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 10 years.
--------------------------------------------------------------------------------
Dear Shareholder:
This annual report for Franklin Rising Dividends Fund covers the 12-month period
ended September 30, 2000.
ECONOMIC OVERVIEW
The 12 months under review saw robust domestic economic activity with only
modest inflation. U.S. economic growth, as measured by real gross domestic
product (GDP), peaked at a surprisingly strong 8.3% annualized growth rate
during the final quarter of 1999, followed by a slowing growth trend that
averaged an annualized 5.2% over the first half of 2000 and an estimated 2.7% in
the third quarter.(1) The historically high level of economic output during the
first nine months of the Fund's fiscal year was tempered somewhat, however, by
increased interest rates and higher energy costs during third quarter 2000.
Nevertheless, consumer confidence remained strong, unemployment hit a 30-year
low and technology continued to drive productivity increases.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ..................... 1
Performance Summary .................... 8
Financial Highlights &
Statement of Investments ............... 12
Financial Statements ................... 17
Notes to Financial Statements .......... 20
Independent Auditors' Report ........... 23
Tax Designation ........................ 24
</TABLE>
[FUND CATEGORY PYRAMID]
1. Source: Bureau of Economic Analysis (BEA), 9/28/00.
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 15.
<PAGE>
The Federal Reserve Board (the Fed) remained concerned that, during most of the
review period, the economy was growing beyond its capacity to expand at a
non-inflationary rate. The Fed expressed a particular concern about tight labor
markets as the unemployment rate hovered at or near 3.9% throughout the year. As
a result, the Fed took an aggressive posture toward mitigating inflationary
tendencies and increased the federal funds target rate to 6.5% during the
reporting period, up from 5.25% a year earlier. By late spring, high short-term
interest rates, rising energy costs and lower stock prices -- particularly in
such technology sectors as e-commerce -- caused economic activity to begin to
cool in line with the Fed's plans for a much-desired soft landing of the U.S.
economy. Consequently, long-term Treasury bond yields, as represented by the
benchmark 30-year Treasury, rose from 6.05% at the beginning of the reporting
period, then fell substantially from a January peak of 6.75% as the bond market
rallied throughout the summer, ultimately settling to 5.89% on September 30,
2000. Policy makers and market participants tried to determine the likely
duration and depth of the slowdown following the most recent, mid-May interest
rate increase. We believe policy implications depend on the economy's future
direction. If the economy strengthens, then additional increases in the federal
funds rate are likely. On the other hand, if the economy weakens further, policy
makers could decide to lower interest rates.
During the first half of the Fund's fiscal year, stocks of most "new economy"
companies -- those involved in technology, telecommunications and biotechnology
-- soared while many "old economy" stocks declined in price even as they stood
to reap the benefits of new economy business and information
2
<PAGE>
innovations. This caused valuations of the favored stocks to reach historically
high levels while many other stocks appeared priced for a recession. From our
perspective, the performance of these two groups became much more balanced as
"new economy" stocks grew quite volatile when they were besieged by lowered
profit expectations and investors' growing interest-rate concerns during the
second half of the Fund's fiscal year. Although some "new economy" stocks
continued to shine, many faltered as evidenced by a decline in the
technology-heavy Nasdaq Composite Index, which plummeted 27.2% from its high of
5048.6 on March 10, 2000, through the end of the reporting period.(2) At the
same time, many "old economy" stocks recovered nicely from their lows set during
the February to March period. In our assessment, however, a wide gulf in
relative valuations persisted through the end of the reporting period, with
stocks of some companies discounting extremely high long-term growth rates while
others were priced as if they would no longer be able to approach their
historical growth rates.
PORTFOLIO NOTES
Our investment strategy is based on our belief that companies with consistently
rising dividends should, over time, also realize appreciation in their stock
prices. We select portfolio securities based on several criteria. To be eligible
for purchase, stocks must pass certain investment "screens," or screening
procedures, requiring consistent and substantial dividend increases, strong
balance sheets and relatively low price-to-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.
"... a wide gulf in relative valuations persisted through the end of the
reporting period. ..."
2. Source: Standard & Poor's Micropal. The Nasdaq Composite Index measures all
Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock
Market(R). The index is market-value weighted and includes over 4,400 companies
(as of 9/30/00).
3
<PAGE>
A good example of a rising dividends company in the portfolio is Dover
Corporation, a diversified industrial product manufacturer. Dover recently
lifted its dividend for the 40th consecutive year. Over this long period, its
earnings per-share (EPS) growth rate has averaged about 13%. Over the past 10
years, Dover's EPS growth rate has also been about 13%. If you exclude its
now-divested elevator business, Dover's EPS growth rate increases to 18% over
the 10-year period. And last year, the company's EPS growth rate was a robust
31%. All of these growth rates far exceed the historical earnings growth rate of
the Standard & Poor's 500(R) (S&P 500(R)) Composite Index, yet Dover's
price-to-earnings multiple of 18.3 times 2000 consensus estimates is well below
the comparable average multiple of 23.5 times for the S&P 500.(3)
Another example is National Commerce Bancorporation (NCBC). NCBC has increased
its dividend for 25 consecutive years. Over the past 10 years, its dividends
grew at a 16% annual rate while EPS has grown at a 15% rate. NCBC's return on
equity has consistently exceeded 18%. These results have been driven by 18%
average annual revenue growth over the 10-year period, strong and improving cost
control, and what we assess as pristine asset quality. Nevertheless, NCBC's
price-to-earnings multiple is only 15.7 times the consensus estimates for 2000.
The portfolio's top-performing position during the period was State Street,
which provides a variety of services to institutional investors worldwide. We
believe the market is now recognizing State Street as a dominant global
information processing company rather than thinking of it as just a bank. Our
position
3. Source: Standard & Poor's Micropal. The S&P 500 Composite Index consists of
500 domestic stocks, comprising four broad sectors: industrials, utilities,
financials and transportation. The S&P 500 serves as the standard for measuring
large-cap U.S. stock market performance. Since some industries are characterized
by companies of relatively small stock capitalization, the index is not composed
of the 500 largest U.S., publicly-traded companies.
4
<PAGE>
in Washington Mutual also delivered strong gains as investors appeared to factor
an end to the Fed's tightening cycle into interest-rate-sensitive issues. Due to
the lag in adjustable rate mortgage re-pricing, Washington Mutual's earnings
could improve significantly if Fed tightening is actually over. Our holdings in
American International Group responded quite favorably to the increase in
premiums for commercial property and casualty insurance. Alberto-Culver, which
has had success with its Sally Beauty Supply distribution business, also
performed well during the period.
The Fund also benefited from increased merger and acquisition activity during
the period. ReliaStar Financial, a life insurance company, agreed to be acquired
by ING Groep in a cash transaction at a substantial premium to its
pre-acquisition trading level. Block Drug Company, which makes health care and
dental products, announced that they had hired an investment banker to review
strategic alternatives for enhancing shareholder value.
The period under review did have its disappointments. One stock that negatively
impacted our performance was West Pharmaceutical Services. West has three main
businesses; its first and largest unit, which focuses on the design and
production of packaging components for pharmaceutical and health care companies,
performed well. The second unit, its newest business segment, identifies and
develops drug delivery systems for biopharmaceutical and other drugs. Although
not yet generating any material revenues for the company, we believe this unit's
products are moving smoothly through the development phase, and the future
appears bright. West's third unit provides contract
TOP 10 EQUITY HOLDINGS
9/30/00
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
SECTOR NET ASSETS
--------------------------------------------------------------------------------
<S> <C>
Family Dollar Stores Inc. 6.9%
Retail Trade
West Pharmaceutical 4.6%
Services Inc.
Health Technology
Alberto-Culver Co., A 4.3%
Consumer Non-Durables
Washington Mutual Inc. 4.1%
Finance
Reynolds & Reynolds Co., A 3.9%
Technology Services
Leggett & Platt Inc. 3.7%
Consumer Durables
National Commerce Bancorp. 3.6%
Finance
Teleflex, Inc.
Producer Manufacturing 3.3%
Dover Corp. 3.1%
Producer Manufacturing
State Street Corp. 3.0%
Finance
</TABLE>
5
<PAGE>
manufacturing and packaging services to pharmaceutical and personal care
companies. This is where West recently delivered disappointing operating
results. It is expected that this business will either recover later in the year
or be divested. The company's period-end stock price assumed little growth in
any of these businesses.
During the period, we eliminated or reduced many portfolio positions to raise
cash or increase investments in what we believed to be more attractively valued
stocks. The most significant sale was ReliaStar Financial which, as previously
discussed, was acquired. Also, during the first half of the period, we greatly
reduced our position in Cohu, which makes semiconductor test-handling equipment.
We sold our position in Cohu based on our assessment that its stock price became
fully valued. Later in the period, the Fund was a significant buyer of Cohu as
its stock once again became attractively valued. We established no new positions
during the period.
Notable year-over-year dividend increases during the 12-month period came from
National Commerce Bancorporation (+44%), Graco (+27%), Leggett & Platt (+22%),
Baldor Electric (+18%), Donaldson Company (+17%) and Washington Mutual (+16%).
As the table on page 5 shows, our 10 largest positions on September 30, 2000,
comprised 40.5% of the Fund's total net assets. It is interesting to note how
these 10 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 21 years in a row and
6
<PAGE>
by 310% in the last 10 years. Their most recent dividend increases averaged
16.1%, for a yield of 1.9% on September 30, 2000, and a dividend payout ratio of
29%. Long-term debt averaged 24% of capitalization, and the average
price/earnings ratio was 17.0 on calendar 2000 estimates versus 23.5 for that of
the unmanaged S&P 500 on the same date. It is our opinion that these companies
are representative of the portfolio's fundamentally high quality. We remain
convinced that, over the long term, companies that increase cash payments to
shareholders, year after year, will be superior builders of wealth.
Sincerely,
/s/ William J. Lippman
William J. Lippman
President
/s/ Donald G. Taylor
Donald G. Taylor
Senior Portfolio Manager
Franklin Rising Dividends Fund
This discussion reflects our views, opinions and portfolio holdings as of
September 30, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
7
<PAGE>
PERFORMANCE SUMMARY AS OF 9/30/00
One-year total return represents the change in value of an investment for the
period indicated and does not include sales charges. Distributions will vary
based on earnings of the Fund's portfolio and any profits realized from the sale
of the portfolio's securities, as well as the level of operating expenses for
each class. Past distributions are not indicative of future trends. All total
returns include reinvested distributions at net asset value.
CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
8/3/98, 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: 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.
<TABLE>
<S> <C> <C>
CLASS A
One-Year Total Return +2.95%
Net Asset Value (NAV) $20.02 (9/30/00) $21.28 (9/30/99)
Change in NAV -$1.26
Distributions (10/1/99-9/30/00) Dividend Income $0.1535
Long-Term Capital Gain $1.6640
--------------------------------------------------------------------------------
Total $1.8175
CLASS B
One-Year Total Return +2.38%
Net Asset Value (NAV) $19.96 (9/30/00) $21.23 (9/30/99)
Change in NAV -$1.27
Distributions (10/1/99-9/30/00) Dividend Income $0.0525
Long-Term Capital Gain $1.6640
--------------------------------------------------------------------------------
Total $1.7165
CLASS C
One-Year Total Return +2.38%
Net Asset Value (NAV) $19.92 (9/30/00) $21.19 (9/30/99)
Change in NAV -$1.27
Distributions (10/1/99-9/30/00) Dividend Income $0.0510
Long-Term Capital Gain $1.6640
--------------------------------------------------------------------------------
Total $1.7150
</TABLE>
Franklin Rising Dividends Fund paid distributions derived from long-term capital
gains of $1.6640 per share in December 1999. The Fund hereby designates such
distributions as capital gains dividends per Internal Revenue Code 852 (b)(3).
Past performance does not guarantee future results.
8
<PAGE>
ADDITIONAL PERFORMANCE
AS OF 9/30/00
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (1/14/87)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +2.95% +72.15% +229.58% +266.63%
Average Annual Total Return(2) -2.98% +10.16% +12.01% +9.47%
Value of $10,000 Investment(3) $9,702 $16,222 $31,073 $34,555
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B 1-YEAR (1/1/99)
--------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) +2.38% -7.22%
Average Annual Total Return(2) -1.38% -6.22%
Value of $10,000 Investment(3) $9,862 $8,938
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 5-YEAR (5/1/95)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) +2.38% +67.64% +89.18%
Average Annual Total Return(2) +0.45% +10.67% +12.27%
Value of $10,000 Investment(3) $10,045 $16,600 $18,724
</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.
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.
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236.
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 does not guarantee future results.
9
<PAGE>
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
We are replacing the Wilshire Target MidCap Growth Index with the Russell MidCap
Value Index because the sponsors of the Wilshire Target MidCap Growth Index
decided not to publish the holdings that comprise the index, which would make it
difficult to determine whether the index continues to provide an appropriate
comparison to the portfolio's performance. We believe the new benchmark, the
Russell MidCap Value Index, is an appropriate benchmark because many of the
holdings that comprise the index are either held by the Fund or are similar to
its portfolio holdings. The Russell MidCap Value Index is widely used as a
benchmark in the mutual fund industry and information regarding the index is
readily available. 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 indexes differ from the Fund in composition, do not pay management
fees or expenses and include reinvested dividends. One cannot invest directly in
an index. The Consumer Price Index (CPI) is a commonly used measure of
inflation.
AVERAGE ANNUAL TOTAL RETURN
9/30/00
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
<S> <C>
1-Year -2.98%
5-Year +10.16%
10-Year +12.01%
Since Inception (1/14/87) +9.47%
</TABLE>
Class A (10/1/90-9/30/00)
The following line graph compares the performance of the Franklin Rising
Dividends Fund's Class A shares to that of the Russell MidCap Value Index,
Wilshire Target MidCap Growth Index, and to the Consumer Price Index based on a
$10,000 investment from 10/1/90 to 9/30/00.
<TABLE>
<CAPTION>
DATE FRANKLIN RUSSELL MIDCAP WILSHIRE TARGET CPI RUSSELL WILSHIRE CONSUMER
RISING VALUE INDEX MIDCAP GROWTH MIDCAP VALUE TARGET PRICE
DIVIDENDS INDEX MIDCAP INDEX NSA
FUND - GROWTH
CLASS A $T
<S> <C> <C> <C> <C> <C> <C> <C>
10/01/1990 $9,428 $10,000 $10,000 $10,000
-----------------------------------------------------------------------------------------------------------------
10/31/1990 $9,304 $9,595 $9,510 $10,060 -4.05% -4.90% 0.60%
-----------------------------------------------------------------------------------------------------------------
11/30/1990 $10,181 $10,446 $10,575 $10,082 8.87% 11.20% 0.22%
-----------------------------------------------------------------------------------------------------------------
12/31/1990 $10,716 $10,879 $11,205 $10,082 4.14% 5.96% 0.00%
-----------------------------------------------------------------------------------------------------------------
01/31/1991 $11,079 $11,558 $12,263 $10,143 6.25% 9.44% 0.60%
-----------------------------------------------------------------------------------------------------------------
02/28/1991 $12,083 $12,482 $13,402 $10,158 7.99% 9.29% 0.15%
-----------------------------------------------------------------------------------------------------------------
03/31/1991 $12,576 $12,899 $14,253 $10,173 3.34% 6.35% 0.15%
-----------------------------------------------------------------------------------------------------------------
04/30/1991 $12,682 $13,125 $14,142 $10,188 1.75% -0.78% 0.15%
-----------------------------------------------------------------------------------------------------------------
05/31/1991 $13,277 $13,718 $14,927 $10,219 4.52% 5.55% 0.30%
-----------------------------------------------------------------------------------------------------------------
06/30/1991 $12,964 $13,170 $14,260 $10,249 -3.99% -4.47% 0.29%
-----------------------------------------------------------------------------------------------------------------
07/31/1991 $13,341 $13,804 $15,033 $10,264 4.81% 5.42% 0.15%
-----------------------------------------------------------------------------------------------------------------
08/31/1991 $13,630 $14,204 $15,604 $10,294 2.90% 3.80% 0.29%
-----------------------------------------------------------------------------------------------------------------
09/30/1991 $13,732 $14,078 $15,621 $10,339 -0.89% 0.11% 0.44%
-----------------------------------------------------------------------------------------------------------------
10/31/1991 $13,868 $14,348 $16,029 $10,354 1.92% 2.61% 0.15%
-----------------------------------------------------------------------------------------------------------------
11/30/1991 $13,703 $13,675 $15,359 $10,385 -4.69% -4.18% 0.29%
-----------------------------------------------------------------------------------------------------------------
12/31/1991 $14,568 $15,004 $17,408 $10,392 9.72% 13.34% 0.07%
-----------------------------------------------------------------------------------------------------------------
01/31/1992 $14,656 $15,390 $17,928 $10,407 2.57% 2.99% 0.15%
-----------------------------------------------------------------------------------------------------------------
02/29/1992 $14,636 $15,964 $18,231 $10,445 3.73% 1.69% 0.36%
-----------------------------------------------------------------------------------------------------------------
03/31/1992 $14,416 $15,722 $17,504 $10,498 -1.52% -3.99% 0.51%
-----------------------------------------------------------------------------------------------------------------
04/30/1992 $14,563 $16,122 $17,087 $10,513 2.55% -2.38% 0.14%
-----------------------------------------------------------------------------------------------------------------
05/31/1992 $14,809 $16,272 $16,874 $10,528 0.93% -1.25% 0.14%
-----------------------------------------------------------------------------------------------------------------
06/30/1992 $14,567 $16,147 $16,108 $10,565 -0.77% -4.54% 0.36%
-----------------------------------------------------------------------------------------------------------------
07/31/1992 $15,138 $16,795 $16,990 $10,588 4.01% 5.48% 0.21%
-----------------------------------------------------------------------------------------------------------------
08/31/1992 $14,961 $16,304 $16,635 $10,617 -2.92% -2.09% 0.28%
-----------------------------------------------------------------------------------------------------------------
09/30/1992 $15,233 $16,630 $16,926 $10,647 2.00% 1.75% 0.28%
-----------------------------------------------------------------------------------------------------------------
10/31/1992 $15,411 $16,978 $17,617 $10,684 2.09% 4.08% 0.35%
-----------------------------------------------------------------------------------------------------------------
11/30/1992 $15,906 $17,693 $18,966 $10,699 4.21% 7.66% 0.14%
-----------------------------------------------------------------------------------------------------------------
12/31/1992 $16,079 $18,257 $19,547 $10,692 3.19% 3.06% -0.07%
-----------------------------------------------------------------------------------------------------------------
01/31/1993 $15,920 $18,719 $19,989 $10,744 2.53% 2.26% 0.49%
-----------------------------------------------------------------------------------------------------------------
02/28/1993 $15,682 $19,123 $19,315 $10,782 2.16% -3.37% 0.35%
-----------------------------------------------------------------------------------------------------------------
03/31/1993 $15,806 $19,787 $19,908 $10,819 3.47% 3.07% 0.35%
-----------------------------------------------------------------------------------------------------------------
04/30/1993 $15,247 $19,439 $19,076 $10,850 -1.76% -4.18% 0.28%
-----------------------------------------------------------------------------------------------------------------
05/31/1993 $15,437 $19,876 $20,163 $10,865 2.25% 5.70% 0.14%
-----------------------------------------------------------------------------------------------------------------
06/30/1993 $15,262 $20,289 $20,296 $10,880 2.08% 0.66% 0.14%
-----------------------------------------------------------------------------------------------------------------
07/31/1993 $15,272 $20,512 $20,116 $10,880 1.10% -0.89% 0.00%
-----------------------------------------------------------------------------------------------------------------
08/31/1993 $15,522 $21,212 $21,135 $10,911 3.41% 5.07% 0.28%
-----------------------------------------------------------------------------------------------------------------
09/30/1993 $15,528 $21,157 $21,666 $10,934 -0.26% 2.51% 0.21%
-----------------------------------------------------------------------------------------------------------------
10/31/1993 $15,749 $20,918 $21,781 $10,978 -1.13% 0.53% 0.41%
-----------------------------------------------------------------------------------------------------------------
11/30/1993 $15,346 $20,435 $21,441 $10,986 -2.31% -1.56% 0.07%
-----------------------------------------------------------------------------------------------------------------
12/31/1993 $15,518 $21,109 $22,627 $10,986 3.30% 5.53% 0.00%
-----------------------------------------------------------------------------------------------------------------
01/31/1994 $15,730 $21,723 $23,425 $11,016 2.91% 3.53% 0.27%
-----------------------------------------------------------------------------------------------------------------
02/28/1994 $15,154 $21,336 $23,549 $11,053 -1.78% 0.53% 0.34%
-----------------------------------------------------------------------------------------------------------------
03/31/1994 $14,414 $20,511 $22,148 $11,091 -3.87% -5.95% 0.34%
-----------------------------------------------------------------------------------------------------------------
04/30/1994 $14,434 $20,812 $22,237 $11,106 1.47% 0.40% 0.14%
-----------------------------------------------------------------------------------------------------------------
05/31/1994 $14,627 $20,839 $21,897 $11,114 0.13% -1.53% 0.07%
-----------------------------------------------------------------------------------------------------------------
06/30/1994 $14,595 $20,456 $20,793 $11,152 -1.84% -5.04% 0.34%
-----------------------------------------------------------------------------------------------------------------
07/31/1994 $14,728 $21,274 $21,300 $11,182 4.00% 2.44% 0.27%
-----------------------------------------------------------------------------------------------------------------
08/31/1994 $15,359 $22,063 $23,124 $11,227 3.71% 8.56% 0.40%
-----------------------------------------------------------------------------------------------------------------
09/30/1994 $15,002 $21,373 $22,941 $11,257 -3.13% -0.79% 0.27%
-----------------------------------------------------------------------------------------------------------------
10/31/1994 $14,941 $21,354 $23,501 $11,265 -0.09% 2.44% 0.07%
-----------------------------------------------------------------------------------------------------------------
11/30/1994 $14,573 $20,412 $22,460 $11,279 -4.41% -4.43% 0.13%
-----------------------------------------------------------------------------------------------------------------
12/31/1994 $14,715 $20,659 $22,833 $11,279 1.21% 1.66% 0.00%
-----------------------------------------------------------------------------------------------------------------
01/31/1995 $15,096 $21,241 $22,837 $11,325 2.82% 0.02% 0.40%
-----------------------------------------------------------------------------------------------------------------
02/28/1995 $15,549 $22,314 $24,207 $11,370 5.05% 6.00% 0.40%
-----------------------------------------------------------------------------------------------------------------
03/31/1995 $15,885 $22,734 $25,101 $11,407 1.88% 3.69% 0.33%
-----------------------------------------------------------------------------------------------------------------
04/30/1995 $15,999 $23,216 $25,475 $11,445 2.12% 1.49% 0.33%
-----------------------------------------------------------------------------------------------------------------
05/31/1995 $16,578 $24,149 $25,892 $11,468 4.02% 1.64% 0.20%
-----------------------------------------------------------------------------------------------------------------
06/30/1995 $16,760 $24,707 $27,521 $11,491 2.31% 6.29% 0.20%
-----------------------------------------------------------------------------------------------------------------
07/31/1995 $17,165 $25,569 $29,833 $11,491 3.49% 8.40% 0.00%
-----------------------------------------------------------------------------------------------------------------
08/31/1995 $17,435 $26,070 $30,289 $11,521 1.96% 1.53% 0.26%
-----------------------------------------------------------------------------------------------------------------
09/30/1995 $18,050 $26,667 $31,134 $11,544 2.29% 2.79% 0.20%
-----------------------------------------------------------------------------------------------------------------
10/31/1995 $17,883 $26,147 $30,038 $11,582 -1.95% -3.52% 0.33%
-----------------------------------------------------------------------------------------------------------------
11/30/1995 $18,800 $27,577 $31,615 $11,574 5.47% 5.25% -0.07%
-----------------------------------------------------------------------------------------------------------------
12/31/1995 $19,166 $27,878 $31,729 $11,566 1.09% 0.36% -0.07%
-----------------------------------------------------------------------------------------------------------------
01/31/1996 $19,555 $28,555 $32,278 $11,634 2.43% 1.73% 0.59%
-----------------------------------------------------------------------------------------------------------------
02/29/1996 $19,796 $28,827 $33,485 $11,671 0.95% 3.74% 0.32%
-----------------------------------------------------------------------------------------------------------------
03/31/1996 $19,754 $29,435 $33,891 $11,732 2.11% 1.21% 0.52%
-----------------------------------------------------------------------------------------------------------------
04/30/1996 $19,680 $29,685 $35,900 $11,778 0.85% 5.93% 0.39%
-----------------------------------------------------------------------------------------------------------------
05/31/1996 $20,239 $29,970 $36,974 $11,800 0.96% 2.99% 0.19%
-----------------------------------------------------------------------------------------------------------------
06/30/1996 $20,440 $30,003 $34,959 $11,807 0.11% -5.45% 0.06%
-----------------------------------------------------------------------------------------------------------------
07/31/1996 $19,784 $28,575 $31,966 $11,829 -4.76% -8.56% 0.19%
-----------------------------------------------------------------------------------------------------------------
08/31/1996 $20,239 $29,775 $34,296 $11,852 4.20% 7.29% 0.19%
-----------------------------------------------------------------------------------------------------------------
09/30/1996 $21,268 $30,868 $35,919 $11,890 3.67% 4.73% 0.32%
-----------------------------------------------------------------------------------------------------------------
10/31/1996 $21,916 $31,680 $34,902 $11,928 2.63% -2.83% 0.32%
-----------------------------------------------------------------------------------------------------------------
11/30/1996 $23,435 $33,669 $36,867 $11,951 6.28% 5.63% 0.19%
-----------------------------------------------------------------------------------------------------------------
12/31/1996 $23,655 $33,528 $36,381 $11,951 -0.42% -1.32% 0.00%
-----------------------------------------------------------------------------------------------------------------
01/31/1997 $24,119 $34,580 $37,436 $11,989 3.14% 2.90% 0.32%
-----------------------------------------------------------------------------------------------------------------
02/28/1997 $24,775 $35,165 $36,728 $12,026 1.69% -1.89% 0.31%
-----------------------------------------------------------------------------------------------------------------
03/31/1997 $24,003 $34,096 $34,484 $12,056 -3.04% -6.11% 0.25%
-----------------------------------------------------------------------------------------------------------------
04/30/1997 $24,604 $34,955 $35,663 $12,071 2.52% 3.42% 0.12%
-----------------------------------------------------------------------------------------------------------------
05/31/1997 $26,476 $37,014 $38,613 $12,063 5.89% 8.27% -0.06%
-----------------------------------------------------------------------------------------------------------------
06/30/1997 $27,416 $38,387 $39,952 $12,078 3.71% 3.47% 0.12%
-----------------------------------------------------------------------------------------------------------------
07/31/1997 $29,757 $41,235 $42,777 $12,092 7.42% 7.07% 0.12%
-----------------------------------------------------------------------------------------------------------------
08/31/1997 $29,144 $40,753 $42,448 $12,115 -1.17% -0.77% 0.19%
-----------------------------------------------------------------------------------------------------------------
09/30/1997 $30,647 $43,280 $45,241 $12,146 6.20% 6.58% 0.25%
-----------------------------------------------------------------------------------------------------------------
10/31/1997 $29,896 $41,964 $43,083 $12,176 -3.04% -4.77% 0.25%
-----------------------------------------------------------------------------------------------------------------
11/30/1997 $30,613 $43,378 $43,337 $12,169 3.37% 0.59% -0.06%
-----------------------------------------------------------------------------------------------------------------
12/31/1997 $31,308 $45,040 $43,705 $12,154 3.83% 0.85% -0.12%
-----------------------------------------------------------------------------------------------------------------
01/31/1998 $31,166 $44,166 $43,399 $12,177 -1.94% -0.70% 0.19%
-----------------------------------------------------------------------------------------------------------------
02/28/1998 $33,643 $47,116 $46,976 $12,200 6.68% 8.24% 0.19%
-----------------------------------------------------------------------------------------------------------------
03/31/1998 $34,570 $49,542 $47,727 $12,223 5.15% 1.60% 0.19%
-----------------------------------------------------------------------------------------------------------------
04/30/1998 $34,428 $49,265 $48,061 $12,245 -0.56% 0.70% 0.18%
-----------------------------------------------------------------------------------------------------------------
05/31/1998 $33,110 $48,117 $45,360 $12,267 -2.33% -5.62% 0.18%
-----------------------------------------------------------------------------------------------------------------
06/30/1998 $32,671 $48,271 $45,088 $12,282 0.32% -0.60% 0.12%
-----------------------------------------------------------------------------------------------------------------
07/31/1998 $31,560 $45,824 $42,410 $12,297 -5.07% -5.94% 0.12%
-----------------------------------------------------------------------------------------------------------------
08/31/1998 $26,547 $39,381 $33,805 $12,312 -14.06% -20.29% 0.12%
-----------------------------------------------------------------------------------------------------------------
09/30/1998 $27,874 $41,681 $35,478 $12,326 5.84% 4.95% 0.12%
-----------------------------------------------------------------------------------------------------------------
10/31/1998 $30,825 $44,382 $38,285 $12,356 6.48% 7.91% 0.24%
-----------------------------------------------------------------------------------------------------------------
11/30/1998 $31,939 $45,940 $40,497 $12,356 3.51% 5.78% 0.00%
-----------------------------------------------------------------------------------------------------------------
12/31/1998 $33,194 $47,336 $43,235 $12,349 3.04% 6.76% -0.06%
-----------------------------------------------------------------------------------------------------------------
01/31/1999 $31,446 $46,233 $42,219 $12,378 -2.33% -2.35% 0.24%
-----------------------------------------------------------------------------------------------------------------
02/28/1999 $30,332 $45,216 $38,850 $12,393 -2.20% -7.98% 0.12%
-----------------------------------------------------------------------------------------------------------------
03/31/1999 $30,138 $45,863 $39,538 $12,430 1.43% 1.77% 0.30%
-----------------------------------------------------------------------------------------------------------------
04/30/1999 $32,471 $50,206 $43,068 $12,521 9.47% 8.93% 0.73%
-----------------------------------------------------------------------------------------------------------------
05/31/1999 $32,810 $50,417 $43,917 $12,521 0.42% 1.97% 0.00%
-----------------------------------------------------------------------------------------------------------------
06/30/1999 $33,998 $50,991 $46,152 $12,521 1.14% 5.09% 0.00%
-----------------------------------------------------------------------------------------------------------------
07/31/1999 $33,446 $49,717 $45,898 $12,559 -2.50% -0.55% 0.30%
-----------------------------------------------------------------------------------------------------------------
08/31/1999 $32,044 $47,996 $44,085 $12,589 -3.46% -3.95% 0.24%
-----------------------------------------------------------------------------------------------------------------
09/30/1999 $30,184 $45,568 $43,490 $12,649 -5.06% -1.35% 0.48%
-----------------------------------------------------------------------------------------------------------------
10/31/1999 $30,454 $46,912 $44,964 $12,672 2.95% 3.39% 0.18%
-----------------------------------------------------------------------------------------------------------------
11/30/1999 $30,085 $46,054 $46,682 $12,680 -1.83% 3.82% 0.06%
-----------------------------------------------------------------------------------------------------------------
12/31/1999 $29,780 $47,288 $50,109 $12,680 2.68% 7.34% 0.00%
-----------------------------------------------------------------------------------------------------------------
01/31/2000 $28,361 $44,460 $45,549 $12,718 -5.98% -9.10% 0.30%
-----------------------------------------------------------------------------------------------------------------
02/29/2000 $28,268 $42,602 $49,930 $12,793 -4.18% 9.62% 0.59%
-----------------------------------------------------------------------------------------------------------------
03/31/2000 $30,684 $47,765 $53,775 $12,897 12.12% 7.70% 0.82%
-----------------------------------------------------------------------------------------------------------------
04/30/2000 $30,544 $47,956 $52,017 $12,905 0.40% -3.27% 0.06%
-----------------------------------------------------------------------------------------------------------------
05/31/2000 $31,055 $48,781 $50,493 $12,921 1.72% -2.93% 0.12%
-----------------------------------------------------------------------------------------------------------------
06/30/2000 $29,359 $46,961 $51,452 $12,988 -3.73% 1.90% 0.52%
-----------------------------------------------------------------------------------------------------------------
07/31/2000 $29,080 $48,060 $52,224 $13,018 2.34% 1.50% 0.23%
-----------------------------------------------------------------------------------------------------------------
08/31/2000 $30,768 $51,006 $56,156 $13,018 6.13% 7.53% 0.00%
-----------------------------------------------------------------------------------------------------------------
09/30/2000 $31,073 $51,496 $55,213 $13,085 0.96% -1.68% 0.52%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Past performance does not guarantee future results.
10
<PAGE>
CLASS B (1/1/99-9/30/00)
The following line graph compares the performance of the Franklin Rising
Dividends Fund's Class B shares to that of the Russell MidCap Value Index,
Wilshire Target MidCap Growth Index, and to the Consumer Price Index based on a
$10,000 investment from 1/1/99 to 9/30/00.
<TABLE>
<CAPTION>
DATE FRANKLIN RUSSELL MIDCAP WILSHIRE CPI RUSSELL WILSHIRE CONSUMER
RISING VALUE INDEX TARGET MIDCAP MIDCAP TARGET MIDCAP PRICE
DIVIDENDS GROWTH INDEX VALUE INDEX GROWTH $T INDEX NSA
FUND -
CLASS B
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
01/01/1999 $10,000 $10,000 $10,000 $10,000
01/31/1999 $9,473 $9,767 $9,765 $10,024 -2.33% -2.35% 0.24%
02/28/1999 $9,133 $9,552 $8,986 $10,036 -2.20% -7.98% 0.12%
03/31/1999 $9,075 $9,689 $9,145 $10,066 1.43% 1.77% 0.30%
04/30/1999 $9,774 $10,606 $9,961 $10,140 9.47% 8.93% 0.73%
05/31/1999 $9,867 $10,651 $10,158 $10,140 0.42% 1.97% 0.00%
06/30/1999 $10,222 $10,772 $10,675 $10,140 1.14% 5.09% 0.00%
07/31/1999 $10,051 $10,503 $10,616 $10,170 -2.50% -0.55% 0.30%
08/31/1999 $9,625 $10,140 $10,197 $10,194 -3.46% -3.95% 0.24%
09/30/1999 $9,063 $9,626 $10,059 $10,243 -5.06% -1.35% 0.48%
10/31/1999 $9,140 $9,910 $10,400 $10,262 2.95% 3.39% 0.18%
11/30/1999 $9,024 $9,729 $10,797 $10,268 -1.83% 3.82% 0.06%
12/31/1999 $8,930 $9,990 $11,590 $10,268 2.68% 7.34% 0.00%
01/31/2000 $8,498 $9,392 $10,535 $10,299 -5.98% -9.10% 0.30%
02/29/2000 $8,471 $9,000 $11,549 $10,360 -4.18% 9.62% 0.59%
03/31/2000 $9,194 $10,091 $12,438 $10,444 12.12% 7.70% 0.82%
04/30/2000 $9,147 $10,131 $12,031 $10,451 0.40% -3.27% 0.06%
05/31/2000 $9,291 $10,305 $11,679 $10,463 1.72% -2.93% 0.12%
06/30/2000 $8,780 $9,921 $11,901 $10,518 -3.73% 1.90% 0.52%
07/31/2000 $8,692 $10,153 $12,079 $10,542 2.34% 1.50% 0.23%
08/31/2000 $9,194 $10,775 $12,989 $10,542 6.13% 7.53% 0.00%
09/30/2000 $8,938 $10,879 $12,770 $10,597 0.96% -1.68% 0.52%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
9/30/00
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------
<S> <C>
1-Year -1.38%
Since Inception (1/1/99) -6.22%
</TABLE>
CLASS C (5/1/95-9/30/00)
The following line graph compares the performance of the Franklin Rising
Dividends Fund's Class C shares to that of the Russell MidCap Value Index,
Wilshire Target MidCap Growth Index, and to the Consumer Price Index based on a
$10,000 investment from 5/1/95 to 9/30/00.
<TABLE>
<CAPTION>
DATE FRANKLIN RUSSELL MIDCAP WILSHIRE CPI RUSSELL WILSHIRE CONSUMER
RISING VALUE INDEX TARGET MIDCAP MIDCAP TARGET MIDCAP PRICE
DIVIDENDS GROWTH INDEX VALUE GROWTH $T INDEX NSA
FUND -
CLASS C
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
05/01/1995 $9,897 $10,000 $10,000 $10,000
05/31/1995 $10,282 $10,402 $10,164 $10,020 4.02% 1.64% 0.20%
06/30/1995 $10,390 $10,642 $10,803 $10,040 2.31% 6.29% 0.20%
07/31/1995 $10,635 $11,014 $11,711 $10,040 3.49% 8.40% 0.00%
08/31/1995 $10,796 $11,230 $11,890 $10,066 1.96% 1.53% 0.26%
09/30/1995 $11,169 $11,487 $12,222 $10,086 2.29% 2.79% 0.20%
10/31/1995 $11,059 $11,263 $11,791 $10,120 -1.95% -3.52% 0.33%
11/30/1995 $11,622 $11,879 $12,411 $10,112 5.47% 5.25% -0.07%
12/31/1995 $11,842 $12,008 $12,455 $10,105 1.09% 0.36% -0.07%
01/31/1996 $12,076 $12,300 $12,671 $10,165 2.43% 1.73% 0.59%
02/29/1996 $12,219 $12,417 $13,145 $10,198 0.95% 3.74% 0.32%
03/31/1996 $12,184 $12,679 $13,304 $10,251 2.11% 1.21% 0.52%
04/30/1996 $12,125 $12,787 $14,093 $10,291 0.85% 5.93% 0.39%
05/31/1996 $12,471 $12,909 $14,514 $10,310 0.96% 2.99% 0.19%
06/30/1996 $12,591 $12,924 $13,723 $10,316 0.11% -5.45% 0.06%
07/31/1996 $12,180 $12,308 $12,548 $10,336 -4.76% -8.56% 0.19%
08/31/1996 $12,461 $12,825 $13,463 $10,356 4.20% 7.29% 0.19%
09/30/1996 $13,086 $13,296 $14,100 $10,389 3.67% 4.73% 0.32%
10/31/1996 $13,479 $13,646 $13,701 $10,422 2.63% -2.83% 0.32%
11/30/1996 $14,402 $14,503 $14,472 $10,442 6.28% 5.63% 0.19%
12/31/1996 $14,533 $14,442 $14,281 $10,442 -0.42% -1.32% 0.00%
01/31/1997 $14,818 $14,895 $14,695 $10,475 3.14% 2.90% 0.32%
02/28/1997 $15,209 $15,147 $14,417 $10,508 1.69% -1.89% 0.31%
03/31/1997 $14,735 $14,687 $13,537 $10,534 -3.04% -6.11% 0.25%
04/30/1997 $15,090 $15,057 $14,000 $10,547 2.52% 3.42% 0.12%
05/31/1997 $16,235 $15,944 $15,157 $10,540 5.89% 8.27% -0.06%
06/30/1997 $16,809 $16,535 $15,683 $10,553 3.71% 3.47% 0.12%
07/31/1997 $18,228 $17,762 $16,792 $10,565 7.42% 7.07% 0.12%
08/31/1997 $17,850 $17,554 $16,663 $10,586 -1.17% -0.77% 0.19%
09/30/1997 $18,761 $18,643 $17,759 $10,612 6.20% 6.58% 0.25%
10/31/1997 $18,293 $18,076 $16,912 $10,639 -3.04% -4.77% 0.25%
11/30/1997 $18,719 $18,685 $17,012 $10,632 3.37% 0.59% -0.06%
12/31/1997 $19,143 $19,401 $17,156 $10,619 3.83% 0.85% -0.12%
01/31/1998 $19,048 $19,024 $17,036 $10,640 -1.94% -0.70% 0.19%
02/28/1998 $20,552 $20,295 $18,440 $10,660 6.68% 8.24% 0.19%
03/31/1998 $21,114 $21,340 $18,735 $10,680 5.15% 1.60% 0.19%
04/30/1998 $21,019 $21,221 $18,866 $10,699 -0.56% 0.70% 0.18%
05/31/1998 $20,204 $20,726 $17,806 $10,719 -2.33% -5.62% 0.18%
06/30/1998 $19,926 $20,793 $17,699 $10,731 0.32% -0.60% 0.12%
07/31/1998 $19,238 $19,738 $16,648 $10,744 -5.07% -5.94% 0.12%
08/31/1998 $16,174 $16,963 $13,270 $10,757 -14.06% -20.29% 0.12%
09/30/1998 $16,983 $17,954 $13,927 $10,770 5.84% 4.95% 0.12%
10/31/1998 $18,764 $19,117 $15,029 $10,796 6.48% 7.91% 0.24%
11/30/1998 $19,437 $19,788 $15,897 $10,796 3.51% 5.78% 0.00%
12/31/1998 $20,188 $20,390 $16,972 $10,789 3.04% 6.76% -0.06%
01/31/1999 $19,120 $19,915 $16,573 $10,815 -2.33% -2.35% 0.24%
02/28/1999 $18,439 $19,477 $15,250 $10,828 -2.20% -7.98% 0.12%
03/31/1999 $18,312 $19,755 $15,520 $10,861 1.43% 1.77% 0.30%
04/30/1999 $19,718 $21,626 $16,906 $10,940 9.47% 8.93% 0.73%
05/31/1999 $19,908 $21,717 $17,239 $10,940 0.42% 1.97% 0.00%
06/30/1999 $20,622 $21,964 $18,117 $10,940 1.14% 5.09% 0.00%
07/31/1999 $20,277 $21,415 $18,017 $10,973 -2.50% -0.55% 0.30%
08/31/1999 $19,422 $20,674 $17,306 $10,999 -3.46% -3.95% 0.24%
09/30/1999 $18,289 $19,628 $17,072 $11,052 -5.06% -1.35% 0.48%
10/31/1999 $18,435 $20,207 $17,651 $11,072 2.95% 3.39% 0.18%
11/30/1999 $18,202 $19,837 $18,325 $11,079 -1.83% 3.82% 0.06%
12/31/1999 $18,014 $20,369 $19,670 $11,079 2.68% 7.34% 0.00%
01/31/2000 $17,142 $19,151 $17,880 $11,112 -5.98% -9.10% 0.30%
02/29/2000 $17,095 $18,350 $19,600 $11,177 -4.18% 9.62% 0.59%
03/31/2000 $18,550 $20,575 $21,109 $11,269 12.12% 7.70% 0.82%
04/30/2000 $18,465 $20,657 $20,419 $11,276 0.40% -3.27% 0.06%
05/31/2000 $18,756 $21,012 $19,821 $11,289 1.72% -2.93% 0.12%
06/30/2000 $17,723 $20,228 $20,197 $11,348 -3.73% 1.90% 0.52%
07/31/2000 $17,545 $20,702 $20,500 $11,374 2.34% 1.50% 0.23%
08/31/2000 $18,559 $21,971 $22,044 $11,374 6.13% 7.53% 0.00%
09/30/2000 $18,724 $22,182 $21,674 $11,433 0.96% -1.68% 0.52%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
9/30/00
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
<S> <C>
1-Year +0.45%
5-Year +10.67%
Since Inception (5/1/95) +12.27%
</TABLE>
*Source: Standard & Poor's Micropal.
The Russell MidCap Value Index measures the performance of those Russell MidCap
companies with lower price-to-book ratios and lower forecasted growth values.
The stocks are also members of the Russell 1000 Value index.
The Wilshire Target MidCap Growth Index consists of companies that overlay the
large and small company universes and are selected from company 501 to 1250 of
the Wilshire 5000. The market capitalization range is from approximately $4.5
billion to $650 million. Key variables used for the value portfolio screenings
include price/earnings ratio, price-to-book and yield.
Past performance does not guarantee future results.
11
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 21.28 $ 21.53 $ 26.93 $ 20.03 $ 17.31
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... .16 .15 .13 .16 .28
Net realized and unrealized gains (losses) ..... .40 1.76 (2.22) 8.23 2.78
-------------------------------------------------------------------------------
Total from investment operations ................ .56 1.91 (2.09) 8.39 3.06
-------------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (.15) (.17) (.11) (.18) (.34)
Net realized gains ............................. (1.67) (1.99) (3.20) (1.31) --
-------------------------------------------------------------------------------
Total distributions ............................. (1.82) (2.16) (3.31) (1.49) (.34)
-------------------------------------------------------------------------------
Net asset value, end of year .................... $ 20.02 $ 21.28 $ 21.53 $ 26.93 $ 20.03
===============================================================================
Total return(b) ................................. 2.95% 8.29% (9.05)% 44.10% 17.83%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 261,571 $ 363,918 $ 407,336 $ 394,873 $ 277,746
Ratios to average net assets:
Expenses ....................................... 1.58% 1.43% 1.39% 1.41% 1.40%
Net investment income .......................... .81% .66% .51% .71% 1.49%
Portfolio turnover rate ......................... 11.91% 14.04% 23.99% 39.47% 31.55%
</TABLE>
(a)Based on average shares outstanding effective year ended September 30, 1999.
(b)Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
12
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
---------------------
YEAR ENDED
SEPTEMBER 30,
2000 1999(d)
---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................. $21.23 $23.54
---------------------
Income from investment operations:
Net investment income(a) ........................... .06 .04
Net realized and unrealized gains (losses) ......... .39 (2.24)
---------------------
Total from investment operations .................... .45 (2.20)
---------------------
Less distributions from:
Net investment income .............................. (.05) (.11)
Net realized gains ................................. (1.67) --
---------------------
Total distributions ................................. (1.72) (.11)
---------------------
Net asset value, end of year ........................ $19.96 $21.23
=====================
Total return(b) ..................................... 2.38% (9.38)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $1,684 $1,477
Ratios to average net assets:
Expenses ........................................... 2.13% 1.98%(c)
Net investment income .............................. .27% .24%(c)
Portfolio turnover rate ............................. 11.91% 14.04%
</TABLE>
(a) Based on average shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Annualized
(d) For the period January 1, 1999 (effective date) to September 30, 1999.
13
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 21.19 $ 21.45 $ 26.85 $ 19.98 $ 17.28
--------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ......................... .06 .03 -- .08 .21
Net realized and unrealized gains (losses) ....... .39 1.75 (2.20) 8.17 2.74
--------------------------------------------------------------------------
Total from investment operations .................. .45 1.78 (2.20) 8.25 2.95
--------------------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.05) (.05) -- (.07) (.25)
Net realized gains ............................... (1.67) (1.99) (3.20) (1.31) --
--------------------------------------------------------------------------
Total distributions ............................... (1.72) (2.04) (3.20) (1.38) (.25)
--------------------------------------------------------------------------
Net asset value, end of year ...................... $ 19.92 $ 21.19 $ 21.45 $ 26.85 $ 19.98
==========================================================================
Total return(b) ................................... 2.38% 7.69% (9.48)% 43.37% 17.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................... $ 23,870 $ 40,544 $ 43,790 $ 14,526 $ 3,882
Ratios to average net assets:
Expenses ......................................... 2.07% 1.98% 1.94% 1.95% 1.95%
Net investment income (loss) ..................... .30% .11% (.05)% .17% .94%
Portfolio turnover rate ........................... 11.91% 14.04% 23.99% 39.47% 31.55%
</TABLE>
(a) Based on average shares outstanding effective year ended September 30, 1999.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
14
See notes to financial statements.
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.4%
COMMERCIAL SERVICES 1.1%
Wallace Computer Services Inc. ....................... 197,000 $ 3,004,250
-----------
CONSUMER DURABLES 5.1%
Leggett & Platt Inc. ................................. 678,100 10,722,456
Newell Rubbermaid Inc. ............................... 165,600 3,777,750
-----------
14,500,206
-----------
CONSUMER NON-DURABLES 11.4%
Alberto-Culver Co., A ................................ 496,900 12,453,556
Block Drug Co. Inc., A ............................... 171,074 7,377,566
Lancaster Colony Corp. ............................... 164,900 4,050,356
Philip Morris Cos. Inc. .............................. 96,500 2,840,719
Universal Corp. ...................................... 209,600 6,157,000
-----------
32,879,197
-----------
ELECTRONIC TECHNOLOGY 5.3%
Cohu Inc. ............................................ 541,800 8,296,313
Diebold Inc. ......................................... 261,800 6,954,063
-----------
15,250,376
-----------
ENERGY MINERALS 1.9%
Royal Dutch Petroleum Co., N.Y. shs. (Netherlands) ... 89,700 5,376,394
-----------
FINANCE 17.9%
Mercantile Bankshares Corp. .......................... 169,950 6,168,654
National Commerce Bancorp ............................ 521,300 10,393,419
State Street Corp. ................................... 66,200 8,606,000
Trustco Bank Corp., N.Y. shs. ........................ 397,446 4,893,554
U.S. Bancorp ......................................... 210,200 4,782,050
Washington Mutual Inc. ............................... 297,600 11,848,200
Wilmington Trust Corp. ............................... 89,200 4,783,350
-----------
51,475,227
-----------
GOVERNMENT SPONSORED CORPORATION 1.3%
Fannie Mae ........................................... 52,800 3,775,200
-----------
HEALTH TECHNOLOGY 8.9%
Becton, Dickinson & Co. .............................. 101,200 2,675,475
Pall Corp. ........................................... 392,300 7,821,481
Superior Uniform Group Inc. .......................... 230,200 1,740,888
West Pharmaceutical Services Inc. .................... 571,300 13,282,725
-----------
25,520,569
-----------
MULTI-LINE INSURANCE 2.0%
American International Group Inc. .................... 59,577 5,700,774
-----------
NON-ENERGY MINERALS 1.2%
Nucor Corp. .......................................... 111,900 3,370,988
-----------
PROCESS INDUSTRIES 8.1%
Bemis Co. Inc. ....................................... 255,300 8,201,513
Brady Corp., A ....................................... 81,700 2,471,425
</TABLE>
15
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2000 (CONT.)
<TABLE>
<CAPTION>
SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
PROCESS INDUSTRIES (CONT.)
Donaldson Co. Inc. ................................................................. 68,900 $ 1,515,800
Myers Industries Inc. .............................................................. 480,577 6,097,321
PolyOne Corp. ...................................................................... 158,400 1,158,300
Sherwin-Williams Co. ............................................................... 182,100 3,892,388
------------
23,336,747
------------
PRODUCER MANUFACTURING 16.5%
Baldor Electric Co. ................................................................ 326,766 6,637,434
CIRCOR International Inc. .......................................................... 220,300 2,271,844
Dover Corp. ........................................................................ 188,400 8,843,025
General Electric Co. ............................................................... 15,800 911,463
Graco Inc. ......................................................................... 170,300 5,492,175
Kaydon Corp. ....................................................................... 272,600 6,269,800
Kimball International Inc., B ...................................................... 145,300 2,597,238
Superior Industries International Inc. ............................................. 151,200 4,536,000
Teleflex Inc. ...................................................................... 272,400 9,363,750
Watts Industries Inc., A ........................................................... 47,700 477,000
------------
47,399,729
------------
PROPERTY-CASUALTY INSURERS 4.0%
Harleysville Group Inc. ............................................................ 75,300 1,431,877
Mercury General Corp. .............................................................. 133,800 3,788,213
RLI Corp. .......................................................................... 164,262 6,334,353
------------
11,554,443
------------
RETAIL TRADE 8.8%
Family Dollar Stores Inc. .......................................................... 1,025,900 19,748,570
The Limited Inc. ................................................................... 153,410 3,384,608
Schultz Sav-O Stores Inc. .......................................................... 184,900 2,022,344
------------
25,155,522
------------
TECHNOLOGY SERVICES 3.9%
Reynolds & Reynolds Co., A ......................................................... 568,900 11,306,888
------------
TOTAL COMMON STOCKS (COST $232,929,473) ............................................ 279,606,510
------------
(a) SHORT TERM INVESTMENTS 2.1%
Franklin Institutional Fiduciary Trust Money Market Portfolio (COST $5,947,008) .... 5,947,008 5,947,008
------------
TOTAL INVESTMENTS (COST $238,876,481) 99.5% ........................................ 285,553,518
OTHER ASSETS, LESS LIABILITIES .5% ................................................. 1,571,327
------------
NET ASSETS 100.0% .................................................................. $287,124,845
============
</TABLE>
(a)The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed
by Franklin Advisers Inc.
See notes to financial statements.
16
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ............................................................................................. $ 238,876,481
=============
Value ............................................................................................ 285,553,518
Receivables:
Investment securities sold ....................................................................... 2,300,585
Capital shares sold .............................................................................. 85,658
Dividends and interest ........................................................................... 458,001
-------------
Total assets ................................................................................. 288,397,762
-------------
Liabilities:
Payables:
Capital shares redeemed .......................................................................... 510,377
Affiliates ....................................................................................... 452,900
Shareholders ..................................................................................... 196,734
Other liabilities ................................................................................. 112,906
-------------
Total liabilities ............................................................................ 1,272,917
-------------
Net assets, at value ........................................................................ $ 287,124,845
=============
Net assets consist of:
Undistributed net investment income ............................................................... $ 509,498
Net unrealized appreciation ....................................................................... 46,677,037
Accumulated net realized loss ..................................................................... (1,994,194)
Capital shares .................................................................................... 241,932,504
-------------
Net assets, at value ........................................................................ $ 287,124,845
=============
CLASS A:
Net asset value per share* ($261,570,794 / 13,067,415 shares outstanding) ......................... $ 20.02
=============
Maximum offering price per share ($20.02 / 94.25%) ................................................ $ 21.24
=============
CLASS B:
Net asset value and maximum offering price per share* ($1,684,116 / 84,360 shares outstanding) .... $ 19.96
=============
CLASS C:
Net asset value per share* ($23,869,935 / 1,198,449 shares outstanding) ........................... $ 19.92
=============
Maximum offering price per share ($19.92 / 99.00%) ................................................ $ 20.12
=============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
17
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Investment income:
(net of foreign taxes and fees of $18,597)
Dividends ................................................. $ 7,743,523
Interest .................................................. 142,953
-----------
Total investment income .............................. 7,886,476
-----------
Expenses:
Management fees (Note 3) .................................. 2,471,863
Distribution fees (Note 3)
Class A .................................................. 1,333,341
Class B .................................................. 15,818
Class C .................................................. 277,199
Transfer agent fees (Note 3) .............................. 902,502
Accounting fees (Note 3) .................................. 40,000
Custodian fees ............................................ 1,265
Reports to shareholders ................................... 144,015
Registration and filing fees .............................. 47,713
Professional fees (Note 3) ................................ 100,245
Trustees' fees and expenses ............................... 18,143
Other ..................................................... 17,269
-----------
Total expenses ....................................... 5,369,373
-----------
Net investment income ............................... 2,517,103
-----------
Realized and unrealized gains (losses):
Net realized loss from investments ........................ (706,049)
Net unrealized appreciation on investments ................ 3,602,886
-----------
Net realized and unrealized gain ........................... 2,896,837
-----------
Net increase in net assets resulting from operations ....... $ 5,413,940
===========
</TABLE>
See notes to financial statements.
18
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
-------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ......................................... $ 2,517,103 $ 2,862,389
Net realized gain (loss) from investments ..................... (706,049) 29,517,292
Net unrealized appreciation on investments .................... 3,602,886 8,111,808
-------------------------------
Net increase in net assets resulting from operations ...... 5,413,940 40,491,489
Distributions to shareholders from:
Net investment income:
Class A ...................................................... (2,286,347) (3,135,285)
Class B ...................................................... (4,239) (3,328)
Class C ...................................................... (74,219) (101,566)
Net realized gains:
Class A ...................................................... (27,626,225) (36,887,240)
Class B ...................................................... (125,676) --
Class C ...................................................... (2,881,817) (4,228,827)
-------------------------------
Total distributions to shareholders ............................ (32,998,523) (44,356,246)
Capital share transactions: (Note 2)
Class A ...................................................... (77,576,033) (40,213,823)
Class B ...................................................... 299,574 1,601,916
Class C ...................................................... (13,952,588) (2,710,610)
-------------------------------
Total capital share transactions ............................... (91,229,047) (41,322,517)
Net decrease in net assets ................................ (118,813,630) (45,187,274)
Net assets:
Beginning of year .............................................. 405,938,475 451,125,749
-------------------------------
End of year .................................................... $ 287,124,845 $ 405,938,475
===============================
Undistributed net investment income included in net assets:
End of year .................................................... $ 509,498 $ 356,764
===============================
</TABLE>
See notes to financial statements.
19
<PAGE>
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 a diversified, open-end investment company, consisting of one
fund, the Franklin Rising Dividends Fund (the Fund). The Fund 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 business trust 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.
20
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST
The Fund offers three classes of shares: Class A, Class B and Class C. Each
class of shares differs by its initial sales load, distribution fees, voting
rights on matters affecting a single class and its exchange privilege.
At September 30, 2000, 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,
----------------------------------------------------------------
2000 1999*
----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------
CLASS A SHARES:
<S> <C> <C> <C> <C>
Shares sold ........................................ 3,156,540 $ 62,357,789 4,288,915 $ 98,522,630
Shares issued in reinvestment of distributions ..... 1,321,454 25,622,053 1,507,550 34,188,280
Shares redeemed .................................... (8,509,483) (165,555,875) (7,615,475) (172,924,733)
----------------------------------------------------------------
Net decrease ....................................... (4,031,489) $ (77,576,033) (1,819,010) $ (40,213,823)
================================================================
CLASS B SHARES:
Shares sold ........................................ 39,937 $ 784,493 70,665 $ 1,626,168
Shares issued in reinvestment of distributions ..... 6,198 119,917 131 2,962
Shares redeemed .................................... (31,319) (604,836) (1,252) (27,214)
----------------------------------------------------------------
Net increase ....................................... 14,816 $ 299,574 69,544 $ 1,601,916
================================================================
CLASS C SHARES:
Shares sold ........................................ 245,683 $ 4,822,593 869,142 $ 19,694,412
Shares issued in reinvestment of distributions ..... 136,866 2,641,358 172,643 3,899,442
Shares redeemed .................................... (1,097,777) (21,416,539) (1,169,620) (26,304,464)
----------------------------------------------------------------
Net decrease ....................................... (715,228) $ (13,952,588) (127,835) $ (2,710,610)
================================================================
</TABLE>
*For the period January 1, 1999 (effective date) to September 30, 1999, for
Class B.
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:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
--------------------------------------------------------------------------------
<S> <C>
.750% First $500 million
.625% Over $500 million, up to and including $1 billion
.500% In excess of $1 billion
</TABLE>
21
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
Management fees were reduced on assets invested in the Franklin Institutional
Fiduciary Trust Money Market Portfolio.
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 $49,573 and $23,575,
respectively.
The Fund paid transfer agent fees of $902,502, of which $620,895 was paid to
Investor Services.
Included in professional fees are legal fees of $78,735 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.
4. INCOME TAXES
At September 30, 2000, the Fund had tax basis capital losses of $290,324, which
may be carried over to offset future capital gains. Such losses expire in 2008.
At September 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $240,580,351 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation ........ $ 72,974,983
Unrealized depreciation ........ (28,001,816)
------------
Net unrealized appreciation .... $ 44,973,167
============
</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 year
ended September 30, 2000, aggregated $38,587,077 and $162,424,571, respectively.
22
<PAGE>
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 statement 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, 2000, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the 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 misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 2000, 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
Franklin Rising Dividends Fund at September 30, 2000, 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 2, 2000
23
<PAGE>
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
Tax Designation
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
100% of ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended September 30, 2000.
24
