UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number_811-10157
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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: 7/31
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Date of reporting period: 7/31/05
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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[LOGO]
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FGT
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FUNDS
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ANNUAL REPORT
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JULY 31, 2005
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Fiduciary
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Trust
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International
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CONTENTS
ANNUAL REPORT
President's Message ....................................................... 1
Fiduciary Large Capitalization Growth and Income Fund ..................... 2
Fiduciary Small Capitalization Equity Fund ................................ 10
Fiduciary European Smaller Companies Fund ................................. 19
Financial Highlights and Statements of Investments ........................ 27
Financial Statements ...................................................... 40
Notes to Financial Statements ............................................. 44
Report of Independent Registered Public Accounting Firm ................... 53
Tax Designation ........................................................... 54
Board Members and Officers ................................................ 55
Shareholder Information ................................................... 60
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ANNUAL REPORT
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the enclosed Franklin Global Trust Funds' annual report
covering the fiscal year ended July 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 annual
report.
Also in the report is new information about the Board of Trustees' approval of
each Fund's investment advisory contract in the past six months. It is designed
to give you an understanding of several factors considered before the Board
approved its contract with the Investment Manager. The disclosure is in the
"Shareholder Information" section beginning on page 60.
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
President and Chief Executive Officer - Investment Management
Franklin Global Trust
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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Annual 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)
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
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This annual report for Fiduciary Large Capitalization Growth and Income Fund
covers the fiscal year ended July 31, 2005.
PERFORMANCE OVERVIEW
Fiduciary Large Capitalization Growth and Income Fund delivered a 12.38% total
return for the 12 months ended July 31, 2005. The Fund underperformed its
benchmark, the S&P 500, which returned 14.04% during the same period.(2)
ECONOMIC AND MARKET OVERVIEW
During the 12 months ended July 31, 2005, a maturing domestic economic expansion
was driven by staying power across most industries, sectors and regions. Gross
domestic product (GDP) rose each quarter, benefiting primarily from personal
consumption and greater business investment. Demand for imported goods and
materials fueled a widening trade gap. The U.S. dollar rallied in the first half
of 2005 driven largely by rising short-term domestic interest rates and strong
U.S. economic growth relative to its major trading partners.
(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. 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.
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 28.
2 | Annual Report
With controlling inflation at the forefront of its agenda, the Federal Reserve
Board raised the federal funds target rate from 1.25% to 3.25% and said it would
respond to changes in economic prospects as needed to fulfill its obligation to
maintain price stability. Oil prices hit record highs, yet inflation remained
relatively contained for the 12 months ended July 31, 2005, as measured by the
2.1% rise for the core Consumer Price Index, which excludes volatile food and
energy costs.(3) Continued competition, globalization and offshoring helped ease
pricing pressures, and many companies held back in passing along higher
commodity and energy costs to consumers. Although short-term interest rates
rose, long-term interest rates actually declined, contributing to continued
robust housing and commercial real estate activity, which added to economic
growth.
Many businesses enjoyed their widest profit margins on record, propelled largely
by productivity gains that lifted corporate profitability and cash flow. The
favorable business environment also helped stabilize the labor market, which
firmed as employment increased and the unemployment rate dropped from 5.5% to
5.0% during the reporting period.(3) Personal income rose, and hiring rebounded
in many industries, bolstered by healthy business spending and solid business
confidence.
For the second half of the reporting period, most stock markets were volatile,
influenced partly by inflation worries, energy prices, the fluctuating dollar
and short-term interest rate hikes. Toward period-end, the S&P 500 and NASDAQ
Composite Index reached four-year highs, as rising dividend payments and solid
corporate profits supported investor confidence. The blue chip stocks of the Dow
Jones Industrial Average posted a one-year total return of 7.29%, while the
broader S&P 500 and technology-heavy NASDAQ Composite Index returned 14.04% and
16.14%.(4)
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
(3) Source: Bureau of Labor Statistics.
(4) 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. See footnote 1 for a
description of the S&P 500. The NASDAQ Composite Index measures all NASDAQ
domestic and international based common type stocks listed on The NASDAQ
Stock Market. The index is market value weighted and includes more than
3,000 companies.
Annual Report | 3
PORTFOLIO BREAKDOWN
Fiduciary Large Capitalization
Growth and Income Fund
7/31/05
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% OF TOTAL
SECTOR/INDUSTRY NET ASSETS
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Communications Equipment 7.4%
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Pharmaceuticals 6.5%
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Software 5.9%
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Aerospace & Defense 5.5%
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Insurance 5.3%
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Biotechnology 4.9%
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Energy Equipment & Services 4.7%
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Industrial Conglomerates 4.7%
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Hotels, Restaurants & Leisure 4.6%
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Semiconductors & Semiconductor Equipment 4.6%
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Food Products 4.6%
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Oil, Gas & Consumable Fuels 4.0%
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Media 3.9%
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Capital Markets 3.6%
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Electric Utilities 2.7%
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Road & Rail 2.6%
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Diversified Telecommunication Services 2.4%
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Personal Products 2.4%
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Food & Staples Retailing 2.3%
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Air Freight & Logistics 2.3%
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IT Services 2.2%
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Machinery 2.1%
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Health Care Equipment & Supplies 2.0%
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Other 3.6%
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Short-Term Investments & Other Net Assets 5.2%
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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.
MANAGER'S DISCUSSION
During the year under review, cash balances we held from time to time accounted
for most of the difference with the benchmark's return. Our equity holdings by
themselves returned 14.30%.
The Fund's allocation to certain sectors supported performance. Sector
weightings that positively impacted the Fund were in energy, utilities, consumer
staples, financials and telecommunication services.(5) Conversely, our
weightings in information technology, health care and industrials hurt
returns.(6)
While sector allocation overall was a positive influence, some stock selections
had a slight negative effect. Our holdings in health care, industrials and
information technology detracted from Fund performance. However, our consumer
staples, telecommunication services and energy positions mitigated some of the
negative effects. Overall, the combination of allocation and selection produced
a positive return.
Among individual stocks, the top three contributors to Fund performance were
integrated oil and gas company ConocoPhillips, fiber-optic cable manufacturer
Corning, and food processor Archer Daniels Midland. The bottom three detractors
were pharmaceutical manufacturers Biogen Idec and Merck & Co., and global
telecommunication equipment supplier Alcatel.
(5) The energy sector comprises energy equipment and services; and oil, gas
and consumable fuels in the SOI. The utilities sector comprises electric
utilities in the SOI. The consumer staples sector comprises food and
staples retailing, food products, and personal products in the SOI. The
financials sector comprises capital markets and insurance in the SOI. The
telecommunication services sector comprises diversified telecommunication
services in the SOI.
(6) The information technology sector comprises communications equipment,
computers and peripherals, IT services, semiconductor equipment and
products, and software in the SOI. The health care sector comprises
biotechnology, health care equipment and supplies, and pharmaceuticals in
the SOI. The industrials sector comprises aerospace and defense, air
freight and logistics, industrial conglomerates, machinery, and road and
rail in the SOI.
4 | Annual 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 International, Inc. (Fiduciary) and
Senior Vice President of Fiduciary Trust Company International (Fiduciary Trust)
/s/ Kenneth J. Siegel
Kenneth J. Siegel
Vice President of Fiduciary and Senior Vice President of Fiduciary Trust
Fiduciary Large Capitalization Growth and Income Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 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.
Annual Report | 5
PERFORMANCE SUMMARY AS OF 7/31/05
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND
The performance table and graph 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)
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INCEPTION
1-YEAR 5-YEAR (12/11/98)
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Average Annual Total Return(2) 12.38% -0.29% 2.22%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
6 | Annual Report
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT(1)
The graph below illustrates the hypothetical investment of $10,000 in Fiduciary
Large Capitalization Growth and Income Fund from inception on 12/11/98 through
7/31/05, compared with the Standard & Poor's 500 Composite Index (S&P 500).3
Total return represents the change in value of an investment over the periods
shown. It includes fund expenses, account fees and reinvested dividends. The
index is unmanaged and includes reinvestment of any income or distributions. It
differs from the Fund in composition and does not pay management fees or
expenses. One cannot invest directly in an index.
AVERAGE ANNUAL TOTAL RETURN(2)
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7/31/05(1)
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1-Year 12.38%
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5-Year -0.29%
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Since Inception (12/11/98) 2.22%
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[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
FIDUCIARY LARGE CAPITALIZATION
DATE GROWTH AND INCOME FUND S&P 500 INDEX(3)
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12/11/1998 $10,000 $10,000
12/31/1998 $10,691 $10,372
1/31/1999 $10,751 $10,805
2/28/1999 $10,221 $10,469
3/31/1999 $10,591 $10,888
4/30/1999 $11,041 $11,310
5/31/1999 $10,711 $11,043
6/30/1999 $11,400 $11,655
7/31/1999 $11,149 $11,292
8/31/1999 $11,149 $11,236
9/30/1999 $10,848 $10,928
10/31/1999 $11,349 $11,620
11/30/1999 $11,419 $11,856
12/31/1999 $11,591 $12,554
1/31/2000 $11,150 $11,923
2/29/2000 $10,895 $11,698
3/31/2000 $11,770 $12,841
4/30/2000 $11,758 $12,455
5/31/2000 $11,746 $12,200
6/30/2000 $12,129 $12,501
7/31/2000 $11,734 $12,306
8/31/2000 $12,663 $13,070
9/30/2000 $11,832 $12,380
10/31/2000 $11,984 $12,327
11/30/2000 $11,193 $11,356
12/31/2000 $11,393 $11,412
1/31/2001 $11,407 $11,816
2/28/2001 $10,453 $10,740
3/31/2001 $9,780 $10,060
4/30/2001 $10,384 $10,841
5/31/2001 $10,581 $10,914
6/30/2001 $10,173 $10,648
7/31/2001 $10,117 $10,543
8/31/2001 $9,850 $9,884
9/30/2001 $9,289 $9,086
10/31/2001 $9,599 $9,259
11/30/2001 $10,162 $9,969
12/31/2001 $10,153 $10,057
1/31/2002 $9,916 $9,910
2/28/2002 $9,871 $9,719
3/31/2002 $10,198 $10,084
4/30/2002 $9,528 $9,473
5/31/2002 $9,424 $9,404
6/30/2002 $8,500 $8,734
7/31/2002 $7,949 $8,053
8/31/2002 $8,024 $8,106
9/30/2002 $7,321 $7,226
10/31/2002 $7,994 $7,861
11/30/2002 $8,442 $8,324
12/31/2002 $7,989 $7,835
1/31/2003 $7,794 $7,630
2/28/2003 $7,659 $7,515
3/31/2003 $7,673 $7,588
4/30/2003 $8,139 $8,213
5/31/2003 $8,590 $8,645
6/30/2003 $8,665 $8,756
7/31/2003 $8,890 $8,910
8/31/2003 $9,101 $9,083
9/30/2003 $8,905 $8,987
10/31/2003 $9,448 $9,495
11/30/2003 $9,628 $9,579
12/31/2003 $10,103 $10,081
1/31/2004 $10,361 $10,266
2/29/2004 $10,528 $10,409
3/31/2004 $10,414 $10,252
4/30/2004 $10,247 $10,091
5/31/2004 $10,398 $10,229
6/30/2004 $10,566 $10,428
7/31/2004 $10,292 $10,083
8/31/2004 $10,095 $10,123
9/30/2004 $10,299 $10,233
10/31/2004 $10,483 $10,389
11/30/2004 $10,970 $10,809
12/31/2004 $11,243 $11,177
1/31/2005 $10,922 $10,905
2/28/2005 $11,115 $11,134
3/31/2005 $11,013 $10,937
4/30/2005 $10,675 $10,730
5/31/2005 $10,948 $11,071
6/30/2005 $11,049 $11,087
7/31/2005 $11,566 $11,499
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.
ENDNOTES
(1) Performance prior to the 7/24/03 reorganization reflects historical
performance of FTI Large Capitalization Growth and Income Fund. Past
expense reductions by the Fund's manager and administrator increased the
Fund's total returns. If the manager and administrator had not taken this
action, the Fund's total returns would have been lower.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated. Average annual total returns
smooth out variations in returns, which can be significant; they are not
the same as year-by-year results.
(3) Source: Standard & Poor's Micropal. 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.
Annual Report | 7
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.
8 | Annual 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.
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BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,059.10 $5.16
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Hypothetical (5% return before expenses) $1,000 $1,019.79 $5.06
- ---------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.01% multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
Annual Report | 9
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)
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
- --------------------------------------------------------------------------------
This annual report for Fiduciary Small Capitalization Equity Fund covers the
fiscal year ended July 31, 2005.
PERFORMANCE OVERVIEW
Fiduciary Small Capitalization Equity Fund delivered a 22.21% total return for
the 12 months ended July 31, 2005. The Fund's performance was comparable to that
of its benchmark, the Russell 2000 Growth Index, which had a 22.58% total return
during the same period.(2)
ECONOMIC AND MARKET OVERVIEW
During the 12 months ended July 31, 2005, a maturing domestic economic expansion
was driven by staying power across most industries, sectors and regions. Gross
domestic product (GDP) rose each quarter, benefiting primarily from personal
consumption and greater business investment. Demand for imported goods and
materials fueled a widening trade gap. The U.S. dollar rallied in the first half
of 2005 driven largely by rising short-term domestic interest rates and strong
U.S. economic growth relative to its major trading partners.
With controlling inflation at the forefront of its agenda, the Federal Reserve
Board raised the federal funds target rate from 1.25% to 3.25% and said it would
respond to changes in economic prospects as needed to fulfill its obligation to
maintain price stability. Oil prices hit record highs, yet inflation remained
relatively contained for the 12 months ended July 31, 2005, as measured by the
2.1% rise for the core Consumer Price Index, which excludes volatile food
(1) The Russell 2000 Index is market capitalization weighted and measures
performance of the 2,000 smallest companies in the Russell 3000(R) 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.
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 32.
10 | Annual Report
and energy costs.(3) Continued competition, globalization and offshoring helped
ease pricing pressures, and many companies held back in passing along higher
commodity and energy costs to consumers. Although short-term interest rates
rose, long-term interest rates actually declined, contributing to continued
robust housing and commercial real estate activity, which added to economic
growth.
Many businesses enjoyed their widest profit margins on record, propelled largely
by productivity gains that lifted corporate profitability and cash flow. The
favorable business environment also helped stabilize the labor market, which
firmed as employment increased and the unemployment rate dropped from 5.5% to
5.0% during the reporting period.(3) Personal income rose, and hiring rebounded
in many industries, bolstered by healthy business spending and solid business
confidence.
For the second half of the reporting period, most stock markets were volatile,
influenced partly by inflation worries, energy prices, the fluctuating dollar
and short-term interest rate hikes. Toward period-end, the Standard & Poor's 500
Composite Index (S&P 500) and NASDAQ Composite Index reached four-year highs, as
rising dividend payments and solid corporate profits supported investor
confidence. The blue chip stocks of the Dow Jones Industrial Average posted a
one-year total return of 7.29%, while the broader S&P 500 and technology-heavy
NASDAQ Composite Index returned 14.04% and 16.14%.(4)
For the year under review, small cap stocks outperformed their large cap
counterparts. Small cap companies as measured by the Russell 2000 Index gained
24.78% during the reporting period ended July 31, 2005, topping large cap
companies as measured by the Russell 1000(R) Index, which rose 16.20%.(5)
Performance varied by investment style, with the Russell 2000 Growth Index
increasing 22.58%, compared with the 26.72% return for the Russell 2000 Value
Index.(6) Performance also varied by sector, but even the poorest performing
sectors delivered solid gains. Within the Russell 2000 Growth Index, the
(3) Source: Bureau of Labor Statistics.
(4) Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is
price weighted based on the average market price of 30 blue chip stocks of
companies that are generally industry leaders. The S&P 500 consists of 500
stocks chosen for market size, liquidity and industry group
representation. Each stock's weight in the index is proportionate to its
market value. The S&P 500 is one of the most widely used benchmarks of
U.S. equity performance. The NASDAQ Composite Index measures all NASDAQ
domestic and international based common type stocks listed on The NASDAQ
Stock Market. The index is market value weighted and includes more than
3,000 companies.
(5) Source: Standard & Poor's Micropal. 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 represent approximately 92% of total market
capitalization of the Russell 3000 Index.
(6) Source: Standard & Poor's Micropal. See footnote 2 for a description of
the Russell 2000 Growth Index. The Russell 2000 Value Index is market
capitalization weighted and measures performance of those Russell 2000
Index companies with lower price-to-book ratios and lower forecasted
growth values.
Annual Report | 11
PORTFOLIO BREAKDOWN
Fiduciary Small Capitalization Equity Fund
7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
Health Care Providers & Services 10.5%
- --------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment 8.2%
- --------------------------------------------------------------------------------
Biotechnology 7.0%
- --------------------------------------------------------------------------------
Communications Equipment 6.6%
- --------------------------------------------------------------------------------
Energy Equipment & Services 6.4%
- --------------------------------------------------------------------------------
Electronic Equipment & Instruments 4.7%
- --------------------------------------------------------------------------------
Commercial Services & Supplies 4.6%
- --------------------------------------------------------------------------------
Capital Markets 4.4%
- --------------------------------------------------------------------------------
Software 4.3%
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 3.3%
- --------------------------------------------------------------------------------
Health Care Equipment & Supplies 3.2%
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 3.2%
- --------------------------------------------------------------------------------
Machinery 3.1%
- --------------------------------------------------------------------------------
Construction & Engineering 3.0%
- --------------------------------------------------------------------------------
Leisure Equipment & Products 2.2%
- --------------------------------------------------------------------------------
Aerospace & Defense 2.1%
- --------------------------------------------------------------------------------
IT Services 2.1%
- --------------------------------------------------------------------------------
Diversified Telecommunication Services 2.0%
- --------------------------------------------------------------------------------
Specialty Retail 2.0%
- --------------------------------------------------------------------------------
Commercial Banks 2.0%
- --------------------------------------------------------------------------------
Other 10.5%
- --------------------------------------------------------------------------------
Short-Term Investments & Other Net Assets 4.6%
- --------------------------------------------------------------------------------
energy sector was the strongest performer buoyed by record high crude oil
prices. The telecommunications, consumer staples and consumer discretionary
sectors also had strong results. The information technology and materials
sectors were the weakest performers, but still managed double-digit returns.
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 year under review, the Fund's performance relative to the Russell
2000 Growth Index benefited from stock selection in the financial sector.(7) In
particular, strong contributors to performance included holdings exposed to
capital markets such as The Nasdaq Stock Market, the electronic stock exchange;
Greenhill, an independent investment banking firm; and TradeStation Group, a
provider of online brokerage services. Stock selection in the industrials sector
also aided the Fund's relative performance.(8) Specifically, three positions
delivering strong results were Aviall, an aerospace aftermarket provider;
Commercial Vehicle Group, a fully integrated system solution provider to the
global commercial vehicle market; and CRA International (formerly, Charles River
Associates), an economic and business consulting firm. In addition, Quanex, an
engineered metal producer in the materials sector also benefited Fund
performance.(9)
Although our overweighting in the energy sector helped relative Fund
performance, our stock selection was a detractor.(10) Our holdings in
Quicksilver Resources, an independent oil and gas company, and Brigham
Exploration, an independent exploration, development and production company,
negatively affected Fund performance. Stock selection and underweighted
allocation in
(7) The financial sector comprises capital markets, commercial banks and
diversified financial services in the SOI.
(8) The industrials sector comprises aerospace and defense, commercial
services and supplies, construction and engineering, and machinery in the
SOI.
(9) The materials sector comprises metals and mining in the SOI.
(10) The energy sector comprises energy equipment and services; and oil, gas
and consumable fuels in the SOI.
12 | Annual Report
the consumer discretionary sector hurt relative performance.(11) Detractors
included Prestige Brands Holdings, an OTC drug, household cleaning and personal
care company, and The Pep Boys - Manny, Moe & Jack, a retail automotive parts
company. Additionally, the health care sector was a drag on relative
performance.(12) Generic drug company Able Laboratories performed poorly as it
faced massive product recalls. We sold our holdings in Quicksilver, Brigham, Pep
Boys and Able during the year under review.
The premium valuations that small cap growth stocks normally command in the
market versus value stocks have shrunk to levels at or near their lows of the
last 25 years. The low valuations and attractive corporate balance sheets
resulted in merger-and-acquisition activities among growth stocks. In our view,
these low valuations could provide attractive opportunities in the small cap
growth segment. In general, small cap stocks lacked the attention investors paid
to larger companies, but once attractive small cap stocks are discovered, we
think their performance has the potential to be rewarding relative to large
caps. In addition to this upside potential, small caps may add to portfolio
performance by diversifying portfolio risk.
In this volatile market environment, we believe it is fundamentally important to
stay disciplined to our investment process and in particular, style and market
cap range. We remained fully dedicated to managing your portfolio according to
its small cap growth mandate. Historically, small cap stocks have been more
volatile in price than larger company stocks, especially over the short term,
and outperformance has been difficult to predict, providing a rationale for a
long-term strategic allocation to small caps.
(11) The consumer discretionary sector comprises distributors; hotels,
restaurants and leisure; household durables; Internet and catalog retail;
leisure equipment and products; specialty retail; and textiles, apparel
and luxury goods in the SOI.
(12) The health care sector comprises biotechnology, health care equipment and
supplies, and health care providers and services in the SOI.
Annual Report | 13
Thank you for your continued participation in Fiduciary Small Capitalization
Equity Fund. We look forward to serving your future investment needs.
/s/ Alison J. Schatz
Alison J. Schatz, CFA
Portfolio Manager of Fiduciary International, Inc. (Fiduciary) and
Senior Vice President of Fiduciary Trust Company International (Fiduciary Trust)
/s/ Vincent G. Piazza
Vincent G. Piazza, CFA
Portfolio Manager of Fiduciary and Vice President of Fiduciary Trust
Fiduciary Small Capitalization Equity Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 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.
14 | Annual Report
PERFORMANCE SUMMARY AS OF 7/31/05
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND
The performance table and graph 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)
- --------------------------------------------------------------------------------
INCEPTION
1-YEAR 5-YEAR (12/22/95)
- --------------------------------------------------------------------------------
Average Annual Total Return(2) 22.21% -3.31% 8.75%
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
Annual Report | 15
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT(1)
The graph below illustrates the hypothetical investment of $10,000 in Fiduciary
Small Capitalization Equity Fund from inception on 12/22/95 through 7/31/05,
compared with the Russell 2000 Growth Index.(3) Total return represents the
change in value of an investment over the periods shown. It includes fund
expenses, account fees and reinvested dividends. The index is unmanaged and
includes reinvestment of any income or distributions. It differs from the Fund
in composition and does not pay management fees or expenses. One cannot invest
directly in an index.
AVERAGE ANNUAL TOTAL RETURN(2)
- ---------------------------------------------------
7/31/05(1)
- ---------------------------------------------------
1-Year 22.21%
- ---------------------------------------------------
5-Year -3.31%
- ---------------------------------------------------
Since Inception (12/22/95) 8.75%
- ---------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
FIDUCIARY SMALL
CAPITALIZATION RUSSELL 2000
DATE EQUITY FUND GROWTH INDEX(3)
- --------------------------------------------------------------------------------
12/22/95 $10,000 $10,000
12/31/95 $10,000 $10,064
01/31/96 $10,130 $9,981
02/29/96 $10,650 $10,436
03/31/96 $11,030 $10,642
04/30/96 $11,920 $11,459
05/31/96 $12,150 $12,047
06/30/96 $11,800 $11,264
07/31/96 $10,910 $9,889
08/31/96 $11,561 $10,621
09/30/96 $12,301 $11,168
10/31/96 $12,041 $10,686
11/30/96 $12,081 $10,984
12/31/96 $12,340 $11,198
01/31/97 $12,170 $11,478
02/28/97 $11,430 $10,784
03/31/97 $10,740 $10,023
04/30/97 $10,689 $9,907
05/31/97 $12,219 $11,397
06/30/97 $12,999 $11,783
07/31/97 $13,849 $12,387
08/31/97 $14,048 $12,758
09/30/97 $15,539 $13,777
10/31/97 $14,819 $12,949
11/30/97 $14,369 $12,640
12/31/97 $14,534 $12,647
01/31/98 $14,226 $12,479
02/28/98 $15,508 $13,580
03/31/98 $16,288 $14,150
04/30/98 $16,134 $14,237
05/31/98 $14,842 $13,203
06/30/98 $15,385 $13,337
07/31/98 $14,462 $12,224
08/31/98 $11,098 $9,402
09/30/98 $12,073 $10,355
10/31/98 $12,586 $10,895
11/30/98 $13,601 $11,740
12/31/98 $14,977 $12,803
01/31/99 $16,269 $13,379
02/28/99 $14,658 $12,155
03/31/99 $15,346 $12,588
04/30/99 $15,911 $13,700
05/31/99 $15,429 $13,721
06/30/99 $16,988 $14,444
07/31/99 $17,070 $13,997
08/31/99 $17,531 $13,474
09/30/99 $17,992 $13,734
10/31/99 $19,203 $14,086
11/30/99 $21,346 $15,575
12/31/99 $25,354 $18,320
01/31/00 $25,299 $18,150
02/29/00 $30,743 $22,372
03/31/00 $29,040 $20,021
04/30/00 $25,477 $17,999
05/31/00 $24,570 $16,423
06/30/00 $27,528 $18,545
07/31/00 $26,498 $16,955
08/31/00 $28,941 $18,739
09/30/00 $28,762 $17,808
10/31/00 $27,373 $16,362
11/30/00 $23,530 $13,392
12/31/00 $26,130 $14,211
01/31/01 $25,132 $15,361
02/28/01 $23,340 $13,256
03/31/01 $21,076 $12,050
04/30/01 $22,857 $13,526
05/31/01 $22,946 $13,839
06/30/01 $23,618 $14,216
07/31/01 $22,295 $13,004
08/31/01 $20,828 $12,191
09/30/01 $18,117 $10,224
10/31/01 $19,562 $11,208
11/30/01 $20,963 $12,143
12/31/01 $22,057 $12,900
01/31/02 $21,230 $12,441
02/28/02 $19,922 $11,635
03/31/02 $21,106 $12,647
04/30/02 $20,156 $12,373
05/31/02 $18,590 $11,650
06/30/02 $17,209 $10,662
07/31/02 $15,100 $9,023
08/31/02 $15,224 $9,019
09/30/02 $14,054 $8,368
10/31/02 $14,720 $8,791
11/30/02 $15,373 $9,662
12/31/02 $14,239 $8,996
01/31/03 $13,561 $8,751
02/28/03 $13,203 $8,518
03/31/03 $13,413 $8,647
04/30/03 $14,548 $9,465
05/31/03 $16,421 $10,532
06/30/03 $16,607 $10,735
07/31/03 $17,568 $11,547
08/31/03 $18,937 $12,167
09/30/03 $18,185 $11,859
10/31/03 $19,751 $12,883
11/30/03 $20,442 $13,303
12/31/03 $20,626 $13,363
01/31/04 $21,429 $14,065
02/29/04 $21,564 $14,043
03/31/04 $21,219 $14,109
04/30/04 $19,950 $13,400
05/31/04 $20,245 $13,667
06/30/04 $20,848 $14,122
07/31/04 $18,321 $12,854
08/31/04 $17,742 $12,577
09/30/04 $18,667 $13,273
10/31/04 $19,246 $13,595
11/30/04 $20,787 $14,745
12/31/04 $21,367 $15,275
01/31/05 $20,160 $14,586
02/28/05 $20,603 $14,787
03/31/05 $19,839 $14,232
04/30/05 $19,198 $13,326
05/31/05 $20,271 $14,266
06/30/05 $20,950 $14,727
07/31/05 $22,392 $15,756
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.
ENDNOTES
(1) Performance prior to the 7/24/03 reorganization reflects historical
performance of FTI Small Capitalization Equity Fund. Past expense
reductions by the Fund's manager and administrator increased the Fund's
total returns. If the manager and administrator had not taken this action,
the Fund's total returns would have been lower.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated. Average annual total returns
smooth out variations in returns, which can be significant; they are not
the same as year-by-year results.
(3) 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.
16 | Annual Report
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.
Annual 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 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,110.70 $6.96
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.20 $6.66
- -------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.33%, multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
18 | Annual Report
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 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 annual report for Fiduciary European Smaller Companies Fund covers the
fiscal year ended July 31, 2005.
PERFORMANCE OVERVIEW
Fiduciary European Smaller Companies Fund delivered a 31.80% cumulative total
return for the 12 months ended July 31, 2005. The Fund underperformed its
benchmark, the HSBC Smaller European Companies Index, which had a 35.71% total
return during the same period.(1)
ECONOMIC AND MARKET OVERVIEW
Economic growth across Europe was generally subdued. Oil prices remained a major
concern, as the commodity reached record highs late in the period. Rising energy
costs impacted companies around the world, but the effect appeared to be more
dramatic in continental Europe, where consumer and business confidence were
weak. Economic growth was slow and in 2005 the euro declined in value against
the U.S. dollar. Largely in consideration of these factors, the European Central
Bank lowered its growth expectations for the 12-nation euro zone to a more
modest range of 1.1% to 1.7% from a December forecast of 1.4% to 2.4%.
Aggravating the situation, France and the Netherlands rejected in principle the
adoption of a common European constitution, which raised some uncertainty about
the European Union's political future.
(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 37.
Annual Report | 19
GEOGRAPHIC BREAKDOWN
Fiduciary European Smaller Companies Fund
7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
France 16.9%
- --------------------------------------------------------------------------------
U.K 15.5%
- --------------------------------------------------------------------------------
Germany 12.4%
- --------------------------------------------------------------------------------
Norway 7.9%
- --------------------------------------------------------------------------------
Switzerland 6.7%
- --------------------------------------------------------------------------------
Italy 6.5%
- --------------------------------------------------------------------------------
Sweden 6.4%
- --------------------------------------------------------------------------------
Denmark 5.1%
- --------------------------------------------------------------------------------
Finland 4.8%
- --------------------------------------------------------------------------------
Ireland 4.5%
- --------------------------------------------------------------------------------
Netherlands 4.4%
- --------------------------------------------------------------------------------
Greece 2.3%
- --------------------------------------------------------------------------------
Austria 2.3%
- --------------------------------------------------------------------------------
Spain 1.3%
- --------------------------------------------------------------------------------
Belgium 1.1%
- --------------------------------------------------------------------------------
Short-Term Investments & Other Net Assets 1.9%
- --------------------------------------------------------------------------------
Despite the predominantly weak outlook for European economies, European equity
markets generally posted strong gains during the year under review. Small
capitalization stocks outperformed their large cap counterparts, while small cap
growth stocks outperformed value. Within the HSBC Smaller European Companies
Index, a measure of small cap performance in developed European countries, the
energy minerals and industrial services sectors were the top performers, led by
oil refining/marketing and contract drilling, respectively, which benefited from
record-high crude oil prices. All sectors experienced positive returns during
the fiscal year, with the weakest sector, electronic technology, returning
"only" 19% due to weakness in the computer peripherals industry. Retail trade
and consumer durables also underperformed the overall index, with particular
weakness in the discount stores and electronics/appliances industries.
We believe the cyclical rally is now behind us amid renewed concerns about
sluggish European economies. New economic growth areas, such as infrastructure,
logistics and natural resources-related companies, seemed to have moved to the
fore in terms of market leadership. Technology continued to lag during the
period; however, some companies reported strong results late in the period.
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 our opinion,
the potential to provide above-average performance.
MANAGER'S DISCUSSION
During the year under review, Fund performance relative to the HSBC Smaller
European Companies Index was helped mostly by strong stock selection in the
industrials sector.(2) For example, positions in Kingspan Group, an Irish
construction and building materials company, and Andritz, an Austrian industrial
(2) The industrials sector comprises aerospace and defense, building products,
commercial services and supplies, construction and engineering, electrical
equipment, industrial conglomerates, machinery, road and rail, and trading
companies and distributors in the SOI.
20 | Annual Report
process solutions company, boosted performance. In the information technology
sector, Fund returns were bolstered by strong performance from Leica Geosystems
Holdings, a Swiss specialty engineering company, and Tandberg Television, a
Norwegian television on-demand content provider.(3)
Despite the Fund's positive return, relative performance was hindered by stock
selection in the consumer discretionary sector.(4) Fund holdings in Hellenic
Duty Free Shops, a Greek duty-free shop operator, and Pace Micro Technology, a
British developer, designer and distributor of digital receivers, impaired
results relative to the index. The Fund was also hurt by a significant
underweighting in the financials sector, as well as stock selection within the
sector.(5) In particular, positions in Intermediate Capital Group, a British
mezzanine financing firm, Almindelig Brand, a Danish insurance and reinsurance
company, and MPC Muenchmeyer Petersen Capital, a German investment management
company, significantly underperformed the index or had negative absolute
returns. Our underweighted allocation to the energy sector also detracted from
results.(6) Some holdings in the materials sector also hindered relative
results, including Huhtamaki, a Finnish packaging products manufacturer, and
Mayr-Melnhof Karton, an Austrian carton board maker.(7)
It is important to recognize the effect of currency movements on the Fund's
performance. 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 12 months
ended July 31, 2005, the U.S. dollar rose in value relative to most non-U.S.
currencies. As a result, the Fund's performance was negatively affected by the
portfolio's predominant investment in securities with non-U.S. currency
exposure.
(3) The information technology sector comprises communications equipment,
computers and peripherals, IT services, electronic equipment and
instruments, and office electronics in the SOI.
(4) The consumer discretionary sector comprises auto components; household
durables; leisure equipment and products; media; specialty retail; and
textiles, apparel and luxury goods in the SOI.
(5) The financials sector comprises capital markets, commercial banks and
insurance in the SOI.
(6) The energy sector comprises energy equipment and services in the SOI.
(7) The materials sector comprises chemicals, and metals and mining in the
SOI.
Annual Report | 21
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 International, Inc. (Fiduciary) and Executive Vice
President of Fiduciary Trust Company International (Fiduciary Trust)
/s/ Pratik M. Patel
Pratik M. Patel
Portfolio Manager of Fiduciary and Vice President of Fiduciary Trust
/s/ Alexandre Oltramare
Alexandre Oltramare
Assistant Vice President of Fiduciary
Fiduciary European Smaller Companies Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 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.
22 | Annual Report
PERFORMANCE SUMMARY AS OF 7/31/05
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND
The performance table and graph 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)
- --------------------------------------------------------------------------------
INCEPTION
1-YEAR 3-YEAR (1/2/01)
- --------------------------------------------------------------------------------
Average Annual Total Return(2) 31.80% 21.87% 1.71%
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
Annual Report | 23
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT(1)
The graph below illustrates the hypothetical investment of $10,000 in Fiduciary
European Smaller Companies Fund from inception on 1/2/01 through 7/31/05,
compared with the HSBC Smaller European Companies Index.3 Total return
represents the change in value of an investment over the periods shown. It
includes fund expenses, account fees and reinvested dividends. The index is
unmanaged and includes reinvestment of any income or distributions. It differs
from the Fund in composition and does not pay management fees or expenses. One
cannot invest directly in an index.
AVERAGE ANNUAL TOTAL RETURN(2)
- -------------------------------------------------
7/31/05(1)
- -------------------------------------------------
1-Year 31.80%
- -------------------------------------------------
3-Year 21.87%
- -------------------------------------------------
Since Inception (1/2/01) 1.71%
- -------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
FTI HSBC
EUROPEAN SMALLER
SMALLER EUROPEAN
COMPANIES COMPANIES
FUND INDEX(3)
- ----------------------------------------------------------
1/2/2001 $10,000 $10,000
1/31/2001 $10,190 $10,253
2/28/2001 $9,330 $9,652
3/31/2001 $8,130 $8,603
4/30/2001 $8,720 $9,037
5/31/2001 $8,580 $8,763
6/30/2001 $7,820 $8,152
7/31/2001 $7,430 $8,000
8/31/2001 $7,410 $7,968
9/30/2001 $6,300 $6,641
10/31/2001 $6,570 $7,073
11/30/2001 $6,890 $7,667
12/31/2001 $7,020 $7,758
1/31/2002 $6,900 $7,632
2/28/2002 $6,850 $7,556
3/31/2002 $7,220 $8,017
4/30/2002 $7,150 $8,182
5/31/2002 $7,210 $8,225
6/30/2002 $6,890 $7,914
7/31/2002 $5,970 $7,165
8/31/2002 $5,690 $7,033
9/30/2002 $4,870 $6,148
10/31/2002 $5,040 $6,408
11/30/2002 $5,270 $6,800
12/31/2002 $5,248 $6,721
1/31/2003 $5,038 $6,546
2/28/2003 $4,897 $6,300
3/31/2003 $4,947 $6,249
4/30/2003 $5,468 $7,088
5/31/2003 $6,009 $7,853
6/30/2003 $6,059 $8,062
7/31/2003 $6,229 $8,408
8/31/2003 $6,490 $8,680
9/30/2003 $6,820 $9,063
10/31/2003 $7,732 $9,726
11/30/2003 $8,032 $10,119
12/31/2003 $8,350 $10,717
1/31/2004 $8,978 $11,318
2/29/2004 $9,312 $11,765
3/31/2004 $8,795 $11,384
4/30/2004 $8,654 $11,169
5/31/2004 $8,715 $11,159
6/30/2004 $8,836 $11,536
7/31/2004 $8,198 $11,120
8/31/2004 $8,077 $11,090
9/30/2004 $8,502 $11,605
10/31/2004 $8,725 $12,065
11/30/2004 $9,423 $13,231
12/31/2004 $9,954 $13,969
1/31/2005 $9,944 $14,223
2/28/2005 $10,501 $15,044
3/31/2005 $10,238 $14,559
4/30/2005 $9,781 $14,026
5/31/2005 $9,974 $14,038
6/30/2005 $10,258 $14,339
7/31/2005 $10,805 $15,090
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.
ENDNOTES
(1) Performance prior to the 7/24/03 reorganization reflects historical
performance of FTI European Smaller Companies Fund. Past expense
reductions by the Fund's manager and administrator increased the Fund's
total returns. If the manager and administrator had not taken this action,
the Fund's total returns would have been lower.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated. Average annual total returns
smooth out variations in returns, which can be significant; they are not
the same as year-by-year results.
(3) 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.
24 | Annual 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.
Annual Report | 25
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 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,086.60 $7.71
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.41 $7.45
- ------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 1.49%, multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
26 | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTS(a)
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND
-------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED NOVEMBER 30,
2005 2004 2003(d) 2002 2001 2000
-------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 6.77 $ 5.91 $ 5.65 $ 7.21 $ 9.63 $ 11.39
-------------------------------------------------------------------------
Income from investment operations:
Net investment income(b) ........................... 0.08 0.03 0.03 0.04 0.04 0.03
Net realized and unrealized gains (losses) ......... 0.74 0.90 0.27 (1.19) (0.81) (0.22)
-------------------------------------------------------------------------
Total from investment operations ...................... 0.82 0.93 0.30 (1.15) (0.77) (0.19)
-------------------------------------------------------------------------
Less distributions from:
Net investment income .............................. (0.08) (0.03) (0.04) (0.05) (0.04) (0.03)
Net realized gains ................................. (0.36) (0.04) -- (0.36) (1.61) (1.54)
-------------------------------------------------------------------------
Total distributions ................................... (0.44) (0.07) (0.04) (0.41) (1.65) (1.57)
-------------------------------------------------------------------------
Net asset value, end of year .......................... $ 7.15 $ 6.77 $ 5.91 $ 5.65 $ 7.21 $ 9.63
=========================================================================
Total return(c) ....................................... 12.38% 15.78% 5.30% (16.93)%(f) (9.22)% (1.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $94,536 $82,921 $70,684 $60,904 $74,634 $87,052
Ratios to average net assets:
Expenses ........................................... 1.01% 1.02% 1.21%(e) 1.10% 1.09% 1.02%
Expenses net of waiver and payments by affiliate ... 1.01% 0.98% 1.03%(e) 1.03% 1.03% 0.97%
Net investment income .............................. 1.13% 0.43% 0.77%(e) 0.73% 0.61% 0.28%
Portfolio turnover rate ............................... 47.08% 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) For the period December 1, 2002 to July 31, 2003.
(e) Annualized. fThe 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 0.15%
Annual Report | See notes to financial statements. | 27
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 94.8%
AEROSPACE & DEFENSE 5.5%
Honeywell International Inc. ......................................... United States 80,000 $ 3,142,400
United Technologies Corp. ............................................ United States 40,000 2,028,000
-------------
5,170,400
-------------
AIR FREIGHT & LOGISTICS 2.3%
United Parcel Service Inc., B ........................................ United States 30,000 2,189,100
-------------
BIOTECHNOLOGY 4.9%
(a)Amgen Inc. ........................................................... United States 32,000 2,552,000
CSL Ltd. ............................................................. Australia 80,000 2,111,908
-------------
4,663,908
-------------
CAPITAL MARKETS 3.6%
Bank of New York Co. Inc. ............................................ United States 57,000 1,754,460
Citigroup Inc. ....................................................... United States 37,000 1,609,500
-------------
3,363,960
-------------
COMMERCIAL SERVICES & SUPPLIES 1.8%
Adecco SA ............................................................ Switzerland 35,000 1,750,068
-------------
COMMUNICATIONS EQUIPMENT 7.4%
(a)Alcatel SA ........................................................... France 170,000 2,075,508
(a)Cisco Systems Inc. ................................................... United States 100,000 1,915,000
(a)Corning Inc. ......................................................... United States 157,000 2,990,850
-------------
6,981,358
-------------
COMPUTERS & PERIPHERALS 1.8%
International Business Machines Corp. ................................ United States 20,000 1,669,200
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.4%
Alltel Corp. ......................................................... United States 34,000 2,261,000
-------------
ELECTRIC UTILITIES 2.7%
FPL Group Inc. ....................................................... United States 60,000 2,587,200
-------------
ENERGY EQUIPMENT & SERVICES 4.7%
BJ Services Co. ...................................................... United States 40,000 2,439,600
(a)Nabors Industries Ltd. ............................................... Bermuda 30,400 1,989,680
-------------
4,429,280
-------------
FOOD & STAPLES RETAILING 2.3%
Tesco PLC ............................................................ United Kingdom 386,000 2,208,409
-------------
FOOD PRODUCTS 4.6%
Nestle SA ............................................................ Switzerland 8,000 2,194,034
Smucker JM Co. ....................................................... United States 45,000 2,140,650
-------------
4,334,684
-------------
28 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
HEALTH CARE EQUIPMENT & SUPPLIES 2.0%
Smith & Nephew PLC ................................................... United Kingdom 196,000 $ 1,863,779
-------------
HOTELS RESTAURANTS & LEISURE 4.6%
Carnival Corp. ....................................................... United States 42,000 2,200,800
McDonald's Corp. ..................................................... United States 70,000 2,181,900
-------------
4,382,700
-------------
INDUSTRIAL CONGLOMERATES 4.7%
General Electric Co. ................................................. United States 60,000 2,070,000
Tyco International Ltd. .............................................. United States 77,000 2,346,190
-------------
4,416,190
-------------
INSURANCE 5.3%
American International Group Inc. .................................... United States 34,000 2,046,800
Hartford Financial Services Group Inc. ............................... United States 31,000 2,497,670
Willis Group Holdings Ltd. ........................................... United States 13,200 437,712
-------------
4,982,182
-------------
IT SERVICES 2.2%
First Data Corp. ..................................................... United States 50,000 2,057,000
-------------
MACHINERY 2.1%
Eaton Corp. .......................................................... United States 30,100 1,966,734
-------------
MEDIA 3.9%
(a)Discovery Holding Co., A ............................................. United States 18,100 258,287
(a)Liberty Media Corp., A ............................................... United States 181,000 1,590,990
(a)Time Warner Inc. ..................................................... United States 110,000 1,872,200
-------------
3,721,477
-------------
OIL, GAS & CONSUMABLE FUELS 4.0%
ConocoPhillips ....................................................... United States 31,200 1,952,808
ExxonMobil Corp. ..................................................... United States 31,800 1,868,250
-------------
3,821,058
-------------
PERSONAL PRODUCTS 2.4%
Estee Lauder Cos. Inc., A ............................................ United States 57,000 2,230,980
-------------
PHARMACEUTICALS 6.5%
Johnson & Johnson .................................................... United States 34,000 2,174,640
Merck & Co. Inc. ..................................................... United States 60,000 1,863,600
Pfizer Inc. .......................................................... United States 78,000 2,067,000
-------------
6,105,240
-------------
ROAD & RAIL 2.6%
Union Pacific Corp. .................................................. United States 35,000 2,460,850
-------------
Annual Report | 29
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.6%
Analog Devices Inc. .................................................. United States 50,000 $ 1,960,000
Intel Corp. .......................................................... United States 88,000 2,388,320
-------------
4,348,320
-------------
SOFTWARE 5.9%
Microsoft Corp. ...................................................... United States 146,000 3,739,060
SAP AG ............................................................... Germany 11,000 1,887,101
-------------
5,626,161
-------------
TOTAL COMMON STOCKS (COST $70,475,843) ............................... 89,591,238
-------------
SHORT TERM INVESTMENT (COST $3,712,689) 3.9%
MONEY FUND 3.9%
(b)Franklin Institutional Fiduciary Trust Money Market Portfolio ........ United States 3,712,689 3,712,689
-------------
TOTAL INVESTMENTS (COST $74,188,532) 98.7% ........................... 93,303,927
OTHER ASSETS, LESS LIABILITIES 1.3% .................................. 1,232,338
-------------
$ 94,536,265
=============
(a) Non-income producing.
(b) See Note 8 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
30 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTSA
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND
-----------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED NOVEMBER 30,
2005 2004 2003(d) 2002 2001 2000
-----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 14.86 $ 14.25 $ 12.48 $ 18.71 $ 21.00 $ 20.81
-----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(b) ...................... (0.10) (0.16) (0.07) (0.15) (0.13) (0.15)
Net realized and unrealized gains (losses) ........... 3.40 0.77 1.84 (4.37) (2.16) 2.25
-----------------------------------------------------------------------
Total from investment operations ........................ 3.30 0.61 1.77 (4.52) (2.29) 2.10
-----------------------------------------------------------------------
Less distributions from net realized gains .............. -- -- -- (1.71) -- (1.91)
-----------------------------------------------------------------------
Net asset value, end of year ............................ $ 18.16 $ 14.86 $ 14.25 $ 12.48 $ 18.71 $ 21.00
=======================================================================
Total return(c) ......................................... 22.21% 4.28% 14.18% (26.65)% (10.90)% 10.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $44,821 $62,786 $61,026 $59,882 $97,660 $109,385
Ratios to average net assets:
Expenses ............................................. 1.30% 1.27% 1.43%e 1.34% 1.32% 1.29%
Expenses net of waiver and payments by affiliate ..... 1.30% 1.26% 1.30%(e) 1.30% 1.30% 1.27%
Net investment income (loss) ......................... (0.66)% (1.01)% (0.89)%(e) (1.01)% (0.67)% (0.68)%
Portfolio turnover rate ................................. 111.92% 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) For the period December 1, 2002 to July 31, 2003.
(e) Annualized.
Annual Report | See notes to financial statements. | 31
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 95.4%
AEROSPACE & DEFENSE 2.1%
(a)Aviall Inc. ........................................................................... 28,100 $ 951,185
--------------
BIOTECHNOLOGY 7.0%
(a)Alkermes Inc. ......................................................................... 51,000 790,500
(a)Cell Genesys Inc. ..................................................................... 77,400 465,174
(a)Cepheid Inc. .......................................................................... 39,600 339,768
(a)Nektar Therapeutics ................................................................... 28,800 540,288
(a)Protein Design Labs Inc. .............................................................. 28,600 651,794
(a)Telik Inc. ............................................................................ 20,300 345,100
--------------
3,132,624
--------------
CAPITAL MARKETS 4.4%
(a)Affiliated Managers Group Inc. ........................................................ 5,950 424,235
(a)GFI Group Inc. ........................................................................ 12,200 426,878
Greenhill & Co. Inc. .................................................................. 13,900 533,204
(a)TradeStation Group Inc. ............................................................... 63,100 605,129
--------------
1,989,446
--------------
COMMERCIAL BANKS 2.0%
(a)Signature Bank ........................................................................ 15,900 477,477
Texas Regional Bancshares Inc., A ..................................................... 13,290 394,181
--------------
871,658
--------------
COMMERCIAL SERVICES & SUPPLIES 4.6%
(a)CRA International Inc. ................................................................ 16,800 893,760
(a)FTI Consulting Inc. ................................................................... 20,400 491,640
Ritchie Bros. Auctioneers Inc. ........................................................ 16,900 655,044
--------------
2,040,444
--------------
COMMUNICATIONS EQUIPMENT 6.6%
(a)Avocent Corp. ......................................................................... 20,500 714,630
(a)F5 Networks Inc. ...................................................................... 16,100 679,098
(a)Packeteer Inc. ........................................................................ 32,800 397,208
(a)Sonus Networks Inc. ................................................................... 237,200 1,148,048
--------------
2,938,984
--------------
COMPUTERS & PERIPHERALS 0.5%
(a)Rackable Systems Inc. ................................................................. 17,500 226,975
--------------
CONSTRUCTION & ENGINEERING 3.0%
(a)Dycom Industries Inc. ................................................................. 30,000 732,000
(a)URS Corp. ............................................................................. 16,700 625,415
--------------
1,357,415
--------------
DISTRIBUTORS 0.3%
(a)Prestige Brands Holdings Inc. ......................................................... 10,300 115,875
--------------
32 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
DIVERSIFIED FINANCIAL SERVICES 1.2%
(a)Nasdaq Stock Market Inc. .............................................................. 22,700 $ 514,155
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.0%
Commonwealth Telephone Enterprises Inc. ............................................... 21,200 907,360
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 4.7%
BEI Technologies Inc. ................................................................. 31,800 1,105,050
(a)Brightpoint Inc. ...................................................................... 27,200 659,600
Cognex Corp. .......................................................................... 9,600 320,352
--------------
2,085,002
--------------
ENERGY EQUIPMENT & SERVICES 6.4%
(a)Atwood Oceanics Inc. .................................................................. 5,400 368,118
(a)Newpark Resources Inc. ................................................................ 55,900 472,914
(a)NS Group Inc. ......................................................................... 11,800 500,910
(a)Superior Energy Services Inc. ......................................................... 43,000 917,620
(a)Universal Compression Holdings Inc. ................................................... 15,400 624,470
--------------
2,884,032
--------------
HEALTH CARE EQUIPMENT & SUPPLIES 3.2%
(a)Advanced Neuromodulation Systems Inc. ................................................. 17,600 880,704
(a)ResMed Inc. ........................................................................... 8,300 556,100
--------------
1,436,804
--------------
HEALTH CARE PROVIDERS & SERVICES 10.5%
(a)American Healthways Inc. .............................................................. 22,200 989,454
(a)AMERIGROUP Corp. ...................................................................... 19,500 675,675
(a)Dendrite International Inc. ........................................................... 27,800 480,940
(a)Pediatrix Medical Group Inc. .......................................................... 11,100 870,462
(a)Sunrise Senior Living Inc. ............................................................ 16,200 858,600
(a)United Surgical Partners International Inc. ........................................... 22,950 826,429
--------------
4,701,560
--------------
HOTELS RESTAURANTS & LEISURE 3.3%
(a)Cosi Inc. ............................................................................. 18,100 153,307
(a)Red Robin Gourmet Burgers Inc. ........................................................ 7,200 432,288
(a)Shuffle Master Inc. ................................................................... 16,925 454,098
(a)Vail Resorts Inc. ..................................................................... 15,200 431,832
--------------
1,471,525
--------------
HOUSEHOLD DURABLES 1.0%
(a)Jarden Corp. .......................................................................... 11,700 448,812
--------------
HOUSEHOLD PRODUCTS 1.5%
(a)Central Garden & Pet Co. .............................................................. 13,500 677,295
--------------
INTERNET & CATALOG RETAIL 1.5%
(a)Audible Inc. .......................................................................... 38,300 689,017
--------------
Annual Report | 33
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
INTERNET SOFTWARE & SERVICES 1.3%
(a)webMethods Inc. ....................................................................... 92,300 $ 560,261
--------------
IT SERVICES 2.1%
(a)Forrester Research Inc. ............................................................... 47,000 927,310
--------------
LEISURE EQUIPMENT & PRODUCTS 2.2%
(a)Marinemax Inc. ........................................................................ 16,900 562,094
(a)Marvel Enterprises Inc. ............................................................... 22,650 439,184
--------------
1,001,278
--------------
MACHINERY 3.1%
(a)Commercial Vehicle Group Inc. ......................................................... 32,600 768,382
Wabtec Corp. .......................................................................... 25,900 632,737
--------------
1,401,119
--------------
MEDIA 1.2%
(a)Lions Gate Entertainment Corp. ........................................................ 53,900 552,475
--------------
METALS & MINING 0.8%
Quanex Corp. .......................................................................... 6,000 366,000
--------------
OIL, GAS & CONSUMABLE FUELS 3.2%
(a)Alon USA Energy Inc. .................................................................. 29,400 521,850
(a)Forest Oil Corp. ...................................................................... 12,800 572,928
OMI Corp. ............................................................................. 17,800 320,934
--------------
1,415,712
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 8.2%
(a)ANADIGICS Inc. ........................................................................ 43,700 109,687
(a)ATMI Inc. ............................................................................. 26,800 853,044
(a)Credence Systems Corp. ................................................................ 46,500 506,385
(a)FEI Co. ............................................................................... 33,300 755,577
(a)Micrel Inc. ........................................................................... 59,400 718,146
(a)Microtune Inc. ........................................................................ 123,000 749,070
--------------
3,691,909
--------------
SOFTWARE 4.3%
(a)Embarcadero Technologies Inc. ......................................................... 30,000 187,500
(a)Salesforce.com Inc. ................................................................... 26,700 628,785
(a)Secure Computing Corp. ................................................................ 19,300 238,548
(a)TIBCO Software Inc. ................................................................... 114,700 882,043
--------------
1,936,876
--------------
SPECIALTY RETAIL 2.0%
(a)Aeropostale Inc. ...................................................................... 11,750 350,738
(a)Golf Galaxy Inc. ...................................................................... 900 16,749
(a)New York & Co. Inc. ................................................................... 22,500 529,650
--------------
897,137
--------------
34 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
TEXTILES, APPAREL & LUXURY GOODS 1.2%
(a)True Religion Apparel Inc. ............................................................. 32,600 $ 552,570
--------------
TOTAL COMMON STOCKS (COST $32,526,745) ................................................. 42,742,815
--------------
SHORT TERM INVESTMENT (COST $2,390,517) 5.3%
MONEY FUND 5.3%
(b)Franklin Institutional Fiduciary Trust Money Market Portfolio .......................... 2,390,517 2,390,517
--------------
TOTAL INVESTMENTS (COST $34,917,262) 100.7% ............................................ 45,133,332
OTHER ASSETS, LESS LIABILITIES (0.7)% .................................................. (312,257)
--------------
NET ASSETS 100.0% ...................................................................... $ 44,821,075
==============
(a) Non-income producing.
(b) See Note 8 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 35
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTS(a)
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND
----------------------------------------------------------------------
YEAR ENDED
YEAR ENDED JULY 31, NOVEMBER 30,
2005 2004 2003(d) 2002 2001F
----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 8.10 $ 6.22 $ 5.27 $ 6.89 $ 10.00
----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(b) ..................... 0.04 0.02 0.08 (0.01) (0.02)
Net realized and unrealized gains (losses) .......... 2.53 1.95 0.88 (1.61) (3.09)
----------------------------------------------------------------------
Total from investment operations ...................... 2.57 1.97 0.96 (1.62) (3.11)
----------------------------------------------------------------------
Less distributions from net investment income ......... (0.01) (0.09) (0.01) -- --
----------------------------------------------------------------------
Net asset value, end of year .......................... $ 10.66 $ 8.10 $ 6.22 $ 5.27 $ 6.89
======================================================================
Total return(c) ....................................... 31.80% 31.61% 18.20% (23.51)% (31.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $21,501 $15,834 $12,996 $14,970 $14,495
Ratios to average net assets:
Expenses before expense reduction ................... 1.51% 1.54% 1.84%(e) 1.61% 2.62%(e)
Expenses net of waiver and payments by affiliate .... 1.51% 1.38% 1.20%(e) 1.20% 1.20%(e)
Expenses net of waiver and payments by affiliate and
expense reduction ................................. 1.50% 1.38% 1.20%(e) 1.20% 1.20%(e)
Net investment income (loss) ........................ 0.42% 0.24% 2.18%(e) (0.14)% (0.28)%(e)
Portfolio turnover rate ............................... 99.52% 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) For the period December 1, 2002 to July 31, 2003.
(e) Annualized.
(f) For the period January 2, 2001 (effective date) to November 30, 2001.
36 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND INDUSTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 98.1%
AUSTRIA 2.3%
Andritz AG ....................................... Machinery 5,080 $ 486,499
-------------
BELGIUM 1.1%
(a)Option NV ........................................ Communications Equipment 5,730 239,326
-------------
DENMARK 5.1%
Bang & Olufsen AS, B ............................. Household Durables 4,208 297,465
DSV De Sammenslut Vognmaend AS, B ................ Road & Rail 5,390 508,904
(a)Rockwool International ASA, B .................... Building Products 3,840 283,307
-------------
1,089,676
-------------
FINLAND 4.8%
Nokian Renkaat OYJ ............................... Auto Components 24,450 495,634
YIT-Yhtyma OYJ ................................... Construction & Engineering 15,090 526,900
-------------
1,022,534
-------------
FRANCE 16.9%
(a)Alten ............................................ IT Services 13,910 413,180
April Group ...................................... Insurance 9,810 321,128
(a)Axalto International NV .......................... Computers & Peripherals 11,300 390,454
Beneteau ......................................... Leisure Equipment & Products 3,862 312,543
Generale de Sante ................................ Health Care Providers & Services 13,839 421,474
Neopost SA ....................................... Office Electronics 6,036 561,294
Nexans SA ........................................ Electrical Equipment 7,530 335,048
Pinguely-Haulotte ................................ Machinery 14,690 246,136
Seche Environnement .............................. Commercial Services & Supplies 2,810 257,558
Spir Communication SA ............................ Media 990 201,526
(a)Trigano SA ....................................... Leisure Equipment & Products 2,160 174,935
-------------
3,635,276
-------------
GERMANY 12.4%
AWD Holding AG ................................... Capital Markets 8,005 365,888
MTU Aero Engines Holding AG ...................... Aerospace & Defense 5,935 186,510
(a)Pfleiderer AG .................................... Building Products 21,560 463,974
Rational AG ...................................... Household Durables 2,620 290,013
Rheinmetall AG ................................... Industrial Conglomerates 6,785 376,757
Solarworld AG .................................... Electrical Equipment 5,078 493,141
(a)Techem AG ........................................ Commercial Services & Supplies 11,140 489,868
-------------
2,666,151
-------------
GREECE 2.3%
Germanos SA ...................................... Specialty Retail 17,262 286,720
Jumbo SA ......................................... Leisure Equipment & Products 20,700 211,816
-------------
498,536
-------------
IRELAND 4.5%
Eircom Group PLC ................................. Diversified Telecommunication Services 119,180 244,195
Grafton Group PLC ................................ Trading Companies & Distributors 32,118 365,256
-------------
Annual Report | 37
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND INDUSTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
IRELAND (CONT.)
Kingspan Group PLC ............................... Building Products 27,779 $ 362,052
-------------
971,503
-------------
ITALY 6.5%
Amplifon SpA ..................................... Health Care Providers & Services 4,365 285,246
Astaldi SpA ...................................... Construction & Engineering 31,140 193,113
Azimut Holding SpA ............................... Capital Markets 35,140 238,581
Banco Di Desio E Della Brianza SpA ............... Commercial Banks 22,747 175,399
Brembo SpA ....................................... Auto Components 21,400 164,753
(a)Interpump Group SpA .............................. Machinery 50,595 350,566
-------------
1,407,658
-------------
NETHERLANDS 4.4%
Kon Bam Groep NV ................................. Construction & Engineering 5,021 356,725
Koninklijke Ten Cate NV .......................... Textiles, Apparel & Luxury Goods 2,190 220,909
SBM Offshore NV .................................. Energy Equipment & Services 5,150 376,505
-------------
954,139
-------------
NORWAY 7.9%
ABG Sundal Collier ASA ........................... Capital Markets 357,640 357,937
Acta Holding ASA ................................. Capital Markets 97,290 233,690
(a)Stolt Offshore SA ................................ Energy Equipment & Services 23,290 268,954
(a)Tandberg Television ASA .......................... Communications Equipment 43,805 558,135
(a)TGS Nopec Geophysical Co. ASA .................... Energy Equipment & Services 9,080 274,025
-------------
1,692,741
-------------
SPAIN 1.3%
Tubacex SA ....................................... Metals & Mining 75,903 284,357
-------------
SWEDEN 6.4%
(a)Elekta AB, B ..................................... Health Care Equipment & Supplies 11,290 530,944
HIQ International AB ............................. IT Services 65,680 311,836
(a)Transcom Worldwide SA, B ......................... Commercial Services & Supplies 70,990 525,209
-------------
1,367,989
-------------
SWITZERLAND 6.7%
Kaba Holding AG .................................. Building Products 1,105 308,195
Leica Geosystems AG .............................. Electronic Equipment & Instruments 1,180 466,892
Phonak Holding AG ................................ Health Care Equipment & Supplies 8,770 347,003
(a)Sika AG .......................................... Chemicals 487 321,908
-------------
1,443,998
-------------
UNITED KINGDOM 15.5%
(a)Charter PLC ...................................... Machinery 60,972 337,316
(a)Gyrus Group PLC .................................. Health Care Equipment & Supplies 55,439 293,795
Homeserve PLC .................................... Commercial Services & Supplies 20,648 384,340
Intermediate Capital Group PLC ................... Capital Markets 14,831 302,391
38 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND INDUSTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
UNITED KINGDOM (CONT.)
Laird Group PLC ................................................. Electronic Equipment & Instruments 51,280 $ 296,090
McBride PLC ..................................................... Household Products 111,840 286,515
Mitie Group PLC ................................................. Commercial Services & Supplies 114,162 337,612
(a)Raymarine PLC ................................................... Household Durables 83,837 316,822
Whatman PLC ..................................................... Machinery 99,120 481,723
Wolverhampton & Dudley Breweries PLC ............................ Beverages 14,870 298,222
------------
3,334,826
------------
TOTAL COMMON STOCKS (COST $15,613,800) .......................... 21,095,209
------------
SHORT TERM INVESTMENT (COST $808,434) 3.8%
MONEY FUND 3.8%
(b)Franklin Institutional Fiduciary Trust Money Market Portfolio ... Money Fund 808,434 808,434
------------
TOTAL INVESTMENTS (COST $16,422,234) 101.9% ..................... 21,903,643
OTHER ASSETS, LESS LIABILITIES (1.9)% ........................... (402,333)
------------
NET ASSETS 100.0% ............................................... $21,501,310
============
(a) Non-income producing.
(b) See Note 8 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 39
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 2005
----------------------------------------------------------
FIDUCIARY FIDUCIARY
LARGE FIDUCIARY EUROPEAN
CAPITALIZATION SMALL SMALLER
GROWTH AND CAPITALIZATION COMPANIES
INCOME FUND EQUITY FUND FUND
----------------------------------------------------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................... $ 70,475,843 $ 32,526,745 $ 15,613,800
Cost - Sweep Money Fund (Note 8) .............................. 3,712,689 2,390,517 808,434
----------------------------------------------------------
Total cost of investments ..................................... $ 74,188,532 $ 34,917,262 $ 16,422,234
==========================================================
Value - Unaffiliated issuers .................................. $ 89,591,238 $ 42,742,815 $ 21,095,209
Value - Sweep Money Fund (Note 8) ............................. 3,712,689 2,390,517 808,434
----------------------------------------------------------
Total value of investments .................................... 93,303,927 45,133,332 21,903,643
Receivables:
Investment securities sold .................................... 1,156,022 596,556 --
Capital shares sold ........................................... 534,000 7,563 22,458
Dividends ..................................................... 45,622 -- 36,415
----------------------------------------------------------
Total assets .............................................. 95,039,571 45,737,451 21,962,516
----------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ............................... 368,817 852,655 185,338
Capital shares redeemed ....................................... 42,013 -- --
Affiliates .................................................... 72,832 44,202 20,919
Funds advanced by custodian ..................................... -- -- 229,482
Other liabilities ............................................... 19,644 19,519 25,467
----------------------------------------------------------
Total liabilities ......................................... 503,306 916,376 461,206
----------------------------------------------------------
Net assets, at value .................................... $ 94,536,265 $ 44,821,075 $ 21,501,310
==========================================================
Net assets consist of:
Undistributed net investment income ............................. $ 34,213 $ -- $ 63,848
Net unrealized appreciation (depreciation) ...................... 19,115,395 10,216,070 5,482,471
Accumulated net realized gain (loss) ............................ 8,293,626 (8,246,488) (6,104,718)
Paid-in capital ................................................. 67,093,031 42,851,493 22,059,709
----------------------------------------------------------
Net assets, at value .................................... $ 94,536,265 $ 44,821,075 $ 21,501,310
==========================================================
Shares outstanding ................................................ 13,229,210 2,467,494 2,016,374
==========================================================
Net asset value and maximum offering price per sharea ............. $ 7.15 $ 18.16 $ 10.66
==========================================================
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
40 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended July 31, 2005
-----------------------------------------------
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 ...................................................... $ 1,814,179 $ 308,672 $ 350,288
Sweep Money Fund (Note 8) ................................................. 62,365 21,213 10,049
-----------------------------------------------
Total investment income ............................................... 1,876,544 329,885 360,337
-----------------------------------------------
Expenses:
Management fees (Note 3a) ................................................... 645,769 510,256 186,541
Administrative fees (Note 3b) ............................................... 174,834 102,819 37,623
Transfer agent fees (Note 3d) ............................................... 1,147 1,831 1,821
Custodian fees (Note 4) ..................................................... 4,245 3,787 7,664
Reports to shareholders ..................................................... 18,717 16,154 10,589
Registration and filing fees ................................................ 21,096 18,313 16,198
Professional fees ........................................................... 11,889 10,202 17,110
Other ....................................................................... 6,406 3,308 7,741
-----------------------------------------------
Total expenses ........................................................ 884,103 666,670 285,287
Expense reductions (Note 4) ........................................... (6) -- (3,487)
-----------------------------------------------
Net expenses ........................................................ 884,097 666,670 281,800
-----------------------------------------------
Net investment income (loss) ...................................... 992,447 (336,785) 78,537
-----------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................... 9,367,638 1,921,643 2,026,967
Foreign currency transactions ............................................. (33,134) -- (741)
-----------------------------------------------
Net realized gain (loss) ............................................ 9,334,504 1,921,643 2,026,226
-----------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................. (8,438) 8,337,273 3,072,550
Translation of assets and liabilities denominated in foreign currencies ..... -- -- (675)
-----------------------------------------------
Net unrealized appreciation (depreciation) .......................... (8,438) 8,337,273 3,071,875
-----------------------------------------------
Net realized and unrealized gain (loss) ....................................... 9,326,066 10,258,916 5,098,101
-----------------------------------------------
Net increase (decrease) in net assets resulting from operations ............... $10,318,513 $ 9,922,131 $5,176,638
===============================================
(a)Foreign taxes withheld on dividends ........................................... $ 43,606 $ 200 $ 46,981
Annual Report | See notes to financial statements. | 41
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------
FIDUCIARY FIDUCIARY
LARGE CAPITALIZATION SMALL CAPITALIZATION
GROWTH AND INCOME FUND EQUITY FUND
----------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
2005 2004 2005 2004
----------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ................................ $ 992,447 $ 355,676 $ (336,785) $ (737,917)
Net realized gain (loss) from investments and foreign
currency transactions ...................................... 9,334,504 3,918,098 1,921,643 12,597,601
Net change in unrealized appreciation (depreciation)
on investments ............................................. (8,438) 7,336,223 8,337,273 (9,124,411)
----------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ...................................... 10,318,513 11,609,997 9,922,131 2,735,273
Distributions to shareholders from:
Net investment income ....................................... (1,018,355) (329,516) -- --
Net realized gains .......................................... (4,439,717) (523,650) -- --
----------------------------------------------------------------
Total distributions to shareholders ........................... (5,458,072) (853,166) -- --
Capital share transactions: (Note 2) ........................... 6,754,820 1,479,699 (27,887,516) (974,561)
----------------------------------------------------------------
Net increase (decrease) in net assets ................. 11,615,261 12,236,530 (17,965,385) 1,760,712
Net assets:
Beginning of year ............................................. 82,921,004 70,684,474 62,786,460 61,025,748
----------------------------------------------------------------
End of year ................................................... $ 94,536,265 $ 82,921,004 $ 44,821,075 $ 62,786,460
================================================================
Undistributed net investment income included in net assets:
End of year ................................................... $ 34,213 $ 64,817 $ -- $ --
================================================================
42 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
------------------------------
FIDUCIARY EUROPEAN SMALLER
COMPANIES FUND
------------------------------
YEAR ENDED JULY 31,
2005 2004
------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ......................................................................... $ 78,537 $ 37,790
Net realized gain (loss) from investments and foreign currency transactions ................... 2,026,226 3,361,441
Net change in unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currencies ............................................ 3,071,875 253,715
------------------------------
Net increase (decrease) in net assets resulting from operations ......................... 5,176,638 3,652,946
------------------------------
Distributions to shareholders from net investment income ........................................ (28,876) (167,068)
Capital share transactions: (Note 2) ............................................................ 520,000 (648,656)
------------------------------
Net increase (decrease) in net assets ................................................... 5,667,762 2,837,222
Net assets:
Beginning of year ............................................................................... 15,833,548 12,996,326
------------------------------
End of year ..................................................................................... $ 21,501,310 $ 15,833,548
==============================
Undistributed net investment income included in net assets:
End of year ..................................................................................... $ 63,848 $ 28,864
==============================
Annual Report | See notes to financial statements. | 43
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
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 following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.
Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. 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
44 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. FOREIGN CURRENCY TRANSLATION (CONTINUED)
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
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 Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statements of Assets and Liabilities.
D. INCOME TAXES
No provision has been made for U.S. income taxes because each Fund's policy is
to continue 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.
Annual Report | 45
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (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 of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
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 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 year.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At July 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
---------------------------------------------------------------------
Year ended July 31, 2005
Shares sold ............................ 1,509,984 $ 10,450,004 97,650 $ 1,597,736
Shares issued in reinvestment
of distributions ...................... 636,956 4,413,959 -- --
Shares redeemed ........................ (1,174,500) (8,109,143) (1,854,247) (29,485,252)
---------------------------------------------------------------------
Net increase (decrease) ................ 972,440 $ 6,754,820 (1,756,597) $(27,887,516)
=====================================================================
46 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (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
Year ended July 31, 2005
Shares sold ................................... 322,037 $ 2,961,306
Shares issued in reinvestment
of distributions ............................. 85 806
Shares redeemed ............................... (261,112) (2,442,112)
---------------------------------
Net increase (decrease) ....................... 61,010 $ 520,000
=================================
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
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 Funds are also officers and/or directors of the following
subsidiaries:
- -------------------------------------------------------------------------------------------------------
SUBSIDIARY 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
Annual Report | 47
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (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 0.75%
Fiduciary Small Capitalization Equity Fund 1.00%
Fiduciary European Smaller Companies Fund 1.00%
B. ADMINISTRATIVE FEES
The Funds pays an administrative fee to FT Services of 0.20% per year of the
average daily net assets of each Fund.
C. DISTRIBUTION FEES
The Trusts' Board of Trustees has adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act. The Funds have not activated the plan.
D. TRANSFER AGENT FEES
The Funds paid transfer agent fees as noted in the Statements of Operations of
which the following amounts were retained by Investor Services:
--------------------------------------------------
FIDUCIARY
LARGE FIDUCIARY FIDUCIARY
CAPITALIZATION SMALL EUROPEAN
GROWTH AND CAPITALIZATION SMALLER
INCOME FUND EQUITY FUND COMPANIES FUND
--------------------------------------------------
Transfer agent fees ....... $ 488 $1,044 $1,250
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 year ended July 31, 2005, the
custodian fees were reduced as noted in the Statements of Operations.
48 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
At July 31, 2005, the Funds had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
-----------------------------
FIDUCIARY
FIDUCIARY EUROPEAN
SMALL SMALLER
CAPITALIZATION COMPANIES
EQUITY FUND FUND
-----------------------------
Capital loss carryovers expiring in:
2010 .................................. $7,387,241 $6,091,789
2011 .................................. -- 11,934
-----------------------------
$7,387,241 $6,103,723
=============================
At July 31, 2005, the Fiduciary Large Capitalization Growth and Income Fund had
deferred currency losses occurring subsequent to October 31, 2004 of $33,350.
For tax purposes, such losses will be reflected in the year ending July 31,
2006.
The tax character of distributions paid during the years ended July 31, 2005 and
2004, was as follows:
----------------------------------------------------------------
FIDUCIARY FIDUCIARY
LARGE CAPITALIZATION EUROPEAN SMALLER
GROWTH AND INCOME FUND COMPANIES FUND
----------------------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------------------
Distributions paid from:
Ordinary income ..................... $1,989,354 $ 853,166 $ 28,876 $ 167,068
Long term capital gain .............. 3,468,718 -- -- --
----------------------------------------------------------------
$5,458,072 $ 853,166 $ 28,876 $ 167,068
================================================================
At July 31, 2005, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains 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 ....................................... $ 74,188,532 $ 35,776,509 $ 16,423,229
==================================================
Unrealized appreciation ................................... $ 20,142,065 $ 10,306,421 $ 5,635,608
Unrealized depreciation ................................... (1,026,670) (949,598) (155,194)
--------------------------------------------------
Net unrealized appreciation (depreciation) ................ $ 19,115,395 $ 9,356,823 $ 5,480,414
==================================================
Undistributed ordinary income ............................. $ 880,472 $ -- $ 63,848
Undistributed long term capital gains ..................... 7,480,717 -- --
--------------------------------------------------
Distributable earnings .................................... $ 8,361,189 $ -- $ 63,848
==================================================
Annual Report | 49
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
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.
6. INVESTMENT TRANSACTIONS
Purchases and sales (excluding short term securities) for the year ended July
31, 2005, were as follows:
---------------------------------------------------
FIDUCIARY FIDUCIARY
LARGE FIDUCIARY EUROPEAN
CAPITALIZATION SMALL SMALLER
GROWTH AND CAPITALIZATION COMPANIES
INCOME FUND EQUITY FUND FUND
---------------------------------------------------
Purchases ............. $40,380,121 $56,486,364 $18,937,243
Sales ................. $39,707,949 $85,149,399 $17,985,559
7. RISK OF INVESTING IN FOREIGN SECURITIES
The Fiduciary European Smaller Companies Fund invests in foreign securities
which may include certain risks and considerations not typically associated with
investing in U.S. securities, such as fluctuating currency values, changing
local and regional economic, political and social conditions, which may result
in greater market volatility. In addition, certain foreign securities may not be
as liquid as U.S. securities.
8. 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.
9. REGULATORY MATTERS
INVESTIGATIONS AND SETTLEMENTS
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.
50 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. REGULATORY MATTERS (CONTINUED)
INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
("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, provided documents and
information in response to subpoenas and/or requests for documents, information
and/or testimony. Beginning in August 2004, the Company entered into settlements
with certain of the regulators and a governmental entity investigating the
mutual fund industry practices noted above. The Company believes that settlement
of each of the matters is in the best interest of the Company and shareholders
of the Franklin, Templeton, and Mutual Series mutual funds (the "funds").
Two of the settlement agreements, those with the SEC and the CAGO concerning
marketing support payments, provide that the distribution of settlement monies
are to be made to the relevant funds, not to individual shareholders. 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 were disbursed to the participating
funds. The Trust did not participate in the CAGO settlement. The SEC has not yet
approved the distribution plan pertaining to the SEC settlement. When approved,
disbursements of settlement monies under the SEC's settlement will be made
promptly in accordance with the terms and conditions of that order.
OTHER LEGAL PROCEEDINGS
On April 12, 2005, the Attorney General of West Virginia filed a complaint in
the Circuit Court of Marshall County, West Virginia against a number of
companies engaged in the mutual fund industry, including Franklin Resources,
Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties
alleging violations of the West Virginia Consumer Credit and Protection Act and
seeking, among other things, civil penalties and attorneys' fees and costs.
Defendants have since removed the matter to the United States District Court for
the Northern District of West Virginia. To the extent applicable to the Company,
the complaint arises from activity that occurred in 2001 and duplicates, in
whole or in part, the allegations asserted in the February 4, 2004 Massachusetts
Administrative Complaint concerning one instance of market timing (the
"Administrative Complaint") and the SEC's findings regarding market timing in
its August 2, 2004 Order (the "SEC Order"), both of which matters were
previously reported.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors
have been named in multiple lawsuits in different courts alleging violations of
various federal securities and state 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
Annual Report | 51
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
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, allegedly resulting in market
timing activity. The majority of these lawsuits duplicate, in whole or in part,
the allegations asserted in the Administrative Complaint and the SEC's findings
regarding market timing in the SEC Order. The lawsuits are styled as class
actions, or derivative actions on behalf of either the named funds or Franklin
Resources, Inc.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and 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 marketing
support payments and/or payment of allegedly excessive commissions and/or
advisory or 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 the named funds.
The Company and fund management strongly believe that the claims made in each of
the lawsuits described above are without merit and intends to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. Public trust and confidence are critical to the Company's business and
any material loss of investor and/or client confidence could result in a
significant decline in assets under management by the Company, which would have
an adverse effect on future financial results. If it is determined that the
Company bears responsibility for any unlawful or inappropriate conduct that
caused losses to the Trust, it is committed to making the Trust or its
shareholders whole, as appropriate. The Company is committed to taking all
appropriate actions to protect the interests of its funds' shareholders.
52 | Annual Report
FRANKLIN GLOBAL TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN GLOBAL TRUST
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Fiduciary Large Capitalization
Growth and Income Fund, Fiduciary Small Capitalization Equity Fund and Fiduciary
European Smaller Companies Fund, separate portfolios of the Franklin Global
Trust (hereafter referred to as the "Funds") at July 31, 2005, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 9, 2005
Annual Report | 53
FRANKLIN GLOBAL TRUST
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fiduciary
Large Capitalization Growth and Income Fund designates $8,521,379 as a capital
gain dividend for the fiscal year ended July 31, 2005.
Under Section 854(b)(2) of the Code, the Funds designate the following maximum
amounts as qualified dividends for purposes of the maximum rate under Section
1(h)(11) of the Code for the fiscal year ended July 31, 2005.
---------------------------------------
FIDUCIARY
LARGE FIDUCIARY
CAPITALIZATION EUROPEAN
GROWTH AND SMALLER
INCOME FUND COMPANIES FUND
---------------------------------------
$1,866,661 $394,928
In January 2006, shareholders will receive Form 1099-DIV which will include
their share of qualified dividends distributed during the calendar year 2005.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
Under Section 854(b)(2) of the Code, the Fiduciary Large Capitalization Growth
and Income Fund designates 69.03% of the ordinary income dividends as income
qualifying for the dividends received deduction for the fiscal year ended July
31, 2005.
At July 31, 2005, 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. The fund elects to treat foreign taxes paid under Section 853 of
the Code. This election will allow shareholders of record in December 2005, 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 foreign tax information will be disclosed in the January 31, 2006,
semi-annual report of the fund.
54 | Annual Report
FRANKLIN GLOBAL TRUST
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Each board member will serve
until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 2000 141 Director, Bar-S Foods (meat
One Franklin Parkway packing company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2000 56 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS);
and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and
Chief Counsel, California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (1932) Trustee Since 2000 142 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2000 134 Director, Amerada Hess
One Franklin Parkway Corporation (exploration and
San Mateo, CA 94403-1906 refining of oil and gas), H.J.
Heinz Company (processed foods
and allied products), RTI
International Metals, Inc.
(manufacture and distribution of
titanium), Canadian National
Railway (railroad), and White
Mountains Insurance Group, Ltd.
(holding company).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 55
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 2000 115 Director, The California Center
One Franklin Parkway for Land Recycling
San Mateo, CA 94403-1906 (redevelopment).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (1928) Trustee Since 2000 141 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology), and
Overstock.com (Internet
services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known
as MCI WorldCom, Inc. and
WorldCom, Inc.) (communications
services) (1988-2002), White
Mountains Insurance Group, Ltd.
(holding com- pany) (1987-2004)
and Spacehab, Inc. (aerospace
services) (1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since June 2005 96 Director, White Mountains
One Franklin Parkway Insurance Group, Ltd. (holding
San Mateo, CA 94403-1906 company), Amerada Hess
Corporation (explo- ration and
refining of oil and gas) and
Sentient Jet (private jet
service); and FORMERLY,
Director, Becton Dickinson and
Company (medical technology),
Cooper Industries, Inc.
(electrical products and tools
and hardware), Health Net, Inc.
(formerly, Foundation Health)
(integrated man- aged care), The
Hertz Corporation, Pacific
Southwest Airlines, The RCA
Corporation, Unicom (formerly,
Commonwealth Edison) and UAL
Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
56 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (1945) Trustee and Since 2000 22 None
One Franklin Parkway Vice President
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 2000 141 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee, Trustee and 125 None
One Franklin Parkway President and President since
San Mateo, CA 94403-1906 Chief 2000 and Chief
Executive Executive Officer
Officer - - Investment
Investment Management
Management since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 48 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 32 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 57
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 48 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 48 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer
and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
EDWARD B. JAMIESON (1948) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; officer of other subsidiaries of Franklin Resources, Inc.;
and officer and trustee of four of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (1937) Vice President Since 2002 Not Applicable Not Applicable
600 Fifth Avenue - AML
Rockefeller Center Compliance
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; Director, FTI Banque, Arch Chemicals, Inc.
and Lingnan Foundation; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
58 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER J. MOLUMPHY (1962) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (1937) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 48 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Trust under the federal securities laws due to
their positions as officers and directors and major shareholders of
Franklin Resources, Inc. (Resources), which is the parent company of the
Trust's adviser and distributor. Harmon E. Burns is considered to be an
interested person of the Trust under the federal securities laws due to
his position as officer and director of Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE TRUST TO DISCLOSE WHETHER THE TRUST'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE TRUST'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE TRUST'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPALS AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE TRUST'S, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/845-4514 TO REQUEST THE SAI.
Annual Report | 59
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held February 28, 2005, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for each of seven separate funds comprising
Franklin Global Trust ("Fund(s)"). In approving the renewal of the Funds'
investment advisory contracts, the Board took into account information furnished
throughout the year at regular Board meetings, as well as information prepared
specifically in connection with the annual renewal review process. Information
furnished and discussed throughout the year included investment performance
reports and related financial information for each Fund, as well as periodic
reports on shareholder services, legal compliance, pricing, brokerage
commissions and execution and other services provided by the Investment Manager
("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for each Fund prepared by Lipper Financial Services
("Lipper"), an independent organization, as well as a Fund profitability
analysis report prepared by management. The Lipper reports compared each Fund's
investment performance and expenses with those of other mutual funds deemed
comparable to the Fund as selected by Lipper. The Fund profitability analysis
report discussed the profitability to Franklin Templeton Investments from its
overall U.S. fund operations, as well as on an individual fund-by-fund basis.
Included with such profitability analysis report was information on a
fund-by-fund basis listing portfolio managers and other accounts they manage, as
well as information on management fees charged by the Manager including
management's explanation of differences where relevant and a three-year expense
analysis with an explanation for any increase in expense ratios. Additional
information accompanying such report was a memorandum prepared by management
describing enhancements to the services provided to the Funds by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
advisory contracts for all Funds were approved at the same Board meeting, the
Board dealt with each Fund separately. In approving continuance of the
investment advisory contract for each Fund, the Board, including a majority of
independent Trustees, determined that the existing management fee structure was
fair and reasonable and that continuance of the investment advisory contract was
in the best interests of each Fund and its shareholders. While attention was
given to all information furnished, the following discusses the primary factors
relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Funds and their shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
each Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy of net asset
60 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
value calculations. The Board also noted the extent of benefits provided Fund
shareholders from being part of the Franklin Templeton family of funds,
including the right to exchange investments between the same class of funds
without a sales charge, the ability to reinvest Fund dividends into other funds
and the right to combine holdings in other funds to obtain a reduced sales
charge. Favorable consideration was given to management's efforts and
expenditures in establishing back-up systems and recovery procedures to function
in the event of a natural disaster, it being noted by the Board that such
systems and procedures had functioned smoothly during the hurricanes and
blackout experienced last year in Florida.
Other factors taken into account by the Board were the Manager's best execution
trading policies, including a favorable third-party report on portfolio
execution, as well as the compliance procedures and qualifications of the Chief
Compliance Officer established in accordance with recently adopted SEC
requirements. Consideration was also given to the experience of each Fund's
portfolio management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of a portfolio manager's bonus compensation was the
relative investment performance of the funds he or she managed so as to be
aligned with the interests of Fund shareholders. The Board also took into
account the transfer agent and shareholder services provided Fund shareholders
by an affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties such as Dalbar, and the firsthand
experience of the individual Trustees who deal with the shareholder services
department in their capacities as shareholders in one or more of the various
Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of each Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the contract
renewals. The Lipper report prepared for each individual Fund showed the
investment performance of the Fund in comparison to a performance universe
selected by Lipper. Comparative performance for each Fund was shown for the
one-year period ended December 31, 2004, and for additional periods ended that
date depending on when a particular Fund commenced operations. Investment
performance was shown on a total return basis for each Fund and on an income
return basis as well for the Fiduciary Core Fixed Income Fund, Fiduciary Core
Plus Fixed Income Fund and the Fiduciary High Income Fund. The following
summarizes the performance results for each of the Funds and the Board's view of
such performance.
FIDUCIARY EUROPEAN SMALLER COMPANIES FUND - The performance universe for this
Fund consisted of the Fund and all retail and institutional European region
funds as selected by Lipper. The Fund's existence covers a three-year period and
the Lipper report showed the Fund's total return to be in the upper half of such
performance universe for the one-year period and on an annualized basis to be in
the first or highest quintile of such universe for the two-year period, and the
second highest quintile of such universe for the three-year period. The Board
was satisfied with this Fund's performance.
Annual Report | 61
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
FIDUCIARY LARGE CAPITALIZATION GROWTH AND INCOME FUND - The performance universe
for this Fund consisted of the Fund and all retail and institutional large-cap
core funds as selected by Lipper. This Fund has been in existence for five full
years and the Lipper report showed the Fund's total return for the one-year
period to be in the first or highest quintile of such performance universe, and
on an annualized basis to be in the highest or second highest quintile for each
of the two-, three-, four-and five-year periods. The Board was satisfied with
this Fund's performance.
FIDUCIARY SMALL CAPITALIZATION EQUITY FUND - The performance universe for this
Fund consisted of the Fund and all retail and institutional small-cap growth
funds as selected by Lipper. The Lipper report showed this Fund's total return
for the one-year period to be in the fifth or lowest quintile of such
performance universe, and on an annualized basis to be in the fifth or lowest
quintile for the previous three-year period, the fourth or second lowest
quintile for the previous two- and four-year periods, and the third or middle
quintile of such performance universe for the five-year period. Management
presented reasons for such performance to the Board, as well as actions being
taken to improve such performance. The Board accepted such performance, noting
the Fund's annualized return for the two-year period exceeded 22% as shown in
the Lipper report, but intends to monitor the effectiveness of the actions being
taken by management.
COMPARATIVE EXPENSES. Consideration was given to the management fee and total
expense ratios of each Fund compared with those of a group of funds selected by
Lipper as its appropriate Lipper expense group. Prior to making such
comparisons, the Board relied upon a survey showing that the scope of management
advisory services covered under a Fund's investment advisory contract were
similar to those provided by fund managers to other mutual fund groups that
would be used as a basis of comparison in the Lipper reports. In reviewing
comparative costs, emphasis was given to each Fund's management fee in
comparison with the effective management fee that would have been charged by
other funds within its Lipper expense group assuming they were the same size as
the Fund, as well as the actual total expenses of the Fund in comparison with
those of its Lipper expense group. The Lipper effective management fee analysis
includes the advisory and administrative fees directly charged to each Fund as
being part of the management fee. The effective management fee ratios for each
of the Fiduciary European Smaller Companies Fund, Fiduciary Large Capitalization
Growth and Income Fund and Fiduciary Small Capitalization Equity Fund were the
most expensive within their Lipper expense groups, but in each case, their total
actual expenses were in the second lowest quintiles of their respective Lipper
expense group. The Board was satisfied with the comparative expenses of these
three Funds, noting that Fiduciary European Smaller Companies Fund which was the
smallest of the group, benefited from a management fee waiver as shown in the
Lipper report for such Fund.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
each Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its
62 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
affiliates might derive ancillary benefits from fund operations, including
potential benefits resulting from allocation of fund brokerage and the use of
"soft" commission dollars to pay for research. Specific attention was given to
the methodology followed in allocating costs to each Fund, it being recognized
that allocation methodologies are inherently subjective and various allocation
methodologies may each be reasonable while producing different results. In this
respect, the Board noted that the cost allocation methodology was consistent
with that followed in profitability report presentations for the Funds made in
prior years and that it had engaged on a biennial basis the Fund's independent
accountants to perform certain procedures specified by the Board solely for its
purpose and use. It was also noted that legal costs and payments incurred by
Franklin Templeton in resolving various legal proceedings arising from its U.S.
fund operations had not been allocated to the Funds for purposes of determining
profitability.
Included in the analysis for each Fund were the revenue and related costs broken
down separately from the management, underwriting and shareholder services
functions provided by the Manager and its affiliates to each Fund, as well as
the relative contribution of each Fund to the profitability of the Manager's
parent. In reviewing and discussing such analysis, management discussed with the
Board its belief that costs incurred in establishing the infrastructure
necessary to the type of mutual fund operations conducted by the Manager and its
corporate affiliates may not be fully reflected in the expenses allocated to
each Fund in determining its profitability, as well as the fact that the level
of profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. The Board also took into account
management's expenditures in improving shareholder services provided the Funds,
as well as the need to meet additional regulatory and compliance requirements
resulting from the Sarbanes-Oxley Act and recent SEC requirements. In addition,
the Board considered a third-party study comparing the profitability of the
Manager's parent on an overall basis as compared to other publicly held managers
broken down to show profitability from management operations exclusive of
distribution expenses, as well as profitability including distribution expenses.
Based upon their consideration of all these factors, the Board determined that
the level of profits realized by the Manager under its investment advisory
contract with each Fund was not excessive in view of the nature, quality and
extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Funds grow larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. Each of the Funds has a
fixed combined management and administrative fee at all asset levels amounting
to 0.95% in the case of Fiduciary Large Capitalization Growth and Income Fund
and 1.2% in the cases of Fiduciary European Smaller Companies Fund and the
Fiduciary Small Capitalization Equity Fund. In considering whether economies of
scale might exist so as to warrant fee breakpoints for these Funds, the Board
took into account the size of each
Annual Report | 63
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
Fund, as well as the fact that, as shown in their respective Lipper report, each
Fund had comparatively low expenses for non-management services provided them,
which included transfer agent and shareholder services furnished by an affiliate
of the Manager. The Board believes the present fee structures under the
investment advisory contract for each of these Funds is appropriate, but intends
to monitor future growth to determine the advisability of providing fee
breakpoints at some level of assets.
PROXY VOTING POLICIES AND PROCEDURES
The Trust has established Proxy Voting Policies and Procedures ("Policies") that
the Trust uses to determine how to vote proxies relating to portfolio
securities. Shareholders may view the Trust's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 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 Trust's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
64 | Annual Report
[LOGO]
-----
FGT
-----
FUNDS
-----
F G T F U N D S
----------
Fiduciary Large Capitalization Growth and Income Fund
Cusip 353533870
Fiduciary Small Capitalization Equity Fund
Cusip 353533862
Fiduciary European Smaller Companies Fund
Cusip 353533854
Authorized for distribution only when accompanied or preceded by a current FGT
Funds prospectus. Investors should carefully consider a fund's investment goals,
risks, charges and expenses before investing.The prospectus contains this and
other information. Please carefully read the prospectus before you invest or
send money.
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 Fiduciary
-----------------
INVESTOR/SHAREHOLDER SERVICES Trust
-----------------
1-800/845-4514 International
-----------------
FGT1 A2005 09/05
-----------------
ANNUAL REPORT | 07 31 2005
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THE EXPERTISE OF MANY. THE STRENGTH OF ONE.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
FRANKLIN GLOBAL TRUST
----------------------------------------
Fiduciary Core Fixed Income Fund
Fiduciary Core Plus Fixed Income Fund
[LOGO](R)
FRANKLIN TEMPLETON
INSTITUTIONAL
FRANKLIN o TEMPLETON o FIDUCIARY
Contents
ANNUAL REPORT
- --------------------------------------------------------------------------------
Fiduciary Core Fixed Income Fund ........................................ 2
Fiduciary Core Plus Fixed Income Fund ................................... 9
Financial Highlights and Statements of Investments ...................... 17
Financial Statements .................................................... 29
Notes to Financial Statements ........................................... 32
Report of Independent Registered Public Accounting Firm ................. 42
Tax Designation ......................................................... 43
Board Members and Officers .............................................. 44
Shareholder Information ................................................. 49
-----------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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Annual Report | 1
ANNUAL 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.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
- --------------------------------------------------------------------------------
We are pleased to bring you the Fiduciary Core Fixed Income Fund (the "Fund")
annual report covering the 12-month period ended July 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 5.13% cumulative total return for the period ended July 31,
2005. The Fund outperformed its benchmark, the Lehman Brothers U.S. Aggregate
Index (Lehman Aggregate)(1), which returned 4.80% during the same period. You
can find the Fund's long-term performance data in the Performance Summary
beginning on page 5.
ECONOMIC AND MARKET OVERVIEW
Over the past 12 months, the Federal Reserve raised short-term interest rates 2%
from 1.25% to 3.25% amid continued growth in the U.S. economy and an improving
employment picture. During the second quarter of 2005, inflation-adjusted gross
domestic product, the most comprehensive measure of economic activity, increased
3.4% after increasing 3.8% in the first quarter(2). The fixed income market was
highly focused on the employment picture. Non-farm payroll numbers showed
considerable volatility, as better than expected labor market figures tended to
be followed by disappointing figures. Nevertheless, there was a clear trend
towards growth. For example, total non-farm employment rose by 126,000, 166,000,
and 207,000 in May, June, and July, respectively(3).
(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.
(2) Bureau of Economic Analysis.
(3) 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 18.
2 | Annual Report
Despite these headwinds, the bond market showed unexpected strength with
positive returns in most sectors. Mortgages and corporate bonds outperformed the
general bond market. Mortgage-backed securities tend to perform well in less
volatile markets. Over the reporting period, mortgage-backed securities
benefited from the relatively stable interest rate environment. The 10-year U.S.
Treasury ended the period with a yield of 4.28%, which is approximately 30 basis
points less than it yielded a year prior. More significant was the flattening of
the yield curve, as the tightening of monetary policy by the Federal Reserve was
a major factor causing interest rates to rise in the front end of the yield
curve. The yield on the 2-year U.S. Treasury rose 1.26% over the period to
4.01%. This contrasted with the long end of the yield curve, where the yield on
the 30-year U.S. Treasury fell 82 basis points to 4.47%.
Despite high energy prices and oil reaching record highs of more than $60 a
barrel, inflation was relatively benign over the period. On a seasonally
adjusted basis, the Consumer Price Index (CPI), a measure of inflation, rose
1.9% for the second quarter of 2005, while the CPI excluding the more volatile
food and energy components rose only 1.2%(4). Expected inflation is a key
determinant of interest rates, and this environment contributed to the strength
in the bond market.
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
During the year under review, our commitment to the Fund's investment strategy
helped provide attractive returns. We remained diligent in executing our
strategy to uncover value across the Fund's opportunity set. We held a
significant portion of the Fund's portfolio in the corporate debt sectors, which
benefited from tightening credit spreads. Strong fundamentals, such as generally
robust corporate earnings, and solid technical factors, including strong foreign
support, and a general demand for yield, also supported the performance of
corporate bonds.
(4) Bureau of Labor Statistics
INDUSTRY BREAKDOWN
Fiduciary Core Fixed Income Fund
Based on Total Net Assets as of 7/31/05*
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Mortgage-Backed Securities 33.3%
U.S. Government and Agency Securities 18.6%
Diversified Financial Services 13.4%
Consumer Finance 4.7%
Municipal Bond Securities 4.5%
Commercial Banks 4.2%
Capital Markets 4.1%
Oil, Gas & Consumable Fuels 3.6%
Diversified Telecommunication Services 3.0%
Communications Equipment 2.2%
Electric Utilities 2.2%
Media 2.0%
Thrifts & Mortgage Finance 1.9%
Foreign Government and Agency Securities 1.3%
Other 5.1%
Short-Term Investments 28.3%
*Other net assets is -32.4% due to liabilities for forward settlements.
Annual Report | 3
TOP 10 HOLDINGS
Fiduciary Core Fixed Income Fund
As of 7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
FNMA 33.6%
MORTGAGE-BACKED SECURITIES/FINANCE
- --------------------------------------------------------------------------------
U.S. Treasury Notes 11.9%
U.S. GOVERNMENT AND AGENCY SECURITIES
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 6.7%
U.S. GOVERNMENT AND AGENCY SECURITIES
- --------------------------------------------------------------------------------
SLM Student Loan Trust 6.5%
DIVERSIFIED FINANCIAL SERVICES
- --------------------------------------------------------------------------------
Core Investment Grade Bond Trust I 3.0%
DIVERSIFIED FINANCIAL SERVICES
- --------------------------------------------------------------------------------
American Express Credit Account
Master Trust 2.6%
DIVERSIFIED FINANCIAL SERVICES
- --------------------------------------------------------------------------------
Centaur Funding Corp. 2.2%
COMMUNICATIONS EQUIPMENT
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust 2.2%
COMMERCIAL BANKS
- --------------------------------------------------------------------------------
Chase Issuance Trust 2.1%
CONSUMER FINANCE
- --------------------------------------------------------------------------------
BNP Paribas 2.0%
COMMERCIAL BANKS
- --------------------------------------------------------------------------------
Our expectation that the yield curve would flatten was rewarded as short- and
intermediate-term yields rose, while longer-term yields fell. The long end of
the yield curve benefited from technical factors including a risk reduction by
pension plans that resulted in significant demand for long dated bonds. The
Fund's duration positioning remained relatively stable during the reporting
period. The Fund's duration was generally less than that of the benchmark as we
had expected higher interest rates. This detracted from performance as interest
rates fell in the 10-year portion of the yield curve and beyond during the
reporting period.
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/ 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 JULY 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 | Annual Report
PERFORMANCE SUMMARY AS OF 7/31/05
FIDUCIARY CORE FIXED INCOME FUND
The performance table and graph 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 Fund dividends and capital gain
distributions, if any, and any unrealized gains or losses.
PERFORMANCE(1)
- --------------------------------------------------------------------------------
AVERAGE CUMULATIVE
ANNUAL TOTAL
TOTAL RETURN RETURN
1-YEAR (8/29/03)(2) (8/29/03)(3)
- --------------------------------------------------------------------------------
FIDUCIARY CORE FIXED INCOME FUND 5.13% 4.73% 9.29%
- --------------------------------------------------------------------------------
LEHMAN BROTHERS U.S. AGGREGATE INDEX(4) 4.80% 4.68% 9.20%
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
Annual Report | 5
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,000 in the
Fiduciary Core Fixed Income Fund from inception on 8/29/03 through 7/31/05,
compared with the Lehman Brothers U.S. Aggregate Index.(4) Total return
represents the change in value of an investment over the periods shown. It
includes Fund expenses, account fees, and reinvested dividends. The unmanaged
index includes reinvestment of any income or distributions. It differs from the
Fund in composition and does not pay management fees or expenses. One cannot
invest directly in an index.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
FIDUCIARY CORE FIXED INCOME FUND
GROWTH OF A $10,000 INVESTMENT
FROM INCEPTION: AUGUST 29, 2003 - JULY 31, 2005
Fiduciary Core Fixed LB U.S.
Income Fund Aggregate Index
- --------------------------------------------------------
8/29/2003 $10,000 $10,000
8/31/2003 $10,000 $10,004
9/30/2003 $10,260 $10,269
10/31/2003 $10,200 $10,173
11/30/2003 $10,250 $10,198
12/31/2003 $10,346 $10,301
1/31/2004 $10,427 $10,384
2/29/2004 $10,517 $10,497
3/31/2004 $10,609 $10,575
4/30/2004 $10,305 $10,300
5/31/2004 $10,254 $10,259
6/30/2004 $10,315 $10,317
7/31/2004 $10,397 $10,419
8/31/2004 $10,563 $10,618
9/30/2004 $10,604 $10,647
10/31/2004 $10,678 $10,736
11/30/2004 $10,625 $10,650
12/31/2004 $10,723 $10,748
1/31/2005 $10,787 $10,816
2/28/2005 $10,744 $10,752
3/31/2005 $10,690 $10,697
4/30/2005 $10,841 $10,842
5/31/2005 $10,939 $10,959
6/30/2005 $10,993 $11,019
7/31/2005 $10,929 $10,918
ENDNOTES
(1) For periods prior to July 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 July 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.
6 | Annual 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 A TOTAL ASSET VALUE OF $8,600, 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 expenses paid for 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% semiannual rate of return before expenses, which does not represent
the Fund's actual return. The figure under the heading "Expenses Paid During
Period" shows the hypothetical expenses your account would have incurred under
this scenario. You can compare this figure with the 5% hypothetical examples
that appear in shareholder reports of other funds.
Annual Report | 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's
prospectus for additional information on operating expenses.
- ------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,013.20 $2.25
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.56 $2.26
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 0.45%, net of
expense waivers, multiplied by the average account value over the period,
multiplied by 181/365 to reflect the one-half year period.
8 | Annual 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.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
- --------------------------------------------------------------------------------
We are pleased to bring you the Fiduciary Core Plus Fixed Income Fund (the
"Fund") annual report covering the 12-month period ended July 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 5.80% total return for the period ended July 31, 2005. The
Fund outperformed its benchmark, the Lehman Brothers U.S. Aggregate Index
(Lehman Aggregate)(1), which returned 4.80% during the same period. You can find
the Fund's long-term performance data in the Performance Summary beginning on
page 13.
ECONOMIC AND MARKET OVERVIEW
Over the past 12 months, the Federal Reserve raised short-term interest rates 2%
from 1.25% to 3.25% amid continued growth in the U.S. economy and an improving
employment picture. During the second quarter of 2005, inflation-adjusted gross
domestic product, the most comprehensive measure of economic activity, increased
3.4% after increasing 3.8% in the first quarter(2). The fixed income market was
highly focused on the employment picture. Non-farm payroll numbers showed
considerable volatility, as better than expected labor market figures tended to
be followed by disappointing figures. Nevertheless, there was a clear trend
towards growth. For example, total non-farm employment rose by 126,000, 166,000,
and 207,000 in May, June, and July, respectively(3).
(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.
(2) Bureau of Economic Analysis.
(3) 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 23.
Annual Report | 9
Despite these headwinds, the bond market showed unexpected strength with
positive returns in most sectors. Mortgages and corporate bonds outperformed the
general bond market. Mortgage-backed securities tend to perform well in less
volatile markets. Over the reporting period, mortgage-backed securities
benefited from the relatively stable interest rate environment. The 10-year U.S.
Treasury ended the period with a yield of 4.28%, which is approximately 30 basis
points less than it yielded a year prior. More significant was the flattening of
the yield curve, as the tightening of monetary policy by the Federal Reserve was
a major factor causing interest rates to rise in the front end of the yield
curve. The yield on the 2-year U.S. Treasury rose 1.26% over the period to
4.01%. This contrasted with the long end of the yield curve, where the yield on
the 30-year U.S. Treasury fell 82 basis points to 4.47%.
Despite high energy prices and oil reaching record highs of more than $60 a
barrel, inflation was relatively benign over the period. On a seasonally
adjusted basis, the Consumer Price Index (CPI), a measure of inflation, rose
1.9% for the second quarter of 2005, while the CPI excluding the more volatile
food and energy components rose only 1.2%(4). Expected inflation is a key
determinant of interest rates, and this environment contributed to the strength
in the bond market.
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.
(4) Bureau of Labor Statistics.
10 | Annual Report
MANAGER'S DISCUSSION
During the year under review, our commitment to the Fund's investment strategy
helped provide attractive returns. We remained diligent in executing our
strategy to uncover value across the entire fixed income opportunity set. We
held a significant portion of the Fund's portfolio in the corporate debt
sectors, including a modest exposure in below investment grade corporate bonds
which benefited from tightening credit spreads. Strong fundamentals, such as
generally robust corporate earnings, and solid technical factors, including
strong foreign support, low issuance and a general demand for yield, also
supported the performance of corporate bonds.
In line with the Fund's strategy, we continued to invest in the non-dollar bond
sector to add incremental risk, as we believed appropriate. This added to
returns as foreign yields fell. This was largely due to disappointing economic
indicators in Japan and Europe. Our decision to leave much of our currency
exposure unhedged did not significantly impact the Fund's performance, as the
dollar weakened for much of the first half of the reporting period and
subsequently strengthened. The rejection of the European Union constitution
caused some concern over the future of Europe and exerted heavy downward
pressure on the euro during the second quarter.
Our expectation that the yield curve would flatten was rewarded as short- and
intermediate-term yields rose, while longer-term yields fell. The long end of
the yield curve benefited from technical factors including a risk reduction by
pension plans that resulted in significant demand for long dated bonds. The
Fund's duration positioning remained relatively stable during the reporting
period. The Fund's duration was generally less than that of the benchmark as we
had expected higher interest rates. This detracted from performance as interest
rates fell in the 10-year portion of the yield curve and beyond during the
reporting period.
INDUSTRY BREAKDOWN
Fiduciary Core Plus Fixed Income Fund
Based on Total Net Assets as of 7/31/05*
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Mortgage-Backed Securities 32.6%
Diversified Financial Services 21.2%
Foreign Government and Agency Securities 10.4%
Capital Markets 8.4%
U.S. Government and Agency Securities 7.6%
Commercial Banks 4.8%
Media 3.7%
Communications Equipment 3.2%
Consumer Finance 3.1%
Thrifts & Mortgage Finance 2.8%
Diversified Telecommunication Services 2.5%
Electric Utilities 2.4%
Airlines 1.8%
Oil, Gas & Consumable Fuels 1.7%
Commercial Services & Supplies 1.4%
Metals & Mining 1.2%
Other 4.5%
Short-Term Investments 18.4%
*Other net assets is -31.7% due to liabilities for forward settlements.
Annual Report | 11
TOP 10 HOLDINGS
Fiduciary Core Plus Fixed Income Fund
As of 7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
FNMA 33.2%
MORTGAGE-BACKED SECURITIES/FINANCE
- --------------------------------------------------------------------------------
SLM Student Loan Trust 12.8%
DIVERSIFIED FINANCIAL SERVICES
- --------------------------------------------------------------------------------
U.S. Treasury Notes 6.5%
U.S. GOVERNMENT AND AGENCY SECURITIES
- --------------------------------------------------------------------------------
Government of Germany 5.4%
FOREIGN GOVERNMENT AND AGENCY SECURITIES
- --------------------------------------------------------------------------------
General Electric Capital Corp. 5.0%
CAPITAL MARKETS
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust 2.8%
COMMERCIAL BANKS
- --------------------------------------------------------------------------------
Fleet Credit Card Master Trust 2.5%
DIVERSIFIED FINANCIAL SERVICES
- --------------------------------------------------------------------------------
Granite Master Issuer PLC 2.4%
CAPITAL MARKETS
- --------------------------------------------------------------------------------
American Express Credit Account
Master Trust 2.4%
DIVERSIFIED FINANCIAL SERVICES
- --------------------------------------------------------------------------------
Government of Russia 2.2%
FOREIGN GOVERNMENT AND AGENCY SECURITIES
- --------------------------------------------------------------------------------
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/ 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 JULY 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 | Annual Report
PERFORMANCE SUMMARY AS OF 7/31/05
FIDUCIARY CORE PLUS FIXED INCOME FUND
The performance table and graph 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 Fund dividends and capital gain
distributions, if any, and any unrealized gains or losses.
PERFORMANCE(1)
- --------------------------------------------------------------------------------
AVERAGE CUMULATIVE
ANNUAL TOTAL
TOTAL RETURN RETURN
1-YEAR (8/4/03)(2) (8/4/03)(3)
- --------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND 5.80% 6.41% 13.17%
- --------------------------------------------------------------------------------
LEHMAN BROTHERS U.S. AGGREGATE INDEX(4) 4.80% 4.80% 9.78%
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
Annual Report | 13
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,000 in the
Fiduciary Core Plus Fixed Income Fund from inception on 8/4/03 through 7/31/05,
compared with the Lehman Brothers U.S. Aggregate Index.(4) Total return
represents the change in value of an investment over the periods shown. It
includes Fund expenses, account fees, and reinvested dividends. The unmanaged
index includes reinvestment of any income or distributions. It differs from the
Fund in composition and does not pay management fees or expenses. One cannot
invest directly in an index.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
FIDUCIARY CORE PLUS FIXED INCOME FUND
GROWTH OF A $10,000 INVESTMENT
FROM INCEPTION: AUGUST 4, 2003 - JULY 31, 2005
LB U.S.
Fiduciary Core Plus Aggregate
Fixed Income Fund Index
- ---------------------------------------------------------
8/4/2003 $10,000 $10,000
8/31/2003 $10,040 $10,058
9/30/2003 $10,360 $10,324
10/31/2003 $10,300 $10,228
11/30/2003 $10,320 $10,252
12/31/2003 $10,532 $10,357
1/31/2004 $10,614 $10,440
2/29/2004 $10,696 $10,553
3/31/2004 $10,779 $10,632
4/30/2004 $10,602 $10,355
5/31/2004 $10,560 $10,314
6/30/2004 $10,591 $10,372
7/31/2004 $10,696 $10,475
8/31/2004 $10,862 $10,675
9/30/2004 $10,914 $10,704
10/31/2004 $10,994 $10,794
11/30/2004 $10,952 $10,707
12/31/2004 $11,072 $10,806
1/31/2005 $11,135 $10,874
2/28/2005 $11,103 $10,810
3/31/2005 $11,019 $10,754
4/30/2005 $11,160 $10,900
5/31/2005 $11,256 $11,018
6/30/2005 $11,352 $11,078
7/31/2005 $11,317 $10,977
ENDNOTES
(1) For periods prior to July 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 July 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.
14 | Annual Report
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 A TOTAL ASSET VALUE OF $8,600, 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 expenses paid for 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% semiannual rate of return before expenses, which does not represent
the Fund's actual return. The figure under the heading "Expenses Paid During
Period" shows the hypothetical expenses your account would have incurred under
this scenario. You can compare this figure with the 5% hypothetical examples
that appear in shareholder reports of other funds.
Annual Report | 15
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's
prospectus for additional information on operating expenses.
- ------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- ------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,016.30 $2.15
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.66 $2.16
- ------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 0.43%, net of
expense waivers, multiplied by the average account value over the period,
multiplied by 181/365 to reflect the one-half year period.
16 | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTS
FIDUCIARY CORE FIXED INCOME FUND
-----------------------
YEAR ENDED JULY 31,
2005 2004(d)
-----------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................................... $ 9.97 $ 10.00
--------------------
Income from investment operations:
Net investment income(a) ................................................. 0.32 0.26
Net realized and unrealized gains (losses) ............................... 0.19 0.13
--------------------
Total from investment operations ........................................... 0.51 0.39
--------------------
Less distributions from:
Net investment income .................................................... (0.45) (0.39)
Net realized gains ....................................................... (0.03) (0.03)
--------------------
Total distributions ........................................................ (0.48) (0.42)
--------------------
Net asset value, end of year ............................................... $ 10.00 $ 9.97
====================
Total return(b) ............................................................ 5.13% 3.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................................ $ 26,720 $ 17,543
Ratios to average net assets:
Expenses ................................................................. 0.72% 0.99%(e)
Expenses net of waiver and payments by affiliate and expense reduction.... 0.45% 0.45%(e)
Net investment income .................................................... 3.19% 2.76%(e)
Portfolio turnover rate .................................................... 473.05% 459.82%
Portfolio turnover rate excluding mortgage dollar rolls(c) ................. 254.13% 259.85%
(a) Based on average daily shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) See Note 1(e) regarding mortgage dollar rolls.
(d) For the period August 29, 2003 (commencement of operations) to July 31,
2004.
(e) Annualized.
Annual Report | See notes to financial statements. | 17
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 23.3%
AEROSPACE & DEFENSE 0.4%
BF Goodrich, 6.80%, 2/01/18 .............................................. United States $ 100,000 $ 112,070
------------
AIRLINES 0.6%
Delta Air Lines Inc., senior note, 6.718%, 7/02/24 ....................... United States 166,152 170,811
------------
CAPITAL MARKETS 2.3%
(a)General Electric Capital Corp., FRN, 3.39%, 3/04/08 ...................... United States 345,000 345,255
Goldman Sachs Group Inc., 5.125%, 1/15/15 ................................ United States 260,000 260,923
------------
606,178
------------
COMMERCIAL BANKS 2.0%
(b)BNP Paribas, sub. note, 144A, 5.186%, Perpetual .......................... France 545,000 541,931
------------
COMMERCIAL SERVICES & SUPPLIES 0.9%
(b)R. R. Donnelley & Sons Co., 144A, 5.50%, 5/15/15 ......................... United States 255,000 253,744
------------
CONSUMER FINANCE 1.2%
Ford Motor Credit Co., 5.70%, 1/15/10 .................................... United States 50,000 47,167
(b)Residential Capital Corp., 144A, 6.375%, 6/30/10 ......................... United States 265,000 269,540
------------
316,707
------------
DIVERSIFIED FINANCIAL SERVICES 3.4%
Core Investment Grade Bond Trust I, Pass-Through Certificates, 4.637%,
11/30/07 .............................................................. United States 797,471 796,080
HSBC Capital Funding LP, 4.61%, Perpetual ................................ Jersey Islands 110,000 106,095
------------
902,175
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 3.0%
Ameritech Capital Funding Corp., 6.25%, 5/18/09 .......................... United States 250,000 262,019
Hutchison Whampoa International Ltd., senior note, Reg S, 6.50%,
2/13/13 ............................................................... Hong Kong 250,000 267,625
Sprint Capital Corp., 6.90%, 5/01/19 ..................................... United States 240,000 272,356
------------
802,000
------------
ELECTRIC UTILITIES 2.2%
Consumers Energy Co., C, 4.25%, 4/15/08 .................................. United States 270,000 267,179
Exelon Corp., 4.90%, 6/15/15 ............................................. United States 260,000 255,616
(b)System Energy Resources Inc., 144A, 5.129%, 1/15/14 ...................... United States 53,934 52,930
------------
575,725
------------
INTERNET & CATALOG RETAIL 1.0%
Interactive Corp., 7.00%, 1/15/13 ........................................ United States 265,000 278,597
------------
MACHINERY 0.2%
Harsco Corp., senior note, 5.125%, 9/15/13 ............................... United States 40,000 40,288
------------
MEDIA 2.0%
Cox Communications Inc., 7.125%, 10/01/12 ................................ United States 235,000 260,021
TCI Communications Inc., senior note, 8.75%, 8/01/15 ..................... United States 210,000 264,626
------------
524,647
------------
18 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
METALS & MINING 1.0%
(b)Glencore Funding LLC, 144A, 6.00%, 4/15/14 ............................... Switzerland $ 130,000 $ 124,785
Glencore Funding LLC, Reg. S, 6.00%, 4/15/14 ............................. Switzerland 140,000 134,384
------------
259,169
------------
OIL, GAS & CONSUMABLE FUELS 2.1%
(b)Enterprise Products Operating LP, senior note, 144A, 5.75%, 3/01/35 ..... United States 165,000 157,412
(b)Petroleum Export Cayman, senior note, 144A, 5.265%, 6/15/11 .............. United States 410,000 409,303
------------
566,715
------------
REAL ESTATE 1.0%
(b)Simon Property Group LP, 144A, 5.10%, 6/15/15 ............................ United States 280,000 276,053
------------
TOTAL CORPORATE BONDS (COST $6,243,072) ................................. 6,226,810
------------
MORTGAGE-BACKED SECURITIES 33.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMa)FIXED RATE 32.2%
(d)FNMA 30 Year, 5.50%, 8/01/35 ............................................ United States 5,501,000 5,530,221
(d)FNMA 30 Year, 6.00%, 8/15/32 ............................................. United States 2,595,000 2,651,766
(d)FNMA 30 Year, 6.50%, 8/15/34 ............................................. United States 399,000 412,840
------------
8,594,827
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMa)FIXED RATE 1.1%
(d)GNMA I SF 30 Year, 6.00%, 4/20/34 - 8/01/35 .............................. United States 292,732 300,871
------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $8,930,730) ....................... 8,895,698
------------
ASSET-BACKED SECURITIES 19.5%
CAPITAL MARKETS 1.8%
(a)Granite Master Issuer PLC, 2005-2, A1, FRN, 3.47%, 6/20/30 ............... United States 490,000 490,000
------------
COMMERCIAL BANKS 2.2%
(a)Citibank Credit Card Issuance Trust, 2003-A9, A9, FRN, 3.36%, 11/22/10 ... United States 575,000 576,263
------------
CONSUMER FINANCE 2.1%
(a)Chase Issuance Trust, 2005-A1, A1, FRN, 3.398%, 12/15/10 ................. United States 571,000 572,021
------------
DIVERSIFIED FINANCIAL SERVICES 10.0%
(a)American Express Credit Account Master Trust, 2003-3, A, FRN, 3.498%,
11/15/10 .............................................................. United States 700,000 702,021
(a)Permanent Financing PLC, 7, 2A, FRN, 3.419%, 9/10/14 ..................... United States 250,000 249,453
(a)SLM Student Loan Trust, 2004-2, A2, FRN, 3.67%, 4/25/13 .................. United States 940,000 940,505
(a)SLM Student Loan Trust, 2004-9, A2, FRN, 3.67%, 10/25/12 ................. United States 225,000 224,900
(a)SLM Student Loan Trust, 2005-2, A1, FRN, 3.63%, 4/25/10 .................. United States 271,125 271,091
(a)SLM Student Loan Trust, 2005-4, A1, FRN, 3.66%, 10/26/15 ................. United States 293,260 293,193
------------
2,681,163
------------
Annual Report | 19
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (CONT.)
OIL, GAS & CONSUMABLE FUELS 1.5%
(b)Gazprom International SA, 144A, 7.201%, 2/01/20 .......................... Russia $ 55,000 $ 59,089
Gazprom International SA, Reg S, 7.201%, 2/01/20 ......................... Russia 320,000 344,400
------------
403,489
------------
THRIFTS & MORTGAGE FINANCE 1.9%
(a)Bear Stearns Adjustable Rate Mortgage Trust, 2004-4, A1B, FRN,
3.515%, 6/25/34 ....................................................... United States 74,796 74,778
(a)Countrywide Asset-Backed Certificates, 2004-6, 2A1, FRN, 3.65%,
10/25/21 .............................................................. United States 44,593 44,624
(a),(b)Countrywide Asset-Backed Certificates, 2004-SD3, A1, 144A, FRN,
3.91%, 9/25/34 ........................................................ United States 81,987 82,244
CS First Boston Mortgage Securities Corp., 2004-1, 5A1, 5.50%, 2/25/19 ... United States 43,897 44,068
Washington Mutual Inc., 2004-AR2, A, 3.904%, 4/25/44 ..................... United States 251,379 254,183
------------
499,897
------------
TOTAL ASSET-BACKED SECURITIES (COST $5,208,071) .......................... 5,222,833
------------
U.S. GOVERNMENT AND AGENCY SECURITIES 18.6%
U.S. Treasury Bond, 7.25%, 8/15/22 ....................................... United States 684,000 901,865
U.S. Treasury Bond, 5.375%, 2/15/31 ...................................... United States 771,000 876,350
U.S. Treasury Note, 6.00%, 8/15/09 ....................................... United States 2,080,000 2,224,138
U.S. Treasury Note, 4.00%, 2/15/15 ....................................... United States 490,000 478,918
(e)U.S. Treasury Note, Index Linked, 1.625%, 1/15/15 ........................ United States 491,757 480,961
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $4,996,767) ........... 4,962,232
------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $303,586) 1.3%
Government of Russia, Reg S, 12.75%, 6/24/28 ............................. Russia 189,000 339,964
------------
MUNICIPAL BONDS 4.5%
South Carolina State, 5.00%, 8/01/12 ..................................... United States 440,000 483,208
Tobacco Settlement Financing Corp. Revenue, 6.375%, 6/01/32 .............. United States 200,000 233,102
Virginia State Public Building Authority Public Facilities Revenue,
5.00%, 8/01/12 ........................................................ United States 440,000 481,492
------------
TOTAL MUNICIPAL BONDS (COST $1,155,228) ................................. 1,197,802
------------
----------
SHARES
----------
PREFERRED STOCKS 3.6%
COMMUNICATIONS EQUIPMENT 2.2%
(b)Centaur Funding Corp., 9.08%, pfd., B, 144A .............................. United States 448 592,340
------------
CONSUMER FINANCE 1.4%
Fannie Mae, 7.185%, pfd .................................................. United States 6,968 387,560
------------
TOTAL PREFERRED STOCKS (COST $959,028) ................................... 979,900
------------
TOTAL LONG TERM INVESTMENTS (COST $27,796,482) ........................... 27,825,239
------------
20 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 28.3%
U.S. GOVERNMENT AND AGENCY SECURITIES (COST $2,792,417) 10.5%
(f)FNMA, 8/31/05 ............................................................ United States $2,800,000 $ 2,792,406
------------
TOTAL INVESTMENTS BEFORE MONEY FUND (COST $30,588,899) ................... 30,617,645
------------
----------
SHARES
----------
MONEY FUND (COST $4,747,582) 17.8%
(g)Franklin Institutional Fiduciary Trust Money Market Portfolio ............ United States 4,747,582 4,747,582
------------
TOTAL INVESTMENTS (COST $35,336,481) 132.4% .............................. 35,365,227
OTHER ASSETS, LESS LIABILITIES (32.4)% .................................. (8,645,177)
------------
NET ASSETS 100.0% ....................................................... $ 26,720,050
============
See Selected Portfolio Abbreviations on page 28.
(a) The coupon rate shown represents the rate at period end.
(b) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. These securities have been deemed liquid under
guidelines approved by the Trust's Board of Trustees.
(c) The principal amount is stated in U.S. dollars unless otherwise indicated.
(d) See Note 1(c) regarding securities purchased on a to-be-announced basis.
(e) Principal amount of security is adjusted for inflation. See Note 1(g).
(f) The security is traded on a discount basis with no stated coupon rate.
(g) See Note 7 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 21
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTS
FIDUCIARY CORE PLUS FIXED INCOME FUND
---------------------------
YEAR ENDED JULY 31,
2005 2004(d)
---------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................................... $ 10.32 $ 10.00
------------------------
Income from investment operations:
Net investment income(a) ................................................. 0.36 0.28(e)
Net realized and unrealized gains (losses) ............................... 0.23 0.41(e)
------------------------
Total from investment operations ............................................ 0.59 0.69
------------------------
Less distributions from:
Net investment income .................................................... (0.45) (0.30)
Net realized gains ....................................................... -- (0.07)
------------------------
Total distributions ......................................................... (0.45) (0.37)
------------------------
Net asset value, end of year ................................................ $ 10.46 $ 10.32
========================
Total return(b) ............................................................. 5.80% 6.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................................. $ 96,823 $ 54,132
Ratios to average net assets:
Expenses ................................................................. 0.58% 0.84%(f)
Expenses net of waiver and payments by affiliate and expense reduction ... 0.43% 0.43%(f)
Net investment income .................................................... 3.44% 2.76%(f)
Portfolio turnover rate ..................................................... 465.89% 426.29%
Portfolio turnover rate excluding mortgage dollar rolls(c) .................. 244.29% 222.53%
(a) Based on average daily shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) See Note 1(e) regarding mortgage dollar rolls.
(d) For the period August 4, 2003 (commencement of operations) to July 31,
2004.
(e) 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.
(f) Annualized.
22 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 29.3%
AEROSPACE & DEFENSE 0.1%
(a)L-3 Communications Corp., senior sub. note, 144A, 6.375%, 10/15/15 ...... United States 105,000 $ 106,838
-------------
AIRLINES 1.2%
(b)Continental Airlines Inc., FRN, 4.25%, 12/06/07 ......................... United States 1,120,000 1,124,589
-------------
CAPITAL MARKETS 6.0%
Aries Vermogen, Reg S, 9.60%, 10/25/14 .................................. Russia 750,000 963,225
General Electric Capital Corp., 1.40%, 11/02/06 ......................... United States 294,000,000 JPY 2,659,689
(b)General Electric Capital Corp., FRN, 3.56%, 9/18/06 ..................... United States 120,000 120,215
(b)General Electric Capital Corp., FRN, 3.39%, 3/04/08 ..................... United States 2,040,000 2,041,507
-------------
5,784,636
-------------
CHEMICALS 0.2%
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13 ............. United States 166,000 192,560
-------------
COMMERCIAL BANKS 2.0%
(a)BNP Paribas, sub. note, 144A, 5.186%, Perpetual ......................... France 1,955,000 1,943,989
-------------
COMMERCIAL SERVICES & SUPPLIES 1.4%
Allied Waste North America Inc., senior secured note, 6.50%, 11/15/10 ... United States 230,000 227,987
Corrections Corp. of America, senior note, 7.50%, 5/01/11 ............... United States 215,000 224,138
(a)R. R. Donnelley & Sons Co., 144A, 5.50%, 5/15/15 ........................ United States 900,000 895,566
-------------
1,347,691
-------------
COMMUNICATIONS EQUIPMENT 1.2%
Panamsat Corp., senior note, 9.00%, 8/15/14 ............................. United States 200,000 222,000
Telecom Italia Capital, 6.375%, 11/15/33 ................................ Luxembourg 885,000 945,064
-------------
1,167,064
-------------
CONSUMER FINANCE 1.0%
Ford Motor Credit Co., 5.70%, 1/15/10 .................................. United States 225,000 212,253
Ford Motor Credit Co., 7.875%, 6/15/10 .................................. United States 235,000 237,425
General Motors Acceptance Corp., 7.00%, 2/01/12 ......................... United States 510,000 490,706
-------------
940,384
-------------
DIVERSIFIED FINANCIAL SERVICES 2.0%
Core Investment Grade Bond Trust I, Pass-Through Certificates, 4.637%,
11/30/07 ............................................................. United States 1,226,668 1,224,527
HSBC Capital Funding LP, 4.61%, Perpetual ............................... Jersey Islands 735,000 708,910
-------------
1,933,437
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.5%
Hutchison Whampoa International Ltd., senior note, Reg S, 6.50%,
2/13/13 .............................................................. Hong Kong 900,000 963,450
Qwest Corp., senior note, 7.875%, 9/01/11 .............................. United States 450,000 471,375
Sprint Capital Corp., 6.90%, 5/01/19 .................................... United States 860,000 975,943
-------------
2,410,768
-------------
Annual Report | 23
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
ELECTRIC UTILITIES 2.4%
Consumers Energy Co., C, 4.25%, 4/15/08 ................................. United States 940,000 $ 930,179
Elektrownia Turow BV, 9.75%, 3/14/11 .................................... Netherlands 345,000 EUR 462,197
Exelon Corp., 4.90%, 6/15/15 ............................................ United States 935,000 919,236
-------------
2,311,612
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 0.3%
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13 ........ Singapore 330,000 341,550
-------------
ENERGY EQUIPMENT & SERVICES 0.2%
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11 ...... United States 185,000 198,413
-------------
FOOD & STAPLES RETAILING 0.3%
(a)Central European Distribution Corp., 144A, 8.00%, 7/25/12 ............... United States 215,000 EUR 270,441
-------------
FOOD PRODUCTS 0.2%
Smithfield Foods Inc., senior note, 7.75%, 5/15/13 ..................... United States 170,000 187,850
-------------
HOTELS RESTAURANTS & LEISURE 0.9%
Boyd Gaming Corp., senior sub. note, 6.75%, 4/15/14 ..................... United States 200,000 207,750
Caesars Entertainment Inc., senior sub. note, 8.125%, 5/15/11 ........... United States 405,000 464,232
Host Marriott LP, senior note, 7.125%, 11/01/13 ......................... United States 195,000 204,506
-------------
876,488
-------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.4%
(a)TXU Corp., 144A, 6.55%, 11/15/34 ........................................ United States 380,000 375,822
-------------
MACHINERY 0.2%
Case New Holland Inc., senior note, 9.25%, 8/01/11 ...................... United States 160,000 174,000
-------------
MEDIA 3.7%
Cablevision Systems Corp., senior note, B, 8.00%, 4/15/12 ............... United States 220,000 222,200
Cox Communications Inc., 7.125%, 10/01/12 ............................... United States 855,000 946,033
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ................... United States 170,000 194,650
(a)DIRECTV Holdings LLC, senior note, 144A, 6.375%, 6/15/15 ................ United States 205,000 205,512
Lamar Media Corp., senior sub. note, 7.25%, 1/01/13 ..................... United States 200,000 213,500
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 .................. United States 225,000 218,250
Medianews Group Inc., senior sub. note, 6.875%, 10/01/13 ................ United States 340,000 344,250
TCI Communications Inc., senior note, 8.75%, 8/01/15 .................... United States 1,010,000 1,272,728
-------------
3,617,123
-------------
METALS & MINING 1.2%
(a)Alrosa Finance SA, 144A, 8.875%, 11/17/14 ............................... Luxembourg 180,000 205,344
(a)Glencore Funding LLC, 144A, 6.00%, 4/15/14 .............................. Switzerland 400,000 383,954
Glencore Funding LLC, Reg S, 6.00%, 4/15/14 ............................. Switzerland 600,000 575,931
-------------
1,165,229
-------------
24 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
OIL, GAS & CONSUMABLE FUELS 0.8%
Chesapeake Energy Corp., senior note, 6.375%, 6/15/15 ................... United States 255,000 $ 263,287
(a)Petroleum Export Cayman, senior note, 144A, 5.265%, 6/15/11 ............. United States 535,000 534,091
-------------
797,378
-------------
PAPER & FOREST PRODUCTS 0.3%
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13 ..................... United States 280,000 317,800
-------------
TRADING COMPANIES & DISTRIBUTORS 0.4%
(a)Noble Group Ltd., senior note, 144A, 6.625%, 3/17/15 .................... Bermuda 265,000 245,449
Noble Group Ltd., senior note, 6.625%, 3/17/15 .......................... Bermuda 155,000 144,289
-------------
389,738
-------------
WIRELESS TELECOMMUNICATION SERVICES 0.4%
Rogers Wireless Communications Inc., senior secured note,
7.25%, 12/15/12 ...................................................... Canada 330,000 355,575
-------------
TOTAL CORPORATE BONDS (COST $28,114,752) ............................... 28,330,975
-------------
MORTGAGE-BACKED SECURITIES 32.6%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMa) FIXED RATE 31.1%
(d)FNMA 30 Year, 5.50%, 8/01/35 ............................................ United States 18,949,000 19,049,657
(d)FNMA 30 Year, 6.00%, 8/15/32 ............................................ United States 8,998,000 9,194,831
(d)FNMA 30 Year, 6.50%, 8/15/34 - 10/01/34 ................................. United States 1,777,254 1,838,972
-------------
30,083,460
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMa)FIXED RATE 1.5%
(d)GNMA I SF 30 Year, 6.00%, 3/20/34 - 8/01/35 ............................. United States 1,430,985 1,470,477
-------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $31,685,844) ..................... 31,553,937
-------------
ASSET-BACKED SECURITIES 28.7%
AIRLINES 0.6%
Delta Air Lines Inc., senior note, 6.718%, 7/02/24 ...................... United States 577,377 593,567
-------------
CAPITAL MARKETS 2.4%
(b)Granite Master Issuer PLC, 2005-2, A1, FRN, 3.47%, 6/20/30 .............. United States 2,310,000 2,310,000
-------------
COMMERCIAL BANKS 2.8%
(b)Citibank Credit Card Issuance Trust, 2003-A9, A9, FRN, 3.36%, 11/22/10 .. United States 2,700,000 2,705,930
-------------
CONSUMER FINANCE 0.0%(e)
(b)WFS Financial Owner Trust, 2002-4, A3B, FRN, 3.45%, 8/20/07 ............. United States 8,924 8,928
-------------
DIVERSIFIED FINANCIAL SERVICES 19.2%
(b)American Express Credit Account Master Trust, 2003-3, A, FRN,
3.498%, 11/15/10 ..................................................... United States 2,300,000 2,306,641
(b)Fleet Credit Card Master Trust, 2002-B, A, FRN, 3.528%, 4/15/10 ......... United States 2,430,000 2,437,196
(b)Permanent Financing PLC, 7, 2A, FRN, 3.419%, 9/10/14 .................... United States 1,470,000 1,466,781
(b)SLM Student Loan Trust, 2002-3, A4, FRN, 3.79%, 10/25/16 ................ United States 717,741 721,872
(b)SLM Student Loan Trust, 2004-2, A2, FRN, 3.67%, 4/25/13 ................. United States 5,233,000 5,235,811
Annual Report | 25
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY AMOUNT(c) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (CONT.)
DIVERSIFIED FINANCIAL SERVICES (CONT.)
(b)SLM Student Loan Trust, 2004-6, A2, FRN, 3.69%, 1/25/13 ................. United States 1,760,538 $ 1,763,376
(b)SLM Student Loan Trust, 2004-9, A2, FRN, 3.67%, 10/25/12 ................ United States 300,000 299,867
(b)SLM Student Loan Trust, 2005-2, A1, FRN, 3.63%, 4/25/10 ................. United States 2,128,796 2,128,536
(b)SLM Student Loan Trust, 2005-4, A1, FRN, 3.66%, 10/26/15 ................ United States 2,256,146 2,255,628
-------------
18,615,708
-------------
OIL, GAS & CONSUMABLE FUELS 0.9%
(a)Gazprom International SA, 144A, 7.201%, 2/01/20 ......................... Russia 510,000 548,888
Gazprom International SA, Reg S, 7.201%, 2/01/20 ........................ Russia 285,000 306,188
-------------
855,076
-------------
THRIFTS & MORTGAGE FINANCE 2.8%
(b)Bear Stearns Adjustable Rate Mortgage Trust, 2004-4, A1B, FRN,
3.515%, 6/25/34 ...................................................... United States 257,916 257,856
(b)Countrywide Asset-Backed Certificates, 2004-6, 2A1, FRN,
3.65%, 10/25/21 ...................................................... United States 259,195 259,377
(a),(b)Countrywide Asset-Backed Certificates, 2004-SD3, A1, 144A, FRN,
3.91%, 9/25/34 ....................................................... United States 40,993 41,122
Master Alternative Loans Trust, 2003-3, 1A1, 6.50%, 5/25/33 ............. United States 178,418 180,165
Master Alternative Loans Trust, 2003-7, 6A1, 6.50%, 12/25/33 ............ United States 301,598 306,055
Washington Mutual Inc., 2004-AR2, A, 3.904%, 4/25/44 .................... United States 1,647,193 1,665,570
-------------
2,710,145
-------------
TOTAL ASSET-BACKED SECURITIES (COST $27,761,026) ........................ 27,799,354
-------------
U.S. GOVERNMENT AND AGENCY SECURITIES 7.6%
U.S. Treasury Bond, 5.375%, 2/15/31 ..................................... United States 969,000 1,101,405
U.S. Treasury Note, 3.625%, 1/15/10 .................................... United States 190,000 186,082
U.S. Treasury Note, 4.00%, 2/15/15 ...................................... United States 1,230,000 1,202,181
(f)U.S. Treasury Note, Inflation-Indexed Note, 1.625%, 1/15/15 ............. United States 2,352,898 2,301,245
U.S. Treasury Note, 6.25%, 2/15/07 ...................................... United States 2,500,000 2,586,720
-------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $7,421,313) ........... 7,377,633
-------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 10.4%
Government of Germany, 5.25%, 1/04/11 ................................... Germany 533,000 EUR 726,598
Government of Germany, 5.50%, 1/04/31 ................................... Germany 2,885,000 EUR 4,503,735
Government of Poland, 5.75%, 3/24/10 .................................... Poland 2,926,000 PLN 900,750
Government of Russia, Reg S, 12.75%, 6/24/28 ............................ Russia 1,167,000 2,099,141
Government of Singapore, 2.625%, 4/01/10 ................................ Singapore 1,550,000 SGD 949,419
(f)Mexican Udibonos, Inflation-Indexed Bond, 3.50%, 12/19/13 ............... Mexico 104,555(g) MXN 894,712
-------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $9,932,479) ....... 10,074,355
-------------
MUNICIPAL BONDS 0.6%
Tobacco Settlement Financing Corp. Revenue, 6.375%, 6/01/32 ............. United States 85,000 99,068
Tobacco Settlement Revenue Management, B, 6.375%, 5/15/28 ............... United States 440,000 471,037
-------------
TOTAL MUNICIPAL BONDS (COST $488,447) .................................. 570,105
-------------
26 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY CORE PLUS FIXED INCOME FUND COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS 4.1%
COMMUNICATIONS EQUIPMENT 2.0%
(a)Centaur Funding Corp., 9.08%, pfd., B, 144A ............................. United States 1,446 $ 1,911,883
-------------
CONSUMER FINANCE 2.1%
Fannie Mae, 7.185%, pfd ................................................. United States 37,492 2,085,305
-------------
TOTAL PREFERRED STOCKS (COST $3,976,487) ................................ 3,997,188
-------------
TOTAL LONG TERM INVESTMENTS (COST $109,380,348) ......................... 109,703,547
-------------
-----------
PRINCIPAL
AMOUNT(c)
-----------
SHORT TERM INVESTMENTS 18.4%
U.S. GOVERNMENT AND AGENCY SECURITIES (COST $8,975,625) 9.3%
(h)FNMA, 8/31/05 ........................................................... United States 9,000,000 8,975,592
-------------
TOTAL INVESTMENTS BEFORE MONEY FUND (COST $118,355,973) ................. 118,679,139
-------------
-----------
SHARES
-----------
MONEY FUND (COST $8,852,438) 9.1%
(i)Franklin Institutional Fiduciary Trust Money Market Portfolio ........... United States 8,852,438 8,852,438
-------------
TOTAL INVESTMENTS (COST $127,208,411) 131.7% ............................ 127,531,577
NET UNREALIZED LOSS ON FORWARD EXCHANGE CONTRACTS 0.0%(e) ............... (20,772)
OTHER ASSETS, LESS LIABILITIES (31.7)% .................................. (30,688,256)
-------------
NET ASSETS 100.0% ...................................................... $ 96,822,549
=============
CURRENCY ABBREVIATIONS:
EUR - Euro
JPY - Japanese Yen
MXN - Mexican Peso
PLN - Polish Zloty
SGD - Singapore Dollar
See Selected Portfolio Abbreviations on page 28.
(a) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. These securities have been deemed liquid under
guidelines approved by the Trust's Board of Trustees.
(b) The coupon shown represents the rate at period end.
(c) The principal amount is stated in U.S. dollars unless otherwise indicated.
(d) See Note 1(c) regarding securities purchased on a to-be-announced basis.
(e) Rounds to less than 0.05% of net assets.
(f) Principal amount of security is adjusted for inflation. See Note 1(g).
(g) Principal amount is stated in $100.00 Peso units.
(h) The security is traded on a discount basis with no stated coupon rate.
(i) See Note 7 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 27
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
SELECTED PORTFOLIO ABBREVIATIONS
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
GNMA - Government National Mortgage Association
28 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 2005
--------------------------------
FIDUCIARY FIDUCIARY
CORE FIXED CORE PLUS FIXED
INCOME FUND INCOME FUND
--------------------------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................ $ 30,588,899 $ 118,355,973
Cost - Sweep Money Fund (Note 7) ....................... 4,747,582 8,852,438
-------------------------------
Total cost of investments .............................. $ 35,336,481 $ 127,208,411
===============================
Value - Unaffiliated issuers ........................... $ 30,617,645 $ 118,679,139
Value - Sweep Money Fund (Note 7) ...................... 4,747,582 8,852,438
-------------------------------
Total value of investments ............................. 35,365,227 127,531,577
Receivables:
Investment securities sold ............................. 206,261 1,472,712
Capital shares sold .................................... -- 65,000
Interest ............................................... 235,449 854,757
Affiliates ............................................. 63 --
Unrealized gain on forward exchange contracts (Note 8) ... -- 23,367
===============================
Total assets ....................................... 35,807,000 129,947,413
===============================
Liabilities:
Payables:
Investment securities purchased ........................ 9,057,325 33,033,079
Capital shares redeemed ................................ 9,138 --
Affiliates ............................................. -- 19,929
Unrealized loss on forward exchange contracts (Note 8) ... -- 44,139
Other liabilities ........................................ 20,487 27,717
===============================
Total liabilities .................................. 9,086,950 33,124,864
===============================
Net assets, at value ............................. $ 26,720,050 $ 96,822,549
===============================
Net assets consist of:
Undistributed net investment income ...................... $ 52,854 $ 523,353
Net unrealized appreciation (depreciation) ............... 28,746 295,274
Accumulated net realized gain (loss) ..................... (54,925) (8,481)
Paid-in capital .......................................... 26,693,375 96,012,403
===============================
Net assets, at value ............................. $ 26,720,050 $ 96,822,549
===============================
Shares outstanding ......................................... 2,672,506 9,258,231
===============================
Net asset value and maximum offering price per share(a) .... $ 10.00 $ 10.46
===============================
(a) Redemption price is equal to net asset value less any applicable
redemption fees retained by the Fund.
Annual Report | See notes to financial statements. | 29
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended July 31, 2005
------------------------------
FIDUCIARY CORE FIDUCIARY CORE
FIXED INCOME PLUS FIXED
FUND INCOME FUND
------------------------------
Investment income:
Dividends:
Unaffiliated issuers ...................................................... $ 37,069 $ 150,890
Sweep Money Fund (Note 7) ................................................. 48,782 148,076
Interest .................................................................... 618,629 2,604,825
---------------------------
Total investment income ............................................... 704,480 2,903,791
---------------------------
Expenses:
Management fees (Note 3a) ................................................... 51,087 205,459
Administrative fees (Note 3b) ............................................... 38,640 149,896
Transfer agent fees (Note 3c) ............................................... 207 780
Custodian fees (Note 4) ..................................................... 1,842 8,912
Reports to shareholders ..................................................... 9,387 25,713
Registration and filing fees ................................................ 15,953 21,365
Professional fees ........................................................... 15,079 16,096
Trustees' fees and expenses ................................................. 7 23
Amortization of offering costs .............................................. 1,672 159
Other ....................................................................... 6,119 10,464
---------------------------
Total expenses ........................................................ 139,993 438,867
Expense reductions (Note 4) ........................................... (134) (15)
Expenses waived/paid by affiliate (Note 3d) ........................... (52,606) (116,520)
---------------------------
Net expenses ........................................................ 87,253 322,332
---------------------------
Net investment income ............................................. 617,227 2,581,459
---------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................... 251,823 967,644
Foreign currency transactions ............................................. -- 317,844
---------------------------
Net realized gain (loss) ............................................ 251,823 1,285,488
---------------------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... 58,037 161,588
Translation of assets and liabilities denominated in foreign currencies ... -- (3,857)
---------------------------
Net change in unrealized appreciation (depreciation) ............... 58,037 157,731
---------------------------
Net realized and unrealized gain (loss) ..................................... 309,860 1,443,219
---------------------------
Net increase (decrease) in net assets resulting from operations ............. $ 927,087 $ 4,024,678
===========================
30 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------
FIDUCIARY CORE FIDUCIARY CORE PLUS
FIXED INCOME FUND FIXED INCOME FUND
---------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
2005 2004(a) 2005 2004(b)
---------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ..................................... $ 617,227 $ 330,807 $ 2,581,459 $ 449,819
Net realized gain (loss) from investments and foreign
currency transactions ................................... 251,823 181,439 1,285,488 (12,838)
Net change in unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies ..................... 58,037 (29,291) 157,731 137,543
---------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ................................... 927,087 482,955 4,024,678 574,524
---------------------------------------------------------------
Distributions to shareholders from:
Net investment income ..................................... (818,857) (482,411) (3,204,428) (561,516)
Net realized gains ........................................ (42,155) (58,547) -- (42,176)
---------------------------------------------------------------
Total distributions to shareholders ......................... (861,012) (540,958) (3,204,428) (603,692)
---------------------------------------------------------------
Capital share transactions (Note 2) ......................... 9,111,043 17,600,935 41,870,288 54,161,179
---------------------------------------------------------------
Net increase (decrease) in net assets ............... 9,177,118 17,542,932 42,690,538 54,132,011
Net assets:
Beginning of year ........................................... 17,542,932 -- 54,132,011 --
---------------------------------------------------------------
End of year ................................................. $ 26,720,050 $ 17,542,932 $ 96,822,549 $ 54,132,011
===============================================================
Undistributed net investment income included in net assets:
End of year ................................................. $ 52,854 $ 25,293 $ 523,353 $ 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.
Annual Report | See notes to financial statements. | 31
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
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 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, 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. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event
32 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. SECURITY VALUATION (CONTINUED)
occurs, the securities may be valued using fair value procedures, which may
include the use of independent pricing services. All security valuation
procedures are approved by the Trust's Board of Trustees.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Trust's Board of Trustees.
The Funds do not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. 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.
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 the net unrealized gain or loss on the contracts,
as measured by the difference between the contractual forward foreign exchange
rates and the forward rates at the reporting date, 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.
Annual Report | 33
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. FOREIGN CURRENCY CONTRACTS (CONTINUED)
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.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.
E. 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 mortgage-backed securities 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 fund's policy is
to continue 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 of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
Inflation-indexed bonds are fixed-income securities whose principal amount is
adjusted to the rate of inflation. Interest is accrued based on the principal
amount, which is adjusted for inflation. Any increase in the principal amount of
an inflation-indexed bond is recorded as interest income.
H. OFFERING COSTS
Offering costs are amortized on a straight line basis over twelve months.
34 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (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 year.
K. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2005, there were an unlimited number of shares authorized ($0.01 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
------------------------------------------------------------
Year ended July 31, 2005
Shares sold ..................... 1,676,232 $ 16,843,953 5,442,801 $ 56,848,263
Shares issued in reinvestment
of distributions .............. 30,951 310,206 42,226 441,194
Shares redeemed ................. (794,720) (8,043,116) (1,472,874) (15,419,169)
------------------------------------------------------------
Net increase (decrease) ........ 912,463 $ 9,111,043 4,012,153 $ 41,870,288
============================================================
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.
Annual Report | 35
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Funds are also officers and/or directors of the following
subsidiaries:
- --------------------------------------------------------------------------------------
SUBSIDIARY 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 0.30% per year of the
average daily net assets of each fund.
B. ADMINISTRATIVE FEES
The Funds pay an administrative fee to FT Services of 0.20% per year of the
average daily net assets of each fund.
C. TRANSFER AGENT FEES
The Funds paid transfer agent fees as noted in the Statements of Operations of
which the following amounts were retained by Investor Services:
------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
------------------------------
Transfer agent fees .................... $45 $100
D. VOLUNTARY WAIVER AND EXPENSE REIMBURSEMENTS
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 reimbursement by the
Funds subsequent to the Funds' fiscal year end.
36 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year ended July 31, 2005, the
custodian fees were reduced as noted in the Statements of Operations.
5. INCOME TAXES
At July 31, 2005, the Fiduciary Core Fixed Income Fund had deferred capital
losses occurring subsequent to October 31, 2004 of $47,907. For tax purposes,
such losses will be reflected in the year ending July 31, 2006.
The tax character of distributions paid during the years ended July 31, 2005 and
2004, was as follows:
----------------------------------------------------
FIDUCIARY FIDUCIARY
CORE FIXED CORE PLUS FIXED
INCOME FUND INCOME FUND
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
Distributions paid from:
Ordinary income ............ $ 855,123 $ 540,958 $3,204,428 $ 603,692
Long term capital gain ..... 5,889 -- -- --
----------------------------------------------------
$ 861,012 $ 540,958 $3,204,428 $ 603,692
====================================================
At July 31, 2005, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:
-----------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
-----------------------------
Cost of investments .......................... $35,380,240 $127,414,374
=============================
Unrealized appreciation ...................... $ 169,153 $ 852,539
Unrealized depreciation ...................... (184,166) (735,336)
-----------------------------
Net unrealized appreciation (depreciation) ... $ (15,013) $ 117,203
=============================
Undistributed ordinary income ................ $ 89,596 $ 692,132
Undistributed long term capital gains ........ -- 7,931
-----------------------------
Distributable earnings ....................... $ 89,596 $ 700,063
=============================
Net investment income 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.
Annual Report | 37
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, mortgage dollar rolls, paydown losses, and bond discounts and
premiums.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
year ended July 31, 2005, were as follows:
-----------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
-----------------------------
Purchases .................................... $108,502,225 $395,904,419
Sales. ....................................... $ 98,330,718 $340,942,572
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 July 31, 2005, the Fiduciary Core Plus Fixed Income Fund has outstanding
forward exchange contracts as set out below.
- ------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR DATE GAIN (LOSS)
- ------------------------------------------------------------------------------------------------
71,000,000 Japanese Yen ........... U.S. $ 632,742 8/18/05 U.S. $ 16,829
4,671,029 Euro ................... 5,667,423 8/17/05 6,538
---------- --------
U.S. $6,300,165 23,367
========== --------
Unrealized gain on forward exchange contracts ............................... U.S. $ 23,367
========
- ------------------------------------------------------------------------------------------------
IN SETTLEMENT UNREALIZED
CONTRACTS TO BUY EXCHANGE FOR DATE GAIN (LOSS)
- ------------------------------------------------------------------------------------------------
184,220,361 Japanese Yen ........... U.S. $1,641,745 8/18/05 U.S. $(44,139)
--------
Unrealized loss on forward exchange contracts ............................... (44,139)
--------
Net unrealized gain (loss) on forward exchange contracts .................... U.S. $(20,772)
========
38 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 July 31, 2005, there
were five unaffiliated shareholders holding 30%, 29%, 8%, 6% and 5%,
respectively of the Fund's outstanding shares.
10. CREDIT RISK
The Fiduciary Core Plus Fixed Income Fund has 5.26% 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 AND SETTLEMENTS
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, provided documents and information in response to
subpoenas and/or requests for documents, information and/or testimony. Beginning
in August 2004, the Company entered into settlements with certain of the
regulators and a governmental entity investigating the mutual fund industry
practices noted above. The Company believes that settlement of each of the
matters is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
Two of the settlement agreements, those with the SEC and the CAGO concerning
marketing support payments, provide that the distribution of settlement monies
are to be made to the relevant funds, not to individual shareholders. 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 were disbursed to the participating
funds The Trust did not participate in the CAGO settlement. The SEC has not yet
approved the distribution plan pertaining to the SEC settlement. When approved,
disbursements of settlement monies under the SEC's settlement will be made
promptly in accordance with the terms and conditions of that order.
Annual Report | 39
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS
On April 12, 2005, the Attorney General of West Virginia filed a complaint in
the Circuit Court of Marshall County, West Virginia against a number of
companies engaged in the mutual fund industry, including Franklin Resources,
Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties
alleging violations of the West Virginia Consumer Credit and Protection Act and
seeking, among other things, civil penalties and attorneys' fees and costs.
Defendants have since removed the matter to the United States District Court for
the Northern District of West Virginia. To the extent applicable to the Company,
the complaint arises from activity that occurred in 2001 and duplicates, in
whole or in part, the allegations asserted in the February 4, 2004 Massachusetts
Administrative Complaint concerning one instance of market timing (the
"Administrative Complaint") and the SEC's findings regarding market timing in
its August 2, 2004 Order (the "SEC Order"), both of which matters were
previously reported.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors
have been named in multiple lawsuits in different courts alleging violations of
various federal securities and state 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, allegedly resulting in market timing activity. The majority
of these lawsuits duplicate, in whole or in part, the allegations asserted in
the Administrative Complaint and the SEC's findings regarding market timing in
the SEC Order. The lawsuits are styled as class actions, or derivative actions
on behalf of either the named funds or Franklin Resources, Inc.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and 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 marketing
support payments and/or payment of allegedly excessive commissions and/or
advisory or 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 the named funds.
40 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
The Company and fund management strongly believe that the claims made in each of
the lawsuits described above are without merit and intends to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. Public trust and confidence are critical to the Company's business and
any material loss of investor and/or client confidence could result in a
significant decline in assets under management by the Company, which would have
an adverse effect on future financial results. If it is determined that the
Company bears responsibility for any unlawful or inappropriate conduct that
caused losses to the Trust, it is committed to making the Trust or its
shareholders whole, as appropriate. The Company is committed to taking all
appropriate actions to protect the interests of its funds' shareholders.
Annual Report | 41
FRANKLIN GLOBAL TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN GLOBAL TRUST
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Fiduciary Core Fixed Income Fund
and Fiduciary Core Plus Fixed Income Fund (each a separate portfolio of the
Franklin Global Trust, hereafter referred to as the "Funds") at July 31, 2005,
the results of each of their operations for the year then ended, and the changes
in each of their net assets and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at July 31, 2005 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 9, 2005
42 | Annual Report
FRANKLIN GLOBAL TRUST
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds
designate the following amounts as capital gain dividends for the fiscal year
ended July 31, 2005:
---------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
---------------------------------
$5,889 $7,931
Under Section 854(b)(2) of the Code, the Funds designate the following maximum
amounts as qualified dividends for purposes of the maximum rate under Section
1(h)(11) of the Code for the fiscal year ended July 31, 2005:
---------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
---------------------------------
$12,262 $61,570
In January 2006, shareholders will receive Form 1099-DIV which will include
their share of qualified dividends distributed during the calendar year 2005.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
Under Section 854(b)(2) of the Code, the Funds designate the following
percentage amounts of the ordinary income dividends as income qualifying for the
dividends received deduction for the fiscal year ended July 31, 2005:
---------------------------------
FIDUCIARY FIDUCIARY
CORE CORE PLUS
FIXED INCOME FIXED INCOME
FUND FUND
---------------------------------
1.43% 1.92%
Annual Report | 43
FRANKLIN GLOBAL TRUST
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Each board member will serve
until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 2000 142 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2000 57 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS);
and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and
Chief Counsel, California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (1932) Trustee Since 2000 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2000 135 Director, Amerada Hess Corporation
One Franklin Parkway (exploration and refining of oil and
San Mateo, CA 94403-1906 gas), H.J. Heinz Company (processed
foods and allied products), RTI
International Metals, Inc. (manufac-
ture and distribution of titanium),
Canadian National Railway (railroad),
and White Mountains Insurance
Group, Ltd. (holding company).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
44 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 2000 116 Director, The California Center for
One Franklin Parkway Land Recycling (redevelopment).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (1928) Trustee Since 2000 142 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology), and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known as
MCI WorldCom, Inc. and WorldCom,
Inc.) (communications services)
(1988-2002), White Mountains
Insurance Group, Ltd. (holding com-
pany) (1987-2004) and Spacehab,
Inc. (aerospace services) (1994-
2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since June 2005 96 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company),
San Mateo, CA 94403-1906 Amerada Hess Corporation (explo-
ration and refining of oil and gas)
and Sentient Jet (private jet
service); and FORMERLY, Director,
Becton Dickinson and Company (medical
technology), Cooper Industries, Inc.
(electrical products and tools and
hardware), Health Net, Inc.
(formerly, Foundation Health)
(integrated managed care), The Hertz
Corporation, Pacific Southwest
Airlines, The RCA Corporation, Unicom
(formerly, Commonwealth Edison) and
UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 45
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (1945) Trustee and Since 2000 22 None
One Franklin Parkway Vice President
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 2000 142 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee, Trustee and 126 None
One Franklin Parkway President and President since
San Mateo, CA 94403-1906 Chief 2000 and Chief
Executive Executive Officer
Officer - - Investment
Investment Management
Management since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 49 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 33 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
46 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 49 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 49 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer
and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
EDWARD B. JAMIESON (1948) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; officer of other subsidiaries of Franklin Resources, Inc.;
and officer and trustee of five of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (1937) Vice President Since 2002 Not Applicable Not Applicable
600 Fifth Avenue - AML
Rockefeller Center Compliance
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; Director, FTI Banque, Arch Chemicals, Inc.
and Lingnan Foundation; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 47
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER J. MOLUMPHY (1962) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (1937) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 49 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources, Inc.
(Resources), which is the parent company of the Trust's adviser and distributor.
Harmon E. Burns is considered to be an interested person of the Trust under the
federal securities laws due to his position as officer and director of
Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE TRUST TO DISCLOSE WHETHER THE TRUST'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE TRUST'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE TRUST'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPALS AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE TRUST'S, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
48 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held February 28, 2005, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for each of seven separate funds comprising
Franklin Global Trust ( "Fund(s)"). In approving the renewal of the Fund's
investment advisory contracts, the Board took into account information furnished
throughout the year at regular Board meetings, as well as information prepared
specifically in connection with the annual renewal review process. Information
furnished and discussed throughout the year included investment performance
reports and related financial information for each Fund, as well as periodic
reports on shareholder services, legal compliance, pricing, brokerage
commissions and execution and other services provided by the Investment Manager
("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for each Fund prepared by Lipper Financial Services
("Lipper"), an independent organization, as well as a Fund profitability
analysis report prepared by management. The Lipper reports compared each Fund's
investment performance and expenses with those of other mutual funds deemed
comparable to the Fund as selected by Lipper. The Fund profitability analysis
report discussed the profitability to Franklin Templeton Investments from its
overall U.S. fund operations, as well as on an individual fund-by-fund basis.
Included with such profitability analysis report was information on a
fund-by-fund basis listing portfolio managers and other accounts they manage, as
well as information on management fees charged by the Manager including
management's explanation of differences where relevant and a three-year expense
analysis with an explanation for any increase in expense ratios. Additional
information accompanying such report was a memorandum prepared by management
describing enhancements to the services provided to the funds by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
advisory contracts for all Funds were approved at the same Board meeting, the
Board dealt with each Fund separately. In approving continuance of the
investment advisory contract for each Fund, the Board, including a majority of
independent Trustees, determined that the existing management fee structure was
fair and reasonable and that continuance of the investment advisory contract was
in the best interests of each Fund and its shareholders. While attention was
given to all information furnished, the following discusses the primary factors
relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Funds and their shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
each Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the Code of Ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board,
Annual Report | 49
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
and the accuracy of net asset value calculations. The Board also noted the
extent of benefits provided Fund shareholders from being part of the Franklin
Templeton family of funds, including the right to exchange investments between
the same class of funds without a sales charge, the ability to reinvest Fund
dividends into other funds and the right to combine holdings in other funds to
obtain a reduced sales charge. Favorable consideration was given to management's
efforts and expenditures in establishing back-up systems and recovery procedures
to function in the event of a natural disaster, it being noted by the Board that
such systems and procedures had functioned smoothly during the hurricanes and
blackout experienced last year in Florida. Other factors taken into account by
the Board were the Manager's best execution trading policies, including a
favorable third-party report on portfolio execution, as well as the compliance
procedures and qualifications of the Chief Compliance Officer established in
accordance with recently adopted SEC requirements. Consideration was also given
to the experience of each Fund's portfolio management team, the number of
accounts managed and general method of compensation. In this latter respect, the
Board noted that a primary factor in management's determination of a portfolio
manager's bonus compensation was the relative investment performance of the
funds he or she managed so as to be aligned with the interests of Fund
shareholders. The Board also took into account the transfer agent and
shareholder services provided Fund shareholders by an affiliate of the Manager,
noting continuing expenditures by management to increase and improve the scope
of such services, periodic favorable reports on such service conducted by third
parties such as Dalbar, and the firsthand experience of the individual Trustees
who deal with the shareholder services department in their capacities as
shareholders in one or more of the various Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of each Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the contract
renewals. The Lipper report prepared for each individual Fund showed the
investment performance of the Fund in comparison to a performance universe
selected by Lipper. Comparative performance for each Fund was shown for the
one-year period ended December 31, 2004, and for additional periods ended that
date depending on when a particular Fund commenced operations. Investment
performance was shown on a total return basis for each Fund and on an income
return basis as well for the Fiduciary Core Fixed Income Fund and Fiduciary Core
Plus Fixed Income Fund. The following summarizes the performance results for
each of the Funds and the Board's view of such performance.
The performance universe for the Fiduciary Core Fixed Income Fund consisted of
the Fund and all retail and institutional BBB rated corporate debt funds as
selected by Lipper. This Fund has been in existence for only one full year and
the Lipper report for the one-year period showed its income return to be in the
highest quintile of such performance universe and its total return to be in the
fifth or lowest quintile of such performance universe. The Board found such
performance to be acceptable in view of the Fund's size and short history of
operations.
50 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
The performance universe for the Fiduciary Core Plus Fixed Income Fund consisted
of the Fund and all retail and institutional BBB rated corporate debt funds as
selected by Lipper. This Fund has been in existence for only one full year and
the Lipper report for the one-year period showed its income return to be in the
fourth or second lowest quintile of such performance universe and its total
return to be in the second highest quintile of such Performance Universe. The
Board was satisfied with the Fund's performance.
COMPARATIVE EXPENSES. Consideration was given to the management fee and total
expense ratios of each Fund compared with those of a group of funds selected by
Lipper as its appropriate Lipper expense group. Prior to making such
comparisons, the Board relied upon a survey showing that the scope of management
advisory services covered under a Fund's investment advisory contract were
similar to those provided by fund managers to other mutual fund groups that
would be used as a basis of comparison in the Lipper reports. In reviewing
comparative costs, emphasis was given to each Fund's management fee in
comparison with the effective management fee that would have been charged by
other funds within its Lipper expense group assuming they were the same size as
the Fund, as well as the actual total expenses of the Fund in comparison with
those of its Lipper expense group. The Lipper effective management fee analysis
includes the advisory and administrative fees directly charged to each Fund as
being part of the management fee. Both the effective management fee rate and
actual total expenses were in the first or least expensive quintile of their
Lipper expense group for the Fiduciary Core Fixed Income Fund and Fiduciary Core
Plus Fixed Income Fund. The Board was satisfied with these comparative expenses
- -- noting that the Funds benefited from fee waivers or reimbursements.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
each Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
including potential benefits resulting from allocation of fund brokerage and the
use of "soft" commission dollars to pay for research. Specific attention was
given to the methodology followed in allocating costs to each Fund, it being
recognized that allocation methodologies are inherently subjective and various
allocation methodologies may each be reasonable while producing different
results. In this respect, the Board noted that the cost allocation methodology
was consistent with that followed in profitability report presentations for the
Funds made in prior years and that it had on a biennial basis the Fund's
independent accountants to perform certain procedures specified by the Board
solely for its purpose and use. It was also noted that legal costs and payments
incurred by Franklin Templeton in resolving various legal proceedings arising
from its U.S. fund operations had not been allocated to the Funds for purposes
of determining profitability.
Annual Report | 51
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
Included in the analysis for each Fund were the revenue and related costs broken
down separately from the management, underwriting and shareholder services
functions provided by the Manager and its affiliates to each Fund, as well as
the relative contribution of each Fund to the profitability of the Manager's
parent. In reviewing and discussing such analysis, management discussed with the
Board its belief that costs incurred in establishing the infrastructure
necessary to the type of mutual fund operations conducted by the Manager and its
corporate affiliates may not be fully reflected in the expenses allocated to
each Fund in determining its profitability, as well as the fact that the level
of profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. The Board also took into account
management's expenditures in improving shareholder services provided the Funds,
as well as the need to meet additional regulatory and compliance requirements
resulting from the Sarbanes-Oxley Act and recent SEC requirements. In addition,
the Board considered a third-party study comparing the profitability of the
Manager's parent on an overall basis as compared to other publicly held managers
broken down to show profitability from management operations exclusive of
distribution expenses, as well as profitability including distribution expenses.
Based upon their consideration of all these factors, the Board determined that
the level of profits realized by the Manager under its investment advisory
contract with each Fund was not excessive in view of the nature, quality and
extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Funds grow larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Trustees believed that
no economies of scale existed in the management of the Fiduciary Core Fixed
Income Fund and Fiduciary Core Plus Fixed Income Fund, which had been in
existence for only one full year and benefited from partial fee waivers or
expense reimbursements.
PROXY VOTING POLICIES AND PROCEDURES
The Trust has established Proxy Voting Policies and Procedures ("Policies") that
the Trust uses to determine how to vote proxies relating to portfolio
securities. Shareholders may view the Trust's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 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 Trust's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
52 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Annual Report | 53
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[LOGO](R) FRANKLIN TEMPLETON INSTITUTIONAL
FRANKLIN(R) TEMPLETON(R)
INSTITUTIONAL 600 Fifth Avenue
New York, NY 10020
FRANKLINTEMPLETONINSTITUTIONAL.COM
ANNUAL 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.
FGT2 A2005 09/05
ANNUAL REPORT | 07 31 2005
- --------------------------------------------------------------------------------
THE EXPERTISE OF MANY. THE STRENGTH OF ONE.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
FRANKLIN GLOBAL TRUST
--------------------------------------
Fiduciary High Income Fund
[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INSTITUTIONAL
FRANKLIN o TEMPLETON o FIDUCIARY
CONTENTS
ANNUAL REPORT
- --------------------------------------------------------------------------------
Fiduciary High Income Fund ................................................ 2
Performance Summary ....................................................... 6
Your Fund's Expenses ...................................................... 8
Financial Highlights and Statement of Investments ......................... 10
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 17
Report of Independent Registered Public Accounting Firm ................... 25
Tax Designation ........................................................... 26
Board Members and Officers ................................................ 27
Shareholder Information ................................................... 32
-----------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
-----------------------------------------------------
Annual Report | 1
ANNUAL 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.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
- --------------------------------------------------------------------------------
We are pleased to bring you the Fiduciary High Income Fund (the "Fund") annual
report covering the 12-month period ended July 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted an 11.86% cumulative total return for the period ended July 31,
2005. The Fund outperformed its benchmark, the CSFB High Yield Index -Developed
Countries Only(1), which returned 9.98% during the same period. You can find the
Fund's long-term performance data in the Performance Summary beginning on page
6.
ECONOMIC AND MARKET OVERVIEW
Over the past 12 months, the Federal Reserve raised short-term interest rates 2%
from 1.25% to 3.25% amid continued growth in the U.S. economy and an improving
employment picture. During the second quarter of 2005, inflation-adjusted gross
domestic product, the most comprehensive measure of economic activity, increased
3.4% after increasing 3.8% in the first quarter(2). The fixed income market was
highly focused on the employment picture. Non-farm payroll numbers showed
considerable volatility, as better than expected labor market figures tended to
be followed by disappointing figures. Nevertheless, there was a clear trend
towards growth. For example, total non-farm employment rose by 292,000, 104,000,
and 146,000 in April, May, and June, respectively(3).
(1) Source: Standard & Poor's Micropal. CSFB High Yield Index - Developed
Countries Only is designed to mirror the investible universe of the U.S.
dollar denominated high yield debt market. The index is unmanaged and
includes reinvested distributions. One cannot invest directly in an index,
nor is an index representative of the Fund's portfolio.
(2) Bureau of Economic Analysis.
(3) Bureau of Labor Statistics.
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 11.
2 | Annual Report
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
Fiduciary High Income Fund
As a Percentage of Total Net Assets
As of 7/31/05
[PIE CHART OMITTED] Corporate Bonds ....................... 97.4%
Cash Equivalents &
Other Net Assets ...................... 2.6%
- --------------------------------------------------------------------------------
Despite these headwinds, the bond market showed unexpected strength with Asia
positive returns in most sectors. The 10-year U.S. Treasury ended the period
with a yield of 4.28%, which is approximately 30 basis points less than it EU
yielded a year prior. More significant was the flattening of the yield curve, as
the tightening of monetary policy by the Federal Reserve was a major factor NA
causing interest rates to rise in the front end of the yield curve. The yield on
the 2-year U.S. Treasury rose 1.26% over the period to 4.01%. This contrasted
with the long end of the yield curve, where the yield on the 30-year U.S.
Treasury fell 82 basis points to 4.47%.
Despite high energy prices and oil reaching multi-year highs of more than $60 a
barrel, inflation was relatively benign over the period. On a seasonally
adjusted basis, the Consumer Price Index (CPI), a measure of inflation, rose
1.9% for the second quarter of 2005, while the CPI excluding the more volatile
food and energy components rose only 1.2%(4). Expected inflation is a key
determinant of interest rates, and this environment contributed to the strength
in the bond market.
Within the high yield market, healthy fundamentals continued to drive solid
performance for the asset class. In general, strong balance sheets, good
liquidity and growing corporate earnings allowed the high yield default rate to
move lower over the past year and thereby remain well below historical averages.
Moreover, the broad equity markets also provided support to the high yield
market, with the S&P500 Index up over 14% in total return. Although the high
yield market did experience some volatility between March and May of 2005
related to the potential downgrades of auto manufacturers General
(4) Bureau of Labor Statistics.
Annual Report | 3
INDUSTRY BREAKDOWN
Fiduciary High Income Fund
Based on Total Net Assets as of 7/31/05
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Consumer Services 19.4%
Utilities 11.4%
Process Industries 10.4%
Communications 10.3%
Producer Manufacturing 8.7%
Energy Minerals 5.1%
Health Services 5.1%
Consumer Durables 4.9%
Industrial Services 4.3%
Electronic Technology 3.8%
Commercial Services 2.6%
Technology Services 2.6%
Consumer Non-Durables 2.5%
Retail Trade 2.5%
Real Estate Development 1.3%
Real Estate Investment Trusts 1.3%
Non-Energy Minerals 1.2%
Short-Term Investments & Other Net Assets 2.6%
Motors and Ford, some interim-period choppiness in the equity markets, and some
negative selling pressure as a result of cash outflows from dedicated high yield
mutual funds, by period end the technical trading environment for high yield
bonds had once again stabilized. Consequently, yield spreads over Treasuries, as
measured by the CSFB High Yield Index - Developed Countries Only, declined from
4.5% to 3.5% over the fiscal year ending July 2005 and drove the 10% total
return of that index over the period.
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.
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 largely driven by individual security selection, along with some net benefit
from industry positioning and a slightly longer duration profile versus its
benchmark (during a period of declining yields in the high yield market).
In terms of industry positioning, the Fund's underweighting in the high yield
automotive sector was a positive contributor to the Fund's relative performance.
The ratings downgrades of Ford and General Motor's corporate debt along with
production cuts in 2005 from these manufacturers put significant pressure on the
debt securities of many of the high yield auto suppliers over the past year.
Also, the Fund's overweighting in the wireless communications sector also
benefited relative performance, as continued consolidation in that sector along
with stable to improving operating performance from many of the high yield
wireless corporate issuers drove that sector's outperformance over the past
year.
On the other hand, the Fund's overweighted exposure to the manufacturing sector
was a detractor to relative performance. Although the overall economy
4| Annual Report
continued to grow reasonably well over the past year, some market concerns later
in the reporting period regarding a potential economic slowdown caused weaker
performance from some of the manufacturing-related issuers in the high yield
market.
In terms of selected highlights from individual security holdings, the Fund sold
its position in an issue purchased earlier in the period, Rainbow National
Services LLC, a company that operates cable network channels, following the
bonds' price appreciation of over 18 points on the back of solid operating
results and the discontinuation of an unprofitable satellite venture. The Fund
also had positions in Huntsman International LLC, among the world's largest
makers of basic chemicals and petrochemicals like ethylene and propylene,
redeemed at a premium to their accreted value as that company completed an
initial public stock offering and refinanced certain of its higher-cost debt.
CONCLUSION
We thank you for your continued participation and look forward to serving your
investment needs.
Sincerely,
/s/ Michael Materasso
[PHOTO OMITTED] Michael Materasso
Vice President of Fiduciary International, Inc. (Fiduciary)
Executive Vice President of Fiduciary Trust Company
International (Fiduciary Trust)
/s/ Warren Keyser
[PHOTO OMITTED] Warren Keyser
Vice President of Fiduciary
Senior Vice President of Fiduciary Trust
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 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 7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
Qwest Communications International Inc. 1.8%
COMMUNICATIONS
- --------------------------------------------------------------------------------
Allied Waste North America Inc. 1.8%
INDUSTRIAL SERVICES
- --------------------------------------------------------------------------------
Calpine Corp. 1.4%
UTILITIES
- --------------------------------------------------------------------------------
Fimep SA 1.4%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Dex Media West LLC 1.4%
CONSUMER SERVICES
- --------------------------------------------------------------------------------
Dynegy Holdings Inc. 1.4%
UTILITIES
- --------------------------------------------------------------------------------
Advanstar Communications Inc. 1.4%
CONSUMER SERVICES
- --------------------------------------------------------------------------------
BCP Crystal Holdings Corp. 1.4%
PROCESS INDUSTRIES
- --------------------------------------------------------------------------------
Georgia-Pacific Corp. 1.4%
PROCESS INDUSTRIES
- --------------------------------------------------------------------------------
Allegheny Energy Supply Co. LLC 1.4%
UTILITIES
- --------------------------------------------------------------------------------
Annual Report | 5
PERFORMANCE SUMMARY AS OF 7/31/05
The performance table and graph 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 Fund dividends and capital gain
distributions, if any, and any unrealized gains or losses.
PERFORMANCE(1)
- ---------------------------------------------------------------------------------------------------
AVERAGE CUMULATIVE
ANNUAL TOTAL
TOTAL RETURN(2) RETURN(3)
1-YEAR (8/25/03) (8/25/03)
- ---------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND 11.86% 13.16% 26.98%
- ---------------------------------------------------------------------------------------------------
CSFB HIGH YIELD INDEX - DEVELOPED COUNTRIES ONLY(4) 9.98% 12.22% 24.96%
- ---------------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
6| Annual Report
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,000 in Fiduciary
High Income Fund from inception on 8/25/03 through 7/31/05, compared with the
CSFB High Yield Index - Developed Countries Only.(4) Total return represents the
change in value of an investment over the periods shown. It includes Fund
expenses, account fees, and reinvested dividends. The unmanaged index includes
reinvestment of any income or distributions. It differs from the Fund in
composition and does not pay management fees or expenses. One cannot invest
directly in an index.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
(8/25/03-7/31/05)
CSFB HY -
FIDUCIARY DEVELOPED
HIGH INCOME COUNTRIES
FUND ONLY INDEX
----------------------------------------------
8/25/2003 $10,000 $10,000
8/31/2003 $10,080 $10,022
9/30/2003 $10,344 $10,298
10/31/2003 $10,559 $10,512
11/30/2003 $10,732 $10,652
12/31/2003 $10,986 $10,902
1/31/2004 $11,216 $11,114
2/29/2004 $11,197 $11,112
3/31/2004 $11,261 $11,178
4/30/2004 $11,199 $11,167
5/31/2004 $10,998 $10,995
6/30/2004 $11,160 $11,163
7/31/2004 $11,351 $11,302
8/31/2004 $11,598 $11,482
9/30/2004 $11,781 $11,655
10/31/2004 $12,069 $11,856
11/30/2004 $12,155 $12,003
12/31/2004 $12,318 $12,183
1/31/2005 $12,322 $12,176
2/28/2005 $12,558 $12,337
3/31/2005 $12,166 $12,040
4/30/2005 $12,031 $11,915
5/31/2005 $12,296 $12,059
6/30/2005 $12,490 $12,261
7/31/2005 $12,698 $12,429
TR 26.98% 24.29%
ENDNOTES
(1) For periods prior to July 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 July 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.
Annual Report | 7
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 A TOTAL ASSET VALUE OF $8,600, 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 expenses paid for 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% semiannual 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.
8 | Annual 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 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- ------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,118.60 $2.63
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.32 $2.51
- ------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 0.50%, net of
expense waivers, multiplied by the average account value over the period,
multiplied by 181/365 to reflect the one-half year period.
Annual Report | 9
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTS
FIDUCIARY HIGH INCOME FUND
-------------------------
YEAR ENDED
JULY 31,
2005 2004(c)
-------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................................................... $10.51 $10.00
-------------------------
Income from investment operations:
Net investment income(a) .................................................................. 0.75 0.72
Net realized and unrealized gains (losses) ................................................ 0.45 0.61
-------------------------
Total from investment operations ............................................................ 1.20 1.33
-------------------------
Less distributions from:
Net investment income ..................................................................... (0.78) (0.77)
Net realized gains ........................................................................ (0.35) (0.05)
-------------------------
Total distributions ......................................................................... (1.13) (0.82)
-------------------------
Net asset value, end of year ................................................................ $10.58 $10.51
=========================
Total return(b) ............................................................................. 11.86% 13.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................................................. $8,161 $7,337
Ratios to average net assets:
Expenses .................................................................................. 1.31% 1.36%(d)
Expenses net of waiver and payments by affiliate and expense reduction .................... 0.50% 0.50%(d)
Net investment income ..................................................................... 7.07% 7.33%(d)
Portfolio turnover rate ..................................................................... 53.77% 82.00%
(a) Based on average daily shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) For the period August 25, 2003 (commencement of operations) to July 31,
2004.
(d) Annualized.
10| See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY PRINCIPAL AMOUNT(c) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS 97.4%
COMMERCIAL SERVICES 2.6%
JohnsonDiversey Inc., senior sub. note, B, 9.625%, 5/15/12 ................. United States $ 100,000 $ 102,750
Lamar Media Corp., senior sub. note, 7.25%, 1/01/13 ....................... United States 100,000 106,750
-------------
209,500
-------------
COMMUNICATIONS 10.3%
Dobson Cellular Systems Inc., senior secured note, 9.875%, 11/01/12 ........ United States 100,000 111,125
Inmarsat Finance II PLC, senior note, zero cpn. to 11/15/08,
10.375% thereafter, 11/15/12 ............................................. United Kingdom 100,000 80,500
(a)Intelsat Bermuda Ltd., senior note, 144A, 8.25%, 1/15/13 ................... Bermuda 100,000 105,000
MCI Inc., senior note, 7.688%, 5/01/09 .................................... United States 75,000 78,375
Millicom International Cellular SA, senior note, 10.00%, 12/01/13 ......... Luxembourg 100,000 104,000
Nextel Communications Inc., senior note, 7.375%, 8/01/15 ................... United States 100,000 108,250
Qwest Communications International Inc., senior note, 8.00%, 2/15/14 ....... United States 150,000 145,500
Rogers Wireless Communications Inc., senior secured note,
7.25%, 12/15/12 ........................................................ Canada 100,000 107,750
-------------
840,500
-------------
CONSUMER DURABLES 4.9%
D.R. Horton Inc., senior note, 7.875%, 8/15/11 ............................. United States 100,000 112,524
General Motors Acceptance Corp., 6.875%, 8/28/12 .......................... United States 100,000 95,897
Simmons Co., senior sub. note, 7.875%, 1/15/14 ............................. United States 100,000 94,250
William Lyon Homes Inc., senior note, 7.625%, 12/15/12 ..................... United States 100,000 98,000
-------------
400,671
-------------
CONSUMER NON-DURABLES 2.5%
Smithfield Foods Inc., senior note, 7.00%, 8/01/11 ......................... United States 100,000 105,250
(a)Spectrum Brands Inc., senior sub. note, 144A, 7.375%, 2/01/15 ............. United States 100,000 99,250
-------------
204,500
-------------
CONSUMER SERVICES 19.4%
(b)Adelphia Communications Corp., senior note, 10.875%, 10/01/10 .............. United States 50,000 43,625
Advanstar Communications Inc., senior secured note, 10.75%, 8/15/10 ........ United States 100,000 114,000
AMC Entertainment Inc., senior sub. note, 9.875%, 2/01/12 .................. United States 100,000 101,500
Boyd Gaming Corp., senior sub. note, 6.75%, 4/15/14 ........................ United States 100,000 103,875
CanWest Media Inc., senior note, B, 7.625%, 4/15/13 ........................ Canada 100,000 107,500
Charter Communications Holdings II, senior note, 10.25%, 9/15/10 ........... United States 100,000 103,750
CSC Holdings Inc., senior deb., 7.625%, 7/15/18 ........................... United States 100,000 98,250
Dex Media West LLC, senior sub. note, 9.875%, 8/15/13 ..................... United States 100,000 114,500
DIRECTV Holdings LLC, senior note, 8.375%, 3/15/13 ......................... United States 65,000 72,394
EchoStar DBS Corp., senior note, 6.375%, 10/01/11 .......................... United States 100,000 100,125
Emmis Operating Co., senior sub. note, 6.875%, 5/15/12 ..................... United States 100,000 100,500
LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ..................... United States 100,000 97,000
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 ............. United States 100,000 108,250
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06,
13.75% thereafter, 7/15/11 .............................................. Canada 100,000 101,625
Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18 .................. United States 100,000 110,000
Station Casinos Inc., senior sub. note, 6.875%, 3/01/16 .................... United States 100,000 103,500
-------------
1,580,394
-------------
Annual Report | 11
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY PRINCIPAL AMOUNT(c) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
ELECTRONIC TECHNOLOGY 3.8%
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13 ........... Singapore $ 100,000 $ 103,500
L-3 Communications Corp., senior sub. note, 5.875%, 1/15/15 ................ United States 100,000 98,250
Xerox Corp., senior note, 7.125%, 6/15/10 .................................. United States 100,000 106,000
-------------
307,750
-------------
ENERGY MINERALS 5.1%
(a)Chesapeake Energy Corp., senior note, 144A, 6.25%, 1/15/18 ................ United States 100,000 99,250
(a)Markwest Energy Partners LP, senior note, 144A, 6.875%, 11/01/14 ........... United States 100,000 101,500
Peabody Energy Corp., senior note, B, 6.875%, 3/15/13 ...................... United States 100,000 106,500
Plains Exploration & Production Co., senior note, 7.125%, 6/15/14 .......... United States 100,000 108,500
-------------
415,750
-------------
HEALTH SERVICES 5.1%
(a)Davita Inc., senior sub. note, 144A, 7.25%, 3/15/15 ....................... United States 100,000 104,000
Fresenius Medical Care Capital Trust II, 7.875%, 2/01/08 ................... Germany 100,000 104,750
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 ..................... United States 100,000 95,500
Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%, 10/01/14 ...... United States 100,000 109,250
-------------
413,500
-------------
INDUSTRIAL SERVICES 4.3%
Allied Waste North America Inc., senior secured note, 6.50%, 11/15/10 ...... United States 50,000 49,563
Allied Waste North America Inc., senior secured note, B, 5.75%, 2/15/11 .... United States 100,000 94,750
(a)Grant Prideco Inc., 144A, senior note, 6.125%, 8/15/15 .................... United States 100,000 102,500
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11 ......... United States 100,000 107,250
-------------
354,063
-------------
NON-ENERGY MINERALS 1.2%
(a)Novelis Inc., senior note, 144A, 7.25%, 2/15/15 ........................... Canada 100,000 102,750
-------------
PROCESS INDUSTRIES 10.4%
Abitibi-Consolidated Inc., senior note, 8.375%, 4/01/15 .................... Canada 100,000 104,500
BCP Crystal Holdings Corp., senior sub. note, 9.625%, 6/15/14 .............. United States 100,000 113,500
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13 ........................ United States 100,000 113,500
Jefferson Smurfit Corp., senior note, 7.50%, 6/01/13 ....................... United States 100,000 96,750
Nalco Co., senior sub. note, 8.875%, 11/15/13 ............................. United States 100,000 109,500
Owens-Brockway Glass Container Inc., senior note, 6.75%, 12/01/14 .......... United States 100,000 102,250
(a)PQ Corp., senior sub. note, 144A, 7.50%, 2/15/13 ........................... United States 100,000 100,500
Rhodia SA, senior note, 10.25%, 6/01/10 .................................... France 100,000 108,250
-------------
848,750
-------------
PRODUCER MANUFACTURING 8.7%
Case New Holland Inc., senior note, 9.25%, 8/01/11 ......................... United States 100,000 108,750
(a)Commercial Vehicle Group Inc., senior note, 144A, 8.00%, 7/01/13 ........... United States 100,000 105,000
Fimep SA, senior note, 10.50%, 2/15/13 ..................................... France 100,000 115,500
(a)Invensys PLC, senior note, 144A, 9.875%, 3/15/11 ........................... United Kingdom 100,000 99,000
Milacron Escrow Corp., senior secured note, 11.50%, 5/15/11 ................ United States 75,000 76,500
Nortek Inc., senior sub. note, 8.50%, 9/01/14 .............................. United States 100,000 97,875
TRW Automotive Inc., senior note, 9.375%, 2/15/13 .......................... United States 100,000 112,500
-------------
715,125
-------------
REAL ESTATE DEVELOPMENT 1.3%
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15 ................. United States 100,000 107,250
-------------
12 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FIDUCIARY HIGH INCOME FUND COUNTRY PRINCIPAL AMOUNT(c) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONT.)
REAL ESTATE INVESTMENT TRUSTS 1.3%
Host Marriott LP, senior note, 7.125%, 11/01/13 ........................ United States $ 100,000 $ 104,875
-------------
RETAIL TRADE 2.5%
Leslie's Poolmart, senior note, 7.75%, 2/01/13 ......................... United States 100,000 102,250
Rite Aid Corp., senior note, 9.25%, 6/01/13 ............................ United States 100,000 99,500
-------------
201,750
-------------
TECHNOLOGY SERVICES 2.6%
(a),(d)Sungard Data Systems Inc., senior note, 144A, 9.125%, 8/15/13 .......... United States 100,000 104,375
UGS Corp., senior sub. note, 10.00%, 6/01/12 ........................... United States 100,000 111,500
-------------
215,875
-------------
UTILITIES 11.4%
(a)Allegheny Energy Supply Co. LLC, 144A, 8.25%, 4/15/12 .................. United States 100,000 113,000
(a)Calpine Corp., senior secured note, 144A, 8.50%, 7/15/10 ............... United States 150,000 116,250
(a)Dynegy Holdings Inc., senior secured note, 144A, 10.125%, 7/15/13 ...... United States 100,000 114,500
El Paso Corp., senior note, 7.875%, 6/15/12 ............................ United States 50,000 52,750
El Paso Natural Gas Co., senior note, A, 7.625%, 8/01/10 ............... United States 100,000 105,770
Midwest Generation LLC, senior secured note, 8.75%, 5/01/34 ............ United States 100,000 112,500
(a)Texas Genco LLC, senior note, 144A, 6.875%, 12/15/14 ................... United States 100,000 105,500
(a)TXU Corp., 144A, 5.55%, 11/15/14 ....................................... United States 100,000 97,988
Utilicorp United Inc., senior note, 9.95%, 2/01/11 ..................... United States 100,000 110,750
-------------
929,008
-------------
TOTAL CORPORATE BONDS (COST $7,661,575) ................................ 7,952,011
-------------
------------
SHARES
------------
SHORT TERM INVESTMENT (COST $38,644) 0.5%
MONEY FUND 0.5%
(e)Franklin Institutional Fiduciary Trust Money Market Portfolio .......... United States 38,644 38,644
-------------
TOTAL INVESTMENTS (COST $7,700,219) 97.9% .............................. 7,990,655
OTHER ASSETS, LESS LIABILITIES 2.1% .................................... 170,328
-------------
NET ASSETS 100.0% ...................................................... $ 8,160,983
=============
(a) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering under the
Securities Act of 1933. These securities have been deemed liquid under the
guidelines approved by the Trust's Board of Trustees.
(b) Defaulted securities. See Note 9.
(c) The principal amount is stated in U.S. dollars unless otherwise stated.
(d) See Note 1(b) regarding securities purchased on a delayed delivery basis.
(e) See Note 7 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 13
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2005
------------
FIDUCIARY
HIGH INCOME
FUND
------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................................... $ 7,661,575
Cost - Sweep Money Fund (Note 7) .......................................... 38,644
------------
Total cost of investments ................................................. $ 7,700,219
============
Value - Unaffiliated issuers .............................................. $ 7,952,011
Value - Sweep Money Fund (Note 7) ......................................... 38,644
------------
Total value of investments ................................................ 7,990,655
Receivables:
Investment securities sold ................................................ 259,886
Interest .................................................................. 165,068
Affiliates ................................................................ 24,914
------------
Total assets .......................................................... 8,440,523
------------
Liabilities:
Payables:
Investment securities purchased ........................................... 207,051
Distributions to shareholders ............................................. 48,685
Professional fees ......................................................... 15,182
Other liabilities ........................................................... 8,622
------------
Total liabilities ..................................................... 279,540
------------
Net assets, at value ................................................ $ 8,160,983
============
Net assets consist of:
Distributions in excess of net investment income ............................ $ (18,465)
Net unrealized appreciation (depreciation) .................................. 290,436
Accumulated net realized gain (loss) ........................................ 114,638
Paid-in capital ............................................................. 7,774,374
------------
Net assets, at value ................................................. $ 8,160,983
============
Shares outstanding ............................................................ 771,550
============
Net asset value and maximum offering price per share(a) ....................... $ 10.58
============
(a) Redemption price is equal to net asset value less any applicable
redemption fees retained by the Fund.
14| See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2005
-----------
FIDUCIARY
HIGH INCOME
FUND
-----------
Investment income:
Dividends from Sweep Money Fund (Note 7) ....................................... $ 1,916
Interest ....................................................................... 597,774
----------
Total investment income ................................................... 599,690
----------
Expenses:
Management fees (Note 3a) ...................................................... 23,461
Administrative fees (Note 3b) .................................................. 15,829
Transfer agent fees (Note 3d) .................................................. 225
Custodian fees (Note 4) ........................................................ 129
Reports to shareholders ........................................................ 22,911
Registration and filing fees ................................................... 16,987
Professional fees .............................................................. 17,034
Trustees' fees and expenses .................................................... 3
Amortization of offering costs ................................................. 1,326
Other .......................................................................... 5,925
----------
Total expenses ............................................................ 103,830
Expense reductions (Note 4) ............................................... (12)
Expenses waived/paid by affiliate (Note 3e) ............................... (64,203)
----------
Net expenses ............................................................ 39,615
----------
Net investment income ................................................. 560,075
----------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ...................................... 160,966
Net change in unrealized appreciation (depreciation) on investments ............ 142,162
----------
Net realized and unrealized gain (loss) ......................................... 303,128
----------
Net increase (decrease) in net assets resulting from operations ................. $ 863,203
==========
Annual Report | See notes to financial statements. | 15
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------
FIDUCIARY HIGH
INCOME FUND
-----------------------------
YEAR ENDED JULY 31,
2005 2004(a)
-----------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................... $ 560,075 $ 504,045
Net realized gain (loss) from investments ........................................... 160,966 272,791
Net change in unrealized appreciation (depreciation) on investments ................. 142,162 148,274
-----------------------------
Net increase (decrease) in net assets resulting from operations .................. 863,203 925,110
Distributions to shareholders from:
Net investment income ............................................................... (581,640) (537,261)
Net realized gains .................................................................. (262,490) (33,283)
-----------------------------
Total distributions to shareholders .................................................... (844,130) (570,544)
Capital share transactions (Note 2) .................................................... 804,841 6,982,503
-----------------------------
Net increase (decrease) in net assets ............................................ 823,914 7,337,069
Net assets:
Beginning of year ................................................................... 7,337,069 --
-----------------------------
End of year ......................................................................... $ 8,160,983 $ 7,337,069
=============================
Distributions in excess of net investment income included in net assets:
End of year ......................................................................... $ (18,465) $ (14,259)
=============================
(a) For the period August 25, 2003 (commencement of operations) to July 31,
2004.
16 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
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.
The 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 following summarizes the Fund's significant accounting
policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.
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. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. 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.
Annual Report | 17
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (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
continue 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 of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
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| Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY HIGH INCOME FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. REDEMPTION FEES
Effective June 1, 2004, redemptions and exchanges of Fund shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital. There were no redemption fees for the year.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2005, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
----------------------------------------------------
YEAR ENDED PERIOD ENDED
JULY 31, 2005 JULY 31, 2004(a)
----------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------
Shares sold ......................................... 496,713 $ 5,508,000 711,372 $ 7,118,366
Shares issued in reinvestment of distributions ...... 24,509 262,490 3,124 33,283
Shares redeemed ..................................... (447,783) (4,965,649) (16,385) (169,146)
----------------------------------------------------
Net increase (decrease) ............................. 73,439 $ 804,841 698,111 $ 6,982,503
====================================================
(a) For the period August 25, 2003 (commencement of operations) to July 31,
2004.
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 trustees of the following
subsidiaries:
- -----------------------------------------------------------------------------------------------------------
SUBSIDIARY 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
Annual Report | 19
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY HIGH INCOME FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES
The Fund pays an investment management fee to Fiduciary of 0.30% 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 0.20% per year of the
average daily net assets of the Fund.
C. DISTRIBUTION FEES
The Fund's Board of Trustees has adopted a distribution plan pursuant to Rule
12B-1 under the 1940 Act. The Fund has not activated the plan.
D. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $225, of which $52 was retained by Investor
Services.
E. VOLUNTARY WAIVER AND EXPENSE REIMBURSEMENTS
FT Services agreed in advance to voluntarily waive administrative fees.
Additionally, Fiduciary 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 and Fiduciary are not subject to
reimbursement by the Fund subsequent to the Fund's fiscal year end.
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 year ended July 31, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
20 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY HIGH INCOME FUND
5. INCOME TAXES
The tax character of distributions paid during the year ended July 31, 2005 and
the period ended 2004, was as follows:
------------------------
2005 2004
------------------------
Distributions paid from ordinary income ........ $844,130 $570,544
At July 31, 2005, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:
Cost of investments ........................................ $ 7,718,460
============
Unrealized appreciation .................................... $ 295,523
Unrealized depreciation .................................... (23,328)
------------
Net unrealized appreciation (depreciation) ................. $ 272,195
============
Undistributed ordinary income .............................. $ 128,221
Undistributed long term capital gains ...................... 34,877
------------
Distributable earnings ..................................... $ 163,098
============
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 treatments of bond discounts and premiums.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
year ended July 31, 2005, aggregated $4,627,985 and $4,137,815, 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.
Annual Report | 21
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY HIGH INCOME 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 July 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 AND DEFAULTED SECURITIES
The Fund has 99.5% 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.
The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At July 31, 2005, the value of these securities
was $43,625, representing 0.53% of the Fund's net assets. The Fund discontinues
accruing income on securities for which income has been deemed uncollectible and
provides an estimate for losses on interest receivable. The securities have been
identified on the accompanying Statement of Investments.
10. REGULATORY MATTERS
INVESTIGATIONS AND SETTLEMENTS
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, provided documents and information in response to
subpoenas and/or requests for documents, information and/or testimony. Beginning
in August 2004, the Company entered into settlements with certain of the
regulators and a governmental entity investigating the mutual fund industry
practices noted above. The Company believes that settlement of each of the
matters is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
22 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY HIGH INCOME FUND
10. REGULATORY MATTERS (CONTINUED)
INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
Two of the settlement agreements, those with the SEC and the CAGO concerning
marketing support payments, provide that the distribution of settlement monies
are to be made to the relevant funds, not to individual shareholders. 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 were disbursed to the participating
funds. The Trust did not participate in the CAGO settlement. The SEC has not yet
approved the distribution plan pertaining to the SEC settlement. When approved,
disbursements of settlement monies under the SEC's settlement will be made
promptly in accordance with the terms and conditions of that order.
OTHER LEGAL PROCEEDINGS
On April 12, 2005, the Attorney General of West Virginia filed a complaint in
the Circuit Court of Marshall County, West Virginia against a number of
companies engaged in the mutual fund industry, including Franklin Resources,
Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties
alleging violations of the West Virginia Consumer Credit and Protection Act and
seeking, among other things, civil penalties and attorneys' fees and costs.
Defendants have since removed the matter to the United States District Court for
the Northern District of West Virginia. To the extent applicable to the Company,
the complaint arises from activity that occurred in 2001 and duplicates, in
whole or in part, the allegations asserted in the February 4, 2004 Massachusetts
Administrative Complaint concerning one instance of market timing (the
"Administrative Complaint") and the SEC's findings regarding market timing in
its August 2, 2004 Order (the "SEC Order"), both of which matters were
previously reported.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors
have been named in multiple lawsuits in different courts alleging violations of
various federal securities and state 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, allegedly resulting in market timing activity. The majority
of these lawsuits duplicate, in whole or in part, the allegations asserted in
the Administrative Complaint and the SEC's findings regarding market timing in
the SEC Order. The lawsuits are styled as class actions, or derivative actions
on behalf of either the named funds or Franklin Resources, Inc.
Annual Report | 23
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY HIGH INCOME FUND
10. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and 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 marketing
support payments and/or payment of allegedly excessive commissions and/or
advisory or 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 the named funds.
The Company and fund management strongly believe that the claims made in each of
the lawsuits described above are without merit and intends to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. Public trust and confidence are critical to the Company's business and
any material loss of investor and/or client confidence could result in a
significant decline in assets under management by the Company, which would have
an adverse effect on future financial results. If it is determined that the
Company bears responsibility for any unlawful or inappropriate conduct that
caused losses to the Trust, it is committed to making the Trust or its
shareholders whole, as appropriate. The Company is committed to taking all
appropriate actions to protect the interests of its funds' shareholders.
24| Annual Report
FRANKLIN GLOBAL TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FIDUCIARY HIGH INCOME FUND
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE FRANKLIN GLOBAL TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Fiduciary High Income Fund (one of
the funds constituting the Franklin Global Trust, hereafter referred to as the
"Fund") at July 31, 2005, the results of its operations for the year then ended
and the changes in its net assets and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2005 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 9, 2005
Annual Report | 25
FRANKLIN GLOBAL TRUST
TAX DESIGNATION (UNAUDITED)
FIDUCIARY HIGH INCOME FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund designates
$34,877 as a capital gain dividend for the fiscal year ended July 31, 2005.
26| Annual Report
FRANKLIN GLOBAL TRUST
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Each board member will serve
until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 2000 142 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President,
Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ----------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2000 57 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems
(CALPERS); and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
- ----------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (1932) Trustee Since 2000 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
- ----------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2000 135 Director, Amerada Hess Corporation
One Franklin Parkway (exploration and refining of oil and
San Mateo, CA 94403-1906 gas), H.J. Heinz Company (processed
foods and allied products), RTI
International Metals, Inc. (manufac-
ture and distribution of titanium),
Canadian National Railway (railroad),
and White Mountains Insurance
Group, Ltd. (holding company).
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary
of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary
and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ----------------------------------------------------------------------------------------------------------------------------------
Annual Report | 27
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 2000 116 Director, The California Center for
One Franklin Parkway Land Recycling (redevelopment).
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ----------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (1928) Trustee Since 2000 142 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology), and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known as
MCI WorldCom, Inc. and WorldCom,
Inc.) (communications services)
(1988-2002), White Mountains
Insurance Group, Ltd. (holding com-
pany) (1987-2004) and Spacehab,
Inc. (aerospace services) (1994-2003).
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992);
and President, National Association of Securities Dealers, Inc. (1970-1987).
- ----------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since June 2005 96 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company),
San Mateo, CA 94403-1906 Amerada Hess Corporation (explo-
ration and refining of oil and gas) and
Sentient Jet (private jet service); and
FORMERLY, Director, Becton Dickinson
and Company (medical technology),
Cooper Industries, Inc. (electrical
products and tools and hardware),
Health Net, Inc. (formerly, Foundation
Health) (integrated managed care),
The Hertz Corporation, Pacific
Southwest Airlines, The RCA
Corporation, Unicom (formerly,
Commonwealth Edison) and UAL
Corporation (airlines).
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ----------------------------------------------------------------------------------------------------------------------------------
28 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (1945) Trustee and Since 2000 22 None
One Franklin Parkway Vice President
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 2000 142 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee, Trustee and 126 None
One Franklin Parkway President and President since
San Mateo, CA 94403-1906 Chief 2000 and Chief
Executive Executive Officer
Officer - - Investment
Investment Management
Management since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 49 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 33 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 29
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 49 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 49 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer
and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
EDWARD B. JAMIESON (1948) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; officer of other subsidiaries of Franklin Resources, Inc.;
and officer and trustee of five of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (1937) Vice President Since 2002 Not Applicable Not Applicable
600 Fifth Avenue - AML
Rockefeller Center Compliance
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; Director, FTI Banque, Arch Chemicals, Inc.
and Lingnan Foundation; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
30 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER J. MOLUMPHY (1962) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (1937) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Financial
Suite 2100 Officer and
Fort Lauderdale, FL 33394-3091 Chief
Accounting
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 49 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Trust under the federal securities laws due to
their positions as officers and directors and major shareholders of
Franklin Resources, Inc. (Resources), which is the parent company of the
Trust's adviser and distributor. Harmon E. Burns is considered to be an
interested person of the Trust under the federal securities laws due to
his position as officer and director of Resources. Note: Charles B.
Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE TRUST TO DISCLOSE WHETHER THE TRUST'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE TRUST'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE TRUST'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPALS AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE TRUST'S, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 31
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held February 28, 2005, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for each of seven separate funds comprising
Franklin Global Trust ( "Fund(s)"). In approving the renewal of the Fund's
investment advisory contracts, the Board took into account information furnished
throughout the year at regular Board meetings, as well as information prepared
specifically in connection with the annual renewal review process. Information
furnished and discussed throughout the year included investment performance
reports and related financial information for each Fund, as well as periodic
reports on shareholder services, legal compliance, pricing, brokerage
commissions and execution and other services provided by each Fund's Investment
Manager ("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for each Fund prepared by Lipper Financial Services
("Lipper"), an independent organization, as well as a Fund profitability
analysis report prepared by management. The Lipper reports compared each Fund's
investment performance and expenses with those of other mutual funds deemed
comparable to the Fund as selected by Lipper. The Fund profitability analysis
report discussed the profitability to Franklin Templeton Investments from its
overall U.S. fund operations, as well as on an individual fund-by-fund basis.
Included with such profitability analysis report was information on a
fund-by-fund basis listing portfolio managers and other accounts they manage, as
well as information on management fees charged by the Manager including
management's explanation of differences where relevant and a three-year expense
analysis with an explanation for any increase in expense ratios. Additional
information accompanying such report was a memorandum prepared by management
describing enhancements to the services provided to the Funds by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
advisory contracts for all Funds were approved at the same Board meeting, the
Board dealt with each Fund separately. In approving continuance of the
investment advisory contract for each Fund, the Board, including a majority of
independent Trustees, determined that the existing management fee structure was
fair and reasonable and that continuance of the investment advisory contract was
in the best interests of each Fund and its shareholders. While attention was
given to all information furnished, the following discusses the primary factors
relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Funds and their shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
each Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and
32| Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
other management personnel with the Code of Ethics adopted throughout the
Franklin Templeton fund complex, the adherence to fair value pricing procedures
established by the Board, and the accuracy of net asset value calculations. The
Board also noted the extent of benefits provided Fund shareholders from being
part of the Franklin Templeton family of funds, including the right to exchange
investments between the same class of funds without a sales charge, the ability
to reinvest Fund dividends into other funds and the right to combine holdings in
other funds to obtain a reduced sales charge. Favorable consideration was given
to management's efforts and expenditures in establishing back-up systems and
recovery procedures to function in the event of a natural disaster, it being
noted by the Board that such systems and procedures had functioned smoothly
during the hurricanes and blackout experienced last year in Florida. Other
factors taken into account by the Board were the Manager's best execution
trading policies, including a favorable third-party report on portfolio
execution, as well as the compliance procedures and qualifications of the Chief
Compliance Officer established in accordance with recently adopted SEC
requirements. Consideration was also given to the experience of each Fund's
portfolio management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of a portfolio manager's bonus compensation was the
relative investment performance of the funds he or she managed so as to be
aligned with the interests of Fund shareholders. The Board also took into
account the transfer agent and shareholder services provided Fund shareholders
by an affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties such as Dalbar, and the firsthand
experience of the individual Trustees who deal with the shareholder services
department in their capacities as shareholders in one or more of the various
Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of each Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the contract
renewals. The Lipper report prepared for each individual Fund showed the
investment performance of the Fund in comparison to a performance universe
selected by Lipper. Comparative performance for each Fund was shown for the one
year period ended December 31, 2004, and for additional periods ended that date
depending on when a particular Fund commenced operations. Investment performance
was shown on a total return basis for each Fund and on an income return basis.
The following summarizes the performance results for Fiduciary High Income Fund
and the Board's view of such performance.
The Performance Universe for this Fund consisted of the Fund and all retail and
institutional high current yield funds as selected by Lipper. This Fund has been
in existence for only one full year and the Lipper report showed the Fund's
income and total return to each be in the highest quintile or such performance
universe for the one-year period. The Board was satisfied with this Fund's
performance.
Annual Report | 33
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
COMPARATIVE EXPENSES. Consideration was given to the management fee and total
expense ratios of each Fund compared with those of a group of funds selected by
Lipper as its appropriate Lipper expense group. Prior to making such
comparisons, the Board relied upon a survey showing that the scope of management
advisory services covered under a Fund's investment advisory contract were
similar to those provided by fund managers to other mutual fund groups that
would be used as a basis of comparison in the Lipper reports. In reviewing
comparative costs, emphasis was given to each Fund's management fee in
comparison with the effective management fee that would have been charged by
other funds within its Lipper expense group assuming they were the same size as
the Fund, as well as the actual total expenses of the Fund in comparison with
those of its Lipper expense group. The Lipper effective management fee analysis
includes the advisory and administrative fees directly charged to each Fund as
being part of the management fee. Both the effective management fee rate and
actual total expenses were in the first or least expensive quintile of their
Lipper expense group for the Fund. The Board was satisfied with these
comparative expenses--noting that the Fund benefited from fee waivers or
reimbursements.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
each Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
including potential benefits resulting from allocation of fund brokerage and the
use of "soft" commission dollars to pay for research. Specific attention was
given to the methodology followed in allocating costs to each Fund, it being
recognized that allocation methodologies are inherently subjective and various
allocation methodologies may each be reasonable while producing different
results. In this respect, the Board noted that the cost allocation methodology
was consistent with that followed in profitability report presentations for the
Funds made in prior years and that it had on a biennial basis the Fund's
independent accountants to perform certain procedures specified by the Board
solely for its purpose and use. It was also noted that legal costs and payments
incurred by Franklin Templeton in resolving various legal proceedings arising
from its U.S. fund operations had not been allocated to the Funds for purposes
of determining profitability.
Included in the analysis for each Fund were the revenue and related costs broken
down separately from the management, underwriting and shareholder services
functions provided by the Manager and its affiliates to each Fund, as well as
the relative contribution of each Fund to the profitability of the Manager's
parent. In reviewing and discussing such analysis, management discussed with the
Board its belief that costs incurred in establishing the infrastructure
necessary to the type of mutual fund operations conducted by the Manager and its
corporate affiliates may not be fully reflected in the expenses allocated to
each Fund in determining its profitability, as well as the fact that the level
of profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. The Board also took into account
management's expenditures in improving shareholder
34 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
services provided the Funds, as well as the need to meet additional regulatory
and compliance requirements resulting from the Sarbanes-Oxley Act and recent SEC
requirements. In addition, the Board considered a third-party study comparing
the profitability of the Manager's parent on an overall basis as compared to
other publicly held managers broken down to show profitability from management
operations exclusive of distribution expenses, as well as profitability
including distribution expenses. Based upon their consideration of all these
factors, the Board determined that the level of profits realized by the Manager
under its investment advisory contract with each Fund was not excessive in view
of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Funds grow larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Trustees believe that no
economies of scale existed in the management of the Fund, which had been in
existence for only one full year and benefited from partial fee waivers or
expense reimbursements.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
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.
Annual Report | 35
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[LOGO](R) FRANKLIN TEMPLETON INSTITUTIONAL
FRANKLIN(R) TEMPLETON(R)
INSTITUTIONAL 600 Fifth Avenue
New York, NY 10020
FRANKLINTEMPLETONINSTITUTIONAL.COM
ANNUAL 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 A20050 9/05
- --------------------------------------------------------------------------------
ANNUAL REPORT | 07 31 2005
- --------------------------------------------------------------------------------
THE EXPERTISE OF MANY. THE STRENGTH OF ONE.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
----------------------------------------------------
FRANKLIN GLOBAL TRUST
----------------------------------------------------
Franklin International Smaller Companies Growth Fund
[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INSTITUTIONAL
FRANKLIN o TEMPLETON o FIDUCIARY
Contents
ANNUAL REPORT
- --------------------------------------------------------------------------------
Franklin International Smaller Companies Growth Fund .................... 2
Performance Summary ..................................................... 6
Your Fund's Expenses .................................................... 8
Financial Highlights and Statement of Investments ....................... 10
Financial Statements .................................................... 14
Notes to Financial Statements ........................................... 17
Report of Independent Registered Public Accounting Firm ................. 25
Tax Designation ......................................................... 26
Board Members and Officers .............................................. 27
Shareholder Information ................................................. 32
-----------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
-----------------------------------------------------
Annual Report | 1
ANNUAL 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
Standard & Poor's (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 REPRESENTS 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.
- --------------------------------------------------------------------------------
We are pleased to bring you the Franklin International Smaller Companies Growth
Fund annual report covering the 12-month period ended July 31, 2005.
PERFORMANCE OVERVIEW
The Fund posted a 35.86% cumulative total return for the 12-month period ended
July 31, 2005. The Fund outperformed its benchmark, the S&P/Citigroup Cap-Range
<$2 Billion EPAC Index(1), which returned 31.62% during the same period. You can
find the Fund's long-term performance data in the Performance Summary beginning
on page 6.
ECONOMIC AND MARKET OVERVIEW
The non-U.S. stock market had strong gains in the period under review as
represented by the S&P/Citigroup EPAC BMI Index's gain of 23.8%. Small cap
stocks outperformed large caps over the past year by 920 basis points. Small cap
companies in the S&P/Citigroup EPAC <$2 Billion Index increased 31.6%, compared
to large cap's 22.4% gain. In the period under review, performance varied by
investment style: the S&P/Citigroup EPAC EMI Growth Index gained
(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 11.
2 | Annual Report
27.2% versus the S&P/Citigroup EPAC EMI Value's rise of 31.8%. Sector
performance was mixed over the past year. The energy minerals and industrials
sectors, led by oil and gas production and contract drilling, were the year's
strongest performers on record high crude oil prices. The technology services
sector posted gains of 15.3%, the weakest gains of the index. The electronic
technology and retail trade sectors were the next weakest performers returning
15.9% and 18.0%, respectively.
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 producer manufacturing sector, where SolarWorld AG, a German solar power
company, gained more than 300% in the year. Daifuku Co., a Japanese factory,
distribution, and cleanroom automation company, and Neopost SA, a French mailing
solutions company, also helped performance within that sector. In the health
technology sector, positions in Amplifon SpA, an Italian company that produces
and distributes hearing and biomedical devices; Topcon Corporation, a Japanese
medical equipment manufacturer; and Elekta AB, a Swedish company that provides
systems and clinical solutions for treatment of severe diseases, contributed to
performance. Tandberg Television ASA, a Norwegian television on-demand content
provider and interactive television provider; Tamura Taiko
GEOGRAPHIC DISTRIBUTION
As of 7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
Europe 54.9%
- --------------------------------------------------------------------------------
Asia
- --------------------------------------------------------------------------------
Australia & New Zealand 5.3%
- --------------------------------------------------------------------------------
Short-Term Investments
& Other Net Assets 0.9%
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
As of 7/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
CTS Eventim 2.2%
MEDIA
- --------------------------------------------------------------------------------
Solarworld AG 2.1%
ELECTRICAL EQUIPMENT
- --------------------------------------------------------------------------------
Pfleiderer AG 2.1%
BUILDING PRODUCTS
- --------------------------------------------------------------------------------
Nokian Renkaat OYJ 2.0%
AUTO COMPONENTS
- --------------------------------------------------------------------------------
Daifuku Co. Ltd. 2.0%
MACHINERY
- --------------------------------------------------------------------------------
Tamura Taiko Holdings Inc. 1.9%
COMMUNICATIONS EQUIPMENT
- --------------------------------------------------------------------------------
CHIYODA Corp. 1.9%
CONSTRUCTION & ENGINEERING
- --------------------------------------------------------------------------------
Tandberg Television ASA 1.8%
COMMUNICATIONS EQUIPMENT
- --------------------------------------------------------------------------------
Generale de Sante 1.8%
HEALTH CARE PROVIDERS & SERVICES
- --------------------------------------------------------------------------------
Axalto International NV 1.7%
COMPUTERS & PERIPHERALS
- --------------------------------------------------------------------------------
Annual Report | 3
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 7/31/05
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Machinery 7.3%
Health Care Providers & Services 6.6%
Construction & Engineering 6.6%
Health Care Equipment & Supplies 6.1%
Communications Equipment 5.4%
Electrical Equipment 5.1%
Media 4.7%
Textiles, Apparel & Luxury Goods 4.6%
Household Durables 4.2%
Commercial Services & Supplies 4.0%
Metals & Mining 3.9%
Specialty Retail 3.7%
Building Products 3.4%
Energy Equipment & Services 3.2%
Food Products 3.1%
IT Services 3.0%
Hotels Restaurants & Leisure 3.0%
Diversified Consumer Services 2.5%
Trading Companies & Distributors 2.5%
Auto Components 2.0%
Capital Markets 1.9%
Computers & Peripherals 1.7%
Road & Rail 1.6%
Food & Staples Retailing 1.5%
Personal Products 1.5%
Other 6.0%
Short-Term Investments & Other Net Assets 0.9%
Holdings, a Japanese telecommunications equipment company; and Axalto
International NV, a French smartcard company, all within the electronic
technology sector, benefited results.
Performance was most burdened by selection in the consumer non-durables sector
where weak performance from Oriflame Cosmetics SA, a Belgian skincare and
cosmetics company, and Pulmuone Company Limited, a South Korean fresh and
natural food company, impaired results. We were also hurt by our selection
within the consumer services sector. In particular, a position in Accord
Customer Care Solutions, a Singapore-based mobile communication after-market
service and distribution management company, impaired results.
It is important to recognize the effect of currency movements on the Fund's
performance. 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 12 months
ended July 31, 2005, the U.S. dollar rose in value relative to most non-U.S.
currencies. As a result, the Fund's performance was negatively affected by the
portfolio's significant investment in securities with non-U.S. currency
exposure.
4 | Annual Report
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
Executive Vice President
Fiduciary International, Inc.
[PHOTO OMITTED] /s/ Pratik Patel
Pratik Patel
Vice President
Fiduciary International, Inc.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 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.
Annual Report | 5
PERFORMANCE SUMMARY AS OF 7/31/05
The performance table and graph 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 Fund dividends and capital gain
distributions, if any, and any unrealized gains or losses.
PERFORMANCE(1)
- ------------------------------------------------------------------------------------------------
AVERAGE CUMULATIVE
ANNUAL TOTAL
TOTAL RETURN(2) RETURN(3)
1-YEAR (10/15/02) (10/15/02)
- ------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND 35.86% 32.75% 120.55%
- ------------------------------------------------------------------------------------------------
S&P/CITIGROUP CAP-RANGE <$2 BILLION EPAC INDEX(4) 31.62% 34.73% 129.92%
- ------------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENTS 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.
6 | Annual Report
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,000 in the
Franklin International Smaller Companies Growth Fund from inception on 10/15/02
through 7/31/05, compared with the S&P/Citigroup Cap-Range <$2 Billion EPAC
Index.(4) Total return represents the change in value of an investment over the
periods shown. It includes Fund expenses, account fees, and reinvested
dividends. The unmanaged index includes reinvestment of any income or
distributions. It differs from the Fund in composition and does not pay
management fees or expenses. One cannot invest directly in an index.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
FRANKLIN
INTERNATIONAL SMALLER
COMPANIES GROWTH S&P/CITIGROUP CAP-RANGE
FUND < $2 BILLION EPAC INDEX
10/15/2002 $10,000 $10,000
10/31/2002 $9,970 $9,956
11/30/2002 $10,180 $10,312
12/31/2002 $10,206 $10,235
1/31/2003 $10,025 $10,085
2/28/2003 $9,845 $10,065
3/31/2003 $9,714 $10,003
4/30/2003 $10,597 $10,832
5/31/2003 $11,459 $11,742
6/30/2003 $11,600 $12,300
7/31/2003 $12,092 $12,700
8/31/2003 $12,664 $13,507
9/30/2003 $13,266 $14,276
10/31/2003 $14,992 $15,258
11/30/2003 $15,011 $15,244
12/31/2003 $15,653 $16,178
1/31/2004 $16,688 $16,855
2/29/2004 $16,947 $17,340
3/31/2004 $17,340 $18,249
4/30/2004 $17,113 $17,659
5/31/2004 $16,637 $17,417
6/30/2004 $17,392 $18,225
7/31/2004 $16,234 $17,467
8/31/2004 $16,090 $17,642
9/30/2004 $16,493 $18,081
10/31/2004 $17,072 $18,687
11/30/2004 $18,510 $20,118
12/31/2004 $19,459 $21,100
1/31/2005 $19,921 $21,573
2/28/2005 $20,855 $22,481
3/31/2005 $20,323 $22,092
4/30/2005 $20,069 $21,597
5/31/2005 $20,242 $21,578
6/30/2005 $21,037 $22,122
7/31/2005 $22,055 $22,989
ENDNOTES
(1) For periods prior to July 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 July 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.
Annual Report | 7
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 A TOTAL ASSET VALUE OF $8,600, 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 expenses paid for 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% semiannual 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.
8 | Annual 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's
prospectus for additional information on operating expenses.
- --------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/31/05 VALUE 7/31/05 PERIOD* 1/31/05-7/31/05
- --------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,107.20 $4.96
- --------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 $4.76
- --------------------------------------------------------------------------------------------------------
*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
181/365 to reflect the one-half year period.
Annual Report | 9
FRANKLIN GLOBAL TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
--------------------------------------
YEAR ENDED JULY 31,
2005 2004 2003(c)
--------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................................... $ 15.70 $ 12.06 $ 10.00
-----------------------------------
Income from investment operations:
Net investment income(a) .................................................. 0.16 0.02 0.07
Net realized and unrealized gains (losses) ................................ 5.12 4.07 2.02
-----------------------------------
Total from investment operations ............................................ 5.28 4.09 2.09
-----------------------------------
Less distributions from:
Net investment income ..................................................... (0.03) (0.08) (0.03)
Net realized gains ........................................................ (1.84) (0.37) --
-----------------------------------
Total distributions ......................................................... (1.87) (0.45) (0.03)
-----------------------------------
Net asset value, end of year ................................................ $ 19.11 $ 15.70 $ 12.06
===================================
Total return(b) ............................................................. 35.86% 34.25% 20.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................................. $16,382 $ 8,653 $ 2,411
Ratios to average net assets:
Expenses .................................................................. 1.48% 1.53% 5.06%(d)
Expenses net of waiver and payments by affiliate and expense reduction .... 0.95% 0.95% 0.75%(d)
Net investment income ..................................................... 0.95% 0.13% 0.65%(d)
Portfolio turnover rate ..................................................... 113.27% 108.64% 126.43%
(a) Based on average daily shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) For the period October 15, 2002 (commencement of operations) to July 31,
2003.
(d) Not annualized.
10 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005
- ----------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS 99.1%
AUTO COMPONENTS 2.0%
Nokian Renkaat OYJ .................................... Finland 16,400 $ 332,450
-----------
BUILDING PRODUCTS 3.4%
Kingspan Group PLC .................................... Ireland 16,070 209,445
(a)Pfleiderer AG ......................................... Germany 15,932 342,858
-----------
552,303
-----------
CAPITAL MARKETS 1.9%
ABG Sundal Collier ASA ................................ Norway 138,300 138,415
Intermediate Capital Group PLC ........................ United Kingdom 8,135 165,866
-----------
304,281
-----------
CHEMICALS 1.2%
Toyo Ink Manufacturing Co. Ltd. ....................... Japan 49,000 196,985
-----------
COMMERCIAL SERVICES & SUPPLIES 4.0%
(a)Eurofins Scientific ................................... France 7,340 239,383
Park24 Co. Ltd. ....................................... Japan 11,600 240,388
Sato Corp. ............................................ Japan 7,900 179,873
-----------
659,644
-----------
COMMUNICATIONS EQUIPMENT 5.4%
EVS Broadcast Equipment SA ............................ Belgium 9,050 273,209
Tamura Taiko Holdings Inc. ............................ Japan 39,000 317,730
(a)Tandberg Television ASA ............................... Norway 23,000 293,051
-----------
883,990
-----------
COMPUTERS & PERIPHERALS 1.7%
(a)Axalto International NV ............................... France 8,141 281,299
-----------
CONSTRUCTION & ENGINEERING 6.6%
Astaldi ............................................... Italy 36,067 223,667
CHIYODA Corp. ......................................... Japan 22,000 305,243
Kon Bam Groep NV ...................................... Netherlands 3,870 274,951
United Group Ltd. ..................................... Australia 39,397 274,917
-----------
1,078,778
-----------
DIVERSIFIED CONSUMER SERVICES 2.5%
A.B.C. Learning Centres Ltd. .......................... Australia 44,805 183,117
(a)Mega Study Co. Ltd. ................................... South Korea 5,700 231,721
-----------
414,838
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES 1.1%
Eircom Group PLC ...................................... Ireland 91,330 187,131
-----------
ELECTRICAL EQUIPMENT 5.1%
Neomax Co. Ltd. ....................................... Japan 11,000 233,335
Nexans SA ............................................. France 5,480 243,833
Solarworld AG ......................................... Germany 3,596 349,219
-----------
826,387
-----------
Annual Report | 11
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
ELECTRONIC EQUIPMENT & INSTRUMENTS 0.9%
Laird Group PLC ....................................... United Kingdom 25,590 $ 147,757
-----------
ENERGY EQUIPMENT & SERVICES 3.2%
SBM Offshore NV ....................................... Netherlands 3,370 246,373
(a)Stolt Offshore SA ..................................... Norway 23,640 272,996
-----------
519,369
-----------
FOOD & STAPLES RETAILING 1.5%
Seijo Corp. ........................................... Japan 11,300 251,256
-----------
FOOD PRODUCTS 3.1%
Kibun Food Chemifa Co. Ltd. ........................... Japan 10,200 259,910
Unicharm Petcare Corp. ................................ Japan 4,200 246,543
-----------
506,453
-----------
HEALTH CARE EQUIPMENT & SUPPLIES 6.1%
Elekta AB, B .......................................... Sweden 5,800 272,761
(a)Gyrus Group PLC ....................................... United Kingdom 44,800 237,414
Nakanishi Inc. ........................................ Japan 2,500 244,586
Topcon Corp. .......................................... Japan 13,000 242,807
-----------
997,568
-----------
HEALTH CARE PROVIDERS & SERVICES 6.6%
Amplifon SpA .......................................... Italy 4,250 277,731
Generale de Sante ..................................... France 9,489 288,992
Parkway Holdings Ltd. ................................. Singapore 214,000 270,032
Primary Health Care Ltd ............................... Australia 34,883 246,058
-----------
1,082,813
-----------
HOTELS RESTAURANTS & LEISURE 3.0%
Elior ................................................. France 18,527 247,982
Hana Tour Service Inc. ................................ South Korea 9,290 238,310
-----------
486,292
-----------
HOUSEHOLD DURABLES 4.2%
Fourlis SA ............................................ Greece 26,580 233,958
Rational AG ........................................... Germany 2,039 225,701
(a)Raymarine PLC ......................................... United Kingdom 62,234 235,184
-----------
694,843
-----------
IT SERVICES 3.0%
(a)Alten ................................................. France 8,710 258,720
HIQ International AB .................................. Sweden 49,850 236,679
-----------
495,399
-----------
MACHINERY 7.3%
Andritz AG ............................................ Austria 2,550 244,207
Daifuku Co. Ltd ....................................... Japan 31,000 327,274
OSG Corp. ............................................. Japan 16,000 207,764
Toshiba Machine Co., Ltd .............................. Japan 29,000 168,168
Whatman PLC ........................................... United Kingdom 50,450 245,187
-----------
1,192,600
-----------
12 | Annual Report
FRANKLIN GLOBAL TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
MEDIA 4.7%
Arbeit-Times Co. Ltd. ................................. Japan 18,300 $ 183,920
(a)CTS Eventim ........................................... Germany 7,440 353,143
Zenrin Co. Ltd ........................................ Japan 14,300 237,581
-----------
774,644
-----------
METALS & MINING 3.9%
Macarthur Coal Ltd. ................................... Australia 30,104 168,602
Sumitomo Titanium Corp. ............................... Japan 1,900 242,496
Tubacex SA ............................................ Spain 61,810 231,560
-----------
642,658
-----------
OFFICE ELECTRONICS 1.4%
Neopost SA ............................................ France 2,494 231,920
-----------
PERSONAL PRODUCTS 1.5%
Milbon Co. Ltd. ....................................... Japan 7,700 243,118
-----------
PHARMACEUTICALS 1.4%
Meda AB, A ............................................ Sweden 24,050 235,177
-----------
ROAD & RAIL 1.6%
DSV De Sammenslut Vognmaend AS, B ..................... Denmark 2,750 259,645
-----------
SPECIALTY RETAIL 3.7%
Aoyama Trading Co. Ltd. ............................... Japan 6,200 157,158
Hard Off Corp. Ltd. ................................... Japan 9,000 219,727
Point Inc. ............................................ Japan 5,540 232,075
-----------
608,960
-----------
TEXTILES, APPAREL & LUXURY GOODS 4.6%
Koninklijke Ten Cate NV ............................... Netherlands 2,560 258,232
Peace Mark Holdings Ltd. .............................. Hong Kong 910,000 232,964
Top Form International Ltd. ........................... Hong Kong 800,000 254,718
-----------
745,914
-----------
TRADING COMPANIES & DISTRIBUTORS 2.5%
Advan Co. Ltd. ........................................ Japan 17,000 214,853
Grafton Group PLC ..................................... Ireland 16,813 191,203
-----------
406,056
-----------
TOTAL COMMON STOCKS (COST $12,820,384) ................ 16,240,528
-----------
---------
PRINCIPAL
AMOUNT
---------
SHORT TERM INVESTMENT (COST $140,000) 0.9%
TIME DEPOSIT 0.9%
Deutsche Bank Securities, 3.25%, 8/01/05 .............. United States $140,000 140,000
-----------
TOTAL INVESTMENTS (COST $12,960,384) 100.0% ........... 16,380,528
OTHER ASSETS, LESS LIABILITIES 0.0%(b) ................ 1,837
-----------
NET ASSETS 100.0% ..................................... $16,382,365
===========
(a) Non-income producing.
(b) Rounds to less than 0.05% of net assets.
Annual Report | See notes to financial statements. | 13
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2005
-------------
FRANKLIN
INTERNATIONAL
SMALLER
COMPANIES
GROWTH FUND
-------------
Assets:
Investments in securities:
Cost ....................................................... $12,960,384
===========
Value ...................................................... $16,380,528
Cash ......................................................... 10,621
Receivables:
Dividends and interest ..................................... 13,582
Affiliates ................................................. 5,085
-----------
Total assets ........................................... 16,409,816
-----------
Liabilities:
Payables:
Reports to shareholders .................................... 8,610
Professional fees .......................................... 16,828
Other liabilities ............................................ 2,013
-----------
Total liabilities ...................................... 27,451
-----------
Net assets, at value ................................. $16,382,365
===========
Net assets consist of:
Undistributed net investment income .......................... $ 98,586
Net unrealized appreciation (depreciation) ................... 3,420,073
Accumulated net realized gain (loss) ......................... 795,711
Paid-in capital .............................................. 12,067,995
-----------
Net assets, at value ................................. $16,382,365
===========
Shares outstanding ............................................. 857,231
===========
Net asset value and maximum offering price per share(a) ........ $ 19.11
===========
(a) Redemption price is equal to net asset value less any applicable
redemption fees retained by the Fund.
14 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2005
-------------
FRANKLIN
INTERNATIONAL
SMALLER
COMPANIES
GROWTH FUND
-------------
Investment income:
Dividends (net of foreign taxes of $21,690) ................................. $ 219,411
Interest .................................................................... 8,353
-----------
Total investment income ................................................. 227,764
-----------
Expenses:
Management fees (Note 3a) .................................................. 89,724
Administrative fees (Note 3b) ............................................... 23,926
Transfer agent fees (Note 3c) ............................................... 189
Custodian fees (Note 4) ..................................................... 3,757
Reports to shareholders ..................................................... 22,197
Registration and filing fees ................................................ 15,664
Professional fees ........................................................... 15,799
Trustees' fees and expenses ................................................. 5
Other ....................................................................... 6,032
-----------
Total expenses .......................................................... 177,293
Expense reductions (Note 4) ............................................ (818)
Expenses waived/paid by affiliate (Note 3d) ............................. (62,877)
-----------
Net expenses .......................................................... 113,598
-----------
Net investment income ............................................... 114,166
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................... 1,150,466
Foreign currency transactions ............................................. (7,938)
-----------
Net realized gain (loss) .............................................. 1,142,528
-----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... 2,327,716
Translation of assets and liabilities denominated in foreign currencies ... 3,017
-----------
Net change in unrealized appreciation (depreciation) ................. 2,330,733
-----------
Net realized and unrealized gain (loss) ....................................... 3,473,261
-----------
Net increase (decrease) in net assets resulting from operations ............... $ 3,587,427
===========
Annual Report | See notes to financial statements. | 15
FRANKLIN GLOBAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------
FRANKLIN INTERNATIONAL SMALLER
COMPANIES GROWTH FUND
------------------------------
YEAR ENDED JULY 31,
2005 2004
------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 114,166 $ 9,686
Net realized gain (loss) from investments and foreign currency transactions ........... 1,142,528 873,249
Net change in unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies ......................... 2,330,733 713,330
-----------------------------
Net increase (decrease) in net assets resulting from operations ................. 3,587,427 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) ..................................................... 5,241,249 4,842,873
-----------------------------
Net increase (decrease) in net assets ........................................... 7,728,943 6,241,930
Net assets:
Beginning of year ....................................................................... 8,653,422 2,411,492
-----------------------------
End of year ............................................................................. $ 16,382,365 $ 8,653,422
=============================
Undistributed net investment income included in net assets:
End of year ............................................................................. $ 98,586 $ 11,519
=============================
16 | See notes to financial statements. | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
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.
The Franklin International Smaller Companies Fund (the Fund) included in this
report is diversified. The financial statements of the remaining funds in the
series are presented separately.
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 investments 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. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. 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
Annual Report | 17
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. FOREIGN CURRENCY TRANSLATION (CONTINUED)
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, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.
D. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
continue 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.
18 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (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 of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
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 year.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
Annual Report | 19
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2005, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
----------------------------------------------------
YEAR ENDED JULY 31,
2005 2004
----------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------
Shares sold ...................................... 283,652 $ 4,911,596 349,891 $ 4,834,480
Shares issued in reinvestment of distributions ... 44,330 714,154 6,040 88,970
Shares redeemed .................................. (21,808) (384,501) (4,874) (80,577)
----------------------------------------------------
Net increase (decrease) .......................... 306,174 $ 5,241,249 351,057 $ 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 0.75% 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 0.20% per year of the
average daily net assets of the Fund.
C. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $189, of which $36 was retained by Investor
Services.
20 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. VOLUNTARY WAIVER AND EXPENSE REIMBURSEMENTS
FT Services agreed in advance to voluntarily waive administrative fees.
Additionally, Advisers agreed in advance to voluntarily waive a portion of
management fees, as noted in the Statement of Operations. Total expenses waived
by Advisers and FT Services are not subject to reimbursement by the Fund
subsequent to the Fund's fiscal year end.
E. OTHER AFFILIATED TRANSACTIONS
At July 31, 2005, Franklin Resources Inc. owned 23.33% 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 year ended July 31, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
At July 31, 2005, the Fund had deferred currency losses occurring subsequent to
October 31, 2004 of $4,142. For tax purposes, such losses will be reflected in
the year ending July 31, 2006.
The tax character of distributions paid during the years ended July 31, 2005 and
2004, was as follows:
----------------------
2005 2004
----------------------
Distributions paid from:
Ordinary income .................................... $ 549,780 $197,208
Long term capital gain ............................. $ 549,953 $ --
----------------------
$1,099,733 $197,208
======================
Net investment income 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.
Annual Report | 21
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
5. INCOME TAXES (CONTINUED)
At July 31, 2005, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:
Cost of investments ........................................... $ 12,962,975
============
Unrealized appreciation ....................................... $ 3,637,819
Unrealized depreciation ....................................... (220,266)
------------
Net unrealized appreciation (depreciation) .................... $ 3,417,553
============
Undistributed ordinary income ................................. $ 513,263
Undistributed long term capital gains ......................... 387,768
------------
Distributable earnings ........................................ $ 901,031
============
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
year ended July 31, 2005 aggregated $17,650,921 and $13,227,674, respectively.
7. RISK OF INVESTING IN FOREIGN SECURITIES
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values, changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.
8. REGULATORY MATTERS
INVESTIGATIONS AND SETTLEMENTS
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, provided documents and information in response to
subpoenas and/or requests for documents, information and/or testimony. Beginning
in August 2004, the Company entered into settlements with certain of the
regulators and a governmental entity investigating the mutual fund industry
practices
22 | Annual Report
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
8. REGULATORY MATTERS (CONTINUED)
INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
noted above. The Company believes that settlement of each of the matters is in
the best interest of the Company and shareholders of the Franklin, Templeton,
and Mutual Series mutual funds (the "funds").
Two of the settlement agreements, those with the SEC and the CAGO concerning
marketing support payments, provide that the distribution of settlement monies
are to be made to the relevant funds, not to individual shareholders. 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 were disbursed to the participating
funds. The Trust did not participate in the CAGO settlement. The SEC has not yet
approved the distribution plan pertaining to the SEC settlement. When approved,
disbursements of settlement monies under the SEC's settlement will be made
promptly in accordance with the terms and conditions of that order.
OTHER LEGAL PROCEEDINGS
On April 12, 2005, the Attorney General of West Virginia filed a complaint in
the Circuit Court of Marshall County, West Virginia against a number of
companies engaged in the mutual fund industry, including Franklin Resources,
Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties
alleging violations of the West Virginia Consumer Credit and Protection Act and
seeking, among other things, civil penalties and attorneys' fees and costs.
Defendants have since removed the matter to the United States District Court for
the Northern District of West Virginia. To the extent applicable to the Company,
the complaint arises from activity that occurred in 2001 and duplicates, in
whole or in part, the allegations asserted in the February 4, 2004 Massachusetts
Administrative Complaint concerning one instance of market timing (the
"Administrative Complaint") and the SEC's findings regarding market timing in
its August 2, 2004 Order (the "SEC Order"), both of which matters were
previously reported.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors
have been named in multiple lawsuits in different courts alleging violations of
various federal securities and state 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, allegedly resulting in market timing activity. The majority
of these lawsuits duplicate, in whole or in part, the allegations asserted in
the Administrative
Annual Report | 23
FRANKLIN GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
8. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
Complaint and the SEC's findings regarding market timing in the SEC Order. The
lawsuits are styled as class actions, or derivative actions on behalf of either
the named funds or Franklin Resources, Inc.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and 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 marketing
support payments and/or payment of allegedly excessive commissions and/or
advisory or 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 the named funds.
The Company and fund management strongly believe that the claims made in each of
the lawsuits described above are without merit and intends to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. Public trust and confidence are critical to the Company's business and
any material loss of investor and/or client confidence could result in a
significant decline in assets under management by the Company, which would have
an adverse effect on future financial results. If it is determined that the
Company bears responsibility for any unlawful or inappropriate conduct that
caused losses to the Trust, it is committed to making the Trust or its
shareholders whole, as appropriate. The Company is committed to taking all
appropriate actions to protect the interests of its funds' shareholders.
24 | Annual Report
FRANKLIN GLOBAL TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE FRANKLIN GLOBAL TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin International Smaller
Companies Growth Fund (one of the funds constituting the Franklin Global Trust,
hereafter referred to as the "Fund") at July 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2005 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 9, 2005
Annual Report | 25
FRANKLIN GLOBAL TRUST
TAX DESIGNATION (UNAUDITED)
FRANKLIN INTERNATIONAL SMALLER COMPANIES GROWTH FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates $738,381 as a capital gain dividend for the fiscal year ended July
31, 2005.
Under Section 854(b)(2) of the Code, the Fund designates up to a maximum of
$226,932 as qualified dividends for purposes of the maximum rate under Section
1(h)(11) of the Code for the fiscal year ended July 31, 2005. In January 2006,
shareholders will receive Form 1099-DIV which will include their share of
qualified dividends distributed during the calendar year 2005. Shareholders are
advised to check with their tax advisors for information on the treatment of
these amounts on their individual income tax returns.
At July 31, 2005, 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. The Fund elects to treat
foreign taxes paid under Section 853 of the Code. This election will allow
shareholders of record in December 2005, 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 foreign tax information will be disclosed in the January 31, 2006,
semi-annual report of the Fund.
26 | Annual Report
FRANKLIN GLOBAL TRUST
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Each board member will serve
until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 2000 142 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2000 57 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS);
and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and
Chief Counsel, California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (1932) Trustee Since 2000 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch (until 2002) (Consultant (2003)).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2000 135 Director, Amerada Hess Corporation
One Franklin Parkway (exploration and refining of oil and
San Mateo, CA 94403-1906 gas), H.J. Heinz Company (processed
foods and allied products), RTI
International Metals, Inc. (manufac-
ture and distribution of titanium),
Canadian National Railway (railroad),
and White Mountains Insurance
Group, Ltd. (holding company).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 27
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 2000 116 Director, The California Center for
One Franklin Parkway Land Recycling (redevelopment).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (1928) Trustee Since 2000 142 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology), and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known as
MCI WorldCom, Inc. and WorldCom,
Inc.) (communications services)
(1988-2002), White Mountains
Insurance Group, Ltd. (holding com-
pany) (1987-2004) and Spacehab,
Inc. (aerospace services) (1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
Chairman, White River Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since June 2005 96 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company),
San Mateo, CA 94403-1906 Amerada Hess Corporation (explo-
ration and refining of oil and gas)
and Sentient Jet (private jet
service); and FORMERLY, Director,
Becton Dickinson and Company (medical
technology), Cooper Industries, Inc.
(electrical products and tools and
hardware), Health Net, Inc. (formerly,
Foundation Health) (integrated managed
care), The Hertz Corporation, Pacific
Southwest Airlines, The RCA
Corporation, Unicom (formerly,
Commonwealth Edison) and UAL
Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
28 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (1945) Trustee and Since 2000 22 None
One Franklin Parkway Vice President
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 2000 142 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee, Trustee and 126 None
One Franklin Parkway President and President since
San Mateo, CA 94403-1906 Chief 2000 and Chief
Executive Executive Officer
Officer - - Investment
Investment Management
Management since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 49 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 33 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 29
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 49 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 49 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer
and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
EDWARD B. JAMIESON (1948) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; officer of other subsidiaries of Franklin Resources, Inc.;
and officer and trustee of five of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (1937) Vice President Since 2002 Not Applicable Not Applicable
600 Fifth Avenue - AML
Rockefeller Center Compliance
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; Director, FTI Banque, Arch Chemicals, Inc.
and Lingnan Foundation; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
30 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER J. MOLUMPHY (1962) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Advisers, Inc.; and officer of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (1937) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 49 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources, Inc.
(Resources), which is the parent company of the Trust's adviser and distributor.
Harmon E. Burns is considered to be an interested person of the Trust under the
federal securities laws due to his position as officer and director of
Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE TRUST TO DISCLOSE WHETHER THE TRUST'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE TRUST'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE TRUST'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPALS AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE TRUST'S, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 31
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held February 28, 2005, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for each of seven separate funds comprising
Franklin Global Trust ("Fund(s)"). In approving the renewal of the Fund's
investment advisory contracts, the Board took into account information furnished
throughout the year at regular Board meetings, as well as information prepared
specifically in connection with the annual renewal review process. Information
furnished and discussed throughout the year included investment performance
reports and related financial information for each Fund, as well as periodic
reports on shareholder services, legal compliance, pricing, brokerage
commissions and execution and other services provided by the Investment Manager
("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for each Fund prepared by Lipper Financial Services
("Lipper"), an independent organization, as well as a Fund profitability
analysis report prepared by management. The Lipper reports compared each Fund's
investment performance and expenses with those of other mutual funds deemed
comparable to the Fund as selected by Lipper. The Fund profitability analysis
report discussed the profitability to Franklin Templeton Investments from its
overall U.S. fund operations, as well as on an individual fund-by-fund basis.
Included with such profitability analysis report was information on a
fund-by-fund basis listing portfolio managers and other accounts they manage, as
well as information on management fees charged by the Manager including
management's explanation of differences where relevant and a three-year expense
analysis with an explanation for any increase in expense ratios. Additional
information accompanying such report was a memorandum prepared by management
describing enhancements to the services provided to the funds by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
advisory contracts for all Funds were approved at the same Board meeting, the
Board dealt with each Fund separately. In approving continuance of the
investment advisory contract for each Fund, the Board, including a majority of
independent Trustees, determined that the existing management fee structure was
fair and reasonable and that continuance of the investment advisory contract was
in the best interests of each Fund and its shareholders. While attention was
given to all information furnished, the following discusses the primary factors
relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Funds and their shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
each Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the Code of Ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board,
32 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
and the accuracy of net asset value calculations. The Board also noted the
extent of benefits provided Fund shareholders from being part of the Franklin
Templeton family of funds, including the right to exchange investments between
the same class of funds without a sales charge, the ability to reinvest Fund
dividends into other funds and the right to combine holdings in other funds to
obtain a reduced sales charge. Favorable consideration was given to management's
efforts and expenditures in establishing back-up systems and recovery procedures
to function in the event of a natural disaster, it being noted by the Board that
such systems and procedures had functioned smoothly during the hurricanes and
blackout experienced last year in Florida. Other factors taken into account by
the Board were the Manager's best execution trading policies, including a
favorable third-party report on portfolio execution, as well as the compliance
procedures and qualifications of the Chief Compliance Officer established in
accordance with recently adopted SEC requirements. Consideration was also given
to the experience of each Fund's portfolio management team, the number of
accounts managed and general method of compensation. In this latter respect, the
Board noted that a primary factor in management's determination of a portfolio
manager's bonus compensation was the relative investment performance of the
funds he or she managed so as to be aligned with the interests of Fund
shareholders. The Board also took into account the transfer agent and
shareholder services provided Fund shareholders by an affiliate of the Manager,
noting continuing expenditures by management to increase and improve the scope
of such services, periodic favorable reports on such service conducted by third
parties such as Dalbar, and the firsthand experience of the individual Trustees
who deal with the shareholder services department in their capacities as
shareholders in one or more of the various Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of each Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the contract
renewals. The Lipper report prepared for each individual Fund showed the
investment performance of the Fund in comparison to a performance universe
selected by Lipper. Comparative performance for each Fund was shown for the
one-year period ended December 31, 2004, and for additional periods ended that
date depending on when a particular Fund commenced operations. Investment
performance was shown on a total return basis for each Fund and on an income
return basis as well for the Franklin International Smaller Companies Growth
Fund. The following summarizes the performance results for the Franklin
International Smaller Companies Growth Fund and the Board's view of such
performance.
The performance universe for this Fund consisted of the Fund and all retail and
institutional international small-cap funds as selected by Lipper. This Fund has
been operational for only one full year and the Lipper report for the one-year
period showed its total return to be in the third or middle quintile of such
performance universe. The Board was satisfied with such performance, noting the
Fund's total return exceeded 24% as shown in the Lipper report for the one-year
period.
Annual Report | 33
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
COMPARATIVE EXPENSES. Consideration was given to the management fee and total
expense ratios of each Fund compared with those of a group of funds selected by
Lipper as its appropriate Lipper expense group. Prior to making such
comparisons, the Board relied upon a survey showing that the scope of management
advisory services covered under a Fund's investment advisory contract were
similar to those provided by fund managers to other mutual fund groups that
would be used as a basis of comparison in the Lipper reports. In reviewing
comparative costs, emphasis was given to each Fund's management fee in
comparison with the effective management fee that would have been charged by
other funds within its Lipper expense group assuming they were the same size as
the Fund, as well as the actual total expenses of the Fund in comparison with
those of its Lipper expense group. The Lipper effective management fee analysis
includes the advisory and administrative fees directly charged to each Fund as
being part of the management fee. Both the effective management fee rate and
actual total expenses were in the first or least expensive quintile of their
Lipper expense group for the Franklin International Smaller Companies Growth
Fund. The Board was satisfied with these comparative expenses--noting that the
Funds benefited from fee waivers or reimbursements.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
each Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the individual funds. The Board also considered the extent to which the
Manager and its affiliates might derive ancillary benefits from fund operations,
including potential benefits resulting from allocation of fund brokerage and the
use of "soft" commission dollars to pay for research. Specific attention was
given to the methodology followed in allocating costs to each Fund, it being
recognized that allocation methodologies are inherently subjective and various
allocation methodologies may each be reasonable while producing different
results. In this respect, the Board noted that the cost allocation methodology
was consistent with that followed in profitability report presentations for the
Funds made in prior years and that it had on a biennial basis the Fund's
independent accountants to perform certain procedures specified by the Board
solely for its purpose and use. It was also noted that legal costs and payments
incurred by Franklin Templeton in resolving various legal proceedings arising
from its U.S. fund operations had not been allocated to the Funds for purposes
of determining profitability.
Included in the analysis for each Fund were the revenue and related costs broken
down separately from the management, underwriting and shareholder services
functions provided by the Manager and its affiliates to each Fund, as well as
the relative contribution of each Fund to the profitability of the Manager's
parent. In reviewing and discussing such analysis, management discussed with the
Board its belief that costs incurred in establishing the infrastructure
necessary to the type of mutual fund operations conducted by the Manager and its
corporate affiliates may not be fully reflected in the expenses allocated to
each Fund in determining its profitability, as well as the fact that the level
of profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. The Board also took into account
management's expenditures in improving
34 | Annual Report
FRANKLIN GLOBAL TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
shareholder services provided the Funds, as well as the need to meet additional
regulatory and compliance requirements resulting from the Sarbanes-Oxley Act and
recent SEC requirements. In addition, the Board considered a third-party study
comparing the profitability of the Manager's parent on an overall basis as
compared to other publicly held managers broken down to show profitability from
management operations exclusive of distribution expenses, as well as
profitability including distribution expenses. Based upon their consideration of
all these factors, the Board determined that the level of profits realized by
the Manager under its investment advisory contract with each Fund was not
excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Funds grow larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Trustees believed that
no economies of scale existed in the management of the Franklin International
Smaller Companies Growth Fund, which had been operational for one full year and
benefited from partial fee waivers or expense reimbursements.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
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.
Annual Report | 35
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[LOGO](R) FRANKLIN TEMPLETON INSTITUTIONAL
FRANKLIN(R) TEMPLETON(R)
INSTITUTIONAL 600 Fifth Avenue
New York, NY 10020
FRANKLINTEMPLETONINSTITUTIONAL.COM
ANNUAL 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 A2005 09/05
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 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $16,058 for the fiscal year ended July 31, 2005 and $146,965 for the fiscal
year ended July 31, 2004.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial statements
were $0 for the fiscal year ended July 31, 2005 and $48,579 for the fiscal year
ended July 31, 2004. The services for which these fees were paid included
attestation services.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $19,591 for the fiscal year ended
July 31, 2005 and $0 for the fiscal year ended July 31, 2004. The services for
which these fees were paid included tax compliance and advise.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended July 31, 2005 and
$90 for the fiscal year ended July 31, 2004. The services for which these fees
were paid included review of materials provided to the fund Board in connection
with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $4,500 for the fiscal year ended July 31,
2005 and $99,910 for the fiscal year ended July 31, 2004. The services for which
these fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process and the
review of the ICI transfer agent survey.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $24,091 for the fiscal year ended July 31, 2005 and $148,579 for
the fiscal year ended July 31, 2004.
(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES
FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT
INVESTMENT COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END
MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY Holders. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 11. CONTROLS AND PROCEDURES. (A) EVALUATION OF DISCLOSURE CONTROLS
AND PROCEDURES. The Registrant maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed in the
Registrant's filings under the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 is recorded, processed, summarized and reported
within the periods specified in the rules and forms of the Securities and
Exchange Commission. Such information is accumulated and communicated to the
Registrant's management, including its principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. The Registrant's management, including the principal executive
officer and the principal financial officer, recognizes that any set of controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN GLOBAL TRUST
By /s/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 26, 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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 26, 2005
By /s/GALEN G. VETTER
-------------------
Galen G. Vetter
Chief Financial Officer
Date September 26, 2005