,188,630
------------------------------
Total investment income ............................................ 332,741 1,250,600
------------------------------
Expenses:
Management fees (Note 3) ................................................ 25,629 92,697
Administrative fees (Note 3) ............................................ 18,978 65,877
Transfer agent fees (Note 3) ............................................ 127 300
Custodian fees (Note 4) ................................................. 399 1,621
Reports to shareholders ................................................. 3,846 3,021
Registration and filing fees ............................................ 6,047 12,475
Amortization of offering costs .......................................... 1,672 159
Professional fees ....................................................... 10,383 9,480
Other ................................................................... 3,564 5,545
------------------------------
Total expenses ..................................................... 70,645 191,175
Expense reductions (Note 4) ........................................ (95) --
Expenses waived/paid by affiliate (Note 3) ......................... (28,346) (49,487)
------------------------------
Net expenses ...................................................... 42,204 141,688
------------------------------
Net investment income ............................................ 290,537 1,108,912
------------------------------
Realized and unrealized gains (losses): Net realized gain (loss) from:
Investments ............................................................ 195,009 630,871
Foreign currency transactions .......................................... -- (87,673)
------------------------------
Net realized gain (loss) .......................................... 195,009 543,198
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................ 205,446 847,486
Translation of assets and liabilities denominated in foreign currencies -- 5,162
------------------------------
Net change in unrealized appreciation (depreciation) .............. 205,446 852,648
------------------------------
Net realized and unrealized gain (loss) .................................. 400,455 1,395,846
------------------------------
Net increase (decrease) in net assets resulting from operations .......... $690,992 $2,504,758
==============================
Semiannual Report | See notes to financial statements. | 27
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended January 31, 2005 (unaudited)
and the period ended July 31, 2004
--------------------------------------------------------------------
FIDUCIARY CORE FIDUCIARY CORE PLUS
FIXED INCOME FUND FIXED INCOME FUND
--------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 2005 JULY 31, 2004A JANUARY 31, 2005 JULY 31, 2004B
--------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................... $ 290,537 $ 330,807 $ 1,108,912 $ 449,819
Net realized gain (loss) from investments and
foreign currency transactions ........................ 195,009 181,439 543,198 (12,838)
Net change in unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities denominated in foreign currencies ........ 205,446 (29,291) 852,648 137,543
--------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............................ 690,992 482,955 2,504,758 574,524
Distributions to shareholders from:
Net investment income ............................... (446,102) (482,411) (1,403,161) (561,516)
Net realized gains .................................. (42,155) (58,547) -- (42,176)
--------------------------------------------------------------------
Total distributions to shareholders .................. (488,257) (540,958) (1,403,161) (603,692)
Capital share transactions (Note 2) .................. (1,411,421) 17,600,935 18,706,280 54,161,179
--------------------------------------------------------------------
Net increase (decrease) in net assets ........... (1,208,686) 17,542,932 19,807,877 54,132,011
Net assets:
Beginning of period .................................. 17,542,932 -- 54,132,011 --
--------------------------------------------------------------------
End of period ........................................ $16,334,246 $17,542,932 $73,939,888 $54,132,011
====================================================================
Undistributed net investment income (distributions
in excess of net investment income) included in
net assets:
End of period ....................................... $ (130,272) $ 25,293 $ (286,859) $ 7,390
====================================================================
a For the period August 29, 2003 (commencement of operations) to July 31, 2004.
b For the period August 4, 2003 (commencement of operations) to July 31, 2004.
28 | See notes to financial statements. | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Global Trust (the Trust) is registered under the Investment Company Act
of 1940 as an open-end investment company, consisting of seven separate series.
All funds included in this report (the Funds) are diversified except Fiduciary
Core Plus Fixed Income Fund. The financial statements of the remaining funds in
the series are presented separately. The investment objective of the Funds
included in this report is total return.
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.
Corporate debt securities, U.S. Government securities, mortgage pass-through
securities, other mortgage-backed securities, collateralized mortgage
obligations and asset-backed securities generally trade in the over-the-counter
market rather than on a securities exchange. The Trust may utilize independent
pricing services, quotations from bond dealers, and information with respect to
bond and note transactions, to assist in determining a current market value for
each security. The Trust's pricing services may use valuation models or matrix
pricing which considers information with respect to comparable bond and note
transactions, quotations from bond dealers, or by reference to other securities
that are considered comparable in such characteristics as rating, interest rate
and maturity date, option adjusted spread models, prepayment projections,
interest rate spreads and yield curves, to determine current value.
Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. 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. 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 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. Some 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. 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. If such an event occurs, the
securities may be valued using fair value procedures, which may include the use
of independent pricing services. All security valuation procedures are approved
by the Trust's Board of Trustees.
Semiannual Report | 29
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Trust's Board of Trustees.
The Funds do not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. SECURITIES PURCHASED ON A TBA BASIS
The Funds may purchase securities on a to-be-announced (TBA) basis, with payment
and delivery scheduled for a future date. These transactions are subject to
market fluctuations and are subject to the risk that the value at delivery may
be more or less than the trade date purchase price. Although the Funds will
generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
D. FOREIGN CURRENCY CONTRACTS
The Fiduciary Core Plus Fixed Income Fund may enter into forward exchange
contracts to hedge against fluctuations in foreign exchange rates. A forward
exchange contract is an agreement between two parties to exchange different
currencies at an agreed upon exchange rate at a future date. These contracts are
valued daily by the fund and any equity therein is included in the Statement of
Assets and Liabilities. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
When the Fiduciary Core Plus Fixed Income Fund purchases or sells foreign
securities it may enter into foreign exchange contracts to minimize foreign
exchange risk from the trade date to the settlement date of the transactions.
Realized and unrealized gains and losses on these contracts are included in the
Statement of Operations.
30 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. FOREIGN CURRENCY CONTRACTS (CONTINUED)
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.
E. MORTGAGE DOLLAR ROLLS
The Funds enter into mortgage dollar rolls, typically on a TBA basis. Dollar
rolls are agreements between the Funds and a financial institution to
simultaneously sell and repurchase a mortgage-backed security at a future date.
Gains or losses are realized at the time of the sale and the difference between
the repurchase price and sale price is recorded as an unrealized gain to the
Funds. The risks of mortgage dollar roll transactions include the potential
inability of the counterparty to fulfill its obligations.
F. INCOME TAXES
No provision has been made for U.S. income taxes because each Funds' policy is
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and
to distribute substantially all of its taxable income. Fund distributions to
shareholders are determined on an income tax basis and may differ from net
investment income and realized gains for financial reporting purposes.
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. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
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. Other expenses are
charged to each fund on a specific identification basis.
Inflation-indexed bonds are fixed-income securities whose principal value is
adjusted to the rate of inflation. Interest is accrued based on the principal
value, which is adjusted for inflation. Any increase in the principal amount of
an inflation-indexed bond is recorded as interest income, even though principal
is not received until maturity.
H. OFFERING COSTS
Offering costs are amortized on a straight line basis over twelve months.
Semiannual Report | 31
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
Effective June 1, 2004, redemptions and exchanges of the Funds' shares held five
trading days or less may be subject to the Funds' redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Funds and accounted for as
additional paid-in capital. There were no redemption fees for the period.
K. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liability 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. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2005, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Funds' shares were as follows:
------------------------------------------------------------
FIDUCIARY CORE FIDUCIARY CORE
FIXED INCOME FUND PLUS FIXED INCOME FUND
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
Six months ended January 31, 2005
Shares sold ............................. 465,679 $ 4,683,495 2,505,506 $26,258,780
Shares issued in reinvestment
of distributions ........................ 20,787 208,749 16,170 169,380
Shares redeemed ......................... (620,563) (6,303,665) (736,262) (7,721,880)
------------------------------------------------------------
Net increase (decrease) ................. (134,097) $(1,411,421) 1,785,414 $18,706,280
============================================================
Period ended July 31, 2004 a
Shares sold ............................. 2,647,196 $26,722,232 5,285,629 $54,569,730
Shares issued in reinvestment
of distributions ........................ 10,151 103,332 28,256 289,874
Shares redeemed ......................... (897,304) (9,224,629) (67,807) (698,425)
------------------------------------------------------------
Net increase (decrease) ................. 1,760,043 $17,600,935 5,246,078 $54,161,179
============================================================
a For the period August 29, 2003 (commencement of operations) to July 31, 2004
for Fiduciary Core Fixed Income Fund and August 4, 2003 (commencement of
operations) to July 31, 2004 for Fiduciary Core Plus Fixed Income Fund.
32 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers and/or directors of
the following entities:
- --------------------------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- --------------------------------------------------------------------------------------------------------------
Fiduciary International Inc. (Fiduciary) 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 Funds pay an investment management fee to Fiduciary of .30% per year of the
average daily net assets of each fund.
B. ADMINISTRATIVE FEES
The Funds pay an administrative fee to FT Services of .20% per year of the
Funds' average daily net assets.
For the Fiduciary Core Fixed Income Fund, FT Services agreed in advance to
voluntarily waive administrative fees. Additionally, Fiduciary agreed in advance
to voluntarily waive a portion of management fees through November 30, 2005, as
noted in the Statement of Operations. For the Fiduciary Core Plus Fixed Income
Fund, FT Services agreed in advance to voluntarily waive a portion of
administrative fees, as noted in the Statement of Operations. Total expenses
waived by Fiduciary and FT Services are not subject to reimbursements by the
Funds subsequent to the Funds' fiscal year end.
C. TRANSFER AGENT FEES
The Funds paid transfer agent fees as noted in the Statements of Operations of
which the following amounts were paid to Investor Services:
- --------------------------------------------------------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
- --------------------------------------------------------------------------------
Transfer agent fees $21 $51
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 January 31, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
Semiannual Report | 33
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. INCOME TAXES
At July 31, 2004, the Fiduciary Core Plus Fixed Income Fund had deferred capital
losses occurring subsequent to October 31, 2003 of $37,373. For tax purposes,
such losses will be reflected in the year ending July 31, 2005.
At July 31, 2004, the Fiduciary Core Plus Fixed Income Fund had deferred
currency losses occurring subsequent to October 31, 2003 of $12,655. For tax
purposes, such losses will be reflected in the year ending July 31, 2005.
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions, mortgage
dollar rolls, paydown losses, bond discounts and premiums, and offering costs.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales, foreign currency
transactions, mortgage dollar rolls, paydown losses, and bond discounts and
premiums.
At January 31, 2005, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes were as follows:
-------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
------------------------------
Cost of investments .................................................. $17,739,095 $81,186,046
==============================
Unrealized appreciation .............................................. $ 184,927 $ 1,018,457
Unrealized depreciation .............................................. (53,252) (215,630)
------------------------------
Net unrealized appreciation (depreciation) ........................... $ 131,675 $ 802,827
==============================
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
period ended January 31, 2005 were as follows:
------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
------------------------------
Purchases ............................................................ $52,075,003 $167,061,321
Sales ................................................................ $54,068,113 $147,550,397
34 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc. (an affiliate of the investment manager). Management fees
paid by the Funds are reduced on assets invested in the Sweep Money Fund, in an
amount not to exceed the management fees paid by the Sweep Money Fund.
8. FORWARD EXCHANGE CONTRACTS
At January 31, 2005, the Fiduciary Core Plus Fixed Income Fund has outstanding
forward exchange contracts as set out below. The contracts are reported in the
financial statements at the Fund's net equity, as measured by the difference
between the forward exchange rates at the reporting date and the forward
exchange rates at the day of entry into the contracts.
- -------------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR DATE GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------
1,096,996 Euro ................................ U.S. $1,429,799 2/08/05 U.S. $ 29,535
141,640,000 Japanese Yen ........................ 1,370,652 3/14/05 17,567
---------- -----------
U.S. $2,800,451 47,102
========== -----------
Unrealized gain on forward exchange contracts ...................................... U.S. $ 47,102
===========
- -------------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO BUY EXCHANGE FOR DATE GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------
1,096,996 Euro ................................ U.S. $1,429,799 2/08/05 U.S. $(26,749)
10,004 Euro ................................ 13,039 2/08/05 (244)
---------- -----------
U.S. $1,442,838 U.S. $(26,993)
========== ===========
- -------------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR DATE GAIN (LOSS)
- -------------------------------------------------------------------------------------------------------
10,004 Euro ................................ U.S. $ 13,039 2/08/05 U.S. $ (17)
1,933,968 Euro ................................ 2,520,689 2/08/05 (3,358)
---------- -----------
U.S. $2,533,728 (3,375)
========== -----------
Unrealized loss on forward exchange contracts ...................................... (30,368)
-----------
Net unrealized gain on forward exchange contracts ................................. U.S. $ 16,734
===========
9. SHAREHOLDER CONCENTRATIONS
The Fiduciary Core Fixed Income Fund has a concentration of shareholders holding
a significant percentage of shares outstanding. Investment activities of these
shareholders could have a material impact on the fund. At January 31, 2005,
Fiduciary Core Fixed Income Fund had five unaffiliated shareholders, holding
40%, 15%, 9%, 8% and 7%, respectively, of the Fund's outstanding shares.
Semiannual Report | 35
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. CREDIT RISK
The Fiduciary Core Plus Fixed Income Fund has 7.7% of its portfolio invested in
below investment grade and comparable quality unrated high yield securities,
which tend to be more sensitive to economic conditions than higher rated
securities. The risk of loss due to default by the issuer may be significantly
greater for the holders of high yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.
11. REGULATORY MATTERS
INVESTIGATIONS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.
SETTLEMENTS
Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.
Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The Order also required Franklin Advisers, Inc. to, among other
things, enhance and periodically review
compliance policies and procedures.
36 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.
On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing, in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing", failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.
On November 17, 2004, Franklin Resources, Inc. announced that Franklin/Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.
On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Second Order").
Semiannual Report | 37
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.
The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The IDC has
substantially completed preparation of these distribution plans. The CAGO has
approved the distribution plan pertaining to the distribution of the monies owed
under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies are expected to be disbursed promptly.
The SEC has not yet approved the distribution plan pertaining to the Second
Order. When approved, disbursements of settlement monies under the SEC's Second
Order will also be made promptly in accordance with the terms and conditions of
that order.
OTHER LEGAL PROCEEDINGS
The Trust, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority of these lawsuits duplicate, in whole or in part, the
allegations asserted in the February 4, 2004 Massachusetts administrative
complaint and the findings in the SEC's August 2, 2004 Order, as described
above. The lawsuits are styled as class actions, or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.
38 | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.
The Company and fund management strongly believes that the claims made in each
of the lawsuits identified above are without merit and intends to vigorously
defend against them. The Company cannot predict with certainty, however, the
eventual outcome of the remaining governmental investigations or private
lawsuits, nor whether they will have a material negative impact on the Company.
Public trust and confidence are critical to the Company's business and any
material loss of investor and/or client confidence could result in a significant
decline in assets under management by the Company, which would have an adverse
effect on the Company's future financial results. If the Company finds that it
bears responsibility for any unlawful or inappropriate conduct that caused
losses to the Trust, it is committed to making the Trust or its shareholders
whole, as appropriate. The Company is committed to taking all appropriate
actions to protect the interests of its funds' shareholders.
Semiannual Report | 39
Franklin Global Trust
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the most recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Funds file a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
40 | Semiannual Report
2005
THE EXPERTISE OF MANY. THE STRENGTH OF ONE.
FRANKLIN GLOBAL TRUST
Fiduciary Core Fixed Income Fund
Fiduciary Core Plus Fixed Income Fund
[LOGO OMITTED]
FRANKLIN[R] TEMPLETON[R]
INSTITUTIONAL
[LOGO OMITTED]
FRANKLIN[R] TEMPLETON[R]
INSTITUTIONAL
FRANKLIN TEMPLETON INSTITUTIONAL
600 Fifth Avenue
New York, NY 10020
FRANKLINTEMPLETONINSTITUTIONAL.COM
SEMIANNUAL REPORT
FIDUCIARY CORE FIXED INCOME FUND
FIDUCIARY CORE PLUS FIXED INCOME FUND
INVESTMENT MANAGER
Fiduciary International, Inc.
DISTRIBUTOR
Franklin Templeton Distributors
One Franklin Parkway
San Mateo, CA 94403-1906
FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
1-800/321-8563
franklintempletoninstitutional.com
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.
FGT2S2005 03/05
SEMIANNUAL REPORT
01 31 2005
THE EXPERTISE OF MANY. THE STRENGTH OF ONE.
- --------------------------------------------------------------------------------
FRANKLIN GLOBAL TRUST
-----------------------------------
Fiduciary High Income Fund
[LOGO
OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Contents
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Fiduciary High Income Fund ..................................... 2
Performance Summary ............................................ 6
Your Fund's Expenses ........................................... 7
Financial Highlights and Statement of Investments .............. 9
Financial Statements ........................................... 14
Notes to Financial Statements .................................. 17
Shareholder Information ........................................ 26
---------------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
---------------------------------------------------------
Semiannual Report |1
Semiannual Report
Fiduciary High Income Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: The Fund seeks total return by investing
primarily in debt securities offering high yield and expected total return. The
Fund may invest up to 100% of its assets in high yield, lower quality debt
securities.
[SIDEBAR]
- --------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR CURRENT PERFORMANCE.
- --------------------------------------------------------------------------------
This semiannual report for the Fiduciary High Income Fund covers the six-month
period ended January 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 8.55% cumulative total return for the period ended January 31,
2005. The Fund outperformed its benchmark, the CSFB High Yield Index, Developed
Countries Only 1, which returned 7.74% during the same period.
ECONOMIC AND MARKET OVERVIEW
During the period under review, economic indicators for the domestic economy
remained mostly positive. Employment growth again reached respectable levels in
August after a lull earlier in the summer. However, non-farm payroll numbers
continued to show volatility throughout the remainder of the period, as a
pattern of better than expected labor market figures followed by disappointing
figures persisted. Nevertheless, the employment picture continued to improve.
Despite decent employment growth, economic reports during the third quarter of
2004 showed softer retail sales, industrial production, and durable goods
orders, as well as a decline in consumer confidence. Later in the year, many of
these numbers rebounded and it became evident that the resilient consumer
continued to keep the economic recovery in tact. This was despite the fact that
oil prices continued their steady march upward, reaching $50 a barrel for the
first time in history during the summer before tapering off in the fall. Despite
high oil prices, inflationary concerns that surfaced during the second quarter
eased. Headline inflation stabilized and core inflation, which excludes food and
energy, was also benign.
1. Source: Standard & Poor's Micropal. The CSFB High Yield Index, Developed
Countries Only, is a subindex of the CSFB High Yield Index and is composed of
only the issues of issuers from developed countries in the index. The index is
unmanaged and includes reinvested distributions. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL VALUE, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 10.
2| Semiannual Report
[PIE CHART OMITTED]
SECTOR ALLOCATION
Fiduciary High Income Fund
As a Percentage of Total Net Assets
As of 1/31/05
Corporate Bonds ........... 96.5%
Preferred Stocks .......... 1.3%
Cash Equivalents &
Other Net Assets .......... 2.2%
- --------------------------------------------------------------------------------
As was widely anticipated by the markets, the Federal Open Market Committee
raised its target for the federal funds rate by 25 basis points on four separate
occasions to end the period at 2.25%. The 10-year Treasury, which began the
period at 4.48%, rallied 35 basis points to end the period at 4.13%. More
significant, however, was the substantial flattening of the yield curve. The
2-year Treasury actually rose 59 basis points to end the quarter at 3.27%, while
yields in the long end of the curve rallied, as evidenced by yield on the
30-year Treasury falling 61 basis points to 4.59%. This price action seems to
indicate that the Federal Reserve is successfully reigning in expectations of a
rise in inflation and it also appears to explain why the 10-year Treasury has
been trading in a relatively narrow range. After a period of very easy monetary
policy, the Fed is now removing the accommodation successfully.
Within the corporate bonds market, high yield continued to generate healthy
total return performance, once again outperforming most other fixed income
sectors. Default rates edged lower and remained well below historical averages,
corporate earnings continued to rise, and overall liquidity for companies
remained robust from both internally-generated cash and ample access to capital
in both the public and private markets. As a result of these trends, yield
spread levels over Treasuries in the high yield market, as measured by the CSFB
High Yield Index - Developed Countries Only, declined from 4.5% at the end of
July 2004 to 3.5% at period end.
INVESTMENT STRATEGY
We are research driven, fundamental investors that rely on a team of analysts to
provide in-depth industry expertise, using both qualitative and quantitative
analysis to evaluate companies. As "bottom-up" investors, we focus primarily on
individual securities.
Semiannual Report |3
[BAR CHART OMITTED]
INDUSTRY BREAKDOWN
Fiduciary High Income Fund
Based on Total Net Assets as of 1/31/05
Media 14.4%
Multi-Utilities & Unregulated Power 8.8%
Hotels Restaurants & Leisure 7.9%
Diversified Telecommunication Services 5.7%
Health Care Providers & Services 5.6%
Wireless Telecommunication Services 5.2%
Chemicals 5.1%
Machinery 4.0%
Oil & Gas 3.8%
Metals & Mining 3.5%
Commercial Services & Supplies 3.1%
Containers & Packaging 2.7%
Electronic Equipment & Instruments 2.7%
Energy Equipment & Services 2.7%
Paper & Forest Products 2.7%
Household Durables 2.6%
Other 17.3%
Short Term Investments & Other Net Assets 2.2%
In selecting securities for the Fund's investment portfolio, we do not rely
principally on the ratings assigned by rating agencies; we perform our own
independent investment analysis to evaluate the creditworthiness of the issuer.
In addition to our fundamental analysis, yield and expected return are also
considered in selecting securities. We focus primarily on individual securities
but also consider industry sectors. Because issuers of high yield bonds tend to
be heavily represented in particular sectors, the Fund may, from time to time,
have significant investments in one or more sectors.
MANAGER'S DISCUSSION
In terms of relative performance versus its benchmark, the Fund's performance
was positively impacted by individual security selection as the range of return
performance among the majority of industry sectors was relatively narrow during
the period. The Fund also benefited from a slightly longer duration profile
versus its benchmark, during a period of declining yields in the high yield
market.
In terms of industry performance, the Fund's underweighting in the retail and
automotive sectors was a positive contributor to performance, given the weaker
returns from those two industries during the period. On the other hand, the
Fund's underweighting in the wireline telecommunications industry had a negative
impact on the Fund's relative performance, given strength in that sector
following increasing merger and acquisition activity and speculation. Otherwise,
individual security selection was the key driver for performance during the
six-month period.
In terms of selected highlights, on the back of stronger demand and utilization
rates, certain holdings in the chemicals sector generated solid performance
during the period, with initial public equity offerings by Celanese and Nalco
providing additional support to our bond holdings in those two companies. The
steel sector was also supported by the healthy demand and increasing pricing
power in that industry; our position in Ispat Inland was a beneficiary of these
fundamental trends as well as further consolidation in the sector by parent
company Mittal Steel, which resulted in an upgrade of Ispat Inlad to investment
grade by one of the rating agencies, Standard & Poor's.
After suffering from overcapacity and significant accounting issues over the
last several years, as noted above, the telecommunications sector experienced a
rebound during the period on the back of a resurgence in merger and acquisition
activity, which drove strong performance from our holdings in MCI and Qwest. In
a similar vein, the proposed merger of Nextel into investment-grade rated Sprint
drove prices for the Fund's Nextel bonds higher during the period.
4| Semiannual Report
Although the utility sector generally participated in the high yield market's
rally during the period, our position in Calpine, a natural gas-based
independent power producer, experienced downward pressure as a result of
continued longer-term liquidity concerns for that company combined with
uncertainty regarding the expected timing for a rebound in pricing power for the
independent power producers in the United States.
CONCLUSION
We thank you for your continued participation and look forward to serving your
investment needs.
Sincerely,
[PHOTO OMITTED]
/s/Christopher J. Molumphy
Christopher J. Molumphy, CFA
Executive Vice President
Portfolio Manager
Franklin Advisers, Inc.
[PHOTO OMITTED]
/s/Eric G. Takaha
Eric G. Takaha, CFA
Senior Vice President
Portfolio Manager
Franklin Advisers, Inc.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
TOP 10 HOLDINGS
Fiduciary High Income Fund
As of 1/31/05
- --------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------
Dynegy Holdings Inc. 2.0%
MULTI-UTILITIES & UNREGULATED POWER
- --------------------------------------------------------------
Qwest Communications International Inc. 1.9%
DIVERSIFIED TELECOMMUNICATION SERVICES
- --------------------------------------------------------------
Allied Waste North America Inc. 1.7%
COMMERCIAL SERVICES & SUPPLIES
- --------------------------------------------------------------
Tenet Healthcare Corp. 1.6%
HEALTH CARE PROVIDERS & SERVICES
- --------------------------------------------------------------
Fimep SA 1.4%
ELECTRONIC EQUIPMENT & INSTRUMENTS
- --------------------------------------------------------------
Calpine Corp. 1.4%
MULTI-UTILITIES & UNREGULATED POWER
- --------------------------------------------------------------
Crown European Holdings SA 1.4%
CONTAINERS & PACKAGING
- --------------------------------------------------------------
Georgia-Pacific Corp. 1.4%
PAPER & FOREST PRODUCTS
- --------------------------------------------------------------
Laidlaw International Inc. 1.4%
ROAD & RAIL
- --------------------------------------------------------------
D.R. Horton Inc. 1.4%
HOUSEHOLD DURABLES
- --------------------------------------------------------------
Semiannual Report |5
Performance Summary as of 1/31/05
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PERFORMANCE 1
- -------------------------------------------------------------------------------------------------------
ANNUALIZED CUMULATIVE
SINCE SINCE
INCEPTION 2 INCEPTION 3
6-MONTH 1-YEAR (8/25/03) (8/25/03)
- -------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND 8.55% 9.87% 15.66% 23.23%
- -------------------------------------------------------------------------------------------------------
CSFB HIGH YIELD INDEX, DEVELOPED COUNTRIES ONLY 4 7.74% 9.56% 15.11% 22.41%
- -------------------------------------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT 5 $10,855 $10,987 NA $12,323
- -------------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR MOST RECENT MONTH-END PERFORMANCE.
INTEREST RATE MOVEMENTS MAY AFFECT THE FUND'S SHARE PRICE AND YIELD. BOND
PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. THE RISKS ASSOCIATED WITH HIGHER-YIELDING,
LOWER-RATED SECURITIES INCLUDE HIGHER RISK OF DEFAULT AND LOSS OF PRINCIPAL. THE
FUND'S INVESTMENTS IN FOREIGN COMPANIES, INCLUDING EMERGING MARKETS, CAN INVOLVE
SPECIAL RISKS INCLUDING CURRENCY VOLATILITY AND POLITICAL, ECONOMIC AND
REGULATORY UNCERTAINTY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE
MAIN INVESTMENT RISKS.
ENDNOTES
1. For periods prior to January 31, 2005, the manager and administrator agreed
in advance to waive or reduce their respective fees and to assume as their own
expenses certain expenses otherwise payable by the Fund so that total Fund
annual operating expenses did not exceed 0.50%. Without this waiver or
reduction, total return would have been lower. After January 31, 2005, the
manager and administrator may end this arrangement at any time upon notice to
the Fund's Board of Trustees.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
3. Cumulative total return represents the change in value of an investment over
the periods indicated.
4. Source: Standard & Poor's Micropal. See page 2 for a description of the CSFB
High Yield Index, Developed Countries Only.
5. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
6| Semiannual Report
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases, if
applicable, and redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, if applicable, 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) of the table below provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period were $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 |7
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, IF APPLICABLE. Therefore, the second line of the table 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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- --------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,085.50 $2.63
- --------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.68 $2.55
*Expenses are equal to the Fund's annualized expense ratio of 0.50%, net of
expense waivers, which includes the net expenses incurred by the Portfolio,
multiplied by the average account value over the period, multiplied by 184/365
to reflect the one-half year period.
8 |Semiannual Report
Franklin Global Trust
FINANCIAL HIGHLIGHTS
FIDUCIARY HIGH INCOME FUND
----------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 2005 JULY 31,
(UNAUDITED) 2004 D
----------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................................................... $10.51 $10.00
----------------------------------
Income from investment operations:
Net investment income a ............................................................... .39 .72
Net realized and unrealized gains (losses) ............................................ .50 .61
----------------------------------
Total from investment operations ....................................................... .89 1.33
----------------------------------
Less distributions from:
Net investment income ................................................................. (.40) (.77)
Net realized gains .................................................................... (.35) (.05)
----------------------------------
Total distributions .................................................................... (.75) (.82)
----------------------------------
Net asset value, end of period ......................................................... $10.65 $10.51
==================================
Total return b ......................................................................... 8.55% 13.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...................................................... $8,217 $7,337
Ratios to average net assets:
Expenses c ............................................................................ 1.12% 1.36%
Expenses net of waiver and payments by affiliate c ..................................... .50% .50%
Net investment income c ................................................................ 7.05% 7.33%
Portfolio turnover rate ................................................................ 32.21% 82.00%
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
d For the period August 25, 2003 (commencement of operations) to July 31, 2004.
Semiannual Report | See notes to financial statements.| 9
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 96.5%
AEROSPACE & DEFENSE 1.2%
L-3 Communications Corp., senior sub. note, 144A, 5.875%, 1/15/15 ..... United States $100,000 $ 100,000
-----------
AUTO COMPONENTS 1.4%
TRW Automotive Inc., senior note, 9.375%, 2/15/13 ..................... United States 100,000 113,000
-----------
CHEMICALS 5.1%
BCP Caylux Holding, senior sub. note, 144A, 9.625%, 6/15/14 ........... United States 100,000 111,500
Huntsman ICI Holdings LLC, senior disc. note, zero cpn., 12/31/09 ..... United States 150,000 84,938
Nalco Co., senior sub. note, 8.875%, 11/15/13 ......................... United States 100,000 109,500
Rhodia SA, senior note, 10.25%, 6/01/10 ............................... France 100,000 114,250
-----------
420,188
-----------
COMMERCIAL SERVICES & SUPPLIES 3.1%
Allied Waste North America Inc., senior secured note, 6.50%,
11/15/10 ............................................................ United States 150,000 143,250
JohnsonDiversey Inc., senior sub. note, B, 9.625%, 5/15/12 ............ United States 100,000 112,000
-----------
255,250
-----------
CONSTRUCTION & ENGINEERING .9%
URS Corp., senior note, 11.50%, 9/15/09 ............................... United States 67,000 76,882
-----------
CONTAINERS & PACKAGING 2.7%
Crown European Holdings SA, senior secured note, 10.875%, 3/01/13 ..... United States 100,000 117,750
Owens-Brockway Glass Container Inc., senior note, 144A, 6.75%,
12/01/14 ............................................................ United States 100,000 100,500
-----------
218,250
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES 5.7%
Intelsat Bermuda Ltd., senior note, 144A, 8.25%, 1/15/13 .............. Bermuda 100,000 104,000
MCI Inc., senior note, 6.908%, 5/01/07 ................................ United States 27,000 27,675
MCI Inc., senior note, 7.688%, 5/01/09 ................................ United States 75,000 78,469
Qwest Communications International Inc., senior note, 144A, 7.50%,
2/15/14 ............................................................. United States 150,000 153,375
Time Warner Telecom Holdings Inc., senior note, 9.25%, 2/15/14 ........ United States 100,000 103,000
-----------
466,519
-----------
ELECTRIC UTILITIES 1.4%
Centerpoint Energy Inc., senior note, B, 7.25%, 9/01/10 ............... United States 100,000 111,441
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS 2.7%
Fimep SA, senior note, 10.50%, 2/15/13 ................................ France 100,000 118,750
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13 ...... Singapore 100,000 101,750
-----------
220,500
-----------
ENERGY EQUIPMENT & SERVICES 2.7%
Grant Prideco Escrow, senior note, 9.00%, 12/15/09 .................... United States 100,000 111,250
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11 .... United States 100,000 108,500
-----------
219,750
-----------
FOOD & STAPLES RETAILING 1.2%
Rite Aid Corp., senior note, 9.25%, 6/01/13 ........................... United States 100,000 100,000
-----------
FOOD PRODUCTS 1.3%
Smithfield Foods Inc., senior note, 7.00%, 8/01/11 .................... United States 100,000 106,875
-----------
10 |Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
GAS UTILITIES 2.0%
El Paso Corp., senior note, 7.875%, 6/15/12 ........................... United States $ 50,000 $ 52,250
El Paso Natural Gas Co., senior note, A, 7.625%, 8/01/10 .............. United States 100,000 110,250
-----------
162,500
-----------
HEALTH CARE PROVIDERS & SERVICES 4.3%
HCA Inc., senior note, 8.75%, 9/01/10 ................................. United States 100,000 114,350
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 ................. United States 150,000 135,375
Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%,
10/01/14 ............................................................ United States 100,000 107,500
-----------
357,225
-----------
HOTELS RESTAURANTS & LEISURE 7.9%
Boyd Gaming Corp., senior sub. note, 6.75%, 4/15/14 ................... United States 100,000 103,000
Host Marriott LP, senior note, 9.25%, 10/01/07 ........................ United States 100,000 111,000
Park Place Entertainment Corp., senior sub. note, 8.125%, 5/15/11 ..... United States 100,000 115,000
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ........ United States 100,000 108,750
Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18 ............. United States 100,000 110,500
Station Casinos Inc., senior sub. note, 6.875%, 3/01/16 ............... United States 100,000 104,250
-----------
652,500
-----------
HOUSEHOLD DURABLES 2.6%
D.R. Horton Inc., senior note, 7.875%, 8/15/11 ........................ United States 100,000 115,429
William Lyon Homes Inc., senior note, 144A, 7.625%, 12/15/12 .......... United States 100,000 97,750
-----------
213,179
-----------
HOUSEHOLD PRODUCTS 1.2%
a Rayovac Corp., senior sub. note, 144A, 7.375%, 2/01/15 ................ United States 100,000 101,375
-----------
IT SERVICES 1.4%
UGS Corp., senior sub. note, 144A, 10.00%, 6/01/12 .................... United States 100,000 112,000
-----------
MACHINERY 4.0%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 .............. United States 100,000 109,750
Invensys PLC, senior note, 144A, 9.875%, 3/15/11 ...................... United Kingdom 100,000 107,750
Milacron Escrow Corp., senior secured note, 11.50%, 5/15/11 ........... United States 100,000 107,500
-----------
325,000
-----------
MEDIA 14.4%
Advanstar Communications Inc., senior secured note, 10.75%, 8/15/10 ... United States 100,000 113,000
CanWest Media Inc., senior note, B, 7.625%, 4/15/13 ................... Canada 100,000 108,500
Charter Communications Holdings II, senior note, 10.25%, 9/15/10 ...... United States 100,000 104,500
CSC Holdings Inc., senior deb., 7.625%, 7/15/18 ....................... United States 100,000 111,000
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ................. United States 100,000 113,875
DIRECTV Holdings LLC, senior note, 8.375%, 3/15/13 .................... United States 100,000 113,125
Emmis Operating Co., senior sub. note, 6.875%, 5/15/12 ................ United States 100,000 103,000
Lamar Media Corp., senior sub. note, 7.25%, 1/01/13 ................... United States 100,000 108,000
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ................ United States 100,000 101,500
Marquee Inc., senior note, 144A, 8.625%, 8/15/12 ...................... United States 100,000 109,000
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06, 13.75%
thereafter, 7/15/11 ................................................. Canada 100,000 99,500
-----------
1,185,000
-----------
Semiannual Report |11
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
METALS & MINING 3.5%
Ispat Inland ULC, senior secured note, 9.75%, 4/01/14 ................. United States $ 63,000 $ 77,301
a Novelis Inc., senior note, 144A, 7.25%, 2/15/15 ....................... Canada 100,000 103,000
Peabody Energy Corp., senior note, B, 6.875%, 3/15/13 ................. United States 100,000 107,500
-----------
287,801
-----------
MULTI-UTILITIES & UNREGULATED POWER 8.8%
Allegheny Energy Supply Co. LLC, 144A, 8.25%, 4/15/12 ................. United States 100,000 111,750
Calpine Corp., senior secured note, 144A, 8.50%, 7/15/10 .............. United States 150,000 118,500
Dynegy Holdings Inc., senior secured note, 144A, 10.125%, 7/15/13 ..... United States 150,000 167,250
Midwest Generation LLC, senior secured note, 8.75%, 5/01/34 ........... United States 100,000 112,250
Texas Genco LLC, senior note, 144A, 6.875%, 12/15/14 .................. United States 100,000 104,000
Utilicorp United Inc., senior note, 9.95%, 2/01/11 .................... United States 100,000 113,125
-----------
726,875
-----------
OFFICE ELECTRONICS 1.3%
Xerox Corp., senior note, 7.125%, 6/15/10 ............................. United States 100,000 108,250
-----------
OIL & GAS 3.8%
Chesapeake Energy Corp., senior note, 144A, 6.375%, 6/15/15 ........... United States 100,000 102,500
Markwest Energy Partners LP, senior note, 144A, 6.875%, 11/01/14 ...... United States 100,000 101,000
Plains Exploration & Production Co., senior note, 7.125%, 6/15/14 ..... United States 100,000 110,250
-----------
313,750
-----------
PAPER & FOREST PRODUCTS 2.7%
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13 ................... United States 100,000 115,625
Jefferson Smurfit Corp., senior note, 7.50%, 6/01/13 .................. United States 100,000 103,750
-----------
219,375
-----------
REAL ESTATE 1.3%
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15 ............ United States 100,000 106,500
-----------
ROAD & RAIL 1.4%
Laidlaw International Inc., senior note, 10.75%, 6/15/11 .............. United States 100,000 115,500
-----------
SPECIALTY RETAIL 1.3%
Leslie's Poolmart, senior note, 144A, 7.75%, 2/01/13 .................. United States 100,000 102,250
-----------
WIRELESS TELECOMMUNICATION SERVICES 5.2%
Dobson Cellular Systems Inc., secured note, 144A, 9.875%, 11/01/12 .... United States 100,000 102,750
Millicom International Cellular SA, senior note, 144A, 10.00%,
12/01/13 ............................................................ Luxembourg 100,000 104,750
Nextel Communications Inc., senior note, 7.375%, 8/01/15 .............. United States 100,000 110,750
Rogers Wireless Communications Inc., senior secured note, 7.25%,
12/15/12 ............................................................ Canada 100,000 107,250
-----------
425,500
-----------
TOTAL CORPORATE BONDS (COST $7,519,900) ............................... 7,923,235
-----------
--------
SHARES
--------
PREFERRED STOCK (COST $103,750) 1.3%
HEALTH CARE PROVIDERS & SERVICES
Fresenius Medical Care Capital Trust II, 7.875%, 2/01/08, pfd. ........ Germany 100 107,750
-----------
TOTAL LONG TERM INVESTMENTS (COST $7,623,650) ......................... 8,030,985
-----------
12 |Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENT (COST $151,907) 1.8%
MONEY FUND
b Franklin Institutional Fiduciary Trust Money Market Portfolio ......... United States 151,907 $ 151,907
-----------
TOTAL INVESTMENTS (COST $7,775,557) 99.6% ............................. 8,182,892
OTHER ASSETS, LESS LIABILITIES .4% .................................... 34,575
-----------
NET ASSETS 100.0% ..................................................... $8,217,467
===========
a See Note 1(b) regarding securities purchased on a delayed delivery basis.
b See Note 7 regarding investments in Franklin Institutional Fiduciary Trust
Money Market Portfolio.
Semiannual Report | See notes to financial statements. |13
Franklin Global Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2005 (unaudited)
--------------
FIDUCIARY
HIGH INCOME
FUND
--------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................................................................ $7,623,650
Cost - Sweep Money Fund (Note 7) ....................................................................... 151,907
--------------
Total cost of investments .............................................................................. 7,775,557
==============
Value - Unaffiliated issuers ........................................................................... 8,030,985
Value - Sweep Money Fund (Note 7) ...................................................................... 151,907
--------------
Total value of investments ............................................................................. 8,182,892
--------------
Receivables:
Investment securities sold ............................................................................. 121,918
Interest ............................................................................................... 163,334
Affiliates ............................................................................................. 4,758
--------------
Total assets ....................................................................................... 8,472,902
--------------
Liabilities:
Payables:
Investment securities purchased ........................................................................ 200,000
Distributions to shareholders ........................................................................... 49,157
Other liabilities ....................................................................................... 6,278
--------------
Total liabilities .................................................................................. 255,435
--------------
Net assets, at value .............................................................................. $8,217,467
==============
Net assets consist of:
Distributions in excess of net investment income ........................................................ $ (24,314)
Net unrealized appreciation (depreciation) .............................................................. 407,335
Accumulated net realized gain (loss) .................................................................... 57,255
Capital shares .......................................................................................... 7,777,191
--------------
Net assets, at value .............................................................................. $8,217,467
==============
Shares outstanding ....................................................................................... 771,704
==============
Net asset value and maximum offering price per share a .................................................... $10.65
==============
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
14| See notes to financial statements. | Semiannual Report
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended January 31, 2005 (unaudited)
--------------
FIDUCIARY
HIGH INCOME
FUND
--------------
Investment income:
Dividends:
Unaffiliated issuers ................................................................................... $ 4,130
Sweep Money Fund (Note 7) .............................................................................. 856
Interest ................................................................................................ 290,025
--------------
Total investment income ............................................................................ 295,011
--------------
Expenses:
Management fees (Note 3) ................................................................................ 11,522
Administrative fees (Note 3) ............................................................................ 7,802
Transfer agent fees (Note 3) ............................................................................ 122
Custodian fees (Note 4) ................................................................................. 160
Reports to shareholders ................................................................................. 4,700
Registration and filing fees ............................................................................ 7,047
Amortization of offering costs .......................................................................... 1,326
Professional fees ....................................................................................... 8,352
Other ................................................................................................... 2,584
--------------
Total expenses ..................................................................................... 43,615
Expense reductions (Note 4) ........................................................................ (10)
Expenses waived/paid by affiliate (Note 3) ......................................................... (24,081)
--------------
Net expenses ...................................................................................... 19,524
--------------
Net investment income ............................................................................ 275,487
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............................................................... 87,041
Net change in unrealized appreciation (depreciation) on investments ..................................... 259,061
--------------
Net realized and unrealized gain (loss) .................................................................. 346,102
--------------
Net increase (decrease) in net assets resulting from operations .......................................... $621,589
==============
Semiannual Report | See notes to financial statements. |15
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended January 31, 2005 (unaudited)
and the period ended July 31, 2004 a
-------------------------------------
FIDUCIARY HIGH INCOME FUND
-------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 2005 JULY 31, 2004
-------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................. $ 275,487 $ 504,045
Net realized gain (loss) from investments ......................................... 87,041 272,791
Net change in unrealized appreciation (depreciation) on investments ............... 259,061 148,274
-------------------------------------
Net increase (decrease) in net assets resulting from operations ............... 621,589 925,110
Distributions to shareholders from:
Net investment income ............................................................. (285,542) (537,261)
Net realized gains ................................................................ (262,490) (33,283)
-------------------------------------
Total distributions to shareholders ................................................ (548,032) (570,544)
Capital share transactions (Note 2) ................................................ 806,841 6,982,503
-------------------------------------
Net increase (decrease) in net assets ......................................... 880,398 7,337,069
Net assets:
Beginning of period ................................................................ 7,337,069 --
-------------------------------------
End of period ...................................................................... $8,217,467 $7,337,069
=====================================
Distributions in excess of net investment income included in net assets:
End of period ...................................................................... $ (24,314) $ (14,259)
=====================================
a For the period August 25, 2003 (commencement of operations) to July 31, 2004.
16| See notes to financial statements. | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FIDUCIARY HIGH INCOME FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Global Trust (the Trust) is registered under the Investment Company Act
of 1940 as an open-end investment company, consisting of seven separate series.
Fiduciary High Income Fund (the Fund), included in this report, is diversified.
The financial statements of the remaining funds in the series are presented
separately. The Fund's investment goal is total return.
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.
Corporate debt securities generally trade in the over-the-counter market rather
than on a securities exchange. The Trust may utilize independent pricing
services, quotations from bond dealers and information with respect to bond and
note transactions, to assist in determining a current market value for each
security. The Trust's pricing services may use valuation models or matrix
pricing which considers information with respect to comparable bond and note
transactions, quotations from bond dealers, or by reference to other securities
that are considered comparable in such characteristics as rating, interest rate
and maturity date, option adjusted spread models, prepayment projections,
interest rate spreads and yield curves, to determine current value.
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. Some 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. 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. If such an event occurs, the
securities may be valued using fair value procedures, which may include the use
of independent pricing services. All security valuation procedures are approved
by the Trust's Board of Trustees.
Semiannual Report |17
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
C. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
D. 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. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
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. Other expenses are
charged to each fund on a specific identification basis.
E. OFFERING COSTS
Offering costs are amortized on a straight line basis over twelve months.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
18| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. REDEMPTION FEES
Effective June 1, 2004, redemptions and exchanges of the Fund's shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital. There were no redemption fees for the period.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liability 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. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2005, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
-----------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JANUARY 31, 2005 JULY 31, 2004 a
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------
Shares sold ............................................ 495,942 $ 5,500,000 711,372 $7,118,366
Shares issued in reinvestment of distributions ......... 24,509 262,490 3,124 33,283
Shares redeemed ........................................ (446,858) (4,955,649) (16,385) (169,146)
-----------------------------------------------------------------
Net increase (decrease) ................................ 73,593 $ 806,841 698,111 $6,982,503
=================================================================
a For the period August 25, 2003 (commencement of operations) to July 31, 2004.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
the following entities:
- ---------------------------------------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ---------------------------------------------------------------------------------------------------------------------------
Fiduciary International Inc. (Fiduciary) Investment manager
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent
Semiannual Report |19
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES
The Fund pays an investment management fee to Fiduciary of .30% per year of the
average daily net assets of the Fund. Under a subadvisory agreement, Advisers,
an affiliate of Fiduciary, provides subadvisory services to the Fund and
receives from Fiduciary fees based on the average daily net assets of the Fund.
B. ADMINISTRATIVE FEES
The Fund pays an administrative fee to FT Services of .20% per year of the
average daily net assets of the Fund.
FT Services agreed in advance to voluntarily waive administrative fees, as noted
in the Statement of Operations. Additionally, Fiduciary and Advisers agreed in
advance to voluntarily waive management fees and assume payment of other
expenses, as noted in the Statement of Operations. Total expenses waived/paid by
FT Services, Fiduciary and Advisers are not subject to reimbursement by the Fund
subsequent to the Fund's fiscal year end.
C. DISTRIBUTION FEES
The Fund reimburses Distributors up to .25% per year of its average daily net
assets for costs incurred in marketing the Fund's shares under a Rule 12b-1
plan. No payments were made by the Fund for the period ended January 31, 2005.
D. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $122, of which $16 was paid to Investor
Services.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended January 31, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of bond discounts and premiums and offering costs.
Net realized gains differ for financial statement and tax purposes primarily due
to differing treatment of bond discounts and premiums.
20| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
5. INCOME TAXES (CONTINUED)
At January 31, 2005, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:
Cost of investments ...................................... $7,795,792
============
Unrealized appreciation .................................. $ 406,703
Unrealized depreciation .................................. (19,603)
------------
Net unrealized appreciation (depreciation) ............... $ 387,100
============
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
period ended January 31, 2005 aggregated $2,957,760 and $2,433,956,
respectively.
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund.
8. SHAREHOLDER CONCENTRATIONS
The Fund has a concentration of shareholders holding a significant percentage of
shares outstanding. Investment activities of these shareholders could have a
material impact on the Fund. At January 31, 2005, there were two unaffiliated
shareholders, one holding 66% and the other holding the remaining 34% of the
Fund's outstanding shares.
9. CREDIT RISK
The Fund has 98.1% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.
Semiannual Report |21
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
10. REGULATORY MATTERS
INVESTIGATIONS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.
SETTLEMENTS
Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.
Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The Order also required Franklin Advisers, Inc. to, among other
things, enhance and periodically review compliance policies and procedures.
22| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
10. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.
On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing, in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing", failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.
On November 17, 2004, Franklin Resources, Inc. announced that Franklin/Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.
On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b)
Semiannual Report |23
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
10. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
and 9(f) of the Investment Company Act of 1940, and Section 15(b) of the
Securities Exchange Act of 1934" (the "Second Order").
Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.
The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The IDC has
substantially completed preparation of these distribution plans. The CAGO has
approved the distribution plan pertaining to the distribution of the monies owed
under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies are expected to be disbursed promptly.
The SEC has not yet approved the distribution plan pertaining to the Second
Order. When approved, disbursements of settlement monies under the SEC's Second
Order will also be made promptly in accordance with the terms and conditions of
that order.
OTHER LEGAL PROCEEDINGS
The Trust, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority of these lawsuits duplicate, in whole or in part, the
allegations asserted in the February 4, 2004 Massachusetts administrative
complaint and the findings in the SEC's August 2, 2004 Order, as described
above. The lawsuits are styled as class actions, or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.
24| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FIDUCIARY HIGH INCOME FUND
10. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.
The Company and fund management strongly believes that the claims made in each
of the lawsuits identified above are without merit and intends to vigorously
defend against them. The Company cannot predict with certainty, however, the
eventual outcome of the remaining governmental investigations or private
lawsuits, nor whether they will have a material negative impact on the Company.
Public trust and confidence are critical to the Company's business and any
material loss of investor and/or client confidence could result in a significant
decline in assets under management by the Company, which would have an adverse
effect on the Company's future financial results. If the Company finds that it
bears responsibility for any unlawful or inappropriate conduct that caused
losses to the Trust, it is committed to making the Trust or its shareholders
whole, as appropriate. The Company is committed to taking all appropriate
actions to protect the interests of its funds' shareholders.
Semiannual Report |25
Franklin Global Trust
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the most recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Funds file a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
26| Semiannual Report
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[LOGO
OMITTED]
FRANKLIN(R) TEMPLETON(R)
INSTITUTIONAL
FRANKLIN TEMPLETON INSTITUTIONAL
600 Fifth Avenue
New York, NY 10020
FRANKLINTEMPLETONINSTITUTIONAL.COM
SEMIANNUAL REPORT
FIDUCIARY HIGH INCOME FUND
INVESTMENT MANAGER
Fiduciary International, Inc.
DISTRIBUTOR
Franklin Templeton Distributors
One Franklin Parkway
San Mateo, CA 94403-1906
FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
1-800/321-8563
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.
067 S2005 03/05
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
01 31 2005
THE EXPERTISE OF MANY. THE STRENGTH OF ONE.
- --------------------------------------------------------------------------------
--------------------------------------------------------
FRANKLIN GLOBAL TRUST
--------------------------------------------------------
Franklin International Smaller Companies Growth Fund
[LOGO OMITTED]
Contents
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Franklin International Smaller Companies Growth Fund ............ 2
Performance Summary ............................................. 5
Your Fund's Expenses ............................................ 6
Financial Highlights and Statement of Investments ............... 8
Financial Statements ............................................ 12
Notes to Financial Statements ................................... 15
Tax Designation ................................................. 24
Shareholder Information ......................................... 26
---------------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
---------------------------------------------------------
Semiannual Report |1
SEMIANNUAL REPORT
Franklin International Smaller
Companies Growth Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: The Fund seeks long-term capital
appreciation by investing at least 80% of its net assets in a diversified
portfolio of marketable equity and equity-related securities of smaller
international companies with market capitalizations not exceeding $2 billion (or
the equivalent in local currencies), or the highest market capitalization of
S&P/Citigroup Cap-Range <$2 Billion EPAC Index, whichever is greater at the time
of purchase. The Fund considers international companies to be those organized
under the laws of a country outside North America or having a principal office
in a country outside of North America, or whose securities are listed or traded
principally on a recognized stock exchange or over-the-counter outside of North
America.
- --------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR MOST RECENT MONTH-END
PERFORMANCE.
- --------------------------------------------------------------------------------
This semiannual report for the Franklin International Smaller Companies Growth
Fund cover the six-month period ended January 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 22.71% cumulative total return for the six-month period ended
January 31, 2005. The Fund underperformed its benchmark, the S&P/Citigroup
Cap-Range <$2 Billion EPAC Index 1, which returned 23.50% during the same
period.
ECONOMIC AND MARKET OVERVIEW
Non-U.S. equity markets, and small cap stocks in particular, performed well in
the past six months, with small caps outperforming their large cap peers. Small
cap growth style indices lagged their small cap value counterparts over the
period under review. Within the S&P/Citigroup Cap-Range <$2 Billion EPAC Index,
a measure of small cap performance in developed Pacific Rim and European
countries, the industrial services and non-energy minerals sectors posted the
strongest gains, led by companies in the oil field services and steel
industries.
1. Source: Standard & Poor's Micropal. S&P/Citigroup Cap-Range <$2 Billion EPAC
Index is a float-adjusted, market capitalization-weighted index designed to
measure the performance of European and Asian equity securities with market
capitalizations of less than $2 billion. The index is rebalanced monthly by
market capitalization. The index is unmanaged and includes reinvested
distributions. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL VALUE, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 9.
2| Semiannual Report
Health services and energy minerals stocks also posted solid gains, driven by
strong performance in the medical nursing services and coal industries.
Electronic technology, distribution services, and retail trade were the poorest
performing sectors, especially the computer peripherals and Internet retail
industries.
INVESTMENT STRATEGY
In choosing individual equity investments, we utilize a fundamental "bottom-up"
approach involving in-depth qualitative and quantitative analysis of individual
equity securities. In narrowing down the universe of eligible investments, we
employ a thematic approach to identify sectors that may benefit from longer-term
dynamic growth. Within these sectors, we focus on companies with proprietary
products and services, and that we believe have strong probability of retaining
or widening margins, and a strong balance sheet. The Fund may, from time to
time, have significant positions in particular sectors such as technology
(including electronic technology, technology services, biotechnology and health
care technology) or in one or more countries, particularly Japan or the United
Kingdom, which represent heavier weightings in the S&P/Citigroup Cap-Range <$2
Billion EPAC Index.
We do not select investments for the Fund that are merely representative of the
small cap asset class, but instead aim to produce a portfolio of securities
of exceptionally dynamic companies operating in sectors that offer attractive
growth potential. While we seek to outperform the S&P/Citigroup Cap-Range <$2
Billion EPAC Index, positions may be taken by the fund that are not represented
in the index.
MANAGER'S DISCUSSION
On a sector basis, performance was most helped by strong stock selection within
the electronic technology sector where the portfolio's holdings in ARGO
GRAPHICS, a Japanese 3D/CAD software company; Tandberg Television, a Norwegian
provider of broadcasting equipment; and Ki Ryung Electronics, a Korean
television and radio receiver manufacturer, added value. Positions in the
finance sector added value, in particular ABG Sundal Collier, a Norwegian
investment bank posted strong results. Performance was most burdened by several
consumer non-durables stocks, including Oriflame Cosmetics, a Swedish cosmetics
retailer, and Pulmuone, a Korean packaged organic tofu company. The
communications sector also hurt relative performance where a position in
eAccess, a Japanese ADSL wholesaler, impaired results.
GEOGRAPHIC DISTRIBUTION
As a Percentage of Total Net Assets
as of 1/31/05
Europe .................. 46.3%
Asia .................... 37.9%
Australia &
New Zealand ............. 11.4%
Short-Term Investments
& Other Net Assets ...... 4.4%
TOP 10 HOLDINGS
As of 1/31/05
- -------------------------------------------------
% OF TOTAL
NET ASSETS
- -------------------------------------------------
Kibun Food Chemifa Co. Ltd. 1.9%
- -------------------------------------------------
Tandberg Television ASA 1.9%
- -------------------------------------------------
Nokian Renkaat OYJ 1.9%
- -------------------------------------------------
Record Investments Ltd. 1.9%
- -------------------------------------------------
ARGO GRAPHICS Inc. 1.8%
- -------------------------------------------------
Macarthur Coal Ltd. 1.8%
- -------------------------------------------------
Tamura Taiko Holdings Inc. 1.8%
- -------------------------------------------------
United Group Ltd. 1.8%
- -------------------------------------------------
Solarworld AG 1.7%
- -------------------------------------------------
Neomax Co. Ltd. 1.7%
- -------------------------------------------------
Semiannual Report |3
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 1/31/05
Commercial Services & Supplies 8.9%
Electronic Equipment & Instruments 8.2%
Machinery 7.3%
Health Care Equipment & Supplies 6.2%
Specialty Retail 5.7%
Capital Markets 4.6%
Media 3.9%
Communications Equipment 3.7%
Food Products 3.6%
Electrical Equipment 3.2%
Textiles, Apparel & Luxury Goods 3.0%
Health Care Providers & Services 2.9%
Food & Staples Retailing 2.0%
Other 32.4%
Short-Term Investments & Other Net Assets 4.4%
In general, if the value of the U.S. dollar goes up compared with a foreign
currency, an investment traded in that foreign currency will go down in value
because it will be worth fewer U.S. dollars. This can have a negative effect on
Fund performance. Conversely, when the U.S. dollar weakens in relation to a
foreign currency, an investment traded in that foreign currency will increase in
value, which can contribute to Fund performance. For the six months ended
January 31, 2005, the U.S. dollar weakened in value relative to most non-U.S.
currencies. On average, during the period, the Fund's portfolio was invested
predominantly in securities with non-U.S. currency exposure, which resulted in a
positive effect on Fund performance. However, one cannot expect the same result
in future periods.
CONCLUSION
We thank you for your continued participation and look forward to serving your
investment needs.
Sincerely,
[PHOTO OMITTED]
/s/Margaret S. Lindsay
- ----------------------
Margaret S. Lindsay
Vice President of Fiduciary International, Inc. (Fiduciary)
Executive Vice President of Fiduciary Trust Company
International (Fiduciary Trust)
[PHOTO OMITTED]
/s/Pratik Patel
- ---------------
Pratik Patel
Assistant Vice President of Fiduciary
Vice President of Fiduciary Trust
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
4| Semiannual Report
Performance Summary as of 1/31/05
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PERFORMANCE 1
- -------------------------------------------------------------------------------------------------------
ANNUALIZED CUMULATIVE
SINCE SINCE
INCEPTION 2 INCEPTION 3
6-MONTH 1-YEAR (10/15/02) (10/15/02)
- -------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH 22.71% 19.36% 34.99% 99.20%
- -------------------------------------------------------------------------------------------------------
S&P/CITIGROUP CAP-RANGE <$2 BILLION EPAC INDEX 4 23.50% 27.99% 39.75% 115.73%
- -------------------------------------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT 5 $12,271 $11,936 NA $19,920
- -------------------------------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS 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 CALL A FRANKLIN TEMPLETON INSTITUTIONAL
SERVICES REPRESENTATIVE AT 1-800/321-8563 FOR MOST RECENT MONTH-END PERFORMANCE.
THE FUND'S INVESTMENTS IN SMALLER-COMPANY STOCKS INVOLVE CERTAIN RISKS AS SUCH
STOCKS HAVE EXHIBITED GREATER PRICE VOLATILITY THAN LARGER COMPANY STOCKS,
PARTICULARLY OVER THE SHORT TERM. THE FUND MAY INVEST IN STOCKS OF FOREIGN
COMPANIES, WHICH INVOLVE SPECIAL RISKS, INCLUDING CURRENCY FLUCTUATIONS AND
ECONOMIC AS WELL AS POLITICAL UNCERTAINTY. EMERGING MARKETS INVOLVE HEIGHTENED
RISKS RELATED TO THE SAME FACTORS IN ADDITION TO THEIR RELATIVELY SMALL SIZE AND
LESSER LIQUIDITY. THE FUND'S PORTFOLIO INCLUDES TECHNOLOGY STOCKS, A SECTOR
WHICH HAS BEEN ONE OF THE MOST VOLATILE AND INVOLVES SPECIAL RISKS. THESE AND
OTHER RISKS ARE DESCRIBED MORE FULLY IN THE FUND'S PROSPECTUS.
ENDNOTES
1. For periods prior to January 31, 2005, the manager and administrator agreed
in advance to waive or reduce their respective fees and to assume as their own
expenses certain expenses otherwise payable by the Fund so that total Fund
annual operating expenses did not exceed 0.95%. Without this waiver or
reduction, total return would have been lower. After January 31, 2005, the
manager and administrator may end this arrangement at any time upon notice to
the Fund's Board of Trustees.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge.
3. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.
4. Source: Standard & Poor's Micropal. See page 2 for a description of the
S&P/Citigroup Cap-Range <$2 Billion EPAC Index.
5. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge.
Semiannual Report |5
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases, if
applicable, and redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, if applicable, 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) of the table below provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period were $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.
6| 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, IF APPLICABLE. Therefore, the second line of the table 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 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
- --------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,227.80 $5.33
- --------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.42 $4.84
- --------------------------------------------------------------------------------------------------------
*Expenses are equal to the annualized expense ratio of 0.95% net of expense
waiver, multiplied by the average account value over the period, multiplied by
184/365 to reflect the one-half year period.
Semiannual Report |7
Franklin Global Trust
FINANCIAL HIGHLIGHTS
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
--------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2005 YEAR ENDED JULY 31,
(UNAUDITED) 2004 2003 D
--------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........................................... $15.70 $12.06 $10.00
--------------------------------------------
Income from investment operations:
Net investment income a ....................................................... .01 .02 .07
Net realized and unrealized gains (losses) .................................... 3.43 4.07 2.02
--------------------------------------------
Total from investment operations ............................................... 3.44 4.09 2.09
--------------------------------------------
Less distributions from:
Net investment income ......................................................... (.03) (.08) (.03)
Net realized gains ............................................................ (1.84) (.37) --
--------------------------------------------
Total distributions ............................................................ (1.87) (.45) (.03)
--------------------------------------------
Net asset value, end of period ................................................. $17.27 $15.70 $12.06
============================================
Total return b ................................................................. 22.78% 34.25% 20.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............................................. $11,346 $8,653 $2,411
Ratios to average net assets:
Expenses ...................................................................... 1.47% c 1.53% 5.06% e
Expenses net of waiver and payments by affiliate .............................. .95% c .95% .75% e
Net investment income ......................................................... .14% c .13% .65% e
Portfolio turnover rate ........................................................ 64.18% 108.64% 126.43%
a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c Annualized.
d For the period October 15, 2002 (commencement of operations) to July 31, 2003.
e Not annualized.
8| See notes to financial statements. | Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 94.0%
AEROSPACE & DEFENSE 1.6%
Latecoere ..................................................... France 3,900 $ 185,010
-----------
AUTO COMPONENTS 1.9%
Nokian Renkaat OYJ ............................................ Finland 1,490 214,846
-----------
AUTOMOBILES 1.6%
Fleetwood Corp. Ltd. .......................................... Australia 25,220 175,725
-----------
BUILDING PRODUCTS 1.4%
Kingspan Group PLC ............................................ Ireland 16,290 159,437
-----------
CAPITAL MARKETS 4.6%
a ABG Sundal Collier ASA ........................................ Norway 126,300 132,935
Aktiv Kapital ASA ............................................. Norway 9,600 177,956
Record Investments Ltd. ....................................... Australia 43,150 212,700
-----------
523,591
-----------
CHEMICALS 1.7%
Whatman PLC ................................................... United Kingdom 40,000 192,688
-----------
COMMERCIAL BANKS 1.0%
a Keiyo Bank Ltd. ............................................... Japan 24,000 111,612
-----------
COMMERCIAL SERVICES & SUPPLIES 8.9%
A.B.C. Learning Centres Ltd. .................................. Australia 38,000 163,458
a Accord Customer Care .......................................... Singapore 315,000 166,361
Arbeit-times Co. .............................................. Japan 4,700 176,854
DIS Deutscher Industries ...................................... Germany 4,570 166,169
Park24 Co. Ltd. ............................................... Japan 8,800 173,631
Watabe Wedding Corp. .......................................... Japan 6,800 164,349
-----------
1,010,822
-----------
COMMUNICATIONS EQUIPMENT 3.7%
a Tamura Taiko Holdings Inc. .................................... Japan 35,000 204,979
a Tandberg Television ASA ....................................... Norway 21,000 216,083
-----------
421,062
-----------
CONSTRUCTION & ENGINEERING 1.8%
United Group Ltd. ............................................. Australia 35,800 199,777
-----------
CONSUMER FINANCE 1.4%
Intermediate Capital Group PLC ................................ United Kingdom 7,400 159,455
-----------
CONTAINERS & PACKAGING 1.5%
Goodpack Ltd. ................................................. Singapore 218,000 171,701
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES 1.4%
a Eircom Group PLC .............................................. Ireland 67,500 163,624
-----------
ELECTRIC UTILITIES 1.5%
Hera SpA ...................................................... Italy 58,700 175,570
-----------
ELECTRICAL EQUIPMENT 3.2%
Phoenix Electric Co. Ltd. ..................................... Japan 8,600 165,951
a Solarworld AG ................................................. Germany 2,150 196,420
-----------
362,371
-----------
Semiannual Report |9
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
ELECTRONIC EQUIPMENT & INSTRUMENTS 8.2%
ARGO GRAPHICS Inc. ............................................ Japan 6,900 $ 206,378
a Axalto International SAS ...................................... France 6,400 186,000
Laird Group PLC ............................................... United Kingdom 23,380 145,434
Neomax Co. Ltd. ............................................... Japan 10,000 195,861
Sato Corp. .................................................... Japan 6,200 157,924
Wincor Nixdorf AG ............................................. Germany 450 36,302
-----------
927,899
-----------
ENERGY EQUIPMENT & SERVICES 1.4%
IHC Caland NV ................................................. Netherlands 2,600 164,035
-----------
FOOD & STAPLES RETAILING 2.0%
a Kibun Food Chemifa Co. Ltd. ................................... Japan 9,300 221,183
-----------
FOOD PRODUCTS 3.6%
Hokuto Corp. .................................................. Japan 7,400 130,800
Vilmorin CL & CIE ............................................. France 830 173,289
a Warabeya Nichiyo Co. Ltd. ..................................... Japan 4,400 99,976
-----------
404,065
-----------
HEALTH CARE EQUIPMENT & SUPPLIES 6.2%
Amplifon SpA .................................................. Italy 3,850 195,232
a Elekta AB, B .................................................. Sweden 5,300 164,509
Nakanishi Inc. ................................................ Japan 2,300 174,644
Topcon Corp. .................................................. Japan 12,000 168,923
-----------
703,308
-----------
HEALTH CARE PROVIDERS & SERVICES 2.9%
Primary Health Care Ltd. ...................................... Australia 25,800 172,968
Ryman Healthcare Ltd. ......................................... New Zealand 63,000 160,959
-----------
333,927
-----------
HOTELS RESTAURANTS & LEISURE 1.5%
Greene King PLC ............................................... United Kingdom 7,000 169,558
-----------
HOUSEHOLD DURABLES 1.6%
Nobia AB ...................................................... Sweden 10,800 176,882
-----------
LEISURE EQUIPMENT & PRODUCTS 1.7%
Beneteau ...................................................... France 2,300 191,839
-----------
MACHINERY 7.2%
Alpha Corp. ................................................... Japan 3,800 175,985
Arrk Corp. .................................................... Japan 3,400 138,434
Daifuku Co. Ltd. .............................................. Japan 23,000 170,872
Kaba Holding AG ............................................... Switzerland 560 172,822
OSG Corp. ..................................................... Japan 12,600 161,930
-----------
820,043
-----------
MEDIA 3.9%
a Clear Media Ltd. .............................................. Hong Kong 150,000 149,046
Future PLC .................................................... United Kingdom 85,000 126,881
Taylor Nelson Sofres PLC ...................................... United Kingdom 38,450 162,590
-----------
438,517
-----------
10| Semiannual Report
Franklin Global Trust
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
METALS & MINING 1.8%
Macarthur Coal Ltd. ........................................... Australia 53,600 $ 205,636
-----------
OFFICE ELECTRONICS 1.5%
Neopost SA .................................................... France 2,260 174,365
-----------
OIL & GAS .2%
a Lundin Petroleum AB ........................................... Sweden 4,000 25,404
-----------
PAPER & FOREST PRODUCTS 1.7%
a Pfleiderer AG ................................................. Germany 14,500 188,594
-----------
ROAD & RAIL 1.6%
DSV De Sammenslut Vognmaend AS, B ............................. Denmark 2,500 178,404
-----------
SOFTWARE .9%
a Temenos Group AG .............................................. Switzerland 15,600 106,387
-----------
SPECIALTY RETAIL 5.7%
Bookoff Corp. ................................................. Japan 8,900 183,332
Point Inc. .................................................... Japan 5,040 167,765
Sa Sa International Holdings Ltd. ............................. Hong Kong 284,000 147,469
USS Co. Ltd. .................................................. Japan 1,750 144,701
-----------
643,267
-----------
TEXTILES, APPAREL & LUXURY GOODS 1.5%
a Li Ning Co. Ltd. .............................................. Hong Kong 356,000 167,739
-----------
TRADING COMPANIES & DISTRIBUTORS 1.7%
a Grafton Group ................................................. Ireland 15,693 192,862
-----------
TOTAL COMMON STOCKS (COST $8,226,715) 10,661,205
-----------
PREFERRED STOCK (COST $136,930) 1.6%
TEXTILES, APPAREL & LUXURY GOODS
Hugo Boss AG, pfd. ............................................ Germany 5,450 178,066
-----------
TOTAL LONG TERM INVESTMENTS (COST $8,363,645) ................. 10,839,271
-----------
--------------------
PRINCIPAL AMOUNT
--------------------
SHORT TERM INVESTMENT (COST $480,000) 4.2%
TIME DEPOSIT
Deutsche Bank Securities, 2.48%, 2/01/05 ...................... United States $480,000 480,000
-----------
TOTAL INVESTMENTS (COST $8,843,645) 99.8% ..................... 11,319,271
OTHER ASSETS, LESS LIABILITIES .2% ............................ 26,643
-----------
NET ASSETS 100.0% ............................................. $11,345,914
-----------
a Non-income producing.
Semiannual Report | See notes to financial statements. |11
Franklin Global Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2005 (unaudited)
----------------
FRANKLIN
INTERNATIONAL
SMALLER
COMPANIES
GROWTH FUND
----------------
Assets:
Investments in securities:
Cost ................................................................................................. $ 8,843,645
================
Value ................................................................................................ 11,319,271
Cash .................................................................................................. 292
Foreign currency, at value (Cost $5,476) .............................................................. 6,293
Receivables:
Investment securities sold ........................................................................... 155,493
Dividends ............................................................................................ 4,974
----------------
Total assets ..................................................................................... 11,486,323
----------------
Liabilities:
Payables:
Investment securities purchased ...................................................................... 117,431
Affiliates ........................................................................................... 14,471
Professional fees .................................................................................... 7,450
Other liabilities ..................................................................................... 1,057
----------------
Total liabilities ................................................................................ 140,409
----------------
Net assets, at value ............................................................................ $11,345,914
================
Net assets consist of:
Undistributed net investment income ................................................................... $ 1,410
Net unrealized appreciation (depreciation) ............................................................ 2,476,251
Accumulated net realized gain (loss) .................................................................. 307,686
Capital shares ........................................................................................ 8,560,567
----------------
Net assets, at value ............................................................................ $11,345,914
================
Shares outstanding ..................................................................................... 657,150
================
Net asset value and maximum offering price per share a ................................................. $17.27
================
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
12| See notes to financial statements. | Semiannual Report
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended January 31, 2005 (unaudited)
----------------
FRANKLIN
INTERNATIONAL
SMALLER
COMPANIES
GROWTH FUND
----------------
Investment income:
Dividends (net of foreign taxes of $3,397) ............................................................ $ 51,794
Interest .............................................................................................. 1,844
----------------
Total investment income .......................................................................... 53,638
----------------
Expenses:
Management fees (Note 3) .............................................................................. 36,738
Administrative fees (Note 3) .......................................................................... 9,797
Transfer agent fees (Note 3) .......................................................................... 164
Custodian fees (Note 4) ............................................................................... 1,102
Reports to shareholders ............................................................................... 2,165
Registration and filing fees .......................................................................... 11,055
Professional fees ..................................................................................... 10,762
Other ................................................................................................. 673
----------------
Total expenses ................................................................................... 72,456
Expense reductions (Note 4) ...................................................................... (164)
Expenses waived/paid by affiliate (Note 3) ....................................................... (25,673)
----------------
Net expenses .................................................................................... 46,619
----------------
Net investment income .......................................................................... 7,019
----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .......................................................................................... 676,227
Foreign currency transactions ........................................................................ (11,753)
----------------
Net realized gain (loss) ........................................................................ 664,474
Net change in unrealized appreciation (depreciation) on:
Investments .......................................................................................... 1,383,197
Translation of assets and liabilities denominated in foreign currencies .............................. 3,714
----------------
Net change in unrealized appreciation (depreciation) ............................................ 1,386,911
----------------
Net realized and unrealized gain (loss) ................................................................ 2,051,385
----------------
Net increase (decrease) in net assets resulting from operations ........................................ $2,058,404
================
Semiannual Report | See notes to financial statements. |13
Franklin Global Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended January 31, 2005 (unaudited)
and the year ended July 31, 2004
-----------------------------------
FRANKLIN INTERNATIONAL SMALLER
COMPANIES GROWTH FUND
-----------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, 2004
-----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................... $ 7,019 $ 9,686
Net realized gain (loss) from investments and foreign currency transactions ......... 664,474 873,249
Net change in unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies ........................ 1,386,911 713,330
-----------------------------------
Net increase (decrease) in net assets resulting from operations ................. 2,058,404 1,596,265
Distributions to shareholders from:
Net investment income ............................................................... (17,128) (34,278)
Net realized gains .................................................................. (1,082,605) (162,930)
-----------------------------------
Total distributions to shareholders .................................................. (1,099,733) (197,208)
Capital share transactions (Note 2) .................................................. 1,733,821 4,842,873
-----------------------------------
Net increase (decrease) in net assets ........................................... 2,692,492 6,241,930
Net assets:
Beginning of period .................................................................. 8,653,422 2,411,492
-----------------------------------
End of period ........................................................................ $11,345,914 $8,653,422
===================================
Undistributed net investment income included in net assets:
End of period ........................................................................ $ 1,410 $ 11,519
===================================
14| See notes to financial statements. | Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Global Trust (the Trust) is registered under the Investment Company Act
of 1940 as an open-end investment company, consisting of seven separate series.
Franklin International Smaller Companies Growth Fund (the Fund), included in
this report, is diversified. The financial statements of the remaining funds in
the series are presented separately. The Fund seeks long-term capital
appreciation.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Short term securities are valued at cost.
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. 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. 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 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. Some 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. 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. If such an event occurs, the
securities may be valued using fair value procedures, which may include the use
of independent pricing services. All security valuation procedures are approved
by the Trust's Board of Trustees.
Semiannual Report |15
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Trust's Board of Trustees.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified 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.
D. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
16| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
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. Other expenses are
charged to each fund on a specific identification basis.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
Effective June 1, 2004, redemptions and exchanges of Fund shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital. There were no redemption fees for the period.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liability 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. However, based on experience, the
Trust expects the risk of loss to be remote.
Semiannual Report |17
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2005, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
------------------------
FRANKLIN
INTERNATIONAL SMALLER
COMPANIES GROWTH FUND
------------------------
SHARES AMOUNT
------------------------
Six months ended January 31, 2005
Shares sold ......................................... 63,285 1,043,947
Shares issued in reinvestment of distributions ...... 44,330 714,153
Shares redeemed ..................................... (1,522) (24,279)
------------------------
Net increase (decrease) ............................. 106,093 $1,733,821
========================
Year ended July 31, 2004
Shares sold ......................................... 349,891 $4,834,480
Shares issued in reinvestment of distributions ...... 6,040 88,970
Shares redeemed ..................................... (4,874) (80,577)
------------------------
Net increase (decrease) ............................. 351,057 $4,842,873
========================
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 Fund are also officers and/or directors of the following
subsidiaries:
- ----------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ----------------------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Fiduciary International Inc. (Fiduciary) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers of .75% per year of the
average daily net assets of the Fund.
Under a subadvisory agreement, Fiduciary, an affiliate of Advisers, provides
subadvisory services to the Fund and receives from Advisers fees based on the
average daily net assets of the Fund.
B. ADMINISTRATIVE FEES
The Fund pays an administrative fee to FT Services of .20% per year of the
average daily net assets of the Fund.
18| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
B. ADMINISTRATIVE FEES (CONTINUED)
FT Services agreed in advance to voluntarily waive administrative fees.
Additionally, Advisers and Fiduciary agreed in advance to voluntarily waive a
portion of management fees, as noted in the Statement of Operations. Total
expenses waived by Advisers, Fiduciary, and FT Services are not subject to
reimbursement by the Fund subsequent to the Fund's fiscal year end.
C. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $164, of which $18 was paid to Investor
Services.
D. OTHER AFFILIATED TRANSACTIONS
At January 31, 2005, Franklin Resources, Inc. owned 30.43% of the Fund.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended January 31, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
At July 31, 2004, the Fund had deferred currency losses occurring subsequent to
October 31, 2003 of $6,175. For tax purposes, such losses will be reflected in
the year ending July 31, 2005.
Net investment income and net realized gains differs for financial statement and
tax purposes primarily due to differing treatment of foreign currency
transactions.
At January 31, 2005, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:
---------------------
FRANKLIN
INTERNATIONAL
SMALLER COMPANIES
GROWTH FUND
---------------------
Cost of investments .................................. $8,843,645
=====================
Unrealized appreciation .............................. $2,528,112
Unrealized depreciation .............................. (52,486)
---------------------
Net unrealized appreciation (depreciation) ........... $2,475,626
=====================
Semiannual Report |19
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
period ended January 31, 2005 aggregated $6,555,195 and $6,114,253,
respectively.
7. REGULATORY MATTERS
INVESTIGATIONS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.
SETTLEMENTS
Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.
Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this
20| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
7. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
time, it is unclear which funds or which shareholders of any particular fund
will receive distributions. The Order also required Franklin Advisers, Inc. to,
among other things, enhance and periodically review compliance policies and
procedures.
On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.
On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing, in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing", failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.
On November 17, 2004, Franklin Resources, Inc. announced that Franklin/Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.
Semiannual Report |21
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
7. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Second Order").
Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.
The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The IDC has
substantially completed preparation of these distribution plans. The CAGO has
approved the distribution plan pertaining to the distribution of the monies owed
under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies are expected to be disbursed promptly.
The SEC has not yet approved the distribution plan pertaining to the Second
Order. When approved, disbursements of settlement monies under the SEC's Second
Order will be made promptly in accordance with the terms and conditions of that
order.
OTHER LEGAL PROCEEDINGS
The Trust, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority
22| Semiannual Report
Franklin Global Trust
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
7. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
of these lawsuits duplicate, in whole or in part, the allegations asserted in
the February 4, 2004 Massachusetts administrative complaint and the findings in
the SEC's August 2, 2004 Order, as described above. The lawsuits are styled as
class actions, or derivative actions on behalf of either the named funds or
Franklin Resources, Inc.
In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.
The Company and fund management strongly believes that the claims made in each
of the lawsuits identified above are without merit and intends to vigorously
defend against them. The Company cannot predict with certainty, however, the
eventual outcome of the remaining governmental investigations or private
lawsuits, nor whether they will have a material negative impact on the Company.
Public trust and confidence are critical to the Company's business and any
material loss of investor and/or client confidence could result in a significant
decline in assets under management by the Company, which would have an adverse
effect on the Company's future financial results. If the Company finds that it
bears responsibility for any unlawful or inappropriate conduct that caused
losses to the Trust, it is committed to making the Trust or its shareholders
whole, as appropriate. The Company is committed to taking all appropriate
actions to protect the interests of its funds' shareholders.
Semiannual Report |23
Franklin Global Trust
TAX DESIGNATION (UNAUDITED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
At July 31, 2004, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from dividends paid to the Fund on these investments. As shown in the table
below, the Fund hereby designates to shareholders the foreign source income and
foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This
designation will allow shareholders of record on December 14, 2004, to treat
their proportionate share of foreign taxes paid by the Fund as having been paid
directly by them. The shareholder shall consider these amounts as foreign taxes
paid in the tax year in which they receive the Fund distribution.
The following table provides a detailed analysis, by country, of foreign tax
paid, foreign source income, foreign qualified dividends, and adjusted foreign
source income as designated by the Fund, to its shareholders. As a service to
individual shareholders filing Form 1116, "Adjusted Foreign Source Income per
Share" in column 4 below reports foreign source income with the required
adjustments to foreign source qualified dividends. This information is provided
to simplify your reporting of foreign source income for line 1 of Form 1116.
- -----------------------------------------------------------------------------------------------------
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- -----------------------------------------------------------------------------------------------------
Australia ...................... $ -- $0.0031 $0.0024 $0.0017
Denmark ........................ 0.0025 0.0154 0.0154 0.0066
Finland ........................ 0.0012 0.0074 0.0074 0.0032
France ......................... 0.0006 0.0035 0.0036 0.0014
Germany ........................ 0.0018 0.0135 0.0084 0.0087
Greece ......................... -- 0.0041 0.0041 0.0018
Hong Kong ...................... -- 0.0070 -- 0.0070
Italy .......................... 0.0040 0.0175 0.0175 0.0075
Japan .......................... 0.0016 0.0202 0.0175 0.0102
Norway ......................... 0.0002 0.0013 0.0013 0.0006
Singapore ...................... 0.0013 0.0101 -- 0.0101
South Korea .................... 0.0002 0.0013 0.0013 0.0006
Spain .......................... 0.0009 0.0058 0.0058 0.0025
Sweden ......................... 0.0006 0.0035 0.0035 0.0015
Switzerland .................... 0.0010 0.0063 0.0063 0.0027
United Kingdom ................. 0.0016 0.0147 0.0147 0.0063
-----------------------------------------------------------------
TOTAL $0.0175 $0.1347 $0.1092 $0.0724
=================================================================
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you,
as a tax credit or deduction (assuming you held your shares in the Fund for a
minimum of 16 days during the 30-day period beginning 15 days before the
ex-dividend date of the Fund's distribution to which the foreign taxes relate).
24| Semiannual Report
Franklin Global Trust
TAX DESIGNATION (UNAUDITED) (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
Foreign Source Income Per Share (Column 2) is the amount Per share of income
dividends paid to you that is attributable to foreign securities held by the
Fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends without adjustment for the lower U.S.
tax rates. Generally, this is the foreign source income to be reported by
certain trusts and corporate shareholders.
Foreign Qualified Dividends Per Share (Column 3) is the amount per share of
foreign source qualified dividends the Fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the Fund. If you are an individual shareholder who
does not meet the qualified dividend holding period requirements, you may find
this information helpful to calculate the foreign source income adjustment
needed to complete line 1 of Form 1116.
Adjusted Foreign Source Income Per Share (Column 4) is the adjusted amount per
share of foreign source income the Fund paid to you. These amounts reflect the
Foreign Source Income reported in column 2 adjusted for the tax rate
differential on foreign source qualified dividends that may be required for
certain individual shareholders pursuant to Internal Revenue Code 904(b)(2)(B).
If you are an individual shareholder who meets the qualified dividend holding
period requirements, generally, these Adjusted Foreign Source Income amounts may
be reported directly on line 1 of Form 1116 without additional adjustment.
In January 2005, shareholders received Form 1099-DIV which included their share
of taxes paid and foreign source income distributed during the calendar year
2004. The Foreign Source Income reported on Form 1099-DIV was reduced to take
into account the tax rate differential on foreign source qualified dividend
income pursuant to Internal Revenue Code 904(b)(2)(B). Shareholders are advised
to check with their tax advisors for information on the treatment of these
amounts on their 2004 individual income tax returns.
Semiannual Report |25
Franklin Global Trust
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the most recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Funds file a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
26| Semiannual Report
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[LOGO OMITTED]
FRANKLIN TEMPLETON INSTITUTIONAL
600 Fifth Avenue
New York, NY 10020
FRANKLINTEMPLETONINSTITUTIONAL.COM
SEMIANNUAL REPORT
FRANKLIN INTERNATIONAL
SMALLER COMPANIES GROWTH FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors
One Franklin Parkway
San Mateo, CA 94403-1906
FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
1-800/321-8563
franklintempletoninstitutional.com
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.
681 S2005 03/05
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS.
(A) Code of Ethics
(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN GLOBAL TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: March 22, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: March 22, 2005
By /s/Galen G. Vetter
Chief Financial Officer
Date: March 22, 2005