SHAREHOLDER LETTER
Dear Shareholder:
This semiannual report for Franklin Managed Trust covers the period ended March
31, 1999.
The past six months could be characterized as a tale of two markets. After
beginning on a shaky note in October, large capitalization stocks reached
all-time highs, whereas small-cap, mid-cap and value stocks were generally left
behind in the rally. Although, the Standard & Poor's(R) 500 (S&P 500(R)) Stock
Index ended the reporting period up 27.34%, on March 31, 1999, the averages do
not tell the whole story. Since the S&P 500 is market-capitalization weighted,
large companies have a disproportionate impact on its results. In fact, in 1998,
the stocks of just 15 companies accounted for half of the S&P 500's total
return, while most stocks were still below their highs set in April 1998. In
contrast, the Wilshire MidCap Growth Index returned 0.14%, and the Russell 2000
Index, which tracks the performance of small-capitalization companies, returned
10%, for the six months under review.
The reporting period began with October's global and domestic financial market
volatility, provoked by conditions such as the Russian debt default, a major
U.S. hedge fund's
CONTENTS
Shareholder Letter ....................................................... 1
Fund Reports
Franklin Investment Grade Income Fund ................................... 4
Franklin Rising Dividends Fund .......................................... 10
Financial Highlights & Statement of Investments .......................... 18
Financial Statements ..................................................... 28
Notes to Financial Statements ............................................ 32
Page
difficulties and the ongoing Asian crisis. The combination of fragile
international financial markets and reduced capital availability in the U.S
prompted the Federal Reserve Board's (the Fed's) monetary policy panel, the
Federal Open Market Committee, to cut the federal funds target rate twice by
0.25%, lowering it to 4.75% on November 17, 1998. The Fed's moves attempted to
provide liquidity to the financial system and make it easier for major
corporations to obtain favorable lending from banks. The U.S. economy responded
enthusiastically, as shown by the 6.0% annualized rate for fourth quarter 1998
gross domestic product (GDP) growth, and 3.9% annualized rate for all of 1998.
U.S. consumer spending continued to fuel the economy. With low inflation and
unemployment running at approximately 4.2% -- the lowest level in decades --
American consumers were in the mood to spend, and they did. Retail sales were
strong during the period, as was the real estate market. In the workplace,
fourth quarter 1998's productivity surged by 4.6%, the strongest showing in six
years. This gain was especially beneficial to the economy, as increasing
productivity is vital to controlling inflation during a period of fast growth.
In fact, inflation as measured by the Consumer Price Index (CPI), registered a
mere 1.61% for all of 1998, a 12-year low.
Near the end of the fourth quarter, as it became apparent that the economy was
growing more rapidly than generally anticipated, yields on U.S. Treasury
securities began to rise in response. By mid-February, concerns mounted that
tight labor
2
Page
markets and strong consumer demand might lead the Fed to increase interest rates
to prevent inflationary pressures from developing. This sent Treasury yields
higher still, with the 30-year bond yield reaching a seven-month high of 5.69%
on March 4. Interest rates and bond prices move in opposite directions so that
as interest rates rise, bond prices will decline and their yields will go up.
Regardless of the market's direction, we at Franklin Templeton emphasize the
value of a long-term investment approach to help minimize the impact of daily
market fluctuations and short-term volatility on your portfolio. We encourage
you to discuss your financial goals with your investment representative. He or
she can address concerns about market volatility, help you diversify your
investments and stay focused on the long term.
As always, we appreciate your support, welcome your questions and comments and
look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ William J. Lippman
William J. Lippman
President
Franklin Managed Trust
3
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FRANKLIN INVESTMENT GRADE
INCOME FUND
[PYRAMID GRAPH]
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 objective
by investing in investment-grade debt securities having primarily intermediate
maturities. The fund also seeks to offer a higher total return than a money
market fund, generally with less risk to principal than a fund composed of
either long-term securities or securities that are below investment-grade
quality.(1)
During the reporting period, the fund emphasized investment in debt securities
with intermediate maturities. Because long-term instruments often exhibit
greater price volatility, both up and down, many investors embrace the more
stable short- and intermediate-term investments, which the fund typically
purchases.
Through a careful selection of securities we seek to control interest rate and
credit risk, paying special attention to the risk posed by a security's
maturity. All of the portfolio's investments
(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.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 20 of
this report.
4
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are call-protected to maturity, or for at least 20 years. Furthermore, as of
March 31, 1999, the portfolio's securities' weighted average credit-rating was
in the AA range, as measured by Standard & Poor's Corporation, a national
credit-rating agency.(2) Standard & Poor's gives the AA rating only to
high-grade debt obligations that offer a strong degree of principal and interest
protection.
On March 31, 1999, the portfolio had 48.6% of total net assets in government
bonds, 39.5% in "put" bonds and 11.9% in cash and equivalents, which include
other assets and liabilities. On the same date, the fund's weighted average
maturity was about 1.8 years using the optional put dates as effective
maturities, and 13 years using the stated maturities.
The use of put bonds remained 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.
[PIECHART]
CREDIT QUALITY BREAKDOWN*
BASED ON TOTAL NET ASSETS
3/31/99
AAA - 64.13%
AA - 3.78%
A - 24.54%
BBB - 7.55%
*Quality breakdown may include internal ratings for bonds not rated by a
national rating agency.
2. This does not indicate Standard & Poor's rating of the fund.
5
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Please remember this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1999, 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.
DIVIDEND DISTRIBUTIONS
Franklin Investment Grade Income Fund
10/1/98 - 3/31/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
-----------------------------------
MONTH CLASS A ADVISOR CLASS
- ---------------------------------------------------------------------------------
<S> <C> <C>
October 3.3 cents 3.49 cents
November 3.3 cents 3.50 cents
December 7.8 cents* 7.99 cents*
January 3.3 cents 3.49 cents
February 3.3 cents 3.49 cents
March 3.3 cents 3.48 cents
- ---------------------------------------------------------------------------------
TOTAL 24.3 CENTS 25.44 CENTS
</TABLE>
*Includes an additional 4.5 cent per share distribution to meet excise tax
requirements.
6
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On March 25, 1999, Franklin Managed Trust's Board of Trustees approved a
proposal to merge Franklin Investment Grade Income Fund into Franklin Strategic
Income Fund, subject to shareholder approval. Franklin Investment Grade Income
Fund's investment goal is to seek a maximum level of income, consistent with
prudent exposure to risk; whereas, Franklin Strategic Income Fund's primary
investment goal is to obtain a high level of current income, with capital
appreciation over the long-term as a secondary goal. The Boards believe this
proposed merger will benefit shareholders. As a Franklin Investment Grade Income
Fund shareholder, this summer you will receive a proxy that includes Franklin
Strategic Income Fund's prospectus and annual report.
7
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FRANKLIN INVESTMENT GRADE INCOME FUND
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ.
ADVISOR CLASS:
No initial sales charge or Rule 12b-1 fees and are available to a limited class
of investors.
PERFORMANCE SUMMARY AS OF 3/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION (10/1/98 - 3/31/99)
<TABLE>
<CAPTION>
CLASS A CHANGE 3/31/99 9/30/98
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.17 $9.05 $9.22
DISTRIBUTIONS
---------------------------------------
Dividend Income $0.243
ADVISOR CLASS CHANGE 3/31/99 9/30/98
- ------------------------------------------------------------------------------
Net Asset Value -$0.17 $9.05 $9.22
DISTRIBUTIONS
---------------------------------------
Dividend Income $0.2544
</TABLE>
Past performance is not predictive of future results.
8
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PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (1/14/87)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) +0.80% +4.50% +28.68% +95.36% +101.43%
Average Annual Total Return(2) -3.49% +0.09% +4.26% +6.46% +5.53%
Distribution Rate(3) 4.19%
30-Day Standardized Yield(4) 4.22%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(5) 6-MONTH 1-YEAR 5-YEAR 10-YEAR (1/14/97)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) +0.93% +4.76% +29.43% +96.50% +102.60%
Average Annual Total Return(2) +0.93% +4.76% +5.29% +6.99% +5.95%
Distribution Rate(3) 4.61%
30-Day Standardized Yield(4) 4.65%
</TABLE>
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 current, applicable,
maximum sales charge for that class. Six-month return has not been annualized.
3. Distribution rate is based on an annualization of the respective class's
March dividend and the maximum offering price (net asset value price for Advisor
Class) per share on March 31, 1999.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended March 31, 1999.
5. 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
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; 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 and average annual
total returns of Advisor Class shares were +12.21% and +5.28% respectively.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
9
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[PYRAMID GRAPH]
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 the belief that companies with consistently
rising dividends should also, over time, 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 six months ended March 31, 1999, the domestic economy continued to
demonstrate healthy growth with low inflation, characteristics that generally
support strong equity valuations. On the other hand, the stock market contended
with significantly higher bond yields, which often depress stock prices. For
example, the 10-year Treasury bond yielded 5.23%
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 25 of
this report.
10
Page
on March 31, 1999, compared with 4.41% on September 30, 1998. However, despite
the increased competition from the bond market, the major stock market indices
showed solid gains during the period. Large capitalization stocks continued to
sharply outperform the average small capitalization stock. The fund did not
perform as well as we would have liked, due to its high concentration of small-
and mid-cap stocks. In accordance with our investment strategy, we maintained an
emphasis on smaller cap stocks because of their more attractive valuations.
Among the large cap stocks that remained in the portfolio, American
International Group Inc., General Electric Co. and Wal-Mart Stores Inc.
outperformed the market by a large margin during the period as investors flocked
to the global market leaders. Several other stocks also posted superior returns.
The Limited Inc., the portfolio's top-performing stock during the period,
enjoyed excellent operating results from its 84%-owned subsidiary, Intimate
Brands Inc. Intimate Brands has two leading retailing concepts: Victoria's
Secret and Bath & Body Works. State Street Corp., a provider of a variety of
services to institutional investors, benefited from the global equity market
rebound during the period. The fund's largest position, Family Dollar Stores
Inc., experienced great success with its "convenience discounter" format. Among
other fund holdings, Cohu Inc. reported an improvement in orders and backlog
after several declining quarters, while National Commerce Bancorp., a leader in
supermarket branch banking, delivered better-than-average results for the
banking industry.
11
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Two of the portfolio's holdings, Pall Corp. and Rite Aid Corp., reported
surprisingly weak quarterly earnings during the period, and as a result, their
stock prices fell sharply. Pall was hurt by the rapid decline in blood filter
sales to hospitals. Although sales are shifting rapidly to the blood banks and
growing steadily overall, this adjustment left them with an excessive hospital
sales infrastructure. Pall intends to address this problem through a
restructuring plan announced with their earnings report. Going forward, their
total blood filter sales should exhibit strong growth, concurrent with declining
expenses for sales and administration. Rite Aid, on the other hand, was impacted
by losses associated with the rapid pace of new store openings in January and
February. In the coming year, they plan to slow this expansion considerably to
reduce its short-term drag on earnings. We note that, during the six months
ended March 31, 1999, we saw no indication of a decline in these drug stores'
underlying profitability.
Other stocks that did not perform in line with our expectations included
Universal Corp., RLI Corp. and Watts Industries Inc. Despite solid earnings, a
significant share repurchase program and no direct product liability exposure,
Universal, the world's leading independent tobacco leaf merchant, suffered from
negative publicity surrounding cigarettes. RLI, a small-cap specialty property
and casualty insurer, saw its stock price drift steadily
12
Page
lower during the period, despite being one among a small number of insurers to
report underwriting profits, as well as investment income and portfolio gains.
Finally, Watts Industries, which makes valves designed to safely reduce gas,
steam and liquid pressure, was hurt by its exposure to the weak oil and gas
markets. Unlike many other companies with similar exposure, its share price did
not benefit from oil's sharp price rebound late in the reporting period.
We made several significant additions to the portfolio during the six months
under review, among them Teleflex Inc., Leggett & Platt Inc., Newell Rubbermaid
Inc. and U.S. Bancorp. Teleflex is a diversified manufacturer of products and
services for the aerospace, automotive, marine, medical and industrial markets.
It has a remarkable record of 24 consecutive years of revenue and earnings
growth in addition to 21 years of dividend growth. Leggett & Platt, a leading
manufacturer of furniture components and commercial fixtures, has increased its
dividend for 28 years. Newell Rubbermaid manufactures a broad range of consumer
products including housewares, home furnishings and office products. Newell
recently acquired Rubbermaid, gaining a well-known and admired consumer brand.
U.S. Bancorp is a high-quality regional bank located primarily in the
upper-midwestern and northwestern states. Late in 1998, a modest earnings
disappointment provided an attractive opportunity to buy more of their shares.
13
Page
At the same time, we reduced a number of portfolio positions during the
reporting period. Although Wal-Mart Stores Inc. is an outstanding company whose
stock performed well for the fund, it became too expensive to merit a large
position. Avery Dennison Corp., another successful stock for the portfolio,
began to look increasingly expensive relative to comparable companies like Bemis
Co. Inc., one of the fund's larger positions. We sold shares of Philip Morris
Cos. Inc. after their stock rose sharply in October and November on diminished
litigation concerns, and we reduced holdings in Fannie Mae on concerns that its
long-term earnings growth rate might slow. The only position we eliminated from
the portfolio during the period was Rockwell International Corp., which no
longer met our rising dividend criteria.
Notable year-over-year dividend increases during the past six months came from
National Commerce Bancorp. (+38.5%), Wal-Mart Stores Inc. (+29%), First Union
Corp. (+27%), Donaldson Co. Inc. (+20%), Leggett & Platt Inc. (+20%), Mercury
General Corp. (+20%) and Washington Mutual Inc. (+19%).
As the table on page 15 shows, our ten largest positions on March 31, 1999,
comprised 33.8% of the fund's total net assets. It is interesting to note how
these ten companies would, in the
14
Page
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
19 years in a row, and by 305% in the last ten years. Their most recent dividend
increases averaged 15.9%, for a 2.25% yield on March 31, 1999, and a dividend
payout ratio of 35%. Long-term debt averaged 20% of capitalization, and the
average price/earnings ratio was 16.8 versus 27.4 for that of the unmanaged
Standard & Poor's 500 Stock Index on the same date. We believe that these
companies are representative of the portfolio's fundamentally high quality, and
that, over the long term, 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 March 31, 1999, 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.
TOP 10 STOCK HOLDINGS
Franklin Rising Dividends Fund
3/31/99
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Family Dollar Stores Inc. 7.36%
Retail Trade
West Pharmaceutical
Services Inc. 3.92%
Health Technology
Leggett & Platt Inc. 3.36%
Consumer Durables
National Commerce Bancorp. 3.25%
Finance
Pall Corp. 3.08%
Process Industries
Wallace Computer
Services Inc. 2.88%
Commercial Services
Washington Mutual Inc. 2.66%
Finance
Newell Rubbermaid Inc. 2.52%
Consumer Durables
First Union Corp. 2.49%
Finance
Reliastar Financial Corp. 2.36%
Insurance
</TABLE>
15
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FRANKLIN RISING
DIVIDENDS FUND
CLASS A (formerly Class I):
Subject to the current, maximum 5.75% initial sales charge. Prior to August 3,
1998, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ.
CLASS B:
Subject to no initial sales charge, but subject to a contingent deferred sales
charge (CDSC) declining from 4% to 0% over six years. These shares have higher
annual fees and expenses than Class A shares.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18
months of investment. These shares have higher annual fees and expenses than
Class A shares.
PERFORMANCE SUMMARY AS OF 3/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION (10/1/98 - 3/31/99)
<TABLE>
<CAPTION>
CLASS A CHANGE 3/31/99 9/30/98
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.21 $21.32 $21.53
DISTRIBUTIONS
---------------------------------------
Dividend Income $0.0920
Long-Term Capital Gain $1.7125
Short-Term Capital Gain $0.2735
TOTAL $2.0780
</TABLE>
<TABLE>
<CAPTION>
CLASS B CHANGE 3/31/99 1/1/99
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$2.21 $21.31 $23.52
DISTRIBUTIONS
---------------------------------------
Dividend Income $0.0533
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 3/31/99 9/30/98
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.22 $21.23 $21.45
DISTRIBUTIONS
---------------------------------------
Dividend Income $0.0325
Long-Term Capital Gain $1.7125
Short-Term Capital Gain $0.2735
TOTAL $2.0185
</TABLE>
Past performance is not predictive of future results.
16
Page
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR (1/14/87)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) +8.12% -12.82% +109.10% +220.15% +255.60%
Average Annual Total Return(2) +1.92% -17.82% +14.53% +11.67% +10.41%
Value of $10,000
Investment(3) $10,192 $8,218 $19,703 $30,167 $33,515
Distribution Rate(4) 0.94%
30-Day Standardized Yield(5) 0.60%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B (1/1/99)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) -9.25%
Aggregate Total Return(2) -12.87%
Value of $10,000 Investment(3) $8,713
Distribution Rate(4) 1.00%
30-Day Standardized Yield(5) 0.10%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1) +7.83% -13.27% +50.29% +85.02%
Average Annual Total Return(2) +5.75% -14.93% +14.16% +16.70%
Value of $10,000 Investment(3) $10,575 $8,507 $14,878 $18,312
Distribution Rate(4) 0.43%
30-Day Standardized Yield(5) 0.09%
</TABLE>
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 current, applicable,
maximum sales charge(s) for that class. Six-month returns have not been
annualized. Since Class B shares have existed for less than one year, the
figures for that class represent aggregate total return from inception;
therefore, average annual total returns are not provided.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
4. Distribution rate is based on an annualization of the respective class's
March dividend and the maximum offering price per share on March 31, 1999.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended March 31, 1999.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares.
Past performance is not predictive of future results.
17
Page
FRANKLIN MANAGED TRUST
Financial Highlights
FRANKLIN INVESTMENT GRADE INCOME FUND
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1999(1) -----------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 9.22 $ 9.08 $ 9.01 $ 9.04 $ 8.82 $ 9.31
------------------------------------------------------------------------
Income from investment operations:
Net investment income .21 .43 .41 .44 .44 .45
Net realized and unrealized gains (losses) (.14) .14 .09 (.06) .26 (.54)
------------------------------------------------------------------------
Total from investment operations .07 .57 .50 .38 .70 (.09)
------------------------------------------------------------------------
Less distributions from net investment income (.24) (.43) (.43) (.41) (.48) (.40)
------------------------------------------------------------------------
Net asset value, end of period $ 9.05 $ 9.22 $ 9.08 $ 9.01 $ 9.04 $ 8.82
------------------------------------------------------------------------
Total return* .80% 6.50% 5.68% 4.25% 8.21% (1.02%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $53,796 $54,958 $43,568 $29,372 $29,824 $29,553
Ratios to average net assets:
Expenses 1.10%** 1.10% 1.05% 1.06% 1.09% 1.05%
Net investment income 4.56%** 4.74% 4.73% 4.81% 4.96% 4.91%
Portfolio turnover rate 6.14% 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 for periods less than one year. Prior
to May 1, 1994, dividends from net investment income were reinvested at the
offering price.
** Annualized
(1) Per share amounts have been calculated using the daily average shares
outstanding during the period.
18
Page
FRANKLIN MANAGED TRUST
Financial Highlights (continued)
FRANKLIN INVESTMENT GRADE INCOME FUND (CONT.)
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1999(1) -------------------------
(UNAUDITED) 1998 1997(2)
-----------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C>
Net asset value, beginning of period .......... $ 9.23 $ 9.07 $ 9.03
--------------------------------------------
Income from investment operations:
Net investment income ........................ .21 .43 .28
Net realized and unrealized gains (losses) ... (.14) .19 .07
--------------------------------------------
Total from investment operations .............. .07 .62 .35
--------------------------------------------
Less distributions from net investment income . (.25) (.46) (.31)
--------------------------------------------
Net asset value, end of period ................ $ 9.05 $ 9.23 $ 9.07
--------------------------------------------
Total return* ................................. .93% 7.02% 3.98%
============================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 86 $ 2,505 $ 39
Ratios to average net assets:
Expenses ..................................... .88%** .82% .85%**
Net investment income ........................ 4.78%** 5.02% 4.84%**
Portfolio turnover rate ....................... 6.14% 20.80% 41.32%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
** Annualized
(1)Per share amounts have been calculated using the daily average shares
outstanding during the period.
(2)For the period January 2, 1997 (effective date) to September 30, 1997.
See notes to financial statements.
19
Page
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INVESTMENT GRADE INCOME FUND AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES AND AGENCIES 48.6%
<S> <C> <C>
Tennessee Valley Authority, (putable* 7/15/01, callable 7/15/20), 6.235%, 7/15/45.. $ 2,000,000 $ 2,030,986
U.S. Treasury Note, 6.00%, 6/30/99 ............................................... 2,000,000 2,006,250
U.S. Treasury Note, 5.875%, 7/31/99 .............................................. 2,000,000 2,008,126
U.S. Treasury Note, 5.875%, 8/31/99 .............................................. 3,000,000 3,015,000
U.S. Treasury Note, 5.75%, 9/30/99 ............................................... 1,000,000 1,005,313
U.S. Treasury Note, 5.625%, 11/30/99 ............................................. 2,000,000 2,011,876
U.S. Treasury Note, 5.625%, 12/31/99 ............................................. 2,000,000 2,012,500
U.S. Treasury Note, 5.50%, 3/31/00 ............................................... 2,000,000 2,011,876
U.S. Treasury Note, 6.00%, 8/15/00 ............................................... 2,000,000 2,026,876
U.S. Treasury Note, 5.125%, 8/31/00 .............................................. 3,000,000 3,005,625
U.S. Treasury Note, 5.375%, 2/15/01 .............................................. 2,000,000 2,013,126
U.S. Treasury Note, 5.75%, 11/30/02 .............................................. 3,000,000 3,056,250
-----------
TOTAL U.S. GOVERNMENT SECURITIES AND AGENCIES (COST $26,206,079) ................. 26,203,804
-----------
CORPORATE BONDS 39.5%
COMMERCIAL SERVICES 2.8%
Xerox Corp., (putable* 5/05/99), 5.90% 5/05/37 ................................... 1,500,000 1,504,710
-----------
CONSUMER NON-DURABLE 3.8%
Coca-Cola Enterprises, (putable* 10/15/03), 6.70% 10/15/36 ....................... 2,000,000 2,070,620
-----------
FINANCE 7.5%
Sears Roebuck Acceptance Corp.,
(putable* 11/15/00), 6.13%, 11/15/05 ............................................ 775,000 788,868
(putable* 11/15/00), 6.15%, 11/15/05 ............................................ 725,000 734,827
Southtrust Bank, (putable* 2/06/01), 5.58%, 2/06/06 .............................. 2,500,000 2,500,605
-----------
4,024,300
-----------
INDUSTRIAL SERVICES 3.8%
WMX Technologies, (putable* 5/15/00), 6.65% 5/15/05 .............................. 2,000,000 2,019,224
-----------
INSURANCE 3.8%
Aetna Services Inc., (putable* 8/15/04), 6.97%, 8/15/36 .......................... 2,000,000 2,024,640
-----------
PROCESS INDUSTRIES 7.5%
Bausch & Lomb, (putable* 8/31/01), 6.56%, 8/12/26 ................................ 2,000,000 2,036,766
Sherwin-Williams Co., (putable* 10/15/99), 5.50%, 10/15/27 ....................... 2,000,000 2,019,436
-----------
4,056,202
-----------
RETAIL TRADE 2.8%
Penney J.C. & Co. Inc., (putable* 8/15/03), 6.90% 8/15/26 ........................ 1,500,000 1,532,477
-----------
UTILITIES 7.5%
Ameritech Corp., (putable* 8/15/27), 5.95% , 1/15/38 ............................. 2,000,000 2,029,996
Bellsouth Corp., (putable* 11/15/00), 5.85%, 11/15/45 ............................ 2,000,000 2,023,072
-----------
4,053,068
-----------
TOTAL CORPORATE BONDS (COST $21,198,554) ......................................... 21,285,241
-----------
TOTAL LONG TERM INVESTMENTS (COST $47,404,633) ................................... 47,489,045
-----------
</TABLE>
20
Page
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (UNAUDITED)(Cont.)
<TABLE>
<CAPTION>
PRINCIPAL
FRANKLIN INVESTMENT GRADE INCOME FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
(a) REPURCHASE AGREEMENT 10.6%
<S> <C> <C>
Joint Repurchase Agreement, 4.875%, 4/01/99 (Maturity Value $5,694,854) (COST $5,694,083) $ 5,694,083 $ 5,694,083
Barclays Capital Inc. (Maturity Value $729,340)
Bear, Stearns & Co. Inc. (Maturity Value $397,842)
Chase Securities Inc. (Maturity Value $191,632)
CIBC Oppenheimer Corp. (Maturity Value $729,340)
Donaldson, Lufkin & Jenrette Securities Corp. (Maturity Value $729,340)
Dresdner Kleinwort Benson, North America LLC (Maturity Value $729,340)
Lehman Brothers Inc. (Maturity Value $729,340)
Paribas Corp. (Maturity Value $729,340)
Warburg Dillon Read LLC (Maturity Value $729,340)
Collateralized by U.S. Treasury Bills & Notes
-----------
TOTAL INVESTMENTS (COST $53,098,716) 98.7% .............................................. 53,183,128
OTHER ASSETS, LESS LIABILITIES 1.3% ..................................................... 698,796
-----------
NET ASSETS 100.0% ....................................................................... $53,881,924
===========
</TABLE>
*Holder may redeem at par on put date.
(a) See Note 1(b) regarding joint repurchase agreement.
See notes to financial statements.
21
Page
FRANKLIN MANAGED TRUST
Financial Highlights
FRANKLIN RISING DIVIDENDS FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1999 ------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 21.53 $ 26.93 $ 20.03 $ 17.31 $ 14.67 $ 15.43
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .08 .13 .16 .28 .33 .28
Net realized and unrealized gains (losses) ... 1.79 (2.22) 8.23 2.78 2.61 (.80)
---------------------------------------------------------------------------------
Total from investment operations .............. 1.87 (2.09) 8.39 3.06 2.94 (.52)
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.09) (.11) (.18) (.34) (.30) (.24)
Net realized gains ........................... (1.99) (3.20) (1.31) -- -- --
---------------------------------------------------------------------------------
Total distributions ........................... (2.08) (3.31) (1.49) (.34) (.30) (.24)
---------------------------------------------------------------------------------
Net asset value, end of period ................ $ 21.32 $ 21.53 $ 26.93 $ 20.03 $ 17.31 $ 14.67
=================================================================================
Total return* ................................. 8.12% (9.05%) 44.10% 17.83% 20.32% (3.38%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 401,547 $ 407,336 $ 394,873 $ 277,746 $ 260,917 $ 261,461
Ratios to average net assets:
Expenses ..................................... 1.43%** 1.39% 1.41% 1.40% 1.43% 1.43%
Net investment income ........................ .67%** .51% .71% 1.49% 2.10% 1.81%
Portfolio turnover rate ....................... 8.77% 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 for periods less than one
year. Prior to May 1, 1994, dividends from net investment income were
reinvested at the offering price.
**Annualized
22
Page
FRANKLIN MANAGED TRUST
Financial Highlights (continued)
FRANKLIN RISING DIVIDENDS FUND (CONT.)
<TABLE>
<CAPTION>
CLASS B
-----------------
PERIOD ENDED
MARCH 31, 1999(1)
(UNAUDITED)
-----------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C>
Net asset value, beginning of period ............................... $23.54
------
Income from investment operations:
Net investment income ............................................. .03
Net realized and unrealized loss .................................. (2.21)
------
Total from investment operations ................................... (2.18)
------
Less distributions from net investment income ...................... (0.05)
------
Net asset value, end of period ..................................... $21.31
======
Total return* ...................................................... (9.25%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)................................... $375
Ratios to average net assets:
Expenses .......................................................... 2.01%**
Net investment income ............................................. .62%**
Portfolio turnover rate ............................................ 8.77%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
**Annualized
(1)For the period January 1, 1999 (effective date) to March 31, 1999.
23
Page
FRANKLIN MANAGED TRUST
Financial Highlights (continued)
FRANKLIN RISING DIVIDENDS FUND (CONT.)
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1999 -----------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 21.45 $ 26.85 $ 19.98 $ 17.28 $ 15.47
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .01 -- .08 .21 .11
Net realized and unrealized gains (losses) ... 1.79 (2.20) 8.17 2.74 1.83
-----------------------------------------------------------------------------
Total from investment operations .............. 1.80 (2.20) 8.25 2.95 1.94
-----------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.03) -- (.07) (.25) (.13)
Net realized gains ........................... (1.99) (3.20) (1.31) -- --
-----------------------------------------------------------------------------
Total distributions ........................... (2.02) (3.20) (1.38) (.25) (.13)
-----------------------------------------------------------------------------
Net asset value, end of period ................ $ 21.23 $ 21.45 $ 26.85 $ 19.98 $ 17.28
=============================================================================
Total return* ................................. 7.83% (9.48%) 43.37% 17.16% 12.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 47,811 $ 43,790 $ 14,526 $ 3,882 $ 1,060
Ratios to average net assets:
Expenses ..................................... 1.98%** 1.94% 1.95% 1.95% 1.90%**
Net investment income (loss) ................. .12%** (.05%) .17% .94% 1.92%**
Portfolio turnover rate ....................... 8.77% 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 for periods less than one year.
**Annualized
(1)For the period May 1, 1995 (effective date) to September 30, 1995.
See notes to financial statements.
24
Page
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 98.0%
COMMERCIAL SERVICES 6.8%
Ennis Business Forms Inc. ............................. 228,700 $ 1,843,894
Reynolds & Reynolds Co., A ............................ 387,400 7,360,600
Standard Register Co. ................................. 286,100 8,493,594
Wallace Computer Services Inc. ........................ 652,700 12,931,619
-----------
30,629,707
-----------
CONSUMER DURABLES 5.9%
Leggett & Platt Inc. .................................. 755,600 15,112,000
Newell Rubbermaid Inc. ................................ 238,600 11,333,500
-----------
26,445,500
-----------
CONSUMER NON-DURABLES 6.1%
Alberto-Culver Co., A ................................. 490,400 10,421,000
Block Drug Co. Inc., A ................................ 150,742 6,180,422
DIMON Inc. ............................................ 416,000 1,586,000
Philip Morris Cos. Inc. ............................... 86,500 3,043,719
Universal Corp. ....................................... 244,100 6,239,806
-----------
27,470,947
-----------
ELECTRONIC TECHNOLOGY 2.3%
Cohu Inc. ............................................. 255,100 5,931,075
Hewlett-Packard Co. ................................... 65,100 4,414,594
-----------
10,345,669
-----------
ENERGY MINERALS 1.0%
Royal Dutch Petroleum Co., N.Y. shs., ADR (Netherlands) 89,700 4,664,400
-----------
FINANCE 16.8%
Fannie Mae ............................................ 52,800 3,656,400
First Union Corp. ..................................... 209,450 11,192,484
Mercantile Bankshares Corp. ........................... 144,950 5,363,150
National Commerce Bancorp ............................. 640,300 14,606,844
State Street Corp. .................................... 94,000 7,725,625
Trustco Bank Corp., N.Y. shs .......................... 258,573 6,464,325
U.S. Bancorp .......................................... 276,700 9,425,094
Washington Mutual Inc. ................................ 293,100 11,980,463
Wilmington Trust Corp. ................................ 91,200 5,209,800
-----------
75,624,185
-----------
HEALTH TECHNOLOGY 4.9%
Becton Dickinson and Co. .............................. 54,200 2,076,538
Superior Uniform Group Inc. ........................... 190,200 2,377,500
West Pharmaceutical Services Inc. ..................... 554,200 17,630,488
-----------
22,084,526
-----------
INSURANCE 12.4%
American Heritage Life Investment Corp. ............... 153,200 3,571,475
American International Group Inc. ..................... 73,775 8,899,109
Chubb Corp. ........................................... 121,000 7,086,063
</TABLE>
25
Page
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
INSURANCE (CONT.)
Harleysville Group Inc. .............. 123,500 $ 2,392,813
Mercury General Corp. ................ 248,200 8,655,975
MMI Cos. Inc. ........................ 395,400 6,079,275
ReliaStar Financial Corp. ............ 248,900 10,609,363
RLI Corp. ............................ 191,562 5,603,189
St. Paul Cos. Inc. ................... 91,400 2,839,113
-----------
55,736,375
-----------
NON-ENERGY MINERALS .7%
Nucor Corp. .......................... 66,900 2,947,781
-----------
PROCESS INDUSTRIES 10.2%
Bemis Co. Inc. ....................... 329,000 10,219,563
Brady Corp., A ....................... 100,500 2,104,219
Donaldson Co. Inc. ................... 126,900 2,284,200
Hanna (M.A.) Co. ..................... 393,200 5,037,875
Millipore Corp. ...................... 146,400 3,531,900
Pall Corp. ........................... 835,600 13,839,625
Sherwin-Williams Co. ................. 318,000 8,943,750
-----------
45,961,132
-----------
PRODUCER MANUFACTURING 18.2%
Avery Dennison Corp. ................. 32,300 1,857,250
Baldor Electric Co. .................. 344,366 6,930,366
Diebold Inc. ......................... 187,700 4,504,800
Dover Corp. .......................... 224,900 7,393,588
Flowserve Corp. ...................... 80,000 1,245,000
General Electric Co. ................. 42,000 4,646,250
Graco Inc. ........................... 134,600 2,969,613
Hubbell Inc., B ...................... 211,500 8,460,000
Kaydon Corp. ......................... 365,100 10,565,081
Kimball International Inc., B ........ 406,900 6,052,638
Myers Industries Inc. ................ 353,880 7,475,715
Superior Industries International Inc. 167,800 3,901,350
Teleflex Inc. ........................ 267,900 9,125,344
Watts Industries Inc., A ............. 498,400 6,759,550
-----------
81,886,545
-----------
RETAIL TRADE 11.6%
Family Dollar Stores Inc. ............ 1,438,200 33,078,600
The Limited Inc. ..................... 160,200 6,347,925
Rite Aid Corp. ....................... 227,800 5,695,000
Schultz Sav-O Stores Inc. ............ 165,000 2,701,875
Wal-Mart Stores Inc. ................. 45,700 4,212,962
-----------
52,036,362
-----------
</TABLE>
26
Page
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION 1.1%
Circle International Group Inc. ......................... 326,000 $ 4,747,375
------------
TOTAL COMMON STOCKS (COST $389,808,745) ................. 440,580,504
------------
CONVERTIBLE PREFERRED STOCK .2%
American Heritage Corp., 8.50%, cvt. pfd. (COST $625,000) 12,500 793,750
------------
TOTAL LONG TERM INVESTMENTS (COST $390,433,745) ......... 441,374,254
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
(a) REPURCHASE AGREEMENT 2.1%
Joint Repurchase Agreement, 4.875%, 4/01/99
(Maturity Value $9,568,012) (COST $9,566,717) $9,566,717 9,566,717
Barclays Capital Inc. (Maturity Value $1,225,375)
Bear, Stearns & Co. Inc. (Maturity Value $668,421)
Chase Securities Inc. (Maturity Value $321,966)
CIBC Oppenheimer Corp. (Maturity Value $1,225,375)
Donaldson, Lufkin & Jenrette Securities Corp.
(Maturity Value $1,225,375)
Dresdner Kleinwort Benson, North America LLC
(Maturity Value $1,225,375)
Lehman Brothers Inc. (Maturity Value $1,225,375)
Paribas Corp. (Maturity Value $1,225,375)
Warburg Dillon Read LLC (Maturity Value $1,225,375)
Collateralized by U.S. Treasury Bills & Notes
------------
TOTAL INVESTMENTS (COST $400,000,462) 100.3% 450,940,971
OTHER ASSETS, LESS LIABILITIES (.3%) (1,207,698)
------------
NET ASSETS 100.0% $449,733,273
============
</TABLE>
(a) See Note 1(b) regarding joint repurchase agreement.
See notes to financial statements.
27
Page
'FRANKLIN MANAGED TRUST
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT GRADE RISING
INCOME FUND DIVIDENDS FUND
---------------------------------
<S> <C> <C>
Assets:
Investments in securities:
Cost .................................. $ 47,404,633 $390,433,745
================================
Value ................................. 47,489,045 441,374,254
Repurchase agreements, at value and cost 5,694,083 9,566,717
Receivables:
Investment securities sold ............ -- 2,320,387
Capital shares sold ................... 330,800 436,475
Dividends and interest ................ 639,299 724,375
--------------------------------
Total assets ...................... 54,153,227 454,422,208
--------------------------------
Liabilities:
Payables:
Investment securities purchased ....... -- 738,297
Capital shares redeemed ............... 171,184 2,091,246
Affiliates ............................ 46,126 734,077
Shareholders .......................... 34,339 1,076,487
Other liabilities ...................... 19,654 48,828
--------------------------------
Total liabilities .................. 271,303 4,688,935
--------------------------------
Net assets, at value ............... $ 53,881,924 $449,733,273
================================
Net assets consist of:
Undistributed net investment income .... $ 90,693 $ 403,600
Net unrealized appreciation ............ 84,412 50,940,509
Accumulated net realized gain (loss) ... (738,786) 19,030,504
Capital shares ......................... 54,445,605 379,358,660
--------------------------------
Net assets, at value ............... $ 53,881,924 $449,733,273
================================
</TABLE>
See notes to financial statements.
28
Page
FRANKLIN MANAGED TRUST
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT GRADE RISING
INCOME FUND DIVIDENDS FUND
--------------------------------
<S> <C> <C>
CLASS A:
Net assets, at value ................................................... $53,796,038 $ 401,547,466
================================
Shares outstanding ..................................................... 5,945,510 18,832,083
================================
Net asset value per share* ............................................. $ 9.05 $ 21.32
================================
Maximum offering price per share (net asset value per share / 95.75% and
94.25%, respectively) ................................................. $ 9.45 $ 22.62
================================
CLASS B:
Net assets, at value ................................................... $ 375,291
==============
Shares outstanding ..................................................... 17,609
==============
Net asset value and maximum offering price per share ................... $ 21.31
==============
CLASS C:
Net assets, at value ................................................... $ 47,810,516
==============
Shares outstanding ..................................................... 2,252,429
==============
Net asset value per share* ............................................. $ 21.23
==============
Maximum offering price per share (net asset value per share / 99.00%) .. $ 21.44
==============
ADVISOR CLASS:
Net assets, at value ................................................... $ 85,886
===========
Shares outstanding ..................................................... 9,493
===========
Net asset value and maximum offering price per share ................... $ 9.05
===========
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
29
Page
FRANKLIN MANAGED TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT GRADE RISING
INCOME FUND DIVIDENDS FUND
---------------------------------
<S> <C> <C>
Investment income:
Dividends ............................................... $ -- $ 4,822,785
Interest ................................................ 1,589,641 259,390
-----------------------------
Total investment income ............................. 1,589,641 5,082,175
-----------------------------
Expenses:
Management fees (Note 3) ................................ 140,364 1,819,950
Distribution fees (Note 3)
Class A ............................................... 68,499 966,342
Class B ............................................... -- 480
Class C ............................................... -- 251,407
Transfer agent fees (Note 3) ............................ 26,957 362,744
Accounting fees (Note 3) ................................ 20,000 20,000
Custodian fees .......................................... 368 2,390
Reports to shareholders ................................. 10,630 77,089
Registration and filing fees ............................ 26,671 52,938
Professional fees ....................................... 9,687 19,341
Trustees' fees and expenses ............................. 1,866 14,707
Other ................................................... 2,653 7,468
-----------------------------
Total expenses ...................................... 307,695 3,594,856
-----------------------------
Net investment income .............................. 1,281,946 1,487,319
-----------------------------
Realized and unrealized gains (losses):
Net realized gain from investments ...................... 1,406 19,201,861
Net unrealized appreciation (depreciation) on investments (871,889) 15,978,166
-----------------------------
Net realized and unrealized gain (loss) .................. (870,483) 35,180,027
-----------------------------
Net increase in net assets resulting from operations ..... $ 411,463 $36,667,346
=============================
</TABLE>
See notes to financial statements.
30
Page
FRANKLIN MANAGED TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
AND THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
FRANKLIN INVESTMENT GRADE FRANKLIN
INCOME FUND RISING DIVIDENDS FUND
-------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
1999 1998 1999 1998
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................... $ 1,281,946 $ 2,384,401 $ 1,487,319 $ 2,261,412
Net realized gain from investments ...................... 1,406 7,326 19,201,861 45,956,036
Net unrealized appreciation (depreciation)
on investments.......................................... (871,889) 840,370 15,978,166 (99,023,374)
-------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .......................... 411,463 3,232,097 36,667,346 (50,805,926)
Distributions to shareholders from:
Net investment income:
Class A ................................................ (1,459,391) (2,346,104) (1,745,634) (1,828,381)
Class B ................................................ -- -- (778) --
Class C ................................................ -- -- (73,490) (4,086)
Advisor Class .......................................... (37,630) (2,510) -- --
Net realized gains:
Class A ................................................ -- -- (36,885,469) (48,479,814)
Class C ................................................ -- -- (4,229,043) (2,105,211)
-------------------------------------------------------------------
Total distributions to shareholders ...................... (1,497,021) (2,348,614) (42,934,414) (52,417,492)
Capital share transactions: (Note 2)
Class A ................................................ (107,513) 10,523,609 (520,246) 107,238,762
Class B ................................................ -- -- 387,540 --
Class C ................................................ -- -- 5,007,298 37,710,977
Advisor Class .......................................... (2,388,609) 2,448,896 -- --
-------------------------------------------------------------------
Total capital share transactions .......................... (2,496,122) 12,972,505 4,874,592 144,949,739
Net increase (decrease) in net assets ............... (3,581,680) 13,855,988 (1,392,476) 41,726,321
Net assets
Beginning of period ...................................... 57,463,604 43,607,616 451,125,749 409,399,428
-------------------------------------------------------------------
End of period ............................................ $ 53,881,924 $ 57,463,604 $ 449,733,273 $ 451,125,749
===================================================================
Undistributed net investment income included in net assets:
End of period ............................................ $ 90,693 $ 305,768 $ 403,600 $ 736,183
===================================================================
</TABLE>
See notes to financial statements.
31
Page
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:
CURRENT INCOME GROWTH AND INCOME
- ---------------------------------------------------------------------------
Franklin Investment Grade Income Fund Franklin Rising Dividends Fund
On March 25, 1999, Franklin Managed Trust's Board of Trustees approved a
proposal to merge Franklin Investment Grade Income Fund into Franklin Strategic
Income Fund, subject to shareholder approval.
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 March 31, 1999, all outstanding repurchase
agreements had been entered into on that date.
c. INCOME TAXES:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially 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. Bond discount is
amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. Other expenses are
charged to each Fund on a specific identification basis.
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.
32
Page
FRANKLIN MANAGED TRUST
Notes to Financial Statements (continued)
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 classes of shares offered within each of the Funds are indicated below.
Effective January 1, 1999, Class I and Class II were renamed Class A and Class
C, respectively, and the Franklin Rising Dividends Fund began offering a new
class of shares, Class B. The shares differ by their initial sales load,
distribution fees, voting rights on matters affecting a single class and the
exchange privilege of each class.
CLASS A & ADVISOR CLASS A, CLASS B & CLASS C
- ---------------------------------------------------------------------------
Franklin Investment Grade Income Fund Franklin Rising Dividends Fund
At March 31, 1999, there were an unlimited number of shares authorized ($.01 par
value). Transactions in each of the Funds' 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 A SHARES:
Six months ended March 31, 1999
Shares sold .................................. 1,389,019 $ 12,665,573 2,364,043 $ 53,751,230
Shares issued in reinvestment of distributions 135,212 1,231,225 1,456,668 33,017,243
Shares redeemed .............................. (1,538,234) (14,004,311) (3,906,542) (87,288,719)
----------------------------------------------------------------
Net decrease ................................. (14,003) $ (107,513) (85,831) $ (520,246)
================================================================
Year ended September 30, 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
================================================================
CLASS B SHARES:
Period ended March 31, 1999(1)
Shares sold ........................................................................... 17,593 $ 387,206
Shares issued in reinvestment of distributions ........................................ 31 669
Shares redeemed ....................................................................... (15) (335)
----------------------------
Net increase .......................................................................... 17,609 $ 387,540
============================
</TABLE>
33
Page
FRANKLIN MANAGED TRUST
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
<TABLE>
<CAPTION>
FRANKLIN INVESTMENT FRANKLIN RISING
GRADE INCOME FUND DIVIDENDS FUND
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Six months ended March 31, 1999
Shares sold .................................. 615,146 $ 13,885,007
Shares issued in reinvestment of distributions 171,574 3,874,909
Shares redeemed .............................. (575,803) (12,752,618)
--------------------------
Net increase ................................. 210,917 $ 5,007,298
==========================
Year ended September 30, 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
==========================
ADVISOR CLASS SHARES:
Six months ended March 31, 1999
Shares sold .................................. 143,471 $ 1,312,977
Shares issued in reinvestment of distributions 4,125 37,630
Shares redeemed .............................. (409,654) (3,739,216)
-------------------------
Net decrease ................................. (262,058) $ (2,388,609)
=========================
Year ended September 30, 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
=========================
</TABLE>
(1) For the period January 1, 1999 (effective date) to March 31, 1999.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers and/or directors 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.
34
Page
FRANKLIN MANAGED TRUST
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
The Funds pay an investment management fee to Advisory Services based on the
average net assets of the Funds as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
-----------------------
<S> <C> <C>
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%
</TABLE>
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%, 1.00% and
1.00% per year of its average daily net assets of Class A, Class B and Class C,
respectively, and the Franklin Investment Grade Income Fund reimburses
Distributors up to .25% per year of the average daily net assets of Class A, for
costs incurred in marketing the Funds' shares.
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the period as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
----------------------------
<S> <C> <C>
Net commissions paid ....................... $11,945 $41,916
Contingent deferred sales charges .......... -- $30,360
</TABLE>
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:
<TABLE>
<S> <C>
1999 ................................................................ $117,414
2003 ................................................................ 254,062
2004 ................................................................ 368,716
--------
$740,192
========
</TABLE>
35
Page
FRANKLIN MANAGED TRUST
Notes to Financial Statements (continued)
4. INCOME TAXES (CONT.)
At March 31, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
-------------------------------------
<S> <C> <C>
Investments at cost ............ $ 53,098,716 $ 401,289,648
======================================
Unrealized appreciation ........ $ 292,031 $ 95,812,956
Unrealized depreciation ........ (207,619) (46,161,633)
-------------------------------------
Net unrealized appreciation .... $ 84,412 $ 49,651,323
=====================================
</TABLE>
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
period ended March 31, 1999, were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN
INVESTMENT RISING
GRADE DIVIDENDS
INCOME FUND FUND
-------------------------------------
<S> <C> <C>
Purchases .................. $ 5,207,193 $41,500,872
Sales ...................... $ 3,000,000 $77,572,457
</TABLE>
36
