ANNUAL REPORT
FRANKLIN EQUITY FUND
June 30, 1998
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
Conrad B. Herrmann
Portfolio Manager
Franklin Equity Fund
Contents
Shareholder Letter................................................ 1
Performance Summaries
Class I.......................................................... 5
Class II......................................................... 8
Advisor Class.................................................... 11
Financial Highlights &
Statement of Investments ........................................ 14
Financial Statements ............................................ 21
Notes to
Financial Statements.............................................. 24
Independent
Auditor's Report.................................................. 27
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 17 of
this report
SHAREHOLDER LETTER
Your Fund's Objective: Franklin Equity Fund seeks capital appreciation and
secondarily, current income, by investing primarily in common stocks or
securities convertible into common stocks.
Dear Shareholder:
We are pleased to bring you this report for Franklin Equity Fund covering the
fiscal year ended June 30, 1998. During this period, the ongoing currency crisis
in Asia caused periodic turbulence in global equity markets. However, as of June
30, this crisis had not significantly affected the U.S. or European economies.
U.S. gross domestic product grew at an estimated 3.5% rate, while the consumer
price index increased only +1.7%. With European conditions also bright, stock
prices in many developed markets ended the year at, or near, record high levels.
Within this environment, Franklin Equity Fund - Class I shares provided a
+22.43% one-year total return, as shown in the Performance Summary on page 5,
outperforming the Dow Jones(R) Industrial Average, which posted a return of
+18.73%. The Standard & Poor's(R) 500 (S&P 500(R)) stock index delivered a
return of +30.16% for the same period.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Holdings from several diverse industries contributed to the fund's positive
performance. The price of our stock in Cisco Systems, Inc., which supplies most
of the devices that regulate the flow of data over the Internet, increased 105%
during the fund's fiscal year and shares of Owens-Illinois, Inc., a leading
global producer of glass and plastic containers, rose 44%. Stock prices of the
advertising agency Omnicom Inc., Providian Financial Corp., and the computer
game software developer Electronic Arts, Inc., increased 61%, 144%, and 60%,
respectively.
Due to anticipated cost savings and more complete product lines, several
corporate mergers and acquisitions involving companies in our portfolio also
contributed to the fund's performance. The price of our stock in U.S.A. Waste
Services, Inc. increased when it merged with Waste Management Corp. to create
the largest waste disposal company in the country; our holdings in Citicorp and
Travelers Group, Inc. benefited from their proposal to combine into a financial
services powerhouse; and our shares in Tellabs, Inc. and CIENA Corp. increased
in price after the announcement that they will combine to produce high-speed
fiber optic telecommunications transmission equipment.
Of course, not every holding performed well. During the reporting period, prices
for several of the fund's technology-related stocks performed below
expectations. Examples include Xilinx, Inc., a leading provider of
custom-programmed semiconductors, and Motorola, Inc., a world leader in wireless
communications systems. Although weak demand from Asian countries affected these
companies, we believe they still have solid long-term growth prospects. In fact,
we remained overweighted in the technology sector because of its potential for
tremendous growth through ongoing changes in computing and communications.
During the period under review, prices declined dramatically for many natural
resource commodities such as crude oil, exerting downward pressure on a number
of stocks in the oilfield services sector and oil exploration and production
industry. This enabled the fund to initiate additional positions in EVI
Weatherford, Inc. and Varco International, Inc., two manufacturers of oilfield
equipment. The former is a leading supplier of oilfield tools and equipment, and
the latter is a leading supplier of oil drilling rigs for offshore deepwater
locations. Oil producers have become more interested in exploring these areas as
a result of operating economics and improved surveying technology.
Looking forward, we are bullish about the domestic market's prospects. An aging
"baby-boom" generation has fostered increased awareness about investing for
retirement, which should provide positive money flows into the capital markets.
And a growing global economy could continue to provide worldwide growth and
productivity opportunities for many domestic firms. Of course, the U.S. equity
market does face at least two potential pitfalls. First, the Asian crisis could
begin to affect U.S. and European economic growth, causing a slowdown in
corporate profits to spread from technology companies to the rest of the
economy. Second, the current, low U.S. unemployment rate could lead to wage
inflation, which might pressure the Federal Reserve to tighten monetary policy.
We believe that Franklin Equity Fund, while not immune to slowing growth and
turmoil in Asia, is positioned so that it may weather any volatility better than
the overall market. The fund has a lower weighted average price/earnings ratio
than that of the S&P 500 (based on an average of analysts' estimates of next
year's earnings), but the weighted average estimated earnings growth rate of our
portfolio is higher than the estimate of earnings growth for the S&P 500 as
estimated by the same analysts. In our opinion, the fund's lower valuation
ratios should provide reduced downside risk, while the higher earnings growth
may provide relatively high returns over the long run.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Please remember, this discussion reflects our views and opinions as of June 30,
1998, the end of the reporting period.
Of course, market and economic conditions are changing constantly, which may
affect our strategies and portfolio holdings. Although historic performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
As always, we thank you for your participation in Franklin Equity Fund and look
forward to serving your investment needs in the years to come. We welcome any
comments or suggestions you may have.
Sincerely,
Conrad B. Herrmann
Portfolio Manager
Franklin Equity Fund
PERFORMANCE SUMMARY
Class I
Franklin Equity Fund - Class I reported a +22.43% cumulative total return for
the one-year period ended June 30, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include the sales charge. The fund's share price, as measured by
net asset value, increased 83 cents, from $10.16 on June 30, 1997, to $10.99 on
June 30, 1998. During the reporting period, shareholders received per-share
distributions of 5.5 cents ($0.055) in income dividends, 14.95 cents ($0.1495)
in short-term capital gains, and $1.0965 in long-term capital gains.
Distributions will vary depending on income earned by the fund and any profits
realized from the sale of securities in the portfolio, as well as the level of
the fund's operating expenses.
The graph on page 6 compares the performance of Franklin Equity Fund - Class I
to that of the Standard and Poor's 500 Stock Index (S&P 500) over the past ten
years. The S&P 500 is a domestic, broad market index consisting of various-sized
companies. Of course, such unmanaged market indices have inherent performance
differentials over any fund. They do not pay management fees to cover salaries
of securities analysts or portfolio managers, or pay commissions or market
spreads to buy and sell securities. Unlike an index, mutual funds are never 100%
invested because they need cash on hand to redeem shares. In addition, the
performance shown for the fund includes the maximum initial sales charge, all
fund expenses and account fees. If operating expenses such as the fund's had
been applied to the index, its performance would have been lower. Please
remember that an index is simply a measure of performance, and one cannot invest
in it directly.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Class I
Periods ended 6/30/98
1-Year 5-Year 10-Year
Cumulative Total Return1 22.43% 134.77% 234.31%
Average Annual Total Return2 16.90% 18.61% 12.83%
Value of $10,000 Investment3 $11,690 $23,477 $33,431
6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
One-Year Total Return4 2.32% 23.78% 22.16% 29.75% 22.43%
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.5%
initial sales charge. Prior to July 1, 1994, Class I shares were offered at a
lower initial sales charge, with dividends reinvested at the offering price;
thus actual total returns would differ.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include the sales charge. Prior to July 1,
1994, Class I shares were offered at a lower initial sales charge, with
dividends reinvested at the offering price; thus actual total returns would
differ.
4. One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charge.
Effective May 1, 1994, the fund eliminated the sales charge on reinvested
dividends and implemented a Rule 12b-1 plan, which affects subsequent
performance.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, and you may have a gain or loss
when you sell your shares.
Franklin Equity Fund - Class I paid distributions derived from long-term capital
gains of $1.0965 per share in December 1997. The fund hereby designates such
distributions as capital gain dividends per Section 852 (b)(3) of the Internal
Revenue Code.
Class II
Franklin Equity Fund - Class II reported a +21.47% cumulative total return for
the one-year period ended June 30, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include sales charges. The fund's share price, as measured by net
asset value, increased 79 cents, from $10.12 on June 30, 1997, to $10.91 on June
30, 1998. During the reporting period, shareholders received per-share
distributions of 14.95 cents ($0.1495) in short-term capital gains and $1.0965
in long-term capital gains. Distributions will vary depending on income earned
by the fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the fund's operating expenses.
The graph on page 10 compares the performance of Franklin Equity Fund - Class II
to that of the Standard and Poor's 500 Stock Index (S&P 500) over the past three
years. The S&P 500 is a domestic, broad market index consisting of various-sized
companies. Of course, such unmanaged market indices have inherent performance
differentials over any fund. They do not pay management fees to cover salaries
of securities analysts or portfolio managers, or pay commissions or market
spreads to buy and sell securities. Unlike an index, mutual funds are never 100%
invested because they need cash on hand to redeem shares. In addition, the
performance shown for the fund includes the maximum initial sales charge, all
fund expenses and account fees. If operating expenses such as the fund's had
been applied to the index, its performance would have been lower. Please
remember that an index is simply a measure of performance, and one cannot invest
in it directly.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Class II
Periods ended 6/30/98
Since
Inception
1-Year 3-Year (5/1/95)
Cumulative Total Return1 21.47% 89.39% 107.53%
Average Annual Total Return2 19.29% 23.33% 25.53%
Value of $10,000 Investment3 $11,929 $18,758 $20,537
6/30/96 6/30/97 6/30/98
One-Year Total Return4 20.94% 28.93% 21.47%
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge applicable to shares
redeemed within 18 months of investment.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include all sales charges.
4. One-year total return represents the change in value of an investment over
the periods ended on the dates indicated and does not include the sales charges.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares.
Franklin Equity Fund - Class II paid distributions derived from long-term
capital gains of $1.0965 per share in December 1997. The fund hereby designates
such distributions as capital gain dividends per Section 852 (b)(3) of the
Internal Revenue Code.
Advisor Class
Franklin Equity Fund - Advisor Class reported a +22.61% cumulative total return
for the one-year period ended June 30, 1998. Cumulative total return measures
the change in value of an investment, assuming reinvestment of all
distributions. The fund's share price, as measured by net asset value, increased
83 cents, from $10.17 on June 30, 1997, to $11.00 on June 30, 1998. During the
reporting period, shareholders received per-share distributions of 7.22 cents
($0.0722) in income dividends, 14.95 cents ($0.1495) in short-term capital
gains, and $1.0965 in long-term capital gains. Distributions will vary depending
on income earned by the fund and any profits realized from the sale of
securities in the portfolio, as well as the level of the fund's operating
expenses.
The graph on page 12 compares the performance of Franklin Equity Fund - Advisor
Class to that of the Standard and Poor's 500 (S&P 500) Stock Index over the past
ten years. The S&P 500 is a domestic, broad market index consisting of
various-sized companies. Of course, such unmanaged market indices have inherent
performance differentials over any fund. They do not pay management fees to
cover salaries of securities analysts or portfolio managers, or pay commissions
or market spreads to buy and sell securities. Unlike an index, mutual funds are
never 100% invested because they need cash on hand to redeem shares. In
addition, the performance shown for the fund includes the maximum initial sales
charge, all fund expenses and account fees. If operating expenses such as the
fund's had been applied to the index, its performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Advisor Class
Periods ended 6/30/98
1-Year* 5-Year* 10-Year*
Cumulative Total Return1 22.61% 146.61% 251.03%
Average Annual Total Return1 22.61% 19.79% 13.38%
Value of $10,000 Investment*,2 $12,261 $24,661 $35,103
6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
One-Year Total Return*, 32.32% 23.78% 22.16% 29.99% 22.61%
*On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the fund's Class I performance, excluding the effect of the Class I sales
charge, but including the effect of Class I expenses, such as 12b-1 fees; and
(b) for periods after January 1, 1997, figures reflect actual Advisor Class
performance including the deduction of all fees and expenses applicable only to
that class. Since January 2, 1997, (commencement of sales), the cumulative total
return of Advisor Class shares was 45.25%. This was a period of generally rising
securities prices.
1. Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated.
2. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated.
3. One-year total return represents the change in value of an investment over
the periods ended on the indicated dates. All calculations assume reinvestment
of dividends and capital gains at net asset value. Since markets can go down as
well as up, investment return and principal value will fluctuate with market
conditions. You may have a gain or loss when you sell your shares.
Franklin Equity Fund - Advisor Class paid distributions derived from long-term
capital gains of $1.0965 per share in December 1997. The fund hereby designates
such distributions as capital gain dividends per Section 852 (b)(3) of the
Internal Revenue Code.
Past performance is not predictive of future results.
FRANKLIN EQUITY FUND
Financial Highlights
<TABLE>
<CAPTION>
Class I
---------------------------------------------------------
Year Ended June 30,
---------------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $10.16 $ 8.26 $7.24 $6.53 $7.25
---------------------------------------------------------
Income from investment operations:
Net investment income ............................ .05 .05 .06 .08 .10
Net realized and unrealized gains ................ 2.08 2.34 1.48 1.33 .11
---------------------------------------------------------
Total from investment operations .................. 2.13 2.39 1.54 1.41 .21
---------------------------------------------------------
Less distributions from:
Net investment income ............................ (.05) (.06) (.06) (.08) (.10)
Net realized gains ............................... (1.25) (.43) (.46) (.62) (.83)
----------------------------------------------------------
Total distributions ............................... (1.30) (.49) (.52) (.70) (.93)
----------------------------------------------------------
Net asset value, end of year ...................... $10.99 $10.16 $8.26 $7.24 $6.53
=========================================================
Total return* ..................................... 22.43% 29.75% 22.16% 23.78% 2.32%
Ratios/supplemental data
Net assets, end of year (000's) ................... $613,835 $462,972 $366,602 $317,463 $279,880
Ratios to average net assets:
Expenses ......................................... .90% .91% .95% .95% .79%
Net investment income ............................ .48% .61% .72% 1.21% 1.27%
Portfolio turnover rate ........................... 38.00% 53.67% 59.86% 86.20% 95.18%
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at the offering price.
Class II
---------------------------------------------
Year Ended June 30,
---------------------------------------------
1998 1997 1996 1995+
---------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................... $10.12 $ 8.23 $7.24 $6.65
---------------------------------------------
Income from investment operations:
Net investment income (loss) ................................ (.01) (.02) .02 .01
Net realized and unrealized gains ........................... 2.05 2.34 1.45 .62
---------------------------------------------
Total from investment operations ............................. 2.04 2.32 1.47 .63
---------------------------------------------
Less distributions from:
Net investment income ....................................... -- -- (.02) (.04)
Net realized gains .......................................... (1.25) (.43) (.46) --
---------------------------------------------
Total distributions .......................................... (1.25) (.43) (.48) (.04)
---------------------------------------------
Net asset value, end of year ................................. $10.91 $10.12 $8.23 $7.24
=============================================
Total return* ................................................ 21.47% 28.93% 20.94% 9.42%
Ratios/supplemental data
Net assets, end of year (000's) .............................. $35,717 $9,554 $4,208 $342
Ratios to average net assets:
Expenses .................................................... 1.69% 1.72% 1.77% 1.77%**
Net investment income (loss) ................................ (.28%) (.22%) (.10%) .74%**
Portfolio turnover rate ...................................... 38.00% 53.67% 59.86% 86.20%
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
+For the period May 1, 1995 (effective date) to June 30, 1995.
Advisor Class
--------------------------
Year Ended June 30,
--------------------------
1998 1997++
--------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ............................................. $10.17 $ 8.62
--------------------------
Income from investment operations:
Net investment income ......................................................... .07 .03
Net realized and unrealized gains ............................................. 2.08 1.56
--------------------------
Total from investment operations ............................................... 2.15 1.59
--------------------------
Less distributions from:
Net investment income ......................................................... (.07) (.04)
Net realized gains ............................................................ (1.25) --
--------------------------
Total distributions ............................................................ (1.32) (.04)
--------------------------
Net asset value, end of year ................................................... $11.00 $10.17
==========================
Total return* .................................................................. 22.61% 18.47%
Ratios/supplemental data
Net assets, end of year (000's) ................................................ $16,911 $6,890
Ratios to average net assets:
Expenses ...................................................................... .69% .72%**
Net investment income ......................................................... .71% .79%**
Portfolio turnover rate ........................................................ 38.00% 53.67%
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
++For the period January 2, 1997 (effective date) to June 30, 1997.
See notes to financial statements.
FRANKLIN EQUITY FUND
Statement of Investments, June 30, 1998
SHARES VALUE
<S> <C> <C>
Common Stocks 93.4%
Consumer Durables 1.5%
Mattel, Inc............................................................ 225,000 $ 9,520,313
-------------
Consumer Non-Durables 7.0%
ConAgra, Inc........................................................... 200,000 6,337,500
Gillette Co. .......................................................... 130,000 7,369,375
Nike, Inc., Class B.................................................... 115,000 5,599,063
PepsiCo, Inc........................................................... 150,000 6,178,125
Philip Morris Cos., Inc................................................ 170,000 6,693,750
Procter & Gamble Co. .................................................. 80,000 7,285,000
Sara Lee Corp. ........................................................ 125,000 6,992,188
-------------
46,455,001
-------------
Consumer Services .9%
a CapStar Hotel Co. ..................................................... 225,000 6,300,000
-------------
Electronic Technology 18.6%
a 3Com Corp. ............................................................ 200,000 6,137,500
a Adaptec, Inc........................................................... 150,000 2,146,875
a Altera Corp. .......................................................... 110,582 3,269,080
a Amkor Technology, Inc.................................................. 150,000 1,401,570
a Applied Materials, Inc................................................. 125,000 3,687,500
a CIENA Corp. ........................................................... 150,000 10,443,750
a Cisco Systems, Inc..................................................... 200,000 18,412,500
Intel Corp. ........................................................... 140,000 10,377,500
a Komag, Inc............................................................. 450,000 2,404,710
a L-3 Communications Holdings, Inc....................................... 50,000 1,634,375
Linear Technology Corp. ............................................... 75,000 4,523,438
Lockheed Martin Corp. ................................................. 47,305 5,008,417
a Loral Space & Communications, Ltd...................................... 300,000 8,475,000
Lucent Technologies, Inc............................................... 100,000 8,318,750
Motorola, Inc.......................................................... 85,000 4,467,813
Nokia Corp., ADR (Finland)............................................. 120,000 8,707,500
a RELTEC Corp. .......................................................... 51,200 2,304,000
a Tekelec ............................................................... 100,000 4,475,000
a Tellabs, Inc........................................................... 100,000 7,162,500
a Uniphase Corp. ........................................................ 90,000 5,650,317
a Xilinx, Inc............................................................ 150,000 5,100,000
-------------
124,108,095
-------------
Energy Minerals 6.0%
a Barrett Resources Corp. ............................................... 225,000 8,423,438
Mobil Corp. ........................................................... 100,000 7,662,500
Texaco, Inc............................................................ 125,000 7,460,938
Ultramar Diamond Shamrock Corp. ....................................... 250,000 7,890,625
YPF, SA, ADR (Argentina)............................................... 275,000 8,267,188
-------------
39,704,689
-------------
Finance 16.6%
Ace, Ltd............................................................... 125,000 $ 4,875,000
American International Group, Inc...................................... 75,000 10,950,000
ARM Financial Group, Inc., Class A..................................... 100,000 2,212,500
Associates First Capital Corp. ........................................ 125,000 9,609,375
BankBoston Corp. ...................................................... 150,000 8,343,750
Citicorp .............................................................. 30,000 4,477,500
Espirito Santo Financial Group, ADR (Luxembourg)....................... 400,000 9,750,000
a Federated Investors, Inc., Class B..................................... 350,000 6,475,000
FelCor Suite Hotels, Inc............................................... 150,000 4,706,250
a Heller Financial, Inc.................................................. 37,500 1,125,000
Household International, Inc........................................... 75,000 3,731,250
Life Re Corp. ......................................................... 47,000 3,854,000
Providian Financial Corp. ............................................. 125,000 9,820,313
a Security Capital Group, Inc., Class B.................................. 150,000 3,993,750
Starwood Hotels & Resorts ............................................. 150,000 7,246,875
Travelers Group, Inc................................................... 115,000 6,971,875
U.S. Bancorp .......................................................... 195,000 8,385,000
Washington Mutual, Inc................................................. 93,750 4,072,266
-------------
110,599,704
-------------
Health Services 1.3%
HBO & Co. ............................................................. 250,000 8,812,500
-------------
Health Technology 7.9%
Baxter International, Inc.............................................. 125,000 6,726,563
Bristol-Myers Squibb Co. .............................................. 70,000 8,045,625
a ESC Medical Systems, Ltd............................................... 250,000 8,437,500
Mentor Corp. .......................................................... 187,900 4,556,575
Novartis, AG (Switzerland) ............................................ 5,000 8,320,148
Roche Holdings, AG (Switzerland) ...................................... 700 6,874,011
a Serologicals Corp. .................................................... 200,000 6,450,000
a Shire Pharmaceuticals Group, Plc., ADR (United Kingdom)................ 152,700 3,263,963
-------------
52,674,385
-------------
Industrial Services 4.7%
a AES Corp. ............................................................. 250,000 13,140,625
a American Disposal Services ............................................ 140,000 6,562,500
a U.S.A. Waste Services, Inc............................................. 100,000 4,937,500
a Varco International, Inc............................................... 275,000 5,448,438
Waste Management, Inc.................................................. 35,000 1,225,000
-------------
31,314,063
-------------
Non-Energy Minerals 2.5%
Carpenter Technology Corp. ............................................ 150,000 7,537,500
De Beers Cons Mines, ADR (South Africa)................................ 300,000 5,250,000
a Ispat International, NV (Netherlands).................................. 200,000 3,750,000
-------------
16,537,500
-------------
Process Industries 2.9%
Crown Cork & Seal Co., Inc............................................. 75,000 $ 3,562,500
a Owens-Illinois, Inc.................................................... 200,000 8,950,000
Praxair, Inc........................................................... 150,000 7,021,875
-------------
19,534,375
-------------
Producer Manufacturing 2.7%
a Atchison Casting Corp. ................................................ 75,000 1,340,625
a EVI Weatherford, Inc................................................... 175,000 6,496,875
Mark IV Industries, Inc................................................ 262,500 5,676,563
Roper Industries, Inc.................................................. 150,000 3,918,750
a U.S. Filter Corp. ..................................................... 29,300 822,231
-------------
18,255,044
-------------
Retail Trade .4%
a Consolidated Stores Corp. ............................................. 75,000 2,718,750
-------------
Technology Services 8.4%
Adobe Systems, Inc..................................................... 100,000 4,243,750
a Electronic Arts, Inc................................................... 175,000 9,450,000
a i2 Technologies, Inc................................................... 200,000 7,025,000
a Oracle Corp. .......................................................... 150,000 3,684,375
a Parametric Technology Corp. ........................................... 225,000 6,103,125
SAP, AG (Germany)...................................................... 25,000 15,166,205
a Synopsys, Inc.......................................................... 215,000 9,836,250
a Unigraphics Solutions, Inc............................................. 20,700 289,800
-------------
55,798,505
-------------
Transportation 4.1%
Air Express International Corp. ....................................... 300,000 8,025,000
C.H. Robinson Worldwide, Inc........................................... 274,500 6,828,188
Expeditors International of Washington, Inc............................ 150,000 6,600,000
Southwest Airlines Co. ................................................ 202,500 5,999,063
-------------
27,452,251
-------------
Utilities & Telecommunications 7.9%
a AirTouch Communications, Inc........................................... 200,000 11,687,500
Enron Corp. ........................................................... 225,000 12,164,063
GTE Corp. ............................................................. 75,000 4,171,875
a Paging Network, Inc.................................................... 500,000 7,000,000
PG & E Corp. .......................................................... 125,000 3,945,313
Portugal Telecommunications, SA (Portugal)............................. 175,000 9,274,840
a STET Hellas Telecommunications, SA, ADR (Greece)....................... 41,000 1,701,500
TECO Energy, Inc....................................................... 100,000 2,681,250
-------------
....................................................................... 52,626,341
-------------
Total Common Stocks (Cost $424,415,660) 622,411,516
-------------
Convertible Bonds 1.8%
Omnicom Group, Inc. sub. notes, 4.25%, 1/03/07 ........................ $ 2,000,000 $ 3,337,500
Omnicom Group, Inc. sub. notes, 144A 4.25%, 1/03/07 ................... 2,000,000 3,322,500
U.S. Filter Corp., sub. notes, 4.50%, 12/15/01 ........................ 5,200,000 5,310,500
-------------
Total Convertible Bonds (Cost $9,995,140).............................. 11,970,500
-------------
b Repurchase Agreement 5.6%
Joint Repurchase Agreement, 5.614%, 7/01/98,
(Maturity Value $37,556,177) (Cost $37,550,321)........................... 37,550,321 37,550,321
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
Bear, Stearns Securities Corp.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner, Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $471,961,121) 100.8%........................... 671,932,337
Other Assets, less Liabilities (.8%)................................... (5,469,311)
-------------
Total Net Assets: 100.0%............................................... $666,463,026
=============
aNon-income producing.
bInvestment is through participation in a joint account with other funds managed
by the investment advisor. At June 30, 1998, all repurchase agreements had been
entered into on that date.
See notes to financial statements.
FRANKLIN EQUITY FUND
Financial Statements
Statement of Assets and Liabilities
June 30, 1998
<S> <C>
Assets:
Investments in securities, at value (cost $471,961,121) ................................... $671,932,337
Cash ...................................................................................... 828,973
Receivables:
Investment securities sold ............................................................... 2,061,161
Capital shares sold ...................................................................... 582,251
Dividends and interest ................................................................... 477,251
-------------
Total assets ......................................................................... 675,881,973
-------------
Liabilities:
Payables:
Investment securities purchased .......................................................... 893,831
Capital shares redeemed .................................................................. 94,799
Affiliates ............................................................................... 605,167
Shareholders ............................................................................. 773,150
Payable upon return of securities loaned (Note 6) ......................................... 7,000,000
Other liabilities ......................................................................... 52,000
-------------
Total liabilities .................................................................... 9,418,947
-------------
Net assets, at value ................................................................ $666,463,026
=============
Net assets consist of:
Undistributed net investment income ....................................................... $--
Net unrealized appreciation ............................................................... 199,971,216
Accumulated net realized gain ............................................................. 36,407,655
Capital shares ............................................................................ 430,084,155
-------------
Net assets, at value ................................................................. $666,463,026
=============
Class I:
Net asset value per share ($613,835,217 / 55,832,059 shares outstanding)* ................. $10.99
=============
Maximum offering price per share ($10.99 / 95.5%) ......................................... $11.51
=============
Class II:
Net asset value per share ($35,716,958 / 3,273,565 shares outstanding)* ................... $10.91
=============
Maximum offering price per share ($10.91 / 99.0%) ......................................... $11.02
=============
Advisor Class:
Net asset value and maximum offering price per share
($16,910,851 / 1,537,562 shares outstanding) ............................................... $11.00
=============
*Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
Statement of Operations
for the year ended June 30, 1998
<S> <C> <C>
Investment income:
(Net of foreign taxes of $141,967)
Dividends .................................................................... $ 5,327,245
Interest ..................................................................... 2,682,061
------------
Total investment income ................................................. $ 8,009,306
Expenses:
Management fees (Note 3) ..................................................... 2,894,330
Distribution fees (Note 3)
Class I ..................................................................... 1,143,410
Class II .................................................................... 193,215
Transfer agent fees (Note 3) ................................................. 741,808
Custodian fees ............................................................... 31,095
Reports to shareholders ...................................................... 182,801
Registration and filing fees ................................................. 75,141
Professional fees ............................................................ 43,829
Directors' fees and expenses ................................................. 23,057
Other ........................................................................ 14,683
------------
Total expenses .......................................................... 5,343,369
--------------
Net investment income .................................................. 2,665,937
--------------
Realized and unrealized gains:
Net realized gain from:
Investments ................................................................. 45,937,802
Foreign currency transactions ............................................... 18,318
------------
Net realized gain ....................................................... 45,956,120
Net unrealized appreciation on investments ................................... 64,966,613
--------------
Net realized and unrealized gain .............................................. 110,922,733
--------------
Net increase in net assets resulting from operations .......................... $113,588,670
==============
Statements of Changes in Net Assets
for the years ended June 30, 1998 and 1997
1998 1997
---------------------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income ..................................................... $ 2,665,937 $ 2,459,947
Net realized gain from investments and foreign currency transactions ...... 45,956,120 53,832,495
Net unrealized appreciation on investments ................................ 64,966,613 52,251,082
---------------------------
Net increase in net assets resulting from operations .................. 113,588,670 108,543,524
Distributions to shareholders from:
Net investment income:
Class I ................................................................... (2,815,157) (2,742,841)
Class II .................................................................. -- (499)
Advisor Class ............................................................. (101,907) (13,857)
Net realized gains:
Class I ................................................................... (59,592,831) (19,328,932)
Class II .................................................................. (1,764,595) (302,817)
Advisor Class ............................................................. (1,486,880) --
---------------------------
Total distributions to shareholders ........................................ (65,761,370) (22,388,946)
Capital share transactions: (Note 2)
Class I ................................................................... 105,330,108 12,024,439
Class II .................................................................. 24,428,866 3,888,815
Advisor Class ............................................................. 9,460,338 6,538,415
---------------------------
Total capital share transactions ........................................... 139,219,312 22,451,669
Net increase in net assets ............................................ 187,046,612 108,606,247
Net assets:
Beginning of year .......................................................... 479,416,414 370,810,167
---------------------------
End of year ................................................................ $666,463,026 $479,416,414
===========================
</TABLE>
See notes to financial statements.
FRANKLIN EQUITY FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Equity Fund (the Fund) is registered under the Investment Company Act
of 1940 as a diversified, open-end investment company. The Fund seeks to provide
capital growth. 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 Directors.
b. Foreign Currency Translation:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. 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 all of its taxable income.
d. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. 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.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
The Fund offers three classes of shares: Class I, Class II and Advisor Class.
The shares have the same rights except for their initial sales load,
distribution fees, voting rights on matters affecting a single class and the
exchange privilege of each class.
At June 30, 1998, there were 5 billion shares authorized (no par value), of
which 2 billion shares each were designated as Class I and Class II, and 1
billion shares were designated as Advisor Class. Transactions in the Fund's
shares were as follows:
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------------------
1998 1997
-------------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold ..................................... 22,473,770 $238,141,732 12,390,036 $ 110,637,538
Shares issued on reinvestment of distributions .. 5,802,636 57,378,546 2,264,152 20,354,201
Shares redeemed ................................. (17,998,114) (190,190,170) (13,503,886) (118,967,300)
-------------------------------------------------------
Net increase .................................... 10,278,292 $ 105,330,108 1,150,302 $ 12,024,439
=======================================================
Class II Shares
Shares sold ..................................... 3,076,695 $ 32,410,808 709,987 $ 6,305,367
Shares issued on reinvestment of distributions .. 162,921 1,603,453 30,191 268,397
Shares redeemed ................................. (910,495) (9,585,395) (307,006) (2,684,949)
-------------------------------------------------------
Net increase .................................... 2,329,121 $ 24,428,866 433,172 $ 3,888,815
=======================================================
Advisor Class Shares*
Shares sold ..................................... 1,602,804 $ 17,239,578 732,158 $ 7,035,865
Shares issued on reinvestment of distributions .. 160,504 1,588,337 1,393 13,857
Shares redeemed ................................. (903,282) (9,367,577) (56,015) (511,307)
-------------------------------------------------------
Net increase .................................... 860,026 $ 9,460,338 677,536 $ 6,538,415
=======================================================
</TABLE>
*Effective date of Advisor Class shares was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin Templeton Services, Inc. (FT
Services), Franklin/Templeton Distributors, Inc. (Distributors), and
Franklin/Templeton Investor Services, Inc. (Investor Services), the Fund's
investment manager, administrative manager, principal underwriter and transfer
agent, respectively.
The Fund pays an investment management fee to Advisers based on the average net
assets of the Fund as follows:
Annualized
Fee Rate Month-End Net Assets
-------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
3. TRANSACTIONS WITH AFFILIATES (cont.)
The Fund reimburses Distributors up to .25% and 1.00% per year of its average
daily net assets of Class I and Class II, respectively, for costs incurred in
marketing the Fund's shares.
Distributors paid net commissions on sales of Fund shares, and received
contingent deferred sales charges for the year of $138,630 and $9,399,
respectively.
4. INCOME TAXES
At June 30, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes of $472,238,229 was as follows:
Unrealized appreciation ........ $215,722,502
Unrealized depreciation ........ (16,028,394)
Net unrealized appreciation .... $199,694,108
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions. Net realized
capital gains differ for financial statement and tax purposes primarily due to
differing treatment of foreign currency transactions and wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended June 30, 1998 aggregated $296,899,712 and $206,459,590, respectively.
6. LENDING OF PORTFOLIO SECURITIES
The Fund loans securities to certain brokers for which it receives cash
collateral against the loaned securities in an amount equal to at least 102% of
the market value of the loaned securities. Net interest income from the
investment of the cash collateral received was $327,714 for the year ended June
30,1998. The value of the loaned securities was $6,496,875 at June 30, 1998.
FRANKLIN EQUITY FUND
Independent Auditor's Report
To the Shareholders and Board of Directors
of Franklin Equity Fund:
We have audited the accompanying statement of assets and liabilities of the
Franklin Equity Fund (the Fund), including the Fund's statement of investments,
as of June 30, 1998, and the related statement 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
presented. These financial statements and financial highlights are the
responsibility of the Fund'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 June
30, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Equity Fund as of June 30, 1998, 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 its financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
August 5, 1998
FRANKLIN EQUITY FUND
Tax Information
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $30,426,840 as a 20% capital gain dividend for the fiscal year ended
June 30, 1998.
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
36.20% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended June 30, 1998.
GRAPHIC MATERIAL (1)
This chart shows, in pie format, the sector distribution of total net assets
for the Franklin Equity Fund, as of June 30, 1998.
Electronic Technology 18.6%
Finance 16.6%
Technology Services 8.4%
Health Technology 7.9%
Utilities 7.9%
Consumer Non-Durables 7.0%
Other Sectors 28.8%
Short-Term Investments & Other Net Assets 4.8%
100.0%
GRAPHIC MATERIAL (2)
This chart shows the top ten holdings of the Franklin Equity Fund, including
company name and industry, as of June 30, 1998, based on total net assets.
% OF TOTAL
COMPANY, INDUSTRY NET ASSETS
Cisco Systems, Inc. 2.8%
ELECTRONIC TECHNOLOGY
SAP AG (Germany) 2.3%
TECHNOLOGY SERVICES
AES Corp. 2.0%
INDUSTRIAL SERVICES
Enron Corp. 1.8%
UTILITIES
AirTouch Communications, Inc. 1.8%
UTILITIES & TELECOMMUNICATIONS
American International Group, Inc. 1.6%
FINANCE
CIENA Corp. 1.6%
ELECTRONIC TECHNOLOGY
Intel Corp. 1.6%
ELECTRONIC TECHNOLOGY
Synopsys, Inc. 1.5%
TECHNOLOGY SERVICES
Providian Financial Corp. 1.5%
FINANCE
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the
Franklin Equity Fund - Class I to that of the S&P 500 Stock Index, based on a
$10,000 investment from July 1, 1988 to June 30, 1998.
DATE FRANKLIN S&P 500 500
EQUITY FUND Composite $T
- CLASS I
6/30/88 $9,556 $10,000
7/31/88 $9,384 $9,962 -0.38%
8/31/88 $8,934 $9,623 -3.40%
9/30/88 $9,339 $10,033 4.26%
10/31/88 $9,556 $10,312 2.78%
11/30/88 $9,281 $10,165 -1.43%
12/31/88 $9,541 $10,343 1.75%
1/31/89 $10,177 $11,100 7.32%
2/28/89 $9,985 $10,823 -2.49%
3/31/89 $10,118 $11,075 2.33%
4/30/89 $10,547 $11,650 5.19%
5/31/89 $11,006 $12,122 4.05%
6/30/89 $10,665 $12,053 -0.57%
7/31/89 $11,376 $13,141 9.03%
8/31/89 $11,910 $13,399 1.96%
9/30/89 $11,605 $13,344 -0.41%
10/31/89 $10,857 $13,034 -2.32%
11/30/89 $10,963 $13,300 2.04%
12/31/89 $11,174 $13,620 2.40%
1/31/90 $10,433 $12,706 -6.71%
2/28/90 $10,638 $12,870 1.29%
3/31/90 $11,142 $13,211 2.65%
4/30/90 $10,701 $12,882 -2.49%
5/31/90 $11,631 $14,138 9.75%
6/30/90 $11,430 $14,043 -0.67%
7/31/90 $11,350 $13,998 -0.32%
8/31/90 $9,932 $12,733 -9.04%
9/30/90 $9,278 $12,113 -4.87%
10/31/90 $8,832 $12,060 -0.43%
11/30/90 $9,645 $12,840 6.46%
12/31/90 $10,172 $13,198 2.79%
1/31/91 $11,223 $13,773 4.36%
2/28/91 $11,951 $14,758 7.15%
3/31/91 $12,096 $15,115 2.42%
4/30/91 $12,032 $15,151 0.24%
5/31/91 $12,662 $15,804 4.31%
6/30/91 $11,997 $15,081 -4.58%
7/31/91 $12,339 $15,783 4.66%
8/31/91 $12,584 $16,157 2.37%
9/30/91 $12,372 $15,888 -1.67%
10/31/91 $12,225 $16,100 1.34%
11/30/91 $11,655 $15,452 -4.03%
12/31/91 $12,890 $17,219 11.44%
1/31/92 $12,960 $16,899 -1.86%
2/29/92 $13,201 $17,117 1.29%
3/31/92 $12,787 $16,783 -1.95%
4/30/92 $12,718 $17,277 2.94%
5/31/92 $12,683 $17,361 0.49%
6/30/92 $12,410 $17,103 -1.49%
7/31/92 $12,741 $17,802 4.09%
8/31/92 $12,532 $17,437 -2.05%
9/30/92 $12,689 $17,641 1.17%
10/31/92 $12,672 $17,701 0.34%
11/30/92 $13,212 $18,303 3.40%
12/31/92 $13,353 $18,528 1.23%
1/31/93 $13,447 $18,684 0.84%
2/28/93 $13,223 $18,938 1.36%
3/31/93 $13,633 $19,337 2.11%
4/30/93 $13,242 $18,869 -2.42%
5/31/93 $13,633 $19,373 2.67%
6/30/93 $13,602 $19,429 0.29%
7/31/93 $13,414 $19,352 -0.40%
8/31/93 $14,033 $20,085 3.79%
9/30/93 $13,827 $19,931 -0.77%
10/31/93 $14,277 $20,343 2.07%
11/30/93 $14,540 $20,150 -0.95%
12/31/93 $14,492 $20,394 1.21%
1/31/94 $14,916 $21,087 3.40%
2/28/94 $14,959 $20,516 -2.71%
3/31/94 $14,131 $19,621 -4.36%
4/30/94 $14,280 $19,872 1.28%
5/31/94 $14,195 $20,198 1.64%
6/30/94 $13,918 $19,703 -2.45%
7/31/94 $14,109 $20,350 3.28%
8/31/94 $14,685 $21,184 4.10%
9/30/94 $14,386 $20,667 -2.44%
10/31/94 $14,621 $21,132 2.25%
11/30/94 $14,280 $20,363 -3.64%
12/31/94 $14,292 $20,664 1.48%
1/31/95 $14,292 $21,199 2.59%
2/28/95 $14,812 $22,026 3.90%
3/31/95 $15,380 $22,676 2.95%
4/30/95 $15,735 $23,343 2.94%
5/31/95 $16,374 $24,276 4.00%
6/30/95 $17,228 $24,840 2.32%
7/31/95 $17,942 $25,664 3.32%
8/31/95 $18,061 $25,728 0.25%
9/30/95 $18,703 $26,814 4.22%
10/31/95 $18,275 $26,718 -0.36%
11/30/95 $18,822 $27,890 4.39%
12/31/95 $18,999 $28,429 1.93%
1/31/96 $19,431 $29,395 3.40%
2/29/96 $19,761 $29,669 0.93%
3/31/96 $19,761 $29,954 0.96%
4/30/96 $20,777 $30,394 1.47%
5/31/96 $21,183 $31,178 2.58%
6/30/96 $21,046 $31,296 0.38%
7/31/96 $19,619 $29,913 -4.42%
8/31/96 $20,485 $30,544 2.11%
9/30/96 $21,861 $32,264 5.63%
10/31/96 $22,065 $33,154 2.76%
11/30/96 $23,849 $35,661 7.56%
12/31/96 $23,362 $34,955 -1.98%
1/31/97 $24,916 $37,140 6.25%
2/28/97 $24,112 $37,429 0.78%
3/31/97 $23,362 $35,891 -4.11%
4/30/97 $24,594 $38,034 5.97%
5/31/97 $26,657 $40,350 6.09%
6/30/97 $27,307 $42,157 4.48%
7/31/97 $29,538 $45,513 7.96%
8/31/97 $28,705 $42,964 -5.60%
9/30/97 $30,640 $45,319 5.48%
10/31/97 $29,189 $43,805 -3.34%
11/30/97 $29,457 $45,833 4.63%
12/31/97 $29,581 $46,622 1.72%
1/31/98 $29,581 $47,139 1.11%
2/28/98 $31,980 $50,538 7.21%
3/31/98 $33,043 $53,126 5.12%
4/30/98 $33,711 $53,662 1.01%
5/31/98 $32,253 $52,739 -1.72%
6/30/98 $33,431 $54,880 4.06%
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the
Franklin Equity Fund - Class II to that of the S&P 500 Stock Index, based on
a $10,000 investment from July 1, 1988 to June 30, 1998.
DATE FRANKLIN S&P 500 500
EQUITY FUND Composite $T
- CLASS II
5/1/95 $9,896 $10,000
5/31/95 $10,298 $10,400 4.00%
6/30/95 $10,843 $10,641 2.32%
7/31/95 $11,262 $10,995 3.32%
8/31/95 $11,322 $11,022 0.25%
9/30/95 $11,726 $11,487 4.22%
10/31/95 $11,457 $11,446 -0.36%
11/30/95 $11,786 $11,948 4.39%
12/31/95 $11,901 $12,179 1.93%
1/31/96 $12,156 $12,593 3.40%
2/29/96 $12,363 $12,710 0.93%
3/31/96 $12,347 $12,832 0.96%
4/30/96 $12,968 $13,021 1.47%
5/31/96 $13,223 $13,357 2.58%
6/30/96 $13,113 $13,407 0.38%
7/31/96 $12,221 $12,815 -4.42%
8/31/96 $12,747 $13,085 2.11%
9/30/96 $13,607 $13,822 5.63%
10/31/96 $13,719 $14,203 2.76%
11/30/96 $14,818 $15,277 7.56%
12/31/96 $14,501 $14,975 -1.98%
1/31/97 $15,453 $15,911 6.25%
2/28/97 $14,969 $16,035 0.78%
3/31/97 $14,484 $15,376 -4.11%
4/30/97 $15,236 $16,294 5.97%
5/31/97 $16,506 $17,286 6.09%
6/30/97 $16,907 $18,060 4.48%
7/31/97 $18,260 $19,498 7.96%
8/31/97 $17,742 $18,406 -5.60%
9/30/97 $18,928 $19,415 5.48%
10/31/97 $17,993 $18,766 -3.34%
11/30/97 $18,176 $19,635 4.63%
12/31/97 $18,240 $19,973 1.72%
1/31/98 $18,221 $20,195 1.11%
2/28/98 $19,690 $21,651 7.21%
3/31/98 $20,330 $22,759 5.12%
4/30/98 $20,725 $22,989 1.01%
5/31/98 $19,803 $22,594 -1.72%
6/30/98 $20,537 $23,511 4.06%
GRAPHIC MATERIAL (5)
The following line graph hypothetically compares the performance of the
Franklin Equity Fund - Advisor Class to that of the S&P 500 Stock Index,
based on a $10,000 investment from July 1, 1988 to June 30, 1998.
DATE FRANKLIN S&P 500 500
EQUITY FUND - Composite $T
ADV CLASS
7/1/88 $10,000 $10,000
7/31/88 $9,820 $9,962 -0.38%
8/31/88 $9,350 $9,623 -3.40%
9/30/88 $9,773 $10,033 4.26%
10/31/88 $10,000 $10,312 2.78%
11/30/88 $9,713 $10,165 -1.43%
12/31/88 $9,985 $10,343 1.75%
1/31/89 $10,650 $11,100 7.32%
2/28/89 $10,449 $10,823 -2.49%
3/31/89 $10,588 $11,075 2.33%
4/30/89 $11,037 $11,650 5.19%
5/31/89 $11,517 $12,122 4.05%
6/30/89 $11,161 $12,053 -0.57%
7/31/89 $11,904 $13,141 9.03%
8/31/89 $12,464 $13,399 1.96%
9/30/89 $12,144 $13,344 -0.41%
10/31/89 $11,361 $13,034 -2.32%
11/30/89 $11,473 $13,300 2.04%
12/31/89 $11,693 $13,620 2.40%
1/31/90 $10,918 $12,706 -6.71%
2/28/90 $11,132 $12,870 1.29%
3/31/90 $11,660 $13,211 2.65%
4/30/90 $11,198 $12,882 -2.49%
5/31/90 $12,171 $14,138 9.75%
6/30/90 $11,961 $14,043 -0.67%
7/31/90 $11,878 $13,998 -0.32%
8/31/90 $10,393 $12,733 -9.04%
9/30/90 $9,709 $12,113 -4.87%
10/31/90 $9,242 $12,060 -0.43%
11/30/90 $10,093 $12,840 6.46%
12/31/90 $10,645 $13,198 2.79%
1/31/91 $11,745 $13,773 4.36%
2/28/91 $12,506 $14,758 7.15%
3/31/91 $12,658 $15,115 2.42%
4/30/91 $12,591 $15,151 0.24%
5/31/91 $13,251 $15,804 4.31%
6/30/91 $12,555 $15,081 -4.58%
7/31/91 $12,913 $15,783 4.66%
8/31/91 $13,169 $16,157 2.37%
9/30/91 $12,947 $15,888 -1.67%
10/31/91 $12,794 $16,100 1.34%
11/30/91 $12,196 $15,452 -4.03%
12/31/91 $13,490 $17,219 11.44%
1/31/92 $13,562 $16,899 -1.86%
2/29/92 $13,815 $17,117 1.29%
3/31/92 $13,381 $16,783 -1.95%
4/30/92 $13,309 $17,277 2.94%
5/31/92 $13,273 $17,361 0.49%
6/30/92 $12,987 $17,103 -1.49%
7/31/92 $13,334 $17,802 4.09%
8/31/92 $13,115 $17,437 -2.05%
9/30/92 $13,279 $17,641 1.17%
10/31/92 $13,261 $17,701 0.34%
11/30/92 $13,826 $18,303 3.40%
12/31/92 $13,974 $18,528 1.23%
1/31/93 $14,072 $18,684 0.84%
2/28/93 $13,837 $18,938 1.36%
3/31/93 $14,267 $19,337 2.11%
4/30/93 $13,857 $18,869 -2.42%
5/31/93 $14,267 $19,373 2.67%
6/30/93 $14,234 $19,429 0.29%
7/31/93 $14,038 $19,352 -0.40%
8/31/93 $14,686 $20,085 3.79%
9/30/93 $14,470 $19,931 -0.77%
10/31/93 $14,941 $20,343 2.07%
11/30/93 $15,216 $20,150 -0.95%
12/31/93 $15,166 $20,394 1.21%
1/31/94 $15,610 $21,087 3.40%
2/28/94 $15,654 $20,516 -2.71%
3/31/94 $14,788 $19,621 -4.36%
4/30/94 $14,943 $19,872 1.28%
5/31/94 $14,855 $20,198 1.64%
6/30/94 $14,564 $19,703 -2.45%
7/31/94 $14,765 $20,350 3.28%
8/31/94 $15,367 $21,184 4.10%
9/30/94 $15,055 $20,667 -2.44%
10/31/94 $15,300 $21,132 2.25%
11/30/94 $14,944 $20,363 -3.64%
12/31/94 $14,956 $20,664 1.48%
1/31/95 $14,956 $21,199 2.59%
2/28/95 $15,501 $22,026 3.90%
3/31/95 $16,095 $22,676 2.95%
4/30/95 $16,466 $23,343 2.94%
5/31/95 $17,135 $24,276 4.00%
6/30/95 $18,028 $24,840 2.32%
7/31/95 $18,775 $25,664 3.32%
8/31/95 $18,900 $25,728 0.25%
9/30/95 $19,572 $26,814 4.22%
10/31/95 $19,124 $26,718 -0.36%
11/30/95 $19,697 $27,890 4.39%
12/31/95 $19,882 $28,429 1.93%
1/31/96 $20,334 $29,395 3.40%
2/29/96 $20,679 $29,669 0.93%
3/31/96 $20,679 $29,954 0.96%
4/30/96 $21,743 $30,394 1.47%
5/31/96 $22,168 $31,178 2.58%
6/30/96 $22,024 $31,296 0.38%
7/31/96 $20,531 $29,913 -4.42%
8/31/96 $21,438 $30,544 2.11%
9/30/96 $22,877 $32,264 5.63%
10/31/96 $23,091 $33,154 2.76%
11/30/96 $24,957 $35,661 7.56%
12/31/96 $24,448 $34,955 -1.98%
1/31/97 $26,074 $37,140 6.25%
2/28/97 $25,261 $37,429 0.78%
3/31/97 $24,476 $35,891 -4.11%
4/30/97 $25,765 $38,034 5.97%
5/31/97 $27,924 $40,350 6.09%
6/30/97 $28,630 $42,157 4.48%
7/31/97 $30,938 $45,513 7.96%
8/31/97 $30,094 $42,964 -5.60%
9/30/97 $32,121 $45,319 5.48%
10/31/97 $30,601 $43,805 -3.34%
11/30/97 $30,910 $45,833 4.63%
12/31/97 $31,011 $46,622 1.72%
1/31/98 $31,043 $47,139 1.11%
2/28/98 $33,527 $50,538 7.21%
3/31/98 $34,673 $53,126 5.12%
4/30/98 $35,373 $53,662 1.01%
5/31/98 $33,813 $52,739 -1.72%
6/30/98 $35,103 $54,880 4.06%
