The Investment
Strategy Pyramid
As a Valuemark contract owner, you can invest in up to nine investment options
at one time. When selecting an option, there are two things you may wish to
consider: 1) your investment objective; and 2) the degree of risk with which you
can feel comfortable. Before you make these decisions, you may want to consider
the investment strategy pyramid pictured below. The base of the pyramid
represents investments emphasizing stability and preservation of capital. Moving
up the pyramid, the categories reflect a greater focus on potential investment
return -- categories that generally entail a greater degree of investment risk
as well. Of course, you should review the prospectus for more information about
a specific option.
Precious Metals Fund
Small Cap Fund*
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton Pacific Growth Fund
Growth and Income Fund Capital Growth
Income Securities Fund Growth and Income
Real Estate Securities Fund Income
Rising Dividends Fund Capital Preservation and Income
Templeton Global Asset
Allocation Fund
Utility Equity Fund
Adjustable U.S. Government Fund
Global Income Fund
High Income Fund
Investment Grade Intermediate
Bond Fund
U.S. Government Securities
Fund
Three Zero Coupon Funds
maturing in 2000, 2005, 2010
Money Market Fund
*As of December 31, 1995, the Small Cap Fund is available in Washington, D.C.
and all states except California.
+Formerly Equity Growth Fund.
Table of Contents Page
Letter to Contract Owners 2
Franklin Valuemark Unit Prices 5
The Franklin Valuemark Funds
Funds Seeking Capital Growth
Precious Metals Fund 10
Small Cap Fund 11
Templeton Developing Markets
Equity Fund 11
Templeton Global Growth Fund 12
Templeton International Equity Fund 13
Templeton Pacific Growth Fund 14
Funds Seeking Growth and Income
Growth and Income Fund 14
Income Securities Fund 15
Real Estate Securities Fund 16
Rising Dividends Fund 18
Templeton Global Asset Allocation Fund 19
Utility Equity Fund 19
Funds Seeking Current Income
Adjustable U.S. Government Fund 20
Global Income Fund 21
High Income Fund 22
Investment Grade
Intermediate Bond Fund 22
U.S. Government Securities Fund 23
Zero Coupon Funds 24
Fund Seeking Capital Preservation and Income
Money Market Fund 24
Fund Index Comparisons 25
Index Definitions 33
Allianz Life Variable Account A
Financial Statements and Notes 35
Franklin Valuemark Funds
Statement of Investments 58
Financial Statements and Notes 132
For service regarding your contract, please contact your investment
representative. You may also call 1-800/624-0197 for specific account
information, or 1-800/342-FUND for portfolio inquiries. To ensure the highest
quality of service, telephone calls to or from a Valuemark service center may be
monitored, recorded and accessed. These calls can be determined by the presence
of a regular beeping tone.
LETTER TO CONTRACT OWNERS
February 15, 1996
Dear Contract Owner:
This annual report covers the 12 months ended December 31, 1995, the fiscal year
for Franklin ValuemarkSM Life, Allianz ValueLife, and the Franklin Valuemark
Funds.
We introduced two new Valuemark funds over the reporting period. On May 1, 1995,
we added the Templeton Global Asset Allocation Fund. This fund seeks a high
level of total return by allocating investments among three asset classes:
global equities, global debt obligations and global money market instruments.
The Franklin Valuemark Small Cap Fund debuted in Franklin ValuemarkSM Life on
November 1, 1995. This fund seeks long-term capital growth by investing
primarily in the equity securities of small capitalization growth companies and
may also invest up to 25% in foreign securities -- including those of developing
markets.*
On the following pages you will find a summary covering global market conditions
over the past year as well as discussions of each fund's performance. Of course,
it is important to remember that financial markets fluctuate daily and past
investment conditions and results are not necessarily indicative of future
trends.
We look forward to the future with confidence and believe Franklin ValuemarkSM
Life and Allianz ValueLife will continue to be appropriate vehicles for
tax-conscious investors seeking to meet their long-term retirement and other
financial needs. As always, we thank you for your continued support and look
forward to serving your financial needs in the years to come.
Sincerely,
Rupert H. Johnson, Jr.
Director and Executive Vice President
Franklin Valuemark Funds
Lowell C. Anderson
Chairman of the Board
Allianz Life Insurance Company
of North America
*As of February 15, 1996, the Small Cap Fund is not available in California or
in Allianz ValueLife.
ECONOMIC OVERVIEW FOR 1995
Declining interest rates, low inflation and moderate growth in most of the major
economies characterized the year under review. This was especially true in the
U.S., where economic growth slowed following a series of interest rate increases
in 1994. Inflation remained mild and corporate earnings strong, which
contributed to strong performance for most financial assets.
The United States
The movement in U.S. interest rates may be viewed as resulting from changes in
the pattern of economic growth. By March 1995, the effects of 1994's interest
rate increases were realized. U.S. Gross Domestic Product (GDP) fell from an
annualized rate of 5.1% in the fourth quarter of 1994 to just 1.3% in the second
quarter of 1995.* This economic climate resulted in what is commonly referred to
as a "soft landing" -- an ideal investment environment characterized by modest
economic growth and low inflation. However, the extremely slow growth of the
second fiscal quarter -- followed by moderate growth in the third quarter --
prompted the U.S. Federal Reserve Board (the Fed) to ease monetary policy by
lowering the federal funds rate in July and again in December of 1995.
Bond markets anticipated the move, as interest rates decreased steadily since
the start of 1995. Following the Fed's rate cut in July, long-term bond yields,
as measured by the 30-year U.S. Treasury bond, jumped slightly to 6.86%, then
resumed the downward course they had followed since November 1994. On December
31, 1995, the yield on the 30-year U.S. Treasury was 5.96%.**
This positive climate, in combination with improved corporate earnings, bode
well for the U.S. stock market and resulted in a powerful upward surge in equity
prices. Even a dramatic weakening in the important technology sector late in
1995 could not restrain investor enthusiasm for equity securities. In fact, the
Dow Jones Industrial Average(R) reached record levels in 1995 with a gain of
more than 36%.
While the market advance was fairly broad based, certain sectors were especially
strong during the reporting period. The U.S. market was dominated by
"mega-mergers" in the banking, entertainment, and utility sectors as companies
placed greater emphasis on cost-cutting and marketing power. Health care stocks
responded to an improved regulatory environment and certain cyclical stocks such
as paper companies benefited from firming industry prices.
*Source: U.S. Commerce Department
**Source: Micropal
Outside the U.S.
In Europe, many equity markets posted impressive results, but the German market
was unimpressive due in part to the mark appreciating versus the U.S. dollar
during the year. This, in turn, eroded the competitiveness of Germany's
industrial base. Although earnings and stock prices were negatively affected,
the depreciation of the dollar led to moderately positive returns (in U.S.
dollar terms) for many German stocks.
Emerging markets suffered considerably from a sharp sell-off over the past 12
months as the negative effects of Mexico's December 1994 currency devaluation,
and subsequent decline of its equity securities, spread to other developing
markets, especially those in Asia. Due to rising interest rates and uncertainty
surrounding its 1997 reversion to China, Hong Kong's equity market was adversely
affected early in the year before rebounding in the second half of 1995.
Many global fixed-income markets strengthened after posting disappointing
returns throughout 1994. At the beginning of 1995, fears of overheating global
economies and increasing inflation were common among investors, which initially
caused fixed-income securities to suffer. By the second quarter of 1995,
however, investors began to realize that world-wide interest rates were too high
to sustain economic growth; by the end of the reporting period, nearly all of
the world's major central banks eased monetary policy by lowering interest
rates.
The depreciating U.S. dollar was one of the factors that separated 1995's best
performing bond markets from those that lagged. In general, non-U.S. markets
offered the highest returns, particularly European markets such as Sweden,
Denmark, Spain, and France. One exception was the United Kingdom, whose currency
remained essentially unchanged versus the dollar. Japan's bond market
underperformed others as the yen appreciated in the beginning of 1995 before
depreciating significantly in July and August.
Looking forward, global interest rates may continue their downward trend, which
would be beneficial to financial markets. The Fed may ease monetary policy
further if inflation remains subdued. European economic conditions should be
characterized by a mix of modest growth and low inflation, with the added
benefit of fiscal reform that is occurring in a broad range of markets.
<TABLE>
<CAPTION>
Variable Account A
Change in Unit Prices
% Change
Unit Price* Unit Price* in Unit Price
Fund Name 12/31/94 12/31/95 12/31/94 to 12/31/95
<S> <C> <C> <C>
Adjustable U.S. Government Fund $11.37 $12.35 8.60%
Global Income Fund $13.48 $15.35 13.82%
Growth and Income Fund $21.01 $27.70 31.84%
High Income Fund $16.51 $19.63 18.87%
Income Securities Fund $16.21 $19.69 21.49%
Investment Grade Intermediate Bond Fund $13.98 $15.26 9.17%
Money Market Fund $14.19 $14.90 4.96%
Precious Metals Fund $14.98 $15.21 1.59%
Real Estate Securities Fund $17.93 $20.91 16.65%
Rising Dividends Fund $ 9.95 $12.82 28.77%
Small Cap Fund N/A** $10.16 N/A
Templeton Developing Markets Equity Fund $ 9.17 $ 9.36 2.07%
Templeton Global Asset Allocation Fund N/A** $10.64 N/A
Templeton Global Growth Fund $ 9.89 $11.07 11.93%
Templeton International Equity Fund $12.39 $13.60 9.77%
Templeton Pacific Growth Fund $13.04 $13.98 7.17%
U.S. Government Securities Fund $16.84 $19.97 18.57%
Utility Equity Fund $17.91 $23.35 30.87%
Zero Coupon Fund - 1995a $17.82 $18.96+ N/A
Zero Coupon Fund - 2000a $19.61 $23.49 19.77%
Zero Coupon Fund - 2005a $20.82 $27.23 30.78%
Zero Coupon Fund - 2010a $21.87 $30.99 41.73%
</TABLE>
*The unit prices have been rounded to the nearest hundredth. Percent change is
calculated using full unit prices which have not been rounded.
**Figures for this time period are not available due to the funds' recent
inception dates. The Small Cap Fund is not available in California.
+Price on December 14, 1995, the fund's final transaction date prior to the
December 15, 1995, maturity date.
aZero Coupon Funds are not available in Allianz ValueLife.
Note: The unit value for each sub-account which invests in a particular fund is
the total value of assets in the sub-account (net assets of the fund), minus the
daily charges for mortality and expense risk and administrative expenses
(annualized at .75% of the account's average daily net assets), plus or minus a
charge or credit for any tax provision, divided by the total number of
outstanding units for that sub-account at the end of the valuation period.
The unit value does NOT include certain charges deducted from the Policy Account
or from premium payments. These charges and deductions can have a significant
effect on policy account, insurance benefit, and cash surrender values. See the
contract prospectus for a complete description of these charges, including
applicable sales charges.
Past performance is not indicative of future performance. Unit price and return
vary, so that investors may have a gain or loss when they sell their units. This
information is for policy owners only and may not be used as sales literature.
VALUEMARK FUND OBJECTIVES
Funds Seeking Capital Growth
Precious Metals Fund
Seeks capital appreciation with current income return as a secondary objective
by concentrating its investments in securities of U.S. and foreign companies
including those engaged in mining, processing or dealing in gold and other
precious metals. The fund is subject to special risks, such as increased
susceptibility to price fluctuations of precious metals, and the currency
fluctuations and market volatility associated with foreign investing.
Small Cap Fund
Seeks long-term capital growth by investing primarily in equity securities of
small capitalization growth companies. The fund may also invest in foreign
securities, including those of developing markets issuers. Because of the fund's
investments in small capitalization companies, an investment in the fund may
involve greater risks and higher volatility and should not be considered a
complete investment program.
Templeton Developing Markets Equity Fund
Seeks long-term capital appreciation through a flexible policy of investing
primarily in equity securities of issuers in countries having developing
markets. The fund is subject to heightened foreign securities investment risks
that accompany foreign developing markets and an investment in the fund may be
considered speculative.
Templeton Global Growth Fund
Seeks long-term capital growth though a flexible policy of investing in stocks
and debt obligations of companies and governments of any nation, including
developing markets. The realization of income, if any, is only incidental to
accomplishment of the fund's objective. Foreign investing involves special
risks, including currency fluctuations, market volatility, and economic, social
and political uncertainty.
Templeton International Equity Fund
Seeks long-term capital growth by investing at least 65% of its total assets in
an internationally-mixed portfolio of foreign equity securities which trade on
markets in countries other than the U.S., including developing markets, and are
issued by companies domiciled in countries other than the U.S., or issued by
companies that derive at least 50% of either their revenues or pre-tax income
from activities outside the U.S. Foreign investing involves special risks.
Templeton Pacific Growth Fund
Seeks long-term capital growth primarily through investment in the equity
securities of companies whose primary operations are located in countries of the
Pacific Rim (including China, Hong Kong, Australia, Singapore, Indonesia, Japan,
the Philippines, Malaysia, and Thailand). Investing in a portfolio of
geographically concentrated foreign securities, including developing markets,
involves increased susceptibility to the risks of foreign investing and
investment in the fund may be considered speculative.
Funds Seeking Growth and Income
Growth and Income Fund
(Formerly Equity Growth Fund)
Seeks capital appreciation, with current income return as a secondary objective,
by investing primarily in domestic common stocks, securities convertible into
common stocks, preferred stocks and debt securities.
Income Securities Fund
Seeks to maximize income while maintaining prospects for capital appreciation by
investing in a diversified portfolio of domestic and foreign (including
developing markets) debt obligations and/or equity securities, including high
yield, high risk, lower-rated bonds which involve increased risks related to the
creditworthiness of their issuers.
Real Estate Securities Fund
Seeks capital appreciation with current income return as a secondary objective
by concentrating its investments in publicly traded securities of companies in
the real estate industry. The portfolio is subject to declines in the value of
real estate and increased susceptibility to adverse economic or regulatory
developments.
Rising Dividends Fund
Seeks capital appreciation and incidental current income primarily through
investment in the equity securities of companies that have paid consistently
rising dividends over the past 10 years. Preservation of capital is also an
important consideration.
Templeton Global Asset Allocation Fund
Seeks a high level of total return through a flexible policy of investing in
equity securities, debt obligations, and money market instruments of issuers in
any nation. Foreign investing involves special risks, including currency
fluctuations, market volatility, and economic, social and political uncertainty.
Utility Equity Fund
Seeks both capital appreciation and current income by investing in securities of
domestic and foreign issuers, including developing markets, engaged in the
public utilities industry.
Funds Seeking Current Income
Adjustable U.S. Government Fund
Seeks a high level of current income with lower volatility of principal by
investing primarily in adjustable-rate, mortgage-backed securities (ARMs) issued
or guaranteed by the U.S. government, its agencies or instrumentalities.
Individual securities in the underlying portfolio, but not units of the
portfolio, are issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
Global Income Fund
Seeks a high level of current income, consistent with the preservation of
capital, with capital appreciation as a secondary consideration. The fund
invests in domestic and foreign debt securities and related currency
transactions. Investing in a non-diversified fund of global securities involves
increased susceptibility to the higher credit risks of some high yield,
lower-rated securities and the risks associated with foreign investing.
High Income Fund
Seeks a high level of current income, with capital appreciation as a secondary
objective, by investing in debt obligations and dividend-paying common and
preferred stocks, including high yield, high risk lower-rated securities, which
involve increased risks related to the creditworthiness of their issuers.
Investment Grade Intermediate Bond Fund
Seeks current income consistent with preservation of capital primarily through
investments in intermediate-term investment grade corporate obligations and in
U.S. government securities.
U.S. Government Securities Fund
Seeks current income and safety of capital by investing exclusively in
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Individual securities in the portfolio, but not units of the
portfolio, are issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
Zero Coupon Funds
(maturity dates: 1995*, 2000, 2005, 2010)
Seek as high an investment return as is consistent with the preservation of
capital. Each zero coupon fund seeks to return a reasonably assured target
dollar amount, predictable at the time of investment, on a specific date in the
future. As interest rates change, zero coupon securities experience greater
fluctuations in market value than interest-paying securities of similar
maturities, which will be reflected in the portfolio's net asset value. The
portfolio may not be appropriate for short-term investors or those who intend to
withdraw money before the maturity date.
Fund Seeking Capital Preservation and Income
Money Market Fund
Seeks high current income consistent with capital preservation and liquidity by
investing exclusively in high quality money market instruments. An investment in
the portfolio is neither insured nor guaranteed by the U.S. Government. The
portfolio attempts to maintain a stable net asset value of $1.00 per share,
although no assurances can be given that it will be able to do so.
*Zero Coupon Fund - 1995 matured on December 15, 1995.
FUND PROFILES -- 1995
Funds Seeking Capital Growth
Precious Metals Fund
The Precious Metals Fund seeks broad diversification in order to decrease the
risk associated with any one economic or political environment. Our five largest
positions on December 31, 1995 were as follows: Newmont Mining Corp. (Canada/
7.7% of total net assets), Placer Dome, Inc. (Canada/ 7.5%), Barrick Gold Corp.
(Canada/ 7.0%), Santa Fe Pacific Gold Corp. (U.S./ 6.4%), and Freeport-McMoran
Copper & Gold, Inc. (U.S./ 4.3%).
During the past 12 months, gold prices were less volatile than at any time since
the central banks relinquished control of gold prices in 1968. Factors that
normally influence the price of gold counteracted one another. Inflationary
fears and political instability were low, which exerted downward pressure on
gold prices. However, the weak U.S. dollar and strong physical demand helped
support prices. The net result was that gold traded within a narrow band of $370
to $400 per ounce, with volatility averaging only 7%.
The reporting period was also noteworthy in that gold production declined for
the first time in decades. Moderate declines were reported in Canada and Russia,
with South African mines experiencing the most significant decreases due to a
combination of lower grades of mined ore, labor disruptions and increased
national holidays. We increased our weighting in long-lived gold mines and
initiated several new positions, including holdings in Western Areas Gold Mining
Co., Ltd.(South Africa), Sons of Gwalia, Ltd. (Australia), and Compania de Minas
Buenaventura (Latin America) -- three gold mines with potential for both reserve
and production growth. Focusing on companies we believe display favorable growth
potential, we added to holdings such as Acacia Resources Ltd., Ashanti
Goldfields Co. Ltd., and Santa Fe Pacific Gold Corp. Meanwhile, we reduced
positions with limited growth potential, including holdings in the base metals
sector. We increased our platinum exposure, however, based on the favorable
outlook for automobile, electronics and jewelry consumption worldwide,
particularly in Japan.
We are optimistic about the long-term prospects for gold and the Valuemark
Precious Metals Fund as supply and demand fundamentals remain attractive. We
expect about a 2% annual demand growth for gold in the near future, while mined
supply could decline further, benefiting gold prices. Given this environment, we
will continue to emphasize those investments we feel are capable of performing
well over the long term -- companies with long-life reserve bases, low operating
costs, and top-quality management.
NEW! Small Cap Fund
Since its inception on November 1, 1995, the Franklin Valuemark Small Cap Fund
has grown to over $13 million in total net assets. The managers have been
cautious in initiating new positions in view of the strong performance of the
U.S. stock market over the past 12 months. As of the end of the year, nearly 63%
of total net assets were invested, and we anticipate being fully invested early
in 1996.
In seeking to achieve the fund's objective of capital growth, our investment
strategy is to search for small capitalization companies that are
well-positioned for rapid growth of revenues, earnings, or cash flow. We look
for companies in their emerging growth phase, focusing on those with a
competitive advantage such as a proprietary product or unique marketing niche.
Our research efforts led us to investments in a wide range of industries,
including technology services (9.0% of total net assets), electronic technology
(9.0%), real estate (9.0%), financial services (6.0%), semiconductors (5.7%),
and health services (4.8%). Our top individual holdings on December 31, 1995,
included Verifone Inc., a leader in transaction automation technology, and
Sterling Software Inc., a provider of systems management and electronic commerce
software. Another top holding was Robert Half International Inc., a rapidly
growing provider of specialized staffing services. Of course, there are risks
involved in investing in a fund seeking long-term growth from small or
relatively new or unseasoned companies. These risks, which include relatively
small revenues, limited product lines and small market share, are further
discussed in the prospectus.
Given the current economic and market conditions, we are optimistic that the
fund -- and small cap stocks in general -- should perform well. The economy is
showing signs of moderate growth and the threat of dramatic price inflation is
low. This economic stability provides an attractive business environment and
should continue to provide opportunities for small companies to develop.
Templeton Developing Markets Equity Fund
Investor interest in emerging markets declined slightly in 1995. Some emerging
market investors encountered a disappointing year, experiencing flat or negative
returns. The IFC Investable Composite Index fell 11.1%, and the MSCI Emerging
Markets Free Index eased 7.6%. While this may have been unsettling, it was an
indication that many emerging market stocks were selling at prices well below
their historic average price/earnings ratios, a potentially good investment
bargain for long-term investors.
On December 31, 1995, the fund had 86.8% of its assets invested in equity
securities, diversified across 248 companies in 21 countries, with the remaining
13.2% held in cash or short-term securities. Our largest geographic holdings
were Asia (36.9% of total net assets), Latin America (34.9%), Southern Europe
(9.4%), Africa (3.3%), Middle East (1.4%), and Eastern Europe (0.9%). Our top
five investment holdings were as follows: Telmex Telefonos de Mexico
(Telecommunications/Mexico, 4.7% of total net assets); Cemex (Building
materials/Mexico, 2.4%); Petrobras (Oil/Brazil, 2.1%); Banco Comercial Portugues
(Banking/Portugal, 2.1%); New World Development Co., Ltd. (Real estate/Hong
Kong, 2.0%).
Asia and Latin America remained our dominant emerging market regions for
investment. While many investors were hesitant to invest in Latin America
following the Mexican peso crisis, this was not our view. The investment
environment of this region improved markedly over the second half of the
reporting period, providing us with opportunities in the Latin American markets
of Argentina and Mexico. In Asia, the growth story we witnessed over the last
two decades remained a driving force behind markets in that region, making Asian
securities attractive investments in our view. As a result, we maintained our
investments in China and Hong Kong.
Overall, our outlook for these regions is positive. We will continue to look for
companies that are potential investment bargains and that have the best
potential for growth and stability in a highly volatile marketplace. Our view
remains long term, with the aim of achieving the best possible investment
results.
Templeton Global Growth Fund
On December 31, 1995, equities and debt obligations represented 92% of the
fund's total net assets. The remaining assets were concentrated in short-term
obligations.
Throughout the year, the fund continued to show significant asset growth, with
assets topping the $330 million mark by December 31, 1995. We also worked to
monitor risk and evaluate new investment opportunities. Our top five holdings at
the end of the reporting period were Travelers, Inc. (Insurance, U.S./2.0% of
total net assets), General Motors Corp. (Automotive, U.S./1.9%), UNUM Corp
(Insurance, U.S./1.9%), Societe Generale de Surveillance Holdings, SA Ltd.
(Insurance, Switzerland/1.8%), and Pharmacia & Upjohn (Pharmaceutical,
U.S./1.7%). These holdings all benefited from the low interest-rate environment
that characterized the year under review, thereby benefiting the fund's overall
performance. In general, insurance companies tend to perform well in a low
interest-rate environment because bond prices increase and these companies
sometimes (often times) take more capital gains.
The fund's performance was also enhanced by holdings in pharmaceuticals. Large
pharmaceutical companies (such as Pharmacia & Upjohn) performed well as
investors' interest shifted to more defensive issues, which tend to be less
susceptible to changes in the business cycle -- such as declining interest
rates. Additionally, mega-mergers within the industry led to strong corporate
profits, enhancing the value of pharmaceutical stocks and further benefiting the
fund.
Over the reporting period, certain emerging market equity securities, while
highly volatile, continued to represent value for us. Among our largest emerging
market holdings are Argentina, Brazil and Mexico. We also find Hong Kong (a
quasi-emerging market) attractive. On December 31, over 17% of the fund's assets
were invested in the emerging markets.
Templeton International Equity Fund
During the fiscal year, we continued to look for undervalued stocks using our
disciplined approach of detailed research of each company. With analysts around
the world, we uncovered value in a wide range of places -- we bought stocks in
21 countries and sold stocks in 18 countries. On December 31, 1995, our assets
were allocated in Europe (53.1%), Asia (10.2%), Australia/New Zealand (6.6%),
North America (11.6%), and Latin America (4.2%), with the remaining 14.3% of the
fund invested in short-term and fixed-income securities.
The world currency markets worked in the fund's favor during 1995 as the U.S.
dollar weakened against most other major currencies. This meant that our
holdings of international stocks (denominated in foreign currencies) were worth
more in U.S. dollars at the end of the year due to stronger foreign currency
values. In some years -- such as 1995 -- currency changes will benefit the fund;
in other years, the dollar will strengthen and hurt the fund's performance.
We are very much long-term value investors, preferring to buy stocks that are
out of favor and unpopular with other investors. Stocks purchased over the year
reflect this contrarian approach. For example, we bought shares in Email Ltd.,
an unloved Australian industrial company typically misperceived as a struggling
appliance company (though less than 30% of its revenue is from appliances). We
also purchased shares in Stena Line, a Swedish sea ferry company, and
International Mueller, a Dutch engineering, contracting and pharmaceutical
wholesaling stock.
Looking forward to 1996, we reiterate our usual agnosticism about what the
markets will do. No one can predict how much stock prices will move, or even if
they will go up or down. A year ago, for example, virtually no market
commentators were forecasting that the U.S. stock market would be up 37% in
1995. Still, we are cautious in our outlook -- today's relatively high market
valuation levels make identifying investment bargains a particular challenge.
Templeton Pacific Growth Fund
On December 31, 1995, the fund's top geographic allocations were Hong Kong
(18.8% of total net assets), Japan (18.8%), Australia (16.5%), Thailand (8.9%),
and Singapore (8.3%).
We maintained our large weighting in Hong Kong throughout the reporting period
(ranging from 18.8% to 19.6% over the year). During the first quarter of 1995,
we increased our holdings in this area as pessimism reached a high point over
the outlook of earnings and the events surrounding the British withdrawal from
Hong Kong in 1997. As a result, we found solid value in this market, adding New
World Development Co., Ltd. and Cathay Pacific Airways, Ltd. to the portfolio.
In comparison to the Morgan Stanley Pacific Rim Index, we held a very
conservative position in Japan (18.8% versus the index's 80.2%). Our Australian
exposure remained healthy at 16.5%, and we slightly increased our weighting in
the Philippines (5.6% at the end of the reporting period, up from 3% on December
31, 1994).
During the year we started positions in two new countries: India (0.4%) and
Pakistan (2.6%). As India's economic growth slowed following rapid growth in
1994, we took advantage of a sharp sell-off in this market and initiated a
position there. Although Pakistan has been a regional laggard due to its
weakness in agricultural output and continued financial distress, we have found
value in positions such as Fauji Fertilizer Co., Ltd. and Pakistan Telecom
Corp., PTC.
Funds Seeking Growth and Income
Growth and Income Fund
On May 1, 1995, the name of the Franklin Valuemark Equity Growth Fund was
changed to the Franklin Valuemark Growth and Income Fund. The new name better
reflects the fund's investment objectives and investment strategy. Seeking both
growth and income, we search for undervalued equity securities with significant
capital appreciation potential, as indicated by their high current yields
relative to the yield of the Standard & Poor's 500 Stock Index(R). Other
valuation tools, including quantitative and fundamental analyses, are also used
to uncover worthy investment opportunities.
In accordance with this strategy, we significantly increased our holdings in
utility stocks this past year to 17.6% of total net assets, up from 3.2% one
year ago. The average yield of the utilities sector during the third quarter of
1995 was higher than the yield on the 30-year U.S. Treasury bond --
historically, a very good indicator of value. Consequently, we initiated new
positions in San Diego Gas & Electric (listed as Enova Corp.), Scana Corp.,
Central and South West Corp., New England Electric System, and Oklahoma Gas and
Electric Co.. We added to our existing position in Public Service Company of
Colorado.
We also took advantage of the relatively weak foreign markets through several
new investments. One such investment was YPF Sociedad Anonima, a major
international oil company in Argentina. YPF's stock fell sharply in response to
the Mexican peso crisis, affording us the opportunity to initiate a position in
the stock. Total investments in energy stocks represented 15.9% of the fund's
net assets on December 31, 1995.
While the market recovery was fairly broad based, certain sectors were
especially strong during the reporting period. Health care stocks responded to
an improved regulatory environment, and financial services and technology stocks
enjoyed above-average earnings growth. As a result, we reduced our exposure to
these sectors as they became Wall Street's favorites, and many of our holdings
in these areas reached our price objectives.
Income Securities Fund
The Income Securities Fund has the flexibility to invest in any combination of
stocks, bonds, and cash as market opportunities warrant. At the end of the
fiscal year, 48.9% of the fund's total net assets were invested in bonds, 37.8%
in stocks, and the remaining 13.3% in cash. The fund's bond holdings were
composed of corporate straight bonds (32.1%), foreign government bonds (9.7%),
U.S. Treasuries (2.8%), and corporate convertible bonds (4.3%). Common stock
(29.4%) and convertible preferred stock (8.3%) comprised the largest portions of
the fund's stock holdings. On December 31, 1995, the largest equity sectors in
the portfolio were utilities (17.6%), energy (4.8%), pharmaceuticals (4.3%),
gold and other precious metals (4.2%), and real estate investment trusts (REITs)
(3.3%).
During the course of the year, many stock and bond markets benefited from
relatively low inflation and falling interest rates resulting from declining
growth in the U.S. economy. Consequently, many of the sectors in which the fund
invests performed well during the reporting period.
Corporate bonds continued to represent the largest bond sector in the fund. Many
of the approximately 100 corporate bond positions in the portfolio performed
relatively well over the reporting period due to lower interest rates and
improved company operations. We initiated positions in Commnet Cellular and
Ralphs Grocery Co., which we believed offered attractive yields and appreciation
potential due to anticipated improvement in credit quality. We started the year
with a 10% weighting in U.S. Treasury bonds and subsequently recognized gains on
a majority of the fund's holdings as interest rates declined.
Strong performances by the South African and Canadian bond markets, combined
with a rebound in Latin American bonds, led to solid performances by the fund's
foreign bonds. We initiated a position in dollar-denominated Brazilian Brady
bonds. Further, we added to our South African and Argentinian Brady bonds and
reduced our holdings in Mexican CETES and Canadian bonds.
With the exception of gold stocks, our equity sectors exhibited strong
performances during the reporting period, with pharmaceutical stocks
appreciating most. We increased our exposure to the utilities sector (17.6% of
total net assets, up from 13.8% a year ago) as we believe that electric utility
companies are adapting to their increasingly competitive environment. Over the
year, we initiated positions in Potomac Electric Power Co., New England Electric
System, Scana Corp., and General Public Utilities Corp. We initiated positions
in other industries as well, including Cablevision Systems convertible preferred
stock and Athabasca Oil Sands Trust common stock.
Due to strength in the financial services, energy, cyclical and technology
sectors, we recognized gains on several convertible securities held in the
portfolio that offered limited call protection and low current income.
With stock and bond markets at near-record levels by the end of the reporting
period, we remained cautious, holding approximately 14% of the fund's assets in
cash. This should enable us to take advantage of future investment
opportunities.
Real Estate Securities Fund
The fund's long-term investment strategy is focused on equity real estate
investment trusts (REITs) and real estate companies with strong growth prospects
and attractive valuations. We favor companies that invest in a single property
type and maintain a dominant position in their local markets, which can often
provide them with a competitive advantage in terms of future growth.
Over the past year, the U.S. real estate market continued to improve. Despite
some new property development within certain geographic regions and property
types, occupancy and rental rates rose across many markets as tenants absorbed
vacant space in new and existing properties. This contributed to an improvement
in the performance of real estate-related securities.
Our largest investment weighting continued to be in the apartment property type;
however, over the reporting period, we sold several of these positions as they
could have been adversely affected by slower cash flow growth. As a result, we
reduced the overall weighting to 24.5% on December 31, 1995, from 32.4% on
December 31, 1994. We maintained our positions in top-quality apartment
operators such as Equity Residential Properties Trust and Security Capital
Pacific Trust as we expect they will continue to have strong cash flow growth.
We also increased our exposure to Bay Apartment Communities Inc. and Irvine
Apartment Communities Inc., two California-based equity REITs that we believe
face minimal risk from new development and whose properties are poised for
substantial rent growth.
Over the past year, we increased the fund's position in the hotel property
sector to 17.5% of total net assets from 12.0%, as growing demand for hotel
rooms outpaced new construction. New positions added to this sector over the
reporting period include Starwood Lodging Trust, Red Lion Hotels, Bristol Hotels
and Patriot American Hospitality. Our outlook for the hotel property type
remains positive and we expect the fund's holdings to generate strong cash flow
as the hotel market continues to strengthen.
The retail property sector represented 10.9% of total net assets at the end of
the reporting period, which was significantly underweighted when compared with
the Wilshire Real Estate Securities Index's retail property weighting of 36%. We
believe that many retailers will continue to face serious obstacles, including
lower profit margins, increased competition, and slow sales growth. Retail
landlords may find it difficult to raise occupancy and rental rates within such
an environment. However, we do hold positions in companies that we believe are
leading owners and operators of regional malls, shopping centers and factory
outlets. These companies should benefit from strong owner/tenant relationships
and possible opportunities to acquire properties from distressed sellers.
Overall, the real estate industry's recovery is well underway across most
property types. Rising demand for space coupled with a relatively low level of
new construction should further drive this recovery. We believe that the fund's
investments in equity REITs and real estate-related securities are attractively
valued and should continue to benefit from this recovery.
Rising Dividends Fund
Federal Reserve Chairman Alan Greenspan appears to have achieved a soft landing
for the economy. Tightening moves that pressured financial stocks in 1994 were
effectively reversed in 1995 against a backdrop of slowing economic growth and
tame inflation. By mid-year, the market was rediscovering the charms of high
quality growth companies with strong balance sheets and steadily increasing cash
flows -- in other words, Rising Dividends companies.
Our interest-rate sensitive banks and insurance companies performed beautifully
in 1995. Despite the slowing economy, several of our more economically-sensitive
companies like General Electric, Monsanto, and Rockwell also turned in good
performances, reflecting their particular strengths.
The pharmaceuticals and our largest tobacco holding, Philip Morris, had a
sensational year. As their prices rose, we took some profits, although we think
they will continue to prosper. When we were loading up on those stocks, they
were the focus of intense negative sentiment. Lately, our cash has been directed
into other areas where we feel negative investor sentiment is making Rising
Dividends companies unreasonably cheap, especially retailing. We have done very
well with our drug store chains, but market sentiment is still heavily against
Family Dollar Stores Inc., and Wal-Mart Stores.
Companies with notable dividend increases in 1995 were: Albertson's, 18.2%;
Arbor Drugs, 25%; Family Dollar Stores, 17.7%; Loctite, 19%; MMI Corp., 25%;
Newell, 20%; Philip Morris, 21.2%; and TrustCo, 20%.
At year-end, the fund's top sector holdings were: industrial (17.3% of total net
assets), insurance/property & casualty (16.9%), banks (12.4%), consumer
goods/services (12.1%), and retail (11.2%).
The fund's top 10 company holdings were: Philip Morris Cos., Inc. (3.3% of total
net assets), Mercury General Corp. (3.1%), Federal National Mortgage Association
(3.0%), DIMON Inc. (2.8%), Rite Aid Corp. (2.8%), Merck & Co., Inc. (2.6%),
General Electric Co. (2.5%), TrustCo Bank Corp., NY (2.5%), Bard (C.R.), Inc.
(2.4%), and Monsanto Co. (2.4%).
It's illustrative to note how these 10 companies reflect the fund's screening
process. On average, they have increased their dividends 19 straight years, by
an average of 418% in the past 10 years (excluding Fannie Mae's 5000% increase),
have long-term debt that is only 20% of capital, and sell at a price/earnings
ratio of 14.8. We think these companies are representative of the fundamentally
high quality of the fund's portfolio. We also believe that, over the long haul,
companies that increase cash payments to shareholders, year after year, will be
superior builders of wealth.
Templeton Global Asset Allocation Fund
During the first year of the Templeton Global Asset Allocation Fund, its total
assets have grown to approximately $14.7 million by December 31, 1995, from
$500,000 in May 1995, allowing us to take advantage of many opportunities in
both the fixed-income and equity markets. On December 31, 1995, 66.9% of the
fund's total net assets were invested in equity securities, with 28.5% in
fixed-income and 4.6% in short-term and other obligations.
Throughout the reporting period, the fund was invested across 29 countries, with
four of those countries having larger-than-average weightings in the equity
portion of the fund's portfolio, including: U.S. (21.5% of total net assets),
France (7.0%), Sweden (5.0%), and Hong Kong (5.1%). Our fixed-income holdings in
France increased significantly in value, benefiting the fund, while in Sweden,
financial and paper stocks were unusually cheap. However, as global
supply/demand shifts in paper and pulp supply are beginning to ripple throughout
the paper industry worldwide, we could see valuations become less favorable in
Swedish paper stocks. In the emerging markets sector, we gained exposure to many
markets, including Brazil (3.3% of total net assets), Argentina (1.4%), and
Mexico (0.9%).
Within our equity sector of the portfolio, we identified many bargains in
cyclical sectors such as paper and forest products (2.5%), auto stocks (2.4%),
and construction and housing (2.3%). Unfortunately, these sectors were out of
favor with many investors despite low current and longer-term valuations and did
not benefit the fund's performance. Our 2.3% weighting in financial stocks
performed well overall, but was not enough to offset the investments in the
aforementioned cyclical stocks.
Our general expectation is that low volatility in global interest rates will
continue through Spring 1996. Growth may pick up slightly, but is unlikely to
give rise to inflation. European conditions may be a similar mix of modest
growth and low inflation, with the added benefit of fiscal reform taking place.
We believe the combination of these factors should lead to strong fund
performance well into the next reporting period.
Utility Equity Fund
Over the reporting period, interest rates eased substantially, with the 30-year
U.S. Treasury bond yield dropping to 5.96% on December 31, 1995, from 7.89% one
year ago. Generally, falling interest rates tend to boost the stock prices of
utility companies. As such, the recent drop in domestic interest rates had a
favorable effect on the fund's domestic utility holdings. For the 12 months
ending December 31, 1995, the Utility Equity Fund posted a total return of
+31.4%.
On December 31, 1995, the fund held approximately 71.3% of its total net assets
in domestic electric utility stocks, 8.8% in domestic telephone companies, 3.7%
in domestic gas utilities, and 7.4% in foreign utility stocks. Foreign
investments offer many of the same characteristics that we look for in our
domestic utility stock holdings: consistent predictable earnings growth and
steady demand fundamentals. However, anticipated higher economic growth in
foreign countries may allow for the companies located there to exhibit higher
growth characteristics.
One of our principle concerns is the changing regulatory environment of domestic
utility industries. For this reason, we have focused specifically on those
domestic utilities that we believe are best positioned to handle increasing
competition. For example, electric utilities may have low production costs,
strong entrepreneurial management teams, and service territories located in
regions with positive demographic trends. We believe that well-positioned
utilities will produce higher total returns than their low-quality peers as they
capture a larger part of a more competitive marketplace.
For 1996, economic estimates forecast moderate growth and stable interest rates.
This is a very favorable environment for utility company investments and we are
very comfortable with the current positioning of the fund. In spite of the
potential for regulatory change in the industry, utilities continue to provide
services that are an essential part of everyday life, and we believe their
stocks will continue to play an important role in a well-diversified investment
portfolio.
Funds Seeking Current Income
Adjustable U.S. Government Fund
On December 31, 1995, 33.1% of the fund's total net assets were invested in
obligations of the Federal National Mortgage Association (FNMA), 22.3% in
obligations of the Federal Home Loan Mortgage Corporations (FHLMC), 14% in
obligations of the Government National Mortgage Association (GNMA), 17.4% in
obligations of Small Business Administration (SBA), and 13.2% in cash and
equivalents.
The performance of the Adjustable U.S. Government Fund over the past 12 months
has been affected primarily by the reversal in the trend of interest rates
during the year. The restrictive monetary policy to which the Federal Reserve
Board adhered through 1994 and early 1995 resulted in seven separate tightening
actions designed to contain potential inflationary pressures in the economy. The
accompanying rise in short-term rates led to sharp declines in adjustable-rate,
mortgage-backed securities (ARMs) prices as coupon adjustments, limited by
periodic caps, were unable to keep pace. However, as the effect of these
tightenings took hold, economic growth slowed to non-inflationary levels and the
Fed shifted to a more neutral stance. Interest rates responded by moving
substantially lower, causing ARM prices to appreciate as the securities caught
up more quickly to earlier rate hikes.
ARMs performed well through most of 1995, though an increase in mortgage
prepayments somewhat limited their price appreciation. Lower interest rates,
especially long-term rates, created an incentive for homeowners to refinance
from an ARM to a fixed-rate mortgage, locking in a lower rate. In an effort to
reduce the negative impact of ARM prepayments, we maintained an overweighting in
seasoned, non-convertible ARMs that were less likely to experience high levels
of prepayments.
Going forward, we anticipate a continuation of the current slow growth, low
inflation environment. This should lead to stable or slightly lower interest
rates and lower levels of interest-rate volatility, which should benefit ARMs.
We are actively positioning the fund to perform well in this environment. Our
main concern continues to be stability of principal while maintaining a yield
which is competitive with short-term alternatives.
Global Income Fund
Over the past year, performance of the global bond markets was quite positive,
which benefited the fund. We attributed this positive performance primarily to
the deceleration of economic growth around the world to a more sustainable
non-inflationary level as well as from the increased attention placed on fiscal
and monetary responsibility by governments worldwide.
Another encouraging factor for global securities was the decline in market
volatility. The Bundesbank, the U.S. Federal Reserve and the Bank of Japan eased
monetary policy in the third quarter of 1995, which tended to make investors
more comfortable in realizing that interest rates were not going to increase
with the possibility of upward growth. Higher risk markets tend to do well in
this lower-volatility environment as investors stretch for additional yield, and
threats to stability are seen as remote. As a result, we focused on a selection
of higher-yielding markets such as Italy and Spain. By the year-end, the
portfolio increased its weightings in Denmark (5.5% of total net assets),
Germany (17.9%), France (7.3%), Spain (4.8%), and Japan (6.6%). To fund these
new allocations, we decreased our holdings in the dollar bloc countries of
Canada (4.2%), Australia (8.9%), and New Zealand (1.9%). Although our outlook
for these dollar bloc countries did not change dramatically, we increased our
weightings in Europe to take advantage of the attractive real rates and to
further diversify the portfolio in the world market.
Our general expectation is that low volatility in global interest rates will
continue into the spring of 1996. The U.S. Federal Reserve may slow the process
of easing monetary policy, but we still believe the decline in rates will
continue. European conditions are likely to be a mix of moderate growth and low
inflation with the added benefit of fiscal reform taking place in a broad range
of European markets. Finally, we think Japan is likely to remain sluggish from a
growth standpoint, but the increasing export of capital to other markets should
help interest rates decline further. Combined, we believe all of these factors
should lead to strong fund performance throughout 1996.
High Income Fund
Over the reporting period, the fund increased its exposure in defensive
industries such as healthcare services (9.8% of total net assets) and decreased
exposure in more cyclical industries such as chemicals (5.6%) and automotive
(1.4%). We made this move toward more defensive industries in response to the
slow growth environment of 1995, as we believe industries such as healthcare
provide basic necessities to the population and, therefore, tend to perform well
even in a slow growth environment. In addition to these industry shifts, the
fund benefited from mergers and acquisitions that occurred during the year --
especially within the healthcare industry. Abbey Healthcare merged with Homedco
to form Apria Healthcare, and American Medical Holdings merged with National
Medical Enterprises to form Tenet Healthcare. Acquisitions outside this industry
included Dr. Pepper/7UP (acquired by Cadbury Schweppes), SHL Systemhouse
(purchased by MCI), and Truck Components Inc. (acquired by Johnstown). These
mergers and acquisitions were beneficial because, in most cases, the acquiring
company was rated investment grade (for instance, Cadbury and MCI). Typically,
the outstanding debt of the target company will be tendered for a high premium.
The infusion of equity into companies through an initial offering of public
stock (IPO) also benefited the fund during the fiscal year. Several companies
held in the fund's portfolio announced IPOs during the year: Sola, Bell &
Howell, American Standard, and Amerisource.
During the last six months of the reporting period, we increased the fund's
overall credit quality by reducing exposure in lower-rated bonds --
specifically, bonds rated B2 by Moody's. On December 31, 1995, 21% of the fund's
bonds were rated B2, down from 29% of total net assets at the start of the
reporting period. We also increased our exposure to B1-rated bonds to 27.5% from
18%. The ratings improvement occurred because there were ratings upgrades of
securities we currently hold; additionally, we recently purchased higher-rated
securities.
Investment Grade Intermediate Bond Fund
Throughout the year, we maintained a weighted average portfolio quality of AA,
with about 63% of the fund's total net assets invested in U.S. government or
government agency bonds on December 31, 1995. The ability to exceed the total
return offered by money market alternatives resulted primarily from our
"putable" strategy, which provided downside protection while maintaining the
potential for upside performance.
A "putable" bond grants the fund the right -- but not the obligation -- to
choose a specified early redemption date (the "effective maturity") on which the
holder may receive full face value regardless of how high interest rates may be
at that time. This valuable "put" option limits price declines when interest
rates rise. However, it does not restrict upward price movement during periods
of falling interest rates and rising prices, when the market evaluates a
"putable" bond in relation to its longer, final stated maturity.
"Putable" bonds represented about 21% of the portfolio's total net assets at the
beginning and end of the reporting period. However -- mainly during the last
half of the year, when prices rose in response to falling interest rates -- we
sold those "putables" that had sharply increased in price (some to as high as
120% of par value), and replaced them with other "putables" selling at about
102% of par value. These transactions locked in substantial gains while
maintaining both the potential for upside performance as well as comfortable
down- side protection for the future. At year end, the portfolio's weighted
average maturity was 1.5 years (using the "put" dates as the "effective"
maturities) or 4.3 years (using the final stated maturities).
U.S. Government Securities Fund
The U.S. Government Securities Fund holds a diversified portfolio of agency
mortgage and government securities, with holdings of Government National
Mortgage Association (GNMA) mortgage passthroughs as our largest positions in
the fund. Some issuers of securities held by the fund over the reporting period
were Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage
Corporation (FHLMC) passthroughs and debentures issued by the Financing
Corporation (FICO) and the Tennessee Valley Authority (TVA). On December 31,
1995, the fund's total net asset investments consisted of 74.3% mortgage-backed
securities (of which 51.2% were GNMAs), 23% other U.S. government and agency
securities, and 2.7% in short-term investments.
During the year, we engaged in several transactions to take advantage of
opportunities in the agency bond market. The fund performed well in 1995 as the
portfolio was positioned with lower coupon mortgage passthroughs and longer
maturity agency and Treasury securities, which had more exposure to
interest-rate movements. As rates fell during the year under review, the
portfolio exhibited strong price appreciation. Additionally, falling interest
rates caused the prepayment risk for mortgages to increase, along with price
premiums for older, more seasoned mortgage passthroughs exhibiting lower
prepayment fluctuations.
Looking ahead, we expect the fund's mortgage passthrough holdings to benefit
from a decrease in the overall volatility of interest rates as the economy
settles into a slower growth pattern. Furthermore, we will continue to position
the fund to take advantage of relative value opportunities in the U.S. agency
and Treasury markets.
Zero Coupon Funds
(maturity dates: 2000, 2005, 2010. The 1995 fund matured on December 15, 1995.)
The significant drop in interest rates during the reporting period was
beneficial to the Franklin Valuemark Zero Coupon Funds. The yield on the 30-year
U.S. Treasury bond fell from 7.89% to 5.96%, between December 31, 1994 and
December 31, 1995, and yields on Treasury securities with maturities between 2
and 10 years also fell.
The portfolios maintain a duration within 12 months of the target maturity date
by investing primarily in government- and agency-backed zero coupon bonds.
Although it is unlikely this year's returns will duplicate those of 1995, the
outlook for fixed-income investments remains favorable as the prospects of slow
to moderate economic growth and reduced inflation continue.
Fund Seeking Capital Preservation and Income
Money Market Fund
During the second half of the reporting period, the economy appeared to be
growing at a quicker rate than in the first half. However, growth slowed
considerably in the fourth quarter, indicated by sluggish retail, home and auto
sales. Inflation also remained subdued. In response, the Federal Reserve Board
(the Fed) lowered its federal funds rate twice during the reporting period to
5.75% from 6.00% in July, and further to 5.50% in December.
In this rate environment, your fund performed relatively well during the period,
and -- as of December 31, 1995 -- its seven-day effective yield, which assumes
the compounding of daily dividends, was 5.43%.
Throughout the reporting period, we continued to emphasize liquidity and safety
by purchasing only the highest-quality securities available to money market
portfolios. Additionally, we maintained our practice of purchasing money market
securities with longer maturities. The fund's weighted average maturity was
still fairly long at 42 days on December 31, 1995, up significantly from 33 days
on December 31, 1994. By purchasing longer-dated securities with attractive
rates relative to the federal funds rate -- thus lengthening the fund's average
maturity -- we were able to lock in those relatively high yields for as long as
possible.
Looking forward, we anticipate slow economic growth, subdued inflation and
declining interest rates. Of course, we will continue to manage the fund for
high quality and liquidity. Therefore, we do not invest in leveraged derivatives
or other potentially volatile securities that involve undue risk.
INDEX COMPARISONS
Indices measure a variety of values -- the Dow Jones Industrial Average(R) and
the Consumer Price Index are two well-known examples. On the following pages, we
have compared the performance of each Valuemark fund with an appropriate index
or indices. On pages 33 and 34, we have also included definitions of all the
indices used.
When reviewing the comparisons, please keep in mind that indices have a number
of inherent performance differentials over the Valuemark funds. First, unlike
the Valuemark portfolios, which must hold a minimum amount of cash to maintain
liquidity, indices do not have a cash component. Second, the Valuemark
portfolios are actively managed and, thus, are subject to management fees to
cover salaries to securities analysts or portfolio managers in addition to other
expenses. Indices are unmanaged and do not include any commissions or other
expenses typically associated with investing in securities. Third, indices often
contain a different mix of securities than the fund to which they are compared.
For instance, the Valuemark U.S. Government Securities Fund is compared to the
Lehman Brothers Intermediate Government Index. While the index and the fund both
hold fixed-rate obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, the fund consists primarily of mortgage-backed
securities (almost 78% of the fund's total net assets on December 31, 1995). The
index, on the other hand, holds no mortgage-backed securities at all.
Additionally, please remember that indices are simply a measure of performance
and cannot be invested in directly.
Managers' Notes to Index Comparisons:
Adjustable U.S. Government Fund: We are replacing the Lehman Brothers (1-5
years) Short U.S. Government Index with the Lehman Brothers (1-2 years) Short
U.S. Government Index. We believe the Lehman Brothers 1-2 year is more
appropriate since its duration better matches that of the fund. The Lehman
Brothers (1-5 years) Short U.S. Government Index will be omitted beginning with
the 1996 annual report.
Global Income Fund: We are adding the JP Morgan Global Index (Unhedged) as we
feel it better represents the way in which we have more recently managed the
fund. In the past, the fund's portfolio was hedged much more than it has been
during the last few years.
Growth and Income Fund: We are omitting the Growth Fund Composite Index as we
feel it is no longer appropriate. The Growth Fund Composite Index was comprised
of a 75% weighting in the Russell 1000 Index (an index consisting of the top
1000 U.S. companies in terms of market capitalization) and a 25% weighting in
the Russell 2000 (an index of 2000 non-large market capitalization companies).
When the index was first used, it reflected the fund's strategy (e.g.:
approximately 25% of the fund's assets were invested in small cap stocks).
However, with the fund's strategy change in May of 1995, the average market
capitalization of the stocks in the fund had been increased to $17 billion and
the percentage of the fund invested in small cap stocks was less than 5% on
December 31, 1995.
High Income Fund: The CS First Boston High Yield Index was added this year
because we believe that its comparison of approximately 1500 high-yield
corporate securities rated BBB and lower by Standard & Poor's bond rating
service provides for a more appropriate comparison, given the fund's current
portfolio. For this reason, the Salomon Brothers Combined Corporate Index may be
removed beginning with the 1996 annual report.
Precious Metals Fund: We are omitting the Philadelphia Gold and Silver Index
(XAU) based on its limited correlation with the entire gold producing universe
or the universe in which the fund invests. The index is comprised solely of
seven securities: six North American gold producers and one South African
closed-end fund which holds a basket of South African producers. Given that
there are no Australian gold producers represented, and that the seven
securities represent only a limited segment of the gold universe available for
investment, we believe that using this index for a benchmark is not useful.
Real Estate Securities Fund: We are replacing the NAREIT Equity Index, an index
of all publicly traded Real Estate Investment Trusts (REITs), with the Wilshire
Real Estate Securities Index. We believe that the Wilshire Real Estate
Securities Index is a more appropriate comparison as it includes real
estate-related securities such as developers and land owners in addition to
REITs and, therefore, is more comparable with the investment strategy of the
fund. The NAREIT Equity Index will be omitted beginning with the 1996 annual
report. Additionally, we are omitting the National Council of Real Estate
Investment Fiduciaries Index (NCREIF) due to the inability to obtain information
on a timely basis.
Franklin Valuemark Funds
Total return of the fund is the percent change in value of a hypothetical
$10,000 investment over the indicated periods and includes reinvestment of
dividends and capital gains. Performance data is historical and cannot predict
or guarantee future results. Principal value and investment return will
fluctuate with market conditions and you may have a gain or loss when you
withdraw your money.
Performance shown in the graph reflects all fund operating expenses but does not
include any Variable Account fees, charges or expenses imposed by the variable
annuity and life insurance contracts that use the Franklin Valuemark Funds. If
they had been included, performance would have been lower. See the contract
prospectus for a complete description of the Variable Account expenses,
including any applicable sales charges. Because of the complexity of certain
contracts, the prospectus may also include a hypothetical illustration intended
to show how the contract works and the effect of such Variable Account expenses
on performance.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
9.41% 5.06% 5.00%
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
14.68% 7.11% 7.87%
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
32.83% 13.31% 9.50%
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
22.40% 16.55% 11.81%
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
19.76% 15.46% 9.68%
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
9.99% 7.93% 7.89%
Franklin Valuemark Funds
Total return of the fund is the percent change in value of a hypothetical
$10,000 investment over the indicated periods and includes reinvestment of
dividends and capital gains. Performance data is historical and cannot predict
or guarantee future results. Principal value and investment return will
fluctuate with market conditions and you may have a gain or loss when you
withdraw your money.
Performance shown in the graph reflects all fund operating expenses but does not
include any Variable Account fees, charges or expenses imposed by the variable
annuity and life insurance contracts that use the Franklin Valuemark Funds. If
they had been included, performance would have been lower. See the contract
prospectus for a complete description of the Variable Account expenses,
including any applicable sales charges. Because of the complexity of certain
contracts, the prospectus may also include a hypothetical illustration intended
to show how the contract works and the effect of such Variable Account expenses
on performance.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
2.35% 7.83% 6.55%
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
17.52% 16.64% 10.43%
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 3-year Since Inception
29.74% 6.30% 7.30%
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Aggregate Total Return
Since Inception
7.01%
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year Since Inception
2.77% -0.98%
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year Since Inception
12.72% 8.74%
Franklin Valuemark Funds
Total return of the fund is the percent change in value of a hypothetical
$10,000 investment over the indicated periods and includes reinvestment of
dividends and capital gains. Performance data is historical and cannot predict
or guarantee future results. Principal value and investment return will
fluctuate with market conditions and you may have a gain or loss when you
withdraw your money.
Performance shown in the graph reflects all fund operating expenses but does not
include any Variable Account fees, charges or expenses imposed by the variable
annuity and life insurance contracts that use the Franklin Valuemark Funds. If
they had been included, performance would have been lower. See the contract
prospectus for a complete description of the Variable Account expenses,
including any applicable sales charges. Because of the complexity of certain
contracts, the prospectus may also include a hypothetical illustration intended
to show how the contract works and the effect of such Variable Account expenses
on performance.
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 3-year Since Inception
10.59% 12.76% 8.92%
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 3-year Since Inception
7.97% 13.19% 9.58%
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
19.46% 9.21% 8.87%
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return (as of 12/14/95)
1-year 5-year Since Inception
7.13% 7.85% 7.82%
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
31.35% 11.50% 11.52%
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
20.67% 11.32% 10.77%
Franklin Valuemark Funds
Total return of the fund is the percent change in value of a hypothetical
$10,000 investment over the indicated periods and includes reinvestment of
dividends and capital gains. Performance data is historical and cannot predict
or guarantee future results. Principal value and investment return will
fluctuate with market conditions and you may have a gain or loss when you
withdraw your money.
Performance shown in the graph reflects all fund operating expenses but does not
include any Variable Account fees, charges or expenses imposed by the variable
annuity and life insurance contracts that use the Franklin Valuemark Funds. If
they had been included, performance would have been lower. See the contract
prospectus for a complete description of the Variable Account expenses,
including any applicable sales charges. Because of the complexity of certain
contracts, the prospectus may also include a hypothetical illustration intended
to show how the contract works and the effect of such Variable Account expenses
on performance.
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
31.76% 14.02% 12.88%
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Average Annual Total Return
1-year 5-year Since Inception
42.79% 15.66% 13.84%
INDEX DEFINITIONS
Consumer Price Index (CPI)
Measure of the average change in prices for a fixed basket of goods and
services regularly bought by consumers in the United States published by
the U.S. Bureau of Labor Statistics.
CS First Boston High Yield
Unmanaged, trader-priced portfolio constructed to mirror the public high
yield debt market (revisions to the index are effected weekly).
International Finance Corporation's
(IFC) Investable Composite Index
Emerging markets index that includes 650 stocks from 18 countries including
Mexico, South Korea, Brazil, Jordan, and Turkey.
JP Morgan Global Bond Index
(Unhedged)
A total return index that tracks the traded sovereign issues of 13
international markets. Each market is weighted according to its traded
market capitalization in U.S. dollar terms, and all issues included in the
index are liquid with remaining maturities of greater than 13 months.
Lehman Brothers
Government/Corporate Bond Index
Includes fixed-rate debt that is rated investment grade or higher by
Moody's, Standard & Poor's, or Fitch. Debt is issued by the U.S. government
and its agencies, domestic corporations, and foreign dollar-denominated
securities.
Lehman Brothers Intermediate
Government Index
Includes fixed-rate debt that is rated investment grade or higher by
Moody's, Standard & Poor's, or Fitch. Debt is issued by the U.S. government
and its agencies, and has a maturity of one to ten years.
Lehman Brothers
Short U.S. Government Index
Includes fixed-rate debt that is rated investment grade or higher by
Moody's, Standard & Poor's, or Fitch. Debt is issued by the U.S. government
and its agencies, and has a maturity of one to five years.
Lipper Income Average
Consists of 21 equity funds that normally seek a high level of current
income through investing in income-producing stocks, bonds, and
money-market instruments.
Merrill Lynch Treasury Zero Coupon
Two-, Five-, Ten- and Twenty-Year Indices
Includes two-, five-, ten- and twenty-year zero coupon bonds, respectively,
which pay no interest and are issued at a discount from redemption price.
Morgan Stanley Capital International
Europe Australia Far East (EAFE) Index
Includes approximately 1000 companies representing the stock markets of 18
countries in Europe, Australia, New Zealand, and the Far East. The average
company has a market capitalization of over $3 billion. This is a total
return index in U.S. dollars, with gross dividends reinvested.
Morgan Stanley Capital International
(MSCI) Pacific Basin Index
Includes over 400 companies in the five countries of Australia, Hong Kong,
Japan, New Zealand, and Singapore/Malaysia. This is a total return index in
U.S. dollars, with gross dividends reinvested.
Morgan Stanley Capital International
(MSCI) World Index
Includes approximately 1450 securities listed on the stock exchanges of 20
countries including the U.S., Europe, Canada, Australia, New Zealand, and
the Far East. The average company in the index has a market capitalization
of about $3.5 billion. This is a total return index in U.S. dollars, with
gross dividends reinvested.
National Association of Real Estate
Investment Trust, Inc. (NAREIT)
Represents equity Real Estate Investment Trusts (REITs). Includes REITs
with 75% or greater of their gross invested book assets invested directly
or indirectly in the equity ownership of real estate. It is calculated as
market-value-weighted averages of all actively traded companies that were
tax-qualified REITs for their most recent fiscal year.
Salomon Brothers
Combined Corporate Index
Includes all corporate issues, rated from AAA to CCC, from the High Yield
Market Index and the corporate component from the Salomon Brothers Broad
Investment Grade Bond Index.
Salomon Brothers World Government
Hedged Index
Currency-hedged index uses rolling one-month forward exchange contracts as
hedging instruments. Total return in U.S. dollars.
Six-Month CD rates
Estimated monthly return averaging the top rates paid by major New York
banks on primary new issues of negotiable CDs. Published by Micropal.
Standard & Poor's 500 Stock Index(R)
(S&P 500(R))
Consists of 500 widely held common stocks within four sectors (industrials,
utilities, financial, and transportation). This index, calculated by
Standard & Poor's Corporation, is a total return index with dividends
reinvested.
Wilshire Midcap Growth Index
Overlaps both the top 750 and the next 1750 of the Wilshire 2500 stock
universe. Includes companies that have market capitalizations ranging from
$300 million to $1.3 billion.
Wilshire Real Estate Securities Index
A market capitalization weighted index of publicly traded real estate
securities such as Real Estate Investment Trusts (REITs), Real Estate
Operating Companies (REOCs), and partnerships. The index is comprised of
companies whose charter is the equity ownership and operation of commercial
real estate.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount Adjustable U.S. Government Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities 86.8%
Federal Home Loan Mortgage Corp. (FHLMC) 22.3%
<S> <C> <C>
$ 604,441 FHLMC, Cap 12.34%, Margin 2.00% + CMT, Resets Semi-Annually, 7.091%, 11/01/18 ................ $ 615,931
6,516,366 FHLMC, Cap 12.522%, Margin 2.105% + CMT, Resets Annually, 7.755%, 06/01/22 ................... 6,721,695
405,932 FHLMC, Cap 13.00%, Margin 2.00% + CMT, Resets Semi-Annually, 8.00%, 07/01/18 ................. 418,345
2,987,296 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.668%, 09/01/19 .................... 3,079,072
3,688,977 FHLMC, Cap 13.125%, Margin 2.00%, + CMT, Resets Annually, 8.112%, 07/01/18 ................... 3,801,823
758,937 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.97%, 07/01/19 .................... 785,339
8,907,981 FHLMC, Cap 13.458%, Margin 2.195% + CMT, Resets Annually, 7.928%, 02/01/19 ................... 9,211,364
6,777,840 FHLMC, Cap 13.50%, Margin 2.03% + CMT, Resets Annually, 7.885%, 05/01/18 ..................... 6,976,634
2,036,365 FHLMC, Cap 13.605%, Margin 2.20% + CMT, Resets Annually, 7.816%, 02/01/19 .................... 2,107,536
8,377,072 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.822%, 04/01/18 ................... 8,638,519
-------------
Total Federal Home Loan Mortgage Corp. (Cost $42,465,408) .............................. 42,356,258
-------------
Federal National Mortgage Association (FNMA) 33.1%
5,159,858 FNMA, Cap 11.76%, Margin 2.15% + CMT, Resets Annually, 7.893%, 10/01/22 ...................... 5,353,327
8,390,050 FNMA, Cap 12.22%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 7.293%, 06/01/18 .......... 8,546,944
1,256,923 FNMA, Cap 12.248%, Margin 1.749% + COFI, Resets Annually, 6.443%, 02/01/28 ................... 1,264,716
1,081,982 FNMA, Cap 12.323%, Margin 1.66% + CMT, Resets Annually, 7.652%, 03/01/21 ..................... 1,103,232
2,544,410 FNMA, Cap 12.49%, Margin 2.00% + CMT, Resets Annually, 7.944%, 02/01/19 ...................... 2,630,181
871,256 FNMA, Cap 12.75%, Margin 2.125% + CMT, Resets Annually, 8.125%, 06/01/18 ..................... 904,434
4,454,797 FNMA, Cap 12.786%, Margin 1.25% + COFI, Resets Monthly, 6.383%, 02/01/03 ..................... 4,474,041
7,722,001 FNMA, Cap 12.819%, Margin 2.127% + CMT, Resets Annually, 7.967%, 09/01/18 .................... 8,023,235
724,829 FNMA, Cap 12.981%, Margin 2.011% + CMT, Resets Annually, 7.787%, 08/01/20 .................... 749,828
1,000,059 FNMA, Cap 13.099%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.574%, 07/01/20 ......... 1,019,390
4,935,228 FNMA, Cap 13.313%, Margin 2.126% + CMT, Resets Annually, 7.866%, 07/01/19 .................... 5,123,211
384,866 FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.792%, 01/01/18 .................... 397,996
758,068 FNMA, Cap 13.793%, Margin 2.167% + CMT, Resets Annually, 7.911%, 06/01/18 .................... 785,673
1,360,922 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.893%, 07/01/24 .......... 1,352,362
522,539 FNMA, Cap 13.843%, Margin 1.25% + COFI, Resets Monthly, 6.361%, 02/01/17 ..................... 523,981
900,053 FNMA, Cap 14.071%, Margin 1.25% + COFI, Resets Monthly, 6.383%, 12/01/18 ..................... 902,816
1,519,528 FNMA, Cap 14.428%, Margin 2.125% + CMT, Resets Annually, 7.75%, 04/01/19 ..................... 1,560,312
6,398,019 FNMA, Cap 14.625%, Margin 1.25% + COFI, Resets Monthly, 6.459%, 06/01/02 ..................... 6,403,649
4,722,374 FNMA, Cap 14.808%, Margin 1.825% + 3CMT, Resets Tri-Annually, 8.427%, 07/01/20 ............... 4,924,303
6,653,769 FNMA, Cap 15.156%, Margin 2.284% + 3CMT, Resets Tri-Annually, 8.506%, 03/01/20 ............... 6,984,062
-------------
Total Federal National Mortgage Association (Cost $63,165,843) ......................... 63,027,693
-------------
Government National Mortgage Association (GNMA) 14.0%
7,646,288 GNMA, Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 7.25%, 08/20/23 ....................... 7,851,360
4,254,765 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.25%, 07/20/17 ....................... 4,362,240
93,286 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.25%, 07/20/23 ....................... 95,788
4,179,742 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.25%, 08/20/23 ....................... 4,291,842
3,818,388 GNMA, Cap 11.50%, Margin 2.50% + CMT, Resets Annually, 6.50%, 07/20/25 ....................... 3,917,208
530,009 GNMA, Cap 12.75%, Margin 1.50% + CMT, Resets Annually, 6.75%, 10/20/17 ....................... 540,249
428,470 GNMA, Cap 13.50%, Margin 1.50% + CMT, Resets Annually, 6.75%, 12/20/17 ....................... 436,748
5,075,461 GNMA, Cap 14.00%, Margin 1.50% + CMT, Resets Annually, 6.75%, 01/20/16 ....................... 5,164,027
-------------
Total Government National Mortgage Association (Cost $26,901,113) ...................... 26,659,462
-------------
Small Business Administration (SBA) 17.4%
10,642,693 SBA, Cap 10.50%, Margin Prime - 0.50%, Resets Quarterly, 8.25%, 03/25/19 ..................... 11,028,490
8,637,536 SBA, Cap 10.85%, Margin Prime - 0.40%, Resets Quarterly, 8.35%, 06/25/19 ..................... 9,023,525
12,241,057 SBA, Cap 10.875%, Margin Prime - 0.125%, Resets Quarterly, 8.625%, 03/25/18 .................. 12,937,268
-------------
Total Small Business Administration (Cost $33,539,337) ................................. 32,989,283
-------------
Total Long Term Investments (Cost $166,071,701) ........................................ 165,032,696
-------------
e Short Term Investments
U.S. Government Securities 10.3%
$19,775,000 U.S. Treasury Bills, 4.99% - 5.61%, 04/04/96 -10/17/96 (Cost $19,458,464) .................... $ 19,497,446
-------------
Total Investments Before Repurchase Agreements (Cost $185,530,165) ..................... 184,530,142
-------------
f,g Receivables From Repurchase Agreements 1.9%
3,463,305 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $3,606,166) (Cost $3,603,866)
Bear Stearns & Co., Inc., (Maturity Value $548,858)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $313,018)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $548,858)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $548,858)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $548,858)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $548,858)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $548,858)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ........................ 3,603,866
-------------
Total Investments (Cost $189,134,031) 99.0% ....................................... 188,134,008
Other Assets and Liabilities, Net 1.0% ............................................ 1,965,589
-------------
Net Assets 100.0% ................................................................. $190,099,597
=============
At December 31, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $189,134,031 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 584,844
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (1,584,867)
-------------
Net unrealized depreciation ................................................................ $ (1,000,023)
=============
PORTFOLIO ABBREVIATIONS:
3CMT - 3 Year Constant Maturity Treasury Index
CMT - 1 Year Constant Maturity Treasury Index
COFI - 11th District Cost of Funds Index
DR - Discount Rate
TB - Treasury Bill Rate
eCertain short-term securities are traded on a discount basis; the rates shown are the discount rates at the time of purchase by the
Fund. Other securities bear interest at the rates shown, payable at fixed dates or upon maturity.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Country* Amount Global Income Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
aBonds 94.1%
<S> <C> <C> <C>
Argentina 4.1%
US 2,500,000 bHidro Electrica Alicura, SA, 8.375%, 03/15/99 ................................... $ 2,328,125
US 13,500,000 Republic of Argentina, Series L, VRN, 4.25%, 03/31/23 ........................... 7,703,438
-------------
10,031,563
-------------
Australia 8.9%
AU 7,000,000 IBM Australia, 12.00%, 03/26/96 ................................................. 5,261,550
AU 9,000,000 New South Wales Treasury Corp., 7.00%, 04/01/04 ................................. 6,168,196
AU 7,000,000 New South Wales Treasury Corp., 6.50%, 05/1/06 .................................. 4,508,971
AU 5,570,000 Queensland Treasury Corp., 8.875%, 11/08/96 ..................................... 4,194,142
AU 2,000,000 Queensland Treasury Corp., 8.00%, 05/14/03 ...................................... 1,468,070
-------------
21,600,929
-------------
Canada 4.2%
CA 11,910,000 Government of Canada, 10.50%, 03/01/01 .......................................... 10,179,532
-------------
Denmark 5.5%
DK 25,917,000 Government of Denmark, 8.00%, 05/15/03 .......................................... 4,958,315
DK 43,000,000 Kingdom of Denmark, 8.00%, 11/15/01 ............................................. 8,310,898
-------------
13,269,213
-------------
France 7.3%
FR 26,670,000 Government of France, 8.125%, 05/25/99 .......................................... 5,862,553
FR 26,850,000 Government of France, 8.50%, 03/28/00 ........................................... 6,030,147
FR 25,306,000 Government of France, 9.50%, 01/25/01 ........................................... 5,950,553
-------------
17,843,253
-------------
Germany 17.9%
DD 10,140,000 Deutsche Bundespost, 7.75%, 10/01/04 ............................................ 7,768,779
DD 5,840,000 Federal Republic of Germany, Bundeschatweis, 6.875%, 12/02/98 ................... 4,359,485
DD 7,350,000 Federal Republic of Germany, Bundesobl, 5.375%, 02/22/99 ........................ 5,284,743
DD 12,520,000 Federal Republic of Germany, Bundes, 8.00%, 01/21/02 ............................ 9,839,294
DD 14,055,000 Federal Republic of Germany, Unity, 8.75%, 08/20/01 ............................. 11,417,084
DD 6,720,000 International Bank for Reconstruction and Development, 7.125%, 04/12/05 ......... 4,982,889
-------------
43,652,274
-------------
India .4%
US 1,000,000 bEssar Gujarat, Ltd., FRN, 8.40%, 07/15/99 ....................................... 990,000
-------------
Italy 4.0%
IT 4,885,000,000 Buoni Poliennali del Tes, 8.50%, 08/01/99 ....................................... 2,906,548
IT 3,145,000,000 Buoni Poliennali del Tes, 10.50%, 09/01/05 ...................................... 1,963,335
IT 7,590,000,000 Government of Italy, 10.50%, 07/15/00 ........................................... 4,817,075
-------------
9,686,958
-------------
Japan 6.6%
JP 505,000,000 European Investment Bank, 5.875%, 11/26/99 ...................................... 5,719,357
JP 714,000,000 European Investment Bank, 6.625%, 03/15/00 ...................................... 8,314,504
JP 176,000,000 International Bank for Reconstruction and Development, 6.75%, 03/15/00 .......... 2,058,886
-------------
16,092,747
-------------
Mexico 2.5%
US 5,000,000 bUnited Mexican States, FRN, 11.188%, 07/20/97 ................................... 5,112,500
US 300,000 United Mexican States, FRN, 7.609%, 03/31/08 .................................... 271,125
US 600,000 United Mexican States, Series B, 6.25%, 12/31/19 ................................ 393,000
US 400,000 United Mexican States, Series D, FRN, 6.875%, 12/31/19 .......................... 288,000
-------------
6,064,625
-------------
New Zealand 1.9%
NZ 3,760,000 Government of New Zealand, 6.50%, 02/15/00 ...................................... $ 2,379,608
NZ 3,435,000 Government of New Zealand, 8.00%, 04/15/04 ...................................... 2,348,790
-------------
4,728,398
-------------
Spain 4.8%
ES 520,280,000 Government of Spain, 12.25%, 03/25/00 ........................................... 4,714,260
ES 462,400,000 Government of Spain, 11.30%, 01/15/02 ........................................... 4,107,469
ES 335,400,000 Government of Spain, 10.00%, 02/28/05 ........................................... 2,805,138
-------------
11,626,867
-------------
Sweden 2.0%
SE 19,700,000 Kingdom of Sweden, 10.25%, 05/05/03 ............................................. 3,282,874
SE 8,900,000 Kingdom of Sweden, 9.00%, 04/20/09 .............................................. 1,392,780
SE 1,100,000 Sweden National Housing Finance Corp., 12.50%, 01/23/97 ......................... 172,351
-------------
4,848,005
-------------
United Kingdom 3.0%
GB 1,425,000 United Kingdom, 9.50%, 01/15/99 ................................................. 2,387,968
GB 3,365,000 United Kingdom, 6.75%, 11/26/04 ................................................. 5,003,708
-------------
7,391,676
-------------
United States 21.0%
US 4,910,000 U.S. Treasury Bonds, 7.625%, 02/15/25 ........................................... 6,003,997
US 13,300,000 U.S. Treasury Notes, 8.875%, 02/15/99............................................ 14,663,250
US 10,850,000 U.S. Treasury Notes, 6.125%, 07/31/00............................................ 11,168,665
US 4,209,000 U.S. Treasury Notes, 8.75%, 08/15/00............................................. 4,780,498
US 3,000,000 U.S. Treasury Notes, 7.50%, 05/15/02 ............................................ 3,326,250
US 5,455,000 U.S. Treasury Notes, 5.75%, 08/15/03 ............................................ 5,520,624
US 380,000 U.S. Treasury Notes, 11.625%, 11/15/04 .......................................... 537,818
US 4,692,000 U.S. Treasury Notes, 6.50%, 05/15/05............................................. 4,991,866
-------------
50,992,968
-------------
Total Long Term Investments (Cost $225,570,756)............................ 228,999,008
-------------
eShort Term Investments 1.7%
Sweden 1.1%
SE 20,000,000 hSweden Treasury Bills, 0.00%, 11/20/96 (Cost $2,837,518)......................... 2,790,519
-------------
Certificates of Deposit.6%
TH 10,000,000 Bangkok Bank, 11.50%, 05/16/96 .................................................. 396,553
TH 10,000,000 Thailand Military Bank, 11.125%, 06/03/96 ....................................... 395,077
TH 14,000,000 Thailand Military Bank, 11.00%, 06/05/96 ........................................ 552,303
-------------
Total Certificates of Deposit (Cost $1,380,013)............................ 1,343,933
-------------
Total Investments Before Repurchase Agreements (Cost $229,788,287)......... 233,133,460
-------------
fReceivables From Repurchase Agreements .9%
US 2,145,000 SBC Capital Markets, Inc., 5.70%, 01/02/96, (Maturity Value $2,286,447)
(Cost $2,285,000)
Collateral: U.S. Treasury Notes, 7.75%, 11/30/99 ............................... $ 2,285,000
-------------
Total Investments (Cost $232,073,287)96.7%............................. 235,418,460
Other Assets and Liabilities, Net 3.3% ............................... 7,775,624
-------------
Net Assets 100.0%..................................................... $243,194,084
=============
At December 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $232,073,287 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................. $ 7,007,487
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................. (3,662,314)
-------------
Net unrealized appreciation.................................................... $ 3,345,173
=============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
DD - Germany
DK - Denmark
ES - Spain
FR - France
GB - United Kingdom
IT - Italy
JP - Japan
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States of America
PORTFOLIO ABBREVIATIONS:
FRN - Floating Rate Notes
VRN - Variable Rate Notes
*Face amount is stated in foreign currency and value is stated in U.S. dollars.
bSee Note 8 regarding Rule 144A securities.
eCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
fFace amount for repurchase agreements is for the underlying collateral.
hZero coupon bonds. Accretion rate may vary.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Shares/ Value
Warrants High Income Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
aCommon Stocks & Warrants .2%
<S> <C> <C>
33,568 Bucyrus-Erie Co................................................................................ $ 272,740
6,500 Dial Page, Inc., warrants ..................................................................... 65
6,900 Empire Gas Corp., warrants..................................................................... 69
70 Foodmaker, Inc., warrants ..................................................................... 1,038
5,000 Gulf States Steel, warrants ................................................................... 50,000
19,386 Kash N' Karry Food Stores, Inc................................................................. 508,883
395 Thermadyne Holdings Corp. ..................................................................... 7,159
-------------
Total Common Stocks & Warrants (Cost $1,197,658)......................................... 839,954
-------------
Preferred Stocks 2.3%
7,437 Panamsat Corp., 12.75%, pfd., PIK (Cost $7,467,762)............................................ 8,403,810
-------------
Total Common Stocks & Warrants, and Preferred Stocks (Cost $8,665,420)................... 9,243,764
-------------
Face
Amount
-------
Bonds 93.2%
Automotive 1.4%
$ 125,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00 ................................... 110,625
4,500,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02 ................................................ 4,837,500
-------------
4,948,125
-------------
Cable Television 10.6%
4,000,000 Cablevision Industries Corp., senior sub. deb., 9.25%, 04/01/08 ............................... 4,340,000
1,500,000 Cablevision System Corp., senior sub. deb., 9.25%, 11/01/05 ................................... 1,571,250
2,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23 .................................. 2,085,000
2,000,000 Comcast Corp., senior sub. deb., 9.125%, 10/15/06 ............................................. 2,090,000
2,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08 .............................................. 2,120,000
500,000 Continental Cablevision, Inc., senior deb., 8.875%, 09/15/05 .................................. 525,000
1,500,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 ................................... 1,597,500
1,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07 ............................. 1,120,000
2,900,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08 .............................. 3,045,000
2,700,000 cDiamond Cable Communications Co., senior disc. notes, zero coupon
to 12/15/00, (original accretion rate 11.75%), 11.75% thereafter, 12/15/05.................... 1,593,000
2,200,000 Le Groupe Videotron Ltee, senior notes, 10.625%, 02/15/05 ..................................... 2,356,750
4,500,000 dRogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14 ...................... 2,888,419
1,500,000 Rogers Communications, Inc., senior deb., 10.875%, 04/15/04 ................................... 1,565,625
8,000,000 cTelewest, Plc., senior deb., zero coupon to 10/01/00, (original accretion rate 11.00%),
11.00% thereafter, 10/01/07 .................................................................. 4,820,000
1,500,000 Time Warner, Inc., senior notes, 10.15%, 05/01/12 ............................................. 1,871,448
1,500,000 Time Warner, Inc., sub. deb., 9.125%, 01/15/13 ................................................ 1,676,250
3,000,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24 ............................... 3,045,000
-------------
38,310,242
-------------
Chemicals 5.6%
3,750,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02 ........................ 4,045,313
5,000,000 Arcadian Partners L.P., senior notes, Series B, 10.75%, 05/01/05 .............................. 5,525,000
2,500,000 Harris Chemical of North America, senior sub. notes, 10.75%, 10/15/03 ......................... 2,262,500
3,000,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00 ............................................... 3,210,000
1,200,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01 ................................... 1,323,000
2,425,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03 .................................... 2,679,625
1,150,000 UCC Investors, senior notes, 10.50%, 05/01/02 ................................................. 1,190,250
-------------
20,235,688
-------------
Consumer Goods 4.6%
$4,250,000 cColeman Holdings, Inc., senior secured disc. notes, (original accretion rate 10.875%), 0.00%,
05/27/98...................................................................................... $ 3,400,000
5,800,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ............................. 5,133,000
5,000,000 Revlon Consumer Products Corp., senior sub. notes, 10.50%, 02/15/03 ........................... 5,150,000
3,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13 ..................................................... 3,078,750
-------------
16,761,750
-------------
Containers & Packaging .6%
1,000,000 Owens-Illinois, Inc., senior sub. notes, 10.00%, 08/01/02 ..................................... 1,046,250
1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04 ...................................... 1,053,750
-------------
2,100,000
-------------
Energy 1.2%
5,000,000 cEmpire Gas Corp., units, senior secured notes, 7.00% coupon to 07/15/99,
12.875% thereafter, 07/15/04 ................................................................. 4,200,000
-------------
Food & Beverage 4.4%
3,000,000 Coca Cola Bottling Group Southwest, Inc., senior sub. notes, 9.00%, 11/15/03 .................. 3,037,500
700,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ................................ 717,500
1,480,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ............................................ 1,065,600
1,700,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05 .................................. 1,797,750
250,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 .......................... 265,000
4,700,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ......................... 4,829,250
1,230,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 ..................... 1,162,350
3,000,000 Texas Bottling Group, Inc., senior sub. notes, 9.00%, 11/15/03 ................................ 3,015,000
-------------
15,889,950
-------------
Food Retailing 8.1%
2,000,000 Bruno's, Inc., senior sub. notes, 10.50%, 08/01/05 ............................................ 1,985,000
3,691,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04 ................................ 3,211,170
6,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03 .................................... 5,805,000
1,000,000 Pathmark Stores, Inc., S.F., sub. notes, 11.625%, 06/15/02 .................................... 1,010,000
3,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03 .............................................. 2,673,750
1,500,000 Penn Traffic Co., senior notes, 10.375%, 10/01/04 ............................................. 1,421,250
1,500,000 Penn Traffic Co., senior sub. notes, 9.625%, 04/15/05 ......................................... 1,170,000
6,500,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03 ...................................... 6,110,000
3,750,000 Ralphs Grocery Co., senior notes, 10.45%, 06/15/04 ............................................ 3,815,625
2,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05 ....................................... 1,960,000
-------------
29,161,795
-------------
Forest & Paper Products 7.3%
3,500,000 Container Corp., senior notes, Series A, 11.25%, 05/01/04 ..................................... 3,587,500
4,000,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06 ......................................... 3,950,000
3,000,000 Fort Howard Corp., sub. notes, 10.00%, 03/15/03 ............................................... 3,120,000
3,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05 ............................... 2,955,000
2,000,000 Repap New Brunswick, senior notes, first priority, 9.875%, 07/15/00 ........................... 2,015,000
2,000,000 Repap New Brunswick, senior notes, second priority, 10.625%, 04/15/05 ......................... 1,960,000
3,000,000 REPAP Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02 .................................. 2,865,000
2,300,000 S.D. Warren Co., senior sub. notes, Series B, 12.00%, 12/15/04 ................................ 2,541,500
3,500,000 Tembec Finance Corp., senior notes, 9.875%, 09/30/05 .......................................... 3,456,250
-------------
26,450,250
-------------
Gaming & Leisure 9.0%
3,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 .............................................. 3,337,500
4,500,000 Bally's Grand, first mortgage, Series B, 10.375%, 12/15/03 .................................... 4,590,000
$1,000,000 Grand Casinos, Inc., first mortgage, 10.125%, 12/01/03 ........................................ $ 1,050,000
3,500,000 aHarrah's Jazz Co., first mortgage, 14.25%, 11/15/01 ........................................... 997,500
1,500,000 bJohn Q. Hammons Hotels L.P., first mortgage, 9.75%, 10/01/05 .................................. 1,511,250
5,900,000 Players International, Inc., senior notes, 10.875%, 04/15/05 .................................. 5,568,125
3,000,000 bRio Hotel and Casino, Inc., senior sub. notes, 10.625%, 07/15/05 .............................. 3,090,000
7,500,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09 ........................................... 8,475,000
5,000,000 b,cSix Flags Theme Parks, senior sub. notes, zero coupon to 06/15/98, (original accretion rate 12.25%),
12.25% thereafter, 06/15/05 .................................................................. 3,925,000
-------------
32,544,375
-------------
Health Care Services 9.8%
7,770,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 .............................. 8,275,050
2,236,911 Amerisource Distribution Corp., senior deb., 11.25%, 07/15/05 ................................. 2,471,787
4,000,000 Dade International, Inc., senior sub. notes, 13.00%, 02/01/05 ................................. 4,480,000
5,500,000 Integrated Health Services, Inc., senior sub. notes, 9.625%, 05/31/02 ......................... 5,589,375
1,000,000 IVAC Corp., senior notes, 9.25%, 12/01/02 ..................................................... 1,030,000
1,000,000 Regency Health Services, Inc., senior sub. notes, 9.875%, 10/15/02 ............................ 997,500
5,500,000 cSola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03..... 5,266,250
850,000 Tenet Healthcare Corp., senior notes, 9.625%, 09/01/02 ........................................ 943,500
2,400,000 Tenet Healthcare Corp., senior notes, 8.625%, 12/01/03 ........................................ 2,520,000
3,400,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05 .................................. 3,782,500
-------------
35,355,962
-------------
Industrial Products 6.8%
8,500,000 cAmerican Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98,
(original accretion rate 10.50%), 10.50% thereafter, 06/01/05................................. 7,310,000
1,000,000 bDay International Group, senior sub. notes, 11.125%, 06/01/05 ................................. 1,010,000
6,500,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01 ......................................... 6,500,000
5,500,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 ............................................. 5,142,500
5,000,000 Pace Industries, Inc., senior notes, Series B, 10.625%, 12/01/02 .............................. 4,425,000
-------------
24,387,500
-------------
Lodging 2.9%
8,000,000 HMH Properties, Inc., senior secured notes, 9.50%, 05/15/05 ................................... 8,210,000
2,310,000 Red Roof Inns, Inc., senior notes, 9.625%, 12/15/03 ........................................... 2,269,575
-------------
10,479,575
-------------
Media & Broadcasting 7.2%
1,000,000 Act III Broadcasting, senior sub. notes, 9.625%, 12/15/03 ..................................... 1,007,500
1,700,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 ................................ 1,717,000
2,500,000 bBenedek Broadcasting, senior notes, 11.875%, 03/01/05 ......................................... 2,662,500
6,500,000 Granite Broadcasting Corp., senior sub. notes, Series A, 10.375%, 05/15/05 .................... 6,727,500
925,000 Infinity Broadcasting Corp., senior sub. notes, 10.375%, 03/15/02 ............................. 996,688
2,500,000 K-III Communications Corp., senior notes, 10.25%, 06/01/04 .................................... 2,687,500
4,000,000 New World Television, Inc., S.F., senior notes, 11.00%, 06/30/05 .............................. 4,220,000
5,000,000 dNews America Holdings, Inc., deb. (Australia), 8.625%, 02/07/14 ............................... 3,261,015
2,500,000 Sinclair Broadcast Group, Inc., senior sub. notes, 10.00%, 09/30/05 ........................... 2,543,750
-------------
25,823,453
-------------
Metals & Mining 2.5%
4,000,000 Algoma Steel, Inc., first mortgage, 12.375%, 07/15/05 ......................................... 3,630,000
5,000,000 Gulf States Steel, first mortgage, 13.50%, 04/15/03 ........................................... 4,300,000
1,110,000 Ucar Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05 .................. 1,268,175
-------------
9,198,175
-------------
Technology & Information Systems 3.0%
$6,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03 ................................. $ 6,457,500
1,400,000 cBell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion rate 11.50%),
11.50% thereafter, 03/01/05................................................................... 889,000
2,450,000 Bell & Howell Co., senior notes, 9.25%, 07/15/00 .............................................. 2,523,500
800,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 ........................................ 852,000
-------------
10,722,000
-------------
Textiles & Apparel 1.1%
144,200 a,lForstmann Textile, Inc., senior sub. notes, 14.75%, 04/15/99 .................................. 61,285
4,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ................................... 3,970,000
-------------
4,031,285
-------------
Transportation 4.3%
3,000,000 Delta Airlines, Inc., S.F., equipment trust, 10.50%, 04/30/16 ................................. 3,839,925
1,600,000 Eletson Holdings, Inc., first mortgage notes, 9.25%, 11/15/03 ................................. 1,582,000
4,500,000 Gearbulk Holding, Ltd., senior notes, 11.25%, 12/01/04 ........................................ 4,826,250
5,000,000 United Airlines, S.F., pass-through trust, Series B-2, 9.06%, 09/26/14 ........................ 5,412,500
-------------
15,660,675
-------------
Utilities 1.8%
3,000,000 cCMS Energy Corp., senior notes, Series B, zero coupon to 10/01/95,
(original accretion rate 9.875%), 9.875% thereafter, 10/01/99................................. 3,121,880
3,030,410 Midland CoGeneration Venture, S.F., sub. deb., Series C, 10.33%, 07/23/02 ..................... 3,200,395
6,000 System Energy Resource, S.F., first mortgage, 11.375%, 09/01/16 ............................... 6,581
-------------
6,328,856
-------------
Wireless Communication 1.0%
6,500,000 cDial Call Communications, units, senior disc. notes, zero coupon to 04/15/99,
(original accretion rate 12.25%), 12.25% thereafter, 04/15/04 ................................ 3,737,500
-------------
Total Bonds (Cost $331,963,734).......................................................... 336,327,156
-------------
Total Long Term Investments (Cost $340,629,154) ......................................... 345,570,920
-------------
f,gReceivables From Repurchase Agreements 2.3%
7,805,217 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $8,128,835) (Cost $8,123,649)
Bear Stearns & Co., Inc., (Maturity Value $1,237,317)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $704,933)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,237,317)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $1,237,317)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $1,237,317)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $1,237,317)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $1,237,317)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00.......................... 8,123,649
-------------
Total Investments (Cost $348,752,803) 98.0% ........................................ 353,694,569
Other Assets and Liabilities, Net 2.0%.............................................. 7,208,977
-------------
Net Assets 100.0% .................................................................. $360,903,546
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $348,752,803 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 14,337,765
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (9,395,999)
-------------
Net unrealized appreciation ................................................................. $ 4,941,766
=============
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
cZero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant.
dFace amount is stated in foreign currency and value is stated in U.S. dollars.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
lSee Note 9 regarding defaulted securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount Investment Grade Intermediate Bond Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government, Agencies & Instrumentalities 41.1%
<S> <C> <C>
$15,000,000 Federal National Mortgage Association, 6.05%, 11/10/97 ........................................ $ 15,171,524
12,000,000 Tennessee Valley Authority, bonds, (putablen 07/15/01, callable 07/15/20), 6.235%, 07/15/45 ... 12,392,364
5,000,000 U.S. Treasury Notes, 6.50%, 04/30/97 .......................................................... 5,085,934
10,000,000 U.S. Treasury Notes, 6.125%, 05/31/97 ......................................................... 10,128,119
15,000,000 U.S. Treasury Notes, 5.625%, 06/30/97 ......................................................... 15,103,125
5,000,000 U.S. Treasury Notes, 5.875%, 08/15/98 ......................................................... 5,079,684
5,000,000 U.S. Treasury Notes, 5.875%, 03/31/99 ......................................................... 5,090,625
-------------
Total U.S. Government, Agencies & Instrumentalities (Cost $67,273,543) .................. 68,051,375
-------------
Corporate Bonds 20.7%
Consumer Goods 3.7%
4,000,000 American Home Products, notes, 6.875%, 04/15/97 ............................................... 4,070,944
2,000,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 ...................................................... 2,003,656
-------------
6,074,600
-------------
Electric Utilities 1.8%
3,000,000 Southern California Edison Co., first mortgage bonds, 6.125%, 07/15/97 ........................ 3,022,524
-------------
Financial Services 10.6%
6,400,000 Associates Corp. of North America, deb., Series B, (putablen 03/03/98), 7.95%, 02/15/10 ...... 7,305,785
7,500,000 GE Capital Corp., medium term notes (step up to 8.125% or putablen 4/01/98), 5.80%, 04/01/08 .. 8,274,697
2,000,000 International Lease Finance Co., notes, 6.375%, 11/01/96....................................... 2,013,028
-------------
17,593,510
-------------
Waste Management 4.6%
7,000,000 WMX Technologies, notes (step up to 8.00% or putablen 04/30/97), 6.22%, 04/30/04 .............. 7,716,072
-------------
Total Corporate Bonds (Cost $31,903,631)................................................. 34,406,706
-------------
Total Long Term Investments (Cost $99,177,174) .......................................... 102,458,081
-------------
Short Term Investments
U.S. Government, Agencies & Instrumentalities 21.6%
7,000,000 Tennessee Valley Authority, bonds, 8.25%, 11/15/96 ............................................ 7,173,998
1,000,000 U.S. Treasury Notes, 7.50%, 01/31/96 .......................................................... 1,002,812
8,000,000 U.S. Treasury Notes, 4.625%, 02/15/96 ......................................................... 8,005,000
1,000,000 U.S. Treasury Notes, 7.75%, 03/31/96 .......................................................... 1,006,562
5,000,000 U.S. Treasury Notes, 5.50%, 04/30/96 .......................................................... 5,006,250
2,500,000 U.S. Treasury Notes, 7.375%, 05/15/96 ......................................................... 2,520,313
5,000,000 U.S. Treasury Notes, 5.875%, 05/31/96 ......................................................... 5,014,059
2,000,000 U.S. Treasury Notes, 7.875%, 07/15/96 ......................................................... 2,028,750
4,000,000 U.S. Treasury Notes, 6.50%, 09/30/96 .......................................................... 4,037,500
-------------
Total U.S. Government, Agencies & Instrumentalities (Cost $36,067,269) .................. 35,795,244
-------------
Total Investments Before Repurchase Agreements (Cost $135,244,443) ...................... 138,253,325
-------------
f,gReceivables From Repurchase Agreements 12.3%
19,636,124 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $20,450,733) (Cost $20,437,687)
Bear Stearns & Co., Inc., (Maturity Value $3,112,875)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $1,773,483)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $3,112,875)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $3,112,875)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $3,112,875)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $3,112,875)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $3,112,875)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00.......................... $ 20,437,687
-------------
Total Investments (Cost $155,682,130) 95.7% ........................................ 158,691,012
Other Assets and Liabilities, Net 4.3% ............................................. 7,211,982
-------------
Net Assets 100.0% .................................................................. $165,902,994
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $155,682,130 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 3,675,246
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (666,364)
-------------
Net unrealized appreciation ................................................................. $ 3,008,882
=============
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
nHolder may choose either to redeem at par on any put date or, if more advantageous, to hold to final stated maturity.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Shares Precious Metals Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 90.0%
<S> <C> <C>
Gold & Diversified Resources 13.3%
160,718 Freeport-McMoRan Copper & Gold, Inc. ........................................................ $ 4,500,104
269,429 RTZ Corp., Plc. ............................................................................. 3,916,411
159,100 Teck Corp., Class B ......................................................................... 3,102,983
270,000 Western Mining Corp., Holdings, Ltd. ........................................................ 1,733,857
28,400 Western Mining Holdings, Ltd., ADR .......................................................... 741,950
-------------
13,995,305
-------------
Long Life Gold Mines 45.5%
190,900 b Ashanti Goldfields Co., Ltd. ................................................................ 3,865,725
279,595 Barrick Gold Corp. .......................................................................... 7,374,318
103,000 Compania de Minas Buenaventura, Class C ..................................................... 664,085
199,500 Driefontein Consolidated Mines, Ltd., ADR ................................................... 2,468,813
226,700 Hartebeestfontein Gold Mining Co., Ltd., ADR ................................................ 575,229
89,488 Homestake Mining Co. ........................................................................ 1,398,250
209,000 Kloof Gold Mining Co., Ltd., ADR ............................................................ 1,972,438
82,400 Newmont Gold Co. ............................................................................ 3,605,000
99,755 Newmont Mining Corp. ........................................................................ 4,513,914
327,500 Placer Dome, Inc. ........................................................................... 7,900,938
553,301 Santa Fe Pacific Gold Corp. ................................................................. 6,708,775
522,000 a TVX Gold, Inc. .............................................................................. 3,680,365
339,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR .............................................. 2,161,125
53,600 Western Areas Gold Mining Co., Ltd. ......................................................... 909,752
-------------
47,798,727
-------------
Medium Life Gold Mines 20.4%
1,043,600 a Acacia Resources, Ltd. ...................................................................... 1,877,090
488,700 a Amax Gold, Inc. ............................................................................. 3,543,075
324,500 Battle Mountain Gold Co. .................................................................... 2,758,250
137,000 a Dayton Mining Corp. ......................................................................... 577,043
168,400 Echo Bay Mines, Ltd. ........................................................................ 1,747,150
15,700 FMC Gold Co. ................................................................................ 64,763
415,000 a Goldfields, Ltd. ............................................................................ 1,042,558
175,000 a Greenstone Resources, Ltd. .................................................................. 506,355
179,000 Hemlo Gold Mines, Inc. ...................................................................... 1,678,125
271,500 Newcrest Mining, Ltd. ....................................................................... 1,142,147
895,600 Placer Pacific, Ltd. ........................................................................ 1,850,523
367,500 Plutonic Resources, Ltd. .................................................................... 1,748,127
878,071 Poseidon Gold, Ltd. ......................................................................... 1,749,041
215,900 Sons Of Gwalia, Ltd. ........................................................................ 1,187,463
-------------
21,471,710
-------------
Mining Finance Companies 3.2%
109,900 DeBeers Consolidated Mines, Ltd., ADR ....................................................... 3,324,475
-------------
Platinum Companies 7.6%
95,000 Impala Platinum Holdings, Ltd. .............................................................. 1,732,957
60,700 Impala Platinum Holdings, Ltd., ADR ......................................................... 1,107,270
227,442 Rustenburg Platinum Holdings, Ltd., ADR ..................................................... 3,743,376
82,300 a,b Stillwater Mining Co. ....................................................................... 1,425,847
-------------
8,009,450
-------------
Total Common Stocks (Cost $90,278,493) ................................................ 94,599,667
-------------
Convertible Bonds .5%
Mining - Precious Metals
$ 480,000 Bema Gold Corp., cvt. sub. notes, 7.50%, 02/28/00 (Cost $530,700) ........................... $ 547,200
-------------
Total Long Term Investments (Cost $90,809,193) ........................................ 95,146,867
-------------
f,g Receivables From Repurchase Agreements 9.7%
9,755,575 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $10,161,516) (Cost $10,155,034)
Bear Stearns & Co. Inc., (Maturity Value $1,546,718)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $881,208)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,546,718)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $1,546,718)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $1,546,718)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $1,546,718)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $1,546,718)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ....................... 10,155,034
-------------
Total Investments (Cost $100,964,227) 100.2% ..................................... 105,301,901
Liabilities in Excess of Other Assets (.2)% ...................................... (193,087)
-------------
Net Assets 100.0% ................................................................ $105,108,814
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $100,964,227 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 9,432,139
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (5,094,465)
-------------
Net unrealized appreciation ............................................................... $ 4,337,674
=============
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Shares Real Estate Securities Fund (Note 1)
Common Stocks 92.2%
Equity REIT - Apartments 24.5%
<S> <C> <C>
150,000 Amli Residential Properties Trust ........................................................... $ 3,000,000
240,000 Bay Apartment Communities, Inc. ............................................................. 5,820,000
110,000 Camden Property Trust ....................................................................... 2,626,250
230,000 Equity Residential Properties Trust ......................................................... 7,043,750
200,000 Evans Withycombe Residential, Inc. .......................................................... 4,300,000
140,000 Gables Residential Trust .................................................................... 3,202,500
135,000 Irvine Apartment Communities, Inc. .......................................................... 2,598,750
53,700 Merry Land & Investment Co. ................................................................. 1,268,663
185,000 Oasis Residential, Inc. ..................................................................... 4,208,750
175,000 Post Properties, Inc. ....................................................................... 5,578,125
253,500 Security Capital Pacific Trust .............................................................. 5,006,625
220,000 South West Property Trust ................................................................... 2,970,000
160,000 Summit Properties, Inc. ..................................................................... 3,180,000
100,000 United Dominion Realty Trust, Inc. .......................................................... 1,500,000
-------------
52,303,413
-------------
Equity REIT - Health Care 4.4%
70,000 Health Care Property Investors, Inc. ........................................................ 2,458,750
70,000 Nationwide Health Properties, Inc. .......................................................... 2,940,000
153,000 Omega Healthcare Investors, Inc. ............................................................ 4,073,625
-------------
9,472,375
-------------
Equity REIT - Hotels 12.9%
500,000 Equity Inns, Inc. ........................................................................... 5,750,000
242,000 FelCor Suite Hotels, Inc. ................................................................... 6,715,500
60,000 Patriot American Hospitality, Inc. .......................................................... 1,545,000
243,000 RFS Hotel Investors, Inc. ................................................................... 3,736,125
123,200 Starwood Lodging Trust ...................................................................... 3,665,200
525,000 i Winston Hotels, Inc. ........................................................................ 6,234,375
-------------
27,646,200
-------------
Equity REIT - Industrial 9.4%
105,000 CenterPoint Properties Corp. ................................................................ 2,428,125
112,500 Duke Realty Investments, Inc. ............................................................... 3,529,688
175,000 Liberty Property Trust ...................................................................... 3,631,250
302,283 Security Capital Industrial Trust ........................................................... 5,289,952
100,000 Spieker Properties, Inc. .................................................................... 2,512,500
110,000 Weeks Corp. ................................................................................. 2,763,750
-------------
20,155,265
-------------
Equity REIT - Mixed Property Type 1.1%
95,000 Colonial Properties Trust ................................................................... 2,422,500
-------------
Equity REIT - Office 4.1%
60,000 Beacon Properties Corp. ..................................................................... 1,380,000
90,000 Crescent Real Estate Equities, Inc. ......................................................... 3,071,250
150,000 Highwoods Properties, Inc ................................................................... 4,237,500
-------------
8,688,750
-------------
Equity REIT - Residential Communities 4.3%
185,000 Manufactured Home Communities, Inc. ......................................................... 3,237,500
125,000 ROC Communities, Inc. ....................................................................... 3,000,000
110,000 Sun Communities, Inc. ....................................................................... 2,901,250
-------------
9,138,750
-------------
Equity REIT - Retail - Community Centers 4.3%
102,000 Developers Diversified Realty Corp. ......................................................... $ 3,060,000
97,500 Kimco Realty Corp. .......................................................................... 2,656,875
90,000 Vornado Realty Trust ........................................................................ 3,375,000
-------------
9,091,875
-------------
Equity REIT - Retail - Outlet Centers 2.0%
75,000 Chelsea GCA Realty, Inc. .................................................................... 2,250,000
80,000 Tanger Factory Outlet Centers, Inc. ......................................................... 2,000,000
-------------
4,250,000
-------------
Equity REIT - Retail - Regional Malls 4.6%
160,000 DeBartolo Realty Corp. ...................................................................... 2,080,000
140,000 The Macerich Co. ............................................................................ 2,800,000
115,000 The Mills Corp. ............................................................................. 1,955,000
118,500 Simon Property Group, Inc. .................................................................. 2,888,437
-------------
9,723,437
-------------
Equity REIT - Storage 8.1%
280,000 Public Storage, Inc. ........................................................................ 5,320,000
340,000 Storage Trust Realty ........................................................................ 7,735,000
130,000 Storage USA, Inc. ........................................................................... 4,241,250
-------------
17,296,250
-------------
Home Builders 5.6%
100,000 a Beazer Homes USA, Inc. ...................................................................... 2,062,500
75,000 Centex Corp. ................................................................................ 2,606,250
85,000 Kaufman & Broad Home Corp. .................................................................. 1,264,375
70,000 Lennar Corp. ................................................................................ 1,758,750
200,000 a NVR, Inc. ................................................................................... 2,000,000
128,000 a Southern Energy Homes, Inc. ................................................................. 2,240,000
-------------
11,931,875
-------------
Hotels 4.6%
39,000 a Bristol Hotel Co. ........................................................................... 950,625
470,000 a Host Marriott Corp. ......................................................................... 6,227,500
155,000 a Red Lion Hotels, Inc. ....................................................................... 2,712,500
-------------
9,890,625
-------------
Mixed Property Type 2.3%
500,000 Security Capital US Realty .................................................................. 5,000,000
-------------
Total Common Stocks (Cost $174,685,433) ............................................... 197,011,315
-------------
Convertible Preferred Stocks .4%
20,000 b Catellus Development Corp., $3.625 cvt. pfd., Series B (Cost $1,000,000) .................... 805,000
-------------
Face
Amount
-------
Bonds .9%
$ 2,000,000 US Home Corp., cvt. sub. notes, 4.875%, 11/01/05 (Cost $1,970,000) .......................... 1,925,000
-------------
Total Long Term Investments (Cost $177,655,433) ....................................... 199,741,315
-------------
f,g Receivables From Repurchase Agreements 5.3%
$10,819,750 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $11,268,262) (Cost $11,261,074)
Bear Stearns & Co., Inc., (Maturity Value $1,715,029)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $978,088)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,715,029)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $1,715,029)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $1,715,029)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $1,715,029)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $1,715,029)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00........................ $ 11,261,074
-------------
Total Investments (Cost $188,916,507) 98.8% ...................................... 211,002,389
Other Assets and Liabilities, Net 1.2% ........................................... 2,470,962
-------------
Net Assets 100.0 % ............................................................... $213,473,351
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $188,916,507 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 24,703,569
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (2,617,687)
-------------
Net unrealized appreciation ............................................................... $ 22,085,882
=============
PORTFOLIO ABBREVIATION:
REIT - Real Estate Investment Trust
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
iSee Note 10 regarding holdings of 5% or more of voting securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount U.S. Government Securities Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities 74.3%
<S> <C> <C>
Federal Home Loan Mortgage Corp. (FHLMC) 12.5%
$25,224,495 FHLMC, 6.50%, 06/01/08 - 01/01/24 ............................................................ $ 25,048,820
18,837,152 FHLMC, 7.00%, 04/01/24 ....................................................................... 19,025,524
19,959,604 FHLMC, PL, 7.00%, 09/17/31 ................................................................... 19,834,856
6,633,213 FHLMC, 7.50%, 11/01/22 - 05/01/24 ............................................................ 6,809,412
5,259,695 FHLMC, 8.00%, 05/01/16 - 05/01/22 ............................................................ 5,450,138
1,593,739 FHLMC, 8.50%, 04/01/18 - 03/01/22 ............................................................ 1,659,783
1,497,701 FHLMC, 9.00%, 03/01/03 - 01/01/21 ............................................................ 1,558,060
463,407 FHLMC, 9.50%, 06/01/16 - 08/01/20 ............................................................ 489,910
240,340 FHLMC, 10.00%, 08/01/20 - 10/01/20 ........................................................... 261,371
-------------
80,137,874
-------------
Federal National Mortgage Association (FNMA) 10.6%
7,547,433 FNMA, 6.00%, 10/01/23 - 04/01/24 ............................................................. 7,306,860
17,376,787 FNMA, 6.50%, 01/01/24 - 06/01/24 ............................................................. 17,192,158
2,109,772 FNMA, 7.00%, 05/01/24 ........................................................................ 2,128,893
10,000,000 FNMA, PL, 7.00%, 06/17/35 .................................................................... 10,007,812
13,210,196 FNMA, 7.50%, 04/01/23 - 08/01/25 ............................................................. 13,548,708
15,743,527 FNMA, 8.00%, 07/01/16 - 02/01/25 ............................................................. 16,324,590
1,481,255 FNMA, 8.50%, 10/01/19 - 03/01/22 ............................................................. 1,546,989
265,743 FNMA, 9.00%, 09/01/18 - 03/01/21 ............................................................. 280,193
128,024 FNMA, 9.50%, 07/01/19 - 08/01/20 ............................................................. 136,426
49,673 FNMA, 10.00%, 10/01/20 ....................................................................... 54,610
-------------
68,527,239
-------------
Government National Mortgage Association (GNMA) 51.2%
13,621,285 GNMA I, SF, 6.00%, 12/15/23 - 01/15/24 ....................................................... 13,238,187
2,388,010 GNMA II, 6.00%, 01/20/24 - 10/20/24 .......................................................... 2,302,938
61,660,901 GNMA I, SF, 6.50%, 05/15/23 - 05/15/24 ....................................................... 61,236,985
8,772,140 GNMA, PL, 6.50%, 09/15/28 .................................................................... 8,667,971
56,548,794 GNMA I, SF, 7.00%, 03/15/22 - 07/15/25 ....................................................... 57,273,349
5,199,550 GNMA II, 7.00%, 01/20/24 ..................................................................... 5,230,425
2,271,652 GNMA, PL, 7.25%, 05/15/22 - 08/15/22 ......................................................... 2,308,213
177,282 GNMA, PL, 7.50%, 03/15/28 .................................................................... 181,603
47,536,133 GNMA I, SF, 7.50%, 02/15/17 - 06/15/23 ....................................................... 48,932,508
36,549,332 GNMA II, 7.50%, 11/20/16 - 12/20/25 .......................................................... 37,394,536
34,306,908 GNMA I, SF, 8.00%, 04/15/05 - 06/15/25 ....................................................... 35,764,949
1,516,360 GNMA II, 8.00%, 02/20/16 - 05/20/17 .......................................................... 1,569,433
3,114,025 GNMA I, 8.25%, 04/15/25 ...................................................................... 3,259,023
13,461,614 GNMA I, SF, 8.50%, 08/15/21 - 08/15/24 ....................................................... 14,143,112
5,554,888 GNMA I, SF, 9.00%, 04/15/16 - 02/15/21 ....................................................... 5,889,922
13,594,683 GNMA I, SF, 9.50%, 10/15/15 - 12/15/21 ....................................................... 14,601,545
4,200,000 k GNMA II, 9.50%, 04/20/25 ..................................................................... 4,437,564
395,832 GNMA II, 10.00%, 07/20/19 - 02/20/21 ......................................................... 427,004
11,213,226 GNMA I SF, 10.00%, 08/15/17 - 12/15/24 ....................................................... 12,327,538
-------------
329,186,805
-------------
Total Mortgage-Backed Securities (Cost $461,742,320) ................................... 477,851,918
-------------
Other Government & Agency Securities 23.0%
2,000,000 Federal Agriculture Mortgage Corp., 6.91%, 07/15/97 .......................................... 2,045,582
5,000,000 Federal Farm Credit Bank, 5.80%, 09/16/03 .................................................... 4,887,250
10,000,000 Federal Farm Credit Bank, 7.06%, 08/05/02 .................................................... 10,078,119
10,000,000 Federal Farm Credit Bank, 7.95%, 04/01/02 .................................................... 10,270,119
2,250,000 Federal Land Bank, 7.35%, 01/20/97 ........................................................... 2,299,189
$ 8,229,753 FHA Project Loan, 7.00%, 02/01/29 ............................................................ $ 8,142,271
3,876,000 h FICO Strips, 0.00%, 11/11/01 ................................................................. 2,787,378
10,000,000 h FICO Strips, 0.00%, 03/07/02 ................................................................. 7,053,870
1,925,000 h FICO Strips, 0.00%, 05/11/02 ................................................................. 1,345,157
10,000,000 h FICO Strips, 0.00%, 05/11/13 ................................................................. 3,278,400
15,000,000 h FICO Strips, Series 1, 0.00%, 05/11/99 ....................................................... 12,487,260
1,758,000 h FICO Strips, Series 1, 0.00%, 05/11/09 ....................................................... 765,408
11,024,000 h FICO Strips, Series 13, 0.00%, 06/27/09 ...................................................... 4,755,158
5,000,000 h FICO Strips, Series 15, 0.00%, 09/07/98 ...................................................... 4,328,155
3,202,000 h FICO Strips, Series 16, 0.00%, 04/05/09 ...................................................... 1,403,741
4,745,000 h FICO Strips, Series 16, 0.00%, 10/05/10 ...................................................... 1,868,651
2,060,000 h FICO Strips, Series A, 0.00%, 02/08/09 ....................................................... 912,918
7,000,000 h FICO Strips, Series D, 0.00%, 09/26/01 ....................................................... 5,072,668
5,000,000 Small Business Administration, 6.45%, 12/01/15 ............................................... 5,064,364
15,000,000 h Student Loan Marketing Association, 0.00%, 05/15/14 .......................................... 3,723,823
10,000,000 h Tennessee Valley Authority, 0.00%, 04/15/03 .................................................. 6,572,198
6,000,000 h Tennessee Valley Authority, 0.00%, 04/15/42 .................................................. 2,185,692
6,700,000 Tennessee Valley Authority, 6.00%, 01/15/97 .................................................. 6,740,682
5,000,000 Tennessee Valley Authority, 6.125%, 07/15/03 ................................................. 5,028,280
10,000,000 Tennessee Valley Authority, 7.25%, 07/15/43 .................................................. 10,357,399
1,000,000 Tennessee Valley Authority, 8.375%, 10/01/99 ................................................. 1,092,130
12,000,000 Tennessee Valley Authority, 8.625%, 11/15/29 ................................................. 13,430,432
10,000,000 U.S. Treasury Notes, 5.75%, 08/15/03 ......................................................... 10,125,000
-------------
Total Other Government & Agency Securities (Cost $138,227,372) ......................... 148,101,294
-------------
Total Long Term Investments (Cost $599,969,692) ........................................ 625,953,212
-------------
f,g Receivables From Repurchase Agreements 2.7%
16,672,717 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $17,365,357) (Cost $17,354,279)
Bear Stearns & Co., Inc., (Maturity Value $2,643,239)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 2/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $1,505,923)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $2,643,239)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $2,643,239)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $2,643,239)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $2,643,239)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $2,643,239)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ........................ 17,354,279
-------------
Total Investments (Cost $617,323,971) 100.0%....................................... 643,307,491
Liabilities in Excess of Other Assets .............................................. (142,020)
-------------
Net Assets 100.0% ................................................................. $643,165,471
=============
At December 31, 1995 the net unrealized appreciation based on the cost of investments
for income tax purposes of $617,323,971 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 27,122,359
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (1,138,839)
-------------
Net unrealized appreciation ................................................................ $ 25,983,520
=============
PORTFOLIO ABBREVIATIONS:
FHA - Federal Housing Authority
FICO - Financing Corp.
PL - Project Loan
SF - Single Family
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
hZero coupon bonds. Accretion rate may vary.
kSee Note 1(g) regarding securities purchased on a when-issued basis.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount Zero Coupon Fund - 2000 (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
hLong Term Investments 99.2%
U.S. Government & Agency Securities 97.9%
<S> <C> <C>
$ 7,567,000 FHLB Strips, Series A-1, 0.00%, 02/25/01 ...................................................... $ 5,696,913
2,884,000 FHLB Strips, Series A-1, 0.00%, 08/25/01 ...................................................... 2,108,731
465,000 FHLB Strips, Series A-1, 0.00%, 02/25/02 ...................................................... 329,972
16,175,000 FHLMC, notes, 0.00%, 05/15/00 ................................................................. 12,745,624
5,550,000 FICO Strips, 0.00%, 02/03/01 .................................................................. 4,179,233
9,023,000 FICO Strips, 0.00%, 03/26/01 .................................................................. 6,735,389
2,000,000 FICO Strips, 0.00%, 04/06/01 .................................................................. 1,490,364
1,139,000 FICO Strips, Series 1, 0.00%, 11/11/00 ........................................................ 870,289
1,000,000 FICO Strips, Series 7, 0.00%, 02/03/01 ........................................................ 753,015
17,390,000 FICO Strips, Series 12, 0.00%, 12/06/00 ....................................................... 13,229,946
6,000,000 FICO Strips, Series 12, 0.00%, 06/06/01 ....................................................... 4,426,967
4,000,000 FICO Strips, Series 13, 0.00%, 06/27/01 ....................................................... 2,941,496
148,000 FICO Strips, Series 15, 0.00%, 09/07/00 ....................................................... 114,227
5,000,000 FICO Strips, Series 15, 0.00%, 03/07/01 ....................................................... 3,744,070
5,875,000 FICO Strips, Series 17, 0.00%, 10/05/00 ....................................................... 4,514,414
6,200,000 FICO Strips, Series 18, 0.00%, 10/06/00 ....................................................... 4,763,403
4,965,000 FICO Strips, Series D, 0.00%, 09/26/00 ........................................................ 3,820,756
3,800,000 FNMA Strips, 0.00%, 11/22/99 .................................................................. 3,071,620
1,000,000 FNMA Strips, 0.00%, 02/12/02 .................................................................. 709,272
500,000 FNMA Strips, Series 1, 0.00%, 02/12/00 ........................................................ 399,054
1,875,000 FNMA Strips, Series 1, 0.00%, 02/01/01 ........................................................ 1,415,130
1,000,000 FNMA Strips, Series 1, 0.00%, 02/01/02 ........................................................ 710,580
3,000,000 FNMA Strips, Series 2, 0.00%, 08/12/01 ........................................................ 2,193,804
9,195,000 REFCO Strips, 0.00%, 01/15/01 ................................................................. 7,018,433
2,320,000 Tennessee Valley Authority, 0.00%, 07/15/00 ................................................... 1,805,345
2,500,000 Tennessee Valley Authority, 0.00%, 10/15/00 ................................................... 1,918,060
65,000 Tennessee Valley Authority, 0.00%, 01/01/01 ................................................... 48,940
10,500,000 Tennessee Valley Authority, 0.00%, 04/15/01 ................................................... 7,810,466
1,000,000 Tennessee Valley Authority, 0.00%, 04/15/02 ................................................... 700,866
1,110,375 U.S. Treasury Strips, 0.00%, 11/15/00 ......................................................... 852,626
2,778,750 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 2,101,671
15,000,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 11,424,433
25,995,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 19,808,423
-------------
134,453,532
-------------
Other Securities - "AAA" Rated 1.3%
220,000 InterAmerican Development Bank, 0.00%, 12/16/00 ............................................... 166,940
405,000 International Bank for Reconstruction and Development, 0.00%, 02/15/00 ........................ 322,756
945,000 International Bank for Reconstruction and Development, 0.00%, 08/15/00 ........................ 731,491
735,000 International Bank for Reconstruction and Development, 0.00%, 02/15/01 ........................ 551,770
-------------
1,772,957
-------------
Total Long Term Investments (Cost $123,931,184).......................................... 136,226,489
-------------
f,gReceivables From Repurchase Agreements .8%
1,075,537 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $1,120,134) (Cost $1,119,419)
Bear Stearns & Co., Inc., (Maturity Value $170,499)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $97,140)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $170,499)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $170,499)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $170,499)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $170,499)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $170,499)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00.......................... $ 1,119,419
-------------
Total Investments (Cost $125,050,603) 100.0%........................................ 137,345,908
Other Assets and Liabilities, Net .................................................. 10,813
-------------
Net Assets 100.0%................................................................... $137,356,721
=============
At December 31, 1995, the net unrealized appreciation based on the cost
of investments for income tax purposes of $125,050,603 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $12,325,056
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (29,751)
-------------
Net unrealized appreciation ................................................................. $12,295,305
=============
PORTFOLIO ABBREVIATIONS:
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corp.
FICO - Financial Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
hZero coupon bonds. Accretion rate may vary.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount Zero Coupon Fund - 2005 (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
hLong Term Investments 98.5%
U.S. Government & Agency Securities 95.4%
<S> <C> <C>
$ 1,000,000 FHLB Strips, Series A-1, 0.00%, 08/25/02 ..................................................... $ 689,571
800,000 FHLB Strips, Series A-1, 0.00%, 02/25/04 ..................................................... 500,391
9,110,000 FHLB Strips, Series A-1P, 0.00%, 02/25/04 .................................................... 5,698,204
11,400,000 FICO Strips, 0.00%, 10/06/05 ................................................................. 6,373,375
3,500,000 FICO Strips, Series 1, 0.00%, 05/11/05 ....................................................... 2,006,868
829,000 FICO Strips, Series 1, 0.00%, 11/11/05 ....................................................... 460,735
3,509,000 FICO Strips, Series 2, 0.00%, 11/02/05 ....................................................... 1,953,148
11,055,000 FICO Strips, Series 12, 0.00%, 12/06/05 ...................................................... 6,114,465
2,755,000 FICO Strips, Series 13, 0.00%, 12/27/05 ...................................................... 1,517,470
2,620,000 FICO Strips, Series 15, 0.00%, 09/07/05 ...................................................... 1,471,953
6,000,000 FICO Strips, Series 16, 0.00%, 04/05/06 ...................................................... 3,240,743
10,000,000 FICO Strips, Series 19, 0.00%, 12/06/05 ...................................................... 5,530,949
6,799,000 FICO Strips, Series D, 0.00%, 09/26/05 ....................................................... 3,807,760
1,763,000 FICO Strips, Series D, 0.00%, 03/26/06 ....................................................... 954,000
5,000,000 FICO Strips, Series F, 0.00%, 03/26/05 ....................................................... 2,890,224
120,000 FNMA Strips, 0.00%, 02/12/08 ................................................................. 57,343
450,000 FNMA Strips, Series 1, 0.00%, 08/01/04 ....................................................... 272,168
1,000,000 FNMA Strips, Series 1, 0.00%, 02/12/05 ....................................................... 583,511
875,000 FNMA Strips, Series 1, 0.00%, 08/12/05 ....................................................... 494,526
4,307,000 FNMA Strips, Series 1, 0.00%, 02/01/06 ....................................................... 2,360,369
250,000 FNMA Strips, Series 1, 0.00%, 02/12/06 ....................................................... 136,715
1,730,000 FNMA Strips, Series 1, 0.00%, 02/01/08 ....................................................... 828,360
6,000,000 FNMA Strips, Series 2, 0.00%, 02/01/05 ....................................................... 3,508,079
530,000 FNMA Strips, Series 9, 0.00%, 08/01/06 ...................................................... 280,968
6,500,000 REFCO Strips, 0.00%, 01/15/06 ............................................................... 3,640,785
3,000,000 REFCO Strips, Series R, 0.00%, 04/15/06 ...................................................... 1,652,517
5,000,000 Tennessee Valley Authority, 0.00%, 10/15/04 .................................................. 2,976,925
2,260,000 Tennessee Valley Authority, 0.00%, 04/15/05 .................................................. 1,301,934
1,000,000 Tennessee Valley Authority, 0.00%, 10/15/05 .................................................. 558,239
31,140,000 U.S. Treasury Strips, 0.00%, 02/15/06 ........................................................ 17,546,048
-------------
79,408,343
-------------
Other Securities - "AAA" Rated 3.1%
1,500,000 Exxon Corp., 0.00%, 11/15/04 ................................................................. 898,980
541,000 International Bank of Reconstruction and Development, 0.00%, 02/15/07 ........................ 275,259
2,500,000 International Bank of Reconstruction and Development, 0.00%, 08/15/07 ........................ 1,227,513
459,000 International Bank of Reconstruction and Development, Series 2, 0.00%, 02/15/07 .............. 232,999
-------------
2,634,751
-------------
Total Long Term Investments (Cost $70,001,446) ......................................... 82,043,094
-------------
f,gReceivables From Repurchase Agreements 1.4%
1,090,685 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $1,135,815) (Cost $1,135,090)
Bear Stearns & Co., Inc., (Maturity Value $172,871)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $98,589)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $172,871)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $172,871)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $172,871)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $172,871)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $172,871)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ........................ $ 1,135,090
-------------
Total Investments (Cost $71,136,536) 99.9% ........................................ 83,178,184
Other Assets and Liabilities, Net .1% ............................................. 43,519
-------------
Net Assets 100.0% ................................................................. $83,221,703
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $71,140,704 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $12,037,480
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. --
-------------
Net unrealized appreciation ................................................................ $12,037,480
=============
PORTFOLIO ABBREVIATIONS:
FHLB - Federal Home Loan Bank
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
hZero coupon bonds. Accretion rate may vary.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount Zero Coupon Fund - 2010 (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
hLong Term Investments 96.6%
<S> <C> <C>
U.S. Government & Agency Securities 91.8%
$ 4,450,000 FHLMC, capital deb., 0.00%, 11/29/19 ......................................................... $ 955,454
4,040,000 FICO Strips, 0.00%, 10/06/10 ................................................................. 1,590,730
16,246,000 FICO Strips, Series 1, 0.00%, 11/11/10 ....................................................... 6,353,875
2,000,000 FICO Strips, Series 3, 0.00%, 05/30/10 ....................................................... 807,612
1,528,000 FICO Strips, Series 4, 0.00%, 10/06/10 ....................................................... 601,642
3,021,000 FICO Strips, Series 8, 0.00%, 08/03/10 ....................................................... 1,203,944
2,837,000 FICO Strips, Series 11, 0.00%, 02/08/11 ...................................................... 1,089,612
4,550,000 FICO Strips, Series 12, 0.00%, 06/06/09 ...................................................... 1,970,996
7,500,000 FICO Strips, Series 12, 0.00%, 12/06/10 ...................................................... 2,918,430
3,000,000 FICO Strips, Series 19, 0.00%, 06/06/10 ...................................................... 1,209,888
2,080,000 FICO Strips, Series 19, 0.00%, 12/06/10 ...................................................... 809,378
7,000,000 FICO Strips, Series A, 0.00%. 08/08/10 ....................................................... 2,786,875
860,000 FICO Strips, Series D, 0.00%, 03/26/10 ....................................................... 351,633
4,000,000 FICO Strips, Series D, 0.00%, 03/26/11 ....................................................... 1,522,324
12,412,000 FICO Strips, Series E, 0.00%, 11/02/10 ....................................................... 4,862,699
860,000 FICO Strips, Series F, 0.00%, 09/26/10 ....................................................... 339,292
5,311,000 FICO Strips, Series F, 0.00%, 02/08/11 ....................................................... 2,039,806
1,975,000 FNMA Strips, 0.00%, 08/12/09 ................................................................. 849,475
5,000,000 FNMA Strips, Series 1, 0.00%,02/01/10 ........................................................ 2,079,620
8,250,000 FNMA Strips, Series 1, 0.00%, 08/01/10 ....................................................... 3,309,751
1,230,000 FNMA Strips, Series 1, 0.00%, 08/12/10 ....................................................... 492,334
4,450,000 FNMA Strips, Series 1, 0.00%, 02/01/11 ....................................................... 1,721,611
3,281,000 FNMA Strips, Series 1, 0.00%, 02/01/12 ....................................................... 1,184,188
20,000,000 REFCO Strips, 0.00%, 10/15/10 ................................................................ 8,160,178
1,000,000 REFCO Strips, 0.00%, 01/15/11 ................................................................ 400,838
8,650,000 SLMA, 0.00%, 05/15/14 ........................................................................ 2,147,404
412,000 Tennessee Valley Authority, 0.00%, 01/01/10 .................................................. 168,738
12,000,000 Tennessee Valley Authority, 0.00%, 04/15/10 .................................................. 4,915,715
1,320,000 Tennessee Valley Authority, 0.00%, 10/15/10 .................................................. 521,850
9,525,000 Tennessee Valley Authority, 0.00%, 04/15/11 .................................................. 3,631,472
7,295,000 Tennessee Valley Authority, 0.00%, 10/15/11 .................................................. 2,684,662
35,990,000 U.S. Treasury Strips, 0.00%, 11/15/10 ........................................................ 14,879,017
-------------
78,561,043
-------------
Other Securities - "AAA" Rated 4.8%
1,392,000 International Bank for Reconstruction and Development, 0.00%, 02/15/11 ....................... 533,765
2,800,000 International Bank for Reconstruction and Development, 0.00%, 02/15/12 ....................... 1,000,084
3,287,000 International Bank for Reconstruction and Development, 0.00%, 02/15/13 ....................... 1,094,084
4,100,000 International Bank for Reconstruction and Development, 0.00%, 08/15/13 ....................... 1,317,059
500,000 International Bank for Reconstruction and Development, Series 2, 0.00%, 02/15/11 ............. 191,726
-------------
4,136,718
-------------
Total Long Term Investments (Cost $66,360,401) ......................................... 82,697,761
-------------
f,gReceivables From Repurchase Agreements 1.3%
1,098,260 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $1,144,519) (Cost $1,143,789)
Bear Stearns & Co., Inc., (Maturity Value $174,196)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $99,343)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $174,196)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $174,196)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $174,196)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $174,196)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $174,196)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ........................ $ 1,143,789
-------------
Total Investments (Cost $67,504,190) 97.9% ........................................ 83,841,550
Other Assets and Liabilities, Net 2.1% ............................................ 1,791,242
-------------
Net Assets 100.0% ................................................................. $85,632,792
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $67,692,588 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $16,148,962
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. --
-------------
Net unrealized appreciation ................................................................ $16,148,962
=============
PORTFOLIO ABBREVIATIONS:
FHLMC - Federal Home Loan Mortgage Corp.
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
SLMA - Student Loan Marketing Association
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
hZero coupon bonds. Accretion rate may vary.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount Money Market Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
eShort Term Investments 89.2%
Certificates of Deposit 17.0%
<S> <C> <C>
$ 15,000,000 Commerzbank A.G., New York Branch, 5.78%, 01/10/96 .......................................... $ 15,000,000
10,000,000 Lloyds Bank, Plc., New York Branch, 5.70%, 09/11/96 ......................................... 10,000,672
18,000,000 National Westminster Bank, New York Branch, 5.81%, 01/30/96 - 02/01/96 ...................... 18,000,247
20,000,000 Societe Generale, New York Branch, 5.78% - 5.90%, 01/09/96 - 05/13/96 ....................... 20,000,000
10,000,000 Svenska Handelsbanken, Inc., New York Branch, 5.82%, 02/01/96 ............................... 10,000,090
-------------
Total Certificates of Deposit (Cost $73,001,009) ...................................... 73,001,009
-------------
Commercial Paper 72.2%
15,000,000 American Express Credit Corp., 5.64%, 02/14/96 .............................................. 14,891,900
10,000,000 Ameritech Corp., 5.70%, 02/26/96 ............................................................ 9,908,167
20,000,000 Associates Corp. of North America, 5.64%, 01/29/96 .......................................... 19,906,000
20,000,000 AT&T Corp., 5.61% - 5.70%, 01/11/96 - 01/12/96 .............................................. 19,959,625
5,000,000 Campbell Soup Co., 5.92%, 02/02/96 .......................................................... 4,972,044
20,100,000 CIESCO L.P., 5.67% - 5.68%, 01/18/96 - 01/24/96 ............................................. 20,035,091
20,000,000 Den Danske Corp., Inc, 5.66% - 5.665%, 02/06/96 - 02/09/96 .................................. 19,873,351
15,000,000 General Electric Capital Corp., 5.68%, 01/26/96 ............................................. 14,936,100
10,000,000 Halifax Building Society, 5.67%, 01/19/96 ................................................... 9,968,500
10,000,000 Heinz, (H.J.), Corp., 5.75%, 01/30/96 ....................................................... 9,950,486
20,000,000 Hewlett-Packard, 5.63% - 5.68%, 01/02/96 - 01/24/96 ......................................... 19,973,351
20,000,000 Kingdom of Sweden, 5.50%, 04/02/96 .......................................................... 19,712,778
6,800,000 MetLife Funding, Inc., 5.68%, 01/19/96 ...................................................... 6,778,542
20,000,000 National Rural Utilities Cooperative Finance Corp., 5.55% - 5.67%, 01/25/96 - 03/28/96 ...... 19,821,842
20,000,000 PepsiCo, Inc., 5.62%, 02/23/96 .............................................................. 19,828,278
10,000,000 Province of Alberta, 5.69%, 01/25/96 ........................................................ 9,959,195
20,000,000 Province of British Columbia, 5.47% - 5.60%, 01/08/96 - 04/03/96 ............................ 19,838,547
10,000,000 Svenska Handelsbanken, Inc., 5.68%, 02/21/96 ................................................ 9,916,378
10,000,000 Treasury Corp. of New South Wales, 5.71%, 01/24/96 .......................................... 9,960,347
20,000,000 U.S. Central Credit Union, 5.77%, 01/17/96 .................................................. 19,942,300
10,000,000 Wool International, Inc., 5.61%, 04/12/96 ................................................... 9,837,933
-------------
Total Commercial Paper (Cost $309,970,755) ............................................ 309,970,755
-------------
Total Investments Before Repurchase Agreements (Cost $382,971,764)..................... 382,971,764
-------------
fReceivables From Repurchase Agreements 11.0%
15,000,000 Bear Stearns & Co., Inc., 5.75%, 01/02/96, (Maturity Value $15,009,583)
Collateral: U.S. Treasury Notes, 6.75%, 05/31/99 ........................................... 15,000,000
17,770,000 Chase Securities, Inc., 5.55%, 01/02/96, (Maturity Value $17,370,705)
Collateral: U.S. Treasury Notes, 4.75%, 09/30/98 ........................................... 17,360,000
15,120,000 Fuji Securities, Inc., 5.85%, 01/02/96, (Maturity Value $15,009,750)
Collateral: U.S. Treasury Notes, 5.125%, 03/31/96........................................... 15,000,000
-------------
Total Receivables From Repurchase Agreements (Cost $47,360,000)........................ 47,360,000
-------------
Total Investments (Cost $430,331,764) 100.2%...................................... 430,331,764
Liabilities in Excess of Other Assets (.2)% ...................................... (784,911)
-------------
Net Assets 100.0% ................................................................ $429,546,853
=============
At December 31, 1995, there was no unrealized appreciation or depreciation for financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
eCertain short-term securities are traded on a discount basis; the rates shown are the discount rates at the time of purchase by the
Fund.
Other securities bear interest at the rates shown, payable at fixed dates or upon maturity.
fFace amount for repurchase agreements is for the underlying collateral.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Shares Growth and Income Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 90.3%
Automobile 1.0%
<S> <C> <C>
154,500 Chrysler Corp. .............................................................................. $ 8,555,438
-------------
Chemicals, Basic 3.4%
177,300 Dow Chemical Co. ............................................................................ 12,477,488
64,500 Du Pont, (E.I.), De Nemours & Co. ........................................................... 4,506,938
197,000 Goodrich (B.F.) Co. ......................................................................... 13,420,625
-------------
30,405,051
-------------
Commercial Services 1.5%
620,000 Ogden Corp. ................................................................................ 13,252,500
-------------
Consumer Products .3%
31,900 Clorox Co. .................................................................................. 2,284,838
-------------
Electrical Equipment 1.5%
182,300 General Electric Co. ........................................................................ 13,125,600
-------------
Financial/Banks 5.5%
33,500 Bank of Boston Corp. ........................................................................ 1,549,375
42,500 BankAmerica Corp. ........................................................................... 2,751,875
23,900 Beneficial Corp. ............................................................................ 1,114,338
172,600 b Christiania Bank, ADS........................................................................ 4,005,649
315,000 H & R Block, Inc. ........................................................................... 12,757,500
101,000 J. P. Morgan & Co., Inc. .................................................................... 8,105,250
119,700 b Nordbanken AB - Sponsored ADR ............................................................... 4,126,681
149,900 PNC Bank Corp. .............................................................................. 4,834,275
510,000 Roosevelt Financial Corp. ................................................................... 9,881,250
-------------
49,126,193
-------------
Forest Products & Paper 2.2%
1,020,000 b Portucel Industrial, SA...................................................................... 6,031,056
353,700 Potlatch Corp. .............................................................................. 14,148,000
-------------
20,179,056
-------------
Insurance 2.4%
213,000 Lincoln National Corp. ...................................................................... 11,448,750
83,500 Marsh & McLennan Cos., Inc. ................................................................. 7,410,625
100,100 Zenith National Insurance.................................................................... 2,139,637
-------------
20,999,012
-------------
Medical Supplies .3%
67,500 Baxter International, Inc.................................................................... 2,826,563
-------------
Metals & Mining, Precious .1%
50,600 Cyprus Amax Minerals Co. .................................................................... 1,321,925
-------------
Miscellaneous Manufacturing 4.0%
1,310,000 Hanson, Plc. ................................................................................ 19,977,500
239,500 Minnesota Mining & Manufacturing Co. ........................................................ 15,866,875
-------------
35,844,375
-------------
Oil/Gas Transmission 15.9%
177,000 Atlantic Richfield Co. ...................................................................... 19,602,750
276,000 Chevron Corp. ............................................................................... 14,490,000
253,000 Consolidated Natural Gas Co. ................................................................ 11,479,875
213,500 Exxon Corp. ................................................................................. 17,106,688
118,000 Mobil Corp. ................................................................................. 13,216,000
320,000 National Fuel Gas Co. ....................................................................... 10,760,000
128,800 ONEOK, Inc. ................................................................................. 2,930,200
203,000 Pennzoil Co. ................................................................................ 8,576,750
59,411 Sun Co., Inc. ............................................................................... $ 1,626,376
276,200 Texaco, Inc. ................................................................................ 21,681,700
130,000 USX-Marathon Group, Inc. .................................................................... 2,535,000
805,000 YPF Sociedad Anonima ........................................................................ 17,408,125
-------------
141,413,464
-------------
Petroleum, Integrated 3.4%
80,700 Amoco Corp. ................................................................................. 5,800,313
92,900 Royal Dutch Petroleum Co., New York Shares .................................................. 13,110,513
436,900 Ultramar Corp. .............................................................................. 11,250,175
-------------
30,161,001
-------------
Pharmaceuticals 4.2%
133,000 American Home Products Corp. ................................................................ 12,901,000
231,500 Bristol-Myers Squibb Co. .................................................................... 19,880,063
110,925 a Pharmacia & Upjohn, Inc. .................................................................... 4,298,344
-------------
37,079,407
-------------
Printing & Publishing 2.5%
345,000 Dun & Bradstreet Corp. ...................................................................... 22,338,750
-------------
Property/Casualty Insurance .9%
157,800 Prudential Reinsurance Holdings, Inc. ....................................................... 3,688,575
78,500 St. Paul Cos., Inc. ......................................................................... 4,366,563
-------------
8,055,138
-------------
Real Estate Investment Trust 3.9%
410,000 Equity Residential Properties Trust.......................................................... 12,556,250
410,000 FelCor Suite Hotels, Inc. ................................................................... 11,377,500
464,400 Oasis Residential, Inc. ..................................................................... 10,565,100
-------------
34,498,850
-------------
Retail 1.8%
335,900 Penney (J.C.) Co., Inc. ..................................................................... 15,997,237
-------------
Telephone/Communications 11.5%
177,000 Ameritech Corp. ............................................................................. 10,443,000
48,800 AT&T Corp. .................................................................................. 3,159,800
257,800 BellSouth Corp. ............................................................................. 11,214,300
367,500 GTE Corp. ................................................................................... 16,170,000
325,000 NYNEX Corp. ................................................................................. 17,550,000
339,500 Southern New England Telecommunications Corp. ............................................... 13,495,125
106,400 Sprint Corp. ................................................................................ 4,242,700
360,000 Telefonos de Mexico, SA, ADR................................................................. 11,475,000
400,100 US West, Inc. ............................................................................... 14,303,575
-------------
102,053,500
-------------
Tobacco 6.2%
240,100 American Brands, Inc. ....................................................................... 10,714,462
195,600 Philip Morris Cos., Inc. .................................................................... 17,701,800
440,560 RJR Nabisco Holdings Corp. .................................................................. 13,602,290
385,000 UST, Inc. ................................................................................... 12,849,374
-------------
54,867,926
-------------
Transportation .2%
46,200 GATX Corp. .................................................................................. 2,246,474
-------------
Utilities 17.6%
223,000 American Electric Power Co. ................................................................. 9,031,500
499,700 Central & South West Corp. .................................................................. 13,929,137
628,000 CINergy Corp. ............................................................................... $ 19,232,500
477,000 Dominion Resources, Inc. .................................................................... 19,676,250
80,000 Duke Power Co. .............................................................................. 3,790,000
368,100 Enova Corp. ................................................................................. 8,742,374
453,300 General Public Utilities Corp. .............................................................. 15,412,200
269,600 New England Electric System.................................................................. 10,682,900
200,000 Oklahoma Gas & Electric Co. ................................................................. 8,600,000
374,400 Pacific Enterprises.......................................................................... 10,576,800
630,000 PacifiCorp. ................................................................................. 13,387,500
250,000 Public Service Co. of Colorado............................................................... 8,843,750
25,900 Scana Corp. ................................................................................. 741,387
24,900 Southern Co. ................................................................................ 613,162
330,000 Texas Utilities Co. ......................................................................... 13,571,251
-------------
156,830,711
-------------
Total Long Term Investments (Cost $703,432,510) ....................................... 803,463,009
-------------
Face
Amount
-------
$83,304,883 f,g Receivables From Repurchase Agreements 9.8%
Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $86,763,678) (Cost $86,708,329)
Bear Stearns & Co., Inc., (Maturity Value $13,206,591)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $7,524,132)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $13,206,591)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $13,206,591)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $13,206,591)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $13,206,591)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $13,206,591)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ....................... 86,708,329
-------------
Total Investments (Cost $790,140,839) 100.1% ..................................... 890,171,338
Liabilities in Excess of Other Assets (.1)%....................................... (683,870)
-------------
Net Assets 100.0%................................................................. $889,487,468
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $790,291,943 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $106,881,015
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (7,001,620)
-------------
Net unrealized appreciation ............................................................... $ 99,879,395
=============
aNon-income producing.
bSee Note 8 regarding Rule 144A Securities.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Shares/ Value
Warrants Income Securities Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 29.5%
Communications .6%
<S> <C> <C>
200,000 U S West Communications Group .............................................................. $ 7,150,000
-------------
Conglomerates .5%
380,000 Hanson, Plc., ADR .......................................................................... 5,795,000
-------------
Consumer Products 1.3%
180,000 Phillip Morris Cos., Inc. .................................................................. 16,290,000
93,750 a,b Specialty Foods Corp. ...................................................................... 222,656
-------------
16,512,656
-------------
Energy 1.3%
576,500 Athabasca Oil Sands Trust................................................................... 5,014,788
25,000 Atlantic Richfield Co. ..................................................................... 2,768,750
50,000 BP Prudhoe Bay Royalty Trust ............................................................... 725,000
100,000 Pennzoil Co. ............................................................................... 4,225,000
140,000 Ultramar Corp. ............................................................................. 3,605,000
-------------
16,338,538
-------------
Home Builders
5,908 a NVR, Inc. .................................................................................. 59,080
-------------
Metals 1.7%
185,200 Driefontein Consolidated Mines, Ltd., ADR .................................................. 2,291,850
390,000 Free State Consolidated Gold Mines, Ltd., ADR............................................... 2,827,500
620,000 Hartebeestfontein Gold Mining Co., Ltd., ADR ............................................... 1,573,188
216,500 Impala Platinum Holdings, Ltd., ADR......................................................... 3,949,328
60,000 Kinross Mines, Ltd., ADR.................................................................... 563,706
34,345 Newmont Mining Corp. ....................................................................... 1,554,111
214,586 Rustenburg Platinum Holdings, Ltd., ADR..................................................... 3,531,785
19,000 St. Helena Gold Mines, Ltd., ADR ........................................................... 100,938
256,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR.............................................. 1,632,000
102,500 Western Deep Levels, Ltd., ADR ............................................................. 3,356,875
-------------
21,381,281
-------------
Pharmaceuticals 4.3%
145,000 American Home Product Corp. ................................................................ 14,065,000
190,000 Bristol-Myers Squibb Co. ................................................................... 16,316,250
242,600 Merck & Co., Inc. .......................................................................... 15,950,950
210,250 a Pharmacia & Upjohn, Inc. ................................................................... 8,147,188
-------------
54,479,388
-------------
Real Estate Investment Trust 2.2%
180,000 Equity Residential Properties Trust, Inc. .................................................. 5,512,500
125,000 FelCor Suite Hotels, Inc. .................................................................. 3,468,750
150,000 Gables Residential Trust.................................................................... 3,431,250
26,600 Merry Land & Investment Co., Inc. .......................................................... 628,425
200,000 Post Properties, Inc. ...................................................................... 6,375,000
360,400 i Tanger Factory Outlet Centers, Inc. ........................................................ 9,010,000
-------------
28,425,925
-------------
Retail
11,870 a Federated Department Stores, Inc. .......................................................... 326,425
-------------
Utilities 17.6%
350,800 American Electric Power Co., Inc. .......................................................... 14,207,400
460,000 Central & South West Corp. ................................................................. 12,822,500
464,400 CINergy Corp. .............................................................................. 14,222,250
350,000 Delmarva Power & Light Co. ................................................................. $ 7,962,500
260,000 Dominion Resources, Inc. ................................................................... 10,725,000
300,000 Entergy Corp. .............................................................................. 8,775,000
290,000 Florida Progress Corp. ..................................................................... 10,258,750
240,000 FPL Group, Inc. ............................................................................ 11,130,000
200,000 General Public Utilities Corp. ............................................................. 6,800,000
142,000 Hawaiian Electric Industries, Inc. ......................................................... 5,502,500
300,000 Houston Industries, Inc. ................................................................... 7,275,000
400,000 Long Island Lighting Co. ................................................................... 6,550,000
175,000 Nevada Power Co. ........................................................................... 3,893,750
149,900 New England Electric System................................................................. 5,939,788
300,000 New York State Electric & Gas Corp. ........................................................ 7,762,500
320,000 Ohio Edison Co. ............................................................................ 7,520,000
550,000 Pacific Gas & Electric Co. ................................................................. 15,606,250
80,000 PacifiCorp ................................................................................. 1,700,000
80,000 Potomac Electric Power Co. ................................................................. 2,100,000
260,000 Public Service Enterprise Group, Inc. ...................................................... 7,962,500
360,000 San Diego Gas & Electric Co. ............................................................... 8,550,000
50,000 Scana Corp. ................................................................................ 1,431,250
590,000 SCE Corp. .................................................................................. 10,472,500
440,000 Southern Co. ............................................................................... 10,835,000
340,000 Southwestern Public Services Co. ........................................................... 11,135,000
295,000 Texas Utilities Co. ........................................................................ 12,131,875
-------------
223,271,313
-------------
Total Common Stocks (Cost $324,684,729)............................................... 373,739,606
-------------
Preferred Stocks .1%
Automotive
10,138 Harvard Industries, Inc., 14.25% pfd., PIK.................................................. 269,291
-------------
Consumer Products .1%
11,000 Pantry Pride, Inc., $14.875 pfd., Series B.................................................. 1,101,375
-------------
Total Preferred Stocks (Cost $1,471,075).............................................. 1,370,666
-------------
Convertible Preferred Stocks 8.7%
Airlines .3%
80,000 a USAir Corp., $4.375 cum. cvt. pfd........................................................... 3,290,000
-------------
Apparel/Textile .1%
40,000 Fieldcrest Cannon, Inc., $3.00 cvt. pfd., Series A.......................................... 1,740,000
-------------
Cable Systems .5%
240,000 Cablevision Systems Corp., 8.50% cvt. pfd. ................................................. 6,540,000
-------------
Consumer Products .2%
300,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd., Series C .................................... 1,912,500
-------------
Energy 3.8%
150,000 Enron Oil & Gas, cvt. pfd................................................................... 3,600,000
125,000 Gerrity Oil & Gas, $1.50 cvt. pfd., Series G................................................ 1,328,125
138,000 Maxus Energy Corp., $4.00 cum. cvt. pfd..................................................... 6,003,000
235,000 b McDermott International, Inc., $2.875 cvt. pfd., Series C................................... 9,664,375
224,700 Noble Drilling Corp., $1.50 cvt. pfd........................................................ 5,786,025
75,000 b Occidental Petroleum Corp., $3.875 cvt. pfd. ............................................... 4,162,500
182,000 b Parker & Parsley Capital, 6.25% cvt. pfd.................................................... 8,736,000
66,923 Santa Fe Energy Resources, Inc., 7.00% cvt. pfd............................................. 1,279,902
593,000 Santa Fe Energy Resources, Inc., 8.25% cvt. pfd............................................. $ 5,855,875
100,000 Snyder Oil Corp., $1.50 cvt. exch. pfd...................................................... 1,975,000
-------------
48,390,802
-------------
Metals 2.4%
138,500 Amax Gold, Inc., $3.75 cvt. pfd., Series B.................................................. 7,548,250
65,000 Armco, Inc., $3.625 cum. cvt. pfd., Series A................................................ 3,233,750
61,000 Battle Mountain Gold Co., $3.25 cvt. pfd. .................................................. 3,027,124
55,000 Cyprus Minerals, $4.00 cvt. pfd., Series A.................................................. 3,279,375
108,800 Freeport-McMoRan Copper & Gold, Inc., $1.25 cum. cvt. pfd. ................................. 3,536,000
90,000 Freeport-McMoRan Copper & Gold, Inc., $1.75 cvt. pfd........................................ 2,587,500
70,000 b Freeport-McMoRan, Inc., 4.375% cvt. exch. pfd. ............................................. 4,865,000
70,000 Hecla Mining Co., $3.50 cvt. pfd., Series B................................................. 2,800,000
-------------
30,876,999
-------------
Real Estate .4%
100,000 Rouse Co., 3.25% cvt. pfd. ................................................................. 5,162,500
-------------
Real Estate Investment Trust .8%
400,000 Security Capital Pacific Trust, 1.75% cvt. pfd., Series A................................... 9,800,000
-------------
Restaurants .2%
210,000 Flagstar Cos., $2.25 cvt. pfd., Series A.................................................... 2,178,750
-------------
Total Convertible Preferred Stocks (Cost $113,818,589)................................ 109,891,551
-------------
Warrants
3,128 a NVR, Inc. (Cost $13,294).................................................................... 6,256
-------------
Total Common Stocks, Preferred Stocks, Convertible Preferred Stocks
and Warrants (Cost $439,987,687).............................................................................. 485,008,079
-------------
Face
Amount
-------
Corporate Bonds 28.6%
Apparel/Textiles 2.8%
$ 7,000,000 a,l Bibb Co., senior sub. notes, 14.00%, 10/01/99 .............................................. 2,765,000
10,000,000 Consoltex Group, Inc., senior sub. notes, Series B, 11.00%, 10/01/03 ....................... 9,250,000
175,000 a,l Forstmann Textile, Inc., S.F., senior sub. deb., 14.75%, 04/15/99 .......................... 74,375
4,195,000 JPS Textile Group, Inc., S.F., deb., 10.85%, 06/01/99 ...................................... 3,041,375
3,981,000 JPS Textile Group, Inc., S.F., sub. notes, 10.25%, 06/01/99 ................................ 2,886,225
5,000,000 JPS Textile Group, Inc., S.F., sub. notes, 7.00%, 05/15/00 ................................. 2,575,000
8,300,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ....................................... 7,304,000
2,000,000 Harvard Industries, Inc., senior notes, 11.125%, 08/01/05 .................................. 2,040,000
5,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ................................ 4,962,500
-------------
34,898,475
-------------
Automotive .6%
400,000 Exide Corp., senior notes, 10.75%, 12/15/02 ................................................ 436,500
7,850,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00 ................................ 6,947,250
-------------
7,383,750
-------------
Building Products .7%
9,250,000 Inter-City Products Corp., senior notes, 9.75%, 03/01/00 ................................... 6,521,250
2,000,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 .......................................... 1,870,000
-------------
8,391,250
-------------
Cable Systems 1.9%
$ 150,000 Cablevision Industries Corp., guaranteed senior sub. notes, 10.75%, 01/30/02 ............... $ 164,250
3,000,000 Cablevision Systems Corp., senior sub. deb., 9.875%, 04/01/23 .............................. 3,127,500
8,000,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 ................................ 8,520,000
7,300,000 Helicon Group L.P. Corp., S.F., senior secured notes, Series B, 9.00%, 11/01/03 ............ 7,044,500
5,000,000 Storer Communiciations, Inc., sub. deb., 10.00%, 05/15/03 .................................. 5,031,250
-------------
23,887,500
-------------
Chemicals 2.0%
8,000,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02 ..................... 8,630,000
7,750,000 b Hines Horticulture, senior sub. notes, 11.75%, 10/15/05 .................................... 8,079,375
3,250,000 IMC Fertilizer Group, Inc., notes, Series B, 10.75%, 06/15/03 .............................. 3,591,250
725,000 UCC Investors, senior notes, 10.50%, 05/01/02 .............................................. 750,375
4,150,000 UCC Investors, senior notes, 11.00%, 05/01/03 .............................................. 4,243,375
-------------
25,294,375
-------------
Communications .4%
5,000,000 CommNet Cellular, Inc., sub. notes, 11.25%, 07/01/05 ....................................... 5,287,500
-------------
Consumer Products 2.0%
1,250,000 b Calmar, Inc., senior sub. notes, 11.50%, 08/15/05 .......................................... 1,273,438
5,050,000 Mafco, Inc., senior sub. notes, 11.875%, 11/15/02 .......................................... 5,151,000
8,000,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 .......................... 7,080,000
5,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03 .............. 5,150,000
5,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13 .................................................. 5,131,250
1,150,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ............................................ 1,173,000
-------------
24,958,688
-------------
Energy 1.9%
3,250,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ............................................ 3,445,000
9,835,000 Gerrity Oil & Gas Corp., senior sub. notes, 11.75%, 07/15/04 ............................... 9,195,725
1,000,000 Global Marine, Inc., senior secured notes, 12.75%, 12/15/99 ................................ 1,107,500
10,000,000 Mesa Capital Corp., disc. notes, 12.75%, 06/30/98 .......................................... 8,900,000
1,752,000 Tesoro Petroleum Corp., S.F., sub. deb., 12.75%, 03/15/01 .................................. 1,822,080
-------------
24,470,305
-------------
Food/Beverages 1.3%
4,979,000 b Del Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ......................................... 3,584,880
1,010,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ....................... 1,070,600
5,000,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ...................... 5,137,500
3,000,000 Specialty Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 ....................... 2,580,000
4,000,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 .................. 3,780,000
-------------
16,152,980
-------------
Food Chains 2.4%
9,000,000 Americold Corp., senior sub. notes, Series B, 11.50%, 03/01/05 ............................. 9,067,500
5,000,000 Bruno's, Inc., senior sub. notes, 10.50%, 08/01/05 ......................................... 4,962,500
7,000,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04 ............................. 6,090,000
10,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05 .................................... 9,800,000
-------------
29,920,000
-------------
Gaming & Hotels 1.3%
8,500,000 Aztar Corp., senior sub. notes, 11.00%, 10/01/02 ........................................... 8,521,250
8,000,000 b Rio Hotel & Casino, Inc., senior sub. notes, 10.625%, 07/15/05 ............................. 8,240,000
-------------
16,761,250
-------------
Health Care .4%
$ 1,500,000 OrNda Healthcorp., Inc., senior sub. notes, 12.25%, 05/15/02 ............................... $ 1,650,000
4,000,000 c Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03 3,830,000
-------------
5,480,000
-------------
Industrial Products 2.5%
8,650,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01 ...................................... 8,650,000
10,000,000 Pace Industries, Inc., senior notes, Series B, 10.625%, 12/01/02 ........................... 8,850,000
6,500,000 b RBX Corp., senior sub. notes, 11.25%, 10/15/05 ............................................. 6,370,000
5,030,000 RHI Holdings, Inc., senior sub. deb., 11.875%, 03/01/99 .................................... 5,030,000
2,696,000 Thermadyne Industries, Inc., notes, 10.75%, 11/01/03 ....................................... 2,709,480
246,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ................................ 247,230
-------------
31,856,710
-------------
Information Technology .4%
4,625,000 a,l Anacomp, Inc., senior sub. notes, 15.00%, 11/01/00 ......................................... 3,335,781
1,600,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 ..................................... 1,704,000
-------------
5,039,781
-------------
Media & Broadcasting .4%
3,000,000 Act III Broadcasting, senior sub. notes, 9.625%, 12/15/03 .................................. 3,022,500
2,000,000 b Benedek Broadcasting, senior notes, 11.875%, 03/01/05 ...................................... 2,130,000
-------------
5,152,500
-------------
Metals .9%
1,000,000 Armco Steel, Inc., senior notes, 11.375%, 10/15/99 ......................................... 1,035,000
6,020,000 Jorgensen, Earle M. Co., senior notes, 10.75%, 03/01/00 .................................... 5,568,500
5,000,000 Republic Engineered Steel, first mortgage, 9.875%, 12/15/01 ................................ 4,512,500
815,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05 ............... 931,138
-------------
12,047,138
-------------
Paper & Forest Products .5%
6,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05 ............................ 5,910,000
-------------
Railroads .5%
6,000,000 Southern Pacific Rail Co., senior notes, 9.375%, 08/15/05 .................................. 6,555,000
-------------
Restaurants 1.0%
10,000,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 ................................... 7,150,000
6,175,000 Foodmaker, Inc., senior sub. notes, 14.25%, 05/15/98 ....................................... 6,298,500
-------------
13,448,500
-------------
Retail .7%
9,540,000 Levitz Furniture Corp., senior notes, 12.375%, 04/15/97 .................................... 8,824,500
-------------
Utilities 4.0%
195,782,500 d ESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08 ................................. 43,748,299
4,329,157 Midland CoGeneration Venture, S.F., sub. deb., Series C, 10.33%, 07/23/02 .................. 4,571,993
2,000,000 Texas, New Mexico Power, secured deb., 10.75%, 09/15/03 .................................... 2,125,912
-------------
50,446,204
-------------
Total Corporate Bonds (Cost $366,016,774)............................................. 362,166,406
-------------
Convertible Corporate Bonds 4.3%
Biotechnology .1%
2,000,000 Centocor, Inc., Eurobonds, cvt. sub. deb., 6.75%, 10/16/01 ................................. 1,830,000
-------------
Computer/Technology .4%
$ 3,000,000 Conner Peripherals, Inc., cvt. sub. deb., 6.75%, 03/01/01 .................................. $ 2,970,000
2,815,000 Maxtor Corp., cvt. sub. deb., 5.75%, 03/01/12 .............................................. 2,195,700
-------------
5,165,700
-------------
Energy 1.7%
4,500,000 Ashland, Inc., S.F., cvt. deb., 6.75%, 07/01/14 ............................................ 4,477,500
9,000,000 Oryx Energy Co., cvt. sub. deb., 7.50%, 05/15/14 ........................................... 8,066,250
276,000 Pogo Producing Co., cvt. sub. deb., 8.00%, 12/31/05 ........................................ 282,900
1,800,000 b Seacor Holdings, Inc., cvt. sub. deb., 6.00%, 07/01/03 ..................................... 2,043,000
7,000,000 Snyder Oil Corp., cvt. sub. notes, 7.00%, 05/15/01 ......................................... 6,492,500
-------------
21,362,150
-------------
Health Care .3%
3,000,000 Grancare, Inc., cvt. sub. deb., 6.50%, 01/15/03 ............................................ 2,606,250
1,430,000 b Medical Care International, Inc., cvt. sub. deb., 6.75%, 10/01/06 .......................... 1,437,150
-------------
4,043,400
-------------
Media
285,050 Time Warner, Inc., cvt. sub. deb., 8.75%, 01/10/15 ......................................... 295,383
-------------
Metals 1.1%
100,000 Coeur D'Alene Mines Corp., cvt. senior sub. deb., 6.00%, 06/10/02 .......................... 88,500
6,000,000 Coeur D'Alene Mines Corp., cvt. sub. deb., 6.375%, 01/31/04 ................................ 5,685,000
1,900,000 FMC Corp., Eurobonds, cvt. senior sub. deb., 6.75%, 01/16/05 ............................... 1,824,000
5,850,000 b Homestake Mining Co., cvt. sub. deb., 5.50%, 06/23/00 ...................................... 6,003,563
-------------
13,601,063
-------------
Pollution Control .2%
3,610,000 Air & Water Technology Corp., cvt. sub. deb., 8.00%, 05/15/15 .............................. 3,068,500
-------------
Retail .1%
1,180,000 Drug Emporium, Inc., cvt. sub. deb., 7.75%, 10/01/14 ....................................... 858,450
-------------
Transportation .4%
4,750,000 AMR Corp., cvt. sub. deb., 6.125%, 11/01/24 ................................................ 4,940,000
-------------
Total Convertible Corporate Bonds (Cost $53,046,273).................................. 55,164,646
-------------
c Zero Coupon/Step-up Bonds 3.0%
10,000,000 Bell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion rate 11.50%),
11.50% thereafter, 03/01/05 ............................................................... 6,350,000
2,600,000 Dr Pepper Bottling Holdings Co., S.F., senior sub. disc. notes, zero coupon to 02/15/98,
(original accretion rate 11.625%), 11.625% thereafter, 02/15/03 ........................... 2,080,000
2,416,000 Dr Pepper/Seven-Up Cos., Inc., senior sub. disc. notes, zero coupon to 11/01/97, (original
accretion rate 11.50%), 11.50% thereafter, 11/01/02 ....................................... 2,258,960
1,000,000 Exide Corp., senior sub. notes, zero coupon to 12/15/97, (original accretion rate 12.25%),
12.25% thereafter, 12/15/04 ............................................................... 845,000
7,000,000 Food 4 Less Supermarkets, Inc., zero coupon to 06/15/00, (original accretion rate 13.625%),
13.625% thereafter, 07/15/05 .............................................................. 3,290,000
1,300,000 L.F.C. Holding Corp., senior deb., zero coupon to 06/15/97, (original accretion rate 15.00%),
15.00% thereafter, 06/15/02 ............................................................... 882,050
14,000,000 Marcus Cable Holding Co., senior disc. notes, zero coupon to 06/15/00, (original accretion
rate 14.25%), 14.25% thereafter, 12/15/05 ................................................. 9,450,000
8,000,000 Revlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion rate 12.00%),
0.00%, 03/15/98 ........................................................................... 5,960,000
6,520,000 Rogers Communication, Inc., cvt. sub. notes, LYONs, (original accretion rate 5.50%),
0.00%, 05/20/13 ........................................................................... 2,290,150
$ 6,250,000 Specialty Foods Corp., senior secured disc. deb., Series B, zero coupon to 08/13/99,
(original accretion rate 13.00%), 13.00% thereafter, 08/15/05 ............................. $ 2,968,750
1,500,000 Uniroyal Chemical Corp., senior notes, zero coupon to 05/01/98, (original accretion rate
12.00%), 12.00% thereafter, 05/01/05....................................................... 1,128,750
-------------
Total Zero Coupon/Step-up Bonds (Cost $36,505,212).................................... 37,503,660
-------------
Total Bonds (Cost $455,568,259)....................................................... 454,834,712
-------------
U.S. Government Securities 2.8%
10,000,000 U.S. Treasury Bonds, 6.25%, 08/15/23 ....................................................... 10,281,250
24,390,000 U.S. Treasury Notes, 6.00% - 6.875%, 04/30/97 - 08/15/02 ................................... 25,159,055
-------------
Total U.S. Government Securities (Cost $33,020,490)................................... 35,440,305
-------------
Foreign Government & Agency Securities 8.9%
14,000,000 d Canadian Government, first coupon, deb., 8.00%, 06/01/23 ................................... 10,752,665
110,000,000 Republic of Argentina, Series L, 5.00%, 03/31/23 ........................................... 62,768,750
23,017,500 Republic of Brazil, 8.75%, 01/01/01 ........................................................ 19,823,822
29,000,000 United Mexican States, Series B, 6.25%, 12/31/19 ........................................... 19,067,500
-------------
Total Foreign Government & Agency Securities (Cost $96,822,642) ...................... 112,412,737
-------------
Total Long Term Investments (Cost $1,025,399,078) .................................... 1,087,695,833
-------------
e Short Term Investments 1.2%
Certificates of Deposit .4%
5,000,000 Societe Generale, Inc., New York Branch, 5.79%, 01/04/96 (Cost $5,000,000) ................. 5,000,125
-------------
c,d Zero Coupon Bonds .8%
Mexican Federal Treasury Certificates (CETES),
24,000,000 (original accretion rate 38.31%), 01/04/96................................................. 3,087,087
21,550,000 (original accretion rate 40.52%), 01/11/96................................................. 2,747,506
14,700,000 (original accretion rate 42,47%), 01/18/96................................................. 1,857,783
20,200,000 (original accretion rate 43,50%), 01/25/96................................................. 2,530,721
-------------
Total Zero Coupon Bonds (Cost $11,740,150)............................................ 10,223,097
-------------
Total Investments Before Repurchase Agreements (Cost $1,042,139,228) ................. 1,102,919,055
-------------
f,g Receivables From Repurchase Agreement 11.7%
142,523,797 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $148,442,387) (Cost $148,347,692)
Bear Stearns & Co., Inc., (Maturity Value $22,594,914)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $12,872,903)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $22,594,914)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $22,594,914)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $22,594,914)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $22,594,914)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $22,594,914)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ...................... 148,347,692
-------------
Total Investments (Cost $1,190,486,920) 98.8% ................................... 1,251,266,747
Other Assets and Liabilities, Net 1.2% .......................................... 15,270,755
-------------
Net Assets 100.0% ............................................................... $1,266,537,502
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,190,486,920 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ........................................................... $ 102,183,535
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................ (41,403,708)
-------------
Net unrealized appreciation .............................................................. $ 60,779,827
=============
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
LYONs - Liquid Yield Option Notes
PIK - Payment-In-Kind
S.F. - Sinking Fund
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
cZero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant.
dFace amount is stated in foreign currency and value is stated in U.S. dollars.
eCertain short-term securities are traded on a discount basis; the rates shown are the discount rates at the time of purchase by the
Fund.
Other securities bear interest at the rates shown, payable at fixed dates or upon maturity.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement
iSee Note 10 regarding holdings of 5% or more of voting securities.
lSee Note 9 regarding defaulted securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
<TABLE>
<CAPTION>
Shares/ Value
Country* Warrants Templeton International Equity Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks & Warrants 79.3%
<S> <C> <C> <C>
Argentina 2.1%
AR 588,699 aCiadea, SA........................................................................ $ 3,060,773
US 221,700 Transportadora de Gas del Sur, SA, ADR, Series B.................................. 2,854,387
AR 56,000 YPF Sociedad Anonima.............................................................. 1,203,819
US 495,000 YPF Sociedad Anonima, ADR......................................................... 10,704,375
-------------
17,823,354
-------------
Australia 5.6%
AU 1,329,181 Australia & New Zealand Banking Group, Ltd. ...................................... 6,233,747
AU 1,310,000 Email, Ltd. ...................................................................... 3,115,709
AU 1,448,642 GIO Austrailia Holdings, Ltd. .................................................... 3,370,087
AU 1,003,000 National Foods, Ltd. ............................................................. 1,230,044
AU 1,984,500 News International, Plc. ......................................................... 9,461,447
AU 6,527,766 Pacific Dunlop, Ltd. ............................................................. 15,283,077
AU 3,219,236 Pioneer International, Ltd. ...................................................... 8,302,673
-------------
46,996,784
-------------
Belgium .6%
BE 9,054 Solvay, SA ....................................................................... 4,914,633
-------------
Bermuda 2.6%
US 547,000 ACE, Ltd. ........................................................................ 21,743,250
-------------
Brazil .1%
US 9,500 Companhia Siderurgica Nacional, ADR............................................... 195,483
-------------
Canada 2.1%
CA 205,800 Bank of Montreal.................................................................. 4,673,333
CA 203,700 Canadian Imperial Bank of Commerce................................................ 6,061,834
CA 29,400 Gendis, Inc., Series A ........................................................... 255,741
CA 127,000 London Insurance Group, Inc. ..................................................... 2,569,956
CA 447,000 National Bank of Canada, Montreal................................................. 3,642,732
-------------
17,203,596
-------------
China .5%
HK 6,960,000 Maanshan Iron & Steel Co., Ltd., Series H......................................... 972,105
US 338,300 Shandong Huaneng Power Development Co., Ltd., ADR ................................ 2,283,525
HK 8,400,000 Shanghai Hai Xing Shipping Co., Series H.......................................... 564,888
HK 1,494,000 Shenzhen China Bicycles Co. (Holdings), Ltd., Series B............................ 245,377
HK 960,000 aYizheng Chemical Fibre Co., Ltd., Series H........................................ 216,023
-------------
4,281,918
-------------
Colombia .2%
US 159,000 Banco Ganadero, SA, ADR, Series C................................................. 2,067,000
-------------
Finland 1.9%
FI 111,562 American Group, Ltd., Series A.................................................... 1,740,153
FI 1,754,300 Enso-Gutzeit Oy, Series R......................................................... 11,687,005
FI 171,000 aOutokumpu Oy, Series A............................................................ 2,710,482
FI 99,700 aOutokumpu Oy, warrants............................................................ 3,894
-------------
16,141,534
-------------
France 4.7%
FR 27,323 Alcatel Cable, SA................................................................. 1,975,157
FR 12,509 Cie de Saint Gobain............................................................... 1,364,061
FR 72,792 Ecco, SA ......................................................................... 11,014,677
FR 14,850 Labinal, SA ...................................................................... 1,646,631
FR 308,870 Pechiney International, SA........................................................ 5,481,071
France (cont.)
FR 100,000 aPechiney, SA, Series A............................................................ $ 3,467,429
FR 148,024 Societe Elf Aquitane, SA.......................................................... 10,906,077
FR 60,833 Total, SA, Series B............................................................... 4,105,637
-------------
39,960,740
-------------
Greece 1.1%
US 113,800 bAlpha Credit Bank ................................................................ 6,575,815
GR 69,970 Ergo Bank, SA .................................................................... 2,787,408
-------------
9,363,223
-------------
Hong Kong 7.9%
HK 5,961,000 C.P. Pokphand Co., Ltd. .......................................................... 2,389,796
HK 846,000 Cathay Pacific Airways, Ltd. ..................................................... 1,291,018
HK 623,000 Cheung Kong Holdings, Ltd......................................................... 3,794,801
HK 1,742,000 Consolidated Electric Power Asia, Ltd. ........................................... 3,165,225
HK 9,123,000 Dairy Farm International Holdings, Ltd. .......................................... 8,393,160
HK 9,922,000 Great Wall Electronic International, Ltd. ........................................ 731,399
HK 779,000 Hang Lung Development Co., Ltd. .................................................. 1,239,146
HK 128,198 HSBC Holdings Corp., Plc. ........................................................ 2,002,845
HK 240,338 HSBC Holdings, Plc. .............................................................. 3,636,540
HK 905,200 Jardine Matheson Holdings, Ltd. .................................................. 6,200,620
HK 2,864,250 Jardine Strategic Holdings, Ltd. ................................................. 8,764,605
HK 318,250 aJardine Strategic Holdings, Ltd., warrants........................................ 101,840
HK 5,999,000 Oriental Press Group.............................................................. 1,823,168
HK 7,155,000 Peregrine Investments Holdings, Ltd. ............................................. 9,253,152
HK 17,474,000 Shun Tak Holdings, Ltd. .......................................................... 12,315,978
HK 3,172,400 Sing Tao Holdings, Ltd. .......................................................... 1,230,805
HK 1,974,000 Yue Yuen Industrial Holdings, Ltd. ............................................... 523,337
-------------
66,857,435
-------------
India .1%
US 109,700 bGujarat Narmada Valley Fertilizers Co., Ltd. ..................................... 685,625
-------------
Indonesia .1%
ID 167,500 PT Barito Pacific Timber, fgn. .................................................. 122,704
-------------
Italy 1.3%
IT 148,000 aBanco di Sardegna, SPA, di Risp................................................... 1,023,164
IT 140,200 Cartiere Burgo, SPA .............................................................. 698,330
IT 904,000 Sasib, SPA, di Risp............................................................... 2,208,418
IT 1,042,000 Sirti, SPA........................................................................ 5,861,312
IT 468,000 aUnione Cementi Marchino Emiliane (Unicem), di Risp................................ 1,187,496
-------------
10,978,720
-------------
Luxembourg .1%
LU 10,650 aArbed, SA......................................................................... 1,143,527
-------------
Mexico 1.3%
MX 699,300 aConsorcio G Grupo Dina, SA, de CV ................................................ 299,117
US 42,800 aConsorcio G Grupo Dina, SA, de CV, ADR............................................ 80,250
US 24,300 Empresas ICA Sociedad Controladora, SA, ADR....................................... 249,075
MX 31,070 Grupo Financiero Banamex Accival, SA, L........................................... 46,152
US 275,600 Telefonos de Mexico, SA, ADR...................................................... 8,784,750
MX 1,274,640 Vitro, SA ........................................................................ 1,982,590
-------------
11,441,934
-------------
Netherlands 8.9%
NL 93,700 ABN AMRO, NV...................................................................... $ 4,275,307
NL 32,300 Akzo Nobel, NV.................................................................... 3,741,889
NL 126,700 DSM, NV........................................................................... 10,439,049
NL 333,554 Ing Groep, NV..................................................................... 22,318,825
NL 58,200 Internatio-Mueller, NV............................................................ 4,028,700
NL 147,900 Koninklijke Bijenkorf Beheer, NV (KBB)............................................ 9,785,531
NL 63,000 NV Holdingsmij de Telegraaf....................................................... 8,887,086
NL 330,807 Philips Electronics, NV........................................................... 11,976,035
-------------
75,452,422
-------------
New Zealand 1.0%
NZ 1,267,106 Fisher & Paykel Industries, Ltd. ................................................. 3,851,915
NZ 3,520,000 Fletcher Challenge, Ltd., Forestry Division....................................... 5,016,605
-------------
8,868,520
-------------
Norway 2.9%
NO 13,200 Elkem, AS......................................................................... 150,045
NO 143,000 Fokus Bank, AS.................................................................... 772,107
NO 757,660 Hafslund Nycomed, SA, Series B.................................................... 19,198,375
NO 34,000 Helikopter Service, AS............................................................ 416,002
NO 295,000 Unitor, AS........................................................................ 4,051,878
-------------
24,588,407
-------------
Peru .5%
PE 1,880,000 Telefonica de Peru, Series B...................................................... 4,026,828
-------------
Portugal .6%
PT 207,900 Banco Portugues de Investimento, SA............................................... 2,484,938
PT 114,078 aBanco Portugues de Investimento, SA, new.......................................... 1,287,307
US 239,400 a,bPortucel Industrial Empresa Produtora Celulose, ADR .............................. 1,415,527
-------------
5,187,772
-------------
South Korea 1.3%
SK 44,500 Byucksan Development Co., Ltd. ................................................... 742,862
SK 109,900 Daegu Bank Co., Ltd. ............................................................. 1,686,999
SK 30,600 Daehan Synthetic Fiber Co., Ltd. ................................................. 3,767,064
SK 10,190 Keumkang Co., Ltd. ............................................................... 806,885
SK 155,990 Pacific Chemical Co., Ltd. ....................................................... 3,629,545
SK 7,870 Pohang Iron & Steel Co., Ltd. .................................................... 570,368
-------------
11,203,723
-------------
Spain 7.0%
ES 172,300 Banco Bilbao Vizcaya ............................................................. 6,207,345
ES 21,953 Banco Popular Espanol............................................................. 4,048,546
ES 25,078 Bankinter, SA .................................................................... 2,439,575
ES 734,000 Compania Sevillana de Electricidad................................................ 5,700,148
ES 318,000 Dragados y Construcciones, SA..................................................... 4,181,451
ES 365,500 Huarte, SA ....................................................................... 1,651,228
ES 1,863,800 Iberdrola, SA..................................................................... 17,055,383
ES 1,238,100 Telefonica de Espana, SA.......................................................... 17,147,634
ES 52,200 Unipapel, SA ..................................................................... 981,171
-------------
59,412,481
-------------
Sweden 10.4%
SE 97,600 Asea, AB, Series A................................................................ 9,477,226
SE 21,600 Autoliv........................................................................... 1,261,703
SE 582,000 Celsius, AB, Series B............................................................. $ 11,828,467
SE 382,000 Electrolux, AB, Series B ......................................................... 15,671,176
SE 158,500 Esselte, AB, Series B............................................................. 2,374,237
SE 170,000 Marieberg Tidnings, AB, Series A.................................................. 3,941,317
US 14,900 bSparbanken Sverige, AB, Series A, ................................................ 189,546
SE 253,000 Stadshypotek, AB, Series A........................................................ 5,065,751
SE 1,288,000 Stena Line, AB, Series B ......................................................... 5,623,226
SE 804,250 Stora Kopparbergs Bergslags, AB, Series B......................................... 9,625,646
SE 311,800 Svenska Handelsbanken, Series A................................................... 6,477,791
SE 831,000 Volvo, AB, Series B............................................................... 17,014,204
-------------
88,550,290
-------------
Switzerland 4.3%
CH 3,690 Baloise-Holding................................................................... 7,677,503
CH 12,800 Bucher Holding, AG................................................................ 7,323,797
CH 11,000 Ciba-Geigy, AG.................................................................... 9,679,237
CH 3,570 Kuoni Reisen Holding, AG, Series B................................................ 5,725,618
CH 15,400 SMH, AG .......................................................................... 9,211,964
-------------
39,618,119
-------------
Thailand .1%
TH 17,400 Charoen Pokphand Feedmill Public Co., Ltd., fgn................................... 84,962
-------------
Turkey .3%
TR 5,874,400 Tofas Turk Otomobil Fabrikasi, AS, GDR............................................ 3,054,688
-------------
United Kingdom 8.6%
GB 6,312,400 Albert Fisher Group, Plc. ........................................................ 4,705,479
GB 2,536,000 Anglian Group, Plc. .............................................................. 5,690,955
GB 1,635,473 Argyll Group, Plc. ............................................................... 8,635,558
GB 394,777 British Aerospace, Plc. .......................................................... 4,886,279
GB 7,123,000 aCordiant, Plc. ................................................................... 10,011,050
GB 1,890,000 Govett & Co., Ltd. ............................................................... 6,780,190
GB 2,493,900 Hillsdown Holdings, Plc. ......................................................... 6,545,364
GB 871,900 Kwik Save Group, Plc. ............................................................ 6,824,413
GB 320,000 Lex Service, Plc. ................................................................ 1,515,716
GB 2,614,971 Meggitt, Plc. .................................................................... 3,695,527
GB 212,341 National Westminster Bank, Plc. .................................................. 2,140,162
GB 8,102,000 Raine, Plc. ...................................................................... 2,138,992
GB 512,900 Thames Water Group, Plc. ......................................................... 4,476,485
GB 1,306,000 Wace Group, Plc. ................................................................. 4,969,096
-------------
73,015,266
-------------
United States 1.1%
US 234,800 aPharmacia & Upjohn, Inc. ......................................................... 9,098,500
-------------
Total Common Stocks & Warrants (Cost $663,437,932).......................... 674,083,438
-------------
Preferred Stocks .1%
Netherlands
NL 2,547 ABN AMRO, cvt., pfd. ............................................................. 109,377
NL 6,910 Ballast Nedam NV, certificate, cvt., pfd. ........................................ 297,172
-------------
Total Preferred Stocks (Cost $401,801)...................................... 406,549
-------------
Total Common Stocks & Warrants, and Preferred Stocks (Cost $663,839,733).... 674,489,987
-------------
Bonds 6.3%
Finland .3%
US 3,050,000 American Group Ltd., 6.25%, cvt., 06/15/03........................................ $ 2,806,000
-------------
Hong Kong .2%
US 1,531,000 Jardine Strategic Holdings, Ltd., 7.50%, cvt., 05/07/49........................... 1,668,790
-------------
United States 5.8%
US 48,000,000 U.S. Treasury Notes, 7.50%, 12/31/96.............................................. 49,049,760
-------------
Total Bonds (Cost $52,516,084).............................................. 53,524,550
-------------
Total Long Term Investments (Cost $716,355,817)............................. 728,014,537
-------------
Short Term Investments 6.5%
US 55,500,000 U.S. Treasury Notes, 5.125%, 03/31/96 (Cost $55,456,641).......................... 55,482,795
-------------
Total Investments Before Repurchase Agreements (Cost $771,812,458).......... 783,497,332
-------------
fReceivables From Repurchase Agreements 6.8%
US 28,375,000 Lehman Brothers, Inc., 5.70%, 01/02/96, (Maturity Value $29,050,387)
Collateral: U.S. Treasury Notes, 6.125%, 09/30/00................................ 29,032,000
US 27,225,000 SBC Capital Markets, Inc., 5.70%, 01/02/96, (Maturity Value $29,050,387)
Collateral: U.S. Treasury Notes, 7.75%, 11/30/99................................. 29,032,000
-------------
Total Receivables from Repurchase Agreements (Cost $58,064,000) .................. 58,064,000
-------------
Total Investments (Cost $829,876,458) 99.0%............................ 841,561,332
Other Assets and Liabilities, Net 1.0%................................. 8,555,290
-------------
Net Assets 100.0%...................................................... $850,116,622
=============
At December 31,1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $831,710,461 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................. $100,166,695
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................. (90,315,824)
-------------
Net unrealized appreciation..................................................... $ 9,850,871
=============
COUNTRY LEGEND:
AR - Argentina
AU - Australia
BE - Belgium
CA - Canada
CH - Switzerland
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
HK - Hong Kong
ID - Indonesia
IT - Italy
LU - Luxembourg
MY - Malaysia
MX - Mexico
NL - Netherlands
NZ - New Zealand
NO - Norway
PE - Peru
PT - Portugal
SE - Sweden
SK - South Korea
TH - Thailand
TR - Turkey
US - United States of America
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
fFace amount for repurchase agreements is for the underlying collateral.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Shares/ Value
Country* Warrants Templeton Pacific Growth Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks & Warrants 95.7%
Australia 16.5%
<S> <C> <C> <C>
AU 1,000,000 Australia and New Zealand Banking Group, Ltd. ..................................... $ 4,689,916
AU 1,706,264 Australian Gas & Light Co., Ord. .................................................. 6,404,324
AU 680,000 Brambles Industries, Ltd. ......................................................... 7,581,163
AU 1,981,000 Capral Aluminium, Ltd. ............................................................ 4,858,857
AU 875,000 Email, Ltd. ....................................................................... 2,081,104
AU 2,399,145 Gio Australia Holdings, Ltd. ...................................................... 5,581,315
AU 5,997,391 Goodman Fielder, Ltd. ............................................................. 6,017,717
AU 919,000 Mayne Nickless, Ltd. .............................................................. 4,098,288
AU 3,547,000 National Foods, Ltd. .............................................................. 4,349,915
AU 2,061,877 Pacific Dunlop, Ltd. .............................................................. 4,827,352
US 118,100 bQantas Airways, Ltd., ADR ......................................................... 1,970,794
AU 489,343 Westpac Banking Corp., Ltd. ....................................................... 2,167,681
-------------
54,628,426
-------------
China 1.0%
HK 3,216,000 Maanshan Iron & Steel Co., Ltd., Series H ......................................... 449,179
US 225,000 Shandong Huaneng Power, ADR ....................................................... 1,518,750
HK 17,658,000 Shanghai Hai Xing Shipping Co., Series H .......................................... 1,187,476
-------------
3,155,405
-------------
Hong Kong 18.8%
HK 3,000,000 Cathay Pacific Airways, Ltd. ...................................................... 4,578,080
HK 800,000 Cheung Kong Holdings, Ltd. ........................................................ 4,872,939
HK 4,197,727 Dairy Farm International Holdings, Ltd. ........................................... 3,861,909
HK 5,415,000 Grand Hotel Holdings, Ltd. ........................................................ 2,013,337
HK 800 aGreat Wall Electronics International, Ltd., warrants .............................. 1
HK 169,800 aHang Lung Development Co., Ltd., warrants ......................................... 25,473
HK 4,909,454 Hon Kwok Land Investment Co., Ltd. ................................................ 1,412,678
US 39,024 Hong Kong Land Holdings, Ltd. ..................................................... 72,194
HK 1,750,000 Hong Kong Telecommunications Co., Ltd. ............................................ 3,123,181
HK 250,000 HSBC Holdings, Plc. ............................................................... 3,782,735
HK 496,000 Hualing Holdings, Ltd. ............................................................ 59,655
HK 632,031 Jardine Matheson Holdings, Ltd. ................................................... 4,329,412
HK 1,000,000 Jardine Strategic Holdings, Ltd. .................................................. 3,060,000
HK 2,846,000 Lai Sun Development Co., Ltd. ..................................................... 342,293
HK 3,860,000 National Mutual Asia, Ltd. ........................................................ 3,494,342
HK 1,574,667 New World Development Co., Ltd. ................................................... 6,862,758
HK 1,050,000 Peregrine Investments Holdings, Ltd. .............................................. 1,357,905
HK 3,210,000 Shun Tak Holdings ................................................................. 2,262,464
HK 2,201,100 Sing Tao Holdings, Ltd. ........................................................... 853,967
HK 4,888,000 South China Morning Post (Holdings), Ltd. ......................................... 2,986,848
HK 645,000 Swire Pacific, Ltd., Series A ..................................................... 5,004,850
HK 3,100,000 Wheelock & Co., Ltd. .............................................................. 5,311,995
HK 1,267,000 Winsor Industrial Corp., Ltd. ..................................................... 1,073,243
HK 3,980,000 Yaohan Hongkong Corp., Ltd. ....................................................... 211,031
HK 5,522,000 Yue Yuen Industrial (Holdings), Ltd. ............................................. 1,463,964
-------------
62,417,254
-------------
India .4%
US 156,100 Great Eastern Shipping Co., Ltd., GDR ............................................. 1,308,118
-------------
Indonesia 4.3%
US 300,000 aAsia Pacific Resources International, Class A ..................................... 1,425,000
ID 300,000 P.T. Bali Bank .................................................................... 590,422
ID 950,000 P.T. Barito Pacific Timber, fgn. .................................................. 695,933
ID 1,405,400 P.T. Ever Shine Textile ........................................................... $ 537,820
ID 1,219,500 P.T. Hadtex Indosyntec, fgn. ..................................................... 573,349
ID 1,015,940 P.T. Indorama Synthetics, fgn. .................................................... 3,676,756
US 155,500 P.T. Indosat, ADR ................................................................. 5,675,750
ID 129,000 P.T. Inti Indorayon Utama ......................................................... 135,403
ID 637,625 P.T. Pabrik Kertas Tjiwi Kimia .................................................... 585,616
ID 451,875 P.T. Panin Bank ................................................................... 405,136
-------------
14,301,185
-------------
Japan 18.8%
JP 1,011,000 Daicel Chemical Industries, Ltd. .................................................. 5,745,820
JP 409,000 Daito Trust Construction Co., Ltd. ................................................ 4,831,098
JP 1,200 East Japan Railway Co. ............................................................ 5,832,405
JP 582,800 Hitachi, Ltd. ..................................................................... 5,868,345
JP 300,000 Matsushita Electric Industrial Co. ................................................ 4,879,702
JP 824,000 Mitsubishi Heavy Industries, Ltd. ................................................. 6,565,832
JP 250,000 Mitsubishi Oil Co., Ltd. .......................................................... 2,219,587
JP 38,000 Nintendo Corp., Ltd. .............................................................. 2,888,125
JP 822 Nippon Telegraph & Telephone Corp. ................................................ 6,642,165
JP 700,000 Nisshinbo Industries, Inc. ........................................................ 6,777,364
JP 134,000 Nissin Corp. ...................................................................... 685,017
JP 550,000 Rengo Co., Ltd. ................................................................... 3,674,299
JP 50,000 Sony Corp. ........................................................................ 2,996,563
JP 70,000 Tenma Corp. ....................................................................... 1,396,137
JP 173,000 Toda Corp. ........................................................................ 1,499,104
-------------
62,501,563
-------------
Malaysia 4.8%
MY 462,000 Commerce Asset Holdings ........................................................... 2,328,464
MY 16,667 aCommerce Asset Holdings, warrants ................................................. 42,985
MY 3,342,666 Malaysian International Shipping Corp., Bhd., fgn. ................................ 8,752,502
MY 80,000 Public Finance .................................................................... 173,249
MY 1,798,800 Sime Darby Berhad ................................................................. 4,780,840
-------------
16,078,040
-------------
New Zealand 2.0%
NZ 2,030,713 Brierley Investments, Ltd. ........................................................ 1,606,367
NZ 1,421,800 Carter Holt Harvey, Ltd. .......................................................... 3,067,349
NZ 770,000 Fletcher Challenge, Ltd. .......................................................... 1,776,954
NZ 109,252 Fletcher Forestry Shares .......................................................... 155,703
-------------
6,606,373
-------------
Pakistan 2.6%
PK 2,818,000 Fauji Fertilizer Co., Ltd. ........................................................ 4,220,930
PK 50,000 aPakistan Telecom Corp. ............................................................ 4,350,000
-------------
8,570,930
-------------
Philippines 5.6%
PH 13,750,000 aFilinvest Land, Inc. .............................................................. 4,403,355
PH 116,000 Philippine Long Distance Telephone Co. ............................................ 6,301,944
US 4,400 Philippine Long Distance Telephone Co., ADR ....................................... 238,150
PH 700,000 aPhilippine National Bank .......................................................... 7,739,230
-------------
18,682,679
-------------
Singapore 8.3%
SG 888,600 City Developments, Ltd. ........................................................... $ 6,470,541
SG 472,000 Development Bank of Singapore Ltd., fgn. .......................................... 5,872,888
US 68,000 G.P. Batteries International, Ltd. ................................................ 163,880
SG 393,800 Overseas Union Bank, Ltd. ......................................................... 2,714,422
SG 1,217,000 Parkway Holdings, Ltd. ............................................................ 3,303,839
SG 882,000 Singapore Airlines, Ltd. .......................................................... 8,230,753
SG 90,500 Singapore Bus Service, Ltd. ....................................................... 646,200
-------------
27,402,523
-------------
South Korea .7%
KR 99,030 aPacific Chemical Co., Ltd. ........................................................ 2,304,211
-------------
Thailand 8.9%
TH 622,000 Bangkok Bank Co., Ltd. ............................................................ 7,555,855
TH 752,400 Charoen Pokphand Feedmill Public Co., Ltd., fgn. .................................. 3,673,886
TH 2,783,133 Industrial Finance Corp. of Thailand .............................................. 9,446,521
TH 722,000 MDX Public Co., Ltd. .............................................................. 1,089,162
TH 103,500 Oriental Hotel, Ltd. .............................................................. 288,641
TH 36,570 Thai Farmers Bank, Ltd. ........................................................... 249,704
TH 733,440 Thai Farmers Bank, Ltd., fgn. ..................................................... 7,395,544
-------------
29,699,313
-------------
United States 3.0%
US 69,000 American International Group, Inc. ................................................ 6,382,500
US 150,000 American President Co. ............................................................ 3,450,000
-------------
9,832,500
-------------
Total Common Stocks & Warrants (Cost $313,110,659) .......................... 317,488,520
-------------
Face
Amount
-------
Convertible Bonds .3%
US 31,000 Dairy Farm International Holdings, Ltd., 6.50%, cvt., 05/10/49 .................... 24,955
US 22,000 Jardine Strategic Holdings, Ltd., 7.50%, cvt., 05/07/49 ........................... 23,980
US 360,000 PT Inti Indorayon Utama, 5.50%, cvt., 10/01/02 .................................... 402,300
US 1,307,000 MDX Public Co., Ltd., 4.75%, cvt., 09/17/03 ....................................... 624,092
-------------
Total Convertible Bonds (Cost $1,994,721) ................................... 1,075,327
-------------
Total Long Term Investments (Cost $315,105,380).............................. 318,563,847
-------------
fReceivables From Repurchase Agreements 4.1%
US 12,690,000 SBC Capital Markets, Inc., 5.70%, 01/02/96, (Maturity Value $13,538,569)
(Cost $13,530,000)
Collateral: U.S. Treasury Notes, 7.75%, 11/30/99 ................................. 13,530,000
-------------
Total Investments (Cost $328,635,380) 100.1% ........................... 332,093,847
Liabilities in Excess of Other Assets (.1)% ............................ (157,966)
-------------
Net Assets 100.0% ...................................................... $331,935,881
=============
At December 31, 1995, the net unrealized depreciation based on the cost of
investments for income tax purposes of $332,190,619 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 35,155,465
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (35,252,237)
-------------
Net unrealized depreciation ..................................................... $ (96,772)
=============
COUNTRY LEGEND:
AU - Australia
HK - Hong Kong
ID - Indonesia
JP - Japan
KR - South Korea
MY - Malaysia
NZ - New Zealand
PK - Pakistan
PH - Philippines
SG - Singapore
TH - Thailand
US - United States of America
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bSee note 8 regarding Rule 144A securities.
fFace amount for repurchase agreements is for the underlying collateral.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Shares Rising Dividends Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 87.4%
Banks 12.4%
<S> <C> <C>
200,000 Banc One Corp. .............................................................................. $ 7,550,000
193,500 Corestates Financial Corp. .................................................................. 7,328,813
279,650 Mercantile Bankshares Corp. ................................................................. 7,795,244
263,000 National Commerce Bancorp. .................................................................. 6,903,750
205,200 State Street Boston Corp. ................................................................... 9,234,000
516,720 TrustCo Bank Corp., New York ................................................................ 11,432,430
232,000 Wilmington Trust Corp. ...................................................................... 7,163,000
-------------
57,407,237
-------------
Consumer Goods/Services 12.1%
222,000 Alberto-Culver Co., Class A ................................................................. 6,771,000
725,000 DIMON, Inc. ................................................................................. 12,778,125
169,000 Philip Morris Cos., Inc. .................................................................... 15,294,500
102,000 Roto-Rooter, Inc. ........................................................................... 3,366,000
410,700 Stride Rite Corp. ........................................................................... 3,080,250
325,000 Universal Corp. ............................................................................. 7,921,875
205,500 UST, Inc. ................................................................................... 6,858,563
-------------
56,070,313
-------------
Drugs/Health Care 7.8%
350,000 Bard (C.R.), Inc. ........................................................................... 11,287,500
52,500 Bristol-Myers Squibb Co. .................................................................... 4,508,438
183,300 Merck & Co., Inc. ........................................................................... 12,051,975
135,000 Pfizer, Inc. ................................................................................ 8,505,000
-------------
36,352,913
-------------
Energy 1.8%
59,500 Royal Dutch Petroleum Co., New York Shares, ADR ............................................. 8,396,938
-------------
Financial Services 3.0%
110,000 Federal National Mortgage Association ....................................................... 13,653,750
-------------
Industrial 17.3%
116,200 Avery-Dennison Corp. ........................................................................ 5,824,525
27,900 Diebold, Inc. ............................................................................... 1,544,963
160,600 General Electric Co. ........................................................................ 11,563,200
660,000 Hanson, Plc., ADR ........................................................................... 10,065,000
134,000 Kaydon Corp. ................................................................................ 4,070,250
154,800 Kimball International, Inc., Class B ........................................................ 3,908,700
184,400 Loctite Corp. ............................................................................... 8,759,000
90,000 Monsanto Co. ................................................................................ 11,025,000
220,000 Myers Industries, Inc. ...................................................................... 3,602,500
385,000 Newell Co. .................................................................................. 9,961,875
81,800 Rockwell International Corp. ................................................................ 4,325,175
158,000 Superior Industries International, Inc. ..................................................... 4,167,250
123,000 Superior Surgical Manufacturing Co., Inc. ................................................... 1,168,500
-------------
79,985,938
-------------
Insurance - Life & Health 1.1%
112,500 Jefferson-Pilot Corp. ....................................................................... 5,231,250
-------------
Insurance - Property Casualty 16.9%
301,900 Allied Group, Inc. .......................................................................... 10,868,400
53,700 American International Group, Inc. .......................................................... 4,967,250
103,100 Chubb Corp. ................................................................................. 9,974,925
16,800 Cincinnati Financial Corp. .................................................................. 1,096,200
302,000 Mercury General Corp. ....................................................................... $ 14,420,500
175,000 MMI Cos., Inc. .............................................................................. 4,200,000
314,625 RLI Corp. ................................................................................... 7,865,625
202,000 SAFECO Corp. ................................................................................ 6,969,000
215,800 Selective Insurance Group, Inc. ............................................................. 7,660,900
188,400 St. Paul Companies, Inc. .................................................................... 10,479,750
-------------
78,502,550
-------------
Miscellaneous 2.6%
500,000 Arnold Industries, Inc. ..................................................................... 8,687,500
168,000 Bob Evans Farms, Inc. ....................................................................... 3,192,000
-------------
11,879,500
-------------
Printing & Publishing 1.2%
31,000 Dun & Bradstreet Corp. ...................................................................... 2,007,250
73,100 Reader's Digest Association, Inc., Class A .................................................. 3,746,375
-------------
5,753,625
-------------
Retail 11.2%
77,000 Albertson's, Inc. ........................................................................... 2,531,375
44,100 Arbor Drugs, Inc. ........................................................................... 926,100
769,000 Family Dollar Stores, Inc. .................................................................. 10,573,750
372,000 Rite Aid Corp. .............................................................................. 12,741,000
315,000 The Limited, Inc. ........................................................................... 5,473,124
303,000 Walgreen Co. ................................................................................ 9,052,124
465,000 Wal-Mart Stores, Inc. ....................................................................... 10,404,374
-------------
51,701,847
-------------
Total Long Term Investments (Cost $326,510,460) ....................................... 404,935,861
-------------
Face
Amount
-------
e Short Term Investments 12.7%
Commercial Paper 5.3%
$12,000,000 American Express Credit Corp., 5.48%, 03/18/96 .............................................. 11,853,120
13,000,000 Societe Generale, 5.50%, 03/22/96 ........................................................... 12,833,079
-------------
Total Commercial Paper (Cost $24,698,471) ............................................. 24,686,199
-------------
Total Investments before Repurchase Agreements (Cost $351,208,931) .................... 429,622,060
-------------
f,g Receivables From Repurchase Agreements 7.4%
$32,983,765 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $34,352,462) (Cost $34,330,548)
Bear Stearns & Co. Inc., (Maturity Value $5,228,904)
Collateral: U. S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $2,979,038)
Collateral: U. S. Treasury Bills, 08/22/96
U. S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $5,228,904)
Collateral: U. S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $5,228,904)
Collateral: U. S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $5,228,904)
Collateral: U. S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $5,228,904)
Collateral: U. S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $5,228,904)
Collateral: U. S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ...................... $ 34,330,548
-------------
Total Investments (Cost $385,539,479) 100.1%...................................... 463,952,608
Liabilities in Excess of Other Assets (.1)% ...................................... (699,331)
-------------
Net Assets 100.0% ................................................................ $463,253,277
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $385,886,250 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 86,873,788
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (8,807,430)
-------------
Net unrealized appreciation ............................................................... $ 78,066,358
=============
eCertain short-term securities are traded on a discount basis; the rates shown are the discount rates at the time of purchase by the
Fund. Other securities bear interest at the rates shown, payable at fixed dates or upon maturity.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Shares/ Value
Warrants Utility Equity Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks & Warrants 91.0%
<S> <C> <C>
167,000 aAES Corp. .................................................................................. $ 3,987,125
446,100 aAirTouch Communications, Inc. .............................................................. 12,602,325
1,298,700 Allegheny Power System, Inc. ............................................................... 37,175,288
1,300,230 American Electric Power Co., Inc. .......................................................... 52,659,315
100,000 Ameritech Corp. ............................................................................ 5,900,000
120,000 AT&T Corp. ................................................................................. 7,770,000
166,200 BellSouth Corp. ............................................................................ 7,229,700
600,000 dCable and Wireless, Plc. ................................................................... 4,295,565
1,733,900 Central & South West Corp. ................................................................. 48,332,463
775,000 dChina Light & Power Co. .................................................................... 3,568,057
1,223,900 CINergy Corp. .............................................................................. 37,481,938
832,710 CIPSCO, Inc. ............................................................................... 32,475,690
1,100 Compania Boliviana de Energia Electricia ................................................... 36,575
445,150 Delmarva Power & Light Co. ................................................................. 10,127,163
880,000 Dominion Resources, Inc. ................................................................... 36,300,000
716,000 DPL, Inc. .................................................................................. 17,721,000
1,081,850 Duke Power Co. ............................................................................. 51,252,644
213,900 Empresa Nacional de Electricidad, ADR....................................................... 12,245,775
1,407,560 Enova Corp. ................................................................................ 33,429,550
100,000 Enron Corp. ................................................................................ 3,812,500
280,000 Enron Global Power & Pipelines L.L.C........................................................ 6,965,000
1,654,000 Entergy Corp. .............................................................................. 48,379,500
195,000 b,dEspoon Sahko Oy, ADS........................................................................ 2,822,118
853,000 Florida Progress Corp. ..................................................................... 30,174,875
1,201,300 FPL Group, Inc.............................................................................. 55,710,288
1,621,100 General Public Utilities Corp. ............................................................. 55,117,400
55,600 a,dGrupo Iusacell, SA, Series D................................................................ 46,123
144,440 a,dGrupo Iusacell, SA, Series L, ADR........................................................... 1,462,455
890,840 GTE Corp. .................................................................................. 39,196,960
525,430 Hawaiian Electric Industries, Inc........................................................... 20,360,413
5,760,000 dHong Kong & China Gas Co., Ltd.............................................................. 9,274,103
103,000 a,dHong Kong & China Gas Co., Ltd., warrants................................................... 133
2,500,000 dHong Kong Electric Holdings, Ltd............................................................ 8,195,926
138,000 aHuaneng Power International, Inc., ADR...................................................... 1,983,750
50,500 Korea Electric Power Corp. ................................................................. 2,209,111
1,017,450 New England Electric System................................................................. 40,316,456
558,050 New York State Electric & Gas Corp.......................................................... 14,439,544
749,900 NIPSCO Industries, Inc...................................................................... 28,683,675
164,500 Nokia, AB................................................................................... 6,394,938
323,000 aNynex Cablecomms Group, ADR................................................................. 5,612,125
229,600 Pacific Enterprises......................................................................... 6,486,200
1,123,150 Pacific Gas & Electric Co. ................................................................. 31,869,381
1,702,400 PacifiCorp.................................................................................. 36,176,000
349,100 Panhandle Eastern Corp. .................................................................... 9,731,163
843,000 Pinnacle West Capital Corp. ................................................................ 24,236,250
330,000 Portugal Telecom, SA, ADR................................................................... 6,270,000
100,000 Public Service Co. of Colorado.............................................................. 3,537,500
230,000 SBC Communications, Inc..................................................................... 13,225,000
1,773,160 SCANA Corp. ................................................................................ 50,756,705
1,154,700 SCEcorp .................................................................................... 20,495,925
590,000 dScottish Power, Plc......................................................................... 3,390,173
47,250 Sierra Pacific Resources ................................................................... 1,104,469
2,331,290 Southern Co. ............................................................................... 57,408,016
14,800 Southern Indiana Gas & Electric Co. ........................................................ $ 514,300
439,300 Southwestern Public Service Co. ............................................................ 14,387,075
1,675,000 dSTET - Societa Finanziaria Telefonica ...................................................... 4,728,915
2,074,850 TECO Energy, Inc. .......................................................................... 53,168,031
315,000 Tele Danmark, A/S, ADS ..................................................................... 8,701,875
115,000 Telecom de Argentina, ADR .................................................................. 5,476,875
170,000 Telefonos de Mexico, SA, ADR................................................................ 5,418,750
69,000 aTelewest Communications, Plc., ADR.......................................................... 1,664,625
1,089,450 Texas Utilities Co. ........................................................................ 44,803,627
370,000 Transportadora de Gas del Sur, SA, ADR ..................................................... 4,763,750
1,084,800 U S West, Inc............................................................................... 38,781,600
480,351 Williams Companies, Inc. ................................................................... 21,075,400
1,029,200 Wisconsin Energy Corp. ..................................................................... 31,519,250
-------------
Total Long Term Investments (Cost $1,188,913,592)..................................... 1,295,438,421
-------------
Face
Amount
-------
f,gReceivables From Repurchase Agreements 8.1%
$ 111,282,099 Joint Repurchase Agreement, 5.745%, 01/02/96, (Maturity Value $115,902,280) (Cost $115,828,343)
Bear Stearns & Co., Inc., (Maturity Value $17,641,875)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%, 02/29/96 - 08/31/00
Daiwa Securities America, Inc., (Maturity Value $10,051,030)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% - 6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $17,641,875)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 03/31/97 - 11/30/99
Fuji Securities, Inc., (Maturity Value $17,641,875)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 - 10/31/99
Lehman Brothers, Inc., (Maturity Value $17,641,875)
Collateral: U.S. Treasury Notes, 5.75% - 8.75%, 09/30/97 - 09/30/00
SBC Capital Markets, Inc., (Maturity Value $17,641,875)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99
UBS Securities, Inc., (Maturity Value $17,641,875)
Collateral: U.S. Treasury Notes, 6.75% - 7.75%, 04/30/97 - 01/31/00 ...................... 115,828,343
-------------
Total Investments (Cost $1,304,741,935) 99.1% ................................... 1,411,266,764
Other Assets and Liabilities, Net .9%............................................ 12,179,436
-------------
Net Assets 100.0% ............................................................... $1,423,446,200
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,304,741,949 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 151,760,867
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (45,236,052)
-------------
Net unrealized appreciation ............................................................... $ 106,524,815
=============
a Non-income producing.
bSee Note 8 regarding Rule 144A securities.
dSecurities traded in foreign currency and valued in U.S. dollars.
fFace amount for repurchase agreements is for the underlying collateral.
gSee Note 1(h) regarding joint repurchase agreement.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Shares/ Value
Country* Warrants Templeton Developing Markets Equity Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks, Preferred Stocks & Warrants 86.8%
<S> <C> <C> <C>
Argentina 12.7%
AR 34,784 Aluar Aluminio Argentino, SA, Series B ............................................ $ 313,009
AR 311,170 aAstra Cia Argentina de Petroleo, SA ............................................... 575,578
AR 200,000 aAtanor Cia Nacional Para la Industria Quimica, SA, Series D ....................... 477,928
AR 228,301 aBanco Bansud, SA, Series B ........................................................ 1,700,587
AR 512,120 Banco de Galicia y Buenos Aires, SA, Series B ..................................... 2,662,625
AR 145,350 Banco Frances del Rio de la Plata, SA ............................................. 1,286,155
AR 134,420 Central Costanera, SA, Series B ................................................... 413,951
AR 14,646 aCentral Termoelectricia de Buenos Aires ........................................... 17,280
AR 323,332 aCiadea, SA ........................................................................ 1,681,076
AR 32,480 aJuan Minetti, SA .................................................................. 107,168
AR 279,089 Molinos Rio de Plata, SA, Series B ................................................ 2,288,187
AR 21,007 Nobleza Piccardo Sociedad Industrial Comercial y Financial ........................ 79,815
AR 499,972 Perez Companc, SA, Series B ....................................................... 2,649,454
AR 291,144 aSevel Argentina, SA, Series C ..................................................... 521,070
AR 1,184,000 aSociedad Comercial del Plata, SA .................................................. 3,137,129
AR 532,000 Transportadora de Gas del Sur, SA, Series B ....................................... 1,281,928
US 44,000 YPF Sociedad Anonima, ADR ......................................................... 951,500
AR 2,840 aZanella Hermanos, SA .............................................................. 477
-------------
20,144,917
-------------
Brazil 7.6%
BR 51,742,194 Banco Bradesco, SA ................................................................ 399,266
BR 10,070,976 aBanco do Brasil, SA .............................................................. 106,725
BR 110,000,000 aBanco do Brasil, SA, pfd. ......................................................... 1,244,920
BR 264,298,700 aBanespa-Banco do Estado de Sao Paulo, SA, pfd. .................................... 1,359,631
BR 2,000,000 Brasmotor, SA, pfd. ............................................................... 397,140
BR 7,484,000 aCia Mesbla, SA, pfd. .............................................................. 92,400
BR 54,700 Copene-Petroquimica do Nordeste, SA, Series A, pfd. ............................... 24,424
BR 15,409,800 Duratex, SA, pfd. ................................................................. 535,883
BR 11,529,000 Eletrobras-Centrais Eletricas Brasileiras, SA, Series B, pfd. ..................... 3,119,633
BR 362,700 Mannesmann, SA, pfd. .............................................................. 61,569
BR 38,007,000 Petrobras-Petroleo Brasileiro, SA, pfd. ........................................... 3,245,229
BR 12,605,000 Telebras-Telecomunicacoes Brasileiras, SA ......................................... 487,626
BR 3,173,800 aTelerj -Telecomunicacoes do Rio de Janeiro, SA, pfd. .............................. 205,720
BR 17,114,000 Unibanco-Uniao de Bancos Brasileiros, SA, pfd. .................................... 669,100
-------------
11,949,266
-------------
China 3.0%
CN 813,800 China Southern Glass Co., Ltd., Series B .......................................... 336,781
CN 816,000 aChina Textile Machinery Co., Ltd., Series B ....................................... 130,560
CN 858,000 Chiwan Wharf Holdings, Ltd., Series B ............................................. 322,894
CN 400,000 aFoshan Electrical and Lighting Co., Ltd., Series B ................................ 268,995
CN 508,000 Guangzhou Shipyard International Co., Ltd., Series H .............................. 128,766
CN 445,000 Luoyang Glass Co., Ltd., Series H ................................................. 114,523
US 96,000 Shandong Huaneng Power Development Co., Ltd., ADR.................................. 648,000
CN 1,269,000 Shanghai Chlor-Alkali Chemical Co., Ltd., Series B ................................ 322,326
CN 300,000 aShanghai Dazhong Taxi Shareholding Co., Ltd., Series B ............................ 229,200
CN 252,000 Shanghai Industrial Sewing Machine Corp. .......................................... 40,824
CN 1,575,000 Shanghai Jin Jiang Tower Co., Ltd., Series B ...................................... 444,150
CN 410,000 Shanghai Jinqiao Export Processing Zone Development Co., Ltd., Series B ........... 153,340
CN 500,000 Shanghai Lujiaxui Finance & Trade Zone Development Stock Co., Ltd., Series B ...... 284,000
CN 308,000 aShanghai Refrigerator Compressor Co., Ltd., Series B .............................. 109,648
CN 1,078,000 aShanghai Vacuum Electron Devices Co., Ltd., Series B .............................. $ 250,096
CN 100,000 Shanghai Yaohua Pilkington Glass Co., Ltd., Series B .............................. 88,000
CN 314,400 Shenzhen Gintian Industrial Co., Ltd., Series B ................................... 107,748
CN 275,000 Shenzhen Properties & Resources Development (Group), Ltd., Series B ............... 55,124
CN 1,603,100 Shenzhen Vanke Co., Ltd., Series B ................................................ 590,861
CN 586,000 Zhuhai SEZ Lizhu Pharmaceutical Group, Inc., Series B ............................. 193,249
-------------
4,819,085
-------------
Czech Republic .3%
CS 15,000 aCEZ, GDR .......................................................................... 543,750
-------------
Greece 3.4%
GR 29,000 Alpha Credit Bank ................................................................. 1,675,735
GR 32,000 Alpha Leasing, SA ................................................................. 782,825
GR 2,000 Elais Oleaginous Co. .............................................................. 64,954
GR 9,000 Ergo Bank, SA ..................................................................... 358,535
GR 32,200 Etba Leasing ...................................................................... 587,393
GR 25,250 Hellas Can - Container Manufacturers .............................................. 505,873
GR 29,000 Intracom, SA ..................................................................... 625,037
GR 3,000 National Bank of Greece, SA ...................................................... 152,917
GR 16,170 Titan Cement Co. .................................................................. 678,609
-------------
5,431,878
-------------
Hong Kong 13.2%
HK 506,000 Cheung Kong Holdings, Ltd. ........................................................ 3,082,134
HK 2,496,000 China Overseas Land & Investment, Ltd. ............................................ 438,999
HK 251,439 Dairy Farm International Holdings, Ltd. ........................................... 231,324
HK 407,000 Dickson Concepts (International), Ltd. ............................................ 378,972
HK 1,154,000 East Asiatic Co. (Hong Kong), Ltd., (The) ......................................... 137,301
HK 2,044,000 aFu Hui Jewellery Co. (H.K.), Ltd. ................................................. 79,302
HK 202,000 Goldlion Holdings, Ltd............................................................. 147,598
HK 566,000 Great Wall Electronics International, Ltd. ........................................ 41,722
HK 987,000 Hang Lung Development Co., Ltd. ................................................... 1,570,010
HK 59,900 aHang Lung Development Co., Ltd., warrants ......................................... 8,986
HK 131,000 Hong Kong Electric Holdings, Ltd. ................................................. 429,466
HK 430,951 Hopewell Holdings, Ltd. ........................................................... 248,009
HK 206,762 HSBC Holdings, Plc. .............................................................. 3,128,504
HK 316,000 Jardine International Motor Holdings, Ltd. ........................................ 359,625
HK 20,643 Jardine Matheson Holdings, Ltd. ................................................... 141,404
HK 194,625 Jardine Strategic Holdings, Ltd. .................................................. 595,553
HK 21,625 aJardine Strategic Holdings, Ltd., warrants ........................................ 6,920
HK 119,000 JCG Holdings, Ltd. ................................................................ 86,951
HK 1,938,389 K Wah International Holdings, Ltd. ................................................ 290,790
HK 187,320 aK Wah International Holdings, Ltd., warrants ...................................... 5,935
HK 2,162,000 Lai Sun Development Co., Ltd. ..................................................... 260,027
HK 234,000 Lai Sun Garment International, Ltd. ............................................... 226,964
HK 1,450,000 aLaws International Holdings, Ltd. ................................................. 129,389
HK 1,172,000 Le Saunda Holdings, Ltd. .......................................................... 97,003
HK 435,000 Linkful International Holdings, Ltd. .............................................. 30,378
HK 700,000 Luks Industrial Co., Ltd. ......................................................... 71,516
HK 731,592 New World Development Co., Ltd. ................................................... 3,188,445
HK 1,626,000 S. Megga International Holdings, Ltd. ............................................. 60,982
HK 240,388 Semi-Tech (Global) Co., Ltd. ...................................................... 387,046
HK 1,280,658 Stelux International Holdings, Ltd. ............................................... $ 327,928
HK 1,351,000 Sun Hung Kai & Co, Ltd............................................................. 288,283
HK 319,000 Sun Hung Kai Properties, Ltd. ..................................................... 2,609,344
HK 2,123,000 Tian An China Investments Co., Ltd. ............................................... 263,573
HK 1,364,000 Tungtex (Holdings) Co., Ltd. ...................................................... 141,119
HK 294,000 Vitasoy International Holdings, Ltd. .............................................. 125,470
HK 393,105 Wai Kee Holdings, Ltd. ............................................................ 49,313
HK 184,000 Wheelock & Co., Ltd. .............................................................. 315,293
HK 1,228,000 Wing Shan International, Ltd. ..................................................... 127,048
HK 1,588,000 Wo Kee Hong Holdings, Ltd. ........................................................ 248,494
HK 300,000 Yaohan Hongkong Corp., Ltd......................................................... 15,907
HK 1,728,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 458,118
-------------
20,831,145
-------------
Indonesia 4.8%
ID 861,500 P.T. Anwar Sierad, fgn. ........................................................... 405,035
ID 68,250 P.T. Aqua Golden Mississippi, fgn. ................................................ 47,759
ID 400,000 P.T. Bank Dagang Nasional Indonesia, fgn. ......................................... 328,012
ID 371,000 P.T. Bank PDFCI, fgn. ............................................................. 235,272
ID 1,127,000 P.T. Barito Pacific Timber, fgn. .................................................. 825,596
ID 532,500 P.T. Charoen Pokphand Indonesia, fgn. ............................................. 1,082,932
ID 127,500 P.T. Dharmala Intiland, fgn. ...................................................... 69,703
ID 273,000 P.T. Duta Anggada Realty, fgn. .................................................... 131,336
ID 1,105,500 P.T. Gadjah Tunggal, fgn. ......................................................... 616,450
ID 435,000 P.T. Gajah Surya Multi Finance, fgn. .............................................. 195,003
ID 829,600 P.T. Ganda Wangsa Utama, fgn. ..................................................... 226,766
ID 278,000 P.T. Hadtex Indosyntec, fgn. ...................................................... 130,702
ID 12,000 P.T. Inter-Pacific Bank, fgn. ..................................................... 9,709
ID 390,000 P.T. Jakarta International Hotel & Development, fgn................................ 477,586
ID 337,500 P.T. Japfa Comfeed Indonesia, fgn. ................................................ 166,056
ID 441,750 P.T. Multibreeder Adirama, fgn. ................................................... 154,559
ID 105,000 P.T. Multipolar Corp., fgn. ....................................................... 48,218
ID 1,656,000 P.T. Polysindo Eka Perkasa, fgn. .................................................. 941,526
ID 468,000 P.T. Pudjiadi Prestige, Ltd., fgn. ................................................ 327,487
ID 1,138,000 aP.T. Sinar Mas Multi Artha, fgn. .................................................. 982,965
ID 316,500 P.T. Summarecon Agung, fgn. ....................................................... 186,869
ID 68,200 P.T. Unggul Indah Corp., fgn. ..................................................... 62,637
-------------
7,652,178
-------------
Israel 1.4%
IL 1,000 aAgis Industries, Ltd. ............................................................. 7,089
IL 227,444 Bank Hapoalim BM .................................................................. 375,401
IL 92,727 Clal Industries, Ltd. ............................................................. 497,554
IL 13,748 Discount Investment Corp. ......................................................... 910,459
IL 2,700 Super Sol, Ltd. ................................................................... 56,626
IL 2,732 The First International Bank of Israel ............................................ 330,558
-------------
2,177,687
-------------
Malaysia 1.6%
MY 258,000 Aokam Perdana, Bhd. ............................................................... 416,506
MY 50,000 Federal Flour Mills, Bhd. ........................................................ 117,140
MY 254,666 Malaysian International Shipping Corp., Bhd., fgn. ................................ 666,822
MY 4,600 Oriental Holdings, Bhd., fgn....................................................... $ 23,365
MY 155,000 Perlis Plantations, Bhd., fgn...................................................... 485,195
MY 732,000 Shangri-La Hotels, Bhd. ........................................................... 711,911
MY 123,000 Shangri La Hotels, Bhd., fgn. ..................................................... 119,624
-------------
2,540,563
-------------
Mexico 12.6%
MX 1,048,000 Cemex, SA, Series B ............................................................... 3,803,500
MX 2,937,085 aCifra, SA, Series C ............................................................... 2,961,830
MX 110,034 aDESC, SA, Series B ................................................................ 403,624
MX 899,000 Grupo Financiero Banamex Accival, SA, Series B .................................... 1,505,519
MX 597,250 Grupo Financiero Banamex Accival, SA, Series L .................................... 887,166
MX 5,650,000 aGrupo Financiero Bancomer, SA de CV, Series B ..................................... 1,574,530
MX 209,259 aGrupo Financiero Bancomer, SA de CV, Series L ..................................... 54,247
MX 529,000 aGrupo Financiero Serfin, SA, Series B ............................................. 274,271
MX 111,056 Grupo Industrial Maseca, SA de CV, Series B ....................................... 67,944
MX 97,000 Telmex-Telefonos de Mexico, SA, Series L .......................................... 155,401
US 228,200 Telmex-Telefonos de Mexico, SA, Series L, ADR ..................................... 7,273,875
MX 589,849 Vitro, SA ......................................................................... 917,458
-------------
19,879,365
-------------
Philippines .9%
PH 500,000 aKeppel Philippine Holdings, Inc., Series B ........................................ 209,684
PH 1,454,000 aPhilex Minning Corp., Series B ................................................... 166,298
US 15,000 Philippine Long Distance Telephone Co., ADR ....................................... 811,875
PH 24,840 aPhilippine National Bank ......................................................... 274,632
-------------
1,462,489
-------------
Poland .6%
PL 13,012 Bank Przemyslowo-Handlowy, SA ..................................................... 377,351
PL 120,000 Elektrim Towarzystwo Handlowe, SA ................................................. 406,408
PL 10,000 aWarta, SA ......................................................................... 158,183
PL 1,242 Wielkopolski Bank Kredytowy, SA ................................................... 2,569
-------------
944,511
-------------
Portugal 6.1%
PT 49,000 Banco Chemical (Portugal), SA ..................................................... 543,444
PT 249,000 Banco Comercial Portugues, SA ..................................................... 3,385,435
PT 116,680 Banco Espirito Santo e Comercial de Lisboa ........................................ 1,763,355
PT 79,000 Banco Portugues de Investimento, SA ............................................... 944,253
PT 43,348 Banco Portugues de Investimento, SA, new .......................................... 489,158
PT 60,000 Banco Totta & Acores, SA .......................................................... 991,749
PT 5,454 aBanco Totta & Acores, SA, new ..................................................... 82,862
US 89,840 Espirito Santo Financial Holding, SA, ADR ......................................... 1,066,850
PT 43,000 aPortucel Industrial Empresa Produtora de Celulose, SA ............................. 254,251
PT 7,010 aSociedade Portuguesa de Celulose, SA .............................................. 145,141
-------------
9,666,498
-------------
Singapore 2.1%
SG 48,000 Acma, Ltd. ........................................................................ 159,491
SG 136,000 Acma, Ltd., fgn. .................................................................. 451,891
SG 66,000 First Capital Corp., Ltd., fgn. ................................................... 182,906
SG 72,000 G.P. Batteries International, Ltd. ................................................ 173,520
SG 18,000 aGP Batteries International, Ltd., warrants ........................................ $ 12,240
SG 552,000 Hai Sun Hup Group, Ltd. ........................................................... 370,732
SG 167,000 Hinds Hotels International, Ltd. .................................................. 198,346
SG 191,000 Hinds Hotels International, Ltd., fgn. ............................................ 226,850
SG 147,000 Inchcape, Bhd., fgn. .............................................................. 471,813
SG 85,000 Isetan, Ltd., fgn. ............................................................... 165,854
SG 300,000 Natsteel, Ltd., fgn. .............................................................. 615,058
SG 132,000 aOsprey Maritime, Ltd. ............................................................. 277,200
-------------
3,305,901
-------------
South Africa 3.1%
ZA 284,000 BTR Dunlop, Ltd. .................................................................. 545,330
ZA 481,800 Del Monte Royal Foods, Ltd. ....................................................... 667,423
ZA 197,067 Engen, Ltd. ....................................................................... 1,486,584
ZA 104,200 First National Bank Holdings, Ltd. ................................................ 957,537
ZA 122,100 Rembrandt Group, Ltd. ............................................................. 1,172,267
-------------
4,829,141
-------------
South Korea 1.9%
KR 15,000 aBoram Bank Co., Ltd. .............................................................. 196,262
KR 3,570 aDae Duck Electronics Co, Ltd. ..................................................... 142,202
KR 44,590 Daegu Bank Co., Ltd. .............................................................. 684,470
KR 2,092 aDaegu Bank Co., Ltd., new ......................................................... 30,764
KR 1,910 Daehan Synthetic Fiber Co., Ltd. .................................................. 235,134
KR 3,950 Hankook Cosmetics Co., Ltd. ....................................................... 110,748
KR 20,000 Kyong Nam Bank .................................................................... 205,092
KR 29,000 aSsangyong Oil Refining Co., Ltd. .................................................. 820,561
KR 34,000 aTong Yang Investment and Finance Co., Ltd. ........................................ 604,834
KR 1,000 Yuhwa Corp. ....................................................................... 51,241
-------------
3,081,308
-------------
Sri Lanka .1%
LK 36,000 Associated Motorways, Ltd. ........................................................ 29,306
-------------
Thailand 3.5%
TH 24,000 American Standard Sanitaryware (THB) Public Co., Ltd., fgn. ....................... 410,639
TH 23,000 Ayudhya Insurance Public Co., Ltd., fgn. .......................................... 149,742
TH 3,300 Bangkok Land Co., Ltd. ............................................................ 4,389
TH 499,500 Bangkok Land Co., Ltd., fgn. ...................................................... 763,428
TH 253,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 1,235,371
TH 103,000 Chareon Pokphand Feedmill Public Co., Ltd. ........................................ 482,493
TH 16,000 Hua Thai Manufacturing Public Co., Ltd. ........................................... 49,067
TH 83,000 Karat Sanitaryware Public Co., Ltd., fgn. ......................................... 336,086
TH 50,700 Kian Gwan Public Co., Ltd., fgn. .................................................. 136,361
TH 313,500 aRoyal Ceramic Industry Public Co., Ltd., fgn. ..................................... 491,594
TH 80,600 Saha Pathanapibul Co., Ltd., fgn. ................................................. 158,384
TH 460,000 Saha Union Public Co., Ltd., fgn. ................................................. 520,445
TH 3,800 Sanyo Universal Electric Public Co., Ltd., fgn. ................................... 15,990
TH 116,410 Thai Asahi Glass Public Co., Ltd. ................................................. 237,996
TH 45,200 Thai Rayon Public Co., Ltd. ....................................................... 394,760
TH 2,700 Thai Wacoal Public Co., Ltd. ...................................................... 14,577
TH 14,900 Thai Wacoal Public Co., Ltd., fgn. ................................................ 111,942
TH 8,450 Thai Wah Public Co., Ltd., fgn. ................................................... $ 10,399
TH 4,500 United Motor Works (Siam) Public Co., Ltd. ........................................ 21,973
-------------
5,545,636
-------------
Turkey 5.7%
TR 12,757,500 Akbank ............................................................................ 2,409,052
TR 1,000,000 Aksigorta, AS ..................................................................... 77,997
TR 852,000 Alarko Sanayii ve Ticaret, SA ..................................................... 237,832
TR 2,344,000 Anadolu Anonim Turk Sigorta Sirketi ............................................... 93,337
TR 2,883,314 Arcelik, AS ....................................................................... 231,991
TR 242,000 Bandirma Gubre Fabrikalari, AS..................................................... 74,507
TR 2,898,724 Bekoteknik, AS .................................................................... 195,152
TR 699,000 Borusan, AS ....................................................................... 140,603
TR 784,250 Cimentas Izmir Cimento Fabrikasi Turk, AS ......................................... 463,596
TR 224,000 Cimsa Cimento Sanayi ve Ticaret, AS ............................................... 97,471
TR 9,000 Compagnie Financiere Ottomane, SA ................................................. 328,457
TR 11,405,000 Eregli Demir ve Celik Fabrikalari, AS ............................................. 936,371
TR 313,714 Izocam Ticaret ve Sanayii, AS ..................................................... 28,847
TR 2,575,000 aKoc Holding, AS ................................................................... 367,857
TR 1,906,400 Koc Yatirim ve Sanayii Mamullesi Pazarlanca, AS ................................... 406,949
TR 1,620,528 Marshall Boya ve Vernik Sanayii, AS ............................................... 156,997
TR 1,594,000 Netas Northern Electric Telekomunic Asyon, AS ..................................... 451,502
TR 493,200 aOtosan Otomobil Sanayii, AS ...................................................... 80,985
TR 614,933 aTat Konserve Sanayii, AS .......................................................... 388,751
TR 6,580,200 Tofas Turk Otomobil Fabrikas, AS .................................................. 637,491
TR 2,118,810 Trakya Cam Sanayii, AS ............................................................ 215,708
TR 2,779,998 Turk Demir Dokum Fabrikalari, AS................................................... 273,891
TR 8,591,400 Turkiye Garanti Bankasi, AS ....................................................... 719,477
TR 1,784,454 Vakif Finansal Kiralama, AS ....................................................... 43,952
-------------
9,058,773
-------------
jVenezuela 2.0%
VE 11,026 Banco Venezolano de Credito ....................................................... 227,332
VE 232,800 Ceramica Carabobo CA, Series A .................................................... 202,149
US 140,000 Ceramica Carabobo CA, Series A, ADR ............................................... 146,440
VE 250,000 Consolidada Carabobo, Series A .................................................... 11,230
VE 3,250,000 Consolidada Carabobo, Series B .................................................... 136,414
VE 947,883 Electricidad de Caracas ........................................................... 647,744
VE 60,000 Industrias Ventane ................................................................ 12,548
VE 10,000 aManufacturera de Aparatos Domesticos, SA .......................................... 7,805
US 258,000 Mavesa, SA, ADR ................................................................... 957,526
VE 50,000 Siderurgica Venezolana Sivensa Saica Svs. ......................................... 16,053
US 222,750 Siderurgica Venezolana Sivensa Saica Svs., ADR..................................... 357,581
VE 301,600 Vencemos de Cementos, SA .......................................................... 370,448
110,240 Venezolana de Cementos-Vencemos ................................................... 118,520
-------------
3,211,790
-------------
Zimbabwe .2%
ZW 700,000 Transarchipel Shipping, Ltd. ...................................................... 187,793
-------------
Total Long Term Investments (Cost $147,051,534) ............................. 137,292,980
-------------
eShort Term Investments 13.4%
US 21,189,000 U.S. Treasury Bills, 4.25% - 5.40%, 02/22/96 (Cost $21,104,898).................... $ 21,118,210
-------------
Total Investments (Cost $168,156,432) 100.2% ........................... 158,411,190
Liabilities in Excess of Other Assets (.2%) ............................ (327,348)
-------------
Net Assets 100.0% ...................................................... $158,083,842
=============
At December 31,1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $168,253,753 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 13,208,715
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (23,051,278)
-------------
Net unrealized depreciation ..................................................... $ (9,842,563)
=============
COUNTRY LEGEND:
AR - Argentina
BR - Brazil
CN - China
CS - Czech Republic
GR - Greece
HK - Hong Kong
ID - Indonesia
IL - Israel
KR - South Korea
LK - Sri Lanka
MX - Mexico
MY - Malaysia
PH - Philippines
PL - Poland
PT - Portugal
SG - Singapore
TH - Thailand
TR - Turkey
US - United States of America
VE - Venezuela
ZA - South Africa
ZW - Zimbabwe
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
eCertain short-term securities are traded on a discount basis; the rates shown are the discount rates at the time of purchase by the
Fund. Other securities bear interest at the rate shown, payable at fixed dates or upon maturity.
jExchange rate to translate security values into U.S. dollars was determined based on procedures established by the Board of
Trustees.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Country* Shares Templeton Global Growth Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
a Common Stocks 85.0%
Argentina 3.2%
<S> <C> <C> <C>
US 50,000 Telecom Argentina Stet France, SA, ADR .......................................... $ 2,381,250
US 386,900 Transportadora de Gas del Sur, SA, ADR, Series B................................. 4,981,338
US 155,000 YPF Sociedad Anonima, ADR ....................................................... 3,351,875
-------------
10,714,463
-------------
Australia 4.9%
AU 250,000 BTR Nylex, Ltd. ................................................................. 677,288
AU 2,069,552 HIH Winterthur Insurance......................................................... 3,322,506
AU 150,000 News International, Plc. ........................................................ 715,151
AU 1,222,727 Pacific BBA, Ltd. ............................................................... 2,544,622
AU 2,149,000 Pacific Dunlop, Ltd. ............................................................ 5,031,328
AU 700,000 Renison Goldfields Consolidated, Ltd. ........................................... 3,485,848
AU 1,356,340 Stanilite Pacific................................................................ 625,023
-------------
16,401,766
-------------
Austria 2.5%
AT 30,000a,b Bohler-Uddeholm, AG.............................................................. 2,288,602
AT 29,500 Evn Energie-Versorgung Niederoesterreich, AG..................................... 4,047,902
AT 8,480 Mayr-Melnhof Karton, AG ......................................................... 424,273
AT 13,000 b VA Technologies, AG, Bearer certificate.......................................... 1,648,586
-------------
8,409,363
-------------
Bermuda 1.6%
US 80,000 ACE, Ltd. ....................................................................... 3,180,000
US 85,000 Partnerre, Ltd. ................................................................. 2,337,500
-------------
5,517,500
-------------
Brazil .8%
BR 129,100,000 Companhia Siderurgica Nacional................................................... 2,656,515
-------------
Canada .8%
CA 9,700 Intrawest Corporation ........................................................... 92,371
CA 37,000 a Newbridge Networks Corp. ........................................................ 1,530,875
CA 195,000 Primex Forest Products, Ltd. .................................................... 892,759
-------------
2,516,005
-------------
China .1%
HK 5,404,000 Shanghai Hai Xing Shipping Co., Series H......................................... 363,412
-------------
Czech Republic .9%
CZ 171,000a,b Komercni Banka, AS, GDR.......................................................... 3,112,200
-------------
Denmark .3%
DK 20,000 Tele Danmark, A/S, Series B...................................................... 1,090,556
-------------
Finland 1.6%
FI 8,300 American Group, Ltd., Series A................................................... 129,464
FI 145,000 Enso-Gutzeit Oy, Series R........................................................ 965,978
FI 54,000 Metsa-Serla Oy, Series B......................................................... 1,662,264
FI 65,000 a Outokumpu Oy, Series A .......................................................... 1,030,300
FI 88,000 Repola Oy ....................................................................... 1,657,669
-------------
5,445,675
-------------
France 4.4%
FR 30,000 Alcatel Alsthom ................................................................. 2,586,482
FR 40,814 AXA, SA.......................................................................... 2,750,382
FR 86,500 Banque Nationale de Paris........................................................ 3,901,950
FR 45,000 Credit Foncier de France ........................................................ $ 650,602
FR 100,000 Pechiney International, SA ...................................................... 1,774,556
FR 5,388 Sa des Galeries Lafayette ....................................................... 1,313,717
FR 21,972 Societe Elf Aquitane, SA ........................................................ 1,618,848
FR 3,229 a Union du Credit Bail Immobilier Unibail.......................................... 333,648
-------------
14,930,185
-------------
Germany 1.1%
DD 60,000 a Bremer Vulkan Verbund, AG........................................................ 1,673,582
DD 6,300 Volkswagen, AG .................................................................. 2,113,106
-------------
3,786,688
-------------
Greece .5%
GR 27,200 Alpha Credit Bank................................................................ 1,571,724
US 4,400 b Alpha Credit Bank, ADR .......................................................... 254,249
-------------
1,825,973
-------------
Hong Kong 4.7%
HK 800,000 Cheung Kong Holdings, Ltd. ...................................................... 4,872,939
HK 278,149 HSBC Holdings, Plc. ............................................................. 4,208,656
HK 800,000 Jardine Strategic Holdings, Ltd. ................................................ 2,448,000
HK 2,299,000 Oriental Press Group............................................................. 698,694
HK 3,600,000 Shun Tak Holdings, Ltd. ......................................................... 2,537,342
HK 150,000 Swire Pacific, Ltd., Series A ................................................... 1,163,919
HK 75,000 Swire Pacific, Ltd., Series B ................................................... 93,598
-------------
16,023,148
-------------
Hungary .6%
US 256,358a,b MOL Magyar Olay - Es Gazipari RT................................................. 2,082,909
-------------
India .5%
US 720,000 a India Fund, (The), Ord., Series B ............................................... 1,151,696
US 37,000 b Larsen and Toubro, Ltd. ......................................................... 633,625
-------------
1,785,321
-------------
Indonesia .6%
US 305,700 a Asia Pacific Resources International, Class A ................................... 1,452,075
ID 843,000 PT Barito Pacific Timber, fgn. .................................................. 617,549
-------------
2,069,624
-------------
Japan 1.0%
JP 230,000 Daito Trust Construction Co., Ltd. .............................................. 2,716,755
JP 48,000 Hitachi, Ltd. ................................................................... 483,323
-------------
3,200,078
-------------
Mexico 1.5%
MX 1,900,000 a Cifra, SA ....................................................................... 1,975,113
MX 400,000 a Consorcio G Grupo Dina, SA ...................................................... 171,095
US 86,400 Telefonos de Mexico, ADR......................................................... 2,754,000
US 24,000 Vitro, SA, ADR .................................................................. 114,000
-------------
5,014,208
-------------
Netherlands 2.0%
NL 56,500 European Vinyls Corp., International, NV......................................... 1,470,601
NL 41,438 Ing Groep, NV.................................................................... 2,772,707
NL 50,000 a Koninklijke Frans Maas Groep, NV................................................. $ 1,716,497
NL 40,000 Koninklijke Nedlloyd Groep, NV................................................... 908,807
-------------
6,868,612
-------------
New Zealand .6%
NZ 560,000 Fisher & Paykel Industries, Ltd. ................................................ 1,702,361
US 15,607 Fletcher Challenge Ltd., Forestry Division....................................... 224,351
-------------
1,926,712
-------------
Norway 1.0%
NO 45,000 Hafslund Nycomed Free, Series B.................................................. 1,140,257
NO 180,600 Helikopter Service, AS........................................................... 2,209,706
-------------
3,349,963
-------------
Philippines .7%
PH 199,890 a Philippine National Bank ........................................................ 2,209,992
-------------
South Korea1.9%
KR 17,000 Byucksan Development Co., Ltd. .................................................. 283,790
KR 11,227 Keumkang Co., Ltd. .............................................................. 888,999
KR 100,000 a Pacific Chemical Co., Ltd. ...................................................... 2,326,781
KR 105,500 Shinhan Bank Co., Ltd. .......................................................... 2,364,315
KR 1,000 Tae Kwang Industrial Co., Ltd. .................................................. 637,448
-------------
6,501,333
-------------
Spain 3.6%
ES 4,400 Banco Popular Espanol............................................................ 811,443
ES 75,000 Banco Santander, SA.............................................................. 3,765,458
ES 63,900 a Cristaleria Espanola, SA ........................................................ 3,582,193
ES 450,000 Iberdrola, SA.................................................................... 4,117,890
-------------
12,276,984
-------------
Sweden 1.8%
SE 35,000 Asea, AB, Series A .............................................................. 3,398,595
SE 50,000 Assidomaen, AB................................................................... 1,083,937
SE 12,400a,b Nordbanken, AB .................................................................. 213,746
SE 68,000 Volvo, AB, Series B.............................................................. 1,392,257
-------------
6,088,535
-------------
Switzerland 3.8%
CH 3,900 Ciba-Geigy, Ltd. ................................................................ 3,431,730
CH 2,200 Kuoni Reisen Holding, AG, Series B .............................................. 3,528,392
CH 3,000 Societe Generale de Surveillance Holdings, SA ................................... 5,955,787
-------------
12,915,909
-------------
Thailand .8%
TH 724,466 Industrial Finance Corp. of Thailand ............................................ 2,458,985
TH 256,100 MDX Public Co., Ltd. ............................................................ 386,336
-------------
2,845,321
-------------
Turkey .2%
US 75,000 a Turkish Growth Fund ............................................................. 778,125
-------------
United Kingdom 3.1%
GB 220,000 Argyll Group, Plc. .............................................................. 1,161,635
GB 1,455,000 a Cordiant, Plc. .................................................................. 2,044,936
GB 1,396,100 Dawson International, Plc. ...................................................... 2,341,577
GB 256,000 Govett & Co., Ltd. .............................................................. $ 918,375
GB 466,666 Lex Service, Plc. ............................................................... 2,210,416
GB 275,300 W.H. Smith Group................................................................. 1,810,623
-------------
10,487,562
-------------
United States 33.9%
US 89,000 A.G. Edwards, Inc. .............................................................. 2,124,870
US 10,000 Aflac, Inc. ..................................................................... 433,750
US 339,000 a Banner Aerospace, Inc. .......................................................... 1,949,250
US 62,000 Citicorp......................................................................... 4,169,500
US 56,500 Dayton-Hudson Corp. ............................................................. 4,237,500
US 59,300 Dean Witter Discover & Co. ...................................................... 2,787,100
US 44,800 a DSC Communications Corp. ........................................................ 1,652,000
US 58,500 Entergy Corp. ................................................................... 1,711,123
US 39,000 Federal National Mortgage Association............................................ 4,840,875
US 90,000 Ford Motor Co. .................................................................. 2,610,000
US 124,500 a Fruit of the Loom, Inc., Series A................................................ 3,034,688
US 89,000 General Growth Properties ....................................................... 1,846,750
US 60,000 General Motors Corp. ............................................................ 3,127,500
US 66,000 General Motors Corp., Series H................................................... 3,242,250
US 65,000 General Public Utilities Corp. .................................................. 2,210,000
US 34,000 Georgia-Pacific Corp. ........................................................... 2,333,250
US 70,000 Goodyear Tire & Rubber Co. ...................................................... 3,176,250
US 34,700 HGI Realty, Inc. ................................................................ 793,763
US 96,100 Highwood Properties, Inc. ....................................................... 2,714,825
US 52,800 Houghton Mifflin Co. ............................................................ 2,270,400
US 41,500 International Business Machines Corp. ........................................... 3,786,875
US 48,900 a Landstar System, Inc. ........................................................... 1,308,075
US 180,000 Limited, Inc. ................................................................... 3,127,500
US 42,000 Merrill Lynch & Co., Inc. ....................................................... 2,142,000
US 20,000 Mobil Corp. ..................................................................... 2,240,000
US 32,000 National Health Investors, Inc. ................................................. 1,060,000
US 30,400 Nike, Inc., Series B ............................................................ 2,116,600
US 157,000 a OMI Corp. ....................................................................... 1,020,500
US 50,000 a Owens Corning Fiberglas Corp. ................................................... 2,243,750
US 70,000 Peco Energy Co. ................................................................. 2,108,750
US 151,700 a Pharmacia & Upjohn, Inc. ........................................................ 5,878,375
US 150,000 Post Properties, Inc. ........................................................... 4,781,250
US 24,000 Reliastar Financial Corp. ....................................................... 1,065,000
US 80,000 Rouse Co. ....................................................................... 1,630,000
US 78,000 Sun Co., Inc..................................................................... 2,135,250
US 130,000 a Syms Corp. ...................................................................... 975,000
US 30,000 Texaco, Inc. .................................................................... 2,355,000
US 40,000 Torchmark Corp. ................................................................. 1,810,000
US 350 a Transport Holdings, Inc., Series A............................................... 14,263
US 105,000 Travelers, Inc. ................................................................. 6,601,875
US 114,200 UNUM Corp. ..................................................................... 6,281,000
US 81,000 Valero Energy Corp. ............................................................. 1,984,500
US 115,000 Weeks Corp. ..................................................................... 2,889,375
US 240,000 Wheelabrator Technologies, Inc. ................................................. 4,020,000
-------------
114,840,582
-------------
Total Common Stocks (Cost $273,259,215) ..................................... 288,035,219
-------------
Preferred Stocks 4.0%
Brazil 2.7%
BR 172,294,548 Banco Bradesco, SA, pfd. ........................................................ $ 1,506,769
BR 151,938,238 Cemig-Cia Energetica de Minas Gerais, pfd. ...................................... 3,360,947
BR 1,952,000 Coteminas Cia Tecidos Norte de Minas, pfd. ...................................... 652,708
US 75,000 Telebras-Telecomunicacoes Brasileiras, SA, pfd., ADR............................. 3,553,125
-------------
9,073,549
-------------
Greece .5%
GR 174,380 i Michaniki, SA, pfd. ............................................................. 1,739,461
-------------
Italy .7%
IT 2,203,300 Concessioni e Costruzioni Autostrade SPA, Series B, pfd. ........................ 2,411,041
-------------
Mexico .1%
US 6,500 Nacional Financiera, SA, 11.25%, cvt., pfd., 05/15/98 ........................... 214,500
-------------
Total Preferred Stocks (Cost $13,426,857) ................................. 13,438,551
-------------
Total Common Stocks and Preferred Stocks (Cost $286,686,072) .............. 301,473,770
-------------
Face
Amount
-------
Bonds 2.9%
India .7%
US 2,000,000 Essar Gujarat, Ltd., 5.50%, cvt., 08/05/98 ...................................... 1,970,000
US 200,000 b Gujarat Ambuja Cements, Ltd., 3.50%, cvt., 06/30/99 ............................. 270,000
-------------
2,240,000
-------------
Italy .6%
IT 2,950,000,000 b Softe, SA, 4.25%, cvt., 07/30/98 ................................................ 2,140,642
-------------
Mexico .2%
US 1,210,000 Empresas ICA Sociedad Controladora, SA, 5.00%, cvt., 03/15/04 ................... 647,350
-------------
Switzerland .2%
US 365,000 C.S. Holding Finance BV, 4.875%, cvt., 11/19/02 ................................. 576,700
-------------
Thailand .5%
US 3,602,000 MDX Public Co., Ltd., 4.75%, cvt., 09/17/03 ..................................... 1,719,955
-------------
United Kingdom .7%
UK 1,388,000 National Power, Plc., 6.25%, 09/23/08 ........................................... 2,290,268
-------------
Total Bonds (Cost $9,585,312).............................................. 9,614,915
-------------
Total Long Term Investments (Cost $296,271,384) ........................... 311,088,685
-------------
f Receivables From Repurchase Agreements 7.8%
US 23,195,000 Lehman Brothers, Inc., 5.70%, 01/02/96, (Maturity Value $26,547,803)
(Cost $26,531,000)
Collateral: U.S. Treasury Notes, 8.75%, 08/15/00 .............................. 26,531,000
-------------
Total Investments (Cost $322,802,384) 99.7%........................... 337,619,685
Other Assets and Liabilities, Net .3%................................. 1,135,432
-------------
Net Assets 100.0%..................................................... $338,755,117
=============
At December 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $323,658,276 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................ $ 34,721,201
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................ (20,759,792)
-------------
Net unrealized appreciation ................................................... $ 13,961,409
=============
COUNTRY LEGEND:
AU - Australia
AT - Austria
BR - Brazil
CA - Canada
CH - Switzerland
CZ - Czech Republic
DD - Germany
DK - Denmark
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
HK - Hong Kong
ID - Indonesia
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NL - Netherland
NO - Norway
NZ - New Zealand
PH - Philippines
SE - Sweden
TH - Thailand
US - United States of America
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
fFace amount for repurchase agreements is for the underlying collateral.
iSee Note 10 regarding holdings of 5% or more of voting securities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Country* Shares Templeton Global Asset Allocation Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 66.6%
Argentina 1.4%
<S> <C> <C> <C>
AR 4,050 aCorcemar Corp. ................................................................... $ 18,425
US 2,000 Telecom Argentina Stet France, SA, ADR ......................................... 95,250
US 6,900 Transportadora de Gas del Sur, SA, ADR, Class B .................................. 88,838
-------------
202,513
-------------
Australia 1.6%
AU 60,017 HIH Winterthur Insurance ........................................................ 96,353
AU 40,757 Pacific BBA, Ltd. ................................................................ 84,820
AU 2,550 Pacific Dunlop, Ltd. ............................................................. 5,970
AU 10,000 Renison Goldfields Consolidated, Ltd. ............................................ 49,798
-------------
236,941
-------------
Austria .6%
AT 1,060 a,bBohler Uddeholm, AG .............................................................. 80,864
-------------
Bermuda 1.9%
US 620 Ace, Ltd. ........................................................................ 24,645
US 5,000 PartnerRe, Ltd. .................................................................. 137,500
US 7,000 Sea Containers, Ltd., Class A .................................................... 121,625
-------------
283,770
-------------
Brazil 3.3%
US 7,500 Cia Energetica de Minas Gerais, ADR............................................... 165,904
US 7,700 Companhia Siderurgica Nacional, ADR............................................... 158,444
US 7,600 aLojas Americanas, SA, ADR ........................................................ 165,770
-------------
490,118
-------------
Canada .5%
CA 5,400 Hudsons Bay Co. .................................................................. 77,629
-------------
Chile .3%
US 1,800 Madeco Manufacturera de Cobre, SA, ADR ........................................... 48,600
-------------
Colombia 1.0%
US 3,500 bCementos Diamante, ADR............................................................ 62,846
US 5,000 a,bCementos Paz del Rio, SA, ADR .................................................... 75,000
-------------
137,846
-------------
Denmark .7%
DK 2,000 Teledanmark, AS, Series B ........................................................ 109,056
-------------
Finland 1.4%
FI 10,000 Enso Gutzeit Oy................................................................... 66,619
FI 750 Metsa Serla Oy.................................................................... 23,087
FI 2,400 Outokumpu Oy...................................................................... 38,042
FI 4,200 Repola Oy......................................................................... 79,116
-------------
206,864
-------------
France 7.0%
FR 3,800 AXA, SA .......................................................................... 256,075
FR 4,000 Banque Nationale de Paris ........................................................ 180,437
FR 9,700 Rhone-Poulenc, SA, Class A ....................................................... 207,786
FR 805 Societe Elf Aquitane, SA.......................................................... 59,311
FR 2,500 Total, SA, Class B ............................................................... 168,726
FR 1,500 aUnion du Credit Bail Immobilier Unibail .......................................... 154,993
-------------
1,027,328
-------------
Germany .8%
DD 360 Volkswagen, AG ................................................................... $ 120,749
-------------
Greece .9%
GR 2,300 Alpha Credit Bank ................................................................ 132,903
-------------
Hong Kong 5.1%
HK 32,000 Cheung Kong Holdings, Ltd. ....................................................... 194,918
HK 111,000 Grand Hotel Holdings, Ltd. ....................................................... 41,271
HK 1,013,600 Hon Kwok Land Investment Co., Ltd. ............................................... 291,660
HK 244,000 Shun Tak Holdings ................................................................ 171,975
HK 164,000 Yue Yuen Industrial (Holdings), Ltd. ............................................. 43,479
-------------
743,303
-------------
Hungary .7%
US 12,107 a,bMOL Magyar Olay - Es Gazipari RT.................................................. 98,369
-------------
Indonesia .6%
US 19,300 aAsia Pacific Resources International, Class A .................................... 91,675
-------------
Italy .2%
IT 10,000 STET - Societe Finanziaria Telefonica ........................................... 28,232
-------------
Japan 1.0%
JP 12,000 Daito Trust Construction Co., Ltd. ............................................... 141,744
-------------
Mexico .9%
MX 96,200 aCifra SA, Series B ............................................................... 100,003
US 3,000 Empresas ICA Sociedad Controladora, SA, ADR....................................... 30,750
-------------
130,753
-------------
Netherlands .9%
NL 2,008 International Nederlanden Group................................................... 134,360
-------------
New Zealand .4%
NZ 51,300 Ceramico Corp., Ltd. ............................................................. 60,032
-------------
Norway .9%
NO 7,800 Elkem, AS ........................................................................ 88,663
NO 1,700 Hafslund Nycomed, SA, Class B .................................................... 43,076
-------------
131,739
-------------
Spain 2.3%
ES 9,500 Dragados y Construcciones, SA..................................................... 124,918
ES 20,500 Iberdrola, SA .................................................................... 187,593
ES 1,750 Telefonica de Espana, SA ........................................................ 24,237
-------------
336,748
-------------
Sweden 5.0%
SE 2,300 Electrolux, AB, Series B ......................................................... 94,355
SE 5,000 Marieberg Tidnings, AB, Class A .................................................. 115,921
SE 18,000 a,bNordbanken, AB.................................................................... 310,277
SE 6,800 Skandia Foersaekrings, AB ........................................................ 183,757
SE 1,650 Svenska Handelsbanken, Class A ................................................... 34,280
-------------
738,590
-------------
Switzerland 2.8%
CH 80 Ciba-Geigy, AG ................................................................... $ 70,394
CH 70 Kuoni Reisen Holding, AG, Series B ............................................... 112,267
CH 115 Societe Generale de Surveillance Holdings, Ltd. .................................. 228,305
-------------
410,966
-------------
Thailand 1.0%
TH 30,000 Charoen Pokphand Feedmill Public Co., Ltd., fgn. ................................. 146,487
-------------
Turkey .5%
US 7,500 aTurkish Growth Fund............................................................... 77,813
-------------
United Kingdom 1.4%
GB 45,000 aCordiant Plc. .................................................................... 63,245
GB 13,500 Dawson International, Plc. ....................................................... 22,643
GB 21,666 Lex Service, Plc. ................................................................ 102,623
GB 2,200 W.H. Smith Group ................................................................. 14,469
-------------
202,980
-------------
United States 21.5%
US 2,860 AK Steel Holding Corp. ........................................................... 97,955
US 5,900 Beacon Properties Corp. .......................................................... 135,700
US 6,800 Carr Realty Corp. ................................................................ 165,750
US 600 Chemical Banking Corp. ........................................................... 35,250
US 2,400 Citicorp ......................................................................... 161,400
US 2,700 Dayton-Hudson Corp. .............................................................. 202,500
US 6,950 aFruit of the Loom, Inc., Class A.................................................. 169,406
US 2,700 General Motors Corp. ............................................................. 140,738
US 3,100 General Motors Corp., Class H..................................................... 152,288
US 800 General Public Utilities Corp. ................................................... 27,200
US 1,500 Georgia-Pacific Corp. ............................................................ 102,938
US 3,600 Goodyear Tire & Rubber Co. ....................................................... 163,350
US 6,000 HGI Realty, Inc. ................................................................. 137,250
US 4,300 Highwood Properties, Inc., REIT................................................... 121,475
US 1,200 Houghton Mifflin Co. ............................................................. 51,600
US 1,500 International Business Machines Corp. ............................................ 136,875
US 3,000 aLandstar System, Inc. ............................................................ 80,250
US 3,900 Limited, Inc. .................................................................... 67,763
US 1,800 Peco Energy Co. .................................................................. 54,225
US 1,000 aPharmacia & Upjohn, Inc. ......................................................... 38,750
US 4,400 Post Properties, Inc. ............................................................ 140,250
US 3,200 Summit Properties, Inc., REIT .................................................... 63,600
US 1,200 Sun Co., Inc. .................................................................... 32,850
US 1,400 Texas Utilties Electric Co. ...................................................... 57,575
US 4,000 UNUM Corp. ....................................................................... 220,000
US 2,400 Valero Energy Corp. .............................................................. 58,800
US 7,500 Weeks Corp. ...................................................................... 188,438
US 10,000 Wheelabrator Technologies, Inc. .................................................. 167,500
-------------
3,171,676
-------------
Total Common Stocks (Cost $9,511,937)....................................... 9,800,648
-------------
Preferred Stocks .3%
Greece
GR 3,890 Michaniki, SA, pfd. (Cost $41,441)................................................ 38,803
-------------
Total Common Stocks and Preferred Stocks (Cost $9,553,378)....................... 9,839,451
-------------
Bonds 28.5%
Argentina 1.1%
US 65,000 Bocon Previsionales II, FRN, 5.063%, 04/01/01 .................................... $ 63,375
US 100,000 Bridas Corp., Yankee, 12.50%, 11/18/99 ........................................... 99,750
-------------
163,125
-------------
Australia 2.2%
AU 205,000 Queensland Treasury Corp., 8.00%, 08/14/01 ....................................... 152,447
AU 155,000 Queensland Treasury Corp., 8.00%, 05/14/03 ....................................... 113,775
AU 75,000 Treasury Corp. of Victoria, 8.25%, 10/15/03 ...................................... 55,666
-------------
321,888
-------------
Brazil 2.2%
US 150,000 bCentrais Electricas Brasileiras, SA, 10.00%, 10/30/98 ............................ 151,125
US 199,500 Government of Brazil, FRN, Series A, 6.688%, 01/01/01 ............................ 171,819
-------------
322,944
-------------
Canada .8%
CA 60,000 Government of Canada, 10.50%, 03/01/01 ........................................... 51,282
CA 80,000 Government of Canada, 9.00%, 12/01/04 ............................................ 66,015
-------------
117,297
-------------
Czech Republic .6%
CS 2,500,000 bSkofin, 11.625%, 02/09/98 ........................................................ 94,995
-------------
Denmark .8%
DK 235,000 Government of Denmark, 8.00%, 05/15/03 ........................................... 44,959
DK 245,000 Kingdom of Denmark, 7.00%, 12/15/04 .............................................. 43,914
DK 120,000 Kingdom of Denmark, 8.00%, 03/15/06 .............................................. 22,772
-------------
111,645
-------------
Ecuador 1.3%
US 561,817 Republic of Ecuador, FRN, 6.813%, 02/27/15 ....................................... 188,911
-------------
France 1.5%
FR 470,000 Government of France, 8.125%, 05/25/99 ........................................... 103,315
FR 280,000 Government of France, 8.50%, 03/28/00 ............................................ 62,884
FR 264,000 Government of France, 9.50%, 01/25/01 ............................................ 62,078
-------------
228,277
-------------
Germany 3.1%
DD 100,000 Deutsche Bundespost, 7.75%, 10/01/04.............................................. 76,615
DD 150,000 Federal Republic of Germany, 8.00%, 07/22/02 ..................................... 118,071
DD 85,000 Federal Republic of Germany, 7.125%, 12/20/02 .................................... 64,157
DD 90,000 Federal Republic of Germany, 6.50%, 07/15/03 ..................................... 65,370
DD 80,000 Federal Republic of Germany, Bundes, 8.25%, 09/20/01 ............................. 63,657
DD 85,000 Federal Republic of Germany, Bundesobl, 6.625%, 01/20/98 ......................... 62,444
-------------
450,314
-------------
India 1.0%
US 150,000 Essar Gujarat, Ltd., 5.50%, cvt., 08/05/98 ....................................... 147,750
-------------
Italy 1.2%
IT 85,000,000 Buoni Poliennali del Tes, 8.50%, 08/01/99 ........................................ 50,575
IT 55,000,000 Buoni Poliennali del Tes, 10.50%, 09/01/05 ....................................... 34,335
IT 140,000,000 Government of Italy, 10.50%, 07/15/00 ............................................ 88,853
-------------
173,763
-------------
Mexico .8%
US 130,000 Bancomer, SA, 8.00%, 07/07/98 .................................................... $ 123,825
-------------
New Zealand .7%
NZ 140,000 Government of New Zealand, 10.00%, 03/15/02 ...................................... 103,513
-------------
Philippines .9%
US 180,000 Philippines Pars, Series B, FRN, 5.75%, 12/01/17 ................................. 134,100
-------------
Poland .8%
US 180,000 Government of Poland, FRN, 3.75%, 10/27/14 ....................................... 116,550
-------------
Spain 1.4%
ES 9,300,000 Government of Spain, 12.25%, 03/25/00 ............................................ 84,267
ES 8,100,000 Government of Spain, 11.30%, 01/15/02 ............................................ 71,952
ES 5,900,000 Government of Spain, 10.00%, 02/28/05 ............................................ 49,345
-------------
205,564
-------------
Sweden .8%
SE 700,000 Kingdom of Sweden, 10.25%, 05/05/03 .............................................. 116,650
-------------
Trinidad and Tobago 1.2%
US 170,000 bSei Holdings IX, Inc., 11.00%, 11/30/00 .......................................... 174,250
-------------
United Kingdom .9%
GB 25,000 United Kingdom, 9.50%, 01/15/99 .................................................. 41,894
GB 60,000 United Kingdom, 6.75%, 11/26/04 .................................................. 89,219
-------------
131,113
-------------
United States 5.2%
US 225,000 U.S. Treasury Notes, 8.00%, 08/15/99 ............................................. 244,471
US 229,000 U.S. Treasury Notes, 7.50%, 11/15/01 ............................................. 252,223
US 150,000 U.S. Treasury Notes, 5.75%, 08/15/03 ............................................. 151,805
US 100,000 U.S. Treasury Bonds, 7.625%, 02/15/25 ............................................ 122,281
-------------
770,780
-------------
Total Bonds (Cost $4,101,013) .............................................. 4,197,254
-------------
Total Long Term Investments (Cost $13,654,391).............................. 14,036,705
-------------
fReceivables From Repurchase Agreements 3.6%
US 500,000 Lehman Brothers, Inc., 5.70%, 01/02/96, (Maturity Value $532,337) (Cost $532,000)
Collateral: U.S. Treasury Notes, 7.125%, 02/29/00 ............................... 532,000
-------------
Total Investments (Cost $14,186,391) 99.0% ............................ 14,568,705
Other Assets and Liabilities, Net 1.0%................................. 159,998
-------------
Net Assets 100.0% ..................................................... $14,728,703
=============
At December 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $14,186,391 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................. $ 831,067
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................. (448,753)
-------------
Net unrealized appreciation..................................................... $ 382,314
=============
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
CA - Canada
CH - Switzerland
DD - Germany
DK - Denmark
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
HK - Hong Kong
IT - Italy
JP - Japan
MX - Mexico
NL - Netherland
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States of America
PORTFOLIO ABBREVIATIONS:
FRN - Floating Rate Notes
REIT - Real Estate Investment Trust
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bSee Note 8 regarding Rule 144A securities.
fFace amount for repurchase agreements is for the underlying collateral.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, December 31, 1995
Value
Shares Small Cap Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 62.8%
<S> <C> <C>
aCommercial Services 1.9%
100 Corestaff, Inc. ................................................................................. $ 3,650
6,000 Robert Half International, Inc. ................................................................. 251,250
-------------
254,900
-------------
Consumer Durables 1.8%
5,600 Callaway Golf Co. ............................................................................... 126,700
6,500 aSouthern Energy Homes, Inc....................................................................... 113,750
-------------
240,450
-------------
aConsumer Non-Durables 1.6%
150 Boston Beer Co., Inc., Class A................................................................... 3,563
100 Pete's Brewing Co. .............................................................................. 1,400
5,000 Tommy Hilfiger Corp. ............................................................................ 211,875
-------------
216,838
-------------
aConsumer Services 1.5%
12,300 Aztar Corp. ..................................................................................... 98,400
6,000 Red Lion Hotels, Inc. ........................................................................... 105,000
-------------
203,400
-------------
Electronic Technology 9.0%
3,100 aAspect Telecommunications Corp. ................................................................. 103,850
2,000 aBay Networks, Inc. .............................................................................. 82,250
4,900 aDendrite International, Inc. .................................................................... 88,200
2,400 aKomag, Inc. ..................................................................................... 110,700
5,000 aLexmark International Group, Inc., Class A....................................................... 91,250
3,400 Logicon, Inc. ................................................................................... 93,500
1,300 aNetwork Appliance, Inc. ......................................................................... 52,000
450 aObjective Systems Integrators, Inc. ............................................................. 24,638
3,000 aSilicon Graphics, Inc. .......................................................................... 82,500
100 aSync Research, Inc. ............................................................................. 4,525
7,000 aTekelec.......................................................................................... 73,500
7,500 aTracor, Inc. .................................................................................... 108,750
9,400 aVerifone, Inc. .................................................................................. 269,075
700 aWestell Technology, Inc. ........................................................................ 17,588
-------------
1,202,326
-------------
Financial Services 6.0%
8,200 aAmericredit Corp. ............................................................................... 111,725
100 aInvestors Financial Service Corp. ............................................................... 2,075
4,600 aLaSalle Re Holdings, Ltd. ...................................................................... 105,225
5,300 Prudential Reinsurance Holdings, Inc. ........................................................... 123,888
10,200 aRisk Capital Holdings, Inc. ..................................................................... 238,425
4,900 aSilicon Valley Bancshares........................................................................ 117,600
2,100 The PMI Group, Inc. ............................................................................. 95,025
-------------
793,963
-------------
aHealth Services 4.8%
5,600 Access Health, Inc. ............................................................................. 247,800
10,800 Advocat, Inc. ................................................................................... 120,150
100 Cycare Systems, Inc. ............................................................................ 2,563
500 IDX Systems Corp. ............................................................................... 17,375
1,800 Mecon, Inc. ..................................................................................... 28,575
7,000 Sierra Health Services, Inc. ................................................................... 222,250
-------------
638,713
-------------
aHealth Technology 3.2%
7,900 Matrix Pharmaceutical, Inc. ..................................................................... $ 148,125
4,200 Medisense, Inc. ................................................................................. 132,825
10,600 Noven Pharmaceuticals, Inc. ..................................................................... 119,250
800 Pharmacopeia, Inc. .............................................................................. 19,400
-------------
419,600
-------------
Industrial Services 2.6%
10,000 Landauer, Inc. .................................................................................. 217,500
7,300 aWaters Corp. .................................................................................... 133,221
-------------
350,721
-------------
Producer Manufacturing 2.5%
14,400 Easco, Inc. ..................................................................................... 124,200
4,600 aGentex Corp. .................................................................................... 101,200
3,000 Roper Industries, Inc. .......................................................................... 110,250
-------------
335,650
-------------
Real Estate 9.0%
16,000 DeBartolo Realty Corp. .......................................................................... 208,000
10,300 Equity Inns, Inc. ............................................................................... 118,450
7,000 Equity Residential Properties Trust ............................................................. 214,375
10,000 Mills Corp. ..................................................................................... 170,000
4,900 Omega Healthcare Investors, Inc. ................................................................ 130,463
11,000 Storage Trust Realty............................................................................. 250,250
9,000 Winston Hotels, Inc. ............................................................................ 106,875
-------------
1,198,413
-------------
aRetail 1.6%
6,000 Borders Group, Inc. ............................................................................. 111,000
5,700 Williams-Sonoma, Inc. ........................................................................... 105,450
-------------
216,450
-------------
aSemiconductors 5.7%
1,400 Advanced Semiconductor Materials................................................................. 68,950
1,800 Altera Corp. .................................................................................... 89,550
3,100 Electro Scientific Industries, Inc. ............................................................. 90,675
3,400 Lattice Semiconductor Corp. ..................................................................... 110,925
9,000 Micro Linear Corp. .............................................................................. 92,250
4,500 Silicon Valley Group, Inc. ...................................................................... 113,625
3,100 Uniphase Corp. .................................................................................. 110,825
2,000 Zilog, Inc. ..................................................................................... 73,250
-------------
750,050
-------------
aTechnology Services 9.0%
4,600 Acclaim Entertainment, Inc. ..................................................................... 56,925
100 Arbor Software Corp. ............................................................................ 4,725
1,500 Business Objects SA, ADR......................................................................... 72,563
300 Fractal Design Corp. ............................................................................ 4,200
3,400 Fulcrum Technology, Inc. ........................................................................ 110,500
2,800 Integrated Systems, Inc. ........................................................................ 109,200
5,000 Mapinfo Corp. ................................................................................... 100,000
4,300 Mercury Interactive Corp. ....................................................................... 78,475
6,000 Software Artistry, Inc. ......................................................................... 90,000
4,000 Sterling Software, Inc. ......................................................................... 249,500
aTechnology Services (cont.)
4,000 Symantec Corp. .................................................................................. $ 93,000
20,000 Systemsoft Corp. ................................................................................ 225,000
-------------
1,194,088
-------------
aTransportation 1.8%
12,400 Atlantic Coast Airlines.......................................................................... 127,100
4,200 Landstar System, Inc. ........................................................................... 112,350
-------------
239,450
-------------
aUtilities/Communications .8%
3,200 Silver King Communications....................................................................... 111,200
-------------
Total Long Term Investments (Cost $8,204,391).............................................. 8,366,212
-------------
Face
Amount
-------
fReceivables From Repurchase Agreements 36.6%
$2,485,000 Chase Securities, Inc., 5.55%, 01/02/96, (Maturity Value $2,431,499)
Collateral: U.S. Treasury Notes, 4.75%, 09/30/98 ............................................... 2,430,000
2,280,000 SBC Capital Markets, Inc., 5.80%, 01/02/96, (Maturity Value $2,431,566)
Collateral: U.S. Treasury Notes, 7.75%, 11/30/99 ............................................... 2,430,000
-------------
Total Receivables From Repurchase Agreements (Cost $4,860,000)............................. 4,860,000
-------------
Total Investments (Cost $13,064,391) 99.4%............................................ 13,226,212
Other Assets and Liabilities, Net .6%................................................. 75,266
-------------
Net Assets 100.0%..................................................................... $13,301,478
=============
At December 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $13,064,391 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 483,392
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (321,571)
-------------
Net unrealized appreciation ................................................................... $ 161,821
=============
aNon-income producing.
fFace amount for repurchase agreements is for the underlying collateral.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
Financial Statements
Statements of Assets and Liabilities
December 31, 1995
Investment Grade
Adjustable U.S. Global High Intermediate Precious
Government Fund Income Fund Income Fund Bond Fund Metals Fund
----------- ---------- ---------- ---------- ----------
Assets:
<S> <C> <C> <C> <C> <C>
Investments in securities:
At identified cost................................. $185,530,165 $229,788,287 $340,629,154 $135,244,443 $ 90,809,193
=========== =========== =========== =========== ===========
At value........................................... 184,530,142 233,133,460 345,570,920 138,253,325 95,146,867
Receivables from repurchase agreements, at value
and cost........................................... 3,603,866 2,285,000 8,123,649 20,437,687 10,155,034
Cash................................................ -- 298 1,470 -- 23,030
Foreign currencies (Cost $1,303 and $122,
respectively)...................................... -- 1,307 122 -- --
Receivables:
Dividends and interest............................. 1,602,982 8,097,073 7,548,883 2,350,752 111,885
Investment securities sold......................... 1,471,306 -- -- 5,000,000 --
Capital shares sold................................ 157,225 93,107 372,812 62,989 54,726
Unrealized gain on forward foreign currency contracts
(Note 2)........................................... -- 54,546 -- -- --
----------- ----------- ----------- ----------- -----------
Total assets.................................. 191,365,521 243,664,791 361,617,856 166,104,753 105,491,542
----------- ----------- ----------- ----------- -----------
Liabilities:
Payables:
Capital shares repurchased......................... 158,884 287,447 530,962 109,221 305,452
Management fees.................................... 91,490 110,771 158,789 80,873 55,350
Accrued expenses and other liabilities.............. 15,550 72,489 24,559 11,665 21,926
Bank Overdraft...................................... 1,000,000 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total liabilities............................. 1,265,924 470,707 714,310 201,759 382,728
----------- ----------- ----------- ----------- -----------
Net assets, at value................................. $190,099,597 $243,194,084 $360,903,546 $165,902,994 $105,108,814
=========== =========== =========== =========== ===========
Net assets consist of:
Undistributed net investment income................. $ 13,329,454 $ 14,271,863 $ 31,020,827 $ 8,616,148 $ 1,615,202
Net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies.................. (1,000,023) 3,350,408 4,939,918 3,008,882 4,337,465
Accumulated net realized gain (loss) from investments
and foreign currency transactions.................. (12,876,504) (5,678,332) 1,641,755 (426,054) 1,438,861
Capital shares...................................... 176,653 180,710 264,211 118,062 74,677
Additional paid-in capital.......................... 190,470,017 231,069,435 323,036,835 154,585,956 97,642,609
----------- ----------- ----------- ----------- -----------
Net assets, at value................................. $190,099,597 $243,194,084 $360,903,546 $165,902,994 $105,108,814
=========== =========== =========== =========== ===========
Shares outstanding................................... 17,665,320 18,071,046 26,421,108 11,806,190 7,467,691
=========== =========== =========== =========== ===========
Net asset value per share............................ $10.76 $13.46 $13.66 $14.05 $14.08
=========== =========== =========== =========== ===========
Representative computation of net asset value of
Adjustable U.S. Government Fund:
Net asset value, offering and redemption price
per share ($190,099,597 O 17,665,320)............. $10.76
-----------
-----------
Real Estate U.S. Government Zero Coupon Zero Coupon Zero Coupon
Securities Fund Securities Fund Fund - 2000 Fund - 2005 Fund - 2010
----------- ----------- ---------- --------- ---------
Assets:
<S> <C> <C> <C> <C> <C>
Investments in securities:
At identified cost.................................. $177,655,433 $599,969,692 $123,931,184 $70,001,446 $66,360,401
=========== =========== =========== =========== ===========
At value............................................ 199,741,315 625,953,212 136,226,489 82,043,094 82,697,761
Receivables from repurchase agreements,
at value and cost................................... 11,261,074 17,354,279 1,119,419 1,135,090 1,143,789
Cash................................................. -- 55,869 -- -- --
Receivables:
Dividends and interest.............................. 1,797,486 4,691,119 -- -- --
Investment securities sold.......................... 1,489,590 43,789 -- -- --
Capital shares sold................................. 246,956 296,485 192,058 127,163 1,840,522
----------- ----------- ----------- ----------- -----------
Total assets.................................... 214,536,421 648,394,753 137,537,966 83,305,347 85,682,072
----------- ----------- ----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased on a when-issued
basis (Note 1)..................................... -- 4,447,304 -- -- --
Capital shares repurchased.......................... 293,105 478,573 131,996 52,147 20,249
Management fees..................................... 98,775 265,305 39,955 24,953 22,771
Accrued expenses and other liabilities............... 671,190 38,100 9,294 6,544 6,260
----------- ----------- ----------- ----------- -----------
Total liabilities............................... 1,063,070 5,229,282 181,245 83,644 49,280
----------- ----------- ----------- ----------- -----------
Net assets, at value.................................. $213,473,351 $643,165,471 $137,356,721 $83,221,703 $85,632,792
=========== =========== =========== =========== ===========
Net assets consist of:
Undistributed net investment income.................. $ 9,334,962 $ 41,588,096 $ 7,341,344 $ 4,217,789 $ 4,091,968
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies .................. 22,085,882 25,983,520 12,295,305 12,041,648 16,337,360
Accumulated net realized gain (loss) from investments
and foreign currency transactions................... (434,944) (15,709,249) 72,186 (6,924) 920,917
Capital shares....................................... 122,666 459,446 87,301 47,884 47,472
Additional paid-in capital........................... 182,364,785 590,843,658 117,560,585 66,921,306 64,235,075
----------- ----------- ----------- ----------- -----------
Net assets, at value.................................. $213,473,351 $643,165,471 $137,356,721 $83,221,703 $85,632,792
=========== =========== =========== =========== ===========
Shares outstanding.................................... 12,266,580 45,944,644 8,730,149 4,788,425 4,747,236
=========== =========== =========== =========== ===========
Net asset value per share............................. $17.40 $14.00 $15.73 $17.38 $18.04
=========== =========== =========== =========== ===========
Templeton Templeton
Money Growth and Income International Pacific
Market Fund Income Fund Securities Fund Equity Fund Growth Fund
---------- ---------- ----------- ---------- ----------
Assets:
<S> <C> <C> <C> <C> <C>
Investments in securities:
At identified cost.................................. $382,971,764 $703,432,510 $1,042,139,228 $771,812,458 $315,105,380
=========== =========== =========== =========== ===========
At value............................................ 382,971,764 803,463,009 1,102,919,055 783,497,332 318,563,847
Receivables from repurchase agreements,
at value and cost................................... 47,360,000 86,708,329 148,347,692 58,064,000 13,530,000
Cash................................................. 5,750 -- -- 316 896
Foreign currencies at value and cost................. -- -- -- -- 49,076
Receivables:
Dividends and interest.............................. 1,001,021 2,742,968 16,385,398 3,971,832 1,036,078
Investment securities sold.......................... -- 53,821 1,434,934 7,601,328 1,501,132
Capital shares sold................................. 1,896,198 917,780 1,659,211 797,480 201,511
----------- ----------- ----------- ----------- -----------
Total assets.................................... 433,234,733 893,885,907 1,270,746,290 853,932,288 334,882,540
----------- ----------- ----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased..................... -- 3,239,430 2,534,435 1,525,269 449,701
Capital shares repurchased.......................... 3,540,368 763,136 1,051,783 772,824 2,121,479
Management fees..................................... 137,328 354,329 498,814 596,192 256,634
Accrued expenses and other liabilities............... 10,184 41,544 123,756 224,868 118,845
Foreign currency overdraft, at value and cost........ -- -- -- 696,513 --
----------- ----------- ----------- ----------- -----------
Total liabilities............................... 3,687,880 4,398,439 4,208,788 3,815,666 2,946,659
----------- ----------- ----------- ----------- -----------
Net assets, at value.................................. $429,546,853 $889,487,468 $1,266,537,502 $850,116,622 $331,935,881
=========== =========== =========== =========== ===========
Net assets consist of:
Undistributed net investment income.................. $-- $ 22,239,184 $ 91,003,300 $ 23,389,762 $ 7,402,137
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies.................... -- 100,030,499 60,782,428 11,684,874 3,458,467
Accumulated net realized gain (loss) from investments
and foreign currency transactions.................... -- 78,563,468 (15,464,708) 30,936,442 5,700,749
Capital shares....................................... 4,295,469 518,982 769,130 638,010 238,701
Additional paid-in capital........................... 425,251,384 688,135,335 1,129,447,352 783,467,534 315,135,827
----------- ----------- ----------- ----------- -----------
Net assets, at value.................................. $429,546,853 $889,487,468 $1,266,537,502 $850,116,622 $331,935,881
=========== =========== =========== =========== ===========
Shares outstanding.................................... 429,546,853 51,898,238 76,913,014 63,801,042 23,870,100
=========== =========== =========== =========== ===========
Net asset value per share............................. $1.00 $17.14 $16.47 $13.32 $13.91
=========== =========== =========== =========== ===========
Templeton
Developing
Rising Utility Markets
Dividends Fund Equity Fund Equity Fund
----------- ------------ ----------
Assets:
<S> <C> <C> <C>
Investments in securities:
At identified cost............................................................ $351,208,931 $1,188,913,592 $168,156,432
=========== =========== ===========
At value...................................................................... 429,622,060 1,295,438,421 158,411,190
Receivables from repurchase agreements, at value and cost...................... 34,330,548 115,828,343 --
Cash........................................................................... -- -- 122
Foreign currencies (Cost $4,921 and $125,596, respectively).................... -- 5,153 77,325
Receivables:
Dividends and interest........................................................ 1,268,556 4,215,348 189,961
Investment securities sold.................................................... -- 9,042,274 --
Capital shares sold........................................................... 270,485 681,474 111,042
----------- ----------- -----------
Total assets.............................................................. 465,491,649 1,425,211,013 158,789,640
----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased............................................... 1,578,500 58,888 410,967
Capital shares repurchased.................................................... 347,455 1,061,870 37,913
Management fees............................................................... 287,880 554,419 164,562
Accrued expenses and other liabilities......................................... 24,537 89,636 92,356
----------- ----------- -----------
Total liabilities......................................................... 2,238,372 1,764,813 705,798
----------- ----------- -----------
Net assets, at value............................................................ $463,253,277 $1,423,446,200 $158,083,842
=========== =========== ===========
Net assets consist of:
Undistributed net investment income............................................ $ 10,367,057 $ 65,687,973 $ 2,084,657
Net unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies...................... 78,413,129 106,525,380 (9,794,161)
Accumulated net realized gain (loss) from investments and foreign currency
transactions.................................................................. (14,812,379) (7,668,462) 3,782,798
Capital shares................................................................. 365,886 795,337 161,582
Additional paid-in capital..................................................... 388,919,584 1,258,105,972 161,848,966
----------- ----------- -----------
Net assets, at value............................................................ $463,253,277 $1,423,446,200 $158,083,842
=========== =========== ===========
Shares outstanding.............................................................. 36,588,561 79,533,668 16,158,219
=========== =========== ===========
Net asset value per share....................................................... $12.66 $17.90 $9.78
=========== =========== ===========
Templeton Templeton
Global Global Asset Small
Growth Fund Allocation Fund Cap Fund
----------- ---------- ---------
Assets:
<S> <C> <C> <C>
Investments in securities:
At identified cost............................................................ $296,271,384 $13,654,391 $ 8,204,391
=========== =========== ===========
At value...................................................................... 311,088,685 14,036,705 8,366,212
Receivables from repurchase agreements, at value and cost...................... 26,531,000 532,000 4,860,000
Cash........................................................................... 281,528 18,270 5,955
Receivables:
Dividends and interest........................................................ 781,164 145,898 28,226
Investment securities sold.................................................... -- -- 49,723
Capital shares sold........................................................... 602,234 28,881 732,412
----------- ----------- -----------
Total assets.............................................................. 339,284,611 14,761,754 14,042,528
----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased............................................... 38,745 -- 732,626
Capital shares repurchased.................................................... 75,551 18,860 41
Management fees............................................................... 242,583 8,329 6,540
Accrued expenses and other liabilities......................................... 172,615 5,720 1,843
Unrealized loss on forward foreign currency contracts (Note 2)................. -- 142 --
----------- ----------- ----------
Total liabilities......................................................... 529,494 33,051 741,050
----------- ----------- ----------
Net assets, at value............................................................ $338,755,117 $14,728,703 $13,301,478
=========== =========== ==========
Net assets consist of:
Undistributed net investment income............................................ $ 5,816,563 $ (6,078) $ 33,213
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies...................... 14,817,301 382,161 161,821
Accumulated net realized gain from investments and foreign currency transactions 7,703,876 23,965 2,754
Capital shares................................................................. 288,403 14,000 12,988
Additional paid-in capital..................................................... 310,128,974 14,314,655 13,090,702
----------- ----------- ----------
Net assets, at value............................................................ $338,755,117 $14,728,703 $13,301,478
=========== =========== ==========
Shares outstanding.............................................................. 28,840,285 1,399,950 1,298,788
=========== =========== ==========
Net asset value per share....................................................... $11.75 $10.52 $10.24
=========== =========== ==========
The accompanying notes are an integral part of these financial statements.
Statements of Operations
for the year ended December 31, 1995
Adjustable U.S. Investment Grade
Government Global High Intermediate Precious Real Estate U.S. Government
Fund Income Fund Income Fund Bond Fund Metals FundSecurities FundSecurities Fund
---------- --------- --------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest1 (Note 1).......... $14,555,303 $19,848,990 $32,351,436 $ 9,597,783 $ 762,529 $ 700,240 $44,865,883
Dividends2.................. -- 416,425 467,762 -- 1,617,923 9,803,240 --
---------- --------- --------- ----------- -------- ---------- -----------
Total income........... 14,555,303 20,265,415 32,819,198 9,597,783 2,380,452 10,503,480 44,865,883
---------- --------- --------- ----------- -------- ---------- -----------
Expenses:
Management fees (Note 6).... 1,158,160 1,354,128 1,700,257 933,279 702,034 1,110,433 3,038,772
Reports to shareholders..... 27,580 30,608 38,845 19,868 13,748 23,663 78,324
Custodian fees.............. 18,013 157,640 33,497 14,361 39,281 17,633 54,597
Professional fees........... 7,660 7,594 11,513 6,657 5,111 7,688 20,323
Trustees' fees and
expenses................... 1,835 1,954 2,707 1,395 996 1,692 5,323
Other....................... 10,868 26,379 10,895 5,869 3,943 6,229 14,638
---------- --------- --------- ----------- -------- ---------- -----------
Total expenses......... 1,224,116 1,578,303 1,797,714 981,429 765,113 1,167,338 3,211,977
---------- --------- --------- ----------- -------- ---------- -----------
Net investment
income............... 13,331,187 18,687,112 31,021,484 8,616,354 1,615,339 9,336,142 41,653,906
---------- --------- --------- ----------- -------- ---------- -----------
Realized and unrealized
gain (loss) from investments
and foreign currency:
Net realized gain (loss)
from:
Investments.............. (1,954,776) (6,262,162) 1,772,462 656,832 1,460,667 1,068,152 (891,143)
Foreign currency
transactions............ -- (1,733,742) (1,743) -- (21,806) -- --
Net unrealized appreciation
(depreciation) on:
Investments.............. 7,421,084 22,691,427 22,887,137 6,077,509 (1,361,684) 21,851,218 68,885,320
Translation of assets and
liabilities denominated
in foreign currencies....... -- 172,783 (2,558) -- (46) -- --
---------- --------- --------- ----------- -------- ---------- -----------
Net realized and unrealized
gain from investments
and foreign currencies...... 5,466,308 14,868,306 24,655,298 6,734,341 77,131 22,919,370 67,994,177
---------- --------- --------- ----------- -------- ---------- -----------
Net increase in net assets
resulting from operations... $18,797,495 $33,555,418 $55,676,782 $15,350,695 $1,692,470 $32,255,512 $109,648,083
========== ========= ========= =========== ======== ========== ===========
1Net of foreign taxes withheld of $111,665 in the Global Income Fund.
2Net of foreign taxes withheld of $115,162 in the Precious Metals Fund.
Income Templeton
Zero Coupon Zero Coupon Zero Coupon Money Growth and Securities International
Fund - 2000 Fund - 2005 Fund - 2010 Market Fund Income Fund Fund Equity Fund
--------- --------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)............ $ 7,816,073 $ 4,490,589 $ 4,346,790 $27,194,063 $ 3,424,008 $ 71,942,901 $ 9,917,590
Dividends3................... -- -- -- -- 22,294,080 24,849,576 21,045,404
--------- --------- --------- --------- ---------- ---------- ---------
Total income............ 7,816,073 4,490,589 4,346,790 27,194,063 25,718,088 96,792,477 30,962,994
--------- --------- --------- --------- ---------- ---------- ---------
Expenses:
Management fees (Note 6)..... 721,943 425,696 398,959 2,295,252 3,283,721 5,335,780 6,748,353
Reports to shareholders...... 14,333 8,386 7,466 54,252 95,894 137,868 97,315
Custodian fees............... 10,733 6,852 5,747 41,584 57,902 232,248 580,482
Professional fees............ 5,204 3,603 3,399 15,627 21,991 36,598 28,745
Trustees' fees and expenses.. 1,007 568 528 4,068 5,581 9,623 7,020
Other........................ 4,248 3,436 3,869 14,280 18,765 30,469 42,168
Expenses waived by manager
(Note 6).................... (282,739) (175,893) (165,315) (594,309) -- -- --
--------- --------- --------- --------- ---------- ---------- ---------
Total expenses.......... 474,729 272,648 254,653 1,830,754 3,483,854 5,782,586 7,504,083
--------- --------- --------- --------- ---------- ---------- ---------
Net investment
income................ 7,341,344 4,217,941 4,092,137 25,363,309 22,234,234 91,009,891 23,458,911
--------- --------- --------- --------- ---------- ---------- ---------
Realized and unrealized
gain (loss) from investments
and foreign currency:
Net realized gain (loss) from:
Investments................ 72,202 27,440 1,268,380 289 79,239,369 (15,548,410) 30,936,442
Foreign currency
transactions.............. -- -- -- -- (54) 83,702 48,513
Net unrealized
appreciation on:
Investments............... 14,631,144 14,450,466 17,390,706 -- 91,264,881 151,742,992 26,538,914
Translation of assets and
liabilities denominated in
foreign currencies....... -- -- -- -- -- 263,813 25,838
--------- --------- --------- --------- ---------- ---------- ---------
Net realized and unrealized
gain from investments
and foreign currencies....... 14,703,346 14,477,906 18,659,086 289 170,504,196 136,542,097 57,549,707
--------- --------- --------- --------- ---------- ---------- ---------
Net increase in net assets
resulting from operations.... $22,044,690 $18,695,847 $22,751,223 $25,363,598 $192,738,430 $227,551,988 $81,008,618
========= ========= ========= ========= ========== ========== =========
3Net of foreign taxes withheld of $71,586, $96,981 and $3,062,178, for the Growth and Income Fund, Income Securities Fund and
Templeton International Equity Fund, respectively.
Templeton
Templeton Developing Templeton Templeton
Pacific Rising Utility Markets Global Global Asset Small
Growth Fund Dividends Fund Equity Fund Equity Fund Growth FundAllocation Fund*Cap Fund**
---------- ---------- ----------- --------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1).............. $ 2,047,387 $ 3,950,280 $ 6,800,237 $1,212,015 $ 3,583,602 $245,159 $ 24,543
Dividends4..................... 8,710,493 9,380,456 65,279,665 3,263,056 4,925,194 65,799 19,747
---------- ---------- ----------- --------- ---------- ----------- -------
Total income.............. 10,757,880 13,330,736 72,079,902 4,475,071 8,508,796 310,958 44,290
---------- ---------- ----------- --------- ---------- ----------- -------
Expenses:
Management fees (Note 6)....... 3,148,402 2,858,740 6,002,369 1,636,864 2,309,970 52,421 9,054
Reports to shareholders........ 39,024 46,378 161,433 8,500 19,000 40 75
Custodian fees................. 295,808 33,784 154,071 195,264 64,550 1,708 144
Professional fees.............. 12,135 13,279 39,838 313 3,893 4,650 1,605
Trustees' fees and expenses.... 2,818 3,197 10,990 100 500 8 5
Other.......................... 17,769 7,663 18,233 1,132 1,971 167 194
---------- ---------- ----------- --------- ---------- ----------- -------
Total expenses............ 3,515,956 2,963,041 6,386,934 1,842,173 2,399,884 58,994 11,077
---------- ---------- ----------- --------- ---------- ----------- -------
Net investment income.... 7,241,924 10,367,695 65,692,968 2,632,898 6,108,912 251,964 33,213
---------- ---------- ----------- --------- ---------- ----------- -------
Realized and unrealized gain
(loss) from investments and
foreign currency:
Net realized gain (loss) from:
Investments.................. 5,700,744 251,515 2,969,274 3,783,510 8,012,094 19,994 2,754
Foreign currency transactions 308,393 -- (152,643) (547,355) (278,975) (8,009) --
Net unrealized appreciation
(depreciation) on:
Investments................. 12,830,068 88,320,864 282,543,319 (2,333,430) 15,467,976 382,172 161,821
Translation of assets and
liabilities denominated in
foreign currencies......... (3,893) -- (3,657) (48,919) 14,607 (11) --
---------- ---------- ----------- --------- ---------- ----------- -------
Net realized and unrealized gain
from investments and foreign
currencies..................... 18,835,312 88,572,379 285,356,293 853,806 23,215,702 394,146 164,575
---------- ---------- ----------- --------- ---------- ----------- -------
Net increase in net assets
resulting from operations...... $26,077,236 $98,940,074 $351,049,261 $3,486,704 $29,324,614 $646,110 $197,788
========== ========== =========== ========= ========== =========== =======
4Net of foreign taxes withheld of $548,989, $125,292, $245,518, $194,982 and $221,820, for the Templeton Pacific Growth Fund, Rising
Dividends Fund, Utility Equity Fund, Templeton Developing Markets Equity Fund and Templeton Global Growth Fund, respectively.
*April 19, 1995 (effective date) to December 31, 1995.
**November 1, 1995 (effective date) to December 31, 1995.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the years ended December 31, 1995 and 1994
Adjustable U.S.
Government Fund Global Income Fund High Income Fund
--------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income................. $ 13,331,187 $ 13,539,572 $18,687,112 $ 20,521,047 $ 31,021,484 $ 21,545,420
Net realized gain (loss) from
investments and foreign currency
transactions......................... (1,954,776) (8,446,100) (7,995,904) (13,480,259) 1,770,719 (191,182)
Net realized gain on expired written
foreign currency options............. -- -- -- 90,000 -- --
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies.... 7,421,084 (5,701,721) 22,864,210 (21,215,816) 22,884,579 (25,640,770)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations...................... 18,797,495 (608,249) 33,555,418 (14,085,028) 55,676,782 (4,286,532)
Distributions to shareholders from:
Undistributed net investment income... (13,455,726) (12,817,214) (9,275,583) (6,910,568) (21,305,944) (10,514,139)
Undistributed net realized capital gains -- -- -- (2,846,724) -- (1,428,550)
Increase (decrease) in net assets from
capital share transactions (Note 3)... (54,937,609) (50,262,985) (35,396,559) 71,559,545 71,496,259 74,294,093
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets.............................. (49,595,840) (63,688,448) (11,116,724) 47,717,225 105,867,097 58,064,872
Net assets:
Beginning of year .................... 239,695,437 303,383,885 254,310,808 206,593,583 255,036,449 196,971,577
---------- ---------- ---------- ---------- ---------- ----------
End of year .......................... $190,099,597 $239,695,437 $243,194,084 $254,310,808 $360,903,546 $255,036,449
========== ========== ========== ========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year.................... $ 13,453,993 $ 12,731,635 $ 20,717,930 $ 7,107,451 $ 21,367,505 $ 10,336,224
========== ========== ========== ========== ========== ==========
End of year.......................... $ 13,329,454 $ 13,453,993 $ 14,271,863 $ 20,717,930 $ 31,020,827 $ 21,367,505
========== ========== ========== ========== ========== ==========
Investment Grade Real Estate
Intermediate Bond Fund Precious Metals Fund Securities Fund
---------------------- ---------------------- ----------------------
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income................. $ 8,616,354 $ 6,714,564 $ 1,615,339 $ 1,704,724 $ 9,336,142 $ 6,462,652
Net realized gain (loss) from
investments and foreign currency
transactions......................... 656,832 (1,082,886) 1,438,861 1,420,070 1,068,152 (1,257,107)
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies.... 6,077,509 (4,836,222) (1,361,730) (5,612,042) 21,851,218 (3,752,188)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations...................... 15,350,695 795,456 1,692,470 (2,487,248) 32,255,512 1,453,357
Distributions to shareholders from:
Undistributed net investment income... (6,603,637) (4,060,614) (1,664,388) (595,781) (6,411,953) (1,877,913)
Undistributed net realized capital gains -- (625,307) (1,232,041) -- -- --
Increase (decrease) in net assets from
capital share transactions (Note 3)... 2,257,200 35,413,004 (18,765,586) 54,586,633 (8,066,883) 103,443,157
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets.............................. 11,004,258 31,522,539 (19,969,545) 51,503,604 17,776,676 103,018,601
Net assets:
Beginning of year..................... 154,898,736 123,376,197 125,078,359 73,574,755 195,696,675 92,678,074
---------- ---------- ---------- ---------- ---------- ----------
End of year........................... $165,902,994 $154,898,736 $105,108,814 $125,078,359 $213,473,351 $195,696,675
========== ========== ========== ========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year.................... $ 6,603,431 $ 3,949,481 $ 1,682,044 $ 573,101 $ 6,410,773 $ 1,826,034
========== ========== ========== ========== ========== ==========
End of year.......................... $ 8,616,148 $ 6,603,431 $ 1,615,202 $ 1,682,044 $ 9,334,962 $ 6,410,773
========== ========== ========== ========== ========== ==========
Statements of Changes in Net Assets (cont.)
for the years ended December 31, 1995 and 1994
U.S. Government
Securities Fund Zero Coupon Fund - 2000 Zero Coupon Fund - 2005
---------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994
---------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income................. $ 41,653,906 $ 43,497,492 $ 7,341,344 $ 5,342,935 $ 4,217,941 $ 2,941,524
Net realized gain (loss) from investments
and foreign currency transactions..... (891,143) (14,818,106) 72,202 (16) 27,440 (34,363)
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies..... 68,885,320 (60,874,526) 14,631,144 (10,807,581) 14,450,466 (7,078,603)
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations...... 109,648,083 (32,195,140) 22,044,690 (5,464,662) 18,695,847 (4,171,442)
Distributions to shareholders from:
Undistributed net investment income... (43,440,615) (32,225,955) (5,282,540) (3,929,502) (2,941,626) (1,813,740)
Undistributed net realized capital gains -- (2,520,838) -- (559,100) -- (566,970)
Increase (decrease) in net assets from
capital share transactions (Note 3)... (2,081,082) (38,322,399) 26,364,407 27,267,700 15,968,605 15,053,117
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets 64,126,386 (105,264,332) 43,126,557 17,314,436 31,722,826 8,500,965
Net assets:
Beginning of year..................... 579,039,085 684,303,417 94,230,164 76,915,728 51,498,877 42,997,912
---------- ----------- ---------- ---------- ---------- ----------
End of year........................... $643,165,471 $579,039,085 $137,356,721 $94,230,164 $83,221,703 $51,498,877
========== =========== ========== ========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year.................... $ 43,374,805 $ 32,103,268 $ 5,282,540 $ 3,869,107 $ 2,941,474 $ 1,813,835
========== =========== ========== ========== ========== ==========
End of year.......................... $ 41,588,096 $ 43,374,805 $ 7,341,334 $ 5,282,540 $ 4,217,789 $ 2,941,474
========== =========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
Zero Coupon Fund - 2010 Money Market Fund Growth and Income Fund
-------------------- ------------------------- ---------------------
1995 1994 1995 1994 1995 1994
---------- ---------- ----------- ----------- ---------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income................. $ 4,092,137 $ 2,088,467 $ 25,363,309 $ 15,558,725 $ 22,234,234 $ 8,306,522
Net realized gain (loss) from
investments and foreign currency
transactions......................... 1,268,380 (247,797) 289 (7,568) 79,239,315 16,759,522
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies.... 17,390,706 (4,693,017) -- -- 91,264,881 (36,767,195)
---------- ---------- ----------- ----------- ---------- -----------
Net increase (decrease) in net
assets resulting from
operations....................... 22,751,223 (2,852,347) 25,363,598 15,551,157 192,738,430 (11,701,151)
Distributions to shareholders from:
Undistributed net investment income... (2,074,389) (1,275,410) (25,363,598)++ (15,551,157)+ (8,012,262) (3,190,611)
Undistributed net realized capital gains -- (618,973) -- -- (17,435,234) (6,567,213)
Increase (decrease) in net assets from
capital share transactions (Note 3)... 19,594,876 20,918,804 (89,071,533) 387,084,518 204,319,488 167,852,487
---------- ---------- ----------- ----------- ---------- -----------
Net increase (decrease) in net assets 40,271,710 16,172,074 (89,071,533) 387,084,518 371,610,422 146,393,512
Net assets:
Beginning of year..................... 45,361,082 29,189,008 518,618,386 131,533,868 517,877,046 371,483,534
---------- ---------- ----------- ----------- ---------- -----------
End of year........................... $85,632,792 $45,361,082 $429,546,853 $518,618,386 $889,487,468 $517,877,046
========== ========== =========== =========== ========== ===========
Undistributed net investment income
included in net assets:
Beginning of year.................... $ 2,074,248 $ 1,261,191 $-- $-- $ 8,017,077 $ 2,901,166
========== ========== =========== =========== ========== ===========
End of year.......................... $ 4,091,968 $ 2,074,248 $-- $-- $ 22,239,184 $ 8,017,077
========== ========== =========== =========== ========== ===========
+ Distributions were decreased by a net realized loss from security transactions of $7,568.
++ Distributions were increased by a net realized gain from security transactions of $289.
Templeton International Templeton
Income Securities Fund Equity Fund Pacific Growth Fund
------------------------ ---------------------- ---------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 91,009,891 $ 68,219,530 $ 23,458,911 $ 13,760,599 $ 7,241,924 $ 6,901,186
Net realized gain (loss) from
investments and foreign
currency transactions............ (15,464,708) 948,127 30,984,955 16,941,223 6,009,137 2,433,153
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities denominated in foreign
currencies....................... 152,006,805 (129,155,214) 26,564,752 (46,356,706) 12,826,175 (40,845,737)
------------ ------------ ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets resulting
from operations............. 227,551,988 (59,987,557) 81,008,618 (15,654,884) 26,077,236 (31,511,398)
Distributions to shareholders from:
Undistributed net investment
income........................... (63,454,170) (28,168,693) (13,634,404) (1,765,449) (6,625,094) (798,003)
Undistributed net realized capital
gains............................ (5,103,693) (4,210,527) (16,891,097) (3,177,968) (2,753,036) (1,475,399)
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... 107,540,999 354,427,242 14,509,031 495,576,867 (60,595,295) 193,734,840
------------ ------------ ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets................... 266,535,124 262,060,465 64,992,148 474,978,566 (43,896,189) 159,950,040
Net assets:
Beginning of year................. 1,000,002,378 737,941,913 785,124,474 310,145,908 375,832,070 215,882,030
------------ ------------ ---------- ---------- ---------- ----------
End of year....................... $1,266,537,502 $1,000,002,378 $850,116,622 $785,124,474 $331,935,881 $375,832,070
============ ============ ========== ========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year................ $ 67,603,145 $ 27,552,308 $ 13,466,616 $ 1,471,466 $ 6,796,802 $ 693,619
============ ============ ========== ========== ========== ==========
End of year...................... $ 91,003,300 $ 67,603,145 $ 23,389,762 $ 13,466,616 $ 7,402,137 $ 6,796,802
============ ============ ========== ========== ========== ==========
Templeton Developing
Rising Dividends Fund Utility Equity Fund Markets Equity Fund
--------------------- ------------------------ ----------------------
1995 1994 1995 1994 1995 1994*
---------- ---------- ------------ ----------- ----------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............ $ 10,367,695 $ 8,185,971 $ 65,692,968 $ 71,196,799 $ 2,632,898 $ 758,368
Net realized gain (loss) from
investments and foreign currency
transactions..................... 251,515 (11,756,980) 2,816,631 (10,481,962) 3,236,155 (154,856)
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities denominated in foreign
currencies........................ 88,320,864 (8,689,799) 282,539,662 (241,583,439) (2,382,349) (7,411,812)
---------- ---------- ------------ ----------- ----------- ----------
Net increase (decrease) in
net assets resulting from
operations........................ 98,940,074 (12,260,808) 351,049,261 (180,868,602) 3,486,704 (6,808,300)
Distributions to shareholders from:
Undistributed net investment
income............................ (8,063,908) (5,040,932) (70,961,297) (52,184,345) (489,978) --
Undistributed net realized capital
gains............................. -- -- -- (9,240,534) (115,132) --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... 62,448,084 27,500,542 (11,752,253) (192,230,223) 57,013,367 104,997,081
---------- ---------- ------------ ----------- ----------- ----------
Net increase (decrease) in net
assets............................ 153,324,250 10,198,802 268,335,711 (434,523,704) 59,894,961 98,188,781
Net assets:
Beginning of year................. 309,929,027 299,730,225 1,155,110,489 1,589,634,193 98,188,881 100
---------- ---------- ------------ ----------- ----------- ----------
End of year....................... $463,253,277 $309,929,027 $1,423,446,200 $1,155,110,489 $158,083,842 $ 98,188,881
========== ========== ============ =========== =========== ==========
Undistributed net investment income
included in net assets:
Beginning of year................ $ 8,063,270 $ 4,918,231 $ 70,953,514 $ 51,941,060 $ 758,368 $--
========== ========== ============ =========== =========== ==========
End of year...................... $ 10,367,057 $ 8,063,270 $ 65,687,973 $ 70,953,514 $ 2,084,657 $ 758,368
========== ========== ============ =========== =========== ==========
*March 15, 1994 (effective date) to December 31, 1994.
Templeton
Templeton Global Global Asset Small
Growth Fund Allocation Fund Cap Fund
--------------------- ---------- ----------
1995 1994* 1995** 1995***
---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income................................................ $ 6,108,912 $ 1,453,560 $ 251,964 $ 33,213
Net realized gain (loss) from investments and foreign
currency transactions................................................ 7,733,119 (451,023) 11,985 2,754
Net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies 15,482,583 (672,201) 382,161 161,821
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations............ 29,324,614 330,336 646,110 197,788
Distributions to shareholders from:
Undistributed net investment income.................................. (1,324,712) -- (246,062) --
Increase in net assets from capital share transactions (Note 3)....... 151,899,127 158,018,150 13,828,655 12,853,690
---------- ---------- ---------- ----------
Net increase in net assets.......................................... 179,899,029 158,348,486 14,228,703 13,051,478
Net assets:
Beginning of year.................................................... 158,856,088 507,602 500,000 250,000
---------- ---------- ---------- ----------
End of year.......................................................... $338,755,117 $158,856,088 $14,728,703 $13,301,478
========== ========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of year................................................... $ 1,454,896 $ 1,336 $-- $ --
========== ========== ========== ==========
End of year......................................................... $ 5,816,563 $ 1,454,896 $ (6,078) $ 33,213
========== ========== ========== ==========
</TABLE>
*March 15, 1994 (effective date) to December 31, 1994.
**April 19, 1995 (effective date) to December 31, 1995.
***November 1, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Valuemark Funds (the Trust) is an open-end diversified management
investment company (mutual fund) registered under the Investment Company Act of
1940 as amended. The Trust currently consists of twenty-one separate funds (the
Funds). Each of the Funds issues a separate series of the Trust's shares and
maintains a totally separate investment portfolio. Shares of the Funds are sold
only to insurance company separate accounts to fund the benefits of variable
life insurance policies or variable annuity contracts issued by Allianz Life
Insurance Company of North America (Allianz Life), which was formerly North
American Life and Casualty Company (NALAC), and its affiliates.
On May 1, 1995, the Board of Trustees (the Board) approved the name change of
Equity Growth Fund to Growth and Income Fund.
The Zero Coupon Fund - 1995 matured on December 15, 1995. The Templeton Global
Asset Allocation Fund and the Small Cap Fund became effective on April 19, 1995
and November 1, 1995, respectivley.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Portfolio securities listed on a securities exchange or on the NASDAQ for which
market quotations are readily available are valued at the last sale price or, if
there is no sale, within the range of the most recent quoted bid and asked
prices. Other securities are valued based on a variety of factors, including
yield, risk, maturity, trade activity and recent developments related to the
securities. Portfolio securities which are traded both in the over the counter
market and on a securities exchange are valued according to the broadest and
most representative market as determined by the manager. The Trust may utilize a
pricing service, bank or broker/dealer experienced in such matters to perform
any of the pricing functions, under procedures approved by the Board. Securities
for which market quotations are not available are valued in accordance with
procedures established by the Board.
The value of a foreign security is determined as of the earlier of the close of
trading on the foreign exchange on which it is traded or the close of trading on
the New York Stock Exchange (Exchange). That value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New York
time, on the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked prices is
used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the Exchange. If events which materially affect the value of
these foreign securities occur during such period, these securities will be
valued in accordance with procedures established by the Board.
The fair values of securities restricted as to resale are determined following
procedures established by the Board.
Portfolio securities in the Money Market Fund are valued at amortized cost,
which approximates value. The Money Market Fund must maintain a dollar weighted
average maturity of 90 days or less and only purchase instruments having
remaining maturities of 397 days or less. If the Fund's portfolio has a
remaining weighted average maturity of greater than 90 days, the portfolio will
be stated at value based on recorded closing sales on a national securities
exchange or, in the absence of a recorded sale, within the range of the most
recent quoted bid and asked prices. The Board has established procedures
designed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00.
b. Income Taxes:
The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to shareholders which will be sufficient to relieve the
Funds from income and excise taxes. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
d. Investment Income, Expenses and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount and premium are amortized as required by the Internal Revenue Code.
For the Money Market Fund, net investment income includes income, calculated on
an accrual basis, amortization of original issue and market discount or premium,
if any, and estimated expenses which are accrued daily. The total available for
dividends is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and changes in unrealized
portfolio appreciation or depreciation, if any.
For the Money Market Fund, distributions are normally declared on each day the
New York Stock Exchange is open for business, equal to the total available for
distributions (as defined above), and are payable to shareholders of record as
of the close of business the preceeding day. Such distributions are declared and
reinvested daily in additional shares of the Fund.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
d. Investment Income, Expenses and Distributions: (cont.)
A portion of the distributions received from investments in Real Estate
Investment Trust (REIT) securities may be characterized as tax basis return of
capital (ROC) distributions, which are not recorded as dividend income, but
reduce the cost basis of the REIT securities. ROC distributions exceeding the
cost basis of the REIT security are recognized by the Funds as capital gain.
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities and foreign currency
transactions - see Note 9.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sales and foreign currency
transactions.
e. Expense Allocation:
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
f. Foreign Currency Translation:
The accounting records of the Funds are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of the currencies against U.S. dollars on the
valuation date. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the day that the transactions are
recorded. Differences between income and expense amounts recorded and collected
or paid are recognized when reported by the custodian.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such changes are included with
the net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales and maturities of
denominated short-term securities, sales of foreign currencies, gains or losses
realized between the trade and settlement dates on security transactions, the
difference between the amounts of dividends and interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized appreciation or
depreciation on translation of assets and liabilities denominated in foreign
currencies arises from changes in the value of assets and liabilities other than
investments in securities at the end of the reporting period, resulting from
changes in exchange rates.
g. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.
h. Repurchase Agreements:
The Funds may enter into a joint repurchase agreement whereby their uninvested
cash balances are deposited into a joint cash account to be used to invest in
one or more repurchase agreements with government securities dealers recognized
by the Federal Reserve Board and/or member banks of the Federal Reserve System.
The value and face amount of the joint repurchase agreement are allocated to the
Funds based on their pro-rata interest. A repurchase agreement is accounted for
as a loan by the Funds to the seller, collateralized by underlying U.S.
government securities, which are delivered to the Funds' custodian. The market
value, including accrued interest, of the initial collateralization is required
to be at least 102% of the dollar amount invested by the Funds, with the value
of the underlying securities marked to market daily to maintain coverage of at
least 100%. At December 31, 1995, all outstanding repurchase agreements held by
the Funds, had been entered into on December 29, 1995.
i. Mortgage Dollar Rolls:
The U.S. Government Securities Fund may enter into mortgage dollar rolls in
which it sells mortgage-backed securities and simultaneously contracts to
repurchase substantially similar, but not identical, securities on a specified
future date, generally at a price lower than the price of the security sold. The
counterparty receives all principal and interest payments, including
prepayments, made on the mortgage-backed security sold while it is the holder.
Mortgage dollar rolls may be renewed with a new sale and repurchase price fixed
and a cash settlement made without physical delivery of the securities subject
to the contract, at the renewal date. Mortgage dollar rolls are accounted for as
non-collateralized financing transactions.
2. FORWARD FOREIGN CURRENCY CONTRACTS
A forward currency contract, which is individually negotiated and privately
traded by currency traders and their customers, is a commitment to purchase or
sell a specific currency for an agreed-upon price at a future date.
The Global Income Fund and Global Asset Allocation Fund may enter into forward
contracts with the objective of minimizing the risk to the Funds from adverse
changes in the relationship between currencies or to enhance income. These Funds
may also enter into a forward contract in relation to a security denominated in
a foreign currency or when they anticipate receipt in a foreign currency of
dividends or interest payments in order to "lock in" the U. S. dollar price of a
security or the U.S. dollar equivalent of such dividend or interest payments.
The Funds segregate sufficient cash, cash equivalents or readily marketable debt
securities as collateral for commitments created by open forward contracts. The
Funds could be exposed to risk if counterparties to the contracts are unable to
meet the terms of their contracts or if the value of the foreign currency
changes unfavorably.
As of December 31, 1995, the Global Income Fund had the following forward
foreign currency contracts outstanding:
<TABLE>
<CAPTION>
In Unrealized
Contracts to Sell Exchange for Settlement Date gain (loss)
-------------------------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
391,995,000 Japanese Yen................. U.S. $3,900,060 01/09/96 U.S. $ 98,502
2,600,000 Canadian Dollars............. U.S. $1,909,729 01/11/96 5,224
---------- ---------
$5,809,789 103,726
========== ---------
Unrealized loss on offsetting forward foreign currency contracts (49,180)
---------
Net unrealized gain on forward foreign currency contracts $ 54,546
=========
The Templeton Global Asset Allocation Fund had the following forward foreign currency contracts outstanding:
In Unrealized
Contracts to Sell Exchange for Settlement Date gain (loss)
-------------------------------- ---------- ---------- ---------
47,500 Canadian Dollars............. U.S. $34,889 01/11/96 U.S. $ 95
========= ---------
Unrealized loss on offsetting forward foreign currency contracts (237)
---------
Net unrealized loss on forward foreign currency contracts $ (142)
=========
3. TRUST SHARES
At December 31,1995, there was an unlimited number of $.01 par value shares of beneficial interest authorized.
Transactions in each of the Fund's shares for the years ended December 31, 1995 and 1994 were as follows:
Adjustable U.S.
Government Fund Global Income Fund High Income Fund
-------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 4,407,426 $ 47,082,174 1,178,751 $ 14,989,802 3,955,751 $ 52,494,118
Shares issued in reinvestment of distributions 1,296,313 13,455,726 732,090 9,275,583 1,649,067 21,305,944
Shares redeemed............................. (3,153,952) (33,749,307) (2,840,995) (36,191,941) (4,087,131) (54,161,612)
Net shares sold (redeemed) from
exercise of exchange privilege............. (7,642,962) (81,726,202) (1,862,284) (23,470,003) 4,012,012 51,857,809
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)................ (5,093,175) $(54,937,609) (2,792,438) $(35,396,559) 5,529,699 $ 71,496,259
========== ========== ========== ========== ========== ==========
1994
Shares sold................................. 12,010,675 $130,272,592 6,738,386 $ 87,098,849 6,522,474 $ 82,707,638
Shares issued in reinvestment of distributions 1,214,917 12,817,214 793,928 9,757,292 983,734 11,942,689
Shares redeemed............................. (3,521,496) (37,802,677) (1,832,803) (22,920,629) (2,213,669) (27,309,521)
Net shares sold (redeemed) from
exercise of exchange privilege............. (14,414,867) (155,550,114) (356,925) (2,375,967) 598,507 6,953,287
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)................ (4,710,771) $ (50,262,985) 5,342,586 $ 71,559,545 5,891,046 $ 74,294,093
========== ========== ========== ========== ========== ==========
3. TRUST SHARES (cont.)
Investment Grade Real Estate U.S. Government
Intermediate Bond Fund Precious Metals Fund Securities Fund Securities Fund
------------------ ------------------ ------------------- --------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 1,209,536 $16,611,224 836,229 $ 11,648,578 1,340,093 $ 20,990,418 4,057,377 $ 54,748,439
Shares issued in
reinvestment of
distributions......... 487,713 6,603,637 205,566 2,896,429 417,717 6,411,953 3,278,537 43,440,615
Shares redeemed....... (1,525,209) (20,903,428) (1,102,540) (15,328,334) (1,401,583) (22,032,486) (7,126,939) (95,628,635)
Net shares redeemed
from exercise of
exchange privilege.... (3,692) (54,233) (1,350,012) (17,982,259) (874,485) (13,436,768) (340,030) (4,641,501)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase
(decrease)............ 168,348 $ 2,257,200 (1,410,757) $(18,765,586) (518,258) $ (8,066,883) (131,055) $ (2,081,082)
========== ========== ========== ========== ========== ========== ========== ==========
1994
Shares sold........... 3,257,872 $ 44,016,572 2,982,606 $ 42,073,264 4,832,335 $ 74,222,833 9,082,274 $121,401,531
Shares issued in
reinvestment of
distributions......... 355,733 4,685,921 43,118 595,781 119,168 1,877,913 2,751,223 34,746,793
Shares redeemed....... (924,245) (12,356,406) (617,375) (8,711,480) (790,561) (11,875,843) (6,478,312) (83,338,710)
Net shares sold
(redeemed) from
exercise of
exchange privilege.... (60,588) (933,083) 1,383,252 20,629,068 2,462,033 39,218,254 (8,441,333) (111,132,013)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase
(decrease)............ 2,628,772 $ 35,413,004 3,791,601 $ 54,586,633 6,622,975 $103,443,157 (3,086,148) $ (38,322,399)
========== ========== ========== ========== ========== ========== ========== ==========
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ----------------- -------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold....................................... 1,413,875 $20,777,927 942,223 $14,600,167 909,048 $13,837,665
Shares issued in reinvestment of distributions.... 354,296 5,282,548 185,240 2,941,626 129,812 2,074,389
Shares redeemed................................... (1,003,208) (14,976,357) (421,198) (6,606,649) (493,484) (7,588,835)
Net shares sold from exercise of
exchange privilege............................... 1,045,976 15,280,289 338,466 5,033,461 718,072 11,271,657
---------- ---------- ---------- ---------- ---------- ----------
Net increase ................................ 1,810,939 $26,364,407 1,044,731 $15,968,605 1,263,448 $19,594,876
========== ========== ========== ========== ========== ==========
1994
Shares sold....................................... 2,043,220 $29,144,438 1,219,989 $17,676,802 735,396 $ 10,083,257
Shares issued in reinvestment of distributions.... 324,365 4,488,602 171,028 2,380,710 145,318 1,894,383
Shares redeemed................................... (643,343) (9,029,470) (277,845) (3,952,827) (308,264) (4,076,991)
Net shares sold (redeemed) from exercise of
exchange privilege............................... 212,507 2,664,130 (43,988) (1,051,568) 1,050,305 13,018,155
---------- ---------- ---------- ---------- ---------- ----------
Net increase................................. 1,936,749 $27,267,700 1,069,184 $15,053,117 1,622,755 $ 20,918,804
========== ========== ========== ========== ========== ==========
3. TRUST SHARES (cont.)
Money Market Fund Growth and Income Fund Income Securities Fund
--------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 202,376,630 $ 202,376,630 7,137,692 $109,151,094 10,113,056 $155,712,027
Shares issued in reinvestment of distributions 25,427,564 25,427,564 1,706,740 25,447,497 4,534,250 68,557,863
Shares redeemed.............................. (146,409,205) (146,409,205) (5,978,524) (90,725,782) (10,094,332) (154,925,002)
Net shares sold (redeemed) from exercise of
exchange privilege.......................... (170,466,522) (170,466,522) 10,428,442 160,446,679 2,479,081 38,196,111
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)................. (89,071,533) $ (89,071,533) 13,294,350 $204,319,488 7,032,055 $107,540,999
========== ========== ========== ========== ========== ==========
1994
Shares sold.................................. 424,037,520 $424,037,520 9,868,807 $137,325,386 23,941,300 $363,246,465
Shares issued in reinvestment of distributions 15,512,865 15,512,865 719,479 9,757,824 2,212,995 32,379,220
Shares redeemed.............................. (95,736,753) (95,736,753) (3,148,857) (43,090,930) (6,252,877) (92,597,936)
Net shares sold from exercise of
exchange privilege.......................... 43,270,886 43,270,886 4,603,502 63,860,207 3,281,250 51,399,493
---------- ---------- ---------- ---------- ---------- ----------
Net increase............................ 387,084,518 $387,084,518 12,042,931 $167,852,487 23,182,668 $354,427,242
========== ========== ========== ========== ========== ==========
Templeton Templeton
International Equity Fund Pacific Growth Fund Rising Dividends Fund
-------------------- ------------------- ------------------
Shares Amount Shares Amount Shares Amount
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 8,219,451 $ 106,471,518 2,230,611 $ 29,634,248 4,053,853 $ 46,217,013
Shares issued in reinvestment of distributions 2,362,655 30,525,501 711,543 9,378,130 726,478 8,063,909
Shares redeemed.............................. (7,007,432) (90,959,162) (3,306,122) (43,982,761) (3,959,378) (44,968,613)
Net shares sold (redeemed) from exercise of
exchange privilege.......................... (2,536,715) (31,528,826) (4,156,691) (55,624,912) 4,683,755 53,135,775
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)................. 1,037,959 $ 14,509,031 (4,520,659) $ (60,595,295) 5,504,708 $ 62,448,084
========== ========== ========== ========== ========== ==========
1994
Shares sold.................................. 24,902,343 $322,951,099 11,284,540 $158,252,876 6,744,155 $68,650,822
Shares issued in reinvestment of distributions 390,029 4,943,416 162,761 2,273,402 502,408 5,040,932
Shares redeemed.............................. (3,427,169) (44,336,564) (2,000,116) (27,492,273) (2,367,971) (23,835,820)
Net shares sold (redeemed) from exercise of
exchange privilege.......................... 16,079,854 212,018,916 4,169,045 60,700,835 (2,160,315) (22,355,392)
---------- ---------- ---------- ---------- ---------- ----------
Net increase............................ 37,945,057 $495,576,867 13,616,230 $193,734,840 2,718,277 $27,500,542
========== ========== ========== ========== ========== ==========
3. TRUST SHARES (cont.)
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund* Global Growth Fund*
----------------------- --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............................. 5,042,256 $ 79,723,893 4,586,720 $ 44,019,390 11,202,768 $124,502,270
Shares issued in reinvestment of
distributions............................ 4,578,148 70,961,297 61,746 605,110 119,022 1,324,712
Shares redeemed.......................... (10,979,441) (173,993,280) (1,121,485) (10,897,349) (1,972,050) (22,039,520)
Net shares sold from exercise of
exchange privilege...................... 787,401 11,555,837 2,365,581 23,286,216 4,330,050 48,111,665
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)............. (571,636) $ (11,752,253) 5,892,562 $ 57,013,367 13,679,790 $151,899,127
========== ========== ========== ========== ========== ==========
1994
Shares sold.............................. 13,792,363 $213,571,803 6,007,111 $ 61,181,104 8,960,993 $ 93,861,733
Shares issued in reinvestment of
distributions............................ 4,307,366 61,424,879 -- -- -- --
Shares redeemed.......................... (8,615,440) (127,070,915) (258,526) (2,643,123) (464,430) (4,891,450)
Net shares sold (redeemed) from
exercise of exchange privilege.......... (22,114,018) (340,155,990) 4,517,062 46,459,100 6,613,922 69,047,867
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)............. (12,629,729) $(192,230,223) 10,265,647 $104,997,081 15,110,485 $158,018,150
========== ========== ========== ========== ========== ==========
Templeton
Global Asset
Allocation Fund** Small Cap Fund***
------------------- -------------------
Shares Amount Shares Amount
------------------------------------------------------
1995
<S> <C> <C> <C> <C>
Shares sold................................................................. 514,807 $ 5,313,984 190,530 $ 1,922,288
Shares issued in reinvestment of distributions.............................. 23,479 246,062
Shares redeemed............................................................. (213,358) (2,230,197) (5,971) (60,260)
Net shares sold from exercise of exchange privilege......................... 1,025,022 10,498,806 1,089,229 10,991,662
---------- ---------- ---------- ----------
Net increase .......................................................... 1,349,950 $13,828,655 1,273,788 $12,853,690
========== ========== ========== ==========
*For the period March 15, 1994 (effective date) to December 31, 1994.
**For the period April 19, 1995 (effective date) to December 31, 1995.
***For the period November 1, 1995 (effective date) to December 31, 1995.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At December 31, 1995, for tax purposes, the Funds had accumulated net realized capital gains or capital loss carryovers
as follows:
Income
High Precious Zero Coupon Zero Coupon Growth and Securities
Income Fund Metals Fund Fund - 2000 Fund - 2010 Income Fund Fund
-------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Accumulated net realized gains..................... $1,643,498 $1,460,667 $72,186 $1,109,315 $78,714,626 $11,125,807
======== ======== ======== ======== ========= =========
Templeton
Templeton Templeton Developing Templeton Global Asset
International Pacific Markets Global Allocation Small
Equity Fund Growth Fund Equity Fund Growth Fund Fund Cap Fund
--------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Accumulated net realized gains..................... $30,936,443 $6,260,080 $3,880,120 $7,874,601 $23,967 $2,754
========= ======== ======== ======== ======== ======
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)
Investment
Adjustable U.S. Global Grade Intermediate Real Estate U.S. Government Zero Coupon
Government Fund Income Fund Bond Fund Securities FundSecurities Fund Fund - 2005
------------ --------- ------------ ---------- ----------- ----------
Capital loss carryovers
<S> <C> <C> <C> <C> <C> <C> <C>
Expiring in: 1999................... $ 159,000 $ -- $ -- $ -- $ -- $ --
2000................... 501,025 -- -- -- -- --
2001................... 1,813,667 -- -- -- -- --
2002................... 8,448,036 2,035,257 426,054 434,944 13,073,674 $2,756
2003................... 1,954,776 3,643,075 -- -- 2,635,575 --
------------ --------- ------------ ---------- ----------- ----------
$12,876,504 $5,678,332 $426,054 $434,944 $15,709,249 $2,756
============ ========= ============ ========== =========== ==========
Rising Utility
Dividends Fund Equity Fund
------------ ---------
Capital loss carryovers
<S> <C> <C> <C>
Expiring in: 2001................... $ 2,985,091 $ --
2002................... 11,480,517 6,321,984
------------ ---------
$14,465,608 $6,321,984
============ =========
</TABLE>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower or unrealized depreciation is higher) than for financial
reporting purposes at December 31, 1995 by $4,168 in Zero Coupon Fund - 2005,
$188,398 in Zero Coupon Fund - 2010, $151,104 in Growth and Income Fund,
$1,834,003 in Templeton International Equity Fund, $3,555,239 in Templeton
Pacific Growth Fund, $346,771 in Rising Dividends Fund, $14 in Utility Equity
Fund, $97,321 in Templeton Developing Markets Equity Fund and $855,892 in
Templeton Global Growth Fund.
<TABLE>
<CAPTION>
5. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of short-term securities) for the year ended December 31,
1995 were as follows:
Investment Grade U.S. Government
Adjustable U.S. Global High Intermediate Precious Real Estate Securities
Government Fund Income Fund Income Fund Bond Fund Metals FundSecurities Fund Fund***
------------ ---------- ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases................ $35,664,702 $364,293,524 $148,105,269 $67,264,370 $16,018,621 $41,458,339 $111,753,153
============ ========== ========== =========== ======== ========== ===========
Sales.................... $91,202,405 $337,227,863 $ 62,196,978 $40,110,451 $23,112,140 $45,329,958 $123,707,953
============ ========== ========== =========== ======== ========== ===========
Templeton Templeton
Zero Coupon Zero Coupon Zero Coupon Growth and Income International Pacific
Fund - 2000 Fund - 2005 Fund - 2010 Income Fund Securities Fund Equity Fund Growth Fund
--------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases................ $22,200,664 $13,077,215 $34,873,391 $852,572,320 $411,380,771 $164,307,283 $112,740,709
========= ========= ========= ========== ========== ========== ==========
Sales.................... $ 1,917,524 $ 1,155,529 $19,774,820 $721,665,026 $270,412,053 $124,247,828 $124,599,402
========= ========= ========= ========== ========== ========== ==========
Templeton Templeton
Rising Utility Developing Markets Templeton Global Global Asset Small
Dividends Fund Equity Fund Equity Fund Growth Fund Allocation Fund* Cap Fund**
---------- ---------- ------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Purchases......................... $109,364,860 $154,104,148 $90,346,514 $279,689,733 $15,571,245 $8,369,979
========== ========== ============ =========== =========== =========
Sales............................. $ 59,119,856 $220,031,503 $21,584,119 $ 62,272,945 $ 1,942,188 $ 159,783
========== ========== ============ =========== =========== =========
*For the period April 19, 1995 (effective date) to December 31, 1995.
**For the period November 1, 1995 (effective date) to December 31, 1995.
***Excludes purchase and sales of mortgage dollar roll transactions, which aggregated $41,145,677 and $41,598,283, respectively.
</TABLE>
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers),
provides investment advice, administrative services, office space and facilities
to each Fund, and receives fees computed monthly based on the average daily net
assets of each Fund as follows, except the Templeton International Equity Fund,
the Templeton Pacific Growth Fund, the Rising Dividends Fund, the Templeton
Global Growth Fund, the Templeton Developing Markets Equity Fund, the Templeton
Global Asset Allocation Fund and the Small Cap Fund:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
.625 of 1% First $100 million
.500 of 1% over $100 million, up to and including $250 million
.450 of 1% over $250 million, up to and including $10 billion
The rate of fee for each Fund is reduced further on net assets over $10 billion.
Under the terms of a separate management agreement with the Templeton
International Equity Fund and the Templeton Pacific Growth Fund, Advisers
receives fees computed monthly based on average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
1% First $100 million
0.90 of 1% over $100 million, up to and including $250 million
0.80 of 1% over $250 million, up to and including $500 million
0.75 of 1% over $500 million
Under the terms of a separate management agreement with the Rising Dividends
Fund and Small Cap Fund, Advisers receives fees computed monthly based on
average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- ----------------------------------
.750 of 1% First $500 million
.625 of 1% over $500 million, up to and including $1 billion
.500 of 1% over $1 billion
Templeton, Galbraith & Hansberger, Ltd. (TGH) serves as the investment adviser
for the Templeton Global Growth Fund and receives fees computed monthly based on
average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
1% First $100 million
0.90 of 1% over $100 million, up to and including $250 million
0.80 of 1% over $250 million, up to and including $500 million
0.75 of 1% over $500 million
TGH serves as the investment adviser for the Templeton Global Asset Allocation
Fund and receives fees computed monthly based on average daily net assets as
follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
.650 of 1% First $200 million
.585 of 1% over $200 million, up to and including $1.3 billion
.520 of 1% over $1.3 billion
Templeton Asset Management, Ltd. (TAML) serves as the investment adviser for the
Templeton Developing Markets Equity Fund and receives a monthly fee equal to an
annual rate of 1.25 of 1% of the average daily net assets.
Under a subadvisory agreement, Templeton Investment Counsel, Inc. (TICI)
provides services to the Templeton International Equity Fund and Templeton
Pacific Growth Fund, and receives from Advisers fees computed monthly based on
the average daily net assets of each Fund as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
0.50 of 1% First $100 million
0.40 of 1% over $100 million, up to and including $250 million
0.30 of 1% over $250 million, up to and including $500 million
0.25 of 1% over $500 million
Under a subadvisory agreement, TICI provides services to the Templeton Global
Asset Allocation Fund and receives from TGH fees computed monthly based on the
average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
.250 of 1% First $200 million
.225 of 1% over $200 million, up to and including $1.3 billion
.200 of 1% over $1.3 billion
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
Under a subadvisory agreement, TICI provides services to the Global Income Fund
and receives from Advisers fees computed monthly based on the average daily net
assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
.350 of 1% First $100 million
.250 of 1% over $100 million, up to and including $250 million
.200 of 1% over $250 million
Under a subadvisory agreement, Templeton Quantitative Advisors, Inc. (TQA)
provides services to the Growth and Income Fund and receives from Advisers fees
computed monthly based on the average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
0.3125 of 1% First $100 million
0.2500 of 1% over $100 million, up to and including $250 million
0.2250 of 1% over $250 million, up to and including $10 billion
0.2200 of 1% over $10 billion, up to and including $12.5 billion
0.2100 of 1% over $12.5 billion, up to and including $15 billion
0.2000 of 1% over $15 billion
Templeton Global Investors, Inc. (Global Investors) serves as the business
manager for the Templeton Global Asset Allocation Fund and receives fees from
the fund computed monthly based on the average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
.150 of 1% First $200 million
.135 of 1% over $200 million, up to and including $700 million
.100 of 1% over $700 million, up to and including $1.2 billion
.075 of 1% over $1.2 billion
Global Investors serves as the business manager for the Templeton Developing
Markets Fund and receives from TAML fees computed monthly based on the average
daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
.150 of 1% First $200 million
.135 of 1% over $200 million, up to and including $700 million
.100 of 1% over $700 million, up to and including $1.2 billion
.075 of 1% over $1.2 billion
Global Investors serves as the business manager for the Templeton Global Growth
Fund and receives from TGH fees computed monthly based on the average daily net
assets as follows:
Annualized Fee Rate Average Daily Net Assets
----------------- --------------------------------
.050 of 1% First $200 million
.045 of 1% over $200 million, up to and including $700 million
.033 of 1% over $700 million, up to and including $1.2 billion
.0025 of 1% over $1.2 billion
The terms of the management agreements provide that aggregate annual expenses of
each Fund be limited to the extent necessary to comply with the limitations set
forth in the laws, regulations and administrative interpretations of the states
in which each Fund's shares are registered. The Funds' expenses did not exceed
these limitations; however, for the year ended December 31, 1995, Advisers
agreed in advance to waive $1,218,256 of the management fees as indicated below:
Zero Coupon Zero Coupon Zero Coupon Money
Fund - 2000 Fund - 2005 Fund - 2010 Market Fund
-------- -------- -------- --------
Fees waived........ $282,739 $175,893 $165,315 $594,309
======== ======== ======== ========
The management agreements between the Funds, Advisers, TGH and TAML include
distribution plans pursuant to Rule 12b-1 under the 1940 Act. However, no
payments were made by any Fund as a result of the plans.
Franklin/Templeton Investors Services, Inc. (Investor Services), under the terms
of an agreement, performs shareholder servicing for the Funds and is not paid by
the Funds for the service.
Certain officers and trustees of the Trust are also officers and/or directors of
Advisers, Investor Services, TGH, TAML, TICI, Global Investors, TQA, all
wholly-owned subsidiaries of Franklin Resources, Inc. (Resources), and/or
Allianz Life.
7. LOANS OF PORTFOLIO SECURITIES
During the year ended December 31, 1995, the Precious Metals Fund loaned
securities to certain brokers for which it received cash collateral against the
loaned securities in an amount equal to at least 102% of the market value of the
loaned securities. The cash collateral received is invested by the Fund in
short-term instruments and any interest income in excess of a predetermined
rebate to the brokers is kept by the fund as interest income. Interest income
from this source amounted to $17,047 for the year ended December 31, 1995, and
as of that date, there were no loaned securities in the Precious Metals Fund.
8. RULE 144A SECURITIES
Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resale of restricted
securities to qualified institutional investors. The Funds value these
securities as disclosed in Note 1. At December 31, 1995, Rule 144A securities
were held as follows:
<TABLE>
<CAPTION>
Global High Precious Real Estate Growth and Income
Income Fund Income Fund Metals Fund Securities Fund Income Fund Securities Fund
-------- --------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Value............................................ $8,430,625 $13,264,350 $5,291,572 $805,000 $14,163,386 $66,811,937
-------- --------- -------- ---------- --------- ----------
Ratio of value to net assets..................... 3.47% 3.68% 5.03% 0.38% 1.59% 5.28%
======== ========= ======== ========== ========= ==========
Templeton Templeton Templeton Templeton
International Pacific Utility Global Global Asset
Equity Fund Growth Fund Equity Fund Growth Fund Allocation Fund
-------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Value......................................................... $8,866,513 $1,970,794 $2,822,118 $12,644,559 $1,047,726
-------- -------- -------- --------- ---------
Ratio of value to net assets.................................. 1.04% 0.59% 0.20% 3.73% 7.11%
======== ======== ======== ========= =========
See the accompanying Statement of Investments in Securities and Net Assets for specific information on such securities.
</TABLE>
9. CREDIT RISK AND DEFAULTED SECURITIES
Although the Trust has diversified portfolios, the High Income Fund and the
Income Securities Fund have 95.75% and 39.25%, respectively, of their portfolios
invested in lower rated and unrated securities. Investments in higher yield
securities are accompanied by a greater degree of credit risk and such lower
quality securities tend to be more sensitive to economic conditions than higher
rated securities. The risk of loss due to default by the issuer may be
significantly greater for the holders of high yielding securities, because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer. At December 31, 1995, the High Income Fund held one defaulted
security issued by one company with a value aggregating $61,285 representing
.02% of the Fund's net assets. The Income Securities Fund held three defaulted
securities issued by three companies with a value aggregating $6,175,156
representing .49% of the Fund's net assets. These securities are identified on
the accompanying Statement of Investments in Securities and Net Assets.
Although each of the Funds has a diversified investment portfolio, there are
certain credit risks, foreign currency exchange risk, or event risk due to the
manner in which certain Funds are invested, which may subject them more
significantly to economic changes occurring in certain industries or sectors, as
follows:
The Global Income Fund has investments in excess of 10% of its net assets in
Germany.
The High Income Fund has investments in excess of 10% of its net assets in Cable
Television.
The Investment Grade Intermediate Bond Fund has investments in excess of 10% of
its net assets in Financial Services.
The Templeton International Equity Fund has investments in excess of 10% of its
net assets in Sweden.
The Templeton Pacific Growth Fund has investments in excess of 10% of its net
assets in Australia, Hong Kong and Japan.
The Templeton Developing Markets Fund has investments in excess of 10% of its
net assets in Argentina, Hong Kong and Mexico.
<TABLE>
<CAPTION>
10. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities are
defined in the Investment Company Act of 1940 as affiliated companies. The Funds
had investments in such affiliated companies at December 31, 1995 as follows:
Purchase Market Dividend
Fund Affiliate Cost Value Income
- -------------------------- -------------------------------------- --------- -------- -------
<S> <C> <C> <C>
Real Estate Securities Fund........ Winston Hotels, Inc............................... $5,522,838 $6,234,375 $414,057
Income Securities Fund............. Tanger Factory Outlet Centers, Inc................ 9,891,880 9,010,000 540,600
Templeton Global Growth Fund....... Michaniki SA, pfd. ............................... 1,922,464 1,739,461 --
</TABLE>
11. OTHER CONSIDERATIONS
As the Manager of the High Income Fund and Income Securities Fund, Advisers may
serve as a member of various credit committees, representing credit interests in
certain corporate restructuring negotiations. Currently, Advisers serves on the
credit committees for Grand Union Capital Corp., Bibb Co., Anacomp Inc., and
Forstmann Textile, Inc. and therefore may be in possession of certain material
non-public information. Advisers has not sold, nor does it intend to sell, any
of the Fund's holdings in these securities while in possession of material
non-public information in contravention of the Federal Securities Laws.
<TABLE>
<CAPTION>
12. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each period, by Fund, are as follows:
Per Share Operating Performance Ratios/Supplemental Data
---------------------------------------------------------------------------- ------------------------------------------
Net Total Distri- Distri- Net Net Ratio of Net
Net Asset Net Realized & From butions butions Asset Assets at Ratio of Investment
Value at Invest- Unrealized Invest- From Net From Total Value at End of Expenses Income to Portfolio
Period Beginning ment Gain (Loss) ment Investment Capital Distri- End of Total Period to Average Average Turnover
Ended of Period Income on Securities Operations Income Gains butions Period Return+ (in 000's) Net Assets Net Assets Rate
Adjustable U.S. Government Fund
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $10.01 $.36 $.49 $.85 $ -- $ -- $ -- $10.86 8.49% $130,664 .334%5 7.19% 43.31%
1992 10.86 .36 .12 .48 (.24) -- (.24) 11.10 4.45 256,980 .6045 5.38 53.69
1993 11.10 .43 (.04) .39 (.45) -- (.45) 11.04 3.55 303,384 .58 4.50 133.68
1994 11.04 .62 (.64) (.02) (.49) -- (.49) 10.53 (.19) 239,695 .57 4.79 62.05
1995 10.53 .90 .06 .96 (.73) -- (.73) 10.76 9.41 190,100 .59 6.45 19.55
Global Income Fund
1991 11.78 .42 .99 1.41 (.60) -- (.60) 12.59 12.34 39,265 .69 7.91 130.66
1992 12.59 .26 (.30) (.04) (.40) (.15) (.55) 12.00 (.40) 75,062 .67 4.72 92.22
1993 12.00 .50 1.47 1.97 (.50) (.16) (.66) 13.31 16.68 206,594 .73 7.56 59.98
1994 13.31 .86 (1.52) (.66) (.33) (.13) (.46) 12.19 (4.99) 254,311 .71 7.99 79.38
1995 12.19 .29 1.47 1.76 (.49) -- (.49) 13.46 14.68 243,194 .64 7.59 152.89
High Income Fund
1991 8.94 .78 1.80 2.58 (.90) -- (.90) 10.62 30.15 23,675 .69 11.41 36.67
1992 10.62 .38 1.31 1.69 (.54) -- (.54) 11.77 16.21 67,991 .68 9.76 33.36
1993 11.77 .37 1.45 1.82 (.46) -- (.46) 13.13 15.71 196,972 .64 8.18 21.06
1994 13.13 .88 (1.18) (.30) (.55) (.07) (.62) 12.21 (2.26) 255,036 .60 9.45 22.94
1995 12.21 1.06 1.30 2.36 (.91) -- (.91) 13.66 19.76 360,904 .56 9.63 20.65
Investment Grade Intermediate Bond Fund
1991 11.36 .43 1.31 1.74 (.49) -- (.49) 12.61 15.75 17,247 .73 7.49 28.75
1992 12.61 .25 .47 .72 (.33) (.02) (.35) 12.98 5.89 49,549 .68 6.15 19.96
1993 12.98 .27 .82 1.09 (.33) (.05) (.38) 13.69 8.52 123,376 .66 4.74 18.84
1994 13.69 .51 (.45) .06 (.38) (.06) (.44) 13.31 .47 154,899 .63 4.66 30.99
1995 13.31 .73 .58 1.31 (.57) -- (.57) 14.05 9.99 165,903 .61 5.33 34.30
Precious Metals Fund
1991 10.52 .38 .02 .40 (.20) (.01) (.21) 10.71 3.86 9,049 .69 3.20 .25
1992 10.71 .10 (1.14) (1.04) (.31) -- (.31) 9.36 (10.13) 13,827 .69 2.23 --
1993 9.36 .03 5.16 5.19 (.09) -- (.09) 14.46 55.62 73,575 .68 1.58 .01
1994 14.46 .16 (.45) (.29) (.08) -- (.08) 14.09 (2.01) 125,078 .68 1.63 7.66
1995 14.09 .22 .12 .34 (.20) (.15) (.35) 14.08 2.35 105,109 .66 1.40 15.66
Real Estate Securities Fund
1991 9.09 .34 2.67 3.01 (.45) -- (.45) 11.65 33.47 4,810 .74 6.05 7.95
1992 11.65 .14 1.24 1.38 (.24) -- (.24) 12.79 12.12 14,859 .69 4.50 2.76
1993 12.79 .09 2.33 2.42 (.17) -- (.17) 15.04 19.01 92,678 .67 4.05 5.84
1994 15.04 .38 .06 .44 (.17) -- (.17) 15.31 2.89 195,697 .62 4.00 11.73
1995 15.31 .78 1.83 2.61 (.52) -- (.52) 17.40 17.53 213,473 .59 4.74 22.15
12. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
---------------------------------------------------------------------------- ------------------------------------------
Net Total Distri- Distri- Net Net Ratio of Net
Net Asset Net Realized & From butions butions Asset Assets at Ratio of Investment
Value at Invest- Unrealized Invest- From Net From Total Value at End of Expenses Income to Portfolio
Period Beginning ment Gain (Loss) ment Investment Capital Distri- End of Total Period to Average Average Turnover
Ended of Period Income on Securities Operations Income Gains butions Period Return+ (in 000's) Net Assets Net Assets Rate
U.S. Government Securities Fund
1991 $11.36$ .41 $1.35 $1.76 $(.40) $ -- $(.40) $12.72 15.93% $187,987 .65% 7.76% 11.69%
1992 12.72 .52 .44 .96 (.43) (.01) (.44) 13.24 7.69 371,828 .59 7.07 28.64
1993 13.24 .50 .77 1.27 (.51) (.08) (.59) 13.92 9.71 684,303 .54 6.06 145.11
1994 13.92 .96 (1.59) (.63) (.67) (.05) (.72) 12.57 (4.55) 579,039 .53 6.87 18.25**
1995 12.57 .93 1.46 2.39 (.96) -- (.96) 14.00 19.46 643,165 .52 6.72 18.68**
Zero Coupon Fund - 2000
1991 11.40 .57 1.67 2.24 (.38) -- (.38) 13.26 20.19 27,699 .255 7.88 19.15
1992 13.26 .57 .58 1.15 (.53) -- (.53) 13.88 9.04 48,217 .255 6.97 9.10
1993 13.88 .66 1.55 2.21 (.62) (.03) (.65) 15.44 16.15 76,916 .375 5.88 7.02
1994 15.44 .68 (1.71) (1.03) (.69) (.10) (.79) 13.62 (6.76) 94,230 .405 6.37 --
1995 13.62 .75 2.03 2.78 (.67) -- (.67) 15.73 20.67 137,357 .405 6.14 1.63
Zero Coupon Fund - 2005
1991 11.15 .54 1.65 2.19 (.43) -- (.43) 12.91 20.37 11,299 .255 8.00 4.54
1992 12.91 .65 .67 1.32 (.61) -- (.61) 13.62 10.81 18,295 .255 7.46 19.48
1993 13.62 .44 2.55 2.99 (.52) (.01) (.53) 16.08 22.21 42,998 .375 5.67 16.59
1994 16.08 .71 (2.24) (1.53) (.60) (.19) (.79) 13.76 (9.60) 51,499 .405 6.53 2.00
1995 13.76 .78 3.53 4.31 (.69) -- (.69) 17.38 31.76 83,222 .405 6.19 1.72
Zero Coupon Fund - 2010
1991 11.25 .56 1.58 2.14 (.55) -- (.55) 12.84 20.09 15,610 .255 8.05 22.44
1992 12.84 1.21 .03 1.24 (.73) -- (.73) 13.35 10.31 13,431 .255 7.64 54.50
1993 13.35 .50 2.81 3.31 (.94) (.04) (.98) 15.68 25.47 29,189 .255 5.89 36.63
1994 15.68 .55 (2.27) (1.72) (.63) (.31) (.94) 13.02 (10.97 45,361 .405 6.57 4.34
1995 13.02 .76 4.75 5.51 (.49) -- (.49) 18.04 42.79 85,633 .405 6.41 31.45
Money Market Fund
1991 1.00 .05 -- .05 (.05) -- (.05) 1.00 5.48 68,060 .67 5.43 --
1992 1.00 .03 -- .03 (.03) -- (.03) 1.00 3.06 86,907 .69 2.99 --
1993 1.00 .03 -- .03 (.03) -- (.03) 1.00 2.54 131,534 .66 2.53 --
1994 1.00 .04 -- .04 (.04) -- (.04) 1.00 3.82 518,618 .465 4.05 --
1995 1.00 .06 -- .06 (.06) -- (.06) 1.00 5.74 429,547 .405 5.58 --
Growth and Income Fund
1991 9.97 .12 2.22 2.34 (.20) -- (.20) 12.11 23.63 117,944 .67 2.09 40.43
1992 12.11 .08 .72 .80 (.12) -- (.12) 12.79 6.73 231,659 .62 1.44 25.22
1993 12.79 .09 1.22 1.31 (.11) -- (.11) 13.99 10.32 371,484 .58 1.00 41.56
1994 13.99 .19 (.47) (.28) (.09) (.20) (.29) 13.42 (3.41) 517,877 .54 1.81 99.21
1995 13.42 .41 3.91 4.32 (.19) (.41) (.60) 17.14 32.83 889,487 .52 3.30 116.54
Income Securities Fund
1991 9.89 .77 3.06 3.83 (.90) -- (.90) 12.82 39.93 61,266 .67 8.91 29.65
1992 12.82 .40 1.26 1.66 (.59) (.24) (.83) 13.65 13.20 182,993 .67 7.44 12.59
1993 13.65 .33 2.18 2.51 (.31) (.05) (.36) 15.80 18.59 737,942 .56 6.66 10.12
1994 15.80 .82 (1.80) (.98) (.44) (.07) (.51) 14.31 (6.27) 1,000,002 .54 7.27 13.33
1995 14.31 1.16 1.96 3.12 (.89) (.07) (.96) 16.47 22.40 1,266,538 .51 8.05 33.14
Templeton International Equity Fund
19921 10.00 .14 (0.38) (0.24) -- -- -- 9.76 (2.40) 13,662 1.77* 3.91* 21.78
1993++ 9.76 .18 2.60 2.78 (.04) -- (.04) 12.50 28.56 310,146 1.12 1.58 29.50
1994 12.50 .19 (.08) .11 (.03) (.07) (.10) 12.51 .87 785,124 .99 2.17 12.22
1995 12.51 .37 .94 1.31 (.22) (.28) (.50) 13.32 10.59 850,117 .92 2.87 16.42
12. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
---------------------------------------------------------------------------- ------------------------------------------
Net Total Distri- Distri- Net Net Ratio of Net
Net Asset Net Realized & From butions butions Asset Assets at Ratio of Investment
Value at Invest- Unrealized Invest- From Net From Total Value at End of Expenses Income to Portfolio
Period Beginning ment Gain (Loss) ment Investment Capital Distri- End of Total Period to Average Average Turnover
Ended of Period Income on Securities Operations Income Gains butions Period Return+ (in 000's) Net Assets Net Assets Rate
Templeton Pacific Growth Fund
19921 $10.00 $ -- $ (.12) $ (.12) $ -- $ -- $ -- $ 9.88 (1.20)% $ 5,788 1.31% 5* --% 8.41%
1993 9.88 .05 4.68 4.73 -- -- -- 14.61 47.87 215,882 1.14 1.29 12.36
1994 14.61 .22 (1.50) (1.28) (.03) (.06) (.09) 13.24 (8.79) 375,832 1.07 2.04 4.29
1995 13.24 .33 .71 1.04 (.26) (.11) (.37) 13.91 7.97 331,936 1.01 2.08 36.06
Rising Dividends Fund
19921 10.00 .06 .92 .98 -- -- -- 10.98 9.80 97,687 .67 5* 2.11* 5.22
1993 10.98 .14 (.52) (.38) (.03) -- (.03) 10.57 (3.48) 299,730 .79 2.31 13.58
1994 10.57 .26 (.69) (.43) (.17) -- (.17) 9.97 (4.08) 309,929 .80 2.71 24.07
1995 9.97 .27 2.66 2.93 (.24) -- (.24) 12.66 29.74 463,253 .78 2.72 18.72
Utility Equity Fund
1991 12.26 .35 2.60 2.95 (.35) -- (.35) 14.86 24.56 243,626 .63 5.92 2.01
1992 14.86 .35 .92 1.27 (.31) -- (.31) 15.82 8.69 667,118 .55 5.18 .13
1993 15.82 .38 1.28 1.66 (.34) -- (.34) 17.14 10.54 1,589,634 .51 4.47 4.80
1994 17.14 .95 (2.94) (1.99) (.62) (.11) (.73) 14.42 (11.56) 1,155,110 .52 5.58 11.74
1995 14.42 .84 3.54 4.38 (.90) -- (.90) 17.90 31.35 1,423,446 .50 5.14 13.27
Templeton Developing Markets Equity Fund
19942 10.00 .07 (.51) (.44) -- -- -- 9.56 (4.40) 98,189 1.53* 1.85* 1.15
1995 9.56 .09 .18 .27 (.04) (.01) (.05) 9.78 2.77 158,084 1.41 2.01 19.96
Templeton Global Growth Fund
19942 10.15 .07 .26 .33 -- -- -- 10.48 3.25 158,856 1.14* 2.49* 7.14
1995 10.48 .16 1.17 1.33 (.06) -- (.06) 11.75 12.72 338,755 .97 2.46 30.92
Templeton Global Asset Allocation Fund
19953 10.00 .18 .52 .70 (.18) -- (.18) 10.52 7.01 14,729 .90* 3.84* 30.00
Small Cap Fund
19954 10.00 .03 .21 .24 -- -- -- 10.24 2.30 13,301 .90* 2.70* 16.04
*Annualized.
**The portfolio turnover rate excludes mortgage dollar roll transactions.
+Total return measures the change in value of an investment over the periods indicated. It assumes reinvestment of dividends and
capital gains, if any, at net asset value and is not annualized.
++Per share amounts have been calculated using the average shares outstanding during the period.
1For the period January 27, 1992 (effective date) to December 31, 1992.
2For the period March 15, 1994 (effective date) to December 31, 1994.
3For the period April 19, 1995 (effective date) to December 31, 1995.
4For the period November 1, 1995 (effective date) to December 31, 1995.
5During the periods indicated below, Advisers agreed in advance to waive a portion of its management fees and made payments of other
expenses incurred by the Funds. Had such action not been taken, the ratio of operating expenses to average net assets would have
been as follows:
</TABLE>
Ratio of
expenses
to average
net assets
---------
Adjustable U.S. Government Fund
1991........................... 0.66%
1992........................... 0.62
Zero Coupon Fund--2000
1991........................... 0.68
1992........................... 0.68
1993........................... 0.67
1994........................... 0.66
1995........................... 0.63
. Ratio of
expenses
to average
net assets
----------
Zero Coupon Fund--2005
1991........................... 0.71%
1992........................... 0.69
1993........................... 0.67
1994........................... 0.68
1995........................... 0.66
Zero Coupon Fund--2010
1991........................... 0.70
1992........................... 0.69
1993........................... 0.68
1994........................... 0.68
1995........................... 0.66
Ratio of
expenses
to average
net assets
----------
Money Market Fund
1994........................... 0.54%
1995........................... 0.53
Templeton Pacific Growth Fund
19921.......................... 2.57*
Rising Dividends Fund
19921.......................... 0.76*
Report of Independent Auditors
To the Shareholders and Board of Trustees
of Franklin Valuemark Funds:
We have audited the accompanying statements of assets and liabilities of the
funds comprising the Franklin Valuemark Funds, including each Fund's statement
of investments in securities and net assets, as of December 31, 1995, and the
related statements of operations for the period then ended, and the statements
of changes in net assets and the financial highlights for 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
December 31, 1995 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
funds comprising the Franklin Valuemark Funds as of December 31, 1995, the
results of their operations for the period then ended, and the changes in their
net assets and the financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
January 31, 1996
Franklin Valuemark Funds
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PERSUANT TO ITEM 304 (A) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph hypothetically compares the performance of the
Adjustable U.S. Government Fund to that of the Lehman Brothers Short(1-2) U.S.
Government Index, Lehman Brothers Short(1-5) U.S. Government Index, and 6-Month
CD, based on a $10,000 investment from 12/3/90 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Adj. US Gov't LB (1-2) LB (1-5) 6-Mo CD
<S> <C> <C> <C> <C>
12/3/90 $10,000 $10,000 $10,000 $10,000
12/31/90 $10,010 $10,110.9 $10,128 $10,060
1/31/91 $10,080 $10,203.92 $10,227.254 $10,115.33
2/28/91 $10,180 $10,271.47 $10,290.663 $10,166.918
3/31/91 $10,270 $10,342.14 $10,354.465 $10,216.736
4/30/91 $10,330 $10,431.29 $10,460.081 $10,264.755
5/31/91 $10,380 $10,490.02 $10,522.842 $10,312.999
6/30/91 $10,440 $10,537.01 $10,548.096 $10,362.501
7/31/91 $10,550 $10,618.78 $10,653.577 $10,412.241
8/31/91 $10,600 $10,751.19 $10,828.296 $10,459.097
9/30/91 $10,690 $10,848.38 $10,975.561 $10,504.071
10/31/91 $10,750 $10,954.59 $11,102.877 $10,546.087
11/30/91 $10,800 $11,063.59 $11,228.34 $10,585.107
12/31/91 $10,860 $11,207.86 $11,440.555 $10,617.921
1/31/92 $10,930 $11,208.64 $11,384.497 $10,649.775
2/29/92 $10,970 $11,241.6 $11,414.096 $10,682.789
3/31/92 $11,020 $11,253.29 $11,387.844 $10,716.974
4/30/92 $11,040 $11,349.5 $11,498.306 $10,749.125
5/31/92 $11,080 $11,444.5 $11,638.585 $10,781.373
6/30/92 $11,180 $11,542.92 $11,787.559 $10,812.639
7/31/92 $11,211 $11,662.27 $11,969.088 $10,839.67
8/31/92 $11,241 $11,745.08 $12,087.582 $10,866.769
9/30/92 $11,262 $11,841.97 $12,231.424 $10,891.763
10/31/92 $11,231 $11,787.74 $12,112.779 $10,917.903
11/30/92 $11,292 $11,776.54 $12,072.807 $10,948.473
12/31/92 $11,343 $11,877.23 $12,205.608 $10,975.844
1/31/93 $11,405 $11,982.94 $12,396.015 $11,002.187
2/28/93 $11,456 $12,059.63 $12,541.049 $11,027.492
3/31/93 $11,497 $12,094.6 $12,584.942 $11,052.855
4/30/93 $11,538 $12,161.12 $12,679.329 $11,078.276
5/31/93 $11,558 $12,139.23 $12,638.756 $11,103.756
6/30/93 $11,650 $12,214.49 $12,772.726 $11,130.405
7/31/93 $11,693 $12,243.81 $12,795.717 $11,157.118
8/31/93 $11,746 $12,325.84 $12,946.707 $11,182.78
9/30/93 $11,735 $12,365.28 $12,989.431 $11,208.5
10/31/93 $11,767 $12,392.49 $13,020.605 $11,234.28
11/30/93 $11,735 $12,407.36 $12,993.262 $11,260.119
12/31/93 $11,746 $12,453.27 $13,045.235 $11,286.017
1/31/94 $11,810 $12,525.49 $13,152.206 $11,310.846
2/28/94 $11,778 $12,474.14 $13,021.21 $11,340.254
3/31/94 $11,682 $12,442.95 $12,894.123 $11,373.141
4/30/94 $11,639 $12,411.85 $12,819.466 $11,409.535
5/31/94 $11,682 $12,434.19 $12,832.927 $11,449.468
6/30/94 $11,720 $12,469 $12,852.304 $11,491.831
7/31/94 $11,798 $12,568.76 $12,993.423 $11,534.351
8/31/94 $11,820 $12,611.49 $13,033.962 $11,577.028
9/30/94 $11,776 $12,601.4 $12,964.882 $11,623.336
10/31/94 $11,676 $12,636.68 $12,981.737 $11,677.966
11/30/94 $11,709 $12,596.25 $12,916.828 $11,731.685
12/31/94 $11,709 $12,626.48 $12,945.245 $11,790.343
1/31/95 $11,820 $12,780.52 $13,142.013 $11,846.937
2/28/95 $11,943 $12,932.61 $13,364.113 $11,902.617
3/31/95 $12,032 $13,006.33 $13,438.952 $11,958.56
4/30/95 $12,132 $13,111.68 $13,577.373 $12,013.569
5/31/95 $12,332 $13,293.93 $13,888.295 $12,066.429
6/30/95 $12,359 $13,364.39 $13,968.847 $12,118.314
7/31/95 $12,442 $13,427.2 $14,000.975 $12,170.423
8/31/95 $12,514 $13,501.05 $14,097.582 $12,222.756
9/30/95 $12,585 $13,561.8 $14,176.528 $12,275.314
10/31/95 $12,657 $13,662.16 $14,312.623 $12,333.008
11/30/95 $12,764 $13,763.26 $14,461.474 $12,384.806
12/31/95 $12,812 $13,859.6 $14,585.843 $12,435.584
</TABLE>
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the Global
Income Fund to that of the Salomon Brothers WGBI Hedged Index, the JP Morgan
Global Bond Unhedged Index, and the Consumer Price Index (CPI), based on a
$10,000 investment from 1/24/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Global Income SB WGBI JP Morgan CPI
<S> <C> <C> <C> <C>
1/24/89 $10,000 $10,000 $10,000 $10,000
1/31/89 $10,020 $10,020.59 $9,927.43 $10,011.86
2/28/89 $10,080 $9,937.06 $9,911.1 $10,051.87
3/31/89 $10,150 $10,003.49 $9,827.16 $10,109.66
4/30/89 $10,220 $10,142.27 $9,989.02 $10,176.35
5/31/89 $10,290 $10,263.29 $9,881.02 $10,234.14
6/30/89 $10,330 $10,481 $10,105.71 $10,259.34
7/31/89 $10,510 $10,705.95 $10,508.11 $10,284.53
8/31/89 $10,610 $10,621.76 $10,197.19 $10,300.83
9/30/89 $10,600 $10,616.5 $10,358.48 $10,333.43
10/31/89 $10,570 $10,748.04 $10,491.69 $10,383.82
11/30/89 $10,760 $10,784.88 $10,585.08 $10,407.53
12/31/89 $10,930 $10,809.87 $10,708.65 $10,423.83
1/31/90 $10,920 $10,624.39 $10,548.89 $10,532.01
2/28/90 $10,850 $10,546.12 $10,434.97 $10,580.91
3/31/90 $10,964.82 $10,548.75 $10,370.89 $10,640.19
4/30/90 $10,944.44 $10,497.45 $10,330.31 $10,656.49
5/31/90 $11,138.06 $10,770.41 $10,660.61 $10,680.2
6/30/90 $11,453.95 $10,884.85 $10,853.51 $10,738
7/31/90 $11,729.1 $10,976.93 $11,172.35 $10,779.49
8/31/90 $11,627.19 $10,821.71 $11,085.27 $10,878.78
9/30/90 $11,617 $10,846.7 $11,188.97 $10,970.66
10/31/90 $11,688.34 $11,093.35 $11,631.1 $11,035.86
11/30/90 $11,881.96 $11,301.85 $11,835.83 $11,061.06
12/31/90 $12,004.24 $11,446.56 $11,967.51 $11,061.06
1/31/91 $12,146.9 $11,616.91 $12,239 $11,127.74
2/28/91 $12,411.85 $11,726.75 $12,250.93 $11,144.04
3/31/91 $12,146.9 $11,761.61 $11,868.2 $11,160.34
4/30/91 $12,320.14 $11,859.61 $12,011.44 $11,176.65
5/31/91 $12,462.8 $11,914.86 $12,021.75 $11,209.25
6/30/91 $12,358.75 $11,878.03 $11,861.23 $11,243.33
7/31/91 $12,604.85 $12,006.95 $12,111.99 $11,259.63
8/31/91 $12,647.65 $12,217.42 $12,363.71 $11,292.24
9/30/91 $12,982.33 $12,450.26 $12,814.53 $11,342.62
10/31/91 $13,153.71 $12,543.66 $12,941.15 $11,358.92
11/30/91 $13,132.29 $12,629.16 $13,151.9 $11,391.52
12/31/91 $13,485.78 $12,957.37 $13,816.52 $11,400.42
1/31/92 $13,460.07 $12,913.3 $13,545.9 $11,416.72
2/29/92 $13,464.36 $12,960.66 $13,506.46 $11,458.21
3/31/92 $13,475.07 $12,883.71 $13,381.75 $11,516.01
4/30/92 $13,603.6 $12,949.48 $13,493.09 $11,532.31
5/31/92 $13,871.4 $13,130.36 $13,876.3 $11,548.61
6/30/92 $13,868.35 $13,252.04 $14,254.73 $11,590.1
7/31/92 $14,013.86 $13,458.57 $14,568.81 $11,615.29
8/31/92 $13,845.95 $13,548.02 $14,956.89 $11,647.9
9/30/92 $13,196.77 $13,755.86 $14,941.61 $11,680.5
10/31/92 $13,476.59 $13,809.8 $14,568.23 $11,721.99
11/30/92 $13,252.73 $13,801.25 $14,310.41 $11,738.29
12/31/92 $13,431.81 $13,976.2 $14,446 $11,730.88
1/31/93 $13,532.57 $14,194.57 $14,690.46 $11,788.68
2/28/93 $13,734.03 $14,461.61 $14,927.28 $11,829.88
3/31/93 $14,148.18 $14,455.03 $15,156.46 $11,871.67
4/30/93 $14,573.52 $14,503.71 $15,432.44 $11,904.27
5/31/93 $14,808.57 $14,534.62 $15,530.79 $11,920.87
6/30/93 $14,777.79 $14,827.31 $15,543.21 $11,937.32
7/31/93 $14,824.89 $14,960.83 $15,549.89 $11,936.87
8/31/93 $15,154.61 $15,269.97 $16,010.16 $11,970.36
9/30/93 $15,107.5 $15,359.42 $16,179.18 $11,994.67
10/31/93 $15,460.73 $15,494.26 $16,171.54 $12,045.05
11/30/93 $15,154.6 $15,504.78 $16,053.13 $12,053.05
12/31/93 $15,672.69 $15,708.68 $16,217.38 $12,052.46
1/31/94 $15,967.07 $15,719.86 $16,370.17 $12,086.1
2/28/94 $15,602.03 $15,404.15 $16,190.64 $12,128.04
3/31/94 $15,131.04 $15,208.14 $16,116.16 $12,169.53
4/30/94 $15,119.27 $15,111.45 $16,103.74 $12,185.83
5/31/94 $15,178.15 $15,033.84 $15,971.01 $12,193.24
6/30/94 $14,440.48 $14,920.05 $16,160.08 $12,234.74
7/31/94 $14,670.46 $15,079.22 $16,311.92 $12,267.34
8/31/94 $14,791.5 $14,992.4 $16,269.9 $12,317.72
9/30/94 $14,779.38 $14,942.42 $16,351.07 $12,350.33
10/31/94 $14,864.11 $14,970.04 $16,595.53 $12,359.22
11/30/94 $14,864.11 $15,081.86 $16,386.4 $12,375.52
12/31/94 $14,755.17 $15,122.64 $16,424.6 $12,375.52
1/31/95 $14,658 $15,331.14 $16,756.91 $12,424.42
2/28/95 $14,888 $15,570.55 $17,188.53 $12,474.07
3/31/95 $15,154 $15,824.44 $18,063.24 $12,515.41
4/30/95 $15,493 $16,060.56 $18,351.62 $12,556.76
5/31/95 $15,868 $16,620.95 $18,863.46 $12,581.51
6/30/95 $15,940 $16,646.61 $18,980.91 $12,606.25
7/31/95 $16,041 $16,759.08 $19,070.67 $12,605.96
8/31/95 $15,839 $16,900.52 $18,540.7 $12,640.04
9/30/95 $16,191 $17,134.09 $18,958.95 $12,663.75
10/31/95 $16,455 $17,343.3 $19,144.2 $12,705.39
11/30/95 $16,593 $17,672.13 $19,357.08 $12,704.51
12/31/95 $16,920 $17,854 $19,597 $12,696.21
</TABLE>
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the Growth
and Income Fund to that of the S&P 500 and the Consumer Price Index (CPI), based
on a $10,000 investment from 2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Growth & Income S&P 500 CPI
<S> <C> <C> <C>
2/1/89 $10,000 $10,000 $10,000
2/28/89 $10,060 $9,751 $10,041
3/31/89 $10,130 $9,978.198 $10,099.24
4/30/89 $10,190 $10,496.07 $10,164.88
5/31/89 $10,259 $10,921.16 $10,222.82
6/30/89 $9,970 $10,858.91 $10,247.36
7/31/89 $10,509 $11,839.47 $10,271.95
8/31/89 $10,998 $12,071.52 $10,288.39
9/30/89 $10,659 $12,022.03 $10,321.31
10/31/89 $10,020 $11,743.12 $10,370.85
11/30/89 $10,090 $11,982.68 $10,395.74
12/31/89 $10,269 $12,270.26 $10,412.37
1/31/90 $9,741 $11,446.92 $10,519.62
2/28/90 $9,900 $11,594.59 $10,569.06
3/31/90 $10,139 $11,901.85 $10,627.19
4/30/90 $9,938 $11,605.49 $10,644.2
5/31/90 $10,803 $12,737.03 $10,668.68
6/30/90 $10,672 $12,651.69 $10,726.29
7/31/90 $10,602 $12,611.2 $10,767.05
8/31/90 $9,716 $11,471.15 $10,866.11
9/30/90 $9,324 $10,912.5 $10,957.38
10/31/90 $9,224 $10,865.58 $11,023.13
11/30/90 $9,757 $11,567.5 $11,047.38
12/31/90 $10,028 $11,890.23 $11,047.38
1/31/91 $10,662 $12,408.65 $11,113.66
2/28/91 $11,104 $13,295.86 $11,130.33
3/31/91 $11,125 $13,617.62 $11,147.03
4/30/91 $11,155 $13,650.31 $11,163.75
5/31/91 $11,577 $14,238.63 $11,197.24
6/30/91 $10,832 $13,586.5 $11,229.71
7/31/91 $11,221 $14,219.64 $11,246.56
8/31/91 $11,600 $14,556.64 $11,279.17
9/30/91 $11,518 $14,313.54 $11,328.8
10/31/91 $11,640 $14,505.35 $11,345.79
11/30/91 $11,139 $13,920.78 $11,378.7
12/31/91 $12,030 $15,513.32 $11,386.66
1/31/92 $12,552 $15,224.77 $11,403.74
2/29/92 $12,562 $15,421.17 $11,444.79
3/31/92 $12,101 $15,120.46 $11,503.16
4/30/92 $12,122 $15,563.49 $11,519.27
5/31/92 $12,193 $15,639.75 $11,535.39
6/30/92 $11,919 $15,406.72 $11,576.92
7/31/92 $12,271 $16,036.85 $11,601.23
8/31/92 $12,095 $15,708.09 $11,633.72
9/30/92 $12,395 $15,891.88 $11,666.29
10/31/92 $12,633 $15,945.91 $11,707.12
11/30/92 $13,109 $16,488.07 $11,723.51
12/31/92 $13,233 $16,690.88 $11,715.31
1/31/93 $13,336 $16,831.08 $11,772.71
2/28/93 $13,254 $17,059.98 $11,813.92
3/31/93 $13,626 $17,419.95 $11,855.26
4/30/93 $13,450 $16,998.38 $11,888.46
5/31/93 $13,812 $17,452.24 $11,905.1
6/30/93 $13,649 $17,502.85 $11,921.77
7/31/93 $13,450 $17,432.84 $11,921.77
8/31/93 $13,951 $18,093.55 $11,955.15
9/30/93 $13,868 $17,954.23 $11,980.26
10/31/93 $14,077 $18,325.88 $12,029.38
11/30/93 $13,962 $18,151.78 $12,037.8
12/31/93 $14,598 $18,371.42 $12,037.8
1/31/94 $15,423 $18,996.05 $12,070.3
2/28/94 $15,224 $18,481.25 $12,111.34
3/31/94 $14,317 $17,675.47 $12,152.52
4/30/94 $14,400 $17,901.72 $12,169.53
5/31/94 $14,442 $18,195.31 $12,178.05
6/30/94 $13,787 $17,749.52 $12,219.45
7/31/94 $14,186 $18,331.71 $12,252.45
8/31/94 $14,659 $19,083.31 $12,301.46
9/30/94 $14,229 $18,617.67 $12,334.67
10/31/94 $14,428 $19,036.57 $12,343.3
11/30/94 $13,892 $18,343.64 $12,359.35
12/31/94 $14,102 $18,615.13 $12,359.35
1/31/95 $14,218 $19,097.26 $12,408.79
2/28/95 $14,785 $19,842.05 $12,458.42
3/31/95 $15,206 $20,427.39 $12,499.54
4/30/95 $15,658 $21,027.96 $12,540.78
5/31/95 $16,141 $21,869.07 $12,565.87
6/30/95 $16,240 $22,376.44 $12,591
7/31/95 $16,514 $23,119.33 $12,591
8/31/95 $16,710 $23,177.13 $12,623.73
9/30/95 $17,432 $24,155.21 $12,648.98
10/31/95 $17,301 $24,068.25 $12,690.72
11/30/95 $17,978 $25,124.84 $12,681.84
12/31/95 $18,732 $25,609.75 $12,672.96
</TABLE>
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the High
Income Fund to that of the Salomon Brothers Combined Corporate Index, the CS
First Boston High Yield Index, and the Consumer Price Index (CPI), based on a
$10,000 investment from 2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending High Income SB Combined CS 1st Boston CPI
<S> <C> <C> <C> <C>
2/1/89 $10,000 $10,000 $10,000 $10,000
2/28/89 $10,060 $9,947 $10,046 $10,041
3/31/89 $10,130 $9,990.38314 $9,973.6688 $10,099.2378
4/30/89 $10,200 $10,158.257 $9,949.731995 $10,164.8828
5/31/89 $10,269 $10,439.3044 $10,186.53562 $10,222.8227
6/30/89 $10,279 $10,733.5552 $10,333.22173 $10,247.3575
7/31/89 $10,309 $10,912.8056 $10,355.95482 $10,271.9511
8/31/89 $10,349 $10,774.213 $10,354.91922 $10,288.3862
9/30/89 $10,279 $10,792.6038 $10,119.86256 $10,321.3091
10/31/89 $10,050 $10,968.4959 $9,866.865991 $10,370.8514
11/30/89 $10,030 $11,045.3602 $9,886.599723 $10,395.7414
12/31/89 $10,110 $11,055.7346 $9,842.110025 $10,412.3746
1/31/90 $9,900 $10,909.5508 $9,495.667752 $10,519.622
2/28/90 $9,751 $10,904.8352 $9,319.997898 $10,569.0643
3/31/90 $9,904 $10,939.7307 $9,588.413838 $10,627.1941
4/30/90 $9,811 $10,844.0039 $9,628.685176 $10,644.1976
5/31/90 $9,873 $11,166.0797 $9,828.961828 $10,668.6793
6/30/90 $10,131 $11,360.8342 $10,138.57413 $10,726.2901
7/31/90 $10,359 $11,511.7335 $10,466.05007 $10,767.0501
8/31/90 $9,873 $11,291.0432 $9,982.518556 $10,866.1069
9/30/90 $9,233 $11,260.8633 $9,220.85239 $10,957.3822
10/31/90 $8,861 $11,257.5624 $8,989.408995 $11,023.1265
11/30/90 $9,057 $11,480.4622 $9,170.096116 $11,047.3774
12/31/90 $9,233 $11,646.4425 $9,214.112577 $11,047.3774
1/31/91 $9,326 $11,817.6097 $9,466.579262 $11,113.6616
2/28/91 $9,915 $12,108.0752 $10,283.54505 $11,130.3321
3/31/91 $10,266 $12,347.8151 $10,921.12485 $11,147.0276
4/30/91 $10,545 $12,580.2945 $11,374.35153 $11,163.7482
5/31/91 $10,638 $12,672.2488 $11,431.22328 $11,197.2394
6/30/91 $10,885 $12,723.1774 $11,730.72133 $11,229.7114
7/31/91 $11,145 $12,926.8916 $12,127.21972 $11,246.556
8/31/91 $11,349 $13,206.0555 $12,347.93511 $11,279.171
9/30/91 $11,496 $13,460.2266 $12,628.23324 $11,328.7993
10/31/91 $11,779 $13,625.7444 $13,046.22776 $11,345.7925
11/30/91 $11,915 $13,767.6842 $13,150.59758 $11,378.6953
12/31/91 $11,983 $14,162.852 $13,246.59695 $11,386.6604
1/31/92 $12,368 $14,100.1344 $13,785.73344 $11,403.7404
2/29/92 $12,582 $14,262.3513 $14,120.72676 $11,444.7939
3/31/92 $12,752 $14,236.887 $14,331.12559 $11,503.1623
4/30/92 $12,831 $14,331.6707 $14,342.59049 $11,519.2668
5/31/92 $13,012 $14,618.3795 $14,537.64972 $11,535.3937
6/30/92 $13,135 $14,851.3305 $14,681.57246 $11,576.9212
7/31/92 $13,384 $15,195.5698 $14,907.66867 $11,601.2327
8/31/92 $13,609 $15,352.1279 $15,113.3945 $11,633.7161
9/30/92 $13,716 $15,524.2475 $15,211.63156 $11,666.2905
10/31/92 $13,550 $15,284.6947 $15,053.4306 $11,707.1226
11/30/92 $13,811 $15,322.8911 $15,279.23206 $11,723.5125
12/31/92 $13,965 $15,574.1865 $15,451.88738 $11,715.3061
1/31/93 $14,226 $15,949.525 $15,873.7239 $11,772.7111
2/28/93 $14,452 $16,289.4986 $16,188.02364 $11,813.9156
3/31/93 $14,665 $16,383.3332 $16,529.59093 $11,855.2643
4/30/93 $14,725 $16,507.8173 $16,623.8096 $11,888.459
5/31/93 $14,867 $16,545.0682 $16,866.51722 $11,905.1029
6/30/93 $15,175 $16,928.9138 $17,171.80119 $11,921.77
7/31/93 $15,286 $17,054.1877 $17,350.38792 $11,921.77
8/31/93 $15,372 $17,419.1474 $17,497.86621 $11,955.151
9/30/93 $15,372 $17,487.082 $17,597.60405 $11,980.2568
10/31/93 $15,889 $17,593.7532 $17,919.64021 $12,029.3758
11/30/93 $15,988 $17,440.6876 $18,145.42767 $12,037.7964
12/31/93 $16,160 $17,559.2842 $18,374.06006 $12,037.7964
1/31/94 $16,504 $17,882.3751 $18,701.11833 $12,070.2984
2/28/94 $16,381 $17,555.1276 $18,729.17001 $12,111.3375
3/31/94 $15,606 $17,023.2072 $18,178.53241 $12,152.516
4/30/94 $15,384 $16,871.7007 $17,934.94008 $12,169.5295
5/31/94 $15,434 $16,843.0188 $18,037.16923 $12,178.0482
6/30/94 $15,588 $16,817.7543 $17,916.3202 $12,219.4536
7/31/94 $15,562 $17,152.4276 $18,000.52691 $12,252.4461
8/31/94 $15,678 $17,195.3087 $18,130.1307 $12,301.4559
9/30/94 $15,730 $16,947.6962 $18,202.65122 $12,334.6698
10/31/94 $15,756 $16,920.5799 $18,215.39308 $12,343.3041
11/30/94 $15,652 $16,852.8976 $18,004.09452 $12,359.3504
12/31/94 $15,821 $17,006.259 $18,194.93792 $12,359.3504
1/31/95 $16,080 $17,344.6835 $18,385.98477 $12,408.7878
2/28/95 $16,702 $17,826.8657 $18,838.27999 $12,458.4229
3/31/95 $16,870 $17,976.6114 $19,051.15256 $12,499.5357
4/30/95 $17,363 $18,289.4044 $19,474.08814 $12,540.7842
5/31/95 $17,842 $19,095.9672 $20,023.25743 $12,565.8657
6/30/95 $17,935 $19,243.0061 $20,155.41093 $12,590.9975
7/31/95 $18,185 $19,221.8388 $20,467.8198 $12,590.9975
8/31/95 $18,240 $19,479.4114 $20,525.12969 $12,623.7341
9/30/95 $18,434 $19,697.5808 $20,761.16868 $12,648.9815
10/31/95 $18,684 $19,945.7704 $20,991.61766 $12,690.7232
11/30/95 $18,628 $20,296.8159 $21,090.27826 $12,681.8397
12/31/95 $18,947 $20,615.4759 $21,358.12479 $12,672.9624
</TABLE>
GRAPHIC MATERIAL (5)
The following line graph hypothetically compares the performance of the Income
Securities Fund to that of the Lehman Brothers Government/Corporate Bond Index,
the S&P 500, and the Lipper Income Average, based on a $10,000 investment from
2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Income Sec LB Gov't S&P 500 Lipper Income
<S> <C> <C> <C> <C>
2/01/89 $10,000 $10,000 $10,000 $10,000
3/31/89 $10,130 $9,976.5972 $9,978.1983 $10,238.67
6/30/89 $10,259 $10,778.716 $10,858.99933 $10,869.37207
9/30/89 $10,439 $10,880.036 $12,021.94255 $11,203.06179
12/31/89 $10,878 $11,272.805 $12,270.02443 $11,382.31078
3/31/90 $10,672 $11,144.295 $11,900.91269 $10,980.51521
6/30/90 $11,008 $11,545.489 $12,649.53649 $11,229.77291
9/30/90 $10,081 $11,614.762 $10,911.08318 $10,363.95742
12/31/90 $10,071 $12,207.115 $11,889.13486 $10,469.66978
3/31/91 $11,731 $12,535.487 $13,616.12622 $11,260.12985
6/30/91 $12,427 $12,724.773 $13,584.88969 $11,389.62134
9/30/91 $13,422 $13,456.447 $14,311.34838 $12,180.06107
12/31/91 $13,971 $14,173.676 $15,511.31266 $12,854.83645
3/31/92 $14,906 $13,961.07 $15,119.55593 $12,854.83645
6/30/92 $15,484 $14,527.89 $15,406.85656 $13,226.34122
9/30/92 $15,823 $15,236.851 $15,892.53247 $13,728.94219
12/31/92 $15,952 $15,247.517 $16,692.70509 $14,017.24997
3/31/93 $16,945 $15,958.051 $17,421.68262 $14,796.60907
6/30/93 $17,636 $16,438.388 $17,506.51283 $15,123.61413
9/30/93 $18,330 $16,984.143 $17,958.85702 $15,613.61923
12/31/93 $18,917 $16,934.889 $18,375.238 $15,794.73721
3/31/94 $18,114 $16,401.44 $17,678.41816 $15,312.99773
6/30/94 $17,780 $16,198.062 $17,752.82365 $15,270.12134
9/30/94 $18,139 $16,279.052 $18,620.90547 $15,592.3209
12/31/94 $17,694 $16,339.285 $18,617.18128 $15,366.23224
3/31/95 $18,423 $17,152.981 $20,430.49474 $16,251.32722
6/30/95 $19,829 $18,264.494 $22,381.60699 $17,226.40685
9/30/95 $20,763 $18,613.346 $24,160.94475 $18,037.77062
12/31/95 $21,657 $19,486 $25,610 $18,847.66652
</TABLE>
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the
Investment Grade Intermediate Bond Fund to that of the Lehman Brothers
Government/Corporate Bond Index and the Consumer Price Index (CPI), based on a
$10,000 investment from 2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Inv. Grade Int. Bond LB Gov't/Corp CPI
<S> <C> <C> <C>
2/1/89 $10,000 $10,000 $10,000
2/28/89 $10,060 $9,924 $10,041
3/31/89 $10,130 $9,976.5972 $10,099.238
4/30/89 $10,200 $10,188.101 $10,164.883
5/31/89 $10,269 $10,438.728 $10,222.823
6/30/89 $10,369 $10,779.031 $10,247.357
7/31/89 $10,499 $11,003.235 $10,271.951
8/31/89 $10,399 $10,832.685 $10,288.386
9/30/89 $10,439 $10,880.348 $10,321.309
10/31/89 $10,589 $11,155.621 $10,370.851
11/30/89 $10,689 $11,256.022 $10,395.741
12/31/89 $10,729 $11,272.906 $10,412.375
1/31/90 $10,649 $11,118.467 $10,519.622
2/28/90 $10,719 $11,142.928 $10,569.064
3/31/90 $10,736 $11,144.042 $10,627.194
4/30/90 $10,695 $11,041.517 $10,644.198
5/31/90 $10,899 $11,361.721 $10,668.679
6/30/90 $11,000 $11,545.781 $10,726.29
7/31/90 $11,122 $11,688.948 $10,767.05
8/31/90 $11,092 $11,519.459 $10,866.107
9/30/90 $11,173 $11,615.07 $10,957.382
10/31/90 $11,274 $11,769.55 $11,023.127
11/30/90 $11,447 $12,026.127 $11,047.377
12/31/90 $11,538 $12,207.721 $11,047.377
1/31/91 $11,681 $12,344.448 $11,113.662
2/28/91 $11,782 $12,450.61 $11,130.332
3/31/91 $11,874 $12,536.519 $11,147.028
4/30/91 $12,016 $12,680.689 $11,163.748
5/31/91 $12,097 $12,740.288 $11,197.239
6/30/91 $12,116 $12,726.274 $11,229.711
7/31/91 $12,222 $12,886.625 $11,246.556
8/31/91 $12,424 $13,183.017 $11,279.171
9/30/91 $12,678 $13,458.543 $11,328.799
10/31/91 $12,784 $13,578.324 $11,345.793
11/30/91 $12,890 $13,714.107 $11,378.695
12/31/91 $13,281 $14,176.272 $11,386.66
1/31/92 $13,165 $13,966.463 $11,403.74
2/29/92 $13,154 $14,040.486 $11,444.794
3/31/92 $13,091 $13,963.263 $11,503.162
4/30/92 $13,176 $14,047.043 $11,519.267
5/31/92 $13,387 $14,319.555 $11,535.394
6/30/92 $13,575 $14,530.053 $11,576.921
7/31/92 $13,902 $14,902.022 $11,601.233
8/31/92 $14,043 $15,034.65 $11,633.716
9/30/92 $14,250 $15,239.121 $11,666.291
10/31/92 $14,109 $15,005.963 $11,707.123
11/30/92 $14,022 $14,992.457 $11,723.513
12/31/92 $14,141 $15,250.328 $11,715.306
1/31/93 $14,348 $15,582.785 $11,772.711
2/28/93 $14,686 $15,906.907 $11,813.916
3/31/93 $14,730 $15,960.99 $11,855.264
4/30/93 $14,839 $16,083.89 $11,888.459
5/31/93 $14,806 $16,075.848 $11,905.103
6/30/93 $14,999 $16,440.77 $11,921.77
7/31/93 $15,055 $16,545.99 $11,921.77
8/31/93 $15,268 $16,926.548 $11,955.151
9/30/93 $15,335 $16,985.791 $11,980.257
10/31/93 $15,369 $17,055.433 $12,029.376
11/30/93 $15,291 $16,862.706 $12,037.796
12/31/93 $15,347 $16,936.902 $12,037.796
1/31/94 $15,481 $17,190.956 $12,070.298
2/28/94 $15,324 $16,816.193 $12,111.337
3/31/94 $15,190 $16,404.196 $12,152.516
4/30/94 $15,156 $16,268.042 $12,169.53
5/31/94 $15,178 $16,238.759 $12,178.048
6/30/94 $15,159 $16,201.41 $12,,219.454
7/31/94 $15,298 $16,525.438 $12,252.446
8/31/94 $15,332 $16,532.048 $12,301.456
9/30/94 $15,309 $16,282.414 $12,334.67
10/31/94 $15,332 $16,264.504 $12,343.304
11/30/94 $15,321 $16,235.228 $12,359.35
12/31/94 $15,367 $16,342.38 $12,359.35
1/31/95 $15,529 $16,656.154 $12,,408.788
2/28/95 $15,702 $17,042.577 $12,458.423
3/31/95 $15,760 $17,156.762 $12,499.536
4/30/95 $15,887 $17,395.241 $12,540.784
5/31/95 $16,152 $18,124.101 $12,565.866
6/30/95 $16,264 $18,269.094 $12,590.997
7/31/95 $16,300 $18,197.845 $12,590.997
8/31/95 $16,421 $18,430.777 $12,623.734
9/30/95 $16,505 $18,618.771 $12,,648.982
10/31/95 $16,637 $18,892.467 $12,690.723
11/30/95 $16,793 $19,204.193 $12,681.84
12/31/95 $16,902 $19,486.494 $12,672.962
</TABLE>
GRAPHIC MATERIAL (7)
The following line graph hypothetically compares the performance of the Precious
Metals Fund to that of the S&P 500 Index, based on a $10,000 investment from
2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Precious Metals Fund S&P 500
<S> <C> <C>
02/01/89 $10,000 $10,000
02/28/89 $10,060 $9,751
03/31/89 $10,130 $9,978.1983
04/30/89 $10,200 $10,496.067
05/31/89 $10,070 $10,921.157
06/30/89 $10,339 $10,858.907
07/31/89 $10,479 $11,839.466
08/31/89 $10,729 $12,071.52
09/30/89 $11,088 $12,022.026
10/31/89 $11,158 $11,743.115
11/30/89 $12,206 $11,982.675
12/31/89 $12,405 $12,270.259
01/31/90 $12,894 $11,446.925
02/28/90 $12,156 $11,594.59
03/31/90 $12,014 $11,901.847
04/30/90 $11,236 $11,605.491
05/31/90 $11,923 $12,737.026
06/30/90 $11,357 $12,651.688
07/31/90 $12,014 $12,611.203
08/31/90 $11,670 $11,471.15
09/30/90 $11,478 $10,912.505
10/31/90 $10,428 $10,865.581
11/30/90 $10,165 $11,567.498
12/31/90 $10,630 $11,890.231
01/31/91 $9,811 $12,408.645
02/28/91 $10,680 $13,295.863
03/31/91 $10,589 $13,617.623
04/30/91 $10,539 $13,650.305
05/31/91 $10,832 $14,238.633
06/30/91 $11,235 $13,586.504
07/31/91 $11,359 $14,219.635
08/31/91 $10,792 $14,556.64
09/30/91 $10,813 $14,313.545
10/31/91 $11,204 $14,505.346
11/30/91 $11,338 $13,920.781
12/31/91 $10,596 $15,513.318
01/31/92 $11,318 $15,224.77
02/29/92 $11,142 $15,421.17
03/31/92 $10,730 $15,120.457
04/30/92 $10,586 $15,563.486
05/31/92 $11,101 $15,639.747
06/30/92 $11,384 $15,406.715
07/31/92 $11,469 $16,036.85
08/31/92 $11,098 $15,708.094
09/30/92 $10,960 $15,891.879
10/31/92 $10,292 $15,945.912
11/30/92 $9,593 $16,488.073
12/31/92 $9,921 $16,690.876
01/31/93 $9,847 $16,831.079
02/28/93 $10,335 $17,059.982
03/31/93 $11,320 $17,419.947
04/30/93 $12,083 $16,998.385
05/31/93 $13,631 $17,452.242
06/30/93 $13,710 $17,502.853
07/31/93 $14,927 $17,432.842
08/31/93 $13,795 $18,093.546
09/30/93 $12,664 $17,954.226
10/31/93 $13,859 $18,325.879
11/30/93 $13,742 $18,151.783
12/31/93 $15,440 $18,371.419
01/31/94 $15,546 $18,996.048
02/28/94 $14,895 $18,481.255
03/31/94 $15,066 $17,675.472
04/30/94 $14,361 $17,901.718
05/31/94 $14,831 $18,195.306
06/30/94 $14,530 $17,749.521
07/31/94 $14,809 $18,331.705
08/31/94 $15,464 $19,083.305
09/30/94 $16,475 $18,617.673
10/31/94 $15,884 $19,036.57
11/30/94 $14,615 $18,343.639
12/31/94 $15,142 $18,615.125
01/31/95 $13,358 $19,097.257
02/28/95 $13,960 $19,842.05
03/31/95 $15,260 $20,427.39
04/30/95 $15,411 $21,027.956
05/31/95 $15,303 $21,869.074
06/30/95 $15,289 $22,376.436
07/31/95 $15,784 $23,119.334
08/31/95 $15,685 $23,177.132
09/30/95 $15,751 $24,155.207
10/31/95 $13,990 $24,068.249
11/30/95 $15211 $25124.845
12/31/95 $15498 $25609.754
</TABLE>
GRAPHIC MATERIAL (8)
The following line graph hypothetically compares the performance of the Real
Estate Securities Fund to that of the S&P 500 Index, the NAREIT Equity Index,
and the Wilshire Real Estate Securities Index, based on a $10,000 investment
from 2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Real Est Sec S&P 500 NAREIT Equity Wilshire
<S> <C> <C> <C> <C>
2/01/89 $10,000 $10,000 $10,000 $10,000
3/31/89 $10,130 $9,978.198 $10,015.86 $10,096.182
6/30/89 $10,519 $10,859.27 $10,596.54 $10,573.73141
9/30/89 $10,729 $12,022.3 $10,985.8 $10,768.28807
12/31/89 $10,459 $12,269.96 $10,647.45 $10,073.73349
3/31/90 $10,229 $11,900.63 $10,235.2 $9,573.068932
6/30/90 $10,239 $12,649.18 $10,223.17 $9,363.418722
9/30/90 $8,790 $10,911.19 $8,735.709 $7,030.991119
12/31/90 $9,206 $11,888.83 $9,012.941 $6,702.643833
3/31/91 $11,059 $13,616.28 $11,062.39 $8,480.855242
6/30/91 $11,074 $13,584.96 $11,148.53 $8,121.26698
9/30/91 $11,390 $14,311.75 $11,604.82 $7,897.932138
12/31/91 $11,886 $15,511.08 $12,230.18 $8,044.833676
3/31/92 $12,371 $15,118.65 $12,311.17 $8,221.015533
6/30/92 $12,365 $15,405.9 $12,635.35 $7,872.444475
9/30/92 $12,904 $15,891.19 $13,498.09 $8,077.915276
12/31/92 $13,776 $16,690.52 $14,014.53 $8,639.330387
3/31/93 $15,823 $17,419.89 $17,047.35 $1,0336.95881
6/30/93 $15,588 $17,505.25 $16,559.45 $9,849.054353
9/30/93 $17,158 $17,956.88 $18,107.98 $10,722.66547
12/31/93 $16,395 $18,373.48 $16,770.85 $9,954.922626
3/31/94 $16,766 $17,677.13 $17,341.62 $10,178.90838
6/30/94 $16,976 $17,751.37 $17,665.39 $10,300.03739
9/30/94 $16,611 $18,619.41 $17,303.62 $10,144.50683
12/31/94 $16,909 $18,615.69 $17,305.35 $10,119.14556
3/31/95 $16,699 $20,428.86 $17,277.66 $10,157.59832
6/30/95 $17,623 $22,379.82 $18,293.59 $10,599.45384
9/30/95 $18,902 $24,159.01 $19,153.39 $11,101.86795
12/31/95 $19,873 $25,610 $19,946.34 $11,500.42501
</TABLE>
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the Rising
Dividends Fund to that of the Wilshire MidCap Growth Index, based on a $10,000
investment from 2/1/92 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Rising Dividends Fund Wishire MidCap Growth Index
<S> <C> <C>
2/1/92 $10,000 $10,000
2/29/92 $10,000 $10,169
3/31/92 $9,930 $9,763.2569
4/30/92 $9,980 $9,530.8914
5/31/92 $10,130 $9,411.7552
6/30/92 $9,990 $8,984.4616
7/31/92 $10,350 $9,476.81
8/31/92 $10,240 $9,278.7447
9/30/92 $10,410 $9,441.1228
10/31/92 $10,540 $9,826.3206
11/30/92 $10,860 $10,579.017
12/31/92 $10,980 $10,902.735
1/31/93 $10,860 $11,149.136
2/28/93 $10,670 $10,773.411
3/31/93 $10,760 $11,104.154
4/30/93 $10,390 $10,640.001
5/31/93 $10,530 $11,246.481
6/30/93 $10,418 $11,320.707
7/31/93 $10,418 $11,219.953
8/31/93 $10,588 $11,788.805
9/30/93 $10,588 $12,084.704
10/31/93 $10,749 $12,148.753
11/30/93 $10,478 $11,959.232
12/31/93 $10,598 $12,620.578
1/31/94 $10,739 $13,066.084
2/28/94 $10,378 $13,135.334
3/31/94 $9,916 $12,353.782
4/30/94 $9,936 $12,403.197
5/31/94 $10,077 $12,213.428
6/30/94 $10,054 $11,597.871
7/31/94 $10,156 $11,880.859
8/31/94 $10,584 $12,897.861
9/30/94 $10,340 $12,795.968
10/31/94 $10,309 $13,108.189
11/30/94 $10,064 $12,527.497
12/31/94 $10,166 $12,735.453
1/31/95 $10,442 $12,738
2/28/95 $10,748 $13,502.28
3/31/95 $10,982 $14,000.514
4/30/95 $11,064 $14,209.122
5/31/95 $11,441 $14,442.152
6/30/95 $11,565 $15,350.563
7/31/95 $11,815 $16,640.01
8/31/95 $12,013 $16,894.602
9/30/95 $12,409 $17,365.962
10/31/95 $12,304 $16,754.68
11/30/95 $12,940 $17,634.301
12/31/95 $13,190 $17,697.784
</TABLE>
GRAPHIC MATERIAL (10)
The following line graph hypothetically compares the performance of the
Templeton Developing Markets Equity Fund to that of the MSCI World Index and the
IFC Investable Composite Index, based on a $10,000 investment from 3/15/94 to
12/31/95.
<TABLE>
<CAPTION>
Period Ending T. Dev. Markets MSCI World IFC Inv. Comp
<S> <C> <C> <C>
3/15/94 $10,000 $10,000 $10,000
3/31/94 $10,000 $9,773.81 $9,451.54
4/30/94 $10,060 $10,077.51 $9,271.69
5/31/94 $10,040 $10,105.12 $9,490.6
6/30/94 $9,990 $10,078.9 $9,153.71
7/31/94 $10,250 $10,272.16 $9,810.71
8/31/94 $10,530 $10,583.46 $11,072.81
9/30/94 $10,520 $10,307.36 $11,346.51
10/31/94 $10,410 $10,602.1 $10,971.87
11/30/94 $10,000 $10,144.47 $10,550.56
12/31/94 $9,560 $10,244.55 $9,437.91
1/31/95 $8,910 $10,092.7 $8,173.72
2/28/95 $8,780 $10,241.79 $8,067.8
3/31/95 $9,150 $10,737.38 $8,052.07
4/30/95 $9,540 $11,113.57 $8,387.91
5/31/95 $9,800 $11,210.83 $8,700.94
6/30/95 $9,855 $11,209.51 $8,754.42
7/31/95 $10,438 $11,772.75 $9,026.03
8/31/95 $10,167 $11,512.52 $8,786.41
9/30/95 $10,097 $11,850.05 $8,722.44
10/31/95 $9,735 $11,665.76 $8,390.79
11/30/95 $9,665 $12,073 $8,348.85
12/31/95 $9,826 $12,428.47 $8,639.33
</TABLE>
GRAPHIC MATERIAL (11)
The following line graph hypothetically compares the performance of the
Templeton Global Asset Allocation Portfolio to that of the MSCI World Index and
the JP Morgan Global Bond Unhedged Index, based on a $10,000 investment from
5/1/95 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending T. Glo. Asset All. MSCI World JP Morgan
<S> <C> <C> <C>
5/01/95 $10,000 $10,000 $10,000
5/31/95 $10,070 $10,214.27 $10,338.62
6/30/95 $10,130 $10,213.07 $10,402.99
7/31/95 $10,340 $10,726.23 $10,452.19
8/31/95 $10,290 $10,489.15 $10,161.73
9/30/95 $10,390 $10,796.67 $10,390.96
10/31/95 $10,320 $10,628.76 $10,492.49
11/30/95 $10,430 $10,999.8 $10,609.16
12/31/95 $10,701 $11,323.67 $10,740.5
</TABLE>
GRAPHIC MATERIAL (12)
The following line graph hypothetically compares the performance of the
Templeton Global Growth Fund to that of the MSCI World Index, based on a $10,000
investment from 3/15/94 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending T. Glo. Growth Fund MSCI World
<S> <C> <C>
3/15/94 $10,000 $10,000
3/31/94 $10,029.5 $9,773.78
4/30/94 $10,078.71 $10,077.49
5/31/94 $10,118.08 $10,105.1
6/30/94 $10,019.66 $10,078.87
7/31/94 $10,295.25 $10,272.13
8/31/94 $10,551.15 $10,583.43
9/30/94 $10,482 $10,307.34
10/31/94 $10,492 $10,602.07
11/30/94 $10,285 $10,144.44
12/31/94 $10,315 $10,244.52
1/31/95 $10,226 $10,092.67
2/28/95 $10,335 $10,241.76
3/31/95 $10,335 $10,737.35
4/30/95 $10,630 $11,113.54
5/31/95 $10,896 $11,210.8
6/30/95 $11,053 $11,209.48
7/31/95 $11,498 $11,772.71
8/31/95 $11,399 $11,512.49
9/30/95 $11,617 $11,850.02
10/31/95 $11,231 $11,665.73
11/30/95 $11,310 $12,072.97
12/31/95 $11,627 $12,428.44
</TABLE>
GRAPHIC MATERIAL (13)
The following line graph hypothetically compares the performance of the
Templeton International Equity Fund to that of the MSCI EAFE Index, based on a
$10,000 investment from 1/27/92 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending T. Int'l Equity MSCI EAFE Index
<S> <C> <C>
1/27/92 $10,000 $10,000
1/31/92 $10,000 $10,182.92
2/29/92 $10,000 $9,821.34
3/31/92 $10,000 $9,175.7
4/30/92 $10,010 $9,221.26
5/31/92 $10,270 $9,841.46
6/30/92 $10,040 $9,378.09
7/31/92 $9,760 $9,140.78
8/31/92 $9,860 $9,717.18
9/30/92 $9,740 $9,528.4
10/31/92 $9,570 $9,031.89
11/30/92 $9,670 $9,119.48
12/31/92 $9,760 $9,169.19
1/31/93 $9,630 $9,170.96
2/28/93 $9,770 $9,450.88
3/31/93 $9,930 $10,277.02
4/30/93 $10,200 $11,255.25
5/31/93 $10,410 $11,496.1
6/30/93 $10,219 $11,319.16
7/31/93 $10,419 $11,718.02
8/31/93 $11,132 $12,353.01
9/30/93 $11,042 $12,077.83
10/31/93 $11,694 $12,453.03
11/30/93 $11,403 $11,367.09
12/31/93 $12,548 $12,190.27
1/31/94 $13,461 $13,223.54
2/28/94 $13,230 $13,189.81
3/31/94 $12,748 $12,624.05
4/30/94 $12,869 $13,162.58
5/31/94 $12,939 $13,089.79
6/30/94 $12,602 $13,277.98
7/31/94 $13,118 $13,408.77
8/31/94 $13,512 $13,728.93
9/30/94 $13,249 $13,299.29
10/31/94 $13,461 $13,745.5
11/30/94 $12,885 $13,088.02
12/31/94 $12,652 $13,172.64
1/31/95 $12,389 $12,670.21
2/28/95 $12,571 $12,637.07
3/31/95 $12,531 $13,428.89
4/30/95 $13,087 $13,937.24
5/31/95 $13,330 $13,774.67
6/30/95 $13,625 $13,536.59
7/31/95 $14,203 $14,383.44
8/31/95 $13,898 $13,837.81
9/30/95 $14,203 $14,111.81
10/31/95 $13,793 $13,736.03
11/30/95 $13,825 $14,121.87
12/31/95 $13,993 $14,694.73
</TABLE>
GRAPHIC MATERIAL (14)
The following line graph hypothetically compares the performance of the
Templeton Pacific Growth Fund to that of the MSCI Pacific Index, based on a
$10,000 investment from 1/27/92 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending T. Pacific Growth MSCI Pacific Index
<S> <C> <C>
1/27/92 $10,000 $10,000
1/31/92 $10,000 $9,948.5
2/29/92 $10,000 $9,253.22
3/31/92 $10,000 $8,374.99
4/30/92 $10,010 $7,992.83
5/31/92 $10,210 $8,618.09
6/30/92 $10,450 $7,942.16
7/31/92 $9,900 $7,833.7
8/31/92 $9,570 $8,908.46
9/30/92 $9,789.99 $8,706.15
10/31/92 $10,229.99 $8,400.83
11/30/92 $10,109.98 $8,560.97
12/31/92 $9,879.99 $8,464.75
1/31/93 $9,979.99 $8,450.47
2/28/93 $10,330 $8,862.22
3/31/93 $10,270 $9,934.59
4/30/93 $10,919.99 $11,519.35
5/31/93 $11,289.99 $11,856.3
6/30/93 $11,099.99 $11,663.85
7/31/93 $11,229.99 $12,355.42
8/31/93 $11,769.98 $12,722.63
9/30/93 $11,840 $12,248.66
10/31/93 $13,110 $12,522.36
11/30/93 $12,969.99 $10,757.4
12/31/93 $14,609.99 $11,509.15
1/31/94 $14,719.99 $12,843.33
2/28/94 $14,299.99 $13,176.53
3/31/94 $13,329.99 $12,450.96
4/30/94 $13,519.99 $12,991.23
5/31/94 $14,079.99 $13,302.17
6/30/94 $13,704.13 $13,739.24
7/31/94 $13,955.67 $13,446.46
8/31/94 $14,549.31 $13,682.11
9/30/94 $14,005.97 $13,341.78
10/31/94 $14,097 $13,681.12
11/30/94 $13,191 $12,919.83
12/31/94 $13,322 $13,008.7
1/31/95 $12,356 $12,189.21
2/28/95 $12,869 $11,889.28
3/31/95 $13,191 $12,804.44
4/30/95 $13,372 $13,351.3
5/31/95 $13,895 $12,819.57
6/30/95 $13,640 $12,278.56
7/31/95 $14,167 $13,166.09
8/31/95 $14,002 $12,672.31
9/30/95 $14,261 $12,791.65
10/31/95 $13,692 $12,171.82
11/30/95 $13,764 $12,772.27
12/31/95 $14,384 $13,397.92
</TABLE>
GRAPHIC MATERIAL (15)
The following line graph hypothetically compares the performance of the U.S.
Government Securities Fund to that of the Lehman Brothers Intermediate
Government Bond Index and the Consumer Price Index (CPI), based on a $10,000
investment from 4/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending US Gov't Sec LB Int Gov't Bond CPI
<S> <C> <C> <C>
4/01/89 $10,000 $10,000 $10,000
4/30/89 $10,000 $10,202 $10,065
5/31/89 $10,000 $10,398.8986 $10,122.3705
6/30/89 $10,050 $10,664.07051 $10,146.6642
7/31/89 $10,190 $10,880.55115 $10,171.0162
8/31/89 $10,080 $10,733.66371 $10,187.2898
9/30/89 $10,140 $10,785.18529 $10,219.8891
10/31/89 $10,370 $11,011.67418 $10,268.9446
11/30/89 $10,470 $11,120.68976 $10,293.5901
12/31/89 $10,540 $11,152.93976 $10,310.0598
1/31/90 $10,420 $11,083.79153 $10,416.2534
2/28/90 $10,480 $11,124.80156 $10,465.2098
3/31/90 $10,510 $11,138.15132 $10,522.7685
4/30/90 $10,398 $11,101.39542 $10,539.6049
5/31/90 $10,671 $11,338.96528 $10,563.846
6/30/90 $10,793 $11,488.63963 $10,620.8908
7/31/90 $10,964 $11,649.48058 $10,661.2502
8/31/90 $10,894 $11,607.54245 $10,759.3337
9/30/90 $10,974 $11,710.84958 $10,849.7121
10/31/90 $11,096 $11,873.63039 $10,914.8103
11/30/90 $11,318 $12,052.92221 $10,938.8229
12/31/90 $11,480 $12,219.25253 $10,938.8229
1/31/91 $11,652 $12,345.11083 $11,004.4558
2/28/91 $11,753 $12,420.41601 $11,020.9625
3/31/91 $11,813 $12,488.7283 $11,037.494
4/30/91 $11,904 $12,617.3622 $11,054.0502
5/31/91 $11,995 $12,688.01943 $11,087.2124
6/30/91 $12,011 $12,698.16984 $11,119.3653
7/31/91 $12,178 $12,835.31008 $11,136.0443
8/31/91 $12,398 $13,079.18097 $11,168.3389
9/30/91 $12,649 $13,301.52704 $11,217.4796
10/31/91 $12,806 $13,453.16445 $11,234.3058
11/30/91 $12,890 $13,610.56648 $11,266.8853
12/31/91 $13,235 $13,941.30324 $11,274.7721
1/31/92 $13,046 $13,807.46673 $11,291.6842
2/29/92 $13,162 $13,850.26988 $11,332.3343
3/31/92 $13,067 $13,794.8688 $11,390.1292
4/30/92 $13,172 $13,919.02262 $11,406.0754
5/31/92 $13,465 $14,126.41606 $11,422.0439
6/30/92 $13,672 $14,329.83645 $11,463.1632
7/31/92 $13,953 $14,604.96931 $11,487.2359
8/31/92 $14,116 $14,753.93999 $11,519.4001
9/30/92 $14,278 $14,957.54436 $11,551.6545
10/31/92 $14,040 $14,778.05383 $11,592.0853
11/30/92 $14,072 $14,717.46381 $11,608.3142
12/31/92 $14,332 $14,907.3191 $11,600.1884
1/31/93 $14,635 $15,184.59523 $11,657.0293
2/28/93 $14,895 $15,407.80878 $11,697.8289
3/31/93 $14,971 $15,464.81767 $11,738.7713
4/30/93 $15,057 $15,585.44325 $11,771.6398
5/31/93 $15,101 $15,543.36255 $11,788.1201
6/30/93 $15,374 $15,768.74131 $11,804.6235
7/31/93 $15,476 $15,800.27879 $11,804.6235
8/31/93 $15,702 $16,035.70295 $11,837.6765
9/30/93 $15,702 $16,101.44933 $11,862.5356
10/31/93 $15,781 $16,140.09281 $11,911.172
11/30/93 $15,577 $16,061.00635 $11,919.5098
12/31/93 $15,724 $16,126.85648 $11,919.5098
1/31/94 $15,928 $16,286.51236 $11,951.6925
2/28/94 $15,611 $16,063.38714 $11,992.3282
3/31/94 $15,058 $15,828.86169 $12,033.1021
4/30/94 $14,911 $15,725.97409 $12,049.9485
5/31/94 $14,934 $15,736.98227 $12,058.3834
6/30/94 $14,761 $15,740.12966 $12,099.382
7/31/94 $15,129 $15,946.32536 $12,132.0503
8/31/94 $15,118 $15,992.56971 $12,180.5785
9/30/94 $14,809 $15,859.83138 $12,213.466
10/31/94 $14,738 $15,863.00334 $12,222.0155
11/30/94 $14,738 $15,793.20613 $12,237.9041
12/31/94 $14,928 $15,845.32371 $12,237.9041
1/31/95 $15,260 $16,103.60249 $12,286.8557
2/28/95 $15,676 $16,414.40201 $12,336.0031
3/31/95 $15,759 $16,504.68122 $12,376.7119
4/30/95 $15,996 $16,696.13553 $12,417.5551
5/31/95 $16,697 $17,166.96655 $12,442.3902
6/30/95 $16,788 $17,276.83513 $12,467.275
7/31/95 $16,737 $17,285.47355 $12,467.275
8/31/95 $16,953 $17,427.21444 $12,499.6899
9/30/95 $17,132 $17,543.97677 $12,524.6893
10/31/95 $17,361 $17,736.96052 $12,566.0208
11/30/95 $17,590 $17,953.35144 $12,557.2245
12/31/95 $17,832 $18,131.08961 $12,548.4345
</TABLE>
GRAPHIC MATERIAL (16)
The following line graph hypothetically compares the performance of Utility
Equity Fund to that of the S&P 500 and the Consumer Price Index (CPI), based on
a $10,000 investment from 2/1/89 to 12/31/95.
<TABLE>
<CAPTION>
Period Ending Utility Equity S&P 500 CPI
<S> <C> <C> <C>
2/1/89 $10,000 $10,000 $10,000
2/28/89 $10,060 $9,751 $10,041
3/31/89 $10,130 $9,978.198 $10,099.2378
4/30/89 $10,190 $10,496.07 $10,164.8828
5/31/89 $10,589 $10,921.16 $10,222.8227
6/30/89 $10,709 $10,858.91 $10,247.3575
7/31/89 $11,238 $11,839.47 $10,271.9511
8/31/89 $11,078 $12,071.52 $10,288.3862
9/30/89 $11,138 $12,022.03 $10,321.3091
10/31/89 $11,238 $11,743.12 $10,370.8514
11/30/89 $11,477 $11,982.68 $10,395.7414
12/31/89 $12,116 $12,270.26 $10,412.3746
1/31/90 $11,657 $11,446.92 $10,519.622
2/28/90 $11,727 $11,594.59 $10,569.0643
3/31/90 $11,644 $11,901.85 $10,627.1941
4/30/90 $11,131 $11,605.49 $10,644.1976
5/31/90 $11,584 $12,737.03 $10,668.6793
6/30/90 $11,654 $12,651.69 $10,726.2901
7/31/90 $11,815 $12,611.2 $10,767.0501
8/31/90 $11,081 $11,471.15 $10,866.1069
9/30/90 $11,091 $10,912.5 $10,957.3822
10/31/90 $11,876 $10,865.58 $11,023.1265
11/30/90 $12,168 $11,567.5 $11,047.3774
12/31/90 $12,339 $11,890.23 $11,047.3774
1/31/91 $12,208 $12,408.65 $11,113.6616
2/28/91 $12,651 $13,295.86 $11,130.3321
3/31/91 $12,862 $13,617.62 $11,147.0276
4/30/91 $12,963 $13,650.31 $11,163.7482
5/31/91 $12,943 $14,238.63 $11,197.2394
6/30/91 $12,846 $13,586.5 $11,229.7114
7/31/91 $13,352 $14,219.64 $11,246.556
8/31/91 $13,714 $14,556.64 $11,279.171
9/30/91 $14,190 $14,313.54 $11,328.7993
10/31/91 $14,397 $14,505.35 $11,345.7925
11/30/91 $14,676 $13,920.78 $11,378.6953
12/31/91 $15,245 $15,513.32 $11,386.6604
1/31/92 $14,728 $15,224.77 $11,403.7404
2/29/92 $14,697 $15,421.17 $11,444.7939
3/31/92 $14,604 $15,120.46 $11,503.1623
4/30/92 $15,038 $15,563.49 $11,519.2668
5/31/92 $15,328 $15,639.75 $11,535.3937
6/30/92 $15,512 $15,406.72 $11,576.9212
7/31/92 $16,346 $16,036.85 $11,601.2327
8/31/92 $16,282 $15,708.09 $11,633.7161
9/30/92 $16,356 $15,891.88 $11,666.2905
10/31/92 $16,251 $15,945.91 $11,707.1226
11/30/92 $16,272 $16,488.07 $11,723.5125
12/31/92 $16,705 $16,690.88 $11,715.3061
1/31/93 $16,969 $16,831.08 $11,772.7111
2/28/93 $17,887 $17,059.98 $11,813.9156
3/31/93 $18,046 $17,419.95 $11,855.2643
4/30/93 $18,056 $16,998.38 $11,888.459
5/31/93 $17,982 $17,452.24 $11,905.1029
6/30/93 $18,422 $17,502.85 $11,921.77
7/31/93 $18,788 $17,432.84 $11,921.77
8/31/93 $19,305 $18,093.55 $11,955.151
9/30/93 $19,208 $17,954.23 $11,980.2568
10/31/93 $19,090 $18,325.88 $12,029.3758
11/30/93 $18,185 $18,151.78 $12,037.7964
12/31/93 $18,465 $18,371.42 $12,037.7964
1/31/94 $18,088 $18,996.05 $12,070.2984
2/28/94 $17,172 $18,481.25 $12,111.3375
3/31/94 $16,569 $17,675.47 $12,152.516
4/30/94 $16,957 $17,901.72 $12,169.5295
5/31/94 $16,073 $18,195.31 $12,178.0482
6/30/94 $15,324 $17,749.52 $12,219.4536
7/31/94 $16,109 $18,331.71 $12,252.4461
8/31/94 $16,267 $19,083.31 $12,301.4559
9/30/94 $15,863 $18,617.67 $12,334.6698
10/31/94 $16,166 $19,036.57 $12,343.3041
11/30/94 $16,255 $18,343.64 $12,359.3504
12/31/94 $16,188 $18,615.13 $12,359.3504
1/31/95 $17,131 $19,097.26 $12,408.7878
2/28/95 $17,198 $19,842.05 $12,458.4229
3/31/95 $16,951 $20,427.39 $12,499.5357
4/30/95 $17,311 $21,027.96 $12,540.7842
5/31/95 $18,265 $21,869.07 $12,565.8657
6/30/95 $18,246 $22,376.44 $12,590.9975
7/31/95 $18,282 $23,119.33 $12,590.9975
8/31/95 $18,460 $23,177.13 $12,623.7341
9/30/95 $19,506 $24,155.21 $12,648.9815
10/31/95 $19,945 $24,068.25 $12,690.7232
11/30/95 $20,278 $25,124.84 $12,681.8397
12/31/95 $21,264 $25,609.75 $12,672.9624
</TABLE>
GRAPHIC MATERIAL (17)
The following line graph hypothetically compares the performance of Zero Coupon
1995 Fund to that of the Merrill Lynch 2-Year Zero Index and the Consumer Price
Index (CPI), based on a $10,000 investment from 4/1/89 to 12/14/95.
<TABLE>
<CAPTION>
Period Ending 0 Coupon 1995 Merrill 2-Yr 0 CPI
<S> <C> <C> <C>
4/1/89 $10,000 $10,000 $10,000
4/30/89 $10,000 $10,158 $10,065
5/31/89 $10,000 $10,323.58 $10,122.371
6/30/89 $10,050 $10,549.66 $10,146.664
7/31/89 $10,310 $10,734.28 $10,171.016
8/31/89 $10,030 $10,643.04 $10,187.29
9/30/89 $10,060 $10,713.28 $10,219.889
10/31/89 $10,370 $10,884.7 $10,268.945
11/30/89 $10,470 $10,980.48 $10,293.59
12/31/89 $10,470 $11,024.4 $10,310.06
1/31/90 $10,290 $11,023.3 $10,416.253
2/28/90 $10,310 $11,070.7 $10,465.21
3/31/90 $10,322 $11,098.38 $10,522.768
4/30/90 $10,141 $11,121.68 $10,539.605
5/31/90 $10,433 $11,306.3 $10,563.846
6/30/90 $10,615 $11,427.28 $10,620.891
7/31/90 $10,817 $11,587.26 $10,661.25
8/31/90 $10,685 $11,631.3 $10,759.334
9/30/90 $10,786 $11,726.67 $10,849.712
10/31/90 $10,978 $11,866.22 $10,914.81
11/30/90 $11,240 $12,008.61 $10,938.823
12/31/90 $11,442 $12,157.52 $10,938.823
1/31/91 $11,543 $12,279.1 $11,004.456
2/28/91 $11,614 $12,341.72 $11,020.963
3/31/91 $11,624 $12,440.45 $11,037.494
4/30/91 $11,785 $12,576.05 $11,054.05
5/31/91 $11,866 $12,671.63 $11,087.212
6/30/91 $11,838 $12,713.45 $11,119.365
7/31/91 $11,986 $12,827.87 $11,136.044
8/31/91 $12,313 $13,026.7 $11,168.339
9/30/91 $12,598 $13,183.02 $11,217.48
10/31/91 $12,778 $13,349.13 $11,234.306
11/30/91 $12,957 $13,486.62 $11,266.885
12/31/91 $13,317 $13,753.66 $11,274.772
1/31/92 $13,137 $13,713.77 $11,291.684
2/29/92 $13,126 $13,765.89 $11,332.334
3/31/92 $13,074 $13,732.85 $11,390.129
4/30/92 $13,253 $13,881.16 $11,406.075
5/31/92 $13,496 $14,026.91 $11,422.044
6/30/92 $13,743 $14,189.63 $11,463.163
7/31/92 $14,081 $14,398.21 $11,487.236
8/31/92 $14,239 $14,529.24 $11,519.4
9/30/92 $14,543 $14,680.34 $11,551.654
10/31/92 $14,295 $14,549.69 $11,592.085
11/30/92 $14,194 $14,498.76 $11,608.314
12/31/92 $14,408 $14,671.3 $11,600.188
1/31/93 $14,633 $14,857.62 $11,657.029
2/28/93 $14,892 $15,012.14 $11,697.829
3/31/93 $14,959 $15,060.18 $11,738.771
4/30/93 $15,060 $15,164.1 $11,771.64
5/31/93 $15,004 $15,103.44 $11,788.12
6/30/93 $15,167 $15,215.21 $11,804.624
7/31/93 $15,191 $15,244.12 $11,804.624
8/31/93 $15,373 $15,379.79 $11,837.676
9/30/93 $15,397 $15,427.47 $11,862.536
10/31/93 $15,434 $15,449.06 $11,911.172
11/30/93 $15,422 $15,442.88 $11,919.51
12/31/93 $15,482 $15,515.47 $11,919.51
1/31/94 $15,591 $15,614.76 $11,951.692
2/28/94 $15,458 $15,500.78 $11,992.328
3/31/94 $15,397 $15,429.47 $12,033.102
4/30/94 $15,312 $15,335.35 $12,049.948
5/31/94 $15,337 $15,358.36 $12,058.383
6/30/94 $15,390 $15,398.29 $12,099.382
7/31/94 $15,506 $15,544.57 $12,132.05
8/31/94 $15,558 $15,603.64 $12,180.578
9/30/94 $15,558 $15,561.51 $12,213.466
10/31/94 $15,571 $15,587.97 $12,222.015
11/30/94 $15,571 $15,508.47 $12,237.904
12/31/94 $15,584 $15,531.73 $12,237.904
1/31/95 $15,752 $15,772.47 $12,286.856
2/28/95 $15,907 $16,020.1 $12,336.003
3/31/95 $15,985 $16,124.23 $12,376.712
4/30/95 $16,075 $16,270.96 $12,417.555
5/31/95 $16,204 $16,601.26 $12,442.39
6/30/95 $16,277 $16,685.93 $12,467.275
7/31/95 $16,361 $16,754.34 $12,467.275
8/31/95 $16,444 $16,866.59 $12,499.69
9/30/95 $16,514 $16,937.43 $12,524.689
10/31/95 $16,583 $17,089.87 $12,566.021
11/30/95 $16,653 $17,250.52 $12,557.225
12/14/95 $16,694.702 $17,312.84 $12,553.255
</TABLE>
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of Zero Coupon
2000 Fund to that of the Merrill Lynch 5-Year Zero Index and the Consumer Price
Index (CPI), based on a $10,000 investment from 4/1/89 to 12/14/95.
<TABLE>
<CAPTION>
Period Ending 0 Coupon 2000 Merrill 5-Yr 0 CPI
<S> <C> <C> <C>
4/1/89 $10,000 $10,000 $10,000
4/30/89 $10,000 $10,216 $10,065
5/31/89 $9,990 $10,528.61 $10,122.371
6/30/89 $10,560 $10,907.64 $10,146.664
7/31/89 $10,790 $11,299.224 $10,171.016
8/31/89 $10,460 $10,977.196 $10,187.29
9/30/89 $10,480 $11,022.202 $10,219.889
10/31/89 $10,910 $11,344.051 $10,268.945
11/30/89 $11,010 $11,488.12 $10,293.59
12/31/89 $11,080 $11,497.311 $10,310.06
1/31/90 $10,610 $11,300.707 $10,416.253
2/28/90 $10,600 $11,312.007 $10,465.21
3/31/90 $10,592 $11,310.876 $10,522.768
4/30/90 $10,170 $11,195.505 $10,539.605
5/31/90 $10,664 $11,535.849 $10,563.846
6/30/90 $10,932 $11,723.883 $10,620.891
7/31/90 $11,076 $11,931.396 $10,661.25
8/31/90 $10,582 $11,775.094 $10,759.334
9/30/90 $10,715 $11,886.958 $10,849.712
10/31/90 $10,973 $12,130.64 $10,914.81
11/30/90 $11,518 $12,454.529 $10,938.823
12/31/90 $11,734 $12,669.992 $10,938.823
1/31/91 $11,868 $12,799.226 $11,004.456
2/28/91 $11,889 $12,844.023 $11,020.963
3/31/91 $11,868 $12,891.546 $11,037.494
4/30/91 $12,064 $13,096.522 $11,054.05
5/31/91 $12,054 $13,137.121 $11,087.212
6/30/91 $11,987 $13,109.533 $11,119.365
7/31/91 $12,147 $13,296.999 $11,136.044
8/31/91 $12,615 $13,693.25 $11,168.339
9/30/91 $13,072 $14,043.797 $11,217.48
10/31/91 $13,157 $14,264.284 $11,234.306
11/30/91 $13,338 $14,508.204 $11,266.885
12/31/91 $13,933 $14,854.95 $11,274.772
1/31/92 $13,487 $14,609.843 $11,291.684
2/29/92 $13,572 $14,634.68 $11,332.334
3/31/92 $13,465 $14,488.333 $11,390.129
4/30/92 $13,519 $14,611.484 $11,406.075
5/31/92 $13,848 $14,975.31 $11,422.044
6/30/92 $14,249 $15,301.772 $11,463.163
7/31/92 $14,880 $15,739.402 $11,487.236
8/31/92 $15,080 $15,995.955 $11,519.4
9/30/92 $15,501 $16,344.666 $11,551.654
10/31/92 $15,102 $15,985.084 $11,592.085
11/30/92 $14,947 $15,806.051 $11,608.314
12/31/92 $15,379 $16,100.043 $11,600.188
1/31/93 $15,789 $16,592.705 $11,657.029
2/28/93 $16,387 $16,982.633 $11,697.829
3/31/93 $16,587 $17,055.658 $11,738.771
4/30/93 $16,664 $17,258.621 $11,771.64
5/31/93 $16,653 $17,170.602 $11,788.12
6/30/93 $17,308 $17,560.375 $11,804.624
7/31/93 $17,412 $17,574.423 $11,804.624
8/31/93 $17,863 $17,987.422 $11,837.676
9/30/93 $17,979 $18,075.56 $11,862.536
10/31/93 $18,129 $18,084.598 $11,911.172
11/30/93 $17,701 $17,901.943 $11,919.51
12/31/93 $17,863 $17,996.824 $11,919.51
1/31/94 $18,176 $18,250.579 $11,951.692
2/28/94 $17,528 $17,823.515 $11,992.328
3/31/94 $16,938 $17,363.669 $12,033.102
4/30/94 $16,729 $17,151.832 $12,049.948
5/31/94 $16,729 $17,163.838 $12,058.383
6/30/94 $16,694 $17,127.794 $12,099.382
7/31/94 $17,023 $17,442.946 $12,132.05
8/31/94 $17,023 $17,500.507 $12,180.578
9/30/94 $16,694 $17,202.999 $12,213.466
10/31/94 $16,596 $17,166.872 $12,222.015
11/30/94 $16,511 $17,032.971 $12,237.904
12/31/94 $16,621 $17,186.268 $12,237.904
1/31/95 $16,950 $17,352.974 $12,286.856
2/28/95 $17,475 $17,852.74 $12,336.003
3/31/95 $17,573 $17,925.936 $12,376.712
4/30/95 $17,829 $18,205.581 $12,417.555
5/31/95 $18,756 $19,072.166 $12,442.39
6/30/95 $18,909 $19,228.558 $12,467.275
7/31/95 $18,781 $19,134.338 $12,467.275
8/31/95 $18,998 $19,318.028 $12,499.69
9/30/95 $19,138 $19,464.845 $12,524.689
10/31/95 $19,482 $19,770.443 $12,566.021
11/30/95 $19,814 $20,138.173 $12,557.225
12/31/95 $20,056 $20,391.914 $12,548.434
</TABLE>
GRAPHIC MATERIAL (19)
The following line graph hypothetically compares the performance of Zero Coupon
2005 Fund to that of the Merrill Lynch 10-Year Zero Index and the Consumer Price
Index (CPI), based on a $10,000 investment from 4/1/89 to 12/14/95.
<TABLE>
<CAPTION>
Period Ending 0 Coupon 2005 Merrill 10-Yr 0 CPI
<S> <C> <C> <C>
4/1/89 $10,000 $10,000 $10,000
4/30/89 $10,000 $10,274 $10,065
5/31/89 $10,070 $10,694.207 $10,122.3705
6/30/89 $11,310 $11,332.651 $10,146.66419
7/31/89 $11,290 $11,639.766 $10,171.01618
8/31/89 $10,850 $11,288.245 $10,187.28981
9/30/89 $10,870 $11,335.655 $10,219.88914
10/31/89 $11,500 $11,799.284 $10,268.9446
11/30/89 $11,580 $11,897.218 $10,293.59007
12/31/89 $11,530 $11,896.028 $10,310.05982
1/31/90 $10,630 $11,413.049 $10,416.25343
2/28/90 $10,640 $11,387.94 $10,465.20982
3/31/90 $10,598 $11,378.83 $10,522.76848
4/30/90 $10,024 $11,060.223 $10,539.60491
5/31/90 $10,746 $11,588.902 $10,563.846
6/30/90 $11,065 $11,863.558 $10,620.89077
7/31/90 $11,171 $11,992.871 $10,661.25015
8/31/90 $10,290 $11,425.608 $10,759.33365
9/30/90 $10,502 $11,555.86 $10,849.71206
10/31/90 $10,746 $11,929.115 $10,914.81033
11/30/90 $11,521 $12,448.031 $10,938.82291
12/31/90 $11,840 $12,728.112 $10,938.82291
1/31/91 $11,978 $12,856.666 $11,004.45585
2/28/91 $11,978 $12,873.379 $11,020.96253
3/31/91 $11,893 $12,964.78 $11,037.49398
4/30/91 $12,127 $13,176.106 $11,054.05022
5/31/91 $11,999 $13,160.295 $11,087.21237
6/30/91 $11,857 $13,068.173 $11,119.36528
7/31/91 $12,066 $13,298.173 $11,136.04433
8/31/91 $12,663 $13,826.11 $11,168.33886
9/30/91 $13,292 $14,301.729 $11,217.47955
10/31/91 $13,237 $14,370.377 $11,234.30577
11/30/91 $13,303 $14,572.999 $11,266.88526
12/31/91 $14,065 $15,370.142 $11,274.77208
1/31/92 $13,579 $14,727.67 $11,291.68423
2/29/92 $13,612 $14,816.036 $11,332.3343
3/31/92 $13,513 $14,624.909 $11,390.1292
4/30/92 $13,480 $14,564.947 $11,406.07538
5/31/92 $13,976 $14,988.787 $11,422.04389
6/30/92 $14,216 $15,339.525 $11,463.16325
7/31/92 $15,016 $16,049.745 $11,487.23589
8/31/92 $15,132 $16,231.107 $11,519.40015
9/30/92 $15,711 $16,685.578 $11,551.65447
10/31/92 $15,143 $16,200.028 $11,592.08526
11/30/92 $15,271 $16,185.448 $11,608.31418
12/31/92 $15,793 $16,745.464 $11,600.18836
1/31/93 $16,291 $17,413.608 $11,657.02928
2/28/93 $17,196 $18,094.48 $11,697.82889
3/31/93 $17,358 $18,145.145 $11,738.77129
4/30/93 $17,346 $18,399.177 $11,771.63985
5/31/93 $17,346 $18,297.981 $11,788.12014
6/30/93 $18,520 $19,302.54 $11,804.62351
7/31/93 $18,724 $19,460.821 $11,804.62351
8/31/93 $19,360 $20,204.225 $11,837.67646
9/30/93 $19,564 $20,444.655 $11,862.53558
10/31/93 $19,840 $20,530.522 $11,911.17197
11/30/93 $19,084 $19,846.856 $11,919.50979
12/31/93 $19,300 $20,021.508 $11,919.50979
1/31/94 $19,864 $20,606.136 $11,951.69247
2/28/94 $18,748 $19,623.224 $11,992.32822
3/31/94 $17,728 $18,614.59 $12,033.10214
4/30/94 $17,452 $18,322.341 $12,049.94848
5/31/94 $17,416 $18,230.729 $12,058.38345
6/30/94 $17,163 $18,093.999 $12,099.38195
7/31/94 $17,691 $18,613.297 $12,132.05028
8/31/94 $17,641 $18,644.939 $12,180.57848
9/30/94 $16,999 $17,973.721 $12,213.46604
10/31/94 $16,899 $17,842.513 $12,222.01547
11/30/94 $16,999 $17,928.157 $12,237.90409
12/31/94 $17,314 $18,240.107 $12,237.90409
1/31/95 $17,704 $18,721.646 $12,286.85571
2/28/95 $18,295 $19,442.429 $12,336.00313
3/31/95 $18,446 $19,576.582 $12,376.71194
4/30/95 $18,862 $19,958.326 $12,417.55509
5/31/95 $20,497 $21,630.833 $12,442.3902
6/30/95 $20,647 $21,916.36 $12,467.27498
7/31/95 $20,279 $21,554.74 $12,467.27498
8/31/95 $20,712 $21,981.524 $12,499.6899
9/30/95 $21,080 $22,344.219 $12,524.68928
10/31/95 $21,657 $22,909.528 $12,566.02075
11/30/95 $22,248 $23,610.56 $12,557.22454
12/31/95 $22,812 $24,186.657 $12,548.43448
</TABLE>
GRAPHIC MATERIAL (20)
The following line graph hypothetically compares the performance of Zero Coupon
2010 Fund to that of the Merrill Lynch 20-Year Zero Index and the Consumer Price
Index (CPI), based on a $10,000 investment from 4/1/89 to 12/14/95.
<TABLE>
<CAPTION>
Period Ending 0 Coupon 2010 Merrill 20-Yr 0 CPI
<S> <C> <C> <C>
4/1/89 $10,000 $10,000 $10,000
4/30/89 $10,000 $10,381 $10,065
5/31/89 $10,000 $11,097.289 $10,122.3705
6/30/89 $11,290 $12,254.73624 $10,146.6642
7/31/89 $11,250 $12,324.58824 $10,171.0162
8/31/89 $10,790 $11,713.28866 $10,187.2898
9/30/89 $10,860 $11,816.3656 $10,219.8891
10/31/89 $11,630 $12,608.0621 $10,268.9446
11/30/89 $11,720 $12,832.4856 $10,293.5901
12/31/89 $11,610 $12,765.75668 $10,310.0598
1/31/90 $10,580 $11,805.77178 $10,416.2534
2/28/90 $10,530 $11,542.50307 $10,465.2098
3/31/90 $10,400 $11,432.84929 $10,522.7685
4/30/90 $9,652 $10,752.59475 $10,539.6049
5/31/90 $10,617 $11,804.19852 $10,563.846
6/30/90 $11,064 $12,291.71192 $10,620.8908
7/31/90 $11,136 $12,241.3159 $10,661.2502
8/31/90 $9,912 $10,892.32289 $10,759.3337
9/30/90 $10,150 $11,118.8832 $10,849.7121
10/31/90 $10,358 $11,441.33082 $10,914.8103
11/30/90 $11,271 $12,472.19472 $10,938.8229
12/31/90 $11,676 $12,801.46067 $10,938.8229
1/31/91 $11,853 $13,063.89061 $11,004.4558
2/28/91 $11,811 $12,946.31559 $11,020.9625
3/31/91 $11,666 $13,040.8237 $11,037.494
4/30/91 $11,946 $13,276.86261 $11,054.0502
5/31/91 $11,686 $13,124.17869 $11,087.2124
6/30/91 $11,412 $12,860.38269 $11,119.3653
7/31/91 $11,619 $13,130.45073 $11,136.0443
8/31/91 $12,362 $13,905.14732 $11,168.3389
9/30/91 $13,061 $14,622.65293 $11,217.4796
10/31/91 $12,864 $14,393.07728 $11,234.3058
11/30/91 $12,744 $14,512.53982 $11,266.8853
12/31/91 $13,749 $15,683.70178 $11,274.7721
1/31/92 $13,246 $15,001.46075 $11,291.6842
2/29/92 $13,290 $15,068.96733 $11,332.3343
3/31/92 $13,235 $14,824.85005 $11,390.1292
4/30/92 $13,050 $14,556.52027 $11,406.0754
5/31/92 $13,759 $15,172.26108 $11,422.0439
6/30/92 $13,776 $15,214.74341 $11,463.1632
7/31/92 $14,598 $16,237.17416 $11,487.2359
8/31/92 $14,679 $16,183.59149 $11,519.4001
9/30/92 $14,923 $16,131.804 $11,551.6545
10/31/92 $14,378 $15,796.26247 $11,592.0853
11/30/92 $14,772 $16,165.89502 $11,608.3142
12/31/92 $15,467 $16,851.32896 $11,600.1884
1/31/93 $15,792 $17,405.73769 $11,657.0293
2/28/93 $16,707 $18,476.19055 $11,697.8289
3/31/93 $17,054 $18,346.85722 $11,738.7713
4/30/93 $16,881 $18,572.52356 $11,771.6398
5/31/93 $16,985 $18,752.67704 $11,788.1201
6/30/93 $18,058 $20,222.88692 $11,804.6235
7/31/93 $18,664 $21,108.64937 $11,804.6235
8/31/93 $19,617 $22,468.04639 $11,837.6765
9/30/93 $19,778 $22,396.14864 $11,862.5356
10/31/93 $20,162 $22,805.99816 $11,911.172
11/30/93 $19,332 $21,886.91644 $11,919.5098
12/31/93 $19,407 $21,810.31223 $11,919.5098
1/31/94 $20,186 $22,682.72472 $11,951.6925
2/28/94 $18,788 $21,126.6898 $11,992.3282
3/31/94 $17,662 $19,797.82101 $12,033.1021
4/30/94 $17,365 $19,287.03723 $12,049.9485
5/31/94 $17,092 $18,696.85389 $12,058.3834
6/30/94 $16,534 $18,399.57392 $12,099.382
7/31/94 $17,392 $19,566.1069 $12,132.0503
8/31/94 $17,041 $18,973.25386 $12,180.5785
9/30/94 $16,248 $17,906.957 $12,213.466
10/31/94 $16,131 $17,803.09664 $12,222.0155
11/30/94 $16,417 $18,237.4922 $12,237.9041
12/31/94 $16,924 $18,914.10316 $12,237.9041
1/31/95 $17,366 $19,642.29614 $12,286.8557
2/28/95 $17,886 $20,259.06423 $12,336.0031
3/31/95 $18,068 $20,510.27663 $12,376.7119
4/30/95 $18,561 $20,963.55374 $12,417.5551
5/31/95 $20,862 $24,003.26904 $12,442.3902
6/30/95 $20,964 $24,327.31317 $12,467.275
7/31/95 $20,415 $23,641.28294 $12,467.275
8/31/95 $21,018 $24,575.11361 $12,499.6899
9/30/95 $21,527 $25,287.79191 $12,524.6893
10/31/95 $22,532 $26,693.79314 $12,566.0208
11/30/95 $23,295 $27,697.47976 $12,557.2245
12/31/95 $24,166 $28,982.64282 $12,548.4345
</TABLE>
