SHAREHOLDER LETTER
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.
Dear Shareholder:
This annual report for Franklin Rising Dividends Fund covers the period ended
September 30, 1999.
ECONOMIC OVERVIEW
During the year ended September 30, 1999, the domestic economy exhibited solid
growth with only modest inflation. Deflationary fears, prevalent during the
first few months of the reporting period, almost completely disappeared. The
Federal Reserve Board (the Fed) grew increasingly concerned that the economy
could not continue its strong growth rate of recent years without inflation
accelerating. As a result, the Fed partially reversed last year's cuts in the
federal funds target rate, raising rates to 5.25% at the August 24, 1999,
meeting. U.S. Treasury bond yields, which rose steadily during the fund's fiscal
year through May, seemed to stabilize with the onset of the rate increases.
The stock market continued to be characterized by the strength of a small number
of stocks, particularly large technology stocks, while most stocks lagged far
behind the major indices. This trend began in the spring of 1998 when the market
grew concerned about further deterioration of global conditions. Twice since
then the market advance appeared to broaden its gains and include more than a
few select "in favor" stocks, only to reverse this trend shortly after. The
first broad market recovery came in the fall of 1998, triggered by the Fed's
easing moves. After struggling early in 1999, the average stock's performance
rose in the spring as investors became more confident of a global economic
recovery. When the Fed increased the federal funds target rate during the
summer, the broader market once again faltered. As a result, the best-performing
stocks over the past year tended to be technology stocks that were considered to
have exciting growth prospects and certain commodity-related stocks that reacted
positively to stronger commodity prices.
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 13 of
this report.
CONTENTS
Shareholder Letter .................... 1
Performance Summary ................... 6
Financial Highlights &
Statement of Investments .............. 10
Financial Statements .................. 16
Notes to
Financial Statements .................. 19
Independent
Auditors' Report ...................... 22
Tax Information ....................... 23
FUND CATEGORY
[PYRAMID GRAPHIC]
PORTFOLIO NOTES
We base our investment strategy on our belief that companies with consistently
rising dividends should, over time, also realize appreciation in their stock
prices. We select securities that have had 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.
Three of the portfolio's five top-performing stocks during the period were from
the technology sector. Cohu Inc., a manufacturer of semiconductor test handling
equipment, and Millipore Corp., which makes filters and filtration equipment
used by the semiconductor industry, benefited from indications that
semiconductor capital equipment purchases will increase in the coming quarters.
Hewlett-Packard Co. pleased investors recently by articulating its e-commerce
strategy.
Several fund holdings outside of the technology sector also performed strongly.
The Limited Inc. was driven by strong operating results at its Intimate Brands
unit, which operates Victoria's Secret and Bath & Body Works stores. Family
Dollar Stores Inc., the fund's largest position, reported notable success with
its "convenience discounter" format. National Commerce Bancorp., a leader in
supermarket branch banking, delivered results far better than the average bank.
West Pharmaceutical Services Inc. reported strong revenue growth during the past
year, after a few years of slow sales growth.
Unfortunately, several stocks in the portfolio reported surprisingly weak
quarterly earnings during the period, and as a result, their share prices fell
sharply. Rite Aid Corp.'s losses associated with an extremely fast pace of new
store openings during January and February negatively impacted its earnings. In
response, Rite Aid reduced its new store openings considerably to minimize the
drag on earnings that resulted from the expansion program. First Union Corp.
also announced disappointing earnings as expense savings and revenue
enhancements anticipated from its acquisition of CoreStates Financial fell short
of the company's plan. Newell Rubbermaid Inc. indicated lower than expected
third-quarter earnings due to sluggish retail demand across its business
segments. Universal Corp. and DIMON Inc.'s stock prices declined as
manufacturers decreased tobacco inventories due to uncertain economic demand
from Asia and Eastern Europe as well as the U.S. The fund's Property and
Casualty Insurance stocks also performed poorly as industry operating results
deteriorated for many commercial and personal underwriters.
New additions to the portfolio during the year included Bank One Corp. and
Lancaster Colony Corp. Bank One emerged as a leader in the implementation of
Internet banking, and used technologies developed by its credit card unit, First
USA, more broadly to deliver services to its retail customers. Bank One has
increased its dividend for 28 years. Lancaster Colony appears ready to return to
its historical earnings growth rate after several flat quarters. Positive
developments occurred at each of the company's three business segments:
specialty foods, automotive, and glassware and candles. Lancaster's dividend has
increased for 36 years. Teleflex Inc., a diversified manufacturer of products
and services for the aerospace, automotive, marine, medical and industrial
markets, was the portfolio's most significant addition during the period. It has
a remarkable record of 24 consecutive years of revenue and earnings growth in
addition to 22 years of dividend growth.
TOP 10 STOCK HOLDINGS
9/30/99
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- -------------------------------------------------------
Family Dollar Stores Inc. 6.43%
Retail Trade
West Pharmaceutical
Services Inc. 5.46%
Health Technology
Pall Corp. 3.76%
Process Industries
National Commerce Bancorp. 3.47%
Finance
Leggett & Platt Inc. 3.37%
Consumer Durables
Cohu Inc. 2.88%
Electronic Technology
Wallace Computer
Services Inc. 2.71%
Commercial Services
Alberto-Culver Co., A 2.57%
Consumer Non-Durables
Teleflex Inc. 2.56%
Producer Manufacturing
Bemis Co. Inc. 2.35%
Process Industries
During the year under review, we eliminated several positions from the portfolio
including Avery Dennison Corp., Flowserve Corp., and Rockwell International
Corp. We sold Avery Dennison from the portfolio, as it became less attractively
valued than other alternative investments. Additionally, Flowserve and Rockwell
no longer met the portfolio's dividend requirements.
We reduced a number of positions within the portfolio during the period. We felt
Wal-Mart Stores Inc. became too expensive to merit a large position. We reduced
Fannie Mae on concerns that its long-term earnings growth might slow. Also, we
cut back First Union stock when it temporarily rebounded after having dropped
when First Union announced disappointing earnings.
Notable year-over-year dividend increases during the past year came from
Washington Mutual Inc. (+21%), Mercury General Corp. (+20%), Becton, Dickinson &
Co. (+17%), General Electric Co. (+17%), The Limited Inc. (+15%), State Street
Corp. (+15%), and Trustco Bank Corp., N.Y. shs (+15%).
As the table on page 3 shows, our ten largest positions on September 30, 1999,
comprised 35.57% 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 19 years in a row and by 259% in the last
10 years. Their most recent dividend increases averaged 8.7%, for a yield of
1.84% on September 30, 1999, and a dividend payout ratio of 30%. Long-term debt
averaged 22% of capitalization, and the average price/earnings ratio was 17.1,
versus 25.1 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 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 September 30, 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.
Sincerely,
/s/ William J. Lippman
- ----------------------------------
William J. Lippman
President
/s/ Donald G. Taylor
- ----------------------------------
Donald G. Taylor
Senior Portfolio Manager
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 9/30/99
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
CLASS A CHANGE 9/30/99 9/30/98
- --------------------------------------------------------------------------------
Net Asset Value -$0.25 $21.28 $21.53
DISTRIBUTIONS (10/1/98 - 9/30/99)
----------------------------------
Dividend Income $0.1701
Long-Term Capital Gain $1.7125
Short-Term Capital Gain $0.2735
TOTAL $2.1561
CLASS B CHANGE 9/30/99 1/1/99
- --------------------------------------------------------------------------------
Net Asset Value -$2.31 $21.23 $23.54
DISTRIBUTIONS (1/1/99 - 9/30/99)
----------------------------------
Dividend Income $0.1070
CLASS C CHANGE 9/30/99 9/30/98
- --------------------------------------------------------------------------------
Net Asset Value -$0.26 $21.19 $21.45
DISTRIBUTIONS (10/1/98 - 9/30/99)
----------------------------------
Dividend Income $0.0462
Long-Term Capital Gain $1.7125
Short-Term Capital Gain $0.2735
TOTAL $2.0322
Franklin Rising Dividends Fund paid distributions derived from long-term capital
gains of $1.7125 per share in December 1998. The fund hereby designates such
distributions as capital gain dividends per Internal Revenue Code 852(b)(3).
Past performance is not predictive of future results.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (1/14/87)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +8.29% +101.20% +184.08% +256.13%
Average Annual Total Return(2) +2.08% +13.66% +10.35% +10.00%
Value of $10,000 Investment(3) $ 10,208 $ 18,969 $ 26,770 $ 33,566
</TABLE>
Distribution Rate(4) 0.69%
30-Day Standardized Yield(5) 0.68%
INCEPTION
CLASS B (1/1/99)
- --------------------------------------------------------------------------------
Cumulative Total Return(1) -9.38%
Aggregate Total Return(2) -12.99%
Value of $10,000 Investment(3) $ 8,701
Distribution Rate(4) 0.43%
30-Day Standardized Yield(5) 0.15%
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return(1) +7.69% +39.76% +84.78%
Average Annual Total Return(2) +5.62% +11.43% +14.64%
Value of $10,000 Investment(3) $10,562 $13,837 $18,289
Distribution Rate(4) 0.12%
30-Day Standardized Yield(5) 0.16%
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. Since Class B shares have existed for
less than one year, the figures for that class represent aggregate total return
from inception, including the maximum sales charge.
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
September dividend and the maximum offering price (net asset value price for
Class B) per share on September 30, 1999.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended September 30, 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.
AVERAGE ANNUAL TOTAL RETURN
9/30/99
CLASS A
- -------------------------------------
1-Year +2.08%
5-Year +13.66%
10-Year +10.35%
Since Inception (1/14/87) +10.00%
AGGREGATE TOTAL RETURN
9/30/99
CLASS B
- -------------------------------------
Since Inception (1/1/99) -12.99%
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charge(s), fund
expenses, account fees and reinvested distributions. The unmanaged index differs
from the fund in composition, does not pay management fees or expenses and
includes reinvested dividends. One cannot invest directly in an index. The
Consumer Price Index (CPI) is a commonly used measure of the inflation rate.
CLASS A (10/1/89 - 9/30/99)
The following line graph compares the performance of the Franklin Rising
Dividends Fund's Class A shares to that of the Wilshire Target MidCap Growth
Index, and to the Consumer Price Index based on a $10,000 investment from
10/1/89 to 9/30/99.
<TABLE>
<CAPTION>
DATE FRANKLIN RISING WILSHIRE TARGET CPI Wilshire Consumer Price
DIVIDENDS FUND - MIDCAP GROWTH INDEX Target MidCap Index NSA
CLASS A Growth $T
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/01/1989 $ 9,423 $10,000 $10,000
10/31/1989 $ 9,323 $ 9,591 $10,048 -4.09% 0.48%
11/30/1989 $ 9,356 $ 9,556 $10,072 -0.36% 0.24%
12/31/1989 $ 9,479 $ 9,613 $10,088 0.59% 0.16%
01/31/1990 $ 9,025 $ 8,720 $10,192 -9.29% 1.03%
02/28/1990 $ 9,140 $ 8,942 $10,240 2.55% 0.47%
03/31/1990 $ 9,297 $ 9,344 $10,296 4.49% 0.55%
04/30/1990 $ 9,048 $ 8,891 $10,313 -4.85% 0.16%
05/31/1990 $ 9,497 $ 9,840 $10,337 10.68% 0.23%
06/30/1990 $ 9,580 $ 9,842 $10,392 0.02% 0.54%
07/31/1990 $ 9,555 $ 9,463 $10,432 -3.85% 0.38%
08/31/1990 $ 8,717 $ 8,162 $10,528 -13.75% 0.92%
09/30/1990 $ 8,362 $ 7,462 $10,616 -8.57% 0.84%
10/31/1990 $ 8,252 $ 7,097 $10,680 -4.90% 0.60%
11/30/1990 $ 9,029 $ 7,892 $10,703 11.20% 0.22%
12/31/1990 $ 9,504 $ 8,362 $10,703 5.96% 0.00%
01/31/1991 $ 9,826 $ 9,151 $10,768 9.44% 0.60%
02/28/1991 $10,716 $10,001 $10,784 9.29% 0.15%
03/31/1991 $11,153 $10,637 $10,800 6.35% 0.15%
04/30/1991 $11,247 $10,554 $10,816 -0.78% 0.15%
05/31/1991 $11,775 $11,139 $10,849 5.55% 0.30%
06/30/1991 $11,498 $10,641 $10,880 -4.47% 0.29%
07/31/1991 $11,832 $11,218 $10,896 5.42% 0.15%
08/31/1991 $12,089 $11,644 $10,928 3.80% 0.29%
09/30/1991 $12,179 $11,657 $10,976 0.11% 0.44%
10/31/1991 $12,299 $11,962 $10,993 2.61% 0.15%
11/30/1991 $12,153 $11,462 $11,024 -4.18% 0.29%
12/31/1991 $12,920 $12,990 $11,032 13.34% 0.07%
01/31/1992 $12,998 $13,379 $11,049 2.99% 0.15%
02/29/1992 $12,980 $13,605 $11,089 1.69% 0.36%
03/31/1992 $12,785 $13,062 $11,145 -3.99% 0.51%
04/30/1992 $12,916 $12,751 $11,161 -2.38% 0.14%
05/31/1992 $13,134 $12,592 $11,176 -1.25% 0.14%
06/30/1992 $12,919 $12,020 $11,217 -4.54% 0.36%
07/31/1992 $13,426 $12,679 $11,240 5.48% 0.21%
08/31/1992 $13,269 $12,414 $11,272 -2.09% 0.28%
09/30/1992 $13,510 $12,631 $11,303 1.75% 0.28%
10/31/1992 $13,668 $13,147 $11,343 4.08% 0.35%
11/30/1992 $14,107 $14,154 $11,359 7.66% 0.14%
12/31/1992 $14,260 $14,587 $11,351 3.06% -0.07%
01/31/1993 $14,119 $14,916 $11,406 2.26% 0.49%
02/28/1993 $13,908 $14,414 $11,446 -3.37% 0.35%
03/31/1993 $14,018 $14,856 $11,486 3.07% 0.35%
04/30/1993 $13,522 $14,235 $11,518 -4.18% 0.28%
05/31/1993 $13,690 $15,047 $11,534 5.70% 0.14%
06/30/1993 $13,535 $15,146 $11,551 0.66% 0.14%
07/31/1993 $13,544 $15,011 $11,551 -0.89% 0.00%
08/31/1993 $13,767 $15,772 $11,583 5.07% 0.28%
09/30/1993 $13,771 $16,168 $11,607 2.51% 0.21%
10/31/1993 $13,967 $16,254 $11,655 0.53% 0.41%
11/30/1993 $13,610 $16,000 $11,663 -1.56% 0.07%
12/31/1993 $13,762 $16,885 $11,663 5.53% 0.00%
01/31/1994 $13,950 $17,481 $11,695 3.53% 0.27%
02/28/1994 $13,440 $17,574 $11,734 0.53% 0.34%
03/31/1994 $12,783 $16,528 $11,774 -5.95% 0.34%
04/30/1994 $12,801 $16,594 $11,791 0.40% 0.14%
05/31/1994 $12,972 $16,340 $11,799 -1.53% 0.07%
06/30/1994 $12,944 $15,517 $11,839 -5.04% 0.34%
07/31/1994 $13,062 $15,895 $11,871 2.44% 0.27%
08/31/1994 $13,622 $17,256 $11,919 8.56% 0.40%
09/30/1994 $13,305 $17,120 $11,951 -0.79% 0.27%
10/31/1994 $13,251 $17,537 $11,959 2.44% 0.07%
11/30/1994 $12,924 $16,760 $11,975 -4.43% 0.13%
12/31/1994 $13,051 $17,039 $11,975 1.66% 0.00%
01/31/1995 $13,389 $17,042 $12,022 0.02% 0.40%
02/28/1995 $13,790 $18,065 $12,071 6.00% 0.40%
03/31/1995 $14,088 $18,731 $12,110 3.69% 0.33%
04/30/1995 $14,189 $19,010 $12,150 1.49% 0.33%
05/31/1995 $14,703 $19,322 $12,175 1.64% 0.20%
06/30/1995 $14,864 $20,537 $12,199 6.29% 0.20%
07/31/1995 $15,223 $22,262 $12,199 8.40% 0.00%
08/31/1995 $15,463 $22,603 $12,231 1.53% 0.26%
09/30/1995 $16,008 $23,234 $12,255 2.79% 0.20%
10/31/1995 $15,860 $22,416 $12,296 -3.52% 0.33%
11/30/1995 $16,674 $23,593 $12,287 5.25% -0.07%
12/31/1995 $16,998 $23,678 $12,278 0.36% -0.07%
01/31/1996 $17,343 $24,087 $12,351 1.73% 0.59%
02/29/1996 $17,557 $24,988 $12,390 3.74% 0.32%
03/31/1996 $17,519 $25,291 $12,455 1.21% 0.52%
04/30/1996 $17,454 $26,790 $12,503 5.93% 0.39%
05/31/1996 $17,949 $27,591 $12,527 2.99% 0.19%
06/30/1996 $18,128 $26,088 $12,535 -5.45% 0.06%
07/31/1996 $17,546 $23,854 $12,559 -8.56% 0.19%
08/31/1996 $17,949 $25,593 $12,582 7.29% 0.19%
09/30/1996 $18,863 $26,804 $12,623 4.73% 0.32%
10/31/1996 $19,437 $26,045 $12,663 -2.83% 0.32%
11/30/1996 $20,784 $27,512 $12,687 5.63% 0.19%
12/31/1996 $20,979 $27,149 $12,687 -1.32% 0.00%
01/31/1997 $21,390 $27,936 $12,728 2.90% 0.32%
02/28/1997 $21,972 $27,408 $12,767 -1.89% 0.31%
03/31/1997 $21,288 $25,733 $12,799 -6.11% 0.25%
04/30/1997 $21,821 $26,613 $12,814 3.42% 0.12%
05/31/1997 $23,481 $28,814 $12,807 8.27% -0.06%
06/30/1997 $24,315 $29,814 $12,822 3.47% 0.12%
07/31/1997 $26,391 $31,922 $12,837 7.07% 0.12%
08/31/1997 $25,847 $31,676 $12,862 -0.77% 0.19%
09/30/1997 $27,181 $33,761 $12,894 6.58% 0.25%
10/31/1997 $26,514 $32,150 $12,926 -4.77% 0.25%
11/30/1997 $27,150 $32,340 $12,919 0.59% -0.06%
12/31/1997 $27,766 $32,615 $12,903 0.85% -0.12%
01/31/1998 $27,640 $32,387 $12,928 -0.70% 0.19%
02/28/1998 $29,838 $35,055 $12,952 8.24% 0.19%
03/31/1998 $30,659 $35,616 $12,977 1.60% 0.19%
04/30/1998 $30,533 $35,865 $13,000 0.70% 0.18%
05/31/1998 $29,365 $33,850 $13,023 -5.62% 0.18%
06/30/1998 $28,975 $33,647 $13,039 -0.60% 0.12%
07/31/1998 $27,990 $31,648 $13,055 -5.94% 0.12%
08/31/1998 $23,544 $25,227 $13,070 -20.29% 0.12%
09/30/1998 $24,721 $26,475 $13,086 4.95% 0.12%
10/31/1998 $27,339 $28,570 $13,117 7.91% 0.24%
11/30/1998 $28,326 $30,221 $13,117 5.78% 0.00%
12/31/1998 $29,439 $32,264 $13,110 6.76% -0.06%
01/31/1999 $27,889 $31,506 $13,141 -2.35% 0.24%
02/28/1999 $26,901 $28,991 $13,157 -7.98% 0.12%
03/31/1999 $26,729 $29,505 $13,196 1.77% 0.30%
04/30/1999 $28,798 $32,139 $13,293 8.93% 0.73%
05/31/1999 $29,099 $32,773 $13,293 1.97% 0.00%
06/30/1999 $30,153 $34,441 $13,293 5.09% 0.00%
07/31/1999 $29,663 $34,251 $13,333 -0.55% 0.30%
08/31/1999 $28,419 $32,898 $13,365 -3.95% 0.24%
09/30/1999 $26,770 $32,454 $13,429 -1.35% 0.48%
</TABLE>
CLASS B (1/1/99 - 9/30/99)
The following line graph compares the performance of the Franklin Rising
Dividends Fund's Class B shares to that of the Wilshire Target MidCap Growth
Index, and to the Consumer Price Index based on a $10,000 investment from 1/1/99
to 9/30/99.
<TABLE>
<CAPTION>
DATE FRANKLIN RISING WILSHIRE TARGET CPI Wilshire Target Consumer
DIVIDENDS FUND - MIDCAP MidCap Price Index
CLASS B GROWTH INDEX Growth $T NSA
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/01/1999 $10,000 10,000 10,000
01/31/1999 $ 9,473 9,765 10,024 -2.35% 0.24%
02/28/1999 $ 9,133 8,986 10,036 -7.98% 0.12%
03/31/1999 $ 9,075 9,145 10,066 1.77% 0.30%
04/30/1999 $ 9,774 9,961 10,140 8.93% 0.73%
05/31/1999 $ 9,867 10,158 10,140 1.97% 0.00%
06/30/1999 $10,222 10,675 10,140 5.09% 0.00%
07/31/1999 $10,051 10,616 10,170 -0.55% 0.30%
08/31/1999 $ 9,625 10,197 10,194 -3.95% 0.24%
09/30/1999 $ 8,701 10,059 10,243 -1.35% 0.48%
</TABLE>
Past performance is not predictive of future results.
CLASS C (5/1/95 - 9/30/99)
The following line graph compares the performance of the Franklin Rising
Dividends Fund's Class C shares to that of the Wilshire Target MidCap Growth
Index, and to the Consumer Price Index based on a $10,000 investment from 5/1/95
to 9/30/99.
<TABLE>
<CAPTION>
DATE FRANKLIN RISING WILSHIRE TARGET CPI Wilshire Target Consumer Price
DIVIDENDS FUND MIDCAP MidCap Index NSA
- CLASS C GROWTH INDEX Growth $T
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
05/01/1995 $ 9,897 $10,000 $10,000
05/31/1995 $10,282 $10,164 $10,020 1.64% 0.20%
06/30/1995 $10,390 $10,803 $10,040 6.29% 0.20%
07/31/1995 $10,635 $11,711 $10,040 8.40% 0.00%
08/31/1995 $10,796 $11,890 $10,066 1.53% 0.26%
09/30/1995 $11,169 $12,222 $10,086 2.79% 0.20%
10/31/1995 $11,059 $11,791 $10,120 -3.52% 0.33%
11/30/1995 $11,622 $12,411 $10,112 5.25% -0.07%
12/31/1995 $11,842 $12,455 $10,105 0.36% -0.07%
01/31/1996 $12,076 $12,671 $10,165 1.73% 0.59%
02/29/1996 $12,219 $13,145 $10,198 3.74% 0.32%
03/31/1996 $12,184 $13,304 $10,251 1.21% 0.52%
04/30/1996 $12,125 $14,093 $10,291 5.93% 0.39%
05/31/1996 $12,471 $14,514 $10,310 2.99% 0.19%
06/30/1996 $12,591 $13,723 $10,316 -5.45% 0.06%
07/31/1996 $12,180 $12,548 $10,336 -8.56% 0.19%
08/31/1996 $12,461 $13,463 $10,356 7.29% 0.19%
09/30/1996 $13,086 $14,100 $10,389 4.73% 0.32%
10/31/1996 $13,479 $13,701 $10,422 -2.83% 0.32%
11/30/1996 $14,402 $14,472 $10,442 5.63% 0.19%
12/31/1996 $14,533 $14,281 $10,442 -1.32% 0.00%
01/31/1997 $14,818 $14,695 $10,475 2.90% 0.32%
02/28/1997 $15,209 $14,417 $10,508 -1.89% 0.31%
03/31/1997 $14,735 $13,537 $10,534 -6.11% 0.25%
04/30/1997 $15,090 $14,000 $10,547 3.42% 0.12%
05/31/1997 $16,235 $15,157 $10,540 8.27% -0.06%
06/30/1997 $16,809 $15,683 $10,553 3.47% 0.12%
07/31/1997 $18,228 $16,792 $10,565 7.07% 0.12%
08/31/1997 $17,850 $16,663 $10,586 -0.77% 0.19%
09/30/1997 $18,761 $17,759 $10,612 6.58% 0.25%
10/31/1997 $18,293 $16,912 $10,639 -4.77% 0.25%
11/30/1997 $18,719 $17,012 $10,632 0.59% -0.06%
12/31/1997 $19,143 $17,156 $10,619 0.85% -0.12%
01/31/1998 $19,048 $17,036 $10,640 -0.70% 0.19%
02/28/1998 $20,552 $18,440 $10,660 8.24% 0.19%
03/31/1998 $21,114 $18,735 $10,680 1.60% 0.19%
04/30/1998 $21,019 $18,866 $10,699 0.70% 0.18%
05/31/1998 $20,204 $17,806 $10,719 -5.62% 0.18%
06/30/1998 $19,926 $17,699 $10,731 -0.60% 0.12%
07/31/1998 $19,238 $16,648 $10,744 -5.94% 0.12%
08/31/1998 $16,174 $13,270 $10,757 -20.29% 0.12%
09/30/1998 $16,983 $13,927 $10,770 4.95% 0.12%
10/31/1998 $18,764 $15,029 $10,796 7.91% 0.24%
11/30/1998 $19,437 $15,897 $10,796 5.78% 0.00%
12/31/1998 $20,188 $16,972 $10,789 6.76% -0.06%
01/31/1999 $19,120 $16,573 $10,815 -2.35% 0.24%
02/28/1999 $18,439 $15,250 $10,828 -7.98% 0.12%
03/31/1999 $18,312 $15,520 $10,861 1.77% 0.30%
04/30/1999 $19,718 $16,906 $10,940 8.93% 0.73%
05/31/1999 $19,908 $17,239 $10,940 1.97% 0.00%
06/30/1999 $20,622 $18,117 $10,940 5.09% 0.00%
07/31/1999 $20,277 $18,017 $10,973 -0.55% 0.30%
08/31/1999 $19,422 $17,306 $10,999 -3.95% 0.24%
09/30/1999 $18,289 $17,072 $11,052 -1.35% 0.48%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
9/30/99
CLASS C
- -------------------------------------
1-Year +5.62%
3-Year +11.43%
Since Inception (5/1/95) +14.64%
*Source: Standard and Poor's Micropal.
Past performance is not predictive of future results.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------
1999(1) 1998 1997 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............ $ 21.53 $ 26.93 $ 20.03 $ 17.31 $ 14.67
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .15 .13 .16 .28 .33
Net realized and unrealized gains (losses) ... 1.76 (2.22) 8.23 2.78 2.61
----------------------------------------------------------------------------------
Total from investment operations .............. 1.91 (2.09) 8.39 3.06 2.94
----------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.17) (.11) (.18) (.34) (.30)
Net realized gains ........................... (1.99) (3.20) (1.31) -- --
----------------------------------------------------------------------------------
Total distributions ........................... (2.16) (3.31) (1.49) (.34) (.30)
----------------------------------------------------------------------------------
Net asset value, end of year .................. $ 21.28 $ 21.53 $ 26.93 $ 20.03 $ 17.31
==================================================================================
Total return* ................................. 8.29% (9.05%) 44.10% 17.83% 20.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............... $ 363,918 $ 407,336 $ 394,873 $ 277,746 $ 260,917
Ratios to average net assets:
Expenses ..................................... 1.43% 1.39% 1.41% 1.40% 1.43%
Net investment income ........................ .66% .51% .71% 1.49% 2.10%
Portfolio turnover rate ....................... 14.04% 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.
(1) Based on average shares outstanding.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
-------------------------
PERIOD ENDED
SEPTEMBER 30, 1999(1),(2)
-------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .................. $ 23.54
---------
Income from investment operations:
Net investment income ................................ .04
Net realized and unrealized loss ..................... (2.24)
---------
Total from investment operations ...................... (2.20)
---------
Less distributions from net investment income ......... (0.11)
---------
Net asset value, end of period ........................ $ 21.23
=========
Total return* ......................................... (9.38%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ..................... $ 1,477
Ratios to average net assets:
Expenses ............................................. 1.98%**
Net investment income ................................ .24%**
Portfolio turnover rate ............................... 14.04%
</TABLE>
* Total return does not reflect 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 September 30, 1999.
(2) Based on average shares outstanding.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1999(2) 1998 1997 1996 1995(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 21.45 $ 26.85 $ 19.98 $ 17.28 $ 15.47
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income .......................... .03 -- .08 .21 .11
Net realized and unrealized gains (losses) ..... 1.75 (2.20) 8.17 2.74 1.83
--------------------------------------------------------------------------------
Total from investment operations ................ 1.78 (2.20) 8.25 2.95 1.94
--------------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (.05) -- (.07) (.25) (.13)
Net realized gains ............................. (1.99) (3.20) (1.31) -- --
--------------------------------------------------------------------------------
Total distributions ............................. (2.04) (3.20) (1.38) (.25) (.13)
--------------------------------------------------------------------------------
Net asset value, end of year .................... $ 21.19 $ 21.45 $ 26.85 $ 19.98 $ 17.28
================================================================================
Total return* ................................... 7.69% (9.48%) 43.37% 17.16% 12.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 40,544 $ 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) ................... .11% (.05%) .17% .94% 1.92%**
Portfolio turnover rate ......................... 14.04% 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.
(2) Based on average shares outstanding.
See notes to financial statements.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 98.4%
COMMERCIAL SERVICES 6.1%
Reynolds & Reynolds Co., A .............................................................. 377,400 $ 7,689,525
Standard Register Co. ................................................................... 253,400 5,954,900
Wallace Computer Services Inc. .......................................................... 542,700 10,989,675
------------
24,634,100
------------
CONSUMER DURABLES 4.9%
Leggett & Platt Inc. .................................................................... 695,100 13,684,781
Newell Rubbermaid Inc. .................................................................. 223,600 6,386,575
------------
20,071,356
------------
CONSUMER NON-DURABLES 6.7%
Alberto-Culver Co., A ................................................................... 532,600 10,418,988
Block Drug Co. Inc., A .................................................................. 167,742 6,028,228
DIMON Inc. .............................................................................. 415,100 1,608,513
Philip Morris Cos. Inc. ................................................................. 86,500 2,957,219
Universal Corp. ......................................................................... 239,100 6,246,488
------------
27,259,436
------------
ELECTRONIC TECHNOLOGY 4.5%
Cohu Inc. ............................................................................... 553,200 11,686,350
Hewlett-Packard Co. ..................................................................... 70,100 6,449,200
------------
18,135,550
------------
ENERGY MINERALS 1.3%
Royal Dutch Petroleum Co., N.Y. shs. .................................................... 89,700 5,297,906
------------
FINANCE 14.4%
Bank One Corp. .......................................................................... 40,000 1,392,500
First Union Corp. ....................................................................... 71,650 2,548,053
Mercantile Bankshares Corp. ............................................................. 169,950 5,257,828
National Commerce Bancorp ............................................................... 640,300 14,066,591
State Street Corp. ...................................................................... 83,000 5,363,875
Trustco Bank Corp., N.Y. shs. ........................................................... 258,573 7,635,984
U.S. Bancorp ............................................................................ 271,700 8,201,944
Washington Mutual Inc. .................................................................. 320,100 9,362,925
Wilmington Trust Corp. .................................................................. 91,200 4,428,900
------------
58,258,600
------------
GOVERNMENT SPONSORED CORPORATION .7%
Fannie Mae .............................................................................. 47,800 2,996,463
------------
HEALTH TECHNOLOGY 7.2%
Becton, Dickinson & Co. ................................................................. 160,200 4,495,613
Superior Uniform Group Inc. ............................................................. 230,200 2,704,850
West Pharmaceutical Services Inc. ....................................................... 584,200 22,163,088
------------
29,363,551
------------
INSURANCE 10.2%
American Heritage Life Investment Corp. ................................................. 108,100 3,432,175
American International Group Inc. ....................................................... 82,218 7,147,827
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (CONT.)
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
INSURANCE (CONT.)
Chubb Corp. ............................................................................. 89,000 $ 4,433,313
Harleysville Group Inc. ................................................................. 158,300 2,226,094
Mercury General Corp. ................................................................... 210,400 5,799,150
MMI Cos. Inc. ........................................................................... 325,400 3,559,063
ReliaStar Financial Corp. ............................................................... 243,900 8,109,675
RLI Corp. ............................................................................... 197,362 6,512,946
------------
41,220,243
------------
NON-ENERGY MINERALS .5%
Nucor Corp. ............................................................................. 45,900 2,185,988
------------
PROCESS INDUSTRIES 10.8%
Bemis Co. Inc. .......................................................................... 281,000 9,518,875
Brady Corp., A .......................................................................... 77,000 2,464,000
Donaldson Co. Inc. ...................................................................... 84,900 1,968,619
Lancaster Colony Corp. .................................................................. 86,700 2,774,400
M.A. Hanna Co. .......................................................................... 255,400 2,905,175
Millipore Corp. ......................................................................... 83,600 3,140,225
Pall Corp. .............................................................................. 658,300 15,264,331
Sherwin-Williams Co. .................................................................... 268,000 5,611,250
------------
43,646,875
------------
PRODUCER MANUFACTURING 20.3%
Baldor Electric Co. ..................................................................... 367,366 6,956,994
Diebold Inc. ............................................................................ 181,700 4,201,813
Dover Corp. ............................................................................. 188,900 7,721,288
General Electric Co. .................................................................... 32,000 3,794,000
Graco Inc. .............................................................................. 134,600 4,416,563
Hubbell Inc., A ......................................................................... 10,000 336,250
Hubbell Inc., B ......................................................................... 206,500 6,582,188
Kaydon Corp. ............................................................................ 373,500 9,290,813
Kimball International Inc., B ........................................................... 406,900 7,832,825
Myers Industries Inc. ................................................................... 413,798 7,344,915
Superior Industries International Inc. .................................................. 171,200 4,793,600
Teleflex Inc. ........................................................................... 263,900 10,407,556
Watts Industries Inc., A ................................................................ 398,500 8,667,375
------------
82,346,180
------------
RETAIL TRADE 9.4%
Family Dollar Stores Inc. ............................................................... 1,235,200 26,093,592
The Limited Inc. ........................................................................ 92,705 3,545,966
Rite Aid Corp. .......................................................................... 227,800 3,146,488
Schultz Sav-O Stores Inc. ............................................................... 184,900 2,912,175
(a)Too Inc. .............................................................................. 13,243 237,546
Wal-Mart Stores Inc. .................................................................... 47,400 2,254,463
------------
38,190,230
------------
</TABLE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (CONT.)
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
TRANSPORTATION 1.4%
Circle International Group Inc. ......................................................... 288,000 $ 5,886,000
------------
TOTAL COMMON STOCKS (COST $356,848,015) ................................................. 399,492,478
------------
CONVERTIBLE PREFERRED STOCKS .3%
American Heritage Corp., 8.50%, cvt. pfd. (COST $625,000) ............................... 12,500 1,054,688
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
(b)REPURCHASE AGREEMENT 1.1%
Joint Repurchase Agreement, 5.217%, 10/01/99 (Maturity Value $4,405,683) (COST $4,405,044) $ 4,405,044 4,405,044
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
CIBC World Markets Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Paine Webber Inc.
Paribas Corp.
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills & Notes
------------
TOTAL INVESTMENTS (COST $361,878,059) 99.8% .............................................. 404,952,210
OTHER ASSETS, LESS LIABILITIES .2% ....................................................... 986,265
------------
NET ASSETS 100.0% ........................................................................ $405,938,475
============
</TABLE>
(a) Non-income producing.
(b) Investment is through participation in a joint account with other funds
managed by the investment advisor. At September 30, 1999, all repurchase
agreements had been entered into on that date.
See notes to financial statements.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Statements
Statement of Assets and Liabilities
September 30, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $361,878,059) ............................................... $404,952,210
Receivables:
Investment securities sold .......................................................................... 1,549,688
Capital shares sold ................................................................................. 66,571
Dividends and interest .............................................................................. 655,292
------------
Total assets .................................................................................. 407,223,761
------------
Liabilities:
Payables:
Capital shares redeemed ............................................................................. 540,555
Affiliates .......................................................................................... 667,239
Shareholders ........................................................................................ 37,000
Other liabilities ..................................................................................... 40,492
------------
Total liabilities ............................................................................. 1,285,286
------------
Net assets, at value .......................................................................... $405,938,475
============
Net assets consist of:
Undistributed net investment income ................................................................... $ 356,764
Net unrealized appreciation ........................................................................... 43,074,151
Accumulated net realized gain ......................................................................... 29,346,009
Capital shares ........................................................................................ 333,161,551
------------
Net assets, at value .......................................................................... $405,938,475
============
CLASS A:
Net asset value per share* ($363,917,581 divided by 17,098,904 shares outstanding) .................... $ 21.28
============
Maximum offering price per share ($21.28 divided by 94.25%) ........................................... $ 22.58
============
CLASS B:
Net asset value and maximum offering price per share* ($1,476,765 divided by 69,544 shares outstanding) $ 21.23
============
CLASS C:
Net asset value per share* ($40,544,129 divided by 1,913,677 shares outstanding) ...................... $ 21.19
============
Maximum offering price per share ($21.19 divided by 99.00%) ........................................... $ 21.40
============
</TABLE>
* Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Statements (continued)
Statement of Operations
for the year ended September 30, 1999
<TABLE>
<S> <C>
Investment income:
(net of foreign taxes of $21,332)
Dividends ..................................................... $ 9,457,688
Interest ...................................................... 481,703
-----------
Total investment income ............................... 9,939,391
-----------
Expenses:
Management fees (Note 3) ...................................... 3,560,910
Distribution fees (Note 3)
Class A ..................................................... 1,903,547
Class B ..................................................... 5,618
Class C ..................................................... 489,596
Transfer agent fees (Note 3) .................................. 769,049
Accounting fees (Note 3) ...................................... 40,000
Custodian fees ................................................ 5,678
Reports to shareholders ....................................... 168,748
Registration and filing fees .................................. 63,838
Professional fees ............................................. 42,593
Trustees' fees and expenses ................................... 18,788
Other ......................................................... 8,637
-----------
Total expenses ........................................ 7,077,002
-----------
Net investment income ................................. 2,862,389
-----------
Realized and unrealized gains:
Net realized gain from investments ............................ 29,517,292
Net unrealized appreciation on investments .................... 8,111,808
-----------
Net realized and unrealized gain ................................ 37,629,100
-----------
Net increase in net assets resulting from operations ............ $40,491,489
===========
</TABLE>
See notes to financial statements.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Statements (continued)
Statements of Changes in Net Assets
for the years ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 2,862,389 $ 2,261,412
Net realized gain from investments ...................................... 29,517,292 45,956,036
Net unrealized appreciation (depreciation) on investments ............... 8,111,808 (99,023,374)
--------------------------------
Net increase (decrease) in net assets resulting from operations ... 40,491,489 (50,805,926)
Distributions to shareholders from:
Net investment income:
Class A .............................................................. (3,135,285) (1,828,381)
Class B .............................................................. (3,328) --
Class C .............................................................. (101,566) (4,086)
Net realized gains:
Class A .............................................................. (36,887,240) (48,479,814)
Class C .............................................................. (4,228,827) (2,105,211)
--------------------------------
Total distributions to shareholders ....................................... (44,356,246) (52,417,492)
Capital share transactions: (Note 2)
Class A .............................................................. (40,213,823) 107,238,762
Class B .............................................................. 1,601,916 --
Class C .............................................................. (2,710,610) 37,710,977
--------------------------------
Total capital share transactions .......................................... (41,322,517) 144,949,739
Net increase (decrease) in net assets ............................. (45,187,274) 41,726,321
Net assets:
Beginning of year ......................................................... 451,125,749 409,399,428
--------------------------------
End of year ............................................................... $ 405,938,475 $ 451,125,749
================================
Undistributed net investment income included in net assets:
End of year ............................................................... $ 356,764 $ 736,183
================================
</TABLE>
See notes to financial statements.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
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. The Trust consists
of one Fund, the Franklin Rising Dividends Fund (the Fund), which seeks to
provide growth and income.
On October 26, 1999, the Shareholders approved an Agreement and Plan of
Reorganization whereby the Fund would be reorganized and its domicile changed
from a Massachusetts corporation to a Delaware business trust.
The following summarizes the Fund's 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. INCOME TAXES:
No provision has been made for income taxes because the 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.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
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.
d. 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 Fund offers three classes of shares: Class A, Class B and Class C. Effective
January 1, 1999, Class I and Class II were renamed Class A and Class C,
respectively, and the Fund began offering a new class of share, Class B. Each
class of shares differs by its initial sales load, distribution fees, voting
rights on matters affecting a single class and its exchange privilege.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST (cont.)
At September 30, 1999, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold ...................................... 4,288,915 $ 98,522,630 6,690,317 $ 168,552,709
Shares issued in reinvestment of distributions ... 1,507,550 34,188,280 1,767,518 42,544,929
Shares redeemed .................................. (7,615,475) (172,924,733) (4,203,389) (103,858,876)
-------------------------------------------------------------------
Net increase (decrease) .......................... (1,819,010) $ (40,213,823) 4,254,446 $ 107,238,762
===================================================================
CLASS B SHARES:*
Shares sold ...................................... 70,665 $ 1,626,168
Shares issued in reinvestment of distributions ... 131 2,962
Shares redeemed .................................. (1,252) (27,214)
-----------------------------
Net increase ..................................... 69,544 $ 1,601,916
=============================
CLASS C SHARES:
Shares sold ...................................... 869,142 $ 19,694,412 1,797,364 $ 45,013,886
Shares issued in reinvestment of distributions ... 172,643 3,899,442 76,771 1,845,670
Shares redeemed .................................. (1,169,620) (26,304,464) (373,593) (9,148,579)
-------------------------------------------------------------------
Net increase (decrease) .......................... (127,835) $ (2,710,610) 1,500,542 $ 37,710,977
===================================================================
</TABLE>
* For the period January 1, 1999 (effective date) to September 30, 1999.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
Franklin Advisory Services, LLC (Advisory Services), Franklin/Templeton
Distributors, Inc. (Distributors), Franklin Templeton Services, Inc. (FT
Services) and Franklin/Templeton Investor Services, Inc. (Investor Services),
the Fund's investment manager, principal underwriter, administrative manager and
transfer agent, respectively.
The Fund pays an investment management fee to Advisory Services based on the
average net assets of the Fund as follows:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
--------------------------------------------------------------
.750% First $500 million
.625% Over $500 million, up to and including $1 billion
.500% In excess of $1 billion
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES (cont.)
The Fund also pays accounting fees to Advisory Services.
Under an agreement with Advisory Services, FT Services provides administrative
services to the Fund. The fee is paid by Advisory Services based on average
daily net assets, and is not an additional expense of the Fund.
The 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, for
costs incurred in marketing the Fund's shares.
Distributors paid net commissions on sales of the Fund's shares, and received
contingent deferred sales charges for the year of $102,667 and $56,598,
respectively.
The Fund paid transfer agent fees of $769,049, of which $696,688 was paid to
Investor Services.
4. INCOME TAXES
At September 30, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $363,166,204 was as follows:
Unrealized appreciation ..................... $ 90,147,034
Unrealized depreciation ..................... (48,361,028)
------------
Net unrealized appreciation ................. $ 41,786,006
============
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, 1999 aggregated $64,881,107 and $144,228,854, respectively.
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF FRANKLIN MANAGED TRUST:
We have audited the accompanying statements of assets and liabilities of the
Franklin Rising Dividends Fund, a series of shares of Franklin Managed Trust,
including the statement of investments, as of September 30, 1999, 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, 1999, by correspondence with the custodian. 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 Rising Dividends Fund as of September 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 5, 1999
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Tax Information
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $30,644,127 as a capital gain dividend for the fiscal year ended
September 30, 1999.
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
100% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended September 30, 1999.
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