SEMI
ANNUAL
REPORT
March 31, 1998
Franklin Managed Trust
Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Corporate Qualified Dividend Fund
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and to expect that mixed in with the good
years can be some bad years. It's important to remember that all securities
markets move both up and down, as do mutual fund share prices. We appreciate
your past support and look forward to serving your investment needs in the years
ahead.
SHAREHOLDER LETTER
CONTENTS
Shareholder Letter............................................ 1
Fund Reports.................................................. 4
Franklin Rising
Dividends Fund................................................ 4
Franklin Investment Grade
Income Fund................................................... 13
Franklin Corporate
Qualified Dividend Fund....................................... 19
Financial Highlights &
Statement of Investments...................................... 24
Financial Statements.......................................... 36
Notes to
Financial Statements.......................................... 40
Dear Shareholder:
We are pleased to bring you the Franklin Managed Trust semi-annual report for
the period ended March 31, 1998.
The future foretold?
In our Franklin Managed Trust annual report of September 30, 1997, we wrote, "It
is important to remember E that markets correct -- in our opinion, it is
desirable for them to do so." I assure you that when we wrote these words, we
had no idea the market was about to prove us accurate in quite so dramatic a
fashion. Less than a month later, on October 27, the Dow Jones(R) Industrial
Average (the Dow) dropped 7.18%, causing the New York Stock Exchange to close
early.*
Although such a steep descent may alarm some investors, it is important to
remember that periods of volatility offer opportunities to purchase companies'
stocks suddenly selling at more attractive valuations. This viewpoint probably
influenced many bargain-hunting investors following the October 27 fall. On the
very next day, the Dow not only rose 4.7%, but continued to rise to new heights.
By the end of the period under review, it stood at 8799.81, compared with its
close at 7945.26 on September 30.*
*Source:Bloomberg. The Dow Jones Industrial Average is a price-weighted average
of 30 actively traded blue chip stocks.
The Asian flu: a global epidemic
The Dow's precipitous drop on October 27, in large part, resulted from concern
over the growing financial crises in Asia. Following Thailand's currency
devaluation during the summer, many Asian markets plummeted, igniting a
worldwide decline in securities markets. Although estimates for Asian market
recovery are still matter of debate, it is clear that these crises had some
positive aspects.
First, the Asian economies' problems are generally perceived to have had a
dampening effect on the U.S. economy, acting as a light foot on the brake that
might otherwise have been applied by the Federal Reserve Board's raising of
interest rates. Second, while the Asian crises may negatively affect profits for
firms that export to the area, the same economic conditions could benefit
businesses that import from the region. Third, the uncertainty in the Asian
equity markets has resulted in a "flight to quality," making financial markets
in the U.S., whose economy has grown moderately without generating inflation,
more attractive to investors worldwide.
"Will the market drop again in the near future? Or will it soar to new heights?
We cannot answer those questions, and neither can anyone else."
A wake-up call
Market volatility such as that experienced during the six months under review is
like the proverbial "wake-up call," rousing investors from dreams of endlessly
rising markets. The fact is that markets always have -- and always will
- -fluctuate. Will the market drop again in the near future? Or will it soar to
new heights? We cannot answer those questions, and neither can anyone else.
Smart investors view their funds as long-term investments and realize that
market fluctuations and short-term volatility have minimal impact upon their
long-term financial goals. They understand that patience, discipline and
diversification are keys to successful investing and that mutual funds offer a
level of diversification that is almost impossible for individual investors to
achieve on their own.
Regardless of the market's direction, Franklin Templeton's disciplined
investment strategy remains the same: to provide shareholders with careful
selection, broad diversification and constant professional supervision. We
encourage you to speak with your investment representative about your financial
goals, diversify your investments, and remember that it is time -- not timing --
that makes the difference.
As always, we appreciate your support, welcome your comments, and look forward
to serving your future investment needs.
Sincerely,
William J. Lippman
President
Franklin Managed Trust
FRANKLIN RISING DIVIDENDS FUND
Your Fund's Objective: Franklin Rising Dividends Fund seeks long-term capital
appreciation. Preservation of capital is also an important consideration. The
fund invests in the equity securities of companies that have paid consistently
rising dividends over the past ten years.
We are pleased to report that Franklin Rising Dividends Fund performed soundly
during the six-month reporting period ended March 31, 1998. As discussed in the
Performance Summary on page 9, the Class I shares' six-month cumulative total
return was +12.80%.
Our investment strategy is based on our belief that companies with consistently
rising dividends should, over time, also realize appreciation in their stock
prices. Highlighted in the table on page 7 are several criteria we use to select
portfolio securities. 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 other investors.
During the period under review, the U.S. stock market benefited from an economy
characterized by solid growth, low inflation and falling long-term interest
rates. Financial services stocks performed particularly well in this positive
atmosphere. This trend aided two of the portfolio's largest holdings, Mercury
General Corp. and National Commerce Bancorp, which also had distinguishing
attributes that contributed to their strong performance during the period.
Automobile insurer Mercury General conducts the majority of its business in
California. It has been able to offer drivers attractively priced auto insurance
through the combination of low cost structure, a strong distribution network and
very effective claims handling capabilities. As a result, Mercury gained market
share while generating strong earnings growth.
National Commerce, a Tennessee-based regional bank, has become a leader in
supermarket branch banking. Several years ago, the company determined that to be
competitive, it needed a very low cost structure, and had to offer its customers
top-quality services. To achieve this, National Commerce decided it would take
itself to its customers, rather than wait for its customers to come to it. And
where could the bank make itself easily accessible to its customers? At their
local supermarkets, of course. This bank's branches are now almost exclusively
located in high traffic supermarket stores -thereby eliminating the need for
costly, stand-alone facilities. Like Mercury General, National Commerce has been
able to gain market share and grow earnings as well.
"Our investment strategy is based on our belief that companies with consistently
rising dividends should, over time, also realize appreciation in their stock
prices."
The retail sector also performed favorably for the portfolio. Our largest
holding in this sector was Family Dollar Stores, Inc., a leading participant in
the growing "convenience discounter" retailing segment. Earnings growth
accelerated as a result of the company's everyday low-pricing strategy, in
addition to its store remodeling and expansion program. Offering basic
merchandise at an attractive price from a convenient location proved to be
especially popular with low- and middle-income consumers.
Despite the strong equity market during the period, several of the portfolio's
stocks suffered sagging prices. These included Cohu, Inc., Dimon, Inc., and
Millipore Corp. The stock price of Cohu, a manufacturer of semiconductor test
handling equipment, fell as a result of weak sales reported by semiconductor
manufacturers. Dimon, a tobacco leaf processor, experienced shipment delays or
cancellations to some cigarette manufacturers in Asia. Slow sales of
microelectronics filtration equipment, and the dollar's strength versus foreign
currencies, hurt Millipore's earnings.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
During the period, we added positions to the portfolio including Pall Corp.,
Diebold, Inc., Bemis Co., Inc., and ReliaStar Financial Corp. Pall makes fluid
filtration devices for a variety of industries including health care. Diebold,
which makes card-based transaction systems, has an exceptional record of 44
years of annual dividend increases. Bemis is a leading manufacturer of flexible
packaging for food industry use. ReliaStar, a provider of a broad range of
insurance related investment products, has increased its dividend for 26 years.
We eliminated several positions from the portfolio including Gap, Inc., UST,
Inc., Monsanto Co., and Bristol-Myers Squibb Co. Gap became less attractively
valued than other alternative investments, and we sold it. UST is facing
increasing competition in its smokeless tobacco product lines, and as a result,
became a candidate for a dividend cut. Monsanto, although continuing to perform
well operationally, decided to cut its dividend significantly and reinvest more
cash into its businesses. In recent years, Bristol-Myers has slowed its dividend
growth enough so that it no longer fits the portfolio's investment criteria.
During the past six months, the following companies made notable year-over-year
dividend increases: Alberto-Culver Co. (+20%), Avery Dennison Corp. (+23.5%),
Baldor Electric Co. (+21.2%), Cohu, Inc. (+33.3%), First Union Corp. (+27.6%),
Mercury General Corp. (+20.7%), Nucor Corp. (+20%), and State Street Corp.
(+20%).
As shown on the table to the left, our ten largest positions on March 31, 1998,
comprised 27.41% of the fund's total net assets. It is interesting to note how
these ten companies would, in the aggregate, respond to the fund's screening
criteria based on a simple average of statistical measures. On average, these 10
companies have raised their dividends 17 years in a row and by 366.48% in the
last ten years. Their most recent dividend increases averaged 17.75%, for a
yield of 1.52% on March 31, 1998, and a dividend payout ratio of 29.10%.
Long-term debt averaged 15.31% of capitalization, and the average price/earnings
ratio was 20.07%, versus 22.88% for that of the unmanaged Standard & Poor's 500
Stock Index on the same date. It is our opinion that these companies are
representative of the portfolio's fundamentally high quality. The table on page
7 compares Franklin Rising Dividends Fund to Standard &Poor's 500 Stock Index by
a variety of standard measures. We also believe that, over the long term,
companies that increase cash payments to shareholders, year after year, will be
superior builders of wealth.
Franklin Rising Dividends Fund vs.
Standard & Poor's 500(R) Stock Index*
Common Stock Analysis
Quarter Ended 3/31/98
Franklin Rising
Dividends Fund S&P 500(R)
==================================================================
Gross Income Yield 1.65% 1.39%
Price/Book Value 3.9x 6.1x
Median Market Capitalization $2.8 billion $7.6 billion
Average Market Capitalization $15.9 billion$ 17.3 billion
Price/Earnings Ratio 19x 28x
BETA 0.74 1.00
Glossary of Terms:
Gross Income Yield: Rate of dividend return for a stock, calculated by dividing
the annual dividend by the stock price.
Price/Book Value: Ratio of a stock's price to its book value per share. Book
value is the total net asset value of a company's securities (total assets minus
total liabilities). Dividing book value by the number of common shares
outstanding gives the book value per share. A stock that has a low ratio of
price to book value may be underpriced, and thus, a good value.
Market Capitalization: The value of a company, determined by multiplying the
market price of one share by the number of its issued and outstanding shares.
Price/Earnings Ratio (P/E): The price of a stock divided by the company's
earnings per share. For instance, a stock selling for $40 a share, and the
company earned $2 per share last year, has a trailing P/E of 20. Companies with
P/Es greater than 20 tend to be young and fast growing, while low P/E stocks
tend to be in mature industries or of established blue chip companies. P/E is
often used to demonstrate how expensive a stock is (i.e., how much investors are
willing to pay for a company's earnings).
BETA: A measure of a stock's relative volatility, in this case relative to the
S&P 500, which has a beta of 1.0. Thus, a beta below this number indicates a
stock or fund should be less volatile than the S&P 500, while a beta higher than
1.0 indicates greater volatility than the S&P 500. A fund beta of 0.74 indicates
the fund should be about 25% less volatile than the S&P 500.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1998, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historic
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
PERFORMANCE SUMMARY
Class I
Franklin Rising Dividends Fund - Class I produced a +12.80% cumulative total
return for the six-month period ended March 31, 1998. Cumulative total return
measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any, and does not include the sales charge. We
have always maintained a long-term perspective when managing the fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table on page 10, the fund's Class I shares delivered a +307.88%
cumulative total return since inception on January 14, 1987.
The fund's share price, as measured by net asset value, decreased $0.17, from
$26.93 on September 30, 1997, to $26.76 on March 31, 1998. During the reporting
period, shareholders received per-share distributions of 5.9 cents ($0.059) in
dividend income, 35.29 cents ($0.3529) in short-term capital gains, and $2.8451
in long-term capital gains. Distributions will vary depending on income earned
by the fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the fund's operating expenses. Past
distributions are not indicative of future trends.
Franklin Rising Dividends Fund - Class I
Periods ended 3/31/98
Since
Inception
1-Year 5-Year 10-Year (1/14/87)
============================================================================
Cumulative Total Return1 44.02% 118.72% 310.21% 307.88%
Average Annual Total Return2 37.52% 15.87% 14.63% 12.90%
Value of $10,000 Investment3 $13,752 $20,883 $39,158 $38,957
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.5%
initial sales charge. See Note below.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include the sales charge. Note: Prior to
July 1, 1994, Class I shares were offered at a lower initial sales charge with
dividends reinvested at net asset value; thus actual total returns would differ.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, and you may have a gain or loss
when you sell your shares.
*Source: Standard and Poor's Micropal. The S&P 500 Stock Index is unmanaged, and
one cannot invest in it directly.
Class II
Franklin Rising Dividends Fund - Class II produced a +12.54% cumulative total
return for the six-month period ended March 31, 1998. Cumulative total return
measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any, and does not include sales charges. We have
always maintained a long-term perspective when managing the fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table on page 12, the fund's Class II shares delivered a +113.33%
cumulative total return since the shares became available on May 1, 1995.
The fund's share price, as measured by net asset value, decreased $0.18, from
$26.85 on September 30, 1997, to $26.67 on March 31, 1998. During the reporting
period, shareholders received no dividend income, but received 35.29 cents
($0.3529) in short-term capital gains, and $2.8451 in long-term capital gains.
Distributions will vary depending on income earned by the fund and any profits
realized from the sale of securities in the portfolio, as well as the level of
the fund's operating expenses. Past distributions are not indicative of future
trends.
"...over the long term, companies that increase cash payments to shareholders,
year after year, will be superior builders of wealth."
Franklin Rising Dividends Fund - Class II
Periods ended 3/31/98
Since
Inception
1-Year (5/1/95)
================================================================
Cumulative Total Return1 43.30% 113.33%
Average Annual Total Return2 40.89% 29.22%
Value of $10,000 Investment3 $14,089 $21,114
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge applicable to shares
redeemed within 18 months of investment.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include sales charges. All calculations
assume reinvestment of dividends and capital gains at net asset value. Since
markets can go down as well as up, 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
Your Fund's Objective: Franklin Investment Grade Income Fund seeks a maximum
level of income consistent with prudent exposure to risk. The fund pursues this
objective by investing in investment-grade debt securities having primarily
intermediate maturities. The fund also seeks to offer a higher total return than
a money market fund, generally with less risk to principal than a fund composed
of either long-term securities or securities that are below investment-grade
quality.1
During the reporting period, the fund emphasized investment in debt securities
with intermediate maturities, attempting to minimize fluctuations in share
value. This strategy proved effective, as the fund's Class I share price, as
measured by net asset value, remained relatively stable, increasing 1.0 cent
($0.01) from $9.08 at the beginning of the period, to $9.09 on March 31, 1998.
Through a careful selection of securities we seek to control risk, in the forms
of interest rate and credit risk, with special attention to the risk posed by a
security's maturity. All of the portfolio's investments are call-protected to
maturity, or for at least 20 years. Further, at the close of the period, the
weighted average credit quality of the portfolio's securities was in the AA
range, as measured by Standard & Poor's Corporation, a national credit-rating
agency. The AA rating is given only to high-grade debt obligations that offer a
strong degree of protection as to principal and interest.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
1. Generally, long-term securities and lower-quality securities provide higher
yields. A money-market fund seeks a stable $1.00 per share net asset value.
Q: What is a "put" bond, and why do we purchase them?
A: A put bond is one that can be redeemed before maturity and still receive
full face value (par). Thus, if interest rates rise, we can redeem a put bond
early, at par on the optional retirement date, and reinvest the proceeds at the
new, higher interest rate. Conversely, if interest rates decline, we can keep
the higher yielding bond, or sell it at a favorable price. We believe that this
put bond strategy should help us produce a higher total return than a money
fund, without subjecting the portfolio's share price to the kind of volatility
associated with longer-term bonds or lower-quality investments. Thus, put bonds
are an integral part of our disciplined investment strategy.
On March 31, 1998, the portfolio had 47.3% of total net assets in government
bonds, 2.0% in straight, short- and intermediate-term bonds, 34.0% in "put"
bonds and 16.7% in cash and equivalents (includes net other assets and
liabilities). On the same date, the fund's weighted average maturity was about
2.04 years, using the optional put dates as effective maturities, and 9.18
years, using the stated maturities.
We will maintain our fiscally responsible investment posture. It is our belief
that this strategy can enable us to produce solid total returns without
subjecting the portfolio's share price to significant price volatility.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1998, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historic
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
PERFORMANCE SUMMARY
Class I
Franklin Investment Grade Income Fund - Class I share price, as measured by net
asset value, increased 1.0 cent ($0.01), from $9.08 on September 30, 1997, to
$9.09 on March 31, 1998. The fund also paid income distributions totaling 23.5
cents ($0.235) per share over the same period. Dividends will vary based on
portfolio earnings, and past distributions are not indicative of future trends.
The fund's distribution rate was 4.17%, based on an annualization of March's
monthly dividend of 3.3 cents ($0.033) per share and the maximum offering price
of $9.49 on March 31, 1998.
For the six-month period ended March 31, 1998, your fund produced a +2.74%
cumulative total return. Cumulative total return reflects the change in value of
an investment, assuming reinvestment of dividends and capital gains, if any, and
does not include the sales charge.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Investment Grade Income Fund - Class I
Periods ended 3/31/98
Since
Inception
1-Year 5-Year 10-Year (1/14/87)
===========================================================================
Cumulative Total Return1 6.31% 26.71% 95.95% 92.77%
Average Annual Total Return2 1.77% 3.93% 6.49% 5.62%
Distribution Rate3 4.17%
30-Day Standardized Yield4 4.37%
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of March's 3.3 cent per share
monthly dividend and the maximum offering price of $9.49 on March 31, 1998.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended March 31, 1998.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at net asset value; thus actual total
returns would differ.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, and you may have a gain or loss
when you sell your shares.
Advisor Class
Franklin Investment Grade Income Fund - Advisor Class share price, as measured
by net asset value, increased 2.0 cents, from $9.07 on September 30, 1997, to
$9.09 on March 31, 1998. The fund also paid income distributions totaling 24.85
cents ($0.2485) per share over the same period. Dividends will vary based on
portfolio earnings, and past distributions are not indicative of future trends.
The fund's distribution rate was 4.61%, based on an annualization of March's
monthly dividend of 3.49 cents ($0.0349) per share and the net asset value price
of $9.09 on March 31, 1998.
For the six-month period ended March 31, 1998, your fund produced a +3.00%
cumulative total return. Cumulative total return reflects the change in value of
an investment, assuming reinvestment of dividends and capital gains, if any.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Investment Grade Income Fund - Advisor Class
Periods ended 3/31/98
Since
Inception*
1-Year* 5-Year* 10-Year* (1/14/87)
===========================================================================
Cumulative Total Return1 6.67% 27.10% 96.56% 93.37%
Average Annual Total Return1 6.67% 4.91% 6.99% 6.06%
Distribution Rate2 4.61%
30-Day Standardized Yield*,3 4.82%
*On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the fund's Class I performance, excluding the effect of the Class I sales
charge, but including the effect of the Class I expenses, including Rule 12b-1
fees; and (b) for periods after January 1, 1997 (commencement of sales), figures
reflect actual Advisor Class performance including the deduction of all fees and
expenses applicable only to that class. This was a period of generally rising
securities prices.
1. Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated.
2. Distribution rate is based on an annualization of March's 3.49 cent per share
monthly dividend and the net asset value price of $9.09 on March 31, 1998.
3. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended March 31, 1998.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions. You may have a gain or loss when
you sell your shares.
FRANKLIN CORPORATE
QUALIFIED DIVIDEND FUND
Your Fund's Objective: Franklin Corporate Qualified Dividend Fund is designed to
serve as an income-producing vehicle for the cash reserves of taxable
corporations. The fund's objective is to generate high, after-tax income for
corporations consistent with investment in investment-quality securities of
domestic corporations whose dividends qualify for the 70% corporate
dividends-received deduction.
We are pleased to report that Franklin Corporate Qualified Dividend Fund met its
investment objective during the reporting period. The fund's share price, as
measured by net asset value, fluctuated within a narrow range and ended at
$24.07 on March 31, 1998, up from $24.03 on September 30, 1997. During the
period, the fund also paid monthly tax-advantaged income, which totaled 50.7
cents ($0.507) per share.
The chart on page 20 profiles the fund's investments at the close of the period.
As the illustration shows, auction-rate preferred stocks and cash & equivalents
comprised about 53.5% of the fund's total net assets. With the exception of cash
& equivalents, auction-rate preferred stocks tend to exhibit the lowest
price-sensitivity to interest rates, because they normally reset their rates
every 49 days, based on the results of a Dutch auction. The process generally
allows investors to receive par value for their securities at periodic
intervals, as other investors bid to set a new dividend rate.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Adjustable-rate preferred stocks offer somewhat less price stability than
auction-rate preferreds. Adjustables reset their dividend rates approximately
every 90 days (according to a yield spread fixed at the time of original sale)
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. Thus, adjustables tend to maintain their prices even when
interest rates swing radically, but they are not protected from losses resulting
from a decline in credit quality.
Fixed-rate preferred stocks have the least price stability. However, all of our
fixed rate preferreds had limited terms until redemption, ranging from a few
months to a few years. This factor lowers their sensitivity to interest rates,
similar to that of short- to intermediate-term bonds.We seek to control various
sources of potential risk, including interest rate and credit risk, through
careful selection of securities and active management of the fund. National
rating services, such as Standard and Poor's and Moody's, as well as our own
in-house evaluations, provide portfolio managers with a guide to each issuer's
credit quality. The chart to the right illustrates the quality breakdown of the
fund's investments at the close of the period.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1998, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historic
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PERFORMANCE SUMMARY
Franklin Corporate Qualified Dividend Fund's share price, as measured by net
asset value, increased 4 cents ($0.04), from $24.03 on September 30, 1997, to
$24.07 on March 31, 1998. The fund also paid income distributions totaling 50.7
cents ($0.507) per share over the same period. Dividends will vary based on
portfolio earnings, and past distributions are not indicative of future trends.
The fund's distribution rate was 4.03%, based on an annualization of March's
monthly dividend of 8.2 cents ($0.082) per share and the maximum offering price
of $24.44 on March 31, 1998. Based on the 1998 maximum federal corporate tax
rate of 35%, the taxable equivalent distribution rate was 5.55%, assuming that
100% of your fund's dividends qualify for the 70% corporate dividends-received
deduction.
For the six-month period ended March 31, 1998, your fund produced a +2.31%
cumulative total return. Cumulative total return reflects the change in value of
an investment, assuming reinvestment of dividends and capital gains, if any, and
does not include the sales charge.
We have always maintained a long-term perspective and encourage our shareholders
to do the same. While the fund may experience volatility from time to time, we
believe its performance should be satisfactory over the long term. As you can
see from the table on page 23, the fund's Class I shares delivered a +93.61%
cumulative total return since inception on January 14, 1987.
Franklin Corporate Qualified Dividend Fund
Periods ended 3/31/98
Since
Inception
1-Year 5-Year 10-Year (1/14/87)
==============================================================================
NAV Cumulative Total Return1 5.08% 25.14% 106.78% 93.61%
POP Cumulative Total Return1 3.52% 23.24% 103.65% 90.71%
NAV Average Annual Total Return2 5.08% 4.59% 7.54% 6.07%
POP Average Annual Total Return2 3.52% 4.27% 7.37% 5.93%
Distribution Rate3 4.03%
Taxable Equivalent Distribution Rate4 5.55%
30-Day Standardized Yield5 3.92%
Taxable Equivalent Yield4 5.40%
1. Net asset value (NAV) cumulative total return shows the change in value of an
investment over the periods indicated and does not include the sales charge.
Public offering price (POP) return includes the sales charge.
2. NAV average annual total return represents the average annual change in value
of an investment over the periods indicated and does not include the sales
charge. POP return reflects the maximum 1.5% initial sales charge.
3. Distribution rate is based on an annualization of March's 8.2 cent per share
monthly dividend and the maximum offering price of $24.44 on March 31, 1998.
4. Taxable equivalent distribution rate and yield assume the 1998 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 March 31, 1998.
Note: All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Since markets can go down as well as up, 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 MANAGED TRUST
Financial Highlights
Franklin Corporate Qualified Dividend Fund
<TABLE>
<CAPTION>
Class I
--------------------------------------------------------------------
Six Months Ended
March 31, 1998 Year Ended September 30,
--------------------------------------------------------
(unaudited) 1997 1996 1995 1994 19931
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ....... $24.03 $23.52 $23.76 $23.69 $24.47 $23.75
Income from investment operations:
Net investment income ..................... .48 1.11 1.10 1.21 1.02 .73
Net realized and unrealized gains (losses) .07 .44 (.19) -- (.84) .78
----------------------------------------------------------------------
Total from investment operations ........... .55 1.55 .91 1.21 .18 1.51
----------------------------------------------------------------------
Less distributions from net investment income (.51) (1.04) (1.15) (1.14) (.96) (.79)
----------------------------------------------------------------------
Net asset value, end of period ............. $24.07 $24.03 $23.52 $23.76 $23.69 $24.47
----------------------------------------------------------------------
Total return* .............................. 2.31% 6.71% 3.94% 5.26% .72% 6.44%
Ratios/supplemental data
Net assets, end of period (000's) .......... $24,454 $24,546 $27,791 $27,793 $31,790 $33,849
Ratio to average net assets:
Expenses .................................. 1.19%** 1.03% 1.07% 1.02% 1.00% 1.06%**
Net investment income ..................... 3.96%** 4.56% 4.64% 5.02% 4.19% 4.09%**
Portfolio turnover rate .................... 9.00% 13.41% 24.88% 29.18% 32.17% 27.46%
Average commission rate paid*** ............ -- $.0600 $.0600 -- -- --
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at offering price.
** Annualized.
*** Relates to purchases and sales of equity securities. Prior to fiscal year
end 1996 disclosure of average commission rate was not required.
1For the nine months ended September 30, 1993.
See notes to financial statements.
FRANKLIN MANAGED TRUST
Statement of Investments, March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
Franklin Corporate Qualified Dividend Fund SHARES VALUE
<S> <C> <C>
a Adjustable Rate Preferred Stocks 26.4%
Commercial Banks/Bank Holding Companies 8.5%
Chase Manhattan, 5.10% flex rate pfd., Series N ................................ 36,000 $ 888,750
Citicorp, 4.956% adj. rate pfd., Series 19 ..................................... 48,200 1,192,950
-------------
2,081,700
-------------
Electric Utilities 8.7%
Arizona Public Service Co., 6.00% adj. rate pfd., Series Q ..................... 10,000 947,500
Toledo Edison Co., 7.00% cum. adj. rate pfd., Series A ......................... 46,700 1,174,799
-------------
2,122,299
-------------
Gas Transmission 4.8%
Enserch Corp., 5.542% adj. rate pfd., Series A ................................. 48,000 1,173,000
-------------
Government Sponsored Enterprise 4.4%
Sallie-Mae, 5.00% adj. rate pfd., Series A ..................................... 22,000 1,078,000
-------------
Total Adjustable Rate Preferred Stocks (Cost $6,300,572) 6,454,999
-------------
b Auction Rate Preferred Stocks 38.6%
c Alabama Power Co., 3.95%, Series 1993 .......................................... 2 200,921
c CNA Financial Corp., 4.015%, Series F ......................................... 12 1,206,558
c Central Power and Light Corp., 4.089%, Series B ................................ 12 1,206,679
c General Electric Capital Corp., 4.10%, Series K ................................ 12 1,206,490
c International Lease Finance, 4.115%, Series B .................................. 11 1,101,886
d Morgan (JP), Inc., 4.20%, Series C ............................................. 1,100 1,103,316
c Northern Trust Corp., 4.00%, Series C .......................................... 11 1,104,278
c Republic NY Corp., 4.095%, Series A ............................................ 11 1,101,877
c Virginia Electric and Power Co., 4.05%, Series 92-A ............................ 12 1,205,805
-------------
Total Auction Rate Preferred Stocks (Cost $9,400,000) 9,437,810
-------------
Fixed Rate Preferred Stocks 20.1%
Financial Services 8.4%
Donaldson, Lufkin & Jenrette Securities Corp., 5.94% adj. rate pfd., Series A .. 20,000 1,021,250
Morgan Stanley & Co., Inc., 5.91% adj. rate pfd. ............................... 20,000 1,030,000
-------------
2,051,250
-------------
Pharmaceuticals 5.4%
c Smithkline Beecham Holding, 5.58%, Series A-1 ................................... 13 1,331,688
-------------
Utilities 6.3%
Entergy Louisiana, Inc., 7.00% S.F., pfd. ...................................... 15,000 1,531,875
-------------
Total Fixed Rate Preferred Stocks (Cost $4,966,050) ............................ 4,914,813
-------------
Total Long Term Investments (Cost $20,666,622) ................................. 20,807,622
-------------
eRepurchase Agreement 15.1%
Joint Repurchase Agreement, 5.819%, 4/01/98, (Maturity Value $3,701,598)
(Cost $3,701,000)............................................................... $3,701,000 $ 3,701,000
BancAmerica Robertson Stephens, (Maturity Value $305,566)
Barclays Capital Group, Inc., (Maturity Value $305,566) Bear, Stearns &
Co., Inc., (Maturity Value $166,672) BT Alex Brown, Inc., (Maturity Value
$55,558) Chase Securities, Inc., (Maturity Value $298,375) CIBC Wood Gundy
Securities Corp., (Maturity Value $430,899) Donaldson, Lufkin & Jenrette
Securities Corp., (Maturity Value $305,566)
Dresdner Kleinwort Benson, North America, L.L.C., (Maturity Value $305,566)
Greenwich Capital Markets, Inc., (Maturity Value $305,566) Morgan Stanley &
Co., Inc., (Maturity Value $305,566) Paribas Corp., (Maturity Value
$305,566) SBC Warburg Dillon Read, Inc., (Maturity Value $305,566) UBS
Securities, L.L.C., (Maturity Value $305,566)
Collateralized by U.S. Treasury Bills and Notes..............................
-------------
Total Investments (Cost $24,367,622) 100.2% .................................... 24,508,622
Other Assets, less Liabilities (.2%) ........................................... (54,410)
-------------
Net Assets 100.0%............................................................... $24,454,212
===========
</TABLE>
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
eSee Note 1(b) regarding joint repurchase agreement.
See notes to financial statements.
FRANKLIN MANAGED TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin Rising Dividends Fund
Class I
-----------------------------------------------------------------
Six Months Ended
March 31, 1998 Year Ended September 30,
----------------------------------------------
(unaudited) 1997 1996 1995 1994 19931
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout
the period)
Net asset value, beginning of period $26.93 $20.03 $17.31 $14.67 $15.43 $16.18
-----------------------------------------------------------------
Income from investment operations:
Net investment income .06 .16 .28 .33 .28 .19
Net realized and unrealized gains (losses) 3.03 8.23 2.78 2.61 (.80) (.74)
-----------------------------------------------------------------
Total from investment operations 3.09 8.39 3.06 2.94 (.52) (.55)
-----------------------------------------------------------------
Less distributions from:
Net investment income (.06) (.18) (.34) (.30) (.24) (.20)
Net realized gains (3.20) (1.31) -- -- -- --
-----------------------------------------------------------------
Total distributions (3.26) (1.49) (.34) (.30) (.24) (.20)
-----------------------------------------------------------------
Net asset value, end of period $26.76 $26.93 $20.03 $17.31 $14.67 $15.43
=================================================================
Total return* 12.80% 44.10% 17.83% 20.32% (3.38%) (3.43%)
Ratios/supplemental data
Net assets, end of period (000's) $492,803 $394,873 $277,746 $260,917 $261,461 $356,708
Ratio to average net assets:
Expenses 1.38%** 1.41% 1.40% 1.43% 1.43% 1.40%**
Net investment income .46%** .71% 1.49% 2.10% 1.81% 1.73%**
Portfolio turnover rate 12.16% 39.47% 31.55% 14.60% 25.75% 11.48%
Average commission rate paid*** $.0536 $.0511 $.0508 -- -- --
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at offering price.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year end
1996 disclosure of average commission rate was not required.
1For the nine months ended September 30, 1993.
<TABLE>
<CAPTION>
Franklin Rising Dividends Fund
Class II
---------------------------------------------
Six Months Ended
March 31, 1998 Year Ended September 30,
---------------------------
(unaudited) 1997 1996 19952
---------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $26.85 $19.98 $17.28 $15.47
---------------------------------------------
Income from investment operations:
Net investment income -- .08 .21 .11
Net realized and unrealized gains 3.02 8.17 2.74 1.83
---------------------------------------------
Total from investment operations 3.02 8.25 2.95 1.94
---------------------------------------------
Less distributions from:
Net investment income -- (.07) (.25) (.13)
Net realized gains (3.20) (1.31) -- --
---------------------------------------------
Total distributions (3.20) (1.38) (.25) (.13)
---------------------------------------------
Net asset value, end of period $26.67 $26.85 $19.98 $17.28
=============================================
Total return* 12.54% 43.37% 17.16% 12.56%
Ratios/supplemental data
Net assets, end of period (000's) $36,142 $14,526 $3,882 $1,060
Ratio to average net assets:
Expenses 1.92%** 1.95% 1.95% 1.90%**
Net investment income (.02%)** .17% .94% 1.92%**
Portfolio turnover rate 12.16% 39.47% 31.55% 14.60%
Average commission rate paid*** $.0536 $.0511 $.0508 --
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year end
1996 disclosure of average commission rate was not required.
2For the period May 1, 1995 (effective date) to September 30, 1995.
See notes to financial statements.
FRANKLIN MANAGED TRUST
Statement of Investments, March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
Franklin Rising Dividends Fund SHARES VALUE
===============================================================================================================
<S> <C> <C>
Common Stocks 97.7%
Banks/Thrifts 14.7%
CoreStates Financial Corp....................................................... 57,500 $ 5,160,625
First Union Corp................................................................ 197,000 11,179,750
Mercantile Bankshares Corp...................................................... 150,950 5,462,503
National Commerce Bancorp....................................................... 274,300 11,692,038
State Street Corp............................................................... 98,200 6,683,738
TrustCo. Bank Corp., New York................................................... 293,716 8,334,192
U.S. Bancorp.................................................................... 77,000 9,605,750
Washington Mutual, Inc.......................................................... 184,500 13,232,119
Wilmington Trust Corp........................................................... 96,200 6,385,267
-------------
77,735,982
-------------
Consumer Goods/Services 17.3%
Alberto-Culver Co., Class A..................................................... 472,100 12,717,194
Bemis Co., Inc.................................................................. 226,600 10,225,325
Block Drug Co., Inc., Class A................................................... 108,659 4,563,678
Dimon, Inc...................................................................... 412,700 6,886,931
Newell Co....................................................................... 187,200 9,067,500
Nike, Inc., Class B............................................................. 68,500 3,031,125
Pall Corp....................................................................... 806,500 17,339,750
Philip Morris Cos., Inc......................................................... 163,700 6,824,244
Sherwin-Williams Co............................................................. 320,000 11,360,000
Stanhome, Inc................................................................... 23,900 643,806
Universal Corp.................................................................. 202,300 8,913,844
-------------
91,573,397
-------------
Drugs/Health Care 2.6%
Becton, Dickinson & Co.......................................................... 129,000 8,780,063
Merck & Co., Inc................................................................ 16,100 2,066,838
West Co., Inc................................................................... 93,600 2,819,700
-------------
13,666,601
-------------
Electronics/Technology 8.6%
Baldor Electric Co.............................................................. 210,266 5,664,040
Cohu, Inc....................................................................... 258,200 9,811,600
Diebold, Inc.................................................................... 224,000 9,856,000
General Electric Co............................................................. 65,000 5,602,188
Hewlett-Packard Co.............................................................. 81,100 5,139,713
Hubbell Inc., Class B........................................................... 119,300 6,009,738
Rockwell International Corp..................................................... 62,300 3,574,463
-------------
45,657,742
-------------
Energy 1.0%
Royal Dutch Petroleum Co. New York Shares, ADR (Netherlands).................... 93,700 5,323,331
-------------
Financial Services 1.7%
Fannie Mae...................................................................... 139,000 8,791,750
-------------
Industrial 19.3%
Donaldson Co., Inc.............................................................. 66,900 $ 1,722,675
Dover Corp...................................................................... 228,400 8,679,200
Flowserve Corp.................................................................. 156,200 5,096,025
Graco, Inc...................................................................... 98,400 2,982,750
Hanna (M.A.) Co................................................................. 406,500 9,933,844
Kaydon Corp..................................................................... 281,700 11,514,488
Kimball International, Inc., Class B............................................ 421,000 9,683,000
Leggett & Platt, Inc............................................................ 215,200 11,069,350
Millipore Corp.................................................................. 238,300 8,280,925
Myers Industries, Inc........................................................... 292,280 6,101,345
Nucor Corp...................................................................... 183,400 9,983,838
Superior Industries International, Inc.......................................... 167,800 5,568,863
Superior Surgical Manufacturing Co., Inc........................................ 138,300 2,420,250
Watts Industries, Inc., Class A................................................. 310,000 9,261,250
-------------
102,297,803
-------------
Insurance - Life .1%
American Heritage Life Investment Corp.......................................... 33,800 697,125
-------------
Insurance - Property/Casualty 12.8%
Allied Group, Inc............................................................... 293,825 9,475,856
American International Group, Inc............................................... 40,250 5,068,984
Chubb Corp...................................................................... 103,000 8,072,625
Harleysville Group, Inc......................................................... 69,700 1,812,200
Mercury General Corp............................................................ 215,200 13,463,450
MMI Cos., Inc................................................................... 395,400 9,514,313
ReliaStar Financial Corp........................................................ 157,800 7,268,663
RLI Corp........................................................................ 159,250 8,599,500
St. Paul Cos., Inc.............................................................. 47,200 4,206,700
-------------
67,482,291
-------------
Office/Business Supplies 8.5%
Avery Dennison Corp............................................................. 188,600 10,066,525
Brady (W.H.) Corp............................................................... 142,300 4,767,050
Ennis Business Forms, Inc....................................................... 256,900 3,018,575
Standard Register Co............................................................ 247,700 8,406,319
Wallace Computer Services, Inc.................................................. 534,900 18,520,913
-------------
44,779,382
-------------
Retail 9.8%
Family Dollar Stores, Inc....................................................... 625,600 23,772,800
The Limited, Inc................................................................ 280,200 8,038,238
Rite Aid Corp................................................................... 273,800 9,377,650
Schultz Sav-O Stores, Inc....................................................... 23,000 385,250
Wal-Mart Stores, Inc............................................................ 204,300 10,380,994
-------------
51,954,932
-------------
Transportation 1.3%
Circle International Group, Inc................................................. 265,200 $ 7,027,800
-------------
Total Common Stocks (Cost $345,304,862)......................................... 516,988,136
-------------
Convertible Preferred Stock .2%
American Heritage Life Investment Corp., 8.50% cvt. pfd. (Cost $625,000)........ 12,500 765,625
-------------
Total Long Term Investments (Cost $345,929,862)................................. 517,753,761
-------------
PRINCIPAL
AMOUNT
-----------
e Repurchase Agreement 2.4%
Joint Repurchase Agreement, 5.819%, 4/01/98, (Maturity Value $12,896,430) $12,894,346 12,894,346
(Cost $12,894,346)
BancAmerica Robertson Stephens, (Maturity Value $1,064,600) Barclays Capital
Group, Inc., (Maturity Value $1,064,600) Bear, Stearns & Co., Inc.,
(Maturity Value $580,726) BT Alex Brown, Inc., (Maturity Value $193,575)
Chase Securities, Inc., (Maturity Value $1,039,581) CIBC Wood Gundy
Securities Corp., (Maturity Value $1,501,148) Donaldson, Lufkin & Jenrette
Securities Corp., (Maturity Value $1,064,600) Dresdner Kleinwort Benson,
North America, L.L.C., (Maturity Value $1,064,600) Greenwich Capital
Markets, Inc., (Maturity Value $1,064,600) Morgan Stanley & Co., Inc.,
(Maturity Value $1,064,600) Paribas Corp., (Maturity Value $1,064,600) SBC
Warburg Dillon Read, Inc., (Maturity Value $1,064,600) UBS Securities,
L.L.C., (Maturity Value $1,064,600)
Collateralized by U.S. Treasury Bills and Notes
-------------
Total Investments (Cost $358,824,208) 100.3%.................................... 530,648,107
Other Assets, less Liabilities (.3%)............................................ (1,703,536)
-------------
Net Assets 100.0%............................................................... $528,944,571
=============
</TABLE>
eSee Note 1(b) regarding joint repurchase agreement.
See notes to financial statements.
FRANKLIN MANAGED TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin Investment Grade Income Fund
Class I
------------------------------------------------------------------
Six Months Ended
March 31, 1998 Year Ended September 30,
----------------------------------------------
(unaudited) 1997 1996 1995 1994 19931
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $9.08 $9.01 $9.04 $8.82 $9.31 $8.93
------------------------------------------------------------------
Income from investment operations:
Net investment income .21 .41 .44 .44 .45 .38
Net realized and unrealized gains .04 .09 (.06) .26 (.54) .40
(losses)
------------------------------------------------------------------
Total from investment operations .25 .50 .38 .70 (.09) .78
------------------------------------------------------------------
Less distributions from net (.24) (.43) (.41) (.48) (.40) (.40)
investment income
------------------------------------------------------------------
Net asset value, end of period $9.09 $9.08 $9.01 $9.04 $8.82 $9.31
==================================================================
Total return* 2.74% 5.68% 4.25% 8.21% (1.02%) 8.94%
Ratios/supplemental data
Net assets, end of period (000's) $50,784 $43,568 $29,372 $29,824 $29,553 $35,970
Ratio to average net assets:
Expenses 1.16%** 1.05% 1.06% 1.09% 1.05% 1.09%**
Net investment income 4.70%** 4.73% 4.81% 4.96% 4.91% 5.61%**
Portfolio turnover rate 11.87% 41.32% 20.06% 64.70% 10.57% 53.19%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at offering price.
**Annualized.
1For the nine months ended September 30, 1993.
FRANKLIN MANAGED TRUST
Financial Highlights (continued)
Franklin Investment Grade Income Fund
<TABLE>
<CAPTION>
Advisor Class
--------------------------------------
Six Months Ended
March 31, 1998 Year Ended
(unaudited) September 30, 19973
--------------------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $9.07 $9.03
--------------------------------------
Income from investment operations:
Net investment income .23 .28
Net realized and unrealized gains .04 .07
--------------------------------------
Total from investment operations .27 .35
--------------------------------------
Less distributions from net investment income (.25) (.31)
--------------------------------------
Net asset value, end of period $9.09 $9.07
======================================
Total return* 3.00% 3.98%
Ratios/supplemental data
Net assets, end of period (000's) $48 $39
Ratio to average net assets:
Expenses .85%** .85%**
Net investment income 4.98%** 4.84%**
Portfolio turnover rate 11.87% 41.32%
</TABLE>
*Total return is not annualized.
**Annualized.
3For the period January 2, 1997 (effective date) to September 30, 1997.
See notes to financial statements.
FRANKLIN MANAGED TRUST
Statement of Investments, March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
Franklin Investment Grade Income Fund AMOUNT VALUE
<S> <C> <C>
e U.S. Government Securities and Agencies 51.3%
Tennessee Valley Authority, bonds, (putable*
7/15/01, callable 7/15/20), 6.235%, 7/15/45).................................... $2,000,000 $ 2,058,512
U.S. Treasury Notes, 5.125%, 4/30/98 ........................................... 1,000,000 1,000,001
U.S. Treasury Notes, 5.875%, 8/15/98 ........................................... 2,000,000 2,003,126
U.S. Treasury Notes, 5.875%, 1/31/99 ........................................... 2,000,000 2,005,626
U.S. Treasury Notes, 5.875%, 3/31/99 ........................................... 1,000,000 1,003,438
U.S. Treasury Notes, 6.00%, 6/30/99 ............................................ 2,000,000 2,010,626
U.S. Treasury Notes, 5.875%, 7/31/99 ........................................... 2,000,000 2,007,502
U.S. Treasury Notes, 5.875%, 8/31/99 ........................................... 3,000,000 3,011,253
U.S. Treasury Notes, 5.75%, 9/30/99 ............................................ 1,000,000 1,002,188
U.S. Treasury Notes, 5.625%, 11/30/99 .......................................... 2,000,000 2,001,252
U.S. Treasury Notes, 5.625%, 12/31/99 .......................................... 2,000,000 2,001,252
U.S. Treasury Notes, 5.50%, 3/31/00 ............................................ 2,000,000 1,997,502
U.S. Treasury Notes, 6.00%, 8/15/00 ............................................ 2,000,000 2,016,876
U.S. Treasury Notes, 5.375%, 2/15/01 ........................................... 2,000,000 1,988,126
-------------
Total U.S. Government Securities and Agencies (Cost $26,028,851)................ 26,107,280
-------------
Corporate Bonds 32.0%
Banking 4.8%
Southtrust Bank Alabama, (putable* 2/06/01), 5.58%, 2/06/06..................... 2,500,000 2,456,768
-------------
Business Services 3.0%
Xerox Corp., (putable* 5/05/98), 5.90%, 5/05/37 ................................ 1,500,000 1,506,774
-------------
Consumer Goods 4.1%
Coca-Cola Enterprises, deb., (putable* 10/15/03), 6.70%,10/15/36 ............... 2,000,000 2,078,366
-------------
Financial Services 5.0%
Norwest Financial, Inc., senior notes, 6.23%, 9/01/98 .......................... 1,000,000 1,001,178
Sears Roebuck Acceptance Corp.,
(putable* 11/15/00), 6.13%, 11/15/05 ........................................... 775,000 783,552
(putable* 8/13/01), 6.15%, 11/15/05 ............................................ 725,000 736,196
-------------
2,520,926
-------------
Industrial 8.0%
Bausch & Lomb, notes, (putable* 11/15/00), 6.56%, 8/12/26 ...................... 2,000,000 2,070,136
WMX Technologies, Inc., notes, (putable* 5/15/00), 6.65%, 5/15/05 .............. 2,000,000 2,018,598
-------------
4,088,734
-------------
Retail 3.1%
Penney J.C. & Co., Inc., deb., (putable* 8/15/03), 6.90%, 8/15/26 .............. 1,500,000 1,568,004
-------------
Telephone Utilities 4.0%
Bellsouth Telecommunications Corp., deb., (putable* 11/15/00), 5.85%, 11/15/45 . 2,000,000 2,014,972
-------------
Total Corporate Bonds (Cost $16,045,873)........................................ 16,234,544
-------------
Total Long Term Investments (Cost $42,074,724).................................. 42,341,824
-------------
e Repurchase Agreement 15.2%
Joint Repurchase Agreement, 5.819%, 4/01/98,
(Maturity Value $7,748,470) (Cost $7,747,218) .................................... $7,747,218 $ 7,747,218
BancAmerica Robertson Stephens, (Maturity Value $639,634)
Barclays Capital Group, Inc., (Maturity Value $639,635) Bear, Stearns & Co.,
Inc., (Maturity Value $348,891) BT Alex Brown, Inc., (Maturity Value
$116,297) Chase Securities, Inc., (Maturity Value $624,580) CIBC Wood Gundy
Securities Corp., (Maturity Value $901,990) Donaldson, Lufkin & Jenrette
Securities Corp., (Maturity Value $639,635)
Dresdner Kleinwort Benson, North America, L.L.C., (Maturity Value $639,634)
Greenwich Capital Markets, Inc., (Maturity Value $639,635)
Morgan Stanley & Co., Inc. (Maturity Value $639,635)
Paribas Corp., (Maturity Value $639,635)
SBC Warburg Dillon Read, Inc., (Maturity Value $639,635)
UBS Securities, L.L.C., (Maturity Value $639,634)
Collateralized by U.S. Treasury Bills and Notes
------------
Total Investments (Cost $49,821,942) 98.5%...................................... 50,089,042
Other Assets, less Liabilities 1.5%............................................. 742,656
------------
Net Assets 100.0%............................................................... $50,831,698
------------
</TABLE>
*Holder may redeem at par on put date.
eSee Note 1(b) regarding joint repurchase agreement.
FRANKLIN MANAGED TRUST
Financial Statements
Statement of Assets and Liabilities
March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
Franklin Franklin Franklin
Corporate Qualified Rising Investment Grade
Dividend Fund Dividends Fund Income Fund
----------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in securities:
Cost $20,666,622 $345,929,862 $42,074,724
=========================================
Value 20,807,622 517,753,761 42,341,824
Repurchase agreements, at value and cost 3,701,000 12,894,346 7,747,218
Cash 94,723 814,234 67
Receivables:
Capital shares sold 674 1,107,061 360,951
Dividends and interest 11,571 670,545 536,044
-----------------------------------------
Total assets 24,615,590 533,239,947 50,986,104
-----------------------------------------
Liabilities:
Payables:
Investment securities purchased -- 3,131,343 --
Capital shares redeemed 112,581 169,326 34,359
Affiliates 40,587 806,922 62,434
Shareholders 1,480 163,505 50,581
Other liabilities 6,730 24,280 7,032
-----------------------------------------
Total liabilities 161,378 4,295,376 154,406
-----------------------------------------
Net assets, at value $24,454,212 $528,944,571 $50,831,698
=========================================
Net assets consist of:
Undistributed net investment income $ 241,198 $ 18,675 $ 181,606
Net unrealized appreciation 141,000 171,823,899 267,100
Accumulated net realized gain (loss) (2,070,150) 13,497,246 (804,316)
Capital shares 26,142,164 343,604,751 51,187,308
-----------------------------------------
Net assets, at value $24,454,212 $528,944,571 $50,831,698
=========================================
Franklin Franklin Franklin
Corporate Qualified Rising Investment Grade
Dividend Fund Dividends Fund Income Fund
Class I:
<S> <C> <C> <C>
Net assets, at value $24,454,212 $492,802,779 $50,784,051
========================================
Shares outstanding 1,016,013 18,413,376 5,587,697
========================================
Net asset value per share* $24.07 $26.76 $9.09
========================================
Maximum offering price per share (net asset value per share / 98.5%,
95.5%, and 95.75%, respectively) $24.44 $28.02 $9.49
========================================
Class II:
Net assets, at value $36,141,792
===========
Shares outstanding 1,355,233
===========
Net asset value per share* $26.67
===========
Maximum offering price per share (net asset value per share / 99%) $26.94
===========
Advisor Class:
Net assets, at value $47,647
========
Shares outstanding 5,242
========
Net asset value and maximum offering price per share $9.09
========
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN MANAGED TRUST
Financial Statements (continued)
Statement of Operations
for the six months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
Franklin Franklin Franklin
Corporate Qualified Rising Investment Grade
Dividend FundDividends Fund Income Fund
---------------------------------------------
Investment income:
<S> <C> <C> <C>
Dividends $511,005 $ 3,688,221 $--
Interest 102,531 453,510 1,396,151
----------------------------------------
Total investment income 613,536 4,141,731 1,396,151
Expenses:
Management fees (Note 3) 59,602 1,674,892 119,342
Distribution fees (Note 3)
Class I 34,995 968,061 74,882
Class II -- 109,577 --
Transfer agent fees (Note 3) 3,590 254,182 23,270
Reports to shareholders 2,788 59,263 7,128
Accounting fees (Note 3) 20,000 20,000 20,000
Registration and filing fees 12,196 27,827 22,262
Professional fees 6,824 14,805 6,117
Trustees' fees and expenses 1,469 14,849 2,250
Other 486 9,305 1,704
-----------------------------------------
Total expenses 141,950 3,152,761 276,955
-----------------------------------------
Net investment income 471,586 988,970 1,119,196
-----------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments (101,500) 18,200,792 6,109
Net unrealized appreciation on investments 165,830 37,838,182 151,169
-----------------------------------------
Net realized and unrealized gain 64,330 56,038,974 157,278
-----------------------------------------
Net increase in net assets resulting from operations $535,916 $57,027,944 $1,276,474
=========================================
</TABLE>
See notes to financial statements.
FRANKLIN MANAGED TRUST
Financial Statements (continued)
Statements of Changes in Net Assets for the six months ended March 31, 1998
(unaudited) and the year ended September 30, 1997
<TABLE>
<CAPTION>
Franklin Corporate Qualified Franklin Rising Franklin Investment Grade
Dividend Fund Dividends Fund Income Fund
--------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1998 1997 March 31, 1998 1997 March 31, 1998 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
Operations:
Net investment income $ 471,586 $1,177,449 $ 988,970 $ 2,313,467 $ 1,119,196 $ 1,724,716
Net realized gain (loss)
from investments (101,500) 5,034 18,200,792 49,210,010 6,109 344,319
Net unrealized appreciation
(depreciation) on investments 165,830 522,548 37,838,182 70,034,445 151,169 (78,808)
-------------------------------------------------------------------------
Net increase in net
assets resulting
from operations 535,916 1,705,031 57,027,944 121,557,922 1,276,474 1,990,227
Distributions to shareholders from:
Net investment income:
Class I (503,429)(1,127,403) (970,295) (2,490,290) (1,206,352)(1,686,440)
Class II -- -- -- (8,072) -- --
Advisor Class -- -- -- -- (1,219) (1,534)
Net realized gains:
Class I -- -- (48,478,297) (18,098,843) -- --
Class II -- -- (2,104,631) (288,240) -- --
-------------------------------------------------------------------------
Total distributions to (503,429)(1,127,403) (51,553,223) (20,885,445) (1,207,571)(1,687,974)
shareholders
Capital share transactions: (Note 2)
Class I (123,778)(3,823,540) 93,507,159 18,867,160 7,146,823 13,893,814
Class II -- -- 20,563,263 8,231,696 -- --
Advisor Class -- -- -- -- 8,356 39,376
-------------------------------------------------------------------------
Total capital share transactions (123,778) (3,823,540) 114,070,422 27,098,856 7,155,179 13,933,190
Net increase (decrease)
in net assets (91,291)(3,245,912) 119,545,143 127,771,333 7,224,082 14,235,443
Net assets:
Beginning of period 24,545,503 27,791,415 409,399,428 281,628,095 43,607,616 29,372,173
---------------------------------------------------------------------------
End of period $24,454,212 $24,545,503 $528,944,571 $409,399,428 $50,831,698 $43,607,616
===========================================================================
Undistributed net investment
income included in net assets
End of period $ 241,198 $ 273,041 $ 18,675 $-- $ 181,606 $ 269,981
===========================================================================
See notes to financial statements.
</TABLE>
FRANKLIN MANAGED TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Managed Trust (the Trust) is registered under the Investment Company
Act of 1940 as an open-end, diversified investment company, consisting of three
series (the Funds). The Funds' investment objectives are:
Fund Objective
----------------------------------------------------------------
Franklin Corporate Qualified Dividend Fund Income
Franklin Rising Dividends Fund Growth and Income
Franklin Investment Grade Income Fund Income
The following summarizes the Funds' significant accounting policies.
a. Security Valuation:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
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 is based upon the values of comparable traded securities.
When market quotations are not readily available for securities held by the
Fund, or for comparable securities, then such securities will be valued at par
value plus the next accrued dividend, as approved by the Board of Trustees.
b. Joint Repurchase Agreements:
The Funds may enter into a joint repurchase agreement whereby their uninvested
cash balance is deposited into a joint cash account to be used to invest in one
or more repurchase agreements. The value and face amount of the joint repurchase
agreement are allocated to the Funds based on their pro-rata interest. A
repurchase agreement is accounted for as a loan by the Fund to the seller,
collateralized by securities which are delivered to the Fund's custodian. The
market value, including accrued interest, of the initial collateralization is
required to be at least 102% of the dollar amount invested by the Funds, with
the value of the underlying securities marked to market daily to maintain
coverage of at least 100%. At March 31, 1998, all outstanding repurchase
agreements had been entered into on that date.
c. Income Taxes:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
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. Bond discount is
amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. Other expenses are
charged to each Fund on a specific identification basis.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
d. Security Transactions, Investment Income, Expenses and Distributions (cont.)
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
The Funds offer three classes of shares: Class I, Class II and Advisor Class.
The shares have the same rights except for their initial sales load,
distribution fees, voting rights on matters affecting a single class and the
exchange privilege of each class.
At March 31, 1998, there were an unlimited number of shares authorized ($.01 par
value). Transactions in each of the Fund's shares were as follows:
<TABLE>
<CAPTION>
Franklin Corporate Qualified Franklin Rising Franklin Investment
Dividend Fund Dividends Fund Grade Income Fund
-------------------------------------------------------------------
Class I Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended March 31, 1998
Shares sold 170,845 $ 4,102,850 3,682,158 $93,611,069 1,716,845 $15,588,152
Shares issued in
reinvestment of distributions 19,256 461,152 1,733,481 41,823,258 112,216 1,016,333
Shares redeemed (195,363) (4,687,780) (1,665,731) (41,927,168) (1,041,192) (9,457,662)
----------------------------------------------------------------------
Net increase (decrease) (5,262) $ (123,778) 3,749,908 $93,507,159 787,869 $ 7,146,823
======================================================================
Year ended September 30, 1997
Shares sold 317,340 $7,553,837 2,748,993 $64,035,322 3,081,133 $27,806,195
Shares issued in
reinvestment of distributions 42,345 1,005,884 803,577 16,782,484 148,291 1,335,521
Shares redeemed (520,179) (12,383,261) (2,754,192) (61,950,646) (1,688,767) (15,247,902)
-----------------------------------------------------------------------
Net increase (decrease) (160,494) $(3,823,540) 798,378 $18,867,160 1,540,657 $13,893,814
=======================================================================
</TABLE>
2. CAPITAL STOCK (cont.)
Franklin Rising
Dividends Fund
--------------------
Class II Shares Amount
- ------------------------------------------------------------------------------
Six months ended March 31, 1998
Shares sold 829,132 $21,019,898
Shares issued in reinvestment of distributions 76,635 1,842,425
Shares redeemed (91,504) (2,299,060)
--------------------
Net increase 814,263 $20,563,263
====================
Year ended September 30, 1997
Shares sold 428,747 $10,143,144
Shares issued in reinvestment of distributions 11,554 239,444
Shares redeemed (93,599) (2,150,892)
--------------------
Net increase 346,70 $ 8,231,696
====================
<TABLE>
<CAPTION>
Franklin Investment
Grade Income Fund
-------------------
Advisor Class Shares Amount
<S> <C> <C>
Six months ended March 31, 1998
Shares sold 790 $ 7,263
Shares issued in reinvestment of distributions 172 1,561
Shares redeemed (51) (468)
------------------
Net increase 911 $ 8,356
==================
Period ended September 30, 1997*
Shares sold 14,121 $127,787
Shares issued in reinvestment of distributions 133 1,192
Shares redeemed (9,923) (89,603)
------------------
Net increase 4,331 $ 39,376
==================
</TABLE>
*Effective date of Advisor Class shares was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers and/or trustees of
Franklin Investment Advisory Services, Inc. (Advisory Services),
Franklin/Templeton Distributors, Inc. (Distributors), Franklin Templeton
Services, Inc (FT Services) and Franklin/ Templeton Investor Services, Inc.
(Investor Services) the Fund's investment manager, principal underwriter,
administrative manager and transfer agent, respectively.
The Funds pay an investment management fee to Advisory Services based on the
average net assets of each Fund as follows:
<TABLE>
<CAPTION>
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividends Fund Grade Income Fund
--------------------------------------------------------------
<S> <C> <C> <C>
Average Daily Net Assets
First $500 million .50% .75% .50%
Over $500 million, up to and including $1 billion .45% .625% .45%
In excess of $1 billion .40% .50% .40%
</TABLE>
3. TRANSACTIONS WITH AFFILIATES (cont.)
Each of the Funds also pays accounting fees to Advisory Services.
Under an agreement with Advisers, FTServices provides administrative services to
the Funds. The fee is paid by Advisers based on average daily net assets, and is
not an additional expense of the Funds.
The Franklin Rising Dividends Fund reimburses Distributors up to .50% and 1.00%
per year of its average daily net assets of Class I and Class II, respectively,
and the Franklin Corporate Qualified Fund and the Franklin Investment Grade
Income Fund reimburses Distributors up to .25% per year of the average daily net
assets of Class I, for costs incurred in marketing the Fund's shares.
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the period ended March 31, 1998 as
follows:
<TABLE>
<CAPTION>
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividend Fund Grade Income Fund
<S> <C> <C> <C>
Net commissions paid $11,714 $165,666 $28,895
Contingent deferred sales charges -- $ 134 --
</TABLE>
The Funds paid transfer agent fees of $281,042, of which $266,103 was paid to
Investor Services.
4. INCOME TAXES
At September 30, 1997, the Franklin Corporate Qualified Dividend Fund and the
Franklin Investment Grade Income Fund had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:
Franklin Franklin
Corporate QualifiedInvestment Grade
Dividend Fund Income Fund
Capital loss carryovers expiring in:
1998 $ 794,958 $ 70,233
1999 226,936 117,414
2000 375,717 --
2002 328,483 --
2003 61,429 254,062
2004 -- 368,716
2005 181,127 --
-----------------------------
$1,968,650 $810,425
=============================
At March 31, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividend Fund Grade Income Fund
---------------------------------------------------------
<S> <C> <C> <C>
Investments at cost $24,367,622 $358,975,306 $49,821,942
=========================================================
Unrealized appreciation $ 251,255 $175,531,438 $ 317,038
Unrealized depreciation (110,255) (3,858,637) (49,938)
---------------------------------------------------------
Net unrealized appreciation $ 141,000 $171,672,801 $ 267,100
=========================================================
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
Franklin Corporate Franklin Rising Franklin Investment
Qualified Dividend Fund Dividend Fund Grade Income Fund
----------------------------------------------------------
<S> <C> <C> <C>
Purchases $4,173,880 $117,282,175 $13,235,484
Sales $1,800,000 $ 53,015,218 $ 4,500,000
</TABLE>
Franklin Managed Trust
Semi-annual Report
March 31, 1998.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM
304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows the top 10 stock holdings of Franklin Rising Dividends Fund
by company and industry as a percentage of total net assets as of 3/31/98.
Company Percentage of Total Net Assets
Industry
Family Dollar Stores, Inc. 4.50%
Retail
Wallace Computer Services, Inc. 3.51%
Office/Business Supplies
Pall Corp. 3.28%
Consumer Goods/Services
Mercury General Corp. 2.55%
Insurance-Property/Casualty
Washington Mutual, Inc. 2.50%
Banks/Thrifts
Alberto Culver Co. 2.41%
Consumer Goods/Serives
National Commerce Bancorp 2.21%
Banks/Thrifts
Kaydon Corporation 2.18%
Industrial
Sherwin-Williams Co. 2.15%
Consumer Goods/Services
First Union Corporation 2.12%
Banks/Thrifts
GRAPHIC MATERIAL (2)
This chart shows in pie format the credit quality breakdown of the Franklin
Investment Grade Income Fund based on a percentage of total net assets as of
3/31/98.
AAA 72.12%
AA 1.96%
A 17.90%
BBB 8.02%
GRAPHIC MATERIAL (3)
This chart shows the dividend distributions for Franklin Investment Grade
Income Fund Class I from 10/1/97 to 3/31/98.
October 3.3 cents
November 3.3 cents
December 7.0 cents
January 3.3 cents
February 3.3 cents
March 3.3 cents
Total 23.5 cents
GRAPHIC MATERIAL (4)
This chart shows the dividend distributions for Franklin Investment Grade
Income Fund Class II from 10/1/97 to 3/31/98.
October 3.41 cents
November 3.45 cents
December 7.52 cents
January 3.49 cents
February 3.49 cents
March 3.49 cents
Total 24.85 cents
GRAPHIC MATERIAL (5)
This chart shows in line format the portfolio breakdown and sector price
stability of Franklin Corporate Qualified Dividend Fund based on total net
assets as of 3/31/98. Price stability is listed lower to higher.
Fixed-Rate Preferred Stocks 20.1%
Adjustable-Rate Preferred Stocks 26.4%
Auction-Rate Preferred Stocks 38.6%
Cash & Equivalents 14.9%
GRAPHIC MATERIAL (6)
This chart shows in pie format the credit quality breakdown of the Franklin
Corporate Qualified Dividend Fund based on a percentage of total net assets
as of 3/31/98.
AAA 19.88%
A 58.85%
BBB 16.49%
BB 4.78%
GRAPHIC MATERIAL (7)
This chart shows the dividend distributions for Franklin Corporate Qualified
Dividend Fund from 10/1/97 to 3/31/98.
October 8.5 cents
November 8.5 cents
December 8.5 cents
January 8.5 cents
February 8.5 cents
March 8.2 cents
Total 50.7 cents
