MESSAGE FROM THE PRESIDENT
Table of Contents Page
Message from the President 1
Fund Reports
Franklin Corporate Qualified
Dividend Fund 3
Franklin Rising Dividends Fund 9
Franklin Investment Grade
Income Fund 15
Statement of Investments 20
Financial Statements 27
Notes to Financial Statements 31
Report of Independent Auditors 37
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most Fund reports, such as the Fund's annual and semi-annual
reports, may be mailed to a household. Additional copies may be obtained,
without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236).
November 15, 1995
Dear Shareholder:
It's a pleasure to bring you the ninth annual report of the Franklin Managed
Trust for the period ended September 30, 1995.
Overall, the Trust's fiscal year was one of contrasts. During the first five
months of the Trust's reporting period, the Federal Reserve Board continued its
aggressive campaign to control inflation, raising the federal funds target rate
twice, to 6.00% from 4.75%.
By March 1995, the effects of these tightenings were realized. U.S. Gross
Domestic Product (GDP) fell from an annualized rate of 5.1% in the fourth
quarter of 1994 to just 2.7% and 1.1% in the first and second quarters of 1995,
respectively.* This led many to believe that the Fed had been overzealous in its
bid to increase interest rates, and prompted fears that another recession was
nearing. In response to this slowed economic growth, the Fed lowered the federal
funds target rate on July 6, 1995, to 5.75% from 6.00%. Since then, the economy
appears to have stabilized, although further rate cuts could be forthcoming.
*U.S. Commerce Department.
While this stable economic environment proved beneficial to the performance of
the funds in the Trust, no one can predict what lies ahead for investors.
There's no guarantee that the markets will continue to rise over the months to
come. As you know, markets experience both ups and downs, and volatility is a
normal part of investing.
Market fluctuations are why we have always encouraged our shareholders to focus
on their long-term investment goals. If you leave your money invested over the
long term, you can usually ignore short-term volatility that will accompany
stock and bond markets.
The following pages contain specific information about each fund's performance,
including the effects of market conditions and management strategies on the
funds. While each fund has a distinct investment objective, the fundamental
principles remain the same: careful selection and constant professional
investment supervision.
We appreciate your continued support, welcome your comments and look forward to
serving you in the years to come.
Sincerely,
William J. Lippman
President
Franklin Managed Trust
FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
Fund Objective:
The Franklin Corporate Qualified Dividend Fund is designed to serve as an
income-producing vehicle for the cash reserves of taxable corporations. The fund
seeks to generate high after-tax income for corporations by investing primarily
in the equity securities of domestic corporations whose dividends qualify for
the 70% corporate dividends-received deduction.
The fund's share price, as measured by net asset value, fluctuated narrowly
throughout the fiscal year, ending almost unchanged at $23.76 on September 30,
1995, up slightly from $23.69 at the start of the fiscal year. We invested a
large portion of the fund's assets in variable rate preferred stocks, which
promptly reset their dividend rates in response to the generally higher-yielding
interest rate environments. This strategy enabled us to increase the monthly
dividend to 8.7 cents from 8.3 cents per share, effective with the December 1994
distribution. We again adjusted the dividend to 10 cents per share, starting
with the February 1995 distribution.
Franklin Corporate Qualified Dividend Fund
Portfolio Breakdown
As a percentage of total net assets
Sector 9/30/94 9/30/95
Auction Rate
Preferred Stocks 31.6% 37.5%
Fixed-Rate
Preferred Stocks 24.3% 26.2%
Adjustable Rate
Preferred Stocks 18.5% 16.1%
Cash & Equivalents 25.6% 20.2%
The table above indicates that the portfolio composition remained somewhat
similar throughout the fiscal year. The fixed-rate preferred stocks, all of
which have limited terms (ranging from a few months to a few years) until
redemption, have a price-sensitivity to interest rates approximating that of
short- to intermediate-term bonds.
Adjustable-rate preferred stocks are even less price-sensitive to changes in
interest rates as they reset their dividends quarterly (according to a yield
spread fixed at the time of their offerings) relative to the highest of three
U.S. Treasury benchmarks: the three-month Treasury bill rate, the 10-year
Constant Maturity Rate, and the 20-year Constant Maturity Rate. Auction-rate
preferred stocks and cash equivalents exhibit the lowest price sensitivity.
Auction-rate preferred stocks normally reset their rates every 49 days pursuant
to Dutch auction. Dutch auction preferreds are typically priced at par plus a
factor equivalent to the amount of dividends "earned" since the last
distribution. Investors have the right to redeem their securities at par on each
auction date.
Franklin Corporate Qualified Dividend Fund
Top 10 Stock Holdings on September 30, 1995
As a percentage of total net assets
Company % of total
Industry net assets
Louisiana Power & Light 5.53%
Utilities
Transamerica 5.42%
Financial
Ford Holdings, Inc. 5.03%
Financial
Bankers Trust 4.99%
Commercial Banks
Rhone-Poulenc Rorer 4.69%
Pharmaceuticals
Northern Trust 4.68%
Insurance
G.E. Capital Corp. 4.68%
Industrial
Sunamerica Corp. 4.37%
Insurance
Household Finance Co. 3.72%
Financial
Rochester Gas & Electric 3.71%
Utilities
For a complete list of portfolio holdings, please see page 20 of this report.
We seek to control various sources of potential risk, including interest rate
risk and credit risk, through careful selection of securities and active
management of the fund. National ratings services such as Standard & Poor's and
Moody's, and our own in-house evaluations, provide your portfolio managers with
a guide to each security issuer's credit quality.
The chart to the right illustrates the qualitative breakdown of the fund's
investments. As described in your fund's prospectus, these ratings, while not
guaranteeing the fund's market value or signifying approval of the shares by
national ratings agencies, reflect the credit quality of the securities and are
subject to change.
GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking forward, we will continue to emphasize investment quality issuers and
frequent dividend resets as means of minimizing price fluctuations. We believe
this conservative approach should position the fund well for the future.
*The ratings reflect Standard & Poor's assessment of the overall credit quality
of the fund's portfolio, based primarily on the fund's stated objectives and
policies. Non-rated bonds were judged to be of comparable credit quality by the
fund's managers.
Performance Summary
Your fund provided a one-year cumulative total return of +5.26% for the period
ended September 30, 1995. Cumulative total return reflects the change in value
of an investment over the periods indicated, assuming reinvestment of dividends
and capital gains, if any. It does not include the maximum 1.5% initial sales
charge. Past performance is not predictive of future results.
During the reporting period, the fund's price per share, as measured by net
asset value, increased 7 cents to $23.76 on September 30, 1995, from $23.69 on
September 30, 1994. The fund paid income distributions totaling $1.14 per share
over the same period. We are pleased to report that due to the fund's increased
income, we were able to raise your monthly distribution twice during the year:
to 8.7 cents ($0.087) from 8.3 cents ($0.083) per share, effective with the
December 1994 distribution, and to 10 cents ($0.10) per share, effective with
the February 1995 distribution. Dividends will vary based on portfolio earnings,
and past distributions are not necessarily indicative of future trends.
The fund's distribution rate was 4.98%, based on an annualization of the current
monthly dividend of 10 cents per share and the maximum offering price of $24.12
on September 30, 1995. Based on the 1995 maximum federal corporate tax rate of
35%, the taxable equivalent distribution rate was 6.86%. These calculations
assume that 100% of your fund's dividends qualify for the 70% corporate
dividends-received deduction.
The charts on the following page compare the Franklin Corporate Qualified
Dividend Fund's performance since inception with the unmanaged Payden & Rygel
90-day T-Bill Index. As you can see, the fund's pre-tax performance has
surpassed that of the index, despite the inherent performance differentials the
index enjoys. More significantly, on an after-tax basis, the fund's performance
surpasses the T-Bill Index by an even wider margin.* Unlike the fund, the index
does not have a cash component, management fees, or a sales charge. In addition,
most of the securities in the Franklin Corporate Qualified Dividend Fund reset
their dividends on either a 49-day or 90-day cycle.
GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
**This performance graph assumes an initial $100,000 investment and includes the
maximum 1.5% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains, if any, are reinvested at net
asset value. The Payden & Rygel 90-Day T-Bill Index includes price appreciation
or depreciation and distributions as a percentage of the original investment.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
+After-tax returns assume the maximum 34% corporate tax rate for the period from
January 1987 through December 1992, and the maximum 35% corporate tax rate from
January 1993. In addition, the fund's calculations assume an 80% dividends
received deduction rate from January 1987 through December 1987, and a 70%
dividends received deduction rate from January 1988. The performance graph
assumes an initial $100,000 investment and includes the fund's maximum 1.5%
initial sales charge, all fund expenses and account fees. It also assumes that
your dividends and capital gains, if any, are reinvested at net asset value. The
Payden & Rygel 90-Day T-Bill Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
is not predictive of future results.
*The value of Treasuries, if held to maturity, is fixed; principal is guaranteed
and interest is fixed. Investment return and share price of the Franklin
Corporate Qualified Dividend Fund fluctuate with market conditions.
<TABLE>
<CAPTION>
Franklin Corporate Qualified Dividend Fund
Periods ended September 30, 1995
Since
Inception
1-Year 5-Year (01/14/87)
<S> <C> <C> <C>
NAV Cumulative Total Return1 5.26% 62.72% 70.62%
POP Cumulative Total Return1 3.68% 60.25% 68.07%
NAV Average Annual Total Return2 5.26% 10.23% 6.32%
POP Average Annual Total Return2 3.68% 9.89% 6.14%
Distribution Rate3 4.98%
Taxable Equivalent Distribution Rate4 6.86%
30-Day Standardized Yield5 4.82%
Taxable Equivalent Yield4 6.64%
</TABLE>
1. Net asset value (NAV) cumulative total returns show the change in value of an
investment over the periods indicated and do not include the maximum 1.5% sales
charge stated in the prospectus. Public offering price (POP) cumulative total
returns show the change in value of an investment over the periods indicated and
include the current maximum 1.5% sales charge. See note below.
2. NAV average annual total returns represent the average annual change in value
of an investment over the specified periods and do not include the maximum 1.5%
sales charge. POP average annual total returns represent the average annual
change in value of an investment over the specified periods and reflect the
current maximum 1.5% sales charge stated in the prospectus. See note below.
3. Based on an annualization of the fund's current 10 cents per share monthly
dividend and the maximum offering price of $24.12 on September 30, 1995.
4. Taxable equivalent distribution rate and yield assume the 1995 maximum
federal corporate tax rate of 35%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended September 30, 1995.
Note: All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value. Your investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN RISING DIVIDENDS FUND
Fund Objective:
The Franklin Rising Dividends Fund seeks long-term capital appreciation
primarily through investment in the equity securities of companies that have
paid consistently rising dividends over the past 10 years.
The above investment strategy is based on our belief that companies with
consistently rising dividends should, over time, realize increases in the prices
of their shares. We select portfolio securities based on several criteria. To be
eligible for purchase, stocks must pass certain investment "screens," or
screening procedures, requiring consistent and substantial dividend increases,
strong balance sheets and relatively low price/earnings ratios. We seek
fundamentally sound companies that meet our standards and attempt to acquire
them at attractive prices, often when they are out of favor with investors.
Franklin Rising Dividends Fund vs.
Standard & Poor's 500 Stock Index(R)
Common Stock Analysis
Quarter ended September 30, 1995
Rising S&P 500
Dividends Stock
Fund Index
Income Yield 3.2% 2.3%
Price/Book Value 3.4x 3.7x
Average Market
Capitalization $5.9 billion $8.7 billion
Price/Earnings 13.0 15.5
Debt/Total Capital 23.9% 38.2%
BETA 0.85 1.00
We have recently completed a study comparing the portfolio of the Standard &
Poor's 500 Stock Index(R) with that of your fund on the basis of several
fundamental investment characteristics.
We reviewed measures such as current yield, relative price, debt ratios, and
other factors, and found that the fund's portfolio compared quite favorably with
the Standard & Poor's Index. The table on page 9 illustrates that our fund's
portfolio yielded more than the index, sold at lower price/earnings and
price/book value ratios, and carried less debt to total capital. These
comparisons confirm our conviction that our investment approach tends to result
in the selection of high quality securities that are attractively priced. Over
time, we believe this will prove rewarding for our shareholders.
Over the past year, the fund's performance benefited from sizable gains in our
tobacco, pharmaceutical, insurance and bank stocks. Philip Morris showed a
one-year gain of 37%, while Mercury General and TrustCo Bank were up 33% and
22%, respectively. In addition, Merck & Co., Inc. delivered a gain of 58% over
the reporting period. It is interesting to note that dividends for these four
companies also increased significantly over the year: Philip Morris's dividends
were up 21%, TrustCo's increased 22%, while Merck and Mercury General each
raised their dividends approximately 14%.
As illustrated in the table on the following page, the above-mentioned companies
are included in our top 10 portfolio holdings as of fiscal year end. In fact,
there are only four new entries to the top 10 list (Pfizer, Inc., Monsanto
Corp., Family Dollar Stores, and Federal National Mortgage Association), each
having been held in last year's portfolio, though in smaller amounts.
During the year, we eliminated our position in Norfolk Southern as we believed
the price had exceeded our view of fair value. In addition, concerns regarding
litigation liability prompted us to eliminate our Torchmark position. Over the
same period, we established initial positions in several companies, and added to
a number of our existing holdings such as Allied Group, General Electric,
Loctite and Diebold at what we considered attractive prices.
Franklin Rising Dividends Fund
Top 10 Stock Holdings on September 30, 1995
As a percentage of total net assets
Company % of total
Industry net assets
Philip Morris Co., Inc. 3.41%
Consumer Goods
TrustCo Bank Corp., NY 3.38%
Banks
Merck & Co., Inc. 3.38%
Pharmaceuticals
Chubb Corp. 2.78%
Insurance - Property/Casualty
Pfizer, Inc. 2.73%
Pharmaceuticals
Federal National Mortgage Assoc. 2.69%
Government Sponsored Corporations
Mercury General Corp. 2.60%
Insurance - Property/Casualty
Monsanto Co. 2.50%
Industrial
Family Dollar Stores 2.49%
Retail
Dimon, Inc.2.49%
Consumer Goods
For a complete list of portfolio holdings, please see page 22 of this report.
Given the sharp increase in the overall market in the past year, it becomes
increasingly difficult to find bargain stocks that meet our criteria and
standards. Fortunately, not all individual stocks react like the general market,
so we are still able to find attractive values for the fund. We plan to add to
many of our newer positions should market action enable us to buy at lower
prices.
Performance Summary
The fund's Class I share price, as measured by net asset value, increased to
$17.31 on September 30, 1995, from $14.67 on September 30, 1994. The fund's
Class II shares, as measured by net asset value, increased to $17.28 on
September 30, 1995, from $15.43 on its inception date of May 1, 1995.
For the one-year period ended September 30, 1995, Class I shareholders received
quarterly distributions totaling 29.8 cents ($0.298) per share, including 26
cents ($0.26) per share in dividend income and a special year-end distribution
of 3.8 cents ($0.038) per share, distributed in December 1994. For the
abbreviated five-month period ended September 30, 1995, Class II shareholders
received quarterly income distributions totaling 12.6 cents ($0.126) per share.
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.
Based on this dividend income and change in share price, the fund's Class I
shares posted a one-year cumulative total return of +20.32% for the period ended
September 30, 1995. Total return measures the change in value of an investment
over the periods indicated, assuming reinvestment of dividends and capital
gains. This calculation does not include the initial sales charge. Past
performance is not indicative of future results.
Since inception, the performance of the fund's Class I shares has generally
followed the unmanaged Wilshire MidCap Growth Index and has exceeded the
Consumer Price Index (CPI). By outperforming the CPI, your investment returns
have exceeded the rate of inflation. As you know, the index has inherent
performance differentials over any fund. The Wilshire MidCap Growth Index, which
somewhat resembles the holdings of the fund, includes companies with market
capitalizations (the market value of a company's issued and outstanding stock)
ranging from $300 million to $1.3 billion, while your fund's portfolio includes
companies with market capitalizations ranging from $83 million to $107 billion.
In addition, unmanaged market indices do not pay commissions or market spreads
to buy and sell securities. Further, they do not pay management fees. And,
unlike the index, mutual funds are never 100% invested because of the need to
have cash on hand to redeem shares. In addition, the fund's results include the
maximum initial sales charge, all fund expenses and account fees. Please
remember that an index is simply a measure of performance and cannot be invested
in directly.
GRAPHIC MATERIAL 3 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.5% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains, if any, are reinvested at net
asset value. The Wilshire MidCap Growth Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Due
to their recent inception, Class II shares are not represented in the above
illustration. Past performance is not predictive of future results.
<TABLE>
<CAPTION>
Franklin Rising Dividends Fund
Periods ended September 30, 1995
Since Since
Inception Inception
1-Year 5-Year (01/14/87) (05/01/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 20.32% 91.45% 112.96% --
Class II Shares -- -- -- 12.56%
Average Annual Total Return2
Class I Shares 14.91% 12.82% 8.49%
</TABLE>
1. Cumulative total returns show the change in value of an investment over the
periods indicated and do not include the maximum 4.5% initial sales charge for
Class I shares, or the 1.00% initial sales charge and 1.00% Contingent Deferred
Sales Charge (CDSC) for Class II shares, applicable to shares redeemed within
the first 18 months of investment. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods, and reflects the maximum 4.5% initial
sales charge. Since Class II shares have existed for less than one year, average
annual total returns are not provided. See note below.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge. Thus, actual total returns for purchasers of shares during that period
would have been somewhat different than noted above. Class II shares, which the
fund began offering on May 1, 1995, are subject to different fees and expenses,
which will affect their performance. Please see the prospectus for more details
regarding Class I and Class II shares.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN INVESTMENT GRADE INCOME FUND
Fund Objective:
The Franklin Investment Grade Income Fund seeks to generate a maximum level of
high current income consistent with investing in investment grade debt
securities having primarily intermediate-term maturities. The Fund seeks to
offer a higher total return than a money market fund, generally with less
potential risk to principal than a fund composed of either long-term securities
or of securities that are below investment-grade quality.*
Early in the fund's fiscal year, intermediate- and long-term interest rates rose
in response to fear that the Federal Reserve Board was failing in its attempt to
control an overheating economy. After November, however, yields declined in
response to several factors: 1) the Fed regained credibility as an inflation
fighter with two sizable increases in the federal funds rate, raising it to
6.00% from 4.75%; 2) the Mexican currency crisis discouraged investment in
developing countries and re-channeled funds to safer havens like the U.S.; and
3) economic statistics showed a slower growth rate with some unwanted inventory
accumulation and without excessive inflationary pressures. By July, the Fed was
willing to signal acceptance of faster economic growth by reversing 25 basis
points of its earlier tightening, cutting the federal funds rate to 5.75%.
Because of the fund's emphasis on a limited maturity structure, higher
short-term interest rates initially enabled us to increase the monthly dividend
distribution to 3.7 cents from 3.3 cents per share, effective with the December
1994 distribution. However, recent trends toward lower short-term rates made it
necessary to readjust the dividend to its previous rate of 3.3 cents per share,
starting with the October 1995 distribution.
*Generally, long-term securities and lower quality securities provide higher
yields. A money fund seeks a stable $1.00 per share net asset value.
As always, we seek to control various sources of potential risk, including
interest-rate risk and credit risk, through careful selection of securities and
active management of their maturities. The weighted average quality of the
portfolio's securities was in the AA range of credit quality, as measured by
Standard & Poor's Corporation. As described in the fund's prospectus, these
ratings do not guarantee the fund's market value or signify approval of the
shares by national ratings agencies; they do reflect the quality of the bonds
and, of course, are subject to change. All investments are call-protected for
life.
On September 30, 1995, the fund's investments included 33% in government and
government-related bonds, 22% in straight short- and intermediate-term corporate
bonds, 17% in "putable" corporate bonds, and 28% in cash and equivalents.
GRAPHIC MATERIAL 4 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
A "putable" bond is structured so that if interest rates rise, the bond can be
redeemed at par value at an early effective maturity. This feature allows the
proceeds to be reinvested at the then-higher interest rate. Conversely, if
interest rates decline by the security's optional retirement date, we can either
keep the higher yielding bond or sell it at a favorable price. The use of
"putable" bonds is an integral part of our conservative investment strategy
whenever we can purchase them on an attractive basis. Early in the fiscal year,
we were able to increase the percentage of "putables" to about 25% of total net
assets. Toward the end of the fiscal year, we were able to realize substantial
profits on some of our "putables," and reduced them to about 16% of the
portfolio. On September 30, 1995, the fund's weighted average maturity was 1.5
years based on the optional "put" dates as the effective maturities, and 3.8
years based on the final stated maturities.
We will continue to pursue our conservative investment posture. It is our belief
that this strategy will enable us to possibly produce more total return than
that which is available from money market funds, while not subjecting the
portfolio's net asset value price to the kind of volatility potentially
associated with long-term bonds or lower-quality investments.
Performance Summary
Your fund's share price, as measured by net asset value, increased over the
reporting period to $9.04 on September 30, 1995, from $8.82 on September 30,
1994.
During the one-year period, your fund paid income distributions totaling 47.9
cents ($0.479) per share, including 43.6 cents ($0.436) in monthly dividend
income and a special year-end distribution of 4.3 cents ($0.043) in December
1994. We were able to raise the fund's monthly dividend to 3.7 cents ($0.037)
from 3.3 cents ($0.033) per share, effective with the December 1994
distribution; however, due to reduced income earned by the fund, it was
necessary to adjust the monthly dividend once again to 3.3 cents per share,
effective with the October 1995 distribution. Dividends will vary based on the
earnings of the fund's portfolio, and past distributions are not indicative of
future trends.
Based on an annualization of the current monthly dividend of 3.3 cents per share
and the maximum public offering price of $9.44 on September 30, 1995, your
fund's distribution rate was 4.19%.
It is helpful to view your investment from a long-term perspective. Since
inception, the fund's performance has generally followed the Lehman Brothers
Government/Corporate Bond Index and has exceeded the increase in the Consumer
Price Index (CPI), as shown in the chart to the right. The broad, unmanaged
Lehman Brothers Index differs from the Franklin Investment Grade Income Fund in
several ways. First, the average weighted maturity of the index was
approximately 10 years on September 30, 1995, compared to the fund's average
effective maturity of about two years. Since longer maturities provide higher
yields, this places the index at an advantage over the fund. Second, unmanaged
market indices do not pay commissions or market spreads to buy and sell bonds.
Further, they do not pay management fees to cover salaries to securities
analysts or portfolio managers. And, unlike the index, mutual funds are never
100% invested because of the need to have cash on hand to redeem shares. In
addition, the performance shown for the fund includes the maximum initial sales
charge, all fund expenses and account fees. Please remember that an index is
simply a measure of performance and cannot be invested in directly.
GRAPHIC MATERIAL 5 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains, if any, are reinvested at net
asset value. The Lehman Brothers Government/Corporate Bond Index includes price
appreciation or depreciation and distributions as a percentage of the original
investment. Past performance is not predictive of future results.
<TABLE>
<CAPTION>
Franklin Investment Grade Income Fund
Periods ended September 30, 1995
Since
Inception
1-Year 5-Year (01/14/87)
<S> <C> <C> <C> <C>
Cumulative Total Return1 8.21% 48.85% 70.16%
Average Annual Total Return2 3.62% 7.34% 5.76%
Distribution Rate3 4.19%
30-Day Standardized Yield4 4.63%
</TABLE>
1. Cumulative total returns show the change in value of an investment over the
periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
3. Based on an annualization of the fund's current 3.3 cents per share monthly
dividend and the maximum offering price of $9.44 on September 30, 1995.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended September 30, 1995.
Note: All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value. Your investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Statement of Investments in Securities and Net Assets, September 30, 1995
Value
Shares Franklin Corporate Qualified Dividend Fund (Note 1)
<S> <C> <C>
aAdjustable Rate Preferred Stocks 16.1%
Commercial Banks & Bank Holding Companies 3.5%
22,400 Marine Midland Bank, Inc., 6.00% adj. rate pfd., Series A ....................... $ 991,200
-----------
Electric Utilities 8.2%
10,000 Arizona Public Service Co., 6.00% adj. rate pfd., Series Q ...................... 805,000
22,500 Niagara Mohawk Power Corp., 7.25% cum. adj. rate pfd., Series C ................. 514,688
46,700 Toledo Edison Co., 7.23% cum. adj. rate pfd., Series A .......................... 963,188
-----------
2,282,876
-----------
Insurance 4.4%
12,000 SunAmerica Inc., 7.00% cum. adj. rate pfd., Series C ............................ 1,215,000
-----------
Total Adjustable Rate Preferred Stocks (Cost $4,941,400) .................. 4,489,076
-----------
b Auction Rate Preferred Stocks 37.5%
10c CNA Financial Corp., 4.348%, Series F ........................................... 1,002,053
13c General Electric Capital Corp., 4.19%, Series F ................................. 1,301,513
1,000dMorgan (JP), Inc., 4.199%, Series C ............................................ 1,005,132
13c Northern Trust Corp., 4.29%, Series C ........................................... 1,300,464
13c Rhone-Poulenc Rorer, 5.31%, Series 1 ............................................ 1,302,109
10c Sara Lee Corp., 4.28%, Series D ................................................. 1,004,399
10c Southern California Gas Co., 4.249%, Series A ................................... 1,001,888
15c Transamerica Co., 4.34%, Series A-1 ............................................. 1,506,872
10c VEPC, 4.32%, Series 92-A ........................................................ 1,001,440
-----------
Total Auction Rate Preferred Stocks (Cost $10,399,999) .................... 10,425,870
-----------
Fixed Rate Preferred Stocks 26.2%
Commercial Banks 5.0%
28,000 Bankers Trust (New York), 7.375% flex rate pfd., Series J ....................... 1,386,277
-----------
Financial 8.8%
14c Ford Holdings, Inc., 4.95% flex rate pfd., Series K ............................. 1,397,529
10,000 Household Finance Co., 7.25% pfd., Series 92-A .................................. 1,033,750
-----------
2,431,279
-----------
Industrial 3.2%
28,913 McDermott, Inc., $2.60 cum. S.F., pfd., Series B ................................ 892,689
-----------
Utilities 9.2%
15,000 Louisiana Power & Light Co., 7.00% S.F., pfd. ................................... 1,535,625
10,000 Rochester Gas & Electric Co., 7.45% S.F., pfd., Series S ........................ 1,031,250
-----------
2,566,875
-----------
Total Fixed Rate Preferred Stocks (Cost $7,368,185) ....................... 7,277,120
-----------
Total Adjustable, Auction and Fixed Rate Preferred Stocks
(Cost $22,709,584) ....................................................... 22,192,066
-----------
eReceivables from Repurchase Agreements 19.0%
$ 2,931,552 fJoint Repurchase Agreement, 6.429%, 10/02/95
Daiwa Securities America, Inc. (Maturity Value $1,410,320)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $1,467,884)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00.............. $ 2,876,663
1,200,000 Nikko Securities Co. International, Inc., 6.42%, 10/02/95 (Maturity Value $1,200,642)
Collateral: U.S. Treasury Notes, 6.00%, 10/15/99 ................................. 1,200,000
1,194,000 UBS Securities, Inc., 6.30%, 10/02/95 (Maturity Value $1,200,630)
Collateral: U.S. Treasury Notes, 5.125%, 03/31/96 ................................ 1,200,000
-----------
Total Receivables from Repurchase Agreements (Cost $5,276,663) ............ 5,276,663
-----------
Total Investments (Cost $27,986,247) 98.8% ........................... 27,468,729
Other Assets and Liabilities, Net 1.2% ............................... 324,304
-----------
Net Assets 100.0% .................................................... $27,793,033
===========
At September 30, 1995, the net unrealized depreciation based on the cost of
investments for income tax purposes of $27,986,247 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................ $ 126,250
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................ (643,768)
-----------
Net unrealized depreciation ................................................... $ (517,518)
===========
PORTFOLIO ABBREVIATIONS:
S.F. - Sinking Fund
aDividend rates adjust quarterly in reference to various U.S. Treasury
benchmarks.
bDividend rates adjust in response to periodic auctions, normally on a 49-day
cycle.
c1 share = $100,000 par value
d1 share = $1,000 par value
eFace amount for repurchase agreements is for the underlying collateral.
fSee Note 1(F) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Statement of Investments in Securities and Net Assets, September 30, 1995
Value
Shares Franklin Rising Dividends Fund (Note 1)
<S> <C> <C>
Common Stocks 88.4%
Banks 15.4%
155,700 Banc One Corp. ................................................................ $ 5,683,050
133,500 CoreStates Financial Corp. .................................................... 4,889,438
215,000 Mercantile Bankshares Corp. ................................................... 5,858,750
197,000 National Commerce Bancorp. .................................................... 4,826,500
133,100 State Street Boston Corp. ..................................................... 5,324,000
407,650 TrustCo Bank Corp., New York .................................................. 8,866,388
161,100 Wilmington Trust Corp. ........................................................ 4,752,450
-----------
40,200,576
-----------
Consumer Goods 12.2%
89,000 Alberto-Culver Co., Class A ................................................... 2,358,500
435,000 Dimon, Inc. ................................................................... 6,525,000
107,000 Philip Morris Cos., Inc. ...................................................... 8,934,500
65,000 Roto-Rooter, Inc. ............................................................. 2,405,000
368,800 Stride Rite Corp. ............................................................. 4,195,100
180,000 Universal Corp. ............................................................... 4,050,000
125,000 UST, Inc. ..................................................................... 3,578,125
-----------
32,046,225
-----------
Drugs/Health Care 7.5%
34,000 Bard (C.R.), Inc. ............................................................. 1,037,000
36,500 Bristol-Myers Squibb Co. ...................................................... 2,659,938
158,000 Merck & Co., Inc. ............................................................. 8,848,000
134,000 Pfizer, Inc. .................................................................. 7,152,250
-----------
19,697,188
-----------
Energy 1.9%
40,000 Royal Dutch Petroleum Co., New York Shares .................................... 4,910,000
-----------
Financial Services 2.7%
68,000 Federal National Mortgage Association ......................................... 7,038,000
-----------
Industrial 17.8%
37,900 Avery Dennison Corp. .......................................................... 1,591,800
14,000 Diebold, Inc. ................................................................. 649,250
68,700 General Electric Co. .......................................................... 4,379,625
104,000 Genuine Parts Co. ............................................................. 4,173,000
303,200 Hanson, Plc., ADR ............................................................. 4,927,000
38,000 Kaydon Corp. .................................................................. 1,121,000
117,000 Kimball International, Inc., Class B .......................................... 3,276,000
102,000 Loctite Corp. ................................................................. 4,934,250
72,500 Masco Corp. ................................................................... 1,993,750
Industrial (cont.)
65,000 Monsanto Co. .................................................................. $ 6,548,750
134,695 Myers Industries, Inc. ........................................................ 2,054,099
217,000 Newell Co. .................................................................... 5,370,750
53,200 Rockwell International Corp. .................................................. 2,513,700
102,000 Superior Industries International, Inc. ....................................... 2,741,250
38,100 Superior Surgical Manufacturing Co., Inc. ..................................... 395,288
-----------
46,669,512
-----------
Insurance - Life & Health .6%
25,000 Jefferson-Pilot Corp. ......................................................... 1,606,250
-----------
Insurance - Property Casualty 16.6%
187,800 Allied Group, Inc. ............................................................ 6,150,450
31,800 American International Group, Inc. ............................................ 2,703,000
76,000 Chubb Corp. ................................................................... 7,296,000
179,000 Mercury General Corp. ......................................................... 6,824,375
95,000 MMI Cos., Inc. ................................................................ 2,303,750
256,250 RLI Corp. ..................................................................... 5,733,594
71,000 SAFECO Corp. .................................................................. 4,659,375
150,000 Selective Insurance Group, Inc. ............................................... 5,475,000
39,900 St. Paul Cos., Inc. ........................................................... 2,329,163
-----------
43,474,707
-----------
Printing/Publishing 1.7%
28,300 Dun & Bradstreet Corp. ........................................................ 1,637,863
57,800 Reader's Digest Association, Inc., Class A .................................... 2,723,824
-----------
4,361,687
-----------
Retail 9.9%
33,000 Albertson's, Inc. ............................................................. 1,126,124
25,650 Arbor Drugs, Inc. ............................................................. 480,937
74,400 Bob Evans Farms, Inc. ......................................................... 1,432,200
343,500 Family Dollar Stores, Inc. .................................................... 6,526,500
226,000 Rite Aid Corp. ................................................................ 6,328,000
220,000 The Limited, Inc. ............................................................. 4,180,000
212,000 Walgreen Co. .................................................................. 5,936,000
-----------
26,009,761
-----------
Transportation 2.1%
314,500 Arnold Industries, Inc. ....................................................... 5,582,374
-----------
Total Common Stocks (Cost $189,942,149) ................................. 231,596,280
-----------
e,fReceivables from Repurchase Agreements 11.1%........................................
$29,525,214 Joint Repurchase Agreement, 6.429%, 10/02/95 (Cost $28,971,844)
Daiwa Securities America, Inc., (Maturity Value $14,203,809)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $14,783,556)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00............... $ 28,971,844
-----------
Total Investments (Cost $218,913,993) 99.5% ........................ 260,568,124
Other Assets and Liabilities, Net .5% .............................. 1,409,134
-----------
Net Assets 100.0% .................................................. $261,977,258
===========
At September 30, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $218,913,993 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................. $ 48,175,459
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................. (6,521,328)
-----------
Net unrealized appreciation ................................................. $ 41,654,131
===========
eFace amount for repurchase agreements is for the underlying collateral.
fSee Note 1(F) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Statement of Investments in Securities and Net Assets, September 30, 1995
Face Value
Amount Franklin Investment Grade Income Fund (Note 1)
<S> <C> <C>
U.S. Government Securities 23.4%
$2,000,000 U.S. Treasury Notes, 5.625%, 06/30/97 ............................................ $ 1,993,750
2,000,000 U.S. Treasury Notes, 5.875%, 07/31/97 ............................................ 2,000,624
2,000,000 U.S. Treasury Notes, 5.875%, 08/15/98 ............................................ 1,999,374
1,000,000 U.S. Treasury Notes, 5.875%, 03/31/99 ............................................ 998,125
-----------
Total U.S. Government Securities (Cost $6,986,408) ......................... 6,991,873
-----------
Corporate Bonds 36.8%
Consumer Goods 5.0%
1,500,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 ......................................... 1,484,032
-----------
Electric Utilities 3.3%
1,000,000 Southern California Edison Co., notes, 5.875%, 02/01/98 .......................... 989,099
-----------
Financial 18.6%
1,300,000 Associates Corp. of North America, deb., (putable * 03/03/98), Series B, 7.95%,
02/15/10 ........................................................................ 1,433,021
1,500,000 Ford Motor Credit Corp., global bond, 6.25%, 02/26/98 ............................ 1,501,350
1,500,000 GE Capital Corp., medium term notes (step up to 8.125% or putable * 04/01/98), 5.80%,
04/01/08 ........................................................................ 1,598,044
1,000,000 Norwest Financial, Inc., senior notes, 6.23%, 09/01/98 ........................... 1,000,934
-----------
5,533,349
-----------
Industrial 3.5%
1,000,000 WMX Technologies, Inc., notes (step up to 8.00% or putable * 04/30/97), 6.22%,
04/30/04 ........................................................................ 1,054,173
-----------
Semiconductor Manufacturers 3.0%
750,000 Motorola, Inc., deb. (putable * 08/15/01), 8.40%, 08/15/31 ....................... 888,308
-----------
Telephone Utilities 3.4%
1,000,000 New England Telephone and Telegraph, notes, 6.25%, 12/15/97 ...................... 1,000,479
-----------
Total Corporate Bonds (Cost $10,476,377) ................................... 10,949,440
-----------
Total Long Term Investments (Cost $17,462,785) ............................. 17,941,313
-----------
Short Term Investments 11.7%
Corporate Bonds 1.7%
500,000 Northern Telecommunications, Ltd., notes, 8.25%, 06/13/96 (Cost $497,590) ........ 507,209
-----------
U.S. Government Securities 10.0%
3,000,000 U.S. Treasury Notes, 3.875%, 10/31/95 (Cost $2,999,572) .......................... 2,997,186
-----------
Total Investments before Repurchase Agreements (Cost $20,959,947) .......... 21,445,708
-----------
eReceivables from Repurchase Agreements 27.0%
$4,139,883fJoint Repurchase Agreement, 6.429%, 10/02/95
Daiwa Securities America, Inc., (Maturity Value $1,991,526)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $2,072,813)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00................ $ 4,062,163
3,777,000 Nikko Securities Co. International, Inc., 6.42%, 10/02/95 (Maturity Value $4,002,140)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99 ................................... 4,000,000
-----------
Total Receivables from Repurchase Agreements (Cost $8,062,163) ............. 8,062,163
-----------
Total Investments (Cost $29,022,110) 98.9% ............................ 29,507,871
Other Assets and Liabilities, Net 1.1% ................................ 315,835
-----------
Net Assets 100.0% ..................................................... $29,823,706
===========
At September 30, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $29,022,110 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................. $ 510,783
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................. (25,022)
-----------
Net unrealized appreciation .................................................... $ 485,761
===========
*Holder may choose either to redeem at par on put date or, if more advantageous, to hold to final stated maturity.
eFace amount for repurchase agreements is for the underlying collateral.
fSee Note 1(F) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Statements
Statements of Assets and Liabilities
September 30, 1995
Franklin Franklin
Corporate Qualified Franklin Rising Investment Grade
Dividend Fund Dividends Fund Income Fund
------------ ---------- -----------
<S> <C> <C> <C>
Assets:
Investments in securities:
At identified cost............................................ $22,709,584 $189,942,149 $20,959,947
============ ========== ===========
At value...................................................... $22,192,066 $231,596,280 $21,445,708
Receivables from repurchase agreements, at value and cost...... 5,276,663 28,971,844 8,062,163
Cash........................................................... 30,950 38,546 64,906
Receivables:
Dividends and interest........................................ 66,671 938,406 290,805
Investment securities sold.................................... -- 1,579,659 --
Capital shares sold........................................... 494,998 230,743 --
------------ ---------- -----------
Total assets.............................................. 28,061,348 263,355,478 29,863,582
------------ ---------- -----------
Liabilities:
Payables:
Investment securities purchased............................... -- 561,073 --
Capital shares repurchased.................................... 230,082 372,714 --
Management fees............................................... 11,243 161,064 12,568
Distribution fees............................................. 10,054 194,909 10,393
Shareholder servicing costs................................... 437 25,100 1,740
Accrued expenses and other liabilities......................... 16,499 63,360 15,175
------------ ---------- -----------
Total liabilities......................................... 268,315 1,378,220 39,876
------------ ---------- -----------
Net assets, at value............................................ $27,793,033 $261,977,258 $29,823,706
============ ========== ===========
Net assets consist of:
Undistributed net investment income............................ $ 284,215 $ 1,107,307 $ 140,167
Unrealized appreciation (depreciation) on investments.......... (517,518) 41,654,131 485,761
Accumulated net realized loss.................................. (8,415,261) (3,319,654) (1,430,260)
Class I capital shares......................................... 11,699 150,703 32,990
Class II capital shares........................................ -- 613 --
Additional paid-in capital..................................... 36,429,898 222,384,158 30,595,048
------------ ---------- -----------
Net assets, at value............................................ $27,793,033 $261,977,258 $29,823,706
============ ========== ===========
Class I Shares:
Net assets, at value........................................... $27,793,033 $260,917,347 $29,823,706
============ ========== ===========
Shares outstanding............................................. 1,169,933 15,070,272 3,298,953
============ ========== ===========
Net asset value per share....................................... $23.76* $17.31* $9.04*
============ ========== ===========
Maximum offering price per share (100/98.5, 100/95.5, 100/95.75 of
net asset value per share, respectively)....................... $24.12 $18.13 $9.44
============ ========== ===========
Class II Shares:
Net assets, at value........................................... $ 1,059,911
==========
Shares outstanding............................................. 61,326
==========
Net asset value per share....................................... $17.28*
==========
Maximum offering price per share (100/99 of net asset value per share) $17.45
==========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST Financial Statements (cont.)
Statements of Operations
for the year ended September 30, 1995
Franklin Franklin Franklin
Corporate Rising Investment
Qualified Dividends Grade Income
Dividend Fund Fund Fund
--------- ----------- ----------
<S> <C> <C> <C>
Investment income:
Dividends........................................................ $1,440,594 $ 7,090,181 $--
Interest (Note 1)................................................ 272,095 1,698,547 1,741,614
--------- ----------- ---------
Total income................................................ 1,712,689 8,788,728 1,741,614
--------- ----------- ---------
Expenses:
Management fees (Note 5)......................................... 141,798 1,866,215 144,062
Distribution fees - Class I (Note 5)............................. 62,121 1,136,963 61,588
Distribution fees - Class II (Note 5)............................ -- 1,508 --
Shareholder servicing costs (Note 5)............................. 3,792 224,176 13,845
Reports to shareholders.......................................... 9,181 160,092 23,879
Accounting fees (Note 5)......................................... 40,000 40,000 40,000
Trustees' fees and expenses...................................... 3,385 29,253 3,475
Professional fees................................................ 12,259 28,031 9,793
Registration and filing fees..................................... 12,423 27,942 10,521
Custodian fees................................................... 2,556 22,536 2,567
Other............................................................ 2,301 14,087 3,657
--------- ----------- ---------
Total expenses.............................................. 289,816 3,550,803 313,387
--------- ----------- ---------
Net investment income....................................... 1,422,873 5,237,925 1,428,227
--------- ----------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)......................................... (61,429) 7,405,862 (759,019)
Net unrealized appreciation...................................... 84,597 33,317,370 1,601,549
--------- ----------- ---------
Net realized and unrealized gain on investments............. 23,168 40,723,232 842,530
--------- ----------- ---------
Net increase in net assets resulting from operations.............. $1,446,041 $45,961,157 $2,270,757
========= =========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended September 30, 1995 and 1994
Franklin Corporate Franklin Rising Franklin Investment Grade
Qualified Dividend Fund Dividends Fund Income Fund
---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment
income.............. $ 1,422,873 $ 1,379,139 $ 5,237,925 $ 5,501,672 $ 1,428,227 $ 1,530,567
Net realized gain
(loss) from security
transactions........ (61,429) (328,483) 7,405,862 (6,786,530) (759,019) 44,247
Net unrealized
appreciation
(depreciation) on
investments......... 84,597 (815,985) 33,317,370 (10,342,790) 1,601,549 (1,862,578)
--------- ------------ --------- ------------ --------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... 1,446,041 234,671 45,961,157 (11,627,648) 2,270,757 (287,764)
Distributions to
shareholders from
undistributed net
investment income:
Class I (Note 7). (1,369,958) (1,296,853) (4,790,807) (4,837,881) (1,554,109) (1,374,547)
Class II (Note 7) -- -- (3,853) -- -- --
Decrease in net
assets from capital
share transactions
(Note 2)............ (4,073,416) (996,529) (40,650,380) (78,781,141) (446,283) (4,753,942)
--------- ------------ --------- ------------ --------- ------------
Net increase
(decrease) in
net assets.......... (3,997,333) (2,058,711) 516,117 (95,246,670) 270,365 (6,416,253)
Net assets:
Beginning of year.. 31,790,366 33,849,077 261,461,141 356,707,811 29,553,341 35,969,594
--------- ------------ --------- ------------ --------- ------------
End of year........ $27,793,033 $31,790,366 $261,977,258 $261,461,141 $29,823,706 $29,553,341
========= ============ ========= ============ ========= ============
Undistributed net
investment income
included in net assets:
Beginning of year. $ 231,300 $ 149,014 $ 664,042 $ 251 266,049 $ 110,029
========= ============ ========= ============ ========= ============
End of year....... $ 284,215 $ 231,300 $ 1,107,307 $ 664,042 140,167 $ 266,049
========= ============ ========= ============ ========= ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN MANAGED TRUST
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Managed Trust (the Trust) is an open-end, diversified management
investment company (mutual fund), registered under the Investment Company Act of
1940 as amended. The Trust's shares are offered in three different Series
(hereinafter Funds), each of which represents a separate fund. The Trust is
required to account for the assets of each Fund separately and to allocate
general expenses of the Trust to each Fund based upon the net assets of each
Fund.
The Franklin Rising Dividends Fund offers two classes of shares, Class I and
Class II. Class I shares are sold with a higher front-end sales charge than
Class II shares. Each class of shares may be subject to a contingent deferred
sales charge and has the same rights, except with respect to the effect of the
respective sales charges, the distribution fees borne by each class, voting
rights on matters affecting a single class and the exchange privilege of each
class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. Security Valuations:
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. Other securities
for which market quotations are readily available are valued at current market
values, obtained from pricing services, which are based on a variety of factors,
including recent trades, institutional size trading in similar types of
securities (considering yield, risk and maturity) and/or developments related to
specific securities. Portfolio securities which are traded both in the
over-the-counter market and on a securities exchange are valued according to the
broadest and most representative market as determined by the Manager. Other
securities for which market quotations are not available, if any, are valued in
accordance with procedures established by the Board of Trustees.
The value of auction rate preferred stock is determined based upon quotations
readily available in the marketplace. If there are no readily available
quotations, the value will be based upon the values of comparable traded
securities. When market quotations are not readily available for securities held
by the Funds, or for comparable securities, then such securities will be valued
at par value plus an accrual of the dividend to be received on the next dividend
payment date, as approved by the Board of Trustees.
B. Income Taxes:
The Trust intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Fund is treated as a separate entity in the determination of compliance
with the Internal Revenue Code.
C. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
D. Investment Income, Expenses and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount and premium, if any, are amortized as required by the Internal Revenue
Code.
E. Expense Allocation:
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. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
F. Repurchase Agreements
The Trust may enter into a Joint Repurchase Agreement whereby its uninvested
cash balance is deposited into a joint cash account to be used to invest in one
or more repurchase agreements with government securities dealers recognized by
the Federal Reserve Board and/or member banks of the Federal Reserve System. The
value and face amount of the Joint Repurchase Agreement are allocated to the
Trust based on its pro-rata interest. In a repurchase agreement, the Trust
purchases a U.S. government security from a dealer or bank subject to an
agreement to resell it at a mutually agreed upon price and date. Such a
transaction is accounted for as a loan by the Trust to the seller,
collateralized by the underlying security. The transaction requires the initial
collateralization of the seller's obligation by U.S. government securities with
market value, including accrued interest, of at least 102% of the dollar amount
invested by the Trust, with the value of the underlying security marked to
market daily to maintain coverage of at least 100%. The collateral is delivered
to the Trust's custodian and held until resold to the dealer or bank. At
September 30, 1995, all outstanding joint repurchase agreements held by the
Trust had been entered into on September 29, 1995.
<TABLE>
<CAPTION>
2. TRUST SHARES
At September 30, 1995, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Funds' shares for
the years ended September 30, 1995 and 1994 were as follows:
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
----------------- ------------------ ------------------
Class I Shares Shares Amount Shares Amount Shares Amount
------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1995
Shares sold ......................... 517,711 $12,210,015 1,128,325 $17,560,571 475,519 $ 4,217,766
Shares issued in reinvestment of
distributions ....................... 50,778 1,195,996 245,418 3,737,669 114,062 1,005,381
Shares redeemed ..................... (700,481) (16,533,103) (3,138,298) (47,889,077) (808,785) (7,148,964)
Changes from exercise of exchange
privilege:
Shares sold ....................... 33,527 790,845 789,099 12,040,922 541,786 4,797,377
Shares redeemed ................... (73,619) (1,737,169) (1,780,795) (27,112,934) (374,809) (3,317,843)
------- ---------- -------- ---------- -------- ----------
Net decrease.......................... (172,084) $ (4,073,416) (2,756,251) $(41,662,849) (52,227) $ (446,283)
======= ========== ======== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
2. TRUST SHARES (cont.)
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
----------------- ------------------ ------------------
Class I Shares (cont.) Shares Amount Shares Amount Shares Amount
------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994
Shares sold ......................... 642,504 $15,490,848 2,324,785 $34,973,066 573,667 $ 5,191,694
Shares issued in reinvestment of
distributions ....................... 46,825 1,128,951 234,159 3,491,298 92,093 831,361
Shares redeemed ..................... (588,984) (14,223,026) (4,407,643) (65,658,112) (1,125,867) (10,294,292)
Changes from exercise of exchange
privilege:
Shares sold ....................... 33,305 801,733 1,261,176 19,012,227 583,017 5,280,721
Shares redeemed ................... (174,643) (4,195,035) (4,707,327) (70,599,620) (635,548) (5,763,426)
------- ---------- -------- ---------- -------- ----------
Net decrease.......................... (40,993) $ (996,529) (5,294,850) $(78,781,141) (512,638) $ (4,753,942)
======= ========== ======== ========== ======== ==========
Class II Shares:
1995*
Shares sold ......................... 61,207 $ 1,010,493
Shares issued in reinvestment of
distributions ....................... 119 1,976
-------- ----------
Net increase.......................... 61,326 $ 1,012,469
======== ==========
*For the period May 1, 1995 to September 30, 1995.
</TABLE>
<TABLE>
<CAPTION>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At September 30, 1995, for tax purposes, the Funds had accumulated net capital
loss carryovers as follows:
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
--------------- ---------- -------------
<S> <C> <C> <C>
Capital loss carryovers
Expiring in:1996 ..................................... $5,376,536 $-- $ 124,885
1997...................................... 1,251,202 -- 274,652
1998 ..................................... 794,958 -- 139,900
1999 ..................................... 226,936 -- 131,804
2000 ..................................... 375,717 -- --
2002 ..................................... 328,483 3,319,654 --
2003 ..................................... 61,429 -- 759,019
--------------- ---------- ------------
$8,415,261 $3,319,654 $1,430,260
=============== ========== ============
The Franklin Corporate Qualified Dividend Fund and the Franklin Investment Grade
Income Fund had capital loss carryovers of $2,056,972 and $178,611,
respectively, that expired on September 30, 1995 and were reclassified to
paid-in-capital.
For tax purposes, the aggregate cost of securities and unrealized appreciation
(depreciation) of the Trust are the same as for financial statement purposes at
September 30, 1995.
</TABLE>
<TABLE>
<CAPTION>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended September 30, 1995, were as follows:
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
--------------- ---------- ------------
<S> <C> <C> <C>
Purchases ............................................. $6,815,000 $32,171,788 $15,679,189
=============== ========== ============
Sales ................................................. $8,291,136 $74,080,592 $22,145,058
=============== ========== ============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to each
Fund, and receives fees computed monthly based on the net assets of the Franklin
Corporate Qualified Dividend Fund and the Franklin Investment Grade Income Fund
at an annualized rate of 0.50% of the Funds' first $500 million in average daily
net assets, 0.45% on the next $500 million, and 0.40% on net assets in excess of
$1 billion; and receives fees computed monthly based on the net assets of the
Franklin Rising Dividends Fund at an annualized rate of 0.75% of the Fund's
first $500 million in average daily net assets, 0.625% on the next $500 million,
and 0.50% on net assets in excess of $1 billion. Pursuant to the terms of the
management agreement, each of the Funds also pays accounting fees of $40,000 per
year to Franklin Advisers, Inc. for the provision of certain accounting,
bookkeeping and recordkeeping functions for the Funds. The terms of the
management agreement provide that aggregate annual expenses of the Funds be
limited to the extent necessary to comply with the limitations set forth in the
laws, regulations and administrative interpretations of the states in which the
Funds' shares are registered. For the year ended September 30, 1995, the Funds'
expenses did not exceed these limitations.
In its capacity as underwriter for the shares of the Trust, Franklin/Templeton
Distributors, Inc. receives commissions on sales of the Trust's capital shares.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Trust, and as such are not expenses of the Funds.
Franklin/Templeton Distributors, Inc., may also make payments, out of its own
resources, to the dealers for certain sales of Class I and Class II shares.
Commissions received by Franklin/Templeton Distributors, Inc., and the amounts
paid to other dealers for the year ended September 30, 1995, were as follows:
<TABLE>
<CAPTION>
Franklin Rising
Franklin Corporate Dividends Fund Franklin Investment
Qualified Dividend Fund Class I Class II Grade Income Fund
--------------- ------- ------- ------------
<S> <C> <C> <C> <C>
Total commissions received...................... $112,146 $388,586 $10,211 $75,773
=============== ======= ====== ============
Paid to other dealers........................... $121,994 $346,372 $20,293 $78,374
=============== ======= ====== ============
</TABLE>
Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc., the Funds pay costs on a per shareholder account basis.
Shareholder servicing costs incurred by the Funds for the year ended September
30, 1995, aggregated $241,813, of which $201,444 was paid to Franklin/Templeton
Investor Services, Inc.
Under the terms of Distribution Plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940, the Franklin Rising Dividends Fund will reimburse
Franklin/Templeton Distributors, Inc., in an amount up to a maximum of 0.50% for
Class I's and 1.00% for Class II's average daily net assets, while Franklin
Corporate Qualified Dividend Fund and Franklin Investment Grade Income Fund will
reimburse up to a maximum of 0.25% per annum of the Funds' average daily net
assets for costs incurred in the promotion, offering and marketing of the Funds'
shares. Fees incurred by the Funds under the agreements aggregated $1,262,180
for the year ended September 30, 1995.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc. and
Franklin/Templeton Investor Services, Inc., all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. SUBSEQUENT EVENTS
On September 25, 1995 the Board of Trustees declared dividends from net
investment income as follows (amounts per share):
Franklin Corporate Franklin Investment
Record Date Ex Date Payment Date Qualified Dividend Fund Grade Income Fund
-------- ------ --------- --------------- ------------
09/29/95 10/02/95 10/13/95 .100 .033
<TABLE>
<CAPTION>
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year by Fund are as follows:
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------ ----------------------------
Ratio of Net
Net Asset Net Realized Distributions Net Asset Net Assets Ratio of Investment
Year Value at Net & Unrealized Total From From Net Value at End of Expenses Income to Portfolio
Ended Beginning Investment Gain (Loss) Investment Investment at End Total Year to Average Average Turnover
Sept. 30 of Year Income on Securities Operations Income of Year Return** (in 000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------------------------------------------
Franklin Corporate Qualified Dividend Fund:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991+ $19.03 $1.73 $ 2.540 $ 4.270 $(1.670) $21.63 23.25% $22,242 1.24% 8.09% --%
1992+ 21.63 1.37 2.144 3.514 (1.394) 23.75 16.57 29,444 1.10 5.97 29.01
1993++ 23.75 .73 .777 1.507 (.787) 24.47 6.44 33,849 1.06* 4.09* 27.46
1994 24.47 1.02 (.844) .176 (.956) 23.69 .72 31,790 1.00 4.19 32.17
1995 23.69 1.21 -- 1.210 (1.140) 23.76 5.26 27,793 1.02 5.02 29.18
Franklin Rising Dividends Fund:
Class I Shares
1991+ 11.21 .28 3.720 4.000 (.300) 14.91 35.95 71,380 1.53 2.16 16.83
1992+ 14.91 .24 1.290 1.530 (.260) 16.18 10.38 197,804 1.46 1.67 12.73
1993++ 16.18 .19 (.745) (.555) (.195) 15.43 (3.43) 356,708 1.40* 1.73* 11.48
1994 15.43 .28 (.800) (.520) (.240) 14.67 (3.38) 261,461 1.43 1.81 25.75
1995 14.67 .33 2.608 2.938 (.298) 17.31 20.32 260,917 1.43 2.10 14.60
Class II Shares
1995+++ 15.47 .11 1.826 1.936 (.126) 17.28 12.56 1,060 1.90* 1.92* 14.60
7. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------ ----------------------------
Ratio of Net
Net Asset Net Realized Distributions Net Asset Net Assets Ratio of Investment
Year Value at Net & Unrealized Total From From Net Value at End of Expenses Income to Portfolio
Ended Beginning Investment Gain (Loss) Investment Investment at End Total Year to Average Average Turnover
Sept. 30 of Year Income on Securities Operations Income of Year Return** (in 000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------------------------------------------
Franklin Investment Grade Income Fund:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991+ $8.40 $.69 $ .635 $1.325 $(.695) $9.03 16.57% $21,773 1.26% 8.36% 28.31%
1992+ 9.03 .62 (.086) .534 (.634) 8.93 6.16 29,367 1.08 7.02 27.28
1993++ 8.93 .38 .402 .782 (.402) 9.31 8.94 35,970 1.09* 5.61* 53.19
1994 9.31 .45 (.544) (.094) (.396) 8.82 (1.02) 29,553 1.05 4.91 10.57
1995 8.82 .44 .259 .699 (.479) 9.04 8.21 29,824 1.09 4.96 64.70
+For the year ended December 31.
++For the nine months ended September 30, 1993.
+++For the period May 1, 1995 to September 30,1995.
*Annualized.
**Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge or the deferred contingent sales charge.The total return for the Funds
also assumes reinvestment of dividends and capital gains, if any, at net asset
value.
The percentage of income dividends paid by the Funds during the year ended
September 30, 1995 which qualified for the 70% dividends-received deduction for
corporations were as follows:
<S> <C>
Franklin Corporate Qualified Dividend Fund...................................... 100.0%
Franklin Rising Dividends Fund.................................................. 100.0%
The above funds hereby designate these amounts as income qualifying for the
corporate dividends-received deduction under IRC 854 (b)(2).
</TABLE>
FRANKLIN MANAGED TRUST
Report of Independent Certified Public Accountants
To the Shareholders and Board of Trustees
of Franklin Managed Trust:
We have audited the accompanying statements of assets and liabilities of the
three funds comprising the Franklin Managed Trust, including each Fund's
statement of investments in securities and net assets, as of September 30, 1995,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
three funds comprising the Franklin Managed Trust as of September 30, 1995, the
results of each Fund's operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 27, 1995
Franklin Managed Trust
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 9/30/95
AAA 25.3%
AA 3.6%
A 50.4%
BBB 17.3%
BB 3.4%
GRAPHIC MATERIAL (2)
The following line graphs hypothetically compare the performance of the Franklin
Corporate Qualified Dividend Fund to that of the Payden & Rygel 90-Day T-Bill
Index, before and after taxes, based on a $100,000 investment from 2/1/87 to
9/30/95.
Period From Pre-Tax After-Tax Pre-Tax P&R After-Tax P&R
Ending 90-Day 90-Day
Initial Total Total T-Bill Index T-Bill Index
Investment Value Value Total Value Total Value
2/1/87 98,503 98,503 98,487 100,000 100,000
2/28/87 98,425 98,425 98,425 100,440 100,290
3/31/87 98,425 98,899 98,867 100,892 100,588
4/30/87 94,880 95,797 95,735 101,386 100,914
5/31/87 93,580 94,997 94,901 101,853 101,220
6/30/87 94,840 96,888 96,748 102,331 101,534
7/31/87 94,762 97,415 97,236 102,782 101,829
8/31/87 94,368 97,620 97,399 103,296 102,165
9/30/87 92,005 95,775 95,520 103,781 102,482
10/31/87 87,436 91,725 91,433 104,611 103,023
11/30/87 87,357 92,262 91,928 105,093 103,336
12/31/87 85,742 91,171 90,802 105,492 103,595
1/31/88 84,364 90,534 90,089 106,019 103,937
2/29/88 86,176 93,134 92,609 106,507 104,252
3/31/88 84,718 92,193 91,614 107,018 104,582
4/30/88 85,506 93,704 93,052 107,489 104,886
5/31/88 86,648 95,617 94,886 107,973 105,198
6/30/88 84,128 93,472 92,703 108,534 105,559
7/31/88 85,664 95,850 94,997 109,088 105,914
8/31/88 84,915 95,674 94,761 109,688 106,298
9/30/88 84,325 95,676 94,704 110,379 106,740
10/31/88 84,206 96,216 95,176 111,063 107,177
11/30/88 83,616 96,216 95,115 111,674 107,566
12/31/88 83,143 96,350 95,187 112,389 108,021
1/31/89 83,931 98,006 96,755 113,131 108,491
2/28/89 84,049 98,837 97,513 113,821 108,928
3/31/89 83,970 99,443 98,049 114,652 109,453
4/30/89 83,537 99,630 98,173 115,615 110,060
5/31/89 82,631 99,251 97,740 116,435 110,575
6/30/89 82,946 100,339 98,750 117,414 111,188
7/31/89 83,497 101,728 100,053 118,271 111,724
8/31/89 84,876 104,139 102,359 119,063 112,218
9/30/89 84,600 104,528 102,680 119,861 112,714
10/31/89 83,458 103,803 101,912 120,724 113,250
11/30/89 82,198 102,927 100,997 121,557 113,766
12/31/89 81,331 102,538 100,559 122,371 114,269
1/31/90 80,583 102,295 100,265 123,142 114,744
2/28/90 80,032 102,307 100,220 123,893 115,206
3/31/90 79,283 102,064 99,925 124,736 115,723
4/30/90 78,771 102,127 99,929 125,559 116,227
5/31/90 79,007 103,168 100,888 126,425 116,756
6/30/90 78,968 103,846 101,493 127,260 117,265
7/31/90 78,102 103,441 101,041 128,176 117,822
8/31/90 77,944 103,982 101,511 129,035 118,343
9/30/90 76,841 103,248 100,739 129,899 118,866
10/31/90 74,793 101,228 98,716 130,718 119,361
11/30/90 75,108 102,422 99,821 131,528 119,849
12/31/90 74,951 103,619 100,879 132,462 120,411
1/31/91 75,738 105,495 102,643 133,270 120,896
2/28/91 77,196 108,319 105,329 133,963 121,310
3/31/91 79,874 112,889 109,706 134,740 121,775
4/30/91 81,922 116,595 113,243 135,441 122,193
5/31/91 82,355 117,965 114,517 136,091 122,580
6/30/91 82,434 118,832 115,304 136,730 122,960
7/31/91 83,340 120,909 117,262 137,400 123,358
8/31/91 84,009 122,653 118,895 138,115 123,781
9/30/91 83,891 123,255 119,424 138,792 124,181
10/31/91 84,679 125,197 121,249 139,472 124,583
11/30/91 84,758 126,095 122,064 140,155 124,986
12/31/91 85,191 127,711 123,559 140,800 125,365
1/31/92 87,633 132,121 127,769 141,279 125,647
2/29/92 90,547 137,274 132,692 141,702 125,895
3/31/92 90,823 138,438 133,765 142,156 126,161
4/30/92 91,887 140,814 136,008 142,725 126,494
5/31/92 93,147 143,505 138,553 143,181 126,762
6/30/92 93,068 144,140 139,114 143,654 127,038
7/31/92 94,250 146,736 141,567 144,185 127,348
8/31/92 94,565 147,991 142,726 144,589 127,583
9/30/92 94,447 148,474 143,149 145,081 127,870
10/31/92 94,210 148,773 143,392 145,356 128,030
11/30/92 93,620 148,420 143,015 145,647 128,199
12/31/92 93,541 148,877 143,417 146,113 128,470
1/31/93 94,171 150,466 144,907 146,551 128,720
2/28/93 94,604 151,748 146,098 146,874 128,904
3/31/93 94,604 152,337 146,626 147,270 129,130
4/30/93 95,825 154,902 149,050 147,624 129,332
5/31/93 96,219 156,070 150,136 147,963 129,525
6/30/93 96,140 156,474 150,489 148,348 129,744
7/31/93 96,495 157,585 151,522 148,734 129,963
8/31/93 96,495 158,121 152,001 149,135 130,192
9/30/93 96,377 158,463 152,295 149,538 130,420
10/31/93 96,140 158,611 152,402 149,882 130,615
11/30/93 95,904 158,728 152,482 150,242 130,819
12/31/93 95,628 158,780 152,500 150,677 131,065
1/31/94 96,061 160,014 153,650 151,084 131,295
2/28/94 95,943 160,330 153,920 151,326 131,432
3/31/94 95,274 159,723 153,306 151,734 131,663
4/30/94 94,644 159,179 152,753 152,083 131,859
5/31/94 94,525 159,498 153,026 152,524 132,108
6/30/94 94,132 159,351 152,854 153,058 132,409
7/31/94 94,171 159,973 153,414 153,579 132,701
8/31/94 93,816 159,925 153,334 154,070 132,977
9/30/94 93,304 159,608 152,997 154,640 133,297
10/31/94 93,029 159,697 153,047 155,181 133,600
11/30/94 92,792 159,851 153,160 155,694 133,887
12/31/94 92,202 159,421 152,714 156,456 134,313
1/31/95 92,596 160,699 153,900 157,129 134,689
2/28/95 92,714 161,591 154,710 157,868 135,100
3/31/95 92,989 162,762 155,786 158,673 135,548
4/30/95 93,186 163,800 156,735 159,434 135,971
5/31/95 93,462 164,981 157,822 160,248 136,422
6/30/95 93,423 165,608 158,379 161,065 136,874
7/31/95 93,423 166,308 159,007 161,838 137,301
8/31/95 93,226 166,660 159,300 162,631 137,738
9/30/95 93,580 168,002 160,538 163,379 138,150
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the Franklin
Rising Dividends Fund to that of the Willshire Midcap Growth Index and the
Consumer Price Index, based on a $10,000 investment from 2/1/87 to 9/30/95, for
the Class I shares.
Period Ending Franklin Rising
Dividend Fund Wilshire CPI
Midcap
2/1/87 $9,552 $10,000 $10,000
2/28/87 $9,628 $10,742 $10,036
3/31/87 $9,561 $10,746 $10,081
4/30/87 $9,341 $10,344 $10,136
5/31/87 $9,332 $10,465 $10,171
6/30/87 $9,619 $10,752 $10,207
7/31/87 $9,773 $11,076 $10,233
8/31/87 $10,140 $11,561 $10,287
9/30/87 $9,909 $11,171 $10,341
10/31/87 $8,568 $8,057 $10,368
11/30/87 $8,169 $7,580 $10,377
12/31/87 $8,461 $8,373 $10,377
1/31/88 $9,008 $8,615 $10,404
2/29/88 $9,420 $9,326 $10,431
3/31/88 $9,479 $9,395 $10,476
4/30/88 $9,558 $9,319 $10,531
5/31/88 $9,558 $9,168 $10,566
6/30/88 $9,944 $9,842 $10,612
7/31/88 $10,043 $9,611 $10,656
8/31/88 $9,914 $9,265 $10,701
9/30/88 $10,113 $9,613 $10,773
10/31/88 $10,272 $9,632 $10,808
11/30/88 $9,981 $9,353 $10,817
12/31/88 $10,051 $9,635 $10,835
1/31/89 $10,355 $10,114 $10,890
2/28/89 $10,376 $10,146 $10,934
3/31/89 $10,588 $10,341 $10,998
4/30/89 $10,853 $10,922 $11,069
5/31/89 $11,262 $11,398 $11,132
6/30/89 $11,364 $11,016 $11,159
7/31/89 $11,858 $11,827 $11,186
8/31/89 $11,982 $12,212 $11,204
9/30/89 $11,951 $12,225 $11,239
10/31/89 $11,824 $11,726 $11,293
11/30/89 $11,865 $11,684 $11,320
12/31/89 $12,021 $11,753 $11,339
1/31/90 $11,445 $10,671 $11,455
2/28/90 $11,592 $10,953 $11,509
3/31/90 $11,791 $11,456 $11,573
4/30/90 $11,475 $10,900 $11,591
5/31/90 $12,044 $12,064 $11,618
6/30/90 $12,150 $12,067 $11,680
7/31/90 $12,118 $11,597 $11,725
8/31/90 $11,055 $9,998 $11,833
9/30/90 $10,604 $9,134 $11,932
10/31/90 $10,465 $8,688 $12,004
11/30/90 $11,451 $9,660 $12,030
12/31/90 $12,053 $10,235 $12,030
1/31/91 $12,461 $11,202 $12,102
2/28/91 $13,590 $12,242 $12,120
3/31/91 $14,145 $13,020 $12,139
4/30/91 $14,264 $12,919 $12,157
5/31/91 $14,934 $13,636 $12,193
6/30/91 $14,582 $13,027 $12,229
7/31/91 $15,005 $13,734 $12,247
8/31/91 $15,331 $14,257 $12,283
9/30/91 $15,445 $14,273 $12,337
10/31/91 $15,598 $14,647 $12,355
11/30/91 $15,413 $14,035 $12,391
12/31/91 $16,385 $15,907 $12,400
1/31/92 $16,484 $16,383 $12,418
2/29/92 $16,462 $16,660 $12,463
3/31/92 $16,215 $15,995 $12,526
4/30/92 $16,380 $15,614 $12,544
5/31/92 $16,656 $15,419 $12,562
6/30/92 $16,384 $14,719 $12,607
7/31/92 $17,027 $15,526 $12,633
8/31/92 $16,828 $15,201 $12,669
9/30/92 $17,133 $15,467 $12,704
10/31/92 $17,334 $16,098 $12,749
11/30/92 $17,890 $17,331 $12,766
12/31/92 $18,085 $17,862 $12,757
1/31/93 $17,907 $18,265 $12,820
2/28/93 $17,638 $17,650 $12,865
3/31/93 $17,778 $18,192 $12,910
4/30/93 $17,149 $17,431 $12,946
5/31/93 $17,362 $18,425 $12,964
6/30/93 $17,166 $18,546 $12,982
7/31/93 $17,177 $18,381 $12,982
8/31/93 $17,459 $19,313 $13,019
9/30/93 $17,465 $19,798 $13,046
10/31/93 $17,714 $19,903 $13,099
11/30/93 $17,261 $19,592 $13,109
12/31/93 $17,454 $20,676 $13,109
1/31/94 $17,692 $21,406 $13,144
2/28/94 $17,045 $21,519 $13,189
3/31/94 $16,212 $20,239 $13,234
4/30/94 $16,235 $20,320 $13,252
5/31/94 $16,451 $20,009 $13,261
6/30/94 $16,416 $19,000 $13,306
7/31/94 $16,565 $19,464 $13,342
8/31/94 $17,276 $21,130 $13,396
9/30/94 $16,874 $20,963 $13,432
10/31/94 $16,805 $21,475 $13,441
11/30/94 $16,391 $20,523 $13,459
12/31/94 $16,551 $20,864 $13,459
1/31/95 $16,980 $20,868 $13,513
2/28/95 $17,489 $22,120 $13,567
3/31/95 $17,867 $22,937 $13,611
4/30/95 $17,995 $23,278 $13,656
5/31/95 $18,647 $23,660 $13,684
6/30/95 $18,851 $25,148 $13,711
7/31/95 $19,307 $27,261 $13,711
8/31/95 $19,610 $27,678 $13,747
9/30/95 $20,302 $28,450 $13,774
GRAPHIC MATERIAL (4)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 9/30/95
AAA 66.9%
AA 14.5%
A 18.6%
GRAPHIC MATERIAL (5)
The following line graph hypothetically compares the performance of the Franklin
Investment Grade Fund to that of the Lehman Brothers GovCorp Bond Index, and the
Consumer Price Index, based on a $10,000 investment from 2/1/87 to 9/30/95.
LB GOV CORP CPI
Period Hypothetical Hypo. Hypo. Investment
Ending Investment Investment
2/1/87 $10,000
2/1/87 $9,579 $ 10,000 $ 10,000
2/28/87 9,588 $ 10,066 $ 10,036
3/31/87 9,497 $ 10,012 $ 10,081
4/30/87 9,115 $ 9,744 $ 10,136
5/31/87 9,047 $ 9,701 $ 10,171
6/30/87 9,164 $ 9,822 $ 10,207
7/31/87 9,044 $ 9,800 $ 10,233
8/31/87 8,964 $ 9,744 $ 10,287
9/30/87 8,763 $ 9,535 $ 10,341
10/31/87 8,913 $ 9,892 $ 10,368
11/30/87 9,007 $ 9,955 $ 10,377
12/31/87 9,067 $ 10,091 $ 10,377
1/31/88 9,283 $ 10,437 $ 10,404
2/29/88 9,427 $ 10,557 $ 10,431
3/31/88 9,416 $ 10,453 $ 10,476
4/30/88 9,404 $ 10,392 $ 10,531
5/31/88 9,403 $ 10,322 $ 10,566
6/30/88 9,531 $ 10,556 $ 10,612
7/31/88 9,537 $ 10,496 $ 10,656
8/31/88 9,565 $ 10,523 $ 10,701
9/30/88 9,648 $ 10,753 $ 10,773
10/31/88 9,710 $ 10,944 $ 10,808
11/30/88 9,694 $ 10,820 $ 10,817
12/31/88 9,724 $ 10,857 $ 10,835
1/31/89 9,809 $ 11,001 $ 10,890
2/28/89 9,816 $ 10,918 $ 10,934
3/31/89 9,869 $ 10,975 $ 10,998
4/30/89 9,945 $ 11,208 $ 11,069
5/31/89 10,069 $ 11,484 $ 11,132
6/30/89 10,193 $ 11,858 $ 11,159
7/31/89 10,365 $ 12,105 $ 11,186
8/31/89 10,277 $ 11,917 $ 11,204
9/30/89 10,308 $ 11,970 $ 11,239
10/31/89 10,445 $ 12,272 $ 11,293
11/30/89 10,521 $ 12,383 $ 11,320
12/31/89 10,550 $ 12,401 $ 11,339
1/31/90 10,467 $ 12,232 $ 11,455
2/28/90 10,533 $ 12,258 $ 11,509
3/31/90 10,537 $ 12,260 $ 11,573
4/30/90 10,502 $ 12,147 $ 11,591
5/31/90 10,710 $ 12,499 $ 11,618
6/30/90 10,829 $ 12,702 $ 11,680
7/31/90 10,960 $ 12,859 $ 11,725
8/31/90 10,909 $ 12,673 $ 11,833
9/30/90 10,950 $ 12,778 $ 11,932
10/31/90 11,043 $ 12,948 $ 12,004
11/30/90 11,205 $ 13,230 $ 12,030
12/31/90 11,289 $ 13,430 $ 12,030
1/31/91 11,412 $ 13,580 $ 12,102
2/28/91 11,549 $ 13,697 $ 12,120
3/31/91 11,655 $ 13,792 $ 12,139
4/30/91 11,802 $ 13,950 $ 12,157
5/31/91 11,881 $ 14,016 $ 12,193
6/30/91 11,878 $ 14,000 $ 12,229
7/31/91 12,014 $ 14,177 $ 12,247
8/31/91 12,251 $ 14,503 $ 12,283
9/30/91 12,475 $ 14,806 $ 12,337
10/31/91 12,626 $ 14,938 $ 12,355
11/30/91 12,781 $ 15,087 $ 12,391
12/31/91 13,159 $ 15,596 $ 12,400
1/31/92 13,002 $ 15,365 $ 12,418
2/29/92 13,021 $ 15,446 $ 12,463
3/31/92 12,967 $ 15,361 $ 12,526
4/30/92 13,075 $ 15,453 $ 12,544
5/31/92 13,244 $ 15,753 $ 12,562
6/30/92 13,445 $ 15,985 $ 12,607
7/31/92 13,783 $ 16,394 $ 12,633
8/31/92 13,909 $ 16,540 $ 12,669
9/30/92 14,120 $ 16,765 $ 12,704
10/31/92 13,947 $ 16,508 $ 12,749
11/30/92 13,867 $ 16,493 $ 12,766
12/31/92 13,970 $ 16,777 $ 12,757
1/31/93 14,202 $ 17,143 $ 12,820
2/28/93 14,531 $ 17,499 $ 12,865
3/31/93 14,559 $ 17,559 $ 12,910
4/30/93 14,700 $ 17,694 $ 12,946
5/31/93 14,655 $ 17,685 $ 12,964
6/30/93 14,867 $ 18,087 $ 12,982
7/31/93 14,919 $ 18,202 $ 12,982
8/31/93 15,199 $ 18,621 $ 13,019
9/30/93 15,218 $ 18,686 $ 13,046
10/31/93 15,256 $ 18,763 $ 13,099
11/30/93 15,179 $ 18,551 $ 13,109
12/31/93 15,233 $ 18,633 $ 13,109
1/31/94 15,403 $ 18,912 $ 13,144
2/28/94 15,176 $ 18,500 $ 13,189
3/31/94 14,981 $ 18,046 $ 13,234
4/30/94 14,902 $ 17,897 $ 13,252
5/31/94 14,908 $ 17,864 $ 13,261
6/30/94 14,929 $ 17,823 $ 13,306
7/31/94 15,104 $ 18,180 $ 13,342
8/31/94 15,126 $ 18,187 $ 13,396
9/30/94 15,063 $ 17,912 $ 13,432
10/31/94 15,085 $ 17,893 $ 13,441
11/30/94 15,039 $ 17,861 $ 13,459
12/31/94 15,056 $ 17,978 $ 13,459
1/31/95 15,243 $ 18,324 $ 13,513
2/28/95 15,448 $ 18,749 $ 13,567
3/31/95 15,513 $ 18,874 $ 13,611
4/30/95 15,649 $ 19,137 $ 13,656
5/31/95 15,945 $ 19,939 $ 13,684
6/30/95 16,082 $ 20,098 $ 13,711
7/31/95 16,094 $ 20,020 $ 13,711
8/31/95 16,215 $ 20,276 $ 13,747
9/30/95 16,299 $ 20,483 $ 13,774
CUM. TR 62.99% 104.83% 37.74%
