ANNUAL
REPORT
SEPTEMBER 30, 1998
FRANKLIN MANAGED TRUST
Franklin Investment Grade Income Fund
Franklin Rising Dividends Fund
Thank you for investing with Franklin Templeton. We encourage our investors
to maintain a long-term perspective and 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.
William J. Lippman
President
Franklin Managed Trust
CONTENTS
Shareholder Letter........................ 1
Fund Reports
Franklin Investment Grade
Income Fund ............................. 4
Franklin Rising
Dividends Fund .......................... 14
Financial Highlights &
Statement of Investments ................. 28
Financial Statements ..................... 37
Notes to
Financial Statements ..................... 41
Report of
Independent Accountants .................. 45
Tax Information........................... 46
SHAREHOLDER LETTER
Dear Shareholder:
It's a pleasure to bring you Franklin Managed Trust's annual report for the
period ended September 30, 1998.
Foreign Storms Bring Rain
Although El Nino's effects on domestic weather subsided in June, the U.S.
stock market faced its own version of adverse elements in August. By the end
of the reporting period, financial events at home mirrored the downpour
abroad, where washed-out currencies flooded foreign markets. On August 31,
storm clouds rained on American stock markets, washing away much of the first
half of 1998's spectacular gains. On that day the Dow Jones(R) Industrial
Average (DJIA) lost 512.61 points or 6.37% of its value.1 Many analysts
attributed this slide to concerns about Russia's economic and political
stability as well as evidence that the Asian countries' economic problems are
more deep-seated than originally believed. At home, 1998 U.S. corporate
profits, through the end of the reporting period, fell dramatically from 1997
levels. Those companies with significant Asian exports, competing with Asian
products or those in commodity businesses like paper, oil and steel were
especially hard hit.
1. Source: Bloomberg.
At the same time, the very factors negatively impacting the U.S. stock
market -- the slowing domestic economy and Russian and Asian economic
turmoil -- provided a boost to the U.S. bond market. Low inflation at home and
foreign investors flocking to U.S. bonds, especially U.S. Treasuries, as a
"safe haven" from stock market volatility abroad, drove bond prices higher.
Bond price and yield move in an inverse relationship, so yields on long-term
bonds fell to their lowest levels in years. The benchmark 30-year U.S.
Treasury bond ended the reporting period yielding 4.98%, compared with 6.41%
a year earlier.2
What is an investor to do faced with steeply fluctuating markets? While the
phrase "investment value may go down as well as up" abounds in financial
literature, the stock market's unusually high gains in the past few years may
have led many investors to believe otherwise. Putting the 1990s into
historical perspective, it is worth noting that the average yearly gain in
the S&P 500(R), which paints a broader picture of the U.S. market than the
DJIA, has been +10.51% since 1930; however, from January 1, 1990, through
June 30, 1998, the S&P 500 rose an average of +17.81% a year.3 Also, there
have been fewer market corrections during the 1990s than previous decades,
with a market correction being defined as a 10% or greater decline over a
period of days, weeks or months.
2. Ibid.
3. Source: Stocks, Bonds, and Inflation 1998 Yearbook, Ibbotson Associates.
Weatherproofing Your Portfolio
In times like these, it's easy to understand why people can become emotional
about their investments. That's why I believe investors should call their
investment representatives, and plan to cover three points in their
conversations. One, review their current financial plans, recalling their
goals and why they made their investment choices in the first place. Two,
discuss the value of diversification, which can help reduce the risk that any
one type of security will have a negative impact on an overall portfolio, and
check if their investments are still properly diversified. As shown during
the reporting period, the bond and stock markets often behave differently. In
each of the five years since 1973 that stocks posted negative annual returns,
bonds posted positive returns.4 Three, review their investment timeframe to
help put recent market declines into perspective and avoid turning what could
be only a temporary paper loss into a permanent one. Maintaining a long-term
outlook is one of the keys to weathering market volatility.
An important component of a long-term approach is having a regular investment
plan. Investing on a scheduled basis, regardless of market directions, can
help investors take advantage of market downturns when prices are low, and
benefit from any market rallies. We encourage you to contact your investment
representative to discuss setting up a regular investment plan. While
investment success is the primary objective of investment planning, one
important by-product of a good plan can be peace of mind.
As always, we appreciate your support, welcome your questions and comments
and look forward to serving your investment needs in the years ahead.
Sincerely,
William J. Lippman
President
Franklin Managed Trust
4. Source: For bond market statistics based on the Lehman Brothers
Government/Corporate Bond Index - Lehman Brothers; for stock market measured
by the S&P 500 Index - Standard & Poor's(R).
FRANKLIN INVESTMENT GRADE
INCOME FUND
Your Fund's Goal: Franklin Investment Grade Income Fund seeks a maximum level
of income consistent with prudent exposure to risk. The fund pursues this
goal 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
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.
During the one-year reporting period, the fund's Class I share price, as
measured by net asset value, rose modestly, increasing from $9.08 to $9.22.
Our continuing emphasis on purchasing securities with limited maturities
contributed to this share price increase. Because long-term instruments often
exhibit relatively greater price volatility, both up and down, many investors
embrace the more stable short- and intermediate-term investment instruments,
which the fund typically purchases.
Also, contributing to the fund's performance was our focus on purchasing
high-quality issues and using "put" bonds. As the chart illustrates, 69% of
the fund's total net assets were invested in AAA-rated issues (the
highest-rated securities available), while 24% were A-rated with the
remainder in BBB-rated instruments.
The use of put bonds remains an integral part of our conservative investment
strategy. A put bond is one that can be redeemed before maturity, at 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 by the security's
optional retirement date, we can either keep the higher-yielding bond, or
sell it at a favorable price.
On September 30, 1998, 42% of the portfolio's total net assets consisted of
government bonds, 38% corporate and government agency put bonds, and 20% cash
and cash equivalents. The fund's average weighted maturity was 1.8 years,
using the optional put dates as effective maturities, and 12.1 years, using
the stated maturities.
We will continue to maintain our emphasis on put bonds and bonds with a
limited maturity structure. 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 September 30, 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 historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Class I
Franklin Investment Grade Income Fund - Class I share price, as measured by
net asset value, increased 14 cents, from $9.08 on September 30, 1997, to
$9.22 on September 30, 1998. During the one-year reporting period,
shareholders received dividend income totaling 43.3 cents ($0.433) per share.
Dividends will vary based on portfolio earnings, and past distributions are
not indicative of future trends.
The fund's distribution rate was 4.11%, based on an annualization of
September's monthly dividend of 3.3 cents ($0.033) per share and the maximum
offering price of $9.63 on September 30, 1998.
For the one-year period ended September 30, 1998, your fund produced a +6.50%
cumulative total return. Cumulative total return reflects the change in value
of an investment, assuming reinvestment of all distributions and does not
include the sales charge.
The graph on page 8 compares the performance of the fund's Class I shares
with that of the Lehman Brothers Government/Corporate Bond Index. Keep in
mind an unmanaged index has inherent performance differentials in comparison
with any fund. An index doesn't pay management fees to cover salaries of
securities analysts or portfolio managers, or pay commissions or market
spreads to buy and sell securities. Unlike an index, mutual funds are never
fully invested because they need 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. If operating expenses such as Franklin
Investment Grade Income Fund's had been applied to the index, its performance
would have been lower. Please remember that an index is simply a measure of
performance and one cannot invest in it directly.
The performance of your fund's shares exceeded the rate of inflation, as
measured by the Consumer Price Index (CPI), keeping your purchasing power
well ahead of inflation -- a primary goal of any investment.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Since
Inception
1-Year 5-Year 10-Year (1/14/87)
Cumulative Total Return1 +6.50% +25.66% +98.23% +99.83%
Average Annual Total Return2 +2.00% +3.78% +6.62% +5.70%
Distribution Rate3 4.11%
30-Day Standardized Yield 44.08%
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. Prior to July 1, 1994, fund shares were offered
at a lower initial sales charge, with dividends reinvested at the offering
price. Thus actual total returns would differ.
3. Distribution rate is based on an annualization of September's 3.3 cent per
share monthly dividend and the maximum offering price of $9.63 on September
30, 1998.
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, 1998.
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.
Advisor Class
Franklin Investment Grade Income Fund - Advisor Class share price, as
measured by net asset value, increased 15 cents, from $9.07 on September 30,
1997, to $9.22 on September 30, 1998. During the one-year reporting period,
shareholders received dividend income totaling 45.79 cents ($0.4579) per
share. Dividends will vary based on portfolio earnings, and past
distributions are not indicative of future trends.
The fund's distribution rate was 4.54%, based on an annualization of
September's monthly dividend of 3.49 cents ($0.0349) per share and the net
asset value price of $9.22 on September 30, 1998.
For the one-year period ended September 30, 1998, your fund produced a +6.91%
cumulative total return. Cumulative total return reflects the change in value
of an investment, assuming reinvestment of all distributions.
The graph on page 12 compares the performance of the fund's Advisor Class
shares with that of the Lehman Brothers Government/
Corporate Bond Index. Keep in mind an unmanaged index has inherent
performance differentials in comparison with any fund.
An index doesn't pay management fees to cover salaries of securities analysts
or portfolio managers, or pay commissions or market spreads to buy and sell
securities. Unlike an index, mutual funds are never fully invested because
they need cash on hand to redeem shares. In addition, the performance shown
for the fund includes all fund expenses and account fees. If operating
expenses such as Franklin Investment Grade Income Fund's had been applied to
the index, its performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
The performance of your fund's shares exceeded the rate of inflation, as
measured by the Consumer Price Index (CPI), keeping your purchasing power
well ahead of inflation -- a primary goal of any investment.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Since
Inception
1-Year* 5-Year* 10-Year* (1/14/87)*
Cumulative Total Return1+ 6.91%+ 26.23%+ 99.14% +100.73%
Average Annual Total Return1+6.91% +4.77% +7.13% +6.13%
Distribution Rate2 4.54%
30-Day Standardized Yield3 4.38%
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 September's 3.49 cent
per share monthly dividend and the net asset value price of $9.22 on
September 30, 1998.
3. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended September 30, 1998.
*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 Class I expenses, including Rule 12b-1 fees; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class
performance, including the deduction of all fees and expenses applicable only
to that class. Since January 2, 1997 (commencement of sales), the cumulative
total return of Advisor Class shares was 11.18%.
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.
FRANKLIN RISING DIVIDENDS FUND
Your Fund's Goal: 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.
Our investment strategy is based on our belief that companies
with consistently rising dividends should, over time, also realize
appreciation in their stock prices. 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 other investors.
During the fiscal year ended September 30, 1998, the domestic economy
demonstrated solid growth, low inflation and sharply falling interest rates.
This benign environment led to strong equity market performance through the
first half of the fund's fiscal year. By the last half of the year, however,
declining corporate profit growth began to weigh heavily on the market as all
major stock market indices fell through the summer.
While earnings of consumer stocks generally continued to be strong, growth in
the manufacturing sector slowed. In many ways the consumer benefited from the
economic problems in Asia. Weak Asian economies, for example, are widely
cited as a leading reason for the significant fall in Treasury bond yields in
the past year. Manufacturers, on the other hand, were hurt by the Asian
crisis. They often either compete with Asian companies globally, or were
disappointed with sales to the region. As a result, most consumer-oriented
stocks performed better than stocks of manufacturers.
A striking feature of the past year was the much stronger performance of
large capitalization stocks relative to medium and small capitalization
stocks. The consumer orientation of many large-cap stocks partially explains
this outperformance. Another factor, however, was the portfolio shift by many
global investors out of Asia and into the U.S. Much of this money flowed into
the largest and most liquid U.S. stocks. Within this environment, the
Wilshire MidCap Growth Index, the fund's benchmark, returned -21.58% for the
one-year period ended September 30, 1998, while Franklin Rising Dividends
Fund posted -9.05% cumulative total return.
Retailers were standout performers during this period, particularly large cap
companies like Wal-Mart Stores, Inc. Sales were strong at all of Wal-Mart's
domestic formats and international prospects continue to be promising. The
portfolio's largest position, Family Dollar Stores, Inc., as well as Rite Aid
Corp. also performed well, although both lagged behind Wal-Mart.
Another particularly strong performer was Allied Group, Inc., a midwestern
property and casualty insurance company. Allied agreed to be acquired by
Nationwide Mutual Insurance Co. at a substantial premium to its previous
trading range.
The portfolio's worst-performing stocks during the year were primarily
smaller, manufacturing-oriented companies. These included M. A. Hanna Co. and
Watts Industries, Inc., which were impacted by the industrial slowdown and,
as a result, had weaker than expected quarterly earnings. Two other
disappointing holdings were Circle International Group, Inc. and Wallace
Computer Services, Inc. Despite Circle's healthy earnings growth, investors
are fearful that the weakening global economy will eventually have a negative
impact on the company's freight forwarding business. Wallace reported weak
quarterly earnings recently due to pricing pressures in certain paper product
categories, despite relatively strong unit growth.
New positions added to the portfolio during the period included Pall Corp.,
Diebold, Inc., Bemis Company, Inc., ReliaStar Financial Corp. and Reynolds and
Reynolds Co. Pall makes fluid filtration devices for a variety of industries
including health care. Pall's most promising market is blood filtration, as a
number of countries have recently announced plans to make filtration mandatory
for all blood transfusions. Diebold is known for manufacturing automated teller
machines and has increased its dividend for an exceptional 45 straight years.
Although earnings slipped in 1998 as a result of slowing orders, Diebold is
well-positioned longer-term to benefit from the increasing use of automation to
deliver consumer products and services. Bemis is a leading manufacturer of
flexible packaging for use by the food industry. ReliaStar, a provider of a
broad range of insurance related investment products, has increased its dividend
for 27 years. Reynolds is a leading provider of information management systems
used primarily by automobile dealerships.
A significant addition to the portfolio was West Company, Inc. The company's
products are used in the packaging and delivery of health care products. West
recently acquired drug delivery technologies that have the potential to
accelerate the company's growth rate.
Several positions were eliminated from the portfolio including Nike, Inc.;
Allied Group, Inc. and Merck & Co., Inc. Nike's operating results suffered as
falling demand for its products led to excess inventory. As previously
mentioned, Allied Group was acquired by Nationwide Mutual. We sold Merck, as
it became less attractively valued than other alternative investments.
Notable year-over-year dividend increases during the past year came from
National Commerce Bancorp. (+45.5%), Cohu, Inc. (+33.3%), First Union Corp.
(+31.3), Avery Dennison Corp. (+23.5%), Mercury General Corp. (+20.7%),
Alberto-Culver Co. (+20%), Myers Industries, Inc. (+20%) and ReliaStar
Financial Corp. (+19.4%).
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As the table shows, our ten largest positions on September 30, 1998,
comprised 32.0% 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 304% in the
last 10 years (excluding Fannie Mae's 1,500% increase). Their most recent
dividend increases averaged 13.8%, for a yield of 2.2% on September 30, 1998,
and a dividend payout ratio of 34%. Long-term debt averaged 23% of
capitalization, and the average price/earnings ratio was 16.4 versus 22.0 for
that of the unmanaged Standard & Poor's(R) 500 Stock Index on the same date. It
is our opinion that these companies are representative of the portfolio's
fundamentally high quality. We also believe that, over time, companies that
increase cash payments to shareholders, year after year, will be superior
builders of wealth.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of September 30, 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
historical performance is no guarantee of future results, these insights may
help you understand our investment and management philosophy.
Class I
Franklin Rising Dividends Fund - Class I produced a -9.05% cumulative total
return for the one-year period ended September 30, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment
of all distributions 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 23, the fund's Class I shares delivered a +228.88%
cumulative total return since inception on January 14, 1987.
The fund's share price, as measured by net asset value, decreased $5.40, from
$26.93 on September 30, 1997, to $21.53 on September 30, 1998. During the
one-year reporting period, shareholders received per-share distributions
consisting of dividend income totaling 10.5 cents ($0.105), $2.8451 in
long-term capital gains and 35.29 cents ($0.3529) in short-term capital
gains. Distributions will vary based on the fund's income and any profits
realized from the sale of securities in the fund's portfolio. Past
distributions are not predictive of future trends.
The graph on page 22 compares the performance of the fund's Class I shares
with that of the fund's unmanaged benchmark index, the Wilshire MidCap Growth
Index, and the Consumer Price Index (CPI), a common measure of inflation. As
you can see, your investment returns have surpassed the rate of inflation, as
measured by the CPI, a primary goal of any investment. Please note that the
Wilshire Index differs from the fund as it 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 smaller market capitalizations and ranges from $83
million to $107 billion.
The Wilshire MidCap Growth Index has outperformed the fund's Class I shares
over the 10 years ended September 30, 1998. However, Franklin Rising
Dividends Fund outperformed the index during some of the U.S. stock markets'
most volatile periods -- the one-, three- and five-year periods ended on the
same date. For the one-year period, the index saw a -21.58% cumulative total
return, compared with the fund's -9.05%. The fund produced a cumulative total
return of +54.43% and +79.51% for the respective three- and five-year periods
ended September 30, 1998, while the index returned +13.95% and +63.75%,
respectively.
Keep in mind an unmanaged index has inherent performance differentials in
comparison with any fund. An index doesn't pay management fees to cover
salaries of securities analysts or portfolio managers, or pay commissions or
market spreads to buy and sell securities. Unlike an index, mutual funds are
never fully invested because they need 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. If operating expenses such
as Franklin Rising Dividends Fund's had been applied to the index, its
performance would have been lower. Please remember that an index is simply a
measure of performance and one cannot invest in it directly.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Rising Dividends Fund - Class I
Periods ended 9/30/98
Since
Inception
1-Year 5-Year 10-Year (1/14/87)
Cumulative Total Return1 -9.05% +79.51% +210.02% +228.88%
Average Annual Total Return2 -14.27% +11.09% +11.32% +10.14%
Distribution Rate3 0.81%
30-Day Standardized Yield4 0.80%
Value of $10,000 Investment5 $8,573 $16,920 $29,217 $30,997
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 has been restated to reflect
the current, maximum 5.75% initial sales charge; thus actual returns may
differ. Prior to August 3, 1998, fund shares were offered at a lower initial
sales charge.
3. Distribution rate is based on an annualization of September's 4.6 cent per
share quarterly dividend and the maximum offering price of $22.84 on
September 30, 1998.
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, 1998.
5. These figures represent the value of a hypothetical $10,000 investment in
the fund over the periods indicated and include the current, maximum 5.75%
initial sales charge; thus actual returns may differ. Prior to August 3,
1998, fund shares were offered at a lower initial sales charge.
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.
Franklin Rising Dividends Fund - Class I paid distributions derived from
long-term capital gains of $2.8451 per share in December 1997. The fund
hereby designates such distributions as capital gain dividends per Internal
Revenue Code Section 852 (b)(3).
Class II
Franklin Rising Dividends Fund - Class II produced a -9.48% cumulative total
return for the one-year period ended September 30, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment
of all distributions 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 27, the fund's Class II shares delivered a +71.59%
cumulative total return since the shares became available on May 1, 1995.
The fund's share price, as measured by net asset value, decreased $5.40, from
$26.85 on September 30, 1997, to $21.45 on September 30, 1998. During the
one-year reporting period, shareholders received per-share distributions
consisting of dividend income totaling 0.14 cents ($0.0014), $2.8451 in
long-term capital gains and 35.29 cents ($0.3529) in short-term capital
gains. Distributions will vary based on the fund's income and any profits
realized from the sale of securities in the fund's portfolio. Past
distributions are not predictive of future trends.
The graph on page 26 compares the performance of the fund's Class II shares
since inception with that of the unmanaged Wilshire MidCap Growth Index, and
the Consumer Price Index (CPI), a common measure of inflation. As you can
see, your investment returns have surpassed the rate of inflation, as
measured by the CPI, a primary goal of any investment. Please note that the
Wilshire Index differs from the fund as it 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 smaller market capitalizations and ranges from $83
million to $107 billion.
Keep in mind an unmanaged index has inherent performance differentials in
comparison with any fund. An index doesn't pay management fees to cover
salaries of securities analysts or portfolio managers, or pay commissions or
market spreads to buy and sell securities. Unlike an index, mutual funds are
never fully invested because they need cash on hand to redeem shares. In
addition, the performance shown for the fund includes the sales charges, all
fund expenses and account fees. If operating expenses such as Franklin Rising
Dividends Fund's had been applied to the index, its performance would have
been lower. Please remember that an index is simply a measure of performance
and one cannot invest in it directly.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Rising Dividends Fund - Class II
Periods ended 9/30/98
Since
Inception
1-Year 3-Year (5/1/95)
Cumulative Total Return1 -9.48% +52.05% +71.59%
Average Annual Total Return2 -11.17% +14.62% +16.77%
Distribution Rate 30.03%
30-Day Standardized Yield4 0.31%
Value of $10,000 Investment5 $8,883 $15,057 $16,983
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, as applicable.
3. Distribution rate is based on an annualization of September's 0.14 cent
per share quarterly dividend and the maximum offering price of $21.67 on
September 30, 1998.
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, 1998.
5. These figures represent the value of a hypothetical $10,000 investment in
the fund over the periods indicated and include sales charges.
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.
Franklin Rising Dividends Fund - Class II paid distributions derived from
long-term capital gains of $2.8451 per share in December 1997. The fund
hereby designates such distributions as capital gain dividends per Internal
Revenue Code Section 852 (b)(3).
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Highlights
Franklin Investment Grade Income Fund
Class I
Year Ended September 30,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................... $9.08 $9.01 $9.04 $8.82 $9.31
------------------------------------------------------
Income from investment operations:
Net investment income............................... .43 .41 .44 .44 .45
Net realized and unrealized gains (losses).......... .14 .09 (.06) .26 (.54)
------------------------------------------------------
Total from investment operations..................... .57 .50 .38 .70 (.09)
------------------------------------------------------
Less distributions from:
Net investment income............................... (.43) (.43) (.41) (.48) (.40)
------------------------------------------------------
Net asset value, end of year......................... $9.22 $9.08 $9.01 $9.04 $8.82
======================================================
Total return*........................................ 6.50% 5.68% 4.25% 8.21% (1.02%)
Ratios/supplemental data:
Net assets, end of year (000's)...................... $54,958 $43,568 $29,372 $29,824 $29,553
Ratios to average net assets:
Expenses............................................ 1.10% 1.05% 1.06% 1.09% 1.05%
Net investment income............................... 4.74% 4.73% 4.81% 4.96% 4.91%
Portfolio turnover rate.............................. 20.80% 41.32% 20.06% 64.70% 10.57%
</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.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Highlights (continued)
Franklin Investment Grade Income Fund
Advisor Class
Year Ended September 30,
1998 19971
----------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................... $9.07 $9.03
----------------------
Income from investment operations:
Net investment income............................................................... .43 .28
Net realized and unrealized gains................................................... .19 .07
----------------------
Total from investment operations..................................................... .62 .35
----------------------
Less distributions from:
Net investment income............................................................... (.46) (.31)
-----------------------
Net asset value, end of year......................................................... $9.23 $9.07
======================
Total return*........................................................................ 7.02% 3.98%
Ratios/supplemental data:
Net assets, end of year (000's)...................................................... $2,505 $39
Ratios to average net assets:
Expenses............................................................................ .82% .85%**
Net investment income............................................................... 5.02% 4.84%**
Portfolio turnover rate.............................................................. 20.80% 41.32%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized.
1For the period January 2, 1997 (effective date) to September 30, 1997.
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Statement of Investments, September 30, 1998
PRINCIPAL
Franklin Investment Grade Income Fund AMOUNT VALUE
<S> <C> <C>
U.S. Government Securities and Agencies 46.0%
Tennessee Valley Authority, bonds, (putable* 7/15/01, callable 7/15/20), 6.235%, 7/15/45 $2,000,000 $ 2,104,436
U.S. Treasury Notes, 5.875%, 1/31/99......................................... 2,000,000 2,008,752
U.S. Treasury Notes, 5.875%, 3/31/99......................................... 1,000,000 1,006,563
U.S. Treasury Notes, 6.00%, 6/30/99.......................................... 2,000,000 2,020,626
U.S. Treasury Notes, 5.875%, 7/31/99......................................... 2,000,000 2,020,002
U.S. Treasury Notes, 5.875%, 8/31/99......................................... 3,000,000 3,033,753
U.S. Treasury Notes, 5.75%, 9/30/99.......................................... 1,000,000 1,011,251
U.S. Treasury Notes, 5.625%, 11/30/99........................................ 2,000,000 2,023,752
U.S. Treasury Notes, 5.625%, 12/31/99........................................ 2,000,000 2,026,252
U.S. Treasury Notes, 5.50%, 3/31/00.......................................... 2,000,000 2,029,376
U.S. Treasury Notes, 6.00%, 8/15/00.......................................... 2,000,000 2,057,502
U.S. Treasury Notes, 5.275%, 8/31/00......................................... 3,000,000 3,043,128
U.S. Treasury Notes, 5.375%, 2/15/01......................................... 2,000,000 2,045,626
--------------
Total U.S. Government Securities and Agencies (Cost $26,058,103)............. 26,431,019
--------------
Corporate Bonds 34.3%
Commercial Services 2.7%
Xerox Corp., notes, (putable* 5/05/99), 5.90% 5/05/37 ....................... 1,500,000 1,559,865
--------------
Consumer Non-Durable 3.7%
Coca-Cola Enterprises, deb., (putable* 10/15/03), 6.70% 10/15/36 ............ 2,000,000 2,133,926
--------------
Finance 10.7%
Aetna Services Inc., (putable* 8/15/04), 6.97%, 8/15/36...................... 2,000,000 2,112,648
Sears Roebuck Acceptance Corp.,
(putable* 11/15/00), 6.13%, 11/15/05......................................... 775,000 799,656
(putable* 11/15/00), 6.15%, 11/15/05......................................... 725,000 751,287
Southtrust Bank, (putable* 2/06/01), 5.58%, 2/06/06.......................... 2,500,000 2,509,005
--------------
6,172,596
--------------
Industrial Services 3.6%
WMX Technologies, Inc., notes, (putable* 5/15/00), 6.65% 5/15/05............. 2,000,000 2,050,958
--------------
Process Industries 7.2%
Bausch & Lomb, notes, (putable* 8/31/01), 6.56%, 8/12/26 .................... 2,000,000 2,099,670
Sherwin-Williams Co., notes, (putable* 10/15/99), 5.50%, 10/15/27 ........... 2,000,000 2,024,746
--------------
4,124,416
--------------
Retail Trade 2.8%
Penney J.C. & Co., Inc., deb., (putable* 8/15/03), 6.90% 8/15/26............. 1,500,000 1,628,928
--------------
Utilities 3.6%
Bellsouth Corp., deb., (putable* 11/15/00), 5.85%, 11/15/45.................. 2,000,000 2,049,370
--------------
Total Corporate Bonds (Cost $19,136,674)..................................... 19,720,059
--------------
Total Long Term Investments (Cost $45,194,777)............................... 46,151,078
--------------
a Repurchase Agreement 21.1%
Joint Repurchase Agreement, 5.275%, 10/01/98,
(Maturity Value $12,144,747) (Cost $12,142,967) ................................ $12,142,967 $12,142,967
BancAmerica Robertson Stephens, (Maturity Value $1,223,700)
Barclays Capital Group, Inc., (Maturity Value $1,131,441)
BT Alex Brown, Inc., (Maturity Value $1,223,701)
Chase Securities, Inc., (Maturity Value $1,223,700)
CIBC Wood Gundy Securities Corp., (Maturity Value $1,223,701)
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,223,700)
Dresdner Kleinwort Benson, North America, L.L.C., (Maturity Value $1,223,701)
Greenwich Capital Markets, Inc., (Maturity Value $1,223,701)
Paribas Corp., (Maturity Value $1,223,701)
SBC Warburg Dillon Read, Inc., (Maturity Value $1,223,701)
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $57,337,744) 101.4%.................................. 58,294,045
Other Assets, less Liabilities (1.4%)........................................ (830,441)
--------------
Net Assets 100.0% ........................................................... $57,463,604
==============
</TABLE>
*Holder may redeem at par on put date.
aSee Note 1(b) regarding joint repurchase agreement.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Highlights
Franklin Rising Dividends Fund
Class I
-------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................... $26.93 $20.03 $17.31 $14.67 $15.43
-------------------------------------------------------
Income from investment operations:
Net investment income............................... .13 .16 .28 .33 .28
Net realized and unrealized gains (losses).......... (2.22) 8.23 2.78 2.61 (.80)
-------------------------------------------------------
Total from investment operations..................... (2.09) 8.39 3.06 2.94 (.52)
-------------------------------------------------------
Less distributions from:
Net investment income............................... (.11) (.18) (.34) (.30) (.24)
Net realized gains.................................. (3.20) (1.31) -- -- --
-------------------------------------------------------
Total distributions.................................. (3.31) (1.49) (.34) (.30) (.24)
-------------------------------------------------------
Net asset value, end of year......................... $21.53 $26.93 $20.03 $17.31 $14.67
=======================================================
Total return*........................................ (9.05)% 44.10% 17.83% 20.32% (3.38)%
Ratios/supplemental data:
Net assets, end of year (000's)...................... $407,336 $394,873 $277,746 $260,917 $261,461
Ratios to average net assets:
Expenses............................................ 1.39% 1.41% 1.40% 1.43% 1.43%
Net investment income............................... .51% .71% 1.49% 2.10% 1.81%
Portfolio turnover rate.............................. 23.99% 39.47% 31.55% 14.60% 25.75%
</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.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Highlights (continued)
Franklin Rising Dividends Fund
Class II
------------------------------------------
Year Ended September 30,
------------------------------------------
1998 1997 1996 19951
------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year............................... $26.85 $19.98 $17.28 $15.47
------------------------------------------
Income from investment operations:
Net investment income........................................... -- .08 .21 .11
Net realized and unrealized gains (losses)...................... (2.20) 8.17 2.74 1.83
------------------------------------------
Total from investment operations................................. (2.20) 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 year..................................... $21.45 $26.85 $19.98 $17.28
==========================================
Total return*.................................................... (9.48)% 43.37% 17.16% 12.56%
Ratios/supplemental data:
Net assets, end of year (000's).................................. $43,790 $14,526 $3,882 $1,060
Ratios to average net assets:
Expenses........................................................ 1.94% 1.95% 1.95% 1.90%**
Net investment income (loss).................................... (.05)% .17% .94% 1.92%**
Portfolio turnover rate.......................................... 23.99% 39.47% 31.55% 14.60%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized.
1For the period May 1, 1995 (effective date) to September 30, 1995.
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Statement of Investments, September 30, 1998
Franklin Rising Dividends Fund SHARES VALUE
<S> <C> <C>
Common Stocks 97.8%
Banks/Thrifts 14.6%
First Union Corp. ........................................................... 271,650 $ 13,905,084
Mercantile Bankshares Corp. ................................................. 170,950 4,807,969
National Commerce Bancorp. .................................................. 568,600 9,381,900
State Street Corp. .......................................................... 98,200 5,358,038
TrustCo Bank Corp., N.Y. Shs. ............................................... 268,116 7,188,860
U.S. Bancorp................................................................. 215,000 7,645,938
Washington Mutual, Inc. ..................................................... 379,000 12,791,250
Wilmington Trust Corp. ...................................................... 96,200 5,002,397
---------------
66,081,436
---------------
Commercial Services 5.2%
Ennis Business Forms, Inc. .................................................. 228,700 2,287,000
Standard Register Co. ....................................................... 282,700 7,685,906
Wallace Computer Services, Inc. ............................................. 753,200 13,510,525
---------------
23,483,431
---------------
Consumer Durables 4.1%
Leggett & Platt, Inc. ....................................................... 526,400 10,922,800
Newell Co. .................................................................. 167,200 7,701,650
---------------
18,624,450
---------------
Consumer Non-Durables 8.0%
Alberto-Culver Co., Class A.................................................. 504,100 10,775,138
Block Drug Co., Inc., Class A................................................ 108,659 3,911,724
DIMON, Inc. ................................................................. 483,300 5,104,856
Philip Morris Cos., Inc. .................................................... 158,700 7,310,119
Universal Corp. ............................................................. 252,300 9,019,725
---------------
36,121,562
---------------
Electronic Technology 2.4%
Cohu, Inc. .................................................................. 311,200 5,134,800
Hewlett-Packard Co. ......................................................... 75,100 3,975,606
Rockwell International Corp. ................................................ 52,300 1,889,338
---------------
10,999,744
---------------
Energy Minerals 1.0%
Royal Dutch Petroleum Co., N.Y. Shs., ADR (Netherlands)...................... 93,700 4,462,463
---------------
Government Sponsored Corporation 2.3%
Fannie Mae................................................................... 159,000 10,215,750
---------------
Health Technology 4.7%
Becton, Dickinson & Co. ..................................................... 74,200 3,051,475
Superior Surgical Manufacturing Co., Inc. ................................... 178,300 2,206,463
West Co., Inc. .............................................................. 553,900 15,924,625
---------------
21,182,563
---------------
Insurance - Life 2.5%
American Heritage Life Investment Corp. ..................................... 78,900 $ 1,799,906
ReliaStar Financial Corp. ................................................... 239,400 9,336,600
---------------
11,136,506
---------------
Insurance - Property/Casualty 8.8%
American International Group, Inc. .......................................... 60,375 4,648,875
Chubb Corp. ................................................................. 113,000 7,119,000
Harleysville Group, Inc. .................................................... 74,700 1,540,688
Mercury General Corp. ....................................................... 245,200 9,195,000
MMI Cos., Inc. .............................................................. 395,400 7,092,488
RLI Corp. ................................................................... 186,562 7,089,356
St. Paul Cos., Inc. ......................................................... 94,400 3,068,000
---------------
39,753,407
---------------
Non-Energy Minerals 1.1%
Nucor Corp. ................................................................. 120,900 4,911,563
Process Industries 13.5%
Bemis Co., Inc. ............................................................. 332,600 11,661,788
Brady Corp., Class A......................................................... 144,300 2,994,225
Donaldson Co., Inc. ......................................................... 126,900 2,030,400
M.A. Hanna Co. .............................................................. 463,200 5,211,000
Millipore Corp. ............................................................. 238,300 4,542,594
Myers Industries, Inc. ...................................................... 290,880 6,690,240
Pall Corp. .................................................................. 936,300 20,774,156
Sherwin-Williams Co. ........................................................ 328,000 7,093,000
---------------
60,997,403
---------------
Producer Manufacturing 16.7%
Avery Dennison Corp. ........................................................ 157,100 6,863,306
Baldor Electric Co. ......................................................... 257,366 5,629,881
Diebold, Inc. ............................................................... 294,000 6,468,000
Dover Corp. ................................................................. 278,400 8,595,600
Flowserve Corp. ............................................................. 156,200 3,163,050
General Electric Co. ........................................................ 54,000 4,296,375
Graco, Inc. ................................................................. 93,800 2,180,850
Hubbell, Inc., Class B....................................................... 187,300 6,649,150
Kaydon Corp. ................................................................ 383,700 10,096,106
Kimball International, Inc., Class B......................................... 408,000 6,273,000
Superior Industries International, Inc. ..................................... 167,800 3,838,425
Teleflex, Inc. .............................................................. 70,000 2,450,000
Watts Industries, Inc., Class A.............................................. 483,000 8,694,000
---------------
75,197,743
---------------
Retail Trade 10.2%
Family Dollar Stores, Inc. .................................................. 1,516,700 23,888,025
Rite Aid Corp. .............................................................. 237,800 8,441,900
Schultz Sav-O Stores, Inc. .................................................. 165,000 2,598,750
Retail Trade (cont.)
The Limited, Inc. ........................................................... 200,200 $ 4,391,888
Wal-Mart Stores, Inc. ....................................................... 125,800 6,871,825
---------------
46,192,388
---------------
Technology Services 1.7%
Reynolds and Reynolds Co., Class A........................................... 428,400 7,630,875
---------------
Transportation 1.0%
Circle International Group, Inc. ............................................ 321,000 4,494,000
---------------
Total Common Stocks (Cost $406,685,441)...................................... 441,485,284
---------------
Convertible Preferred Stock .2%
American Heritage Life Investment Corp., 8.50% cvt. pfd. (Cost $625,000)..... 12,500 787,500
---------------
Total Long Term Investments (Cost $407,310,441).............................. 442,272,784
---------------
PRINCIPAL
AMOUNT
a Repurchase Agreement 1.8%
Joint Repurchase Agreement, 5.275%, 10/01/98,
(Maturity Value $7,977,690) (Cost $7,976,521) .................................. $7,976,521 7,976,521
BancAmerica Robertson Stephens, (Maturity Value $803,832)
Barclays Capital Group, Inc., (Maturity Value $743,202)
BT Alex Brown, Inc., (Maturity Value $803,832)
Chase Securities, Inc., (Maturity Value $803,832)
CIBC Wood Gundy Securities Corp., (Maturity Value $803,832)
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $803,832)
Dresdner Kleinwort Benson, North America, L.L.C., (Maturity Value $803,832)
Greenwich Capital Markets, Inc., (Maturity Value $803,832)
Paribas Corp., (Maturity Value $803,832)
SBC Warburg Dillion Read, Inc., (Maturity Value $803,832)
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $415,286,962) 99.8% ................................. 450,249,305
Other Assets, less Liabilities .2% .......................................... 876,444
---------------
Net Assets 100.0% ........................................................... $451,125,749
===============
aSee Note 1(b) regarding joint repurchase agreement.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Statements
Statement of Assets and Liabilities
September 30, 1998
FRANKLIN FRANKLIN
INVESTMENT GRADE RISING
INCOME FUND DIVIDENDS FUND
<S> <C> <C>
Assets:
Investments in securities:
Cost....................................................................... $45,194,777 $407,310,441
=============================
Value...................................................................... 46,151,078 442,272,784
Repurchase agreements, at value and cost.................................... 12,142,967 7,976,521
Cash........................................................................ -- 553,852
Receivables:
Investment securities sold................................................. -- 1,117,015
Capital shares sold........................................................ 56,154 197,212
Dividends and interest..................................................... 578,216 727,922
Other assets................................................................ 3,725 --
-----------------------------
Total assets................................................................. 58,932,140 452,845,306
-----------------------------
Liabilities:
Payables:
Investment securities purchased............................................ -- 137,596
Capital shares redeemed.................................................... 1,367,418 493,636
Affiliates................................................................. 51,747 762,828
Shareholders............................................................... 34,142 286,298
Other liabilities........................................................... 15,229 39,199
-----------------------------
Total liabilities............................................................ 1,468,536 1,719,557
-----------------------------
Net assets, at value........................................................ $57,463,604 $451,125,749
=============================
Net assets consist of:
Undistributed net investment income......................................... $ 305,768 $ 736,183
Net unrealized appreciation................................................. 956,301 34,962,343
Accumulated net realized gain (loss)........................................ (740,192) 40,943,155
Capital shares.............................................................. 56,941,727 374,484,068
-----------------------------
Net assets, at value ........................................................ $57,463,604 $451,125,749
=============================
FRANKLIN FRANKLIN
INVESTMENT GRADE RISING
INCOME FUND DIVIDENDS FUND
<S> <C> <C>
CLASS I:
Net assets, at value........................................................ $54,958,417 $407,336,106
=============================
Shares outstanding.......................................................... 5,959,513 18,917,914
=============================
Net asset value per share*.................................................. $9.22 $21.53
=============================
Maximum offering price per share
(net asset value per share / 95.75% and 94.25%, respectively)............... $9.63 $22.84
=============================
Class II:
Net assets, at value........................................................ $ 43,789,643
===============
Shares outstanding.......................................................... 2,041,512
===============
Net asset value per share*.................................................. $21.45
===============
Maximum offering price per share (net asset value per share / 99%).......... $21.67
===============
Advisor Class:
Net assets, at value........................................................ $ 2,505,187
==============
Shares outstanding.......................................................... 271,551
==============
Net asset value and maximum offering price per share........................ $9.23
==============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Statements (continued)
Statement of Operations
for the year ended September 30, 1998
FRANKLIN FRANKLIN
INVESTMENT GRADE RISING
INCOME FUND DIVIDENDS FUND
<S> <C> <C>
Investment income:
Dividends................................................................... $-- $ 8,333,734
Interest ................................................................... 2,935,984 778,232
----------------------------
Total investment income ..................................................... 2,935,984 9,111,966
----------------------------
Expenses:
Management fees (Note 3).................................................... 251,633 3,577,836
Distribution fees (Note 3)
Class I.................................................................... 140,894 2,055,618
Class II................................................................... -- 322,448
Transfer agent fees (Note 3) ............................................... 50,222 574,615
Custodian fees.............................................................. 648 6,375
Reports to shareholders .................................................... 20,726 129,466
Accounting fees (Note 3) ................................................... 40,000 40,000
Registration and filing fees ............................................... 25,146 62,099
Professional fees .......................................................... 13,023 40,401
Trustees' fees and expenses ................................................ 3,835 31,174
Other....................................................................... 5,456 10,522
----------------------------
Total expenses .............................................................. 551,583 6,850,554
----------------------------
Net investment income ...................................................... 2,384,401 2,261,412
----------------------------
Realized and unrealized gains (losses):
Net realized gain from investments ......................................... 7,326 45,956,036
Net unrealized appreciation (depreciation) on investments................... 840,370 (99,023,374)
----------------------------
Net realized and unrealized gain (loss)...................................... 847,696 (53,067,338)
----------------------------
Net increase (decrease) in net assets resulting from operations ............. $3,232,097 $(50,805,926)
============================
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the years ended September 30, 1998 and 1997
FRANKLIN INVESTMENT GRADE FRANKLIN
INCOME FUND RISING DIVIDENDS FUND
-------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................... $ 2,384,401 $ 1,724,716 $ 2,261,412 $ 2,313,467
Net realized gain from investments........ 7,326 344,319 45,956,036 49,210,010
Net unrealized appreciation (depreciation)
on investments............................. 840,370 (78,808) (99,023,374) 70,034,445
-------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations.................. 3,232,097 1,990,227 (50,805,926) 121,557,922
Distributions to shareholders from:
Net investment income:
Class I................................... (2,346,104) (1,686,440) (1,828,381) (2,490,290)
Class II.................................. -- -- (4,086) (8,072)
Advisor Class............................. (2,510) (1,534) -- --
Net realized gains:
Class I................................... -- -- (48,479,814) (18,098,843)
Class II.................................. -- -- (2,105,211) (288,240)
--------------------------------------------------------------
Total distributions to shareholders......... (2,348,614) (1,687,974) (52,417,492) (20,885,445)
Capital share transactions (Note 2)
Class I................................... 10,523,609 13,893,814 107,238,762 18,867,160
Class II.................................. -- -- 37,710,977 8,231,696
Advisor Class............................. 2,448,896 39,376 -- --
-------------------------------------------------------------
Total capital share transactions............ 12,972,505 13,933,190 144,949,739 27,098,856
Net increase in net assets.................. 13,855,988 14,235,443 41,726,321 127,771,333
Net assets:
Beginning of year.......................... 43,607,616 29,372,173 409,399,428 281,628,095
-------------------------------------------------------------
End of year................................ $57,463,604 $43,607,616 $451,125,749 $409,399,428
=============================================================
Undistributed net investment
income included in net assets:
End of year................................ $ 305,768 $ 269,981 $ 736,183 $--
=============================================================
</TABLE>
See notes to financial statements.
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 two
series (the Funds). The Funds and their investment objectives are:
Fund Objective
- ---------------------------------------------------------------------------
Franklin Investment Grade Income Fund Income
Franklin Rising Dividends FundGrowth and Income
On July 15, 1998, the Franklin Corporate Qualified Dividend Fund (a fund of the
Trust) ceased operations pursuant to a resolution approved by the Board of
Trustees.
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.
b. Joint Repurchase Agreement:
The Funds 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. 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 September 30, 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
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 expense are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. Other expenses are
charged to each Fund on a specific identification basis.
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.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
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. SHARES OF BENEFICIAL INTEREST
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 September 30, 1998, there were an unlimited number of shares authorized
($0.01 par value). Transactions in each of the Fund's shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN INVESTMENT FRANKLIN RISING
GRADE INCOME FUND DIVIDENDS FUND
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Class I Shares
1998
Shares sold ........................................ 3,275,365 $29,782,945 6,690,317 $168,552,709
Shares issued in reinvestment of distributions...... 219,360 1,989,262 1,767,518 42,544,929
Shares redeemed ....................................(2,335,040) (21,248,598) (4,203,389)(103,858,876)
-----------------------------------------------------
Net increase........................................ 1,159,685 $10,523,609 4,254,446 $107,238,762
====================================================
1997
Shares sold ........................................ 3,081,133 $27,806,195 2,748,993 $ 64,035,322
Shares issued in reinvestment of distributions...... 148,291 1,335,521 803,577 16,782,484
Shares redeemed ....................................(1,688,767) (15,247,902) (2,754,192) (61,950,646)
-----------------------------------------------------
Net increase........................................ 1,540,657 $13,893,814 798,378 $ 18,867,160
====================================================
Class II Shares
1998
Shares sold .................................................................... 1,797,364 $ 45,013,886
Shares issued in reinvestment of distributions.................................. 76,771 1,845,670
Shares redeemed ................................................................ (373,593) (9,148,579)
-------------------------
Net increase.................................................................... 1,500,542 $ 37,710,977
========================
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.................................................................... 346,702 $ 8,231,696
========================
</TABLE>
2. SHARES OF BENEFICIAL INTEREST (cont.)
FRANKLIN INVESTMENT
GRADE INCOME FUND
SHARES AMOUNT
Advisor Class Shares
1998
Shares sold ........................................ 267,539 $ 2,451,802
Shares issued in reinvestment of distributions...... 315 2,853
Shares redeemed .................................... (634) (5,759)
------------------------
Net increase......................................... 267,220 $ 2,448,896
=======================
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
=======================
*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 Funds' 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:
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
Average Daily Net Assets
First $500 million.......................... .50% .75%
Over $500 million, up to and
including $1 billion ...................... .45% .625%
In excess of $1 billion..................... .40% .50%
Each of the Funds also pays accounting fees to Advisory Services.
Under an agreement with Advisory Services, FT Services provides administrative
services to the Funds. The fee is paid by Advisory Services 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 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.
3. TRANSACTIONS WITH AFFILIATES (cont.)
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the year as follows:
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
Net Commissions paid...................... $39,980 $451,232
Contingent deferred sales charges......... $ 184 $ 20,936
The Funds paid transfer agent fees of $624,837, of which $421,594 was paid to
Investor Services.
4. INCOME TAXES
At September 30, 1998, the Franklin Investment Grade Income Fund had tax basis
capital losses of $740,192 which may be carried over to offset future capital
gains. Such losses expire as follows:
Capital loss carryovers expiring in:
1999............................... $117,414
2003............................... 254,062
2004............................... 368,716
-------------
$740,192
=============
On September 30, 1998, the Franklin Investment Grade Income Fund had expired
capital loss carryovers of $62,907 which were reclassified to paid-in capital.
At September 30, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes was as follows:
Franklin Franklin
Investment Rising
Grade Dividends
INCOME FUND FUND
Investment at cost............ $57,337,744 $415,448,272
=================================
Unrealized appreciation ...... $ 956,301 $ 86,792,019
Unrealized depreciation ...... -- (51,990,986)
----------------------------------
Net unrealized appreciation .. $ 956,301 $ 34,801,033
=================================
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended September 30, 1998, were as follows:
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
Purchases ................ $20,352,020 $208,058,353
Sales .................... $ 8,500,000 $110,166,062
FRANKLIN MANAGED TRUST
Report of Independent Accountants
To the Shareholders and Board of Trustees
of Franklin Managed Trust:
We have audited the accompanying statements of assets and liabilities of the
Franklin Managed Trust (comprised of the Franklin Investment Grade Income Fund
and the Franklin Rising Dividends Fund), including each Fund's statement of
investments in securities and net assets, as of September 30, 1998, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. 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 misstatements. 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, 1998, 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
Franklin Investment Grade Income Fund and the Franklin Rising Dividends Fund as
of September 30, 1998, the results of their 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 periods presented, in
conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 5, 1998
FRANKLIN MANAGED TRUST
Tax Information
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Rising Dividends
Fund hereby designates $40,456,757 as a capital gain dividend for the fiscal
year ended September 30, 1998.
Under Section 854(b)(2) of the Internal Revenue Code, the Franklin Rising
Dividends Fund hereby designates 100% of ordinary income dividends as income
qualifying for the dividends received deduction for the fiscal year ended
September 30, 1998.
Franklin Managed Trust
Annual Report
September 30, 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 in pie format the credit quality breakdown of the Franklin
Investment Grade Income Fund based on total net assets on 9/30/98.
AAA 69%
A 24%
BBB 7%
GRAPHIC MATERIAL (2)
This chart shows the dividend distributions for Franklin Investment Grade Income
Fund - Class I from 5/1/97 to 9/30/98.
Dividend
MONTH PER SHARE
- --------------------------------
October 3.3 cents
November 3.3 cents
December 7.0 cents
January 3.3 cents
February 3.3 cents
March 3.3 cents
April 3.3 cents
May 3.3 cents
June 3.3 cents
July 3.3 cents
August 3.3 cents
SEPTEMBER 3.3 CENTS
- --------------------------------
Total 43.3 cents
GRAPHIC MATERIAL (3)
The following line graph compares the performance of the Franklin Investment
Grade Income Fund - Class I shares to that of the Lehman Brothers
Government/Corporate Bond Index, and to the Consumer Price Index based on a
$10,000 investment from 10/1/88 to 9/30/98.
Franklin Alabama Lehman Brothers
Date Tax-Free Municipal CPI
Income Fund-Class I Bond Index
10/1/88 $9,575 $10,000 $10,000
10/31/88 $9,636 1.77% $10,177 0.33% $10,033
11/30/88 $9,621 -1.13% $10,062 0.08% $10,041
12/31/88 $9,650 0.34% $10,096 0.17% $10,058
1/31/89 $9,735 1.33% $10,230 0.50% $10,108
2/28/89 $9,742 -0.76% $10,153 0.41% $10,150
3/31/89 $9,794 0.53% $10,207 0.58% $10,209
4/30/89 $9,870 2.12% $10,423 0.65% $10,275
5/31/89 $9,992 2.46% $10,679 0.57% $10,334
6/30/89 $10,115 3.26% $11,027 0.24% $10,358
7/31/89 $10,287 2.08% $11,257 0.24% $10,383
8/31/89 $10,199 -1.55% $11,082 0.16% $10,400
9/30/89 $10,230 0.44% $11,131 0.32% $10,433
10/31/89 $10,365 2.53% $11,413 0.48% $10,483
11/30/89 $10,442 0.90% $11,515 0.24% $10,508
12/31/89 $10,470 0.15% $11,533 0.16% $10,525
1/31/90 $10,387 -1.37% $11,375 1.03% $10,634
2/28/90 $10,453 0.22% $11,400 0.47% $10,684
3/31/90 $10,457 0.01% $11,401 0.55% $10,742
4/30/90 $10,423 -0.92% $11,296 0.16% $10,760
5/31/90 $10,629 2.90% $11,624 0.23% $10,784
6/30/90 $10,747 1.62% $11,812 0.54% $10,843
7/31/90 $10,877 1.24% $11,958 0.38% $10,884
8/31/90 $10,827 -1.45% $11,785 0.92% $10,984
9/30/90 $10,867 0.83% $11,883 0.84% $11,076
10/31/90 $10,960 1.33% $12,041 0.60% $11,143
11/30/90 $11,120 2.18% $12,303 0.22% $11,167
12/31/90 $11,203 1.51% $12,489 0.00% $11,167
1/31/91 $11,325 1.12% $12,629 0.60% $11,234
2/28/91 $11,462 0.86% $12,738 0.15% $11,251
3/31/91 $11,566 0.69% $12,825 0.15% $11,268
4/30/91 $11,713 1.15% $12,973 0.15% $11,285
5/31/91 $11,791 0.47% $13,034 0.30% $11,319
6/30/91 $11,787 -0.11% $13,020 0.29% $11,351
7/31/91 $11,923 1.26% $13,184 0.15% $11,368
8/31/91 $12,158 2.30% $13,487 0.29% $11,401
9/30/91 $12,380 2.09% $13,769 0.44% $11,452
10/31/91 $12,532 0.89% $13,891 0.15% $11,469
11/30/91 $12,686 1.00% $14,030 0.29% $11,502
12/31/91 $13,061 3.37% $14,503 0.07% $11,510
1/31/92 $12,905 -1.48% $14,288 0.15% $11,527
2/29/92 $12,924 0.53% $14,364 0.36% $11,569
3/31/92 $12,870 -0.55% $14,285 0.51% $11,628
4/30/92 $12,978 0.60% $14,371 0.14% $11,644
5/31/92 $13,146 1.94% $14,650 0.14% $11,660
6/30/92 $13,345 1.47% $14,865 0.36% $11,702
7/31/92 $13,681 2.56% $15,245 0.21% $11,727
8/31/92 $13,806 0.89% $15,381 0.28% $11,760
9/30/92 $14,015 1.36% $15,590 0.28% $11,793
10/31/92 $13,844 -1.53% $15,352 0.35% $11,834
11/30/92 $13,764 -0.09% $15,338 0.14% $11,851
12/31/92 $13,866 1.72% $15,602 -0.07% $11,842
1/31/93 $14,096 2.18% $15,942 0.49% $11,900
2/28/93 $14,423 2.08% $16,274 0.35% $11,942
3/31/93 $14,451 0.34% $16,329 0.35% $11,984
4/30/93 $14,590 0.77% $16,455 0.28% $12,017
5/31/93 $14,546 -0.05% $16,446 0.14% $12,034
6/30/93 $14,757 2.27% $16,820 0.14% $12,051
7/31/93 $14,808 0.64% $16,927 0.00% $12,051
8/31/93 $15,086 2.30% $17,317 0.28% $12,085
9/30/93 $15,105 0.35% $17,377 0.21% $12,110
10/31/93 $15,142 0.41% $17,449 0.41% $12,160
11/30/93 $15,066 -1.13% $17,251 0.07% $12,168
12/31/93 $15,120 0.44% $17,327 0.00% $12,168
1/31/94 $15,289 1.50% $17,587 0.27% $12,201
2/28/94 $15,063 -2.18% $17,204 0.34% $12,243
3/31/94 $14,869 -2.45% $16,782 0.34% $12,284
4/30/94 $14,791 -0.83% $16,643 0.14% $12,301
5/31/94 $14,797 -0.18% $16,613 0.07% $12,310
6/30/94 $14,818 -0.23% $16,575 0.34% $12,352
7/31/94 $14,991 2.00% $16,906 0.27% $12,385
8/31/94 $15,014 0.04% $16,913 0.40% $12,435
9/30/94 $14,951 -1.51% $16,658 0.27% $12,468
10/31/94 $14,973 -0.11% $16,639 0.07% $12,477
11/30/94 $14,927 -0.18% $16,609 0.13% $12,493
12/31/94 $14,944 0.66% $16,719 0.00% $12,493
1/31/95 $15,129 1.92% $17,040 0.40% $12,543
2/28/95 $15,333 2.32% $17,435 0.40% $12,593
3/31/95 $15,397 0.67% $17,552 0.33% $12,635
4/30/95 $15,532 1.39% $17,796 0.33% $12,677
5/31/95 $15,826 4.19% $18,542 0.20% $12,702
6/30/95 $15,962 0.80% $18,690 0.20% $12,727
7/31/95 $15,974 -0.39% $18,617 0.00% $12,727
8/31/95 $16,094 1.28% $18,856 0.26% $12,761
9/30/95 $16,178 1.02% $19,048 0.20% $12,786
10/31/95 $16,309 1.47% $19,328 0.33% $12,828
11/30/95 $16,495 1.65% $19,647 -0.07% $12,819
12/31/95 $16,590 1.47% $19,936 -0.07% $12,810
1/31/96 $16,705 0.62% $20,059 0.59% $12,886
2/29/96 $16,546 -2.12% $19,634 0.32% $12,927
3/31/96 $16,533 -0.84% $19,469 0.52% $12,994
4/30/96 $16,502 -0.69% $19,335 0.39% $13,045
5/31/96 $16,508 -0.17% $19,302 0.19% $13,070
6/30/96 $16,624 1.34% $19,560 0.06% $13,078
7/31/96 $16,667 0.23% $19,605 0.19% $13,103
8/31/96 $16,710 -0.24% $19,558 0.19% $13,127
9/30/96 $16,865 1.78% $19,907 0.32% $13,169
10/31/96 $17,058 2.33% $20,370 0.32% $13,212
11/30/96 $17,196 1.84% $20,745 0.19% $13,237
12/31/96 $17,169 -1.11% $20,515 0.00% $13,237
1/31/97 $17,213 0.12% $20,540 0.32% $13,279
2/28/97 $17,257 0.21% $20,583 0.31% $13,320
3/31/97 $17,224 -1.19% $20,338 0.25% $13,353
4/30/97 $17,327 1.46% $20,635 0.12% $13,370
5/31/97 $17,429 0.93% $20,827 -0.06% $13,361
6/30/97 $17,532 1.20% $21,077 0.12% $13,378
7/31/97 $17,713 3.06% $21,721 0.12% $13,394
8/31/97 $17,700 -1.12% $21,478 0.19% $13,419
9/30/97 $17,823 1.57% $21,815 0.25% $13,453
10/31/97 $17,927 1.60% $22,164 0.25% $13,486
11/30/97 $17,993 0.53% $22,282 -0.06% $13,478
12/31/97 $18,092 1.05% $22,516 -0.12% $13,462
1/31/98 $18,238 1.41% $22,833 0.19% $13,488
2/28/98 $18,244 -0.20% $22,788 0.19% $13,513
3/31/98 $18,311 0.31% $22,858 0.19% $13,539
4/30/98 $18,357 0.50% $22,973 0.18% $13,563
5/31/98 $18,465 1.07% $23,218 0.18% $13,588
6/30/98 $18,572 1.02% $23,455 0.12% $13,604
7/31/98 $18,599 0.08% $23,474 0.12% $13,620
8/31/98 $18,769 1.95% $23,932 0.12% $13,637
9/30/98 $18,981 2.86% $24,616 0.12% $13,653
Total 89.81% 146.16% 36.53%
Return
GRAPHIC MATERIAL (4)
This chart shows the dividend distributions for Franklin Investment Grade Income
Fund - Advisor Class from 10/1/97 to 9/30/98.
Dividend
MONTH PER SHARE
- --------------------------------
October 3.41 cents
November 3.45 cents
December 7.52 cents
January 3.49 cents
February 3.49 cents
March 3.49 cents
April 3.49 cents
May 3.49 cents
June 3.49 cents
July 3.49 cents
August 3.49 cents
SEPTEMBER 3.49 CENTS
- --------------------------------
Total 45.79 cents
GRAPHIC MATERIAL (5)
The following line graph compares the performance of the Franklin Investment
Grade Income Fund - Advisor Class shares to that of the Lehman Brothers
Government/Corporate Bond Index, and to the Consumer Price Index based on a
$10,000 investment from 10/1/88 to 9/30/98.
Franklin Investment Lehman Brothers
Grade Municipal
Date Income Fund-Advisor Class Bond Index CPI
10/1/88 $10,000 $10,000 $10,000
10/31/88 $10,064 1.77% $10,177 0.33% $10,033
11/30/88 $10,048 -1.13% $10,062 0.08% $10,041
12/31/88 $10,078 0.34% $10,096 0.17% $10,058
1/31/89 $10,167 1.33% $10,230 0.50% $10,108
2/28/89 $10,174 -0.76% $10,153 0.41% $10,150
3/31/89 $10,229 0.53% $10,207 0.58% $10,209
4/30/89 $10,308 2.12% $10,423 0.65% $10,275
5/31/89 $10,436 2.46% $10,679 0.57% $10,334
6/30/89 $10,564 3.26% $11,027 0.24% $10,358
7/31/89 $10,743 2.08% $11,257 0.24% $10,383
8/31/89 $10,652 -1.55% $11,082 0.16% $10,400
9/30/89 $10,684 0.44% $11,131 0.32% $10,433
10/31/89 $10,825 2.53% $11,413 0.48% $10,483
11/30/89 $10,905 0.90% $11,515 0.24% $10,508
12/31/89 $10,934 0.15% $11,533 0.16% $10,525
1/31/90 $10,848 -1.37% $11,375 1.03% $10,634
2/28/90 $10,917 0.22% $11,400 0.47% $10,684
3/31/90 $10,921 0.01% $11,401 0.55% $10,742
4/30/90 $10,885 -0.92% $11,296 0.16% $10,760
5/31/90 $11,100 2.90% $11,624 0.23% $10,784
6/30/90 $11,224 1.62% $11,812 0.54% $10,843
7/31/90 $11,359 1.24% $11,958 0.38% $10,884
8/31/90 $11,307 -1.45% $11,785 0.92% $10,984
9/30/90 $11,349 0.83% $11,883 0.84% $11,076
10/31/90 $11,446 1.33% $12,041 0.60% $11,143
11/30/90 $11,613 2.18% $12,303 0.22% $11,167
12/31/90 $11,700 1.51% $12,489 0.00% $11,167
1/31/91 $11,828 1.12% $12,629 0.60% $11,234
2/28/91 $11,970 0.86% $12,738 0.15% $11,251
3/31/91 $12,079 0.69% $12,825 0.15% $11,268
4/30/91 $12,232 1.15% $12,973 0.15% $11,285
5/31/91 $12,315 0.47% $13,034 0.30% $11,319
6/30/91 $12,310 -0.11% $13,020 0.29% $11,351
7/31/91 $12,452 1.26% $13,184 0.15% $11,368
8/31/91 $12,697 2.30% $13,487 0.29% $11,401
9/30/91 $12,929 2.09% $13,769 0.44% $11,452
10/31/91 $13,088 0.89% $13,891 0.15% $11,469
11/30/91 $13,249 1.00% $14,030 0.29% $11,502
12/31/91 $13,641 3.37% $14,503 0.07% $11,510
1/31/92 $13,478 -1.48% $14,288 0.15% $11,527
2/29/92 $13,498 0.53% $14,364 0.36% $11,569
3/31/92 $13,441 -0.55% $14,285 0.51% $11,628
4/30/92 $13,553 0.60% $14,371 0.14% $11,644
5/31/92 $13,729 1.94% $14,650 0.14% $11,660
6/30/92 $13,937 1.47% $14,865 0.36% $11,702
7/31/92 $14,288 2.56% $15,245 0.21% $11,727
8/31/92 $14,418 0.89% $15,381 0.28% $11,760
9/30/92 $14,637 1.36% $15,590 0.28% $11,793
10/31/92 $14,458 -1.53% $15,352 0.35% $11,834
11/30/92 $14,374 -0.09% $15,338 0.14% $11,851
12/31/92 $14,481 1.72% $15,602 -0.07% $11,842
1/31/93 $14,722 2.18% $15,942 0.49% $11,900
2/28/93 $15,063 2.08% $16,274 0.35% $11,942
3/31/93 $15,092 0.34% $16,329 0.35% $11,984
4/30/93 $15,238 0.77% $16,455 0.28% $12,017
5/31/93 $15,191 -0.05% $16,446 0.14% $12,034
6/30/93 $15,412 2.27% $16,820 0.14% $12,051
7/31/93 $15,465 0.64% $16,927 0.00% $12,051
8/31/93 $15,755 2.30% $17,317 0.28% $12,085
9/30/93 $15,775 0.35% $17,377 0.21% $12,110
10/31/93 $15,814 0.41% $17,449 0.41% $12,160
11/30/93 $15,734 -1.13% $17,251 0.07% $12,168
12/31/93 $15,790 0.44% $17,327 0.00% $12,168
1/31/94 $15,967 1.50% $17,587 0.27% $12,201
2/28/94 $15,731 -2.18% $17,204 0.34% $12,243
3/31/94 $15,529 -2.45% $16,782 0.34% $12,284
4/30/94 $15,448 -0.83% $16,643 0.14% $12,301
5/31/94 $15,453 -0.18% $16,613 0.07% $12,310
6/30/94 $15,475 -0.23% $16,575 0.34% $12,352
7/31/94 $15,657 2.00% $16,906 0.27% $12,385
8/31/94 $15,680 0.04% $16,913 0.40% $12,435
9/30/94 $15,614 -1.51% $16,658 0.27% $12,468
10/31/94 $15,637 -0.11% $16,639 0.07% $12,477
11/30/94 $15,590 -0.18% $16,609 0.13% $12,493
12/31/94 $15,607 0.66% $16,719 0.00% $12,493
1/31/95 $15,801 1.92% $17,040 0.40% $12,543
2/28/95 $16,013 2.32% $17,435 0.40% $12,593
3/31/95 $16,081 0.67% $17,552 0.33% $12,635
4/30/95 $16,221 1.39% $17,796 0.33% $12,677
5/31/95 $16,528 4.19% $18,542 0.20% $12,702
6/30/95 $16,670 0.80% $18,690 0.20% $12,727
7/31/95 $16,683 -0.39% $18,617 0.00% $12,727
8/31/95 $16,808 1.28% $18,856 0.26% $12,761
9/30/95 $16,896 1.02% $19,048 0.20% $12,786
10/31/95 $17,033 1.47% $19,328 0.33% $12,828
11/30/95 $17,226 1.65% $19,647 -0.07% $12,819
12/31/95 $17,327 1.47% $19,936 -0.07% $12,810
1/31/96 $17,446 0.62% $20,059 0.59% $12,886
2/29/96 $17,280 -2.12% $19,634 0.32% $12,927
3/31/96 $17,267 -0.84% $19,469 0.52% $12,994
4/30/96 $17,234 -0.69% $19,335 0.39% $13,045
5/31/96 $17,240 -0.17% $19,302 0.19% $13,070
6/30/96 $17,362 1.34% $19,560 0.06% $13,078
7/31/96 $17,406 0.23% $19,605 0.19% $13,103
8/31/96 $17,451 -0.24% $19,558 0.19% $13,127
9/30/96 $17,613 1.78% $19,907 0.32% $13,169
10/31/96 $17,815 2.33% $20,370 0.32% $13,212
11/30/96 $17,959 1.84% $20,745 0.19% $13,237
12/31/96 $17,931 -1.11% $20,515 0.00% $13,237
1/31/97 $17,977 0.12% $20,540 0.32% $13,279
2/28/97 $18,033 0.21% $20,583 0.31% $13,320
3/31/97 $17,982 -1.19% $20,338 0.25% $13,353
4/30/97 $18,112 1.46% $20,635 0.12% $13,370
5/31/97 $18,222 0.93% $20,827 -0.06% $13,361
6/30/97 $18,313 1.20% $21,077 0.12% $13,378
7/31/97 $18,505 3.06% $21,721 0.12% $13,394
8/31/97 $18,515 -1.12% $21,478 0.19% $13,419
9/30/97 $18,627 1.57% $21,815 0.25% $13,453
10/31/97 $18,759 1.60% $22,164 0.25% $13,486
11/30/97 $18,830 0.53% $22,282 -0.06% $13,478
12/31/97 $18,945 1.05% $22,516 -0.12% $13,462
1/31/98 $19,102 1.41% $22,833 0.19% $13,488
2/28/98 $19,112 -0.20% $22,788 0.19% $13,513
3/31/98 $19,186 0.31% $22,858 0.19% $13,539
4/30/98 $19,239 0.50% $22,973 0.18% $13,563
5/31/98 $19,355 1.07% $23,218 0.18% $13,588
6/30/98 $19,451 1.02% $23,455 0.12% $13,604
7/31/98 $19,504 0.08% $23,474 0.12% $13,620
8/31/98 $19,708 1.95% $23,932 0.12% $13,637
9/30/98 $19,914 2.86% $24,616 0.12% $13,653
Total 99.14% 146.16% 36.53%
Return
GRAPHIC MATERIAL (6)
This chart shows the top 10 stock holdings by company and industry of the
Franklin Rising Dividends Fund based on total net assets on September 30, 1998.
Company % of Total
INDUSTRY NET ASSETS
Family Dollar Stores, Inc. 5.30%
Retail Trade
Pall Corp. 4.60%
Process Industries
West Co., Inc. 3.53%
Health Technology
First Union Corporation 3.08%
Banks/Thrifts
Wallace Computer Services, Inc. 2.99%
Commercial Services
Washington Mutual, Inc. 2.84%
Banks/Thrifts
Bemis Co., Inc. 2.59%
Process Industries
Leggett & Platt, Inc. 2.42%
Consumer Durables
Alberto-Culver Co., Class A 2.39%
Consumer Non-Durables
Fannie Mae 2.26%
Government Sponsored Corporation
GRAPHIC MATERIAL (7)
The following line graph compares the performance of the Franklin Rising
Dividends Fund - Class I shares to that of the Wilshire MidCap Growth Index, and
to the Consumer Price Index based on a $10,000 investment from 10/1/88 to
9/30/98.
Franklin Rising Wilshire MidCap
Dividends Growth
Date Fund- Class I Index CPI
10/1/88 $9,424 $10,000 $10,000
10/31/88 $9,573 0.19% $10,019 0.33% $10,033
11/30/88 $9,302 -2.90% $9,728 0.08% $10,041
12/31/88 $9,367 3.01% $10,021 0.17% $10,058
1/31/89 $9,650 4.97% $10,519 0.50% $10,108
2/28/89 $9,669 0.31% $10,552 0.41% $10,150
3/31/89 $9,868 1.93% $10,756 0.58% $10,209
4/30/89 $10,115 5.63% $11,361 0.65% $10,275
5/31/89 $10,495 4.37% $11,858 0.57% $10,334
6/30/89 $10,591 -3.34% $11,462 0.24% $10,358
7/31/89 $11,051 7.36% $12,305 0.24% $10,383
8/31/89 $11,166 3.26% $12,706 0.16% $10,400
9/30/89 $11,137 0.10% $12,719 0.32% $10,433
10/31/89 $11,019 -4.09% $12,199 0.48% $10,483
11/30/89 $11,058 -0.36% $12,155 0.24% $10,508
12/31/89 $11,203 0.59% $12,227 0.16% $10,525
1/31/90 $10,666 -9.29% $11,091 1.03% $10,634
2/28/90 $10,803 2.55% $11,374 0.47% $10,684
3/31/90 $10,988 4.49% $11,884 0.55% $10,742
4/30/90 $10,694 -4.85% $11,308 0.16% $10,760
5/31/90 $11,224 10.68% $12,516 0.23% $10,784
6/30/90 $11,323 0.02% $12,518 0.54% $10,843
7/31/90 $11,293 -3.85% $12,036 0.38% $10,884
8/31/90 $10,302 -13.75% $10,381 0.92% $10,984
9/30/90 $9,882 -8.57% $9,491 0.84% $11,076
10/31/90 $9,752 -4.90% $9,026 0.60% $11,143
11/30/90 $10,672 11.20% $10,037 0.22% $11,167
12/31/90 $11,232 5.96% $10,636 0.00% $11,167
1/31/91 $11,613 9.44% $11,640 0.60% $11,234
2/28/91 $12,665 9.29% $12,721 0.15% $11,251
3/31/91 $13,182 6.35% $13,529 0.15% $11,268
4/30/91 $13,293 -0.78% $13,423 0.15% $11,285
5/31/91 $13,917 5.55% $14,168 0.30% $11,319
6/30/91 $13,589 -4.47% $13,535 0.29% $11,351
7/31/91 $13,984 5.42% $14,268 0.15% $11,368
8/31/91 $14,287 3.80% $14,811 0.29% $11,401
9/30/91 $14,394 0.11% $14,827 0.44% $11,452
10/31/91 $14,536 2.61% $15,214 0.15% $11,469
11/30/91 $14,363 -4.18% $14,578 0.29% $11,502
12/31/91 $15,270 13.34% $16,523 0.07% $11,510
1/31/92 $15,362 2.99% $17,017 0.15% $11,527
2/29/92 $15,341 1.69% $17,304 0.36% $11,569
3/31/92 $15,111 -3.99% $16,614 0.51% $11,628
4/30/92 $15,265 -2.38% $16,218 0.14% $11,644
5/31/92 $15,522 -1.25% $16,016 0.14% $11,660
6/30/92 $15,269 -4.54% $15,289 0.36% $11,702
7/31/92 $15,868 5.48% $16,126 0.21% $11,727
8/31/92 $15,682 -2.09% $15,789 0.28% $11,760
9/30/92 $15,967 1.75% $16,066 0.28% $11,793
10/31/92 $16,154 4.08% $16,721 0.35% $11,834
11/30/92 $16,672 7.66% $18,002 0.14% $11,851
12/31/92 $16,854 3.06% $18,553 -0.07% $11,842
1/31/93 $16,687 2.26% $18,972 0.49% $11,900
2/28/93 $16,437 -3.37% $18,333 0.35% $11,942
3/31/93 $16,567 3.07% $18,896 0.35% $11,984
4/30/93 $15,982 -4.18% $18,106 0.28% $12,017
5/31/93 $16,180 5.70% $19,138 0.14% $12,034
6/30/93 $15,997 0.66% $19,264 0.14% $12,051
7/31/93 $16,008 -0.89% $19,093 0.00% $12,051
8/31/93 $16,270 5.07% $20,061 0.28% $12,085
9/30/93 $16,276 2.51% $20,564 0.21% $12,110
10/31/93 $16,508 0.53% $20,673 0.41% $12,160
11/30/93 $16,086 -1.56% $20,351 0.07% $12,168
12/31/93 $16,265 5.53% $21,476 0.00% $12,168
1/31/94 $16,488 3.53% $22,234 0.27% $12,201
2/28/94 $15,884 0.53% $22,352 0.34% $12,243
3/31/94 $15,108 -5.95% $21,022 0.34% $12,284
4/30/94 $15,129 0.40% $21,106 0.14% $12,301
5/31/94 $15,331 -1.53% $20,783 0.07% $12,310
6/30/94 $15,299 -5.04% $19,736 0.34% $12,352
7/31/94 $15,438 2.44% $20,217 0.27% $12,385
8/31/94 $16,099 8.56% $21,948 0.40% $12,435
9/30/94 $15,725 -0.79% $21,774 0.27% $12,468
10/31/94 $15,661 2.44% $22,306 0.07% $12,477
11/30/94 $15,275 -4.43% $21,318 0.13% $12,493
12/31/94 $15,424 1.66% $21,671 0.00% $12,493
1/31/95 $15,824 0.02% $21,676 0.40% $12,543
2/28/95 $16,299 6.00% $22,976 0.40% $12,593
3/31/95 $16,651 3.69% $23,824 0.33% $12,635
4/30/95 $16,770 1.49% $24,179 0.33% $12,677
5/31/95 $17,377 1.64% $24,576 0.20% $12,702
6/30/95 $17,568 6.29% $26,121 0.20% $12,727
7/31/95 $17,992 8.40% $28,316 0.00% $12,727
8/31/95 $18,275 1.53% $28,749 0.26% $12,761
9/30/95 $18,920 2.79% $29,551 0.20% $12,786
10/31/95 $18,745 -3.52% $28,511 0.33% $12,828
11/30/95 $19,706 5.25% $30,008 -0.07% $12,819
12/31/95 $20,090 0.36% $30,116 -0.07% $12,810
1/31/96 $20,497 1.73% $30,637 0.59% $12,886
2/29/96 $20,750 3.74% $31,782 0.32% $12,927
3/31/96 $20,706 1.21% $32,167 0.52% $12,994
4/30/96 $20,628 5.93% $34,075 0.39% $13,045
5/31/96 $21,214 2.99% $35,093 0.19% $13,070
6/30/96 $21,425 -5.45% $33,181 0.06% $13,078
7/31/96 $20,737 -8.56% $30,340 0.19% $13,103
8/31/96 $21,214 7.29% $32,552 0.19% $13,127
9/30/96 $22,293 4.73% $34,092 0.32% $13,169
10/31/96 $22,972 -2.83% $33,127 0.32% $13,212
11/30/96 $24,564 5.63% $34,992 0.19% $13,237
12/31/96 $24,795 -1.32% $34,530 0.00% $13,237
1/31/97 $25,281 2.90% $35,532 0.32% $13,279
2/28/97 $25,969 -1.89% $34,860 0.31% $13,320
3/31/97 $25,160 -6.11% $32,730 0.25% $13,353
4/30/97 $25,790 3.42% $33,850 0.12% $13,370
5/31/97 $27,752 8.27% $36,649 -0.06% $13,361
6/30/97 $28,737 3.47% $37,921 0.12% $13,378
7/31/97 $31,191 7.07% $40,602 0.12% $13,394
8/31/97 $30,548 -0.77% $40,289 0.19% $13,419
9/30/97 $32,124 6.58% $42,940 0.25% $13,453
10/31/97 $31,337 -4.77% $40,892 0.25% $13,486
11/30/97 $32,088 0.59% $41,133 -0.06% $13,478
12/31/97 $32,816 0.85% $41,483 -0.12% $13,462
1/31/98 $32,667 -0.70% $41,192 0.19% $13,488
2/28/98 $35,265 8.24% $44,587 0.19% $13,513
3/31/98 $36,236 1.60% $45,300 0.19% $13,539
4/30/98 $36,087 0.70% $45,617 0.18% $13,563
5/31/98 $34,705 -5.62% $43,053 0.18% $13,588
6/30/98 $34,245 -0.60% $42,795 0.12% $13,604
7/31/98 $33,081 -5.94% $40,253 0.12% $13,620
8/31/98 $27,827 -20.29% $32,086 0.12% $13,637
9/30/98 $29,217 4.95% $33,674 0.12% $13,653
GRAPHIC MATERIAL (8)
The following line graph compares the performance of the Franklin Rising
Dividends Fund - Class II shares to that of the Wilshire MidCap Growth Index,
and to the Consumer Price Index based on a $10,000 investment from 5/1/95 to
9/30/98.
Franklin Rising Wilshire MidCap
Dividends Growth
Date Fund- Class II Index CPI
5/1/95 $9,897 $10,000 $10,000
5/31/95 $10,282 1.64% $10,164 0.20% $10,020
6/30/95 $10,390 6.29% $10,803 0.20% $10,040
7/31/95 $10,635 8.40% $11,711 0.00% $10,040
8/31/95 $10,796 1.53% $11,890 0.26% $10,066
9/30/95 $11,169 2.79% $12,222 0.20% $10,086
10/31/95 $11,059 -3.52% $11,791 0.33% $10,120
11/30/95 $11,622 5.25% $12,411 -0.07% $10,112
12/31/95 $11,842 0.36% $12,455 -0.07% $10,105
1/31/96 $12,076 1.73% $12,671 0.59% $10,165
2/29/96 $12,219 3.74% $13,145 0.32% $10,198
3/31/96 $12,184 1.21% $13,304 0.52% $10,251
4/30/96 $12,125 5.93% $14,093 0.39% $10,291
5/31/96 $12,471 2.99% $14,514 0.19% $10,310
6/30/96 $12,591 -5.45% $13,723 0.06% $10,316
7/31/96 $12,180 -8.56% $12,548 0.19% $10,336
8/31/96 $12,461 7.29% $13,463 0.19% $10,356
9/30/96 $13,086 4.73% $14,100 0.32% $10,389
10/31/96 $13,479 -2.83% $13,701 0.32% $10,422
11/30/96 $14,402 5.63% $14,472 0.19% $10,442
12/31/96 $14,533 -1.32% $14,281 0.00% $10,442
1/31/97 $14,818 2.90% $14,695 0.32% $10,475
2/28/97 $15,209 -1.89% $14,417 0.31% $10,508
3/31/97 $14,735 -6.11% $13,537 0.25% $10,534
4/30/97 $15,090 3.42% $14,000 0.12% $10,547
5/31/97 $16,235 8.27% $15,157 -0.06% $10,540
6/30/97 $16,809 3.47% $15,683 0.12% $10,553
7/31/97 $18,228 7.07% $16,792 0.12% $10,565
8/31/97 $17,850 -0.77% $16,663 0.19% $10,586
9/30/97 $18,761 6.58% $17,759 0.25% $10,612
10/31/97 $18,293 -4.77% $16,912 0.25% $10,639
11/30/97 $18,719 0.59% $17,012 -0.06% $10,632
12/31/97 $19,143 0.85% $17,156 -0.12% $10,619
1/31/98 $19,048 -0.70% $17,036 0.19% $10,640
2/28/98 $20,552 8.24% $18,440 0.19% $10,660
3/31/98 $21,114 1.60% $18,735 0.19% $10,680
4/30/98 $21,019 0.70% $18,866 0.18% $10,699
5/31/98 $20,204 -5.62% $17,806 0.18% $10,719
6/30/98 $19,926 -0.60% $17,699 0.12% $10,731
7/31/98 $19,238 -5.94% $16,648 0.12% $10,744
8/31/98 $16,174 -20.29% $13,270 0.12% $10,757
9/30/98 $16,983 4.95% $13,927 0.12% $10,770
