THE INVESTMENT STRATEGY PYRAMID
As a Franklin ValuemarkSM Life policy 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: your investment objective and the degree of risk with
which you feel comfortable. Before you make these decisions, you may want to
review 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 Franklin Valuemark Funds prospectus
for more information about a specific option.
Capital Growth Fund**
Precious Metals Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund**
Templeton Pacific Growth Fund
Growth and Income Fund*
Income Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
Adjustable U.S. Government Fund+
High Income Fund
Investment Grade Intermediate
Bond Fund+
Templeton Global Income
Securities Fund++
U.S. Government Securities Fund
Three Zero Coupon Funds
maturing in 2000, 2005, 2010
Money Market Fund
High
Risk/Reward
Potential
Low
*Formerly Equity Growth Fund.
**As of June 30, 1996, the portfolios were not available in California. They
became available on July 9, 1996. +Subject to regulatory approval, shares of the
Adjustable U.S. Government Fund and the Investment Grade Intermediate Bond Fund
will be replaced by shares of the U.S. Government Securities Fund on October 25,
1996, or shortly thereafter. After the substitution, the Adjustable U.S.
Government Fund and the Investment Grade Intermediate Bond Fund will no longer
be available. ++Effective May 1, 1996, the Global Income Fund's name changed to
the Templeton Global Income Securities Fund. The portfolio's objective and
investment strategy remain unchanged.
Table of Contents Page
Letter to Policy Owners 2
Economic Overview 3
Franklin Valuemark Unit Prices 5
Portfolio Objectives 6
Portfolio Profiles
Portfolios Seeking Capital Growth
Capital Growth Fund 11
Precious Metals Fund 11
Small Cap Fund 12
Templeton Developing Markets
Equity Fund 13
Templeton Global Growth Fund 13
Templeton International Equity Fund 15
Templeton International
Smaller Companies Fund 15
Templeton Pacific Growth Fund 16
Portfolios Seeking Growth and Income
Growth and Income Fund 16
Income Securities Fund 17
Real Estate Securities Fund 19
Rising Dividends Fund 21
Templeton Global Asset Allocation Fund 21
Utility Equity Fund 22
Portfolios Seeking Current Income
Adjustable U.S. Government Fund 23
High Income Fund 24
Investment Grade Intermediate
Bond Fund 25
Templeton Global Income
Securities Fund 25
U.S. Government Securities Fund 26
Zero Coupon Funds 27
Portfolio Seeking Capital Preservation and Income
Money Market Fund 28
Allianz Life Variable Account A
Financial Statements and Notes 29
Franklin Valuemark Funds
Statement of Investments 54
Financial Statements and Notes 139
For service regarding your policy, 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 POLICY OWNERS
August 15, 1996
Dear Policy Owner:
This semi-annual report covers the six months ended June 30, 1996, for Franklin
ValuemarkSM Life, Allianz ValueLife, and the Franklin Valuemark Funds.*
We introduced two new Valuemark portfolios over the reporting period. On May 1,
1996, we added the Capital Growth Fund and the Templeton International Smaller
Companies Fund.** The Capital Growth Fund seeks capital appreciation with
current income as a secondary objective, investing primarily in large- or
mid-cap U.S. companies. The Templeton International Smaller Companies Fund seeks
long-term capital appreciation through a flexible policy of investing primarily
in equity securities of smaller companies outside the U.S.
After October 25, 1996, shares of the Adjustable U.S. Government Fund and the
Investment Grade Intermediate Bond Fund will no longer be available as
investment options and will be replaced by shares of the U.S. Government
Securities Fund. The substitution is designed to benefit policy owners by
consolidating the assets of portfolios with similar investment objectives,
strategies and risks, thereby potentially lowering operating expenses.+
On the following pages, you will find a summary covering global market
conditions over the past six months, as well as discussions of each portfolio's
performance. It is important to remember that financial markets fluctuate daily
and past investment conditions and results are not indicative of future trends.
We look 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
you 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 August 15, 1996, Franklin Valuemark Life is not available in the
following states: California, Washington D.C., Maine, New Jersey, New York,
Pennsylvania, and Vermont. As of August 15, 1996, Allianz ValueLife is not
available for sale in the following states: California, Washington D.C., Maine,
New Jersey, New York, and Vermont.
**As of June 30, 1996, the portfolios were not available in California. They
became available on July 9, 1996.
+Substitution of shares is subject to regulatory approval.
ECONOMIC OVERVIEW
During the six-month reporting period, economic stability, relatively low
interest rates and moderate inflation contributed to strong performances for
most equity markets. Taking advantage of these favorable conditions, investors
poured record amounts of capital into the equity market, which ultimately led to
even higher stock prices in developed and developing countries.
The United States
No market epitomized the demand for equity securities more than the U.S., where
inflows of capital into mutual funds reached record levels. Despite potentially
troublesome concerns about the federal budget and debate over tax reform in the
first quarter of 1996, news of all-time market highs appeared nearly every week,
further encouraging new investments and pushing U.S. stock prices even higher.
The Dow Jones Industrial Average(R) rose more than 10% during the six-month
period, from 5117.12 on December 31, 1995, to 5654.63 on June 30, 1996.
Domestic bond markets had rallied through most of 1995 but began to decline in
February and March of 1996 amid signs of moderately accelerating economic
growth. Interest rates, which had been falling until January 1996, began to rise
and continued to do so throughout the reporting period, with the yield of the
30-year U.S. Treasury bond climbing from 5.96% on December 31, 1995, to 6.90% on
June 30, 1996.
It appears that the economy has continued to grow slowly. For the first quarter
of 1996, it grew at an annualized rate of approximately 2.8% with roughly 2%
inflation (second quarter growth is estimated to be around 3.5% to 4.05%).
Still, uncertainty and confusion followed a much stronger-than-expected
employment report released in early March. While well-known economists disagreed
on the market's direction, investors reacted to their mixed messages. Nervous
investors, fearing inflation might accelerate, caused a 3% decline in bond
prices and a short-lived 120-point drop in the Dow Jones Industrial Average on
March 8, 1996. Another positive employment report released in early June also
caused investors to over-react to imagined concerns of increasing inflation.
However, the U.S. Federal Reserve Board remained neutral in its stance on
monetary policy and chose not to raise the federal funds rate at its Open Market
Committee meeting in early July.
International
Consumer spending and confidence in the core European countries of France and
the United Kingdom remained relatively low due to their uncertain economic
prospects. Although historically low inflation levels resulted in lower interest
rates in these countries, economic growth was depressed, in part by the spending
restrictions required for membership in the European Monetary Union. This
depressed economic situation came at a time when growth was already faltering
and unemployment was rising. The German stock index (DAX), however, responding
to possibilities of further interest rate cuts and a more competitive local
currency, performed well in the first half of 1996.
Latin American equity markets continued to recover from the "Tequila Effect,"
which depressed stock prices following Mexico's December 1994 currency
devaluation. From December 1995 through June 1996, Mexico's Bolsa Index rose
more than 17% in U.S. dollar terms, and the Mexican peso appreciated versus the
U.S. dollar. Although Mexico has not entirely recovered, there is evidence that
the government's austerity program has been largely successful in restoring
investor confidence after significant amounts of capital fled the country only
18 months ago.
Many Pacific Rim equity markets strengthened in response to improved economic
fundamentals, moderate inflation and low interest rates. A significant
development was the tremendous amount of Japanese equity securities purchased by
foreign investors (an estimated $36.9 billion in stock) as market sentiment
improved following the Japanese government's intervention in the country's
crippling banking crisis. Thailand, however, did not fare as well as other
countries in the region mainly because of concerns regarding political
leadership, economic stability, and lackluster corporate earnings.
<TABLE>
<CAPTION>
Variable Account A
Change in Unit Prices
% Change
Unit Price* Unit Price* in Unit Price
Portfolio Name 12/31/95 6/30/96 12/31/95 to 6/30/96
<S> <C> <C> <C>
Adjustable U.S. Government Fund $12.35 $12.65 2.44%
Capital Growth Fund $10.00** $10.17 1.68%
Growth and Income Fund+ $27.70 $29.13 5.15%
High Income Fund $19.63 $20.29 3.38%
Income Securities Fund $19.69 $20.41 3.65%
Investment Grade Intermediate Bond Fund $15.26 $15.32 0.40%
Money Market Fund $14.90 $15.22 2.13%
Precious Metals Fund $15.21 $16.46 8.18%
Real Estate Securities Fund $20.91 $22.33 6.78%
Rising Dividends Fund $12.82 $13.69 6.85%
Small Cap Fund $10.16 $12.02 18.36%
Templeton Developing Markets Equity Fund $ 9.36 $10.81 15.49%
Templeton Global Asset Allocation Fund $10.64 $11.47 7.82%
Templeton Global Growth Fund $11.07 $12.22 10.41%
Templeton Global Income Securities Fund++ $15.35 $15.48 0.89%
Templeton International Equity Fund $13.60 $15.22 11.89%
Templeton International Smaller Companies Fund $10.00** $10.32 3.18%
Templeton Pacific Growth Fund $13.98 $15.62 11.74%
U.S. Government Securities Fund $19.97 $19.60 -1.83%
Utility Equity Fund $23.35 $24.29 4.03%
Zero Coupon Fund - 2000++ $23.49 $22.91 -2.46%
Zero Coupon Fund - 2005++ $27.23 $25.32 -7.00%
Zero Coupon Fund - 2010++ $30.99 $27.59 -10.97%
</TABLE>
*The unit prices have been rounded to the nearest hundredth. Percent change is
calculated using actual unit prices.
**Unit price at inception on May 1, 1996.
+Formerly Equity Growth Fund.
++Zero Coupon Funds are not available in Allianz ValueLife.
++Effective May 1, 1996, the Global Income Fund's name changed to the Templeton
Global Income Securities Fund. The portfolio's objective and investment strategy
remain unchanged.
Note: The unit value for each sub-account that invests in a particular portfolio
is the total value of assets in the sub-account (net assets of the portfolio),
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 provisions, 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
policy 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 surrender their policy
or make a partial withdrawal. This information is for policy owners only and may
not be used as sales literature.
PORTFOLIO OBJECTIVES
Portfolio Description
- --------------------------------------------------------------------------------
Portfolios Seeking Capital Growth
Capital Growth Fund*
Seeks capital appreciation with current income as a secondary
consideration. The portfolio invests primarily in equity securities,
including common stocks and securities convertible into common stocks.
Precious Metals Fund
Seeks capital appreciation through concentration of its investments in
securities of issuers, including those in developing markets, engaged in
mining, processing or dealing in gold and other precious metals. The
portfolio's secondary objective is to provide current income return through
the receipt of dividends or interest from its investments.
Small Cap Fund
Seeks long-term capital growth. The portfolio invests primarily in equity
securities of small capitalization growth companies. Investments in small
capitalization companies may involve greater risks and greater volatility
than investments in larger and more established companies.
Templeton Developing Markets
Equity Fund
Seeks long-term capital appreciation. The portfolio seeks to achieve this
objective by investing primarily in equity securities of issuers in
countries having developing markets under normal market conditions.
Templeton Global Growth Fund
Seeks long-term capital growth; any income realized will be incidental. The
portfolio seeks to achieve its objective through a flexible policy of
investing in stocks and debt obligations of companies and governments of
any nation, including developing markets under normal market conditions.
Templeton International Equity Fund
Seeks long-term capital growth. Under normal market conditions, the
portfolio will invest at least 65% of its total assets in an
internationally diversified portfolio of equity securities. These equity
securities will trade on markets in countries other than the U.S.,
including developing markets, and be issued by companies domiciled in
countries other than the U.S., or 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 International
Smaller Companies Fund*
Seeks long-term capital appreciation. The portfolio seeks to achieve this
objective by investing primarily in equity securities of smaller companies
outside the U.S., including developing markets under normal market
conditions.
Templeton Pacific Growth Fund
Seeks long-term capital growth. Under normal conditions, the portfolio will
invest at least 65% of its assets in equity securities which trade on
markets in the Pacific Rim, including developing markets, and which are
issued by companies domiciled in the Pacific Rim or companies that derived
at least 50% of either their revenues or pre-tax income from activities in
the Pacific Rim. For purposes of the portfolio's 65% investment policy, the
countries in the Pacific Rim are Australia, Hong Kong, Indonesia, Japan,
Korea, Malaysia, New Zealand, Singapore and Thailand.
Portfolios Seeking Growth and Income
Growth and Income Fund
(Formerly Equity Growth Fund)
Seeks capital appreciation. The portfolio's secondary objective is to
provide current income return. The portfolio pursues capital appreciation
by investing primarily in domestic common stocks, securities convertible
into common stocks and preferred stocks.
Income Securities Fund
Seeks to maximize income while maintaining prospects for capital
appreciation. The portfolio will pursue its objective by investing in a
diversified portfolio of domestic and foreign (including developing
markets) debt obligations, which may include high yield, high risk,
lower-rated bonds, as well as equity securities, selected with particular
consideration of current income production along with capital appreciation.
Real Estate Securities Fund
Seeks capital appreciation, with a secondary objective of earning current
income on its investments. The portfolio pursues its principal objective by
investing primarily in securities of companies in the real estate industry,
primarily equity real estate investment trusts (REITs).
Rising Dividends Fund
Seeks capital appreciation and current income incidental to capital
appreciation. In seeking capital appreciation, the portfolio invests with a
long-term investment horizon. Preservation of capital, while not an objective,
is also an important consideration. The portfolio seeks to achieve its
investment objectives by investing, as a fundamental policy, at least 65% of
its net assets in financially sound companies that have paid consistently
rising dividends based on the investment philosophy that the securities of
such companies, because of their dividend record, have a strong potential to
increase in value.
Templeton Global Asset Allocation Fund
Seeks a high level of total return through a flexible policy of investing
in the following market segments: equity securities of issuers of any
nation, debt obligations of companies and governments of any nation, and
Money Market Instruments. The mix of investments among these three market
segments will be adjusted in an attempt to capitalize on total return
potential produced by changing economic conditions throughout the world.
Utility Equity Fund
Seeks both capital appreciation and current income by concentrating
investments in the securities of companies in the public utilities
industry. The portfolio pursues its objective by investing, under normal
conditions, at least 65% of the portfolio's total assets in securities of
issuers engaged in the public utilities industry, which includes the
manufacture, production, generation, transmission and sale of gas and
electric energy and water. Assets may also be invested in issuers engaged
in the communications field, including entities such as telephone,
telegraph, satellite, microwave and other companies providing communication
facilities for the public benefit.
Portfolios Seeking Current Income
Adjustable U.S. Government Fund**
Seeks a high level of current income, consistent with lower volatility of
principal. The portfolio pursues its investment objective by investing
primarily in adjustable rate securities with interest rates that reset at
periodic intervals and which are issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
High Income Fund
Seeks a high level of current return. As a secondary objective, the
portfolio seeks capital appreciation to the extent consistent with its
principal objective. The portfolio may invest in both debt obligations and
dividend-paying common or preferred stocks, including high risk securities,
and will seek to invest in whatever type of investment is offering the
highest yield and expected total return without excessive risk at the time
of purchase.
Investment Grade Intermediate Bond Fund**
Seeks current income, consistent with preservation of capital, primarily
through investments in intermediate-term investment grade corporate
obligations and U.S. government securities.
Templeton Global Income
Securities Fund+
(Formerly Global Income Fund)
Seeks high current income, consistent with preservation of capital, with
capital appreciation as a secondary consideration. The portfolio will
pursue its objectives by investing at least 65% of its net assets in both
domestic and foreign debt obligations including those in developing markets
and related foreign currency transactions.
U.S. Government Securities Fund
Seeks to earn income through investments in a portfolio limited to
securities which are obligations of the U.S. government, its agencies or
instrumentalities. These obligations may include fixed-rate or
adjustable-rate mortgage backed securities.
Three Zero Coupon Funds
(maturity dates: 2000, 2005, 2010)
Seek to provide as high an investment return as is consistent with the
preservation of capital. Each portfolio seeks to return a reasonably
assured targeted dollar amount, predictable at the time of investment, on a
specific target date in the future by investing primarily in zero coupon
securities that pay no cash income but are acquired by the portfolio at
substantial discounts from their value at maturity.
Portfolio Seeking Preservation of Capital and Income
Money Market Fund
Seeks to obtain as high a level of current income (in the context of the
type of investment available to the portfolio) consistent with capital
preservation and liquidity. The portfolio will seek to maintain a $1 per
share net asset value, but there is no guarantee that it will be successful
in doing so.
*As of June 30, 1996, the Capital Growth Fund and the Templeton International
Smaller Companies Fund were not available in California. They became available
on July 9, 1996.
**Subject to regulatory approval, shares of the Adjustable U.S. Government Fund
and the Investment Grade Intermediate Bond Fund will be replaced by shares of
the U.S. Government Securities Fund on October 25, 1996, or shortly thereafter.
After the substitution, the Adjustable U.S. Government Fund and Investment Grade
Intermediate Bond Fund will no longer be available.
+Effective May 1, 1996, the name of the Global Income Fund changed to the
Templeton Global Income Securities Fund. The portfolio's objective and current
investment strategy remain unchanged.
PORTFOLIO PROFILES
Portfolios Seeking Capital Growth
NEW! Capital Growth Fund
The Franklin Valuemark Funds Trust added a new portfolio on May 1, 1996: the
Capital Growth Fund. The fund was created for investors seeking capital
appreciation in a diversified portfolio of primarily large- and
mid-capitalization equity securities, in what we consider to be generally
stable-growth companies with strong appreciation prospects over the long term.
The portfolio consists predominately of domestic equity securities, including
common stocks and securities convertible into common stocks. The mix of
securities is within sectors that we believe offer growth potential over the
longer term. Some of our top sectors as of June 30, 1996, included health
technology (13.2% of total net assets), electronic technology (12.2%),
technology services (11.5%), financial (7.4%), and consumer non-durables (4.1%).
Of course, these holdings will change as market conditions warrant.
The basic investment strategy of the fund is to buy what we believe are good
solid growth companies -- trading at attractive valuations -- and hold such
securities over the long term. This involves a "bottom-up" investment selection
process, with a continual review of fundamental criteria such as market
position, product cycles, strength of management, quality of earnings, potential
revenue and earnings growth, and valuation. Our adherence to a buy-and-hold
strategy within the fund, in securities which we believe offer significant
opportunities for future growth, should benefit you with solid growth of capital
over the long term.
Although most of the companies in which we invest are domestically domiciled,
many are globally competitive -- selling products or services throughout the
world. With favorable prospects for renewed economic growth worldwide, coupled
with increased moves toward capitalism in developing nations, we remain very
optimistic about the opportunities for growth through the fund's investments.
Precious Metals Fund
The Precious Metals Fund invests in quality mining companies with attractive
reserve, production and growth, with the objective of long-term capital
appreciation. This strategy was evident in the fund's top five holdings over the
reporting period: all are large capitalization, established, low-cost producers.
Our five largest positions as a percentage of total net assets on June 30, 1996,
were as follows: Placer Dome, Inc. (U.S./6.4% of total net assets), Santa Fe
Pacific Gold Corp. (U.S./6.4%), Barrick Gold Corp. (U.S./5.2%), Newmont Mining
Corp. (Canada/4.0%), and Freeport-McMoRan Copper & Gold, Inc. (U.S./3.9%). Of
course, these holdings will change as market conditions warrant.
For the first half of 1996, the gold market experienced increased volatility and
exceeded our forecasted trading range for the first time in two years. Gold
prices began 1996 at $387 an ounce, climbed strongly to peak at $416.25 by early
February, and have since retreated back to the $380 level by the end of the
reporting period. While both gold bullion and platinum experienced strong upward
movements before retracing and ending the period on a negative note -- down 1.0%
and 4.9%, respectively -- copper plunged with the announcement of the Sumitomo
scandal and never recovered -- dropping 27.5% by the end of the reporting
period.
Within our conservative investment policy, we increased exposure to smaller U.S.
companies with international exploration and mining potential, as well as to
South African companies where valuations appeared attractive. The new holdings
added during the period continue to focus on quality operations and uphold our
emphasis on diversifying geographically.
Looking forward, our long-term outlook for gold and the Precious Metals Fund
remains optimistic. With demand exceeding supply in all sectors, we believe gold
fundamentals continue to improve and support a gradual increase in the gold
price. Given the difficulty of predicting future gold prices, we will continue
to invest in mining companies that should be able to increase reserves,
production, cash flow and earnings over the long term.
Small Cap Fund
During the six months ended June 30, 1996, the stock market proved to be very
volatile, and solid gains made early in the year were partially offset by
profit-taking during the second quarter of 1996. We think the sell-off was due
in part to the fact that the economy appeared to be picking up steam, causing
investors to fear that interest rates may increase.
We continue to search for small capitalization companies in their emerging
growth phase. Our positive performance during the period was helped by our
exposure to the health services sector (4.0% of total net assets) and energy
sectors (5.2%); however, we continue to find many of the best growth companies
in the electronic technology sector (12.4%). Technology stocks were volatile
during the second quarter, but this volatility gave us the opportunity to
purchase what we believe are several solid growth companies at very attractive
prices. We picked up shares of Etec Systems, a leader in semiconductor equipment
manufacturing, and Verilink Corp., a manufacturer of telecommunications network
access products. We also purchased attractive names outside the technology
sector, including Norrell Corp., a provider of temporary personnel and
outsourcing services, and Designer Holdings, an apparel company that sells
sportswear under the Calvin Klein label.
We remain very optimistic about the long-term prospects for the fund, and for
small cap stocks in general. The economy continues to show signs of strength
and, at this time, there appears to us to be little threat of inflationary
pressure. We believe these conditions will provide an excellent opportunity for
small companies to grow and will provide ample investment opportunities for the
fund.
Templeton Developing Markets Equity Fund
We typically take a value-oriented approach when selecting securities for our
emerging markets portfolio, choosing individual stocks based on intrinsic value
and do not purchase solely on sectors of the economy or individual countries.
Nevertheless, the 1994 peso crisis in Mexico -- which had strong ramifications
for Latin American emerging markets -- brought to our attention a great number
of bargains in this region, particularly in the relatively high-liquidity
markets of Brazil, Argentina and Mexico. As of June 30, 1996, the fund held
35.6% of its total net assets in Latin America, including 12.8% in Argentina,
11.7% in Mexico, and 9.2% in Brazil. We also found many bargain stocks in Hong
Kong, where uncertainty over the prospect for the economy after the reversion to
Chinese rule in 1997 has suppressed the long-term growth in stock prices.
By industry, we were most heavily invested in the finance sector (27.9% of total
net assets on June 30, 1996).
Although we have stated that we do not choose securities based on sector or
country, it just so happens that many banks in emerging market countries have
strong valuations. We think this is a result of strong earnings growth due to
the new technology available to them. Also, we believe many of these banks have
high absolute earnings levels, as the shortage of good financing in emerging
markets provides an opportunity for very favorable profit margins.
We expect emerging market equities to resume their rally later this year. These
markets continue to show strong fundamentals (e.g.: high economic and earnings
growth) and, after a poor performance in 1995, these stocks are looking
undervalued to us. With foreign investors once again prepared to accept the
higher risk of investing in emerging markets, vis-a-vis their developed
counterparts, we think this could lead to increased liquidity, which should help
support further gains.
Templeton Global Growth Fund
On June 30, 1996, equities and debt obligations represented 87.4% of the fund's
total net assets. The remaining assets were concentrated in short-term
obligations.
During the past six months, the fund continued to show significant asset growth,
with total assets topping the $477 million mark by June 30, 1996. We adhered to
an investment philosophy of "bottom-up" selection, long-term investment decision
and discount price purchasing. Our top five holdings at the end of the reporting
period were AXA SA (France/1.7% of total net assets), Partnerre Ltd.
(Bermuda/1.6%), Societe Generale de Surveillance Holdings, SA Ltd.
(Switzerland/1.5%), Travelers, Inc. (U.S./ 1.5%), and UNUM Corp (U.S./ 1.49%).
Of course, these holdings will change as market conditions warrant.
The U.S. markets performed well during the six-month period, and the fund reaped
the benefits as its largest geographical weighting was in the U.S. (31.5% of
total net assets). Pharmacia & Upjohn and Nike, have been outstanding U.S.
performers and should continue to do so over the long run.
Not all European markets had such a favorable six months. France, in particular,
has been the victim of union disputes, which caused some French stocks to lag
behind their usual performance. However, with increased emphasis on corporate
restructuring and equities in general, we believe the future for Europe looks
quite favorable.
Latin American markets are still recovering from the Mexican peso devaluation,
which negatively affected some of the fund's Mexican holdings. On the whole, we
think investor confidence is being restored by the government's stringent
economic program, and the Mexican Bolsa index continues to rise.
In general, Asia seems to us to be an area of untapped investment and economic
growth. Potential bargain stocks are constantly being evaluated in this region,
with Hong Kong performing particularly well in the past six months.
Regarding investment sectors, real estate holdings form a large weighting in the
fund (5.7% of total net assets), particularly shares in real estate investment
trusts (REITs). Performance in this area has been good, with the exception of
Credit Foncier de France, which is currently undergoing restructuring, and MDX
Public Co., a Thai industry park developer that suffered construction delays on
several projects because of floods.
Another sizable sector is energy sources (4.4%). During the reporting period, we
made purchases in companies we believe to be undervalued such as Transportadora
de Gas del Sur (Argentina) and Societe Elf Aquitaine (France).
Templeton International Equity Fund
We continued to look for undervalued stocks using our disciplined approach of
detailed research of individual companies. With analysts and other research
sources around the world, we uncovered value in a wide range of places -- we
currently hold stocks in 32 countries. On June 30, 1996, our assets were
allocated in Europe (54.8% of total net assets), Asia (9.3%), Australia/New
Zealand (6.2%), North America (4.6%), and Latin America (4.7%), with the
remaining 20.4% of the fund invested in short-term and fixed-income securities.
Of course, these holdings will change as market conditions warrant.
European equity markets turned in mixed performances during the period. The
Netherlands (8.5% of total net assets), Sweden (10.8%), and Norway (2.7%) led
the way on the strength of stocks in the cyclical and banking sectors. The stock
market of the U.K. (8.6%), however, posted relatively lackluster returns
primarily because of the country's uncertain economic prospects and low levels
of consumer spending. Although low inflation resulted in lower interest rates in
these countries, economic growth was depressed in part by spending restrictions
required for membership in the European Monetary Union. This came at a time when
growth was already faltering and unemployment was rising.
Looking forward, 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. We are cautious in our outlook -- today's relatively high market
valuation levels make identifying investment bargains a particular challenge.
NEW! Templeton International
Smaller Companies Fund
On May 1, 1996, we introduced the Templeton International Smaller Companies
Fund. This fund seeks long-term capital appreciation by investing primarily in
the equity securities of smaller companies outside the U.S., including
developing markets. We invest in companies whose outstanding common stock has,
at the time of purchase by the portfolio, a market value of not more than $1
billion.
The portfolio managers' value-oriented strategy along with portfolio
diversification across numerous industries and in many markets are designed to
help manage the risks associated with foreign investments in smaller companies.
On June 30, 1996, 41.4% of the fund's total net assets were invested in equity
securities from Europe, North America and Asia, with the remaining 58.6% in
short-term securities. Of course, these holdings will change as market
conditions warrant.
Templeton Pacific Growth Fund
On June 30, 1996, the fund's top five geographic allocations were Japan (18.8%
of total net assets), Hong Kong (17.0%), Australia (15.7%), Thailand (8.9%), and
Singapore (7.6%). Of course, these holdings will change as market conditions
warrant.
The most notable development during the reporting period was the tremendous
amount of Japanese equities purchased by foreign investors. The Gaijin (a
Japanese term for foreigners) bought an estimated $36.9 billion in Japanese
stocks as market sentiment improved following that government's intervention in
the country's crippling banking crisis. These efforts resulted in the Nikkei 225
Index rebounding almost 7%, from $191.944 on December 31, 1995, to $205.348 on
June 30, 1996. Taking advantage of this rising equity market, we sold our shares
of Nintendo Corp., Ltd. following strong performance by the company's stock.
Another important development in this region was the improvement in
Chinese-British relations as the two countries reached an agreement regarding
the technical issues of Hong Kong's upcoming reversion to China. Real estate in
Hong Kong became more affordable, which boosted sales and propelled property
stocks higher. As a result of these developments, we maintained our relatively
large weighting in Hong Kong during the reporting period.
We remain optimistic about the Pacific Rim equity market's potential. Although
possibilities of higher interest rates in the U.S. and Japan could prove
problematic in the near future, the tremendous growth potential in this region
may lead to continued inflows of capital, which would be beneficial to stock
prices.
Portfolios Seeking Growth and Income
Growth and Income Fund
Our strategy has always been to buy stocks when they are out of favor and
represent bargains based on their longer-term prospects. An area that we
identified as having excellent valuations is international stocks. Many overseas
stocks are trading at significant discounts to their U.S. counterparts. We
purchased equity securities in the U.K. during the reporting period;
specifically, we purchased shares in British Steel, British Telecom and the
pharmaceutical company Glaxo Welcome Plc. All of these stocks had dividend
yields in excess of 4% and are trading near their recent lows. These purchases
boosted the fund's international stock holdings to 11% of total net assets by
June 30, 1996.
In the U.S., we selectively put cash to work. One area that drew our interest
during the reporting period was the basic materials sector, most notably the
forest/paper products companies. Although this industry's fundamentals are weak
in the near term, the stock prices of many industry leaders have been extremely
depressed and their long-term growth potential is excellent in our opinion.
Recent investments in this area include Union Camp, Weyerhauser, and Georgia
Pacific. Investments in the basic materials sector comprised 11.5% of the fund's
total net assets on June 30, 1996, down slightly from 10% six months ago.
We also continued to find excellent values in the electric utilities group.
These stocks performed well for us in late 1995, but their performance has been
adversely affected thus far in 1996 because of their sensitivity to higher
interest rates. We took advantage of specific weaknesses in these stocks to
initiate positions in Peco Energy, Pacific Gas & Electric, and Public Service
Enterprises. With these purchases, and additions to existing positions, 17.9% of
the portfolio's total net assets were in electric utilities on June 30 -- which
makes this sector the fund's largest. The fund's second largest sector -- at
15.9% of total net assets at the end of the reporting period -- was the energy
sector. During the period, we added to our holdings of industry leaders such as
Mobil Corp., Exxon Corp., and Atlantic Richfield Co. We believe these
well-managed, financially strong companies will benefit from a worldwide boost
in energy consumption in the years ahead.
We maintain a long-term perspective when managing the fund and will continue to
take advantage of investment opportunities as they arise in the months ahead. Of
course, the holdings previously described will change as market conditions
warrant.
Income Securities Fund
The first half of 1996 was generally characterized by an improving economic
outlook, rising interest rates, and a buoyant stock market. The sectors in which
the fund invests provided varied results in this environment, with most sectors
performing relatively well.
In response to market volatility, resulting from rising interest rates, we
utilized our cash position in purchasing securities we believed to be
undervalued. On June 30, 1996, bonds accounted for the largest portion of the
fund, representing 54.5% of total net assets. This can be broken down into
corporate straight bonds (28.9%), foreign government bonds (11.4%), U.S.
Treasuries (7.1%), and corporate convertible bonds (4.3%). Stocks represented
41.3% of the fund's total net assets, with the largest portions being common
stock (31.6%) and convertible preferred stock (9.2%). Cash equivalents made up
the remaining 4.2% of the portfolio's total net assets.
As indications of stronger economic growth led to rising long-term interest
rates, we increased our U.S. Treasury exposure over the reporting period, from
2.8% to 7.1% of total net assets, in response to what we considered to be
attractive yields. Corporate bonds, which represented the largest segment of
bonds in the fund, exhibited solid performance despite the rise in interest
rates. When purchasing corporate bonds, we focus on companies with significant
underlying assets and ample cash flow to service debt. We also seek bonds with
attractive yields and the potential for capital appreciation through improved
company operations and enhanced credit ratings. We initiated several corporate
bond positions during the period that met this criteria, including Harvey's
Casino Resorts (gaming), Plains Resources (energy), Riverwood International
(packaging), and Smith's Food & Drug (food retailing).
In addition, several corporate bond positions benefited from announced mergers
and acquisitions, including Motor Wheel Corp., Pace Industries, and Uniroyal
Chemical. These bonds experienced significant appreciation due to the
recognition that the combined entities would be stronger financially than the
companies on a stand-alone basis. Although the possibility of mergers or
acquisitions is not an overriding investment criteria, our value-oriented
approach can identify the securities of companies which are also attractive to
potential acquirers or partners.
Dollar-denominated Latin American bonds experienced some weakness due to the
rise in U.S. interest rates, which began in February. We took advantage of
market declines by initiating positions in dollar-denominated, collateralized
Brazilian and Ecuadorian Brady bonds. Subsequently, strength in the fund's Latin
American positions helped to offset weakness in our Canadian and South African
bonds.
Utilities represented our largest equity sector (20.8% of total net assets),
followed by energy (5.7%), metals (4.2%), real estate investment trusts (REITs)
(3.6%), and pharmaceuticals (2.4%). The interest-rate sensitive utility sector
was adversely affected by the rise in rates between February and June, while
strength in most other equity sectors of the fund offset this weak area. Gold
and energy stocks were especially strong during the period. Taking a contrarian
approach, we selectively added to the fund's existing utility positions in
Central & SouthWest, Entergy, General Public Utility, Potomac Energy, and
ScanaCorp., while initiating new positions in Peco and Western Resources.
Along with purchases in the utility sector, we also initiated common stock
positions in Canadian Oil Sands Trust (a Canadian oil project), Meditrust (a
health care REIT), and FelCor Suites (a hotel REIT). We also added several new
convertible securities to the portfolio, including Ashanti Goldfields Co., Ltd.
(metals), Cablevision Systems Corp. (cable systems), Nortel Inversora
(telecommunications), and Security Capital Industrial (industrial REIT).
Finally, we sold or reduced several of the fund's holdings in the energy,
airline, REIT and pharmaceutical sectors due to price appreciation, low relative
yields and limited appreciation potential.
In the future, we will continue to follow our value-oriented approach as we seek
income and growth from a diversified mix of stocks, bonds and cash. With the
stock market near all-time highs, we remain selective and opportunistic as we
search for additional investments for you. Of course, the previously mentioned
holdings will change as market conditions warrant.
Real Estate Securities Fund
The Real Estate Securities Fund seeks capital appreciation with current income
as a secondary objective. The portfolio invests in the securities of companies
operating in the real estate industry and focuses primarily on equity real
estate investment trusts (REITs). Equity REITs are real estate companies that
own and manage income-producing properties such as apartments or hotels. This
income, primarily rent from these properties, is generally passed on to
investors in the form of dividends. These companies provide experienced property
management teams and generally concentrate on a specific geographic region and
property type.
In general, the U.S. real estate market continued to improve during the
reporting period. Limited new property development and strong demand for space
resulted in rising occupancy levels and rental rates. Real estate fundamentals,
however, typically vary according to property type or geographic region. Over
the past year, for example, the retail sector experienced a period of weak
demand and overbuilding, while hotel properties enjoyed stronger demand and
limited new development. Although demand for real estate in general remained
weak in the Northeast, strong job growth caused demand to rise in the West.
Within this environment, we remained committed to our long-term investment
strategy: focusing on property types and geographic regions with strong supply
and demand fundamentals. We target stocks with significant growth prospects and
attractive valuations within each property sector. As a result, we maintained
the majority of the fund's investments during the reporting period in the
apartment, hotel, industrial and self-storage property types, where we
anticipated the most favorable supply and demand characteristics. Our large
positions in the apartment and hotel sectors contributed significantly to our
performance.
The largest property-type weighting continued to be in the apartment sector
(23.1% of total net assets at the end of the period). We maintained large
positions in apartment operators, such as Equity Residential Properties Trust
and Security Capital Pacific Trust, where we expect continued strong cash flow
growth. In addition, recognizing the continued rebound of the California
economy, we added to our holdings in Bay Apartment Communities, Inc. and Irvine
Apartment Communities, Inc., two California-based equity REITs.
In the hotel sector, growing demand for rooms continued to outpace construction,
driving room and occupancy rates higher. Anticipating that this trend should
continue, we maintained our overweighted position in this sector, roughly 17.3%
of total net assets on June 30, 1996. Our core holdings in this property type
include FelCor Suite Hotels, Inc., Winston Hotels, Inc. and Host Marriott
Corporation.
During the reporting period, we added two new positions to the fund. In Belmont
Homes, Inc., a manufactured-home builder located in the Southeast, we see an
opportunity to participate in the continued growth of this industry as home
buyers seek more affordable alternatives to traditional single family homes. The
other addition, Interstate Hotels Co., is the largest independent hotel
management company in the U.S. and should benefit as the hotel industry
continues to improve.
We also sold several securities during the six-month period in accordance with
our disciplined approach to valuation. We sold two positions in the apartment
sector and two positions in the hotel sector as the securities had become
overvalued relative to their growth prospects.
Looking forward, we will remain focused on those property types and geographic
areas exhibiting the most favorable supply and demand fundamentals. Within each
sector, we will continue to emphasize attractively valued securities of
well-managed companies generating strong cash flow and dividend growth. In our
opinion, the real estate industry should continue to benefit from limited new
development and steady demand for space from both new and existing tenants.
Therefore, we believe that the portfolio offers attractive return potential. Of
course, the previously mentioned holdings will change as market conditions
warrant.
Rising Dividends Fund
Our investment strategy is based on our belief that companies with consistently
rising dividends should, over time, realize increases in their share prices. We
select portfolio securities based on several criteria. To be eligible for
purchase, stocks must pass certain investment "screens," or screening
procedures, including consistent and substantial dividend increases, strong
balance sheets and relatively low price/earnings ratios. We seek fundamentally
sound companies that meet our standards and attempt to acquire them at
attractive prices, often when they are out of favor with investors.
The fund's top 10 company holdings on June 30, 1996, were: Philip Morris Cos.,
Inc. (3.48% of total net assets), Federal National Mortgage Association (2.92%),
Family Dollar Stores Inc. (2.86%), General Electric Co. (2.75%), Wal-Mart
Stores, Inc. (2.65%), DIMON Inc. (2.62%), Mercury General Corp. (2.61%), Allied
Group, Inc. (2.60%), Bard (C.R.), Inc. (2.56%), and Monsanto Co. (2.44%). Of
course, these holdings will change as market conditions warrant.
It is interesting to note how these 10 companies would, in the aggregate,
illustrate the fund's screening criteria. To do this, we take a simple average
of statistical measures. On average, these 10 companies have raised their
dividends 18 years in a row, and by 438% in the last 10 years, have long-term
debt that is only 22% of capital, and sell at a 13.7 price/earnings ratio. 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
On June 30, 1996, equities (including convertible and preferred securities)
accounted for 45.3% of the portfolio's total net assets, with 24.4% in
fixed-income and 30.3% in short-term and other obligations.
During the past six months, the fund continued to show tremendous asset growth,
with assets climbing to $35 million on June 30, 1996, from $14.7 million on
December 31, 1995. While such an inflow of funds has made it difficult to remain
fully invested, we were able to find securities in roughly 30 countries, with
four of these countries having larger-than-average weightings in the equity
portion of the portfolio: U.S. (15.8%), France (5.1%), Sweden (2.8%), and Hong
Kong (2.4%).
European markets turned in mixed performances for the equity and fixed-income
portions of the fund during the six-month period. Some of the best bond
performers so far in 1996 have been the higher-yielding markets in Europe. In
May, however, Spain and Sweden showed mild signs of vulnerability, and foreign
investors paused to question the prospects for the European Monetary Union in
1999.
While European bonds dipped in May, the equity markets of Sweden, Norway and the
Netherlands rose on the strength of stocks in cyclical and banking sectors. The
stock markets of core European countries, such as the U.K. and France, however,
posted relatively lackluster returns due primarily to these countries' uncertain
economic prospects and low levels of consumer spending.
Economic conditions in Europe may continue to be a mix of modest growth and low
inflation, with the added benefit of further fiscal reform as countries work to
qualify for entrance into the European Monetary Union. We believe the
combination of these factors could lead to strong fund performance through the
end of the next reporting period.
Utility Equity Fund
During the reporting period, we found attractive values in several domestic and
foreign utility stocks. We purchased shares in Pacific Enterprises (a domestic
natural gas distributor), Enron Global Power, and ENDESA of Chile -- both
electric power generation companies. We also acquired shares of several
telecommunications companies, among these: Intelcom Group, Nippon Telephone &
Telegraph, and Hellenic Telecommunications (the recently privatized telephone
utility of Greece). These stocks were bought at attractive valuations, and we
believe they offer excellent capital appreciation potential. Of course, these
holdings will change as market conditions warrant.
In addition to our investments in domestic utility stocks (82.1% of total net
assets on June 30, 1996), we also sought investment opportunities outside the
U.S. Over the past six months, we took advantage of opportunities in foreign
markets to build up our small foreign component. At the end of the reporting
period, 15.8% of the portfolio's holdings were in foreign electric, gas and
telecommunications companies. These foreign holdings have many of the same
characteristics that we traditionally look for in domestic securities: strong
economic growth, strong demographics, favorable political and regulatory
environments and superior entrepreneurial management.
Looking forward, one of our principle concerns is the changing regulatory
environment of the domestic utility industry. For this reason, we have been
focusing specifically on those utilities that are best positioned to handle
increasing competition. Such utilities have low production costs, strong
entrepreneurial management teams and service territories located in regions with
positive demographic trends. We believe that these utilities will produce higher
returns than their peers as they work to capture a larger part of the more
competitive marketplace.
Portfolios Seeking Current Income
Adjustable U.S. Government Fund
On June 30, 1996, 30.4% of the fund's total net assets were invested in
obligations of the Federal National Mortgage Association (FNMA), 22.4% in
obligations of the Federal Home Loan Mortgage Corporations (FHLMC), 18.8% in
obligations of the Government National Mortgage Association (GNMA), 17.5% in
obligations of Small Business Association (SBA) and 10.9% in cash and other
short-term obligations.
Prices of adjustable rate mortgage-backed securities (ARMs) moved modestly over
the reporting period. ARMs have interest payments (also known as "coupons") that
adjust periodically within preset limits to reflect current rates. These
coupons, which can often adjust to higher rates and compensate for the negative
effects these rates have on the value of most bonds, usually enable ARMs to have
greater price stability than fixed-rate securities. Interest rate changes in the
near term will likely occur within the preset limits of ARMs, and the securities
should continue to adjust accordingly.
Though we are experiencing a period of higher interest rates, of some concern
(especially in a low interest rate environment) to us is prepayment risk. When
interest rates drop, it is likely that homeowners will try to replace their
adjustable-rate mortgages -- prepaying them -- with competitive, fixed-rate
loans. For investors in ARMs, such prepayment brings the risk of reducing future
income streams. In an effort to reduce this risk, we have maintained an
overweighting in seasoned, non-convertible ARMs, which are less likely to
experience high levels of prepayment.
Looking forward, we anticipate a return to slow growth and low inflation. This
should lead to stable, or slightly lower, interest rate volatility -- both of
which should benefit ARMs securities in general. Our efforts continue to focus
on stability of principal while maintaining a yield that is competitive with
short-term investment alternatives. We will, of course, take into consideration
the proposed substitution in making portfolio investment decisions.
High Income Fund
With signs of stronger economic growth and fears of inflation increasing over
the past six months, interest rates, as measured by the 30-year U.S. Treasury
bond, increased from 5.99% on December 31, 1995, to 6.90% on June 30, 1996.
Despite rising interest rates, the high yield market performed very well
compared to other fixed-income sectors having similar maturities. We believe
this strong performance can be attributed to the hybrid nature of these
securities: high yield bonds have both debt and equity characteristics. While
the "debt" component of these securities was negatively impacted by rising
interest rates, the "equity" component was positively impacted by expectations
of economic growth.
During the past two quarters of 1996, the fund increased its exposure to the
media/broadcasting and utilities sectors. Recent regulatory changes have
brightened the prospects for the media sector, and we increased our exposure to
11.22% of total net assets at period end, up from 9.5% on December 31, 1995. We
increased our holdings in the utility sector (to 2.35% from 1.8% six months ago)
to benefit from the stable cash flow generated by utility operations and the
generally positive outlook for this sector. As part of repositioning the fund,
we decreased our exposure to forest/paper products, transportation, and food
retailing industries.
In addition to these strategic changes, we also benefited from mergers in
several industries. Specifically, Pace Industries (industrial products) was
purchased by Leggett and Platt, an investment-grade industrial conglomerate. In
the gaming sector, Bally's Casino agreed to be bought by Hilton, another
investment grade company. In general, mergers and consolidations positively
impact the price of the company being purchased.
We continued to increase the overall credit quality of the fund's portfolio
during the period by purchasing higher-rated securities and receiving ratings
upgrades on securities already in the portfolio. Additionally, the average
maturity of the portfolio decreased from 9 years to 8.2 years over the reporting
period.
Given the current outlook for the economy -- moderate growth with low inflation
- -- we believe high yield bonds should continue to benefit from the earnings
improvement of corporations.
Investment Grade Intermediate Bond Fund
With long-term interest rates up almost 100 basis points since year-end 1995,
the fund has been well-served by its emphasis on short and intermediate
maturities. As of June 30, 1996, 77% of the fund's assets were invested in
securities having average maturities of under 2 years -- a factor contributing
stability to the fund's performance. The weighted average quality of the
portfolio was AA+, with approximately 57.5% of the assets in AAA-rated, U.S.
Government-related securities.
We continued our strategic emphasis on "putable" bonds, which represented
approximately 21.2% of the total net assets at the end of the six-month
reporting period. A "putable" bond grants the holder (the portfolio) the right,
but not the obligation, to choose a specified early redemption date (the
"effective maturity") on which the bond will be redeemed by the issuer at full
face value regardless of the level of interest rates. In a rising bond market,
such bonds would tend to increase in price because of their long-term final
stated maturities; however, in a falling bond market, they would be supported in
price because of the ability to sell them at par (face value) value much earlier
on the "putable" date.
We maintain our belief that this approach will produce a better total return
than that available from a money market fund, without having to assume the risks
potentially associated with lower quality or longer term investments. We will,
of course, take into consideration the proposed substitution in making portfolio
investment decisions.
Templeton Global Income Securities Fund
(Formerly Global Income Fund)
On May 1, 1996, the Global Income Fund's name was changed to Templeton Global
Income Securities Fund. The fund's objective and investment strategy remain the
same.
Some of the best bond performers so far during 1996 have been in the
higher-yielding markets of Europe. In May, however, Spain and Sweden showed mild
signs of vulnerability, and foreign investors paused to question the prospects
for the European Monetary Union in 1999. Italy was the exception to the rule as
investors continued to support both the Lira and the Italian bond market. Two
other markets demonstrating a distinct positive trend in May were the Canadian
and Australian bond markets. Despite the influence of a poor U.S. market, both
of these dollar-linked markets rallied in May and generated positive returns for
the reporting period.
Looking forward, we feel these are the most important factors influencing global
fixed-income markets: the sustainability of U.S. economic growth, the prospects
for a rebound in core European economies, and the course of the U.S. dollar.
Although we perceive the risk of sustained current-trend global growth to be
relatively small, we believe the U.S. economy is in a mild but renewed rebound,
which is likely to persist through the end of summer. We also believe that the
European economies are past the down point in their business cycle, although any
renewed growth will be slow to arrive and sluggish. We think the near-term
direction of the U.S. dollar will be influenced primarily by the outlook for the
monetary policy in major markets, but also by the constraints placed on domestic
policies in European countries relative to the European Monetary Union. We feel
this backdrop supports a somewhat higher U.S. dollar over the balance of the
year.
Given this global outlook, we feel that the Templeton Global Income Securities
Fund is positioned conservatively with respect to both currency and
interest-rate risk. The portfolio holds approximately 63.7% of its assets in
intermediate maturities in the dollar block of bond markets (U.S., Canada, and
Australia), while holding roughly 36.3% of net assets in intermediate bonds from
Italy, Spain, Sweden, Denmark, Ireland and the United Kingdom. Core European
markets and Japan are still underweighted. Turnover in the fund during the last
six months was minimal. However, we continued to shift assets from the core
European markets (France and Germany) to Italy, Spain and Sweden. We have also
reduced our exposure in New Zealand and reinvested the proceeds in the U.S. Of
course, these holdings will change as market conditions warrant.
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 or "Ginnie Mae") mortgage passthroughs as our largest
positions. Some issuers held by the portfolio 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 June 30, 1996,
the fund's investments consisted of 77.2% of total net assets in mortgage-backed
securities (of which approximately 53% were Ginnie Maes), 20.4% in other U.S.
government and agency securities, and 2.4% in short-term investments. Of course,
these holdings will change as market conditions warrant.
In Washington D.C., talk of a balanced budget package has been replaced by
political positioning in this presidential election year. Elections are known
events with unknown outcomes: as the rhetoric heats up going into the elections,
the potential exists for increased volatility, with each side trying to "please"
everyone. Currently, economists are generally divided into the two camps of
slower growth and faster growth. We think that current interest rate levels
adequately discount election rhetoric and economic uncertainty.
We believe investing in Ginnie Mae securities through the portfolio is a
reasonable way to invest, especially in a period of economic uncertainty. Ginnie
Maes generally have the price volatility of an intermediate-term bond, with more
income than a 30-year U.S. Treasury bond. The portfolio continues to use Ginnie
Maes as the investment vehicle of choice -- highest credit quality, moderate
volatility and high current income.
Three Zero Coupon Funds
(maturity dates: 2000, 2005, 2010)
Increased economic growth and rising interest rates adversely affected the
Franklin Valuemark Zero Coupon Funds during the six-month reporting period.
Interest rates on 5- to 15-year U.S. Treasury securities have increased more
than 100 basis points during this period, which is significant because the
valuation of the portfolio's zero coupon securities move in the opposite
direction of interest rates.
We began 1996 with very slow economic growth;
in fact, the Federal Reserve Board (the Fed) lowered the target for the federal
funds rate in January as insurance against economic recession. Soon, however,
the economy had resumed a more moderate growth pattern. The Gross Domestic
Product (GDP) grew at an annualized rate of 2.8% in the first quarter of 1996,
compared to only .50% in the fourth quarter of 1995. In our view, bond markets
now anticipate the Fed could reverse its course and raise interest rate
benchmarks to curb potential inflation.
Zero coupon investments, especially those with longer maturities, are volatile
in price primarily due to their interest rate sensitivity and the fact that they
have no current income. Holding these securities to maturity, however, may bring
an investor a fixed return because the final value is known. Therefore, zero
coupon investments can be attractive for both aggressive and risk averse
investors. In each portfolio, we maintain -- at all times -- a duration within
12 months of the target maturity. We do not try to time the market; instead, our
portfolio activity mirrors shareholder activity. We make purchases when money
flows into the portfolios, and sell securities to meet redemptions.
Additionally, we primarily hold only top-rated U.S. Treasury and agency zero
coupon and stripped securities as well as top-rated corporate securities. We
believe this strategy keeps default risk at a minimum.
Portfolio Seeking Capital Preservation
and Income
Money Market Fund
The economy was weak throughout most of 1995, and continued to lose momentum in
early 1996. With prospects for continued slow growth and low inflation, the
Federal Reserve Board (the Fed) lowered the federal funds rate to 5.25% in
January.
To the surprise of many investors, the economic reports turned sharply positive
in March 1996. Annualized Gross Domestic Product (GDP) growth rebounded to 2.8%
in the first quarter, compared with only .50% in the fourth quarter of 1995.
Since March, the majority of economic data released has remained stronger than
expected, with the index of leading economic indicators, consumer confidence and
industrial production all up significantly.
As a result of the recent growth, many economists estimate second quarter 1996
GDP growth at or around 4.2%.
These trends were also reflected in short-term interest rates during the
six-month reporting period. For example, the 90-day U.S. Treasury bill rate
declined from 4.91% on December 31, 1995, to 4.86% on February 29, 1996, (the
middle of the first quarter) as economic growth continued to slow. Since then,
Treasury bill rates have steadily risen to 5.10% by June 30, 1996, as the
economy improves. Since we maintained a relatively short weighted average
maturity during the reporting period, the portfolio's 7-day yield mirrored the
movements in Treasury bill rates in lag fashion. The portfolio's 7-day yield
began the period at 5.43%, declined to 4.81% at the end of the February 1996,
then rose to 4.93% as of June 30, 1996.
We continue to invest the portfolio's assets in securities that are among the
highest quality available to money market portfolios. Since the portfolio's
objective is to provide you with a high quality conservative investment, we do
not invest in leveraged derivatives or other potentially volatile securities
that, we believe, involve undue risk.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Adjustable U.S. Government Fund (Note 1)
Adjustable Rate Mortgage Securities 89.1%
<C> <S> <C>
Federal Home Loan Mortgage Corp. (FHLMC) 22.4%
$ 569,357 FHLMC, Cap 12.34%, Margin 2.00% + CMT, Resets Semi-Annually, 7.109%, 11/01/18 ............... $ 565,588
5,707,488 FHLMC, Cap 12.522%, Margin 2.105% + CMT, Resets Annually, 7.664%, 06/01/22 .................. 5,944,405
383,799 FHLMC, Cap 13.00%, Margin 2.00% + CMT, Resets Semi-Annually, 8.00%, 07/01/18 ................ 394,691
2,773,023 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.542%, 09/01/19 ................... 2,847,835
3,437,845 FHLMC, Cap 13.125%, Margin 2.00% + CMT, Resets Annually, 7.551%, 07/01/18 ................... 3,558,032
707,234 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.687%, 07/01/19 .................. 727,530
8,459,301 FHLMC, Cap 13.458%, Margin 2.195% + CMT, Resets Annually, 7.735%, 02/01/19 .................. 8,701,784
6,184,848 FHLMC, Cap 13.50%, Margin 2.03% + CMT, Resets Annually, 7.551%, 05/01/18 .................... 6,426,058
1,798,102 FHLMC, Cap 13.605%, Margin 2.20% + CMT, Resets Annually, 7.559%, 02/01/19 ................... 1,867,114
7,648,300 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.662%, 04/01/18 .................. 7,960,962
------------
Total Federal Home Loan Mortgage Corp. (Cost $38,948,224) ............................ 38,993,999
------------
Federal National Mortgage Association (FNMA) 30.4%
7,549,309 FNMA, Cap 12.22%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 6.794%, 06/01/18 ......... 7,678,629
1,187,131 FNMA, Cap 12.248%, Margin 1.749% + COFI, Resets Annually, 6.869%, 02/01/28 .................. 1,180,756
708,314 FNMA, Cap 12.323%, Margin 1.66% + CMT, Resets Annually, 6.667%, 03/01/21 .................... 720,681
2,375,281 FNMA, Cap 12.49%, Margin 2.00% + CMT, Resets Annually, 7.686%, 02/01/19 ..................... 2,467,941
797,968 FNMA, Cap 12.75%, Margin 2.125% + CMT, Resets Annually, 8.125%, 06/01/18 .................... 833,846
4,413,854 FNMA, Cap 12.786%, Margin 1.25% + COFI, Resets Monthly, 6.225%, 02/01/03 .................... 4,409,484
7,352,292 FNMA, Cap 12.819%, Margin 2.127% + CMT, Resets Annually, 7.661%, 09/01/18 ................... 7,698,879
660,593 FNMA, Cap 12.981%, Margin 2.011% + CMT, Resets Annually, 7.531%, 08/01/20 ................... 681,877
869,633 FNMA, Cap 13.099%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.108%, 07/01/20 ........ 882,904
4,716,932 FNMA, Cap 13.313%, Margin 2.126% + CMT, Resets Annually, 7.664%, 07/01/19 ................... 4,884,666
376,033 FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.652%, 01/01/18 ................... 388,911
748,908 FNMA, Cap 13.793%, Margin 2.167% + CMT, Resets Annually, 7.904%, 06/01/18 ................... 776,794
1,220,305 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.787%, 07/01/24 ......... 1,216,803
439,716 FNMA, Cap 13.843%, Margin 1.25% + COFI, Resets Monthly, 6.124%, 02/01/17 .................... 436,396
893,416 FNMA, Cap 14.071%, Margin 1.25% + COFI, Resets Monthly, 6.225%, 12/01/18 .................... 886,385
1,427,253 FNMA, Cap 14.428%, Margin 2.125% + CMT, Resets Annually, 7.25%, 04/01/19 .................... 1,481,147
6,330,773 FNMA, Cap 14.625%, Margin 1.25% + COFI, Resets Monthly, 6.31%, 06/01/02 ..................... 6,310,579
3,812,289 FNMA, Cap 14.808%, Margin 1.825% + 3CMT, Resets Tri-Annually, 8.489%, 07/01/20 .............. 3,920,482
5,743,226 FNMA, Cap 15.156%, Margin 2.284% + 3CMT, Resets Tri-Annually, 8.52%, 03/01/20 ............... 5,972,495
------------
Total Federal National Mortgage Association (Cost $53,042,036) ........................ 52,829,655
------------
Government National Mortgage Association (GNMA) 18.8%
15,000,000 jGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 06/01/26 ..................... 15,060,938
5,000,000 jGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.00%, 06/01/26 ..................... 5,070,313
4,006,662 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.25%, 07/20/17 ...................... 4,065,280
3,563,800 GNMA, Cap 11.50%, Margin 2.50% + CMT, Resets Annually, 6.50%, 07/20/25 ...................... 3,639,353
4,808,343 GNMA, Cap 14.00%, Margin 1.50% + CMT, Resets Annually, 6.50%, 01/20/16 ...................... 4,832,145
------------
Total Government National Mortgage Association (Cost $32,655,173) ..................... 32,668,029
------------
Small Business Administration (SBA) 17.5%
9,116,252 SBA, Cap 10.50%, Margin Prime - 0.50%, Resets Quarterly, 7.75%, 03/25/19 .................... 9,469,507
8,067,712 SBA, Cap 10.85%, Margin Prime - 0.40%, Resets Quarterly, 7.85%, 06/25/19 .................... 8,430,760
11,876,352 SBA, Cap 10.875%, Margin Prime - 0.125%, Resets Quarterly, 8.125%, 03/25/18 ................. 12,603,778
------------
Total Small Business Administration (Cost $30,915,918) ................................ 30,504,045
------------
Total Adjustable Rate Mortgage Securities (Cost $155,561,351).......................... 154,995,728
------------
Government Securities 14.1%
25,000,000 U.S. Treasury Notes, 5.125%, 03/31/98 - 06/30/98 (Cost $24,690,357).......................... 24,579,672
------------
Total Long Term Investments (Cost $180,251,708) ....................................... 179,575,400
------------
f Short Term Investments 3.4%.................................................................
Government Securities
$ 6,000,000 U.S. Treasury Bills, 4.99% - 5.19%, 10/17/96 - 01/09/97 (Cost $5,846,630).................... $ 5,846,210
------------
Total Investments before Repurchase Agreements (Cost $186,098,338) .................... 185,421,610
------------
g,hReceivables from Repurchase Agreements 3.9%
6,821,225 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $6,855,802) (Cost $6,852,696)
Chase Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $944,116)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 6,852,696
------------
Total Investments (Cost $192,951,034) 110.5% ..................................... 192,274,306
Liabilities in Excess of Other Assets (10.5)%..................................... (18,294,103)
------------
Net Assets100.0% .................................................................. $173,980,203
============
At June 30, 1996, the net unrealized depreciation based on the
cost of investments for income tax purposes of $192,951,034
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 604,202
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (1,280,930)
------------
Net unrealized depreciation ............................................................... $ (676,728)
============
</TABLE>
PORTFOLIOABBREVIATIONS
3 CMT - 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
fSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Face Value
Country* Amount Templeton Global Income Securities Fund (Note 1)
Bonds 94.3%
<S> <C> <C> <C>
Argentina 5.7%
US 2,500,000 bHidroelectrica Alicura, SA, 8.375%, 03/15/99 ................................... $ 2,425,000
US 2,895,000 Republic of Argentina, 10.95%, 11/01/99 ......................................... 3,021,656
US 3,620,000 Republic of Argentina, 8.375%, 12/20/03 ......................................... 3,140,350
US 7,690,000 Republic of Argentina, Series L, VRN, 5.25%, 03/31/23 ........................... 4,219,888
------------
12,806,894
------------
Australia 6.9%
AU 14,290,000 eGovernment of Australia, 7.00%, 04/15/00 ....................................... 10,716,236
AU 5,120,000 eRepublic of Australia, 12.00%, 11/15/01 ........................................ 4,596,833
------------
15,313,069
------------
Brazil 1.0%
US 4,100,000 Government of Brazil, 4.25%, 04/15/24 ........................................... 2,270,375
------------
Canada 4.4%
CA 11,910,000 eGovernment of Canada, 10.50%, 03/01/01 ......................................... 9,933,651
------------
Denmark 5.6%
DK 25,917,000 eGovernment of Denmark, 8.00%, 05/15/03 ......................................... 4,683,022
DK 43,000,000 eKingdom of Denmark, 8.00%, 11/15/01 ............................................ 7,843,206
------------
12,526,228
------------
Germany 5.0%
DD 5,350,000 eFederal Republic of Germany, Bundesobl, 5.375%, 02/22/99 ....................... 3,591,416
DD 10,000,000 eFederal Republic of Germany, Unity, 8.75%, 08/20/01 ............................ 7,483,145
------------
11,074,561
------------
Ireland 1.1%
IR 1,600,000 eRepublic of Ireland, 6.25%, 10/18/04 ........................................... 2,364,551
------------
Italy 8.6%
IT 4,885,000,000 eBuoni Poliennali del Tes, 8.50%, 08/01/99 ...................................... 3,196,498
IT 11,165,000,000 eBuoni Poliennali del Tes, 10.50%, 09/01/05 ..................................... 7,858,323
IT 11,620,000,000 eGovernment of Italy, 10.50%, 07/15/00 .......................................... 8,056,432
------------
19,111,253
------------
Japan 3.1%
JP 505,000,000 eEuropean Investment Bank, 5.875%, 11/26/99 ..................................... 5,208,743
JP 154,000,000 eInternational Bank for Reconstruction and Development, 6.75%, 03/15/00 ......... 1,644,392
------------
6,853,135
------------
Mexico 4.6%
US 9,715,000 United Mexican States, 9.75%, 02/06/01 .......................................... 9,666,425
US 300,000 United Mexican States, FRN, 7.609%, 03/31/08 .................................... 286,875
US 400,000 United Mexican States, Series D, FRN, 6.547%, 12/31/19 .......................... 315,000
------------
10,268,300
------------
Spain 7.2%
ES 779,230,000 eGovernment of Spain, 12.25%, 03/25/00 .......................................... 6,918,440
ES 462,400,000 eGovernment of Spain, 11.30%, 01/15/02 .......................................... 4,067,516
ES 616,890,000 eGovernment of Spain, 10.00%, 02/28/05 .......................................... 5,146,975
------------
16,132,931
------------
Sweden 5.0%
SE 41,400,000 eKingdom of Sweden, 13.00%, 06/15/01 ............................................ $ 7,615,493
SE 19,700,000 eKingdom of Sweden, 10.25%, 05/05/03 ............................................ 3,356,879
SE 1,100,000 eSweden National Housing Finance Corp., 12.50%, 01/23/97 ........................ 171,945
------------
11,144,317
------------
United Kingdom 8.8%
GB 5,805,000 eUnited Kingdom, 9.50%, 10/25/04 ................................................ 9,933,508
GB 2,850,000 eUnited Kingdom, ln., 12.00%, 11/20/98 .......................................... 4,936,394
GB 2,925,000 eUnited Kingdom, ln., 9.50%, 01/15/99 ........................................... 4,829,234
------------
19,699,136
------------
United States 27.3%
US 10,880,000 U.S. Treasury Bonds, 6.375%, 08/15/02 ........................................... 10,793,286
US 28,835,000 U.S. Treasury Notes, 6.125%, 07/31/00 ........................................... 28,515,220
US 21,780,000 U.S. Treasury Notes, 6.25%, 08/31/00 ............................................ 21,626,887
------------
60,935,393
------------
Total Long Term Investments (Cost $211,454,138) ........................... 210,433,794
------------
gReceivables from Repurchase Agreements 3.3%
US 4,020,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $4,001,783)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 4,000,000
US 3,390,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $3,456,540)
Collateral: U.S. Treasury Notes, 6.75%, 06/30/99 ............................... 3,455,000
------------
Total Receivables from Repurchase Agreements (Cost $7,455,000)............. 7,455,000
------------
Total Investments (Cost $218,909,138) 97.6%........................... 217,888,794
Other Assets and Liabilities, Net 2.4%................................ 5,349,177
------------
Net Assets 100.0% .................................................... $223,237,971
============
At June 30, 1996, the net unrealized depreciation
based on the cost of investments for income tax
purposes of $218,909,138 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over cost ...................................................... $ 2,881,315
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (3,901,659)
------------
Net unrealized depreciation ................................................... $ (1,020,344)
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
DD - Germany
DK - Denmark
ES - Spain
GB - United Kingdom
IR - Ireland
IT - Italy
JP - Japan
SE - Sweden
US - United States
PORTFOLIO ABBREVIATIONS:
FRN - Floating Rate Notes
VRN - Variable Rate Notes
*Securities traded in currency of country indicated and valued in U.S. dollars.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Warrants High Income Fund (Note 1)
Common Stocks & Warrants .2%
<S> <C> <C>
33,568 aBucyrus-Erie Co.............................................................................. $ 344,072
6,900 aEmpire Gas Corp., warrants................................................................... 6,900
70 aFoodmaker, Inc., warrants.................................................................... 1,616
5,000 aGulf States Steel, warrants.................................................................. 25,000
19,386 aKash N'Karry Food Stores, Inc. .............................................................. 504,036
6,500 aNextel Communications, warrants.............................................................. 65
395 aThermadyne Holdings Corp. ................................................................... 8,493
------------
Total Common Stocks & Warrants (Cost $1,197,658)........................................ 890,182
------------
Preferred Stocks 3.1%
7,920 PanAmSat Corp., 12.75%, pfd., PIK............................................................. 9,267,187
2,146 Time Warner, Inc., 10.25%, pfd., Series K .................................................... 2,103,858
------------
Total Preferred Stocks (Cost $10,162,729)..................................................... 11,371,045
------------
Total Common Stocks & Warrants, and Preferred Stocks (Cost $11,360,387)................. 12,261,227
------------
Face
Amount
Bonds 88.6%
Automotive 1.6%
$ 1,000,000 Collins & Aikman Products, senior sub. notes, 11.50%, 04/15/06................................ 1,020,000
125,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00................................... 129,688
4,500,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02................................................ 4,792,500
------------
5,942,188
------------
Cable Television 10.8%
4,000,000 Cablevision Industries Corp., senior sub. deb., 9.25%, 04/01/08............................... 4,050,000
1,500,000 Cablevision System Corp., senior sub. deb., 9.25%, 11/01/05................................... 1,391,250
3,000,000 Cablevision System Corp., senior sub. deb., 10.50%, 05/15/16.................................. 2,925,000
2,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23.................................. 1,840,000
2,000,000 Comcast Corp., senior sub. deb., 9.125%, 10/15/06............................................. 1,900,000
2,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08.............................................. 1,930,000
500,000 Continental Cablevision, Inc., senior deb., 8.875%, 09/15/05.................................. 536,715
1,500,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13................................... 1,640,089
1,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07............................. 1,133,185
2,900,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08.............................. 3,162,313
2,700,000 Diamond Cable Communications Co., senior disc. notes, zero coupon to 12/15/00,
(original accretion rate 11.75%), 11.75% thereafter, 12/15/05................................ 1,603,125
2,200,000 Le Groupe Videotron Ltee, senior notes, 10.625%, 02/15/05..................................... 2,315,500
4,500,000 cRogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14..................... 2,877,989
1,500,000 Rogers Communications, Inc., senior deb., 10.875%, 04/15/04................................... 1,530,000
8,000,000 Telewest Plc., senior deb., zero coupon to 10/01/00, (original accretion rate 11.00%),
11.00% thereafter, 10/01/07.................................................................. 4,760,000
1,500,000 Time Warner, Inc., senior notes, 10.15%, 05/01/12............................................. 1,731,354
1,500,000 Time Warner, Inc., sub. deb., 9.125%, 01/15/13................................................ 1,545,000
3,000,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24............................... 2,842,500
------------
39,714,020
------------
Chemicals 5.1%
3,750,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02........................ 3,806,250
5,000,000 Arcadian Partners L.P., senior notes, Series B, 10.75%, 05/01/05.............................. 5,431,250
2,500,000 Harris Chemical of North America, senior sub. notes, 10.75%, 10/15/03......................... 2,443,750
3,000,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00............................................... 3,082,500
1,200,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01................................... 1,272,000
2,425,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03.................................... 2,600,813
------------
18,636,563
------------
Consumer Products 4.7%
$ 4,250,000 Coleman Holdings, Inc., senior secured disc. notes, (original accretion rate 10.875%),
0.00%, 05/27/98.............................................................................. $ 3,580,625
5,800,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03............................. 5,452,000
5,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03................. 5,037,500
3,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13..................................................... 3,000,000
------------
17,070,125
------------
Containers & Packaging 1.6%
3,500,000 Container Corp., senior notes, Series A, 11.25%, 05/01/04..................................... 3,622,500
1,000,000 Owens-Illinois, Inc., senior sub. notes, 10.00%, 08/01/02..................................... 1,025,000
1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04...................................... 1,007,500
------------
5,655,000
------------
Energy 1.5%
5,000,000 Empire Gas Corp., units, senior secured notes, 7.00% coupon to 07/15/99, 12.875%
thereafter, 07/15/04......................................................................... 4,375,000
1,800,000 Mesa Operating Co., senior sub. notes, zero coupon to 07/01/01, (original accretion rate 11.625%),
11.625% thereafter, 07/01/06................................................................. 1,071,000
------------
5,446,000
------------
Food & Beverage 3.8%
3,000,000 Coca Cola Bottling Group Southwest, Inc., senior sub. notes, 9.00%, 11/15/03.................. 2,925,000
700,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05................................ 682,500
1,570,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02........................................... 1,256,000
250,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00.......................... 260,625
4,700,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03......................... 4,629,500
1,230,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01..................... 1,154,663
3,000,000 Texas Bottling Group, Inc., senior sub. notes, 9.00%, 11/15/03................................ 2,925,000
------------
13,833,288
------------
Food Retailing 8.0%
2,000,000 Bruno's Inc., senior sub. notes, 10.50%, 08/01/05............................................. 1,985,000
1,700,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05.................................. 1,806,250
3,691,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04................................ 3,464,926
4,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03.................................... 3,775,000
1,000,000 Pathmark Stores, Inc., S.F., sub. notes, 11.625%, 06/15/02.................................... 1,000,000
3,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03.............................................. 2,497,500
1,500,000 Penn Traffic Co., senior sub. notes, 9.625%, 04/15/05......................................... 1,087,500
6,500,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03...................................... 5,768,750
3,750,000 Ralphs Grocery Co., senior notes, 10.45%, 06/15/04............................................ 3,609,375
2,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05....................................... 1,850,000
2,500,000 Smith's Food & Drug, senior sub. notes, 11.25%, 05/15/07...................................... 2,543,750
------------
29,388,051
------------
Forest & Paper Products 3.7%
3,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05............................... 3,225,000
2,000,000 Repap New Brunswick, senior notes, second priority, 10.625%, 04/15/05......................... 1,895,000
3,000,000 Repap Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02.................................. 2,842,500
2,300,000 S.D. Warren Co., senior sub. notes, Series B, 12.00%, 12/15/04................................ 2,449,500
3,500,000 Tembec Finance Corp., senior notes, 9.875%. 09/30/05.......................................... 3,272,500
------------
13,684,500
------------
Gaming & Leisure 8.3%
3,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04.............................................. 3,457,500
4,500,000 Bally's Grand, first mortgage, Series B, 10.375%, 12/15/03.................................... 4,955,625
Gaming & Leisure (cont.)
$ 5,900,000 Players International, Inc., senior notes, 10.875%, 04/15/05.................................. $ 6,003,250
3,000,000 Rio Hotel and Casino Inc., senior sub. notes, 10.625%, 07/15/05............................... 3,135,000
7,500,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09........................................... 8,662,500
5,000,000 Six Flags Theme Parks, senior sub. notes, zero coupon to 06/15/98, (original accretion rate 12.25%),
12.25% thereafter, 06/15/05.................................................................. 4,262,500
------------
30,476,375
------------
Health Care Services 8.9%
7,770,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02.............................. 8,003,100
5,500,000 Integrated Health Services, Inc., senior sub. notes, 9.625%, 05/31/02......................... 5,472,500
1,000,000 IVAC Corp., senior notes, 9.25%, 12/01/02..................................................... 1,000,000
5,500,000 Mariner Health Group Inc., senior sub. notes, 9.50%, 04/01/06................................. 5,321,250
1,000,000 Regency Health Services Inc., senior sub. notes, 9.875%, 10/15/02............................. 962,500
5,500,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03.... 5,032,500
850,000 Tenet Healthcare Corp., senior notes, 9.625%, 09/01/02........................................ 903,125
2,400,000 Tenet Healthcare Corp., senior notes, 8.625%, 12/01/03........................................ 2,436,000
3,400,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05.................................. 3,604,000
------------
32,734,975
------------
Industrial Products 5.5%
8,500,000 American Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98, (original accretion
rate 10.50%), 10.50% thereafter, 06/01/05.................................................... 7,395,000
1,000,000 Day International Group, senior sub. notes, 11.125%, 06/01/05................................. 1,025,000
6,500,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01......................................... 6,565,000
5,500,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04............................................. 5,252,500
------------
20,237,500
------------
Lodging 3.1%
8,000,000 HMH Properties, Inc., senior secured notes, 9.50%, 05/15/05................................... 7,640,000
1,500,000 John Q. Hammons Hotels L.P., first mortgage, 9.75%, 10/01/05.................................. 1,453,125
2,310,000 Red Roof Inns Inc., senior notes, 9.625%, 12/15/03............................................ 2,211,825
------------
11,304,950
------------
Media & Broadcasting 8.1%
1,700,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04................................ 1,717,000
2,500,000 Benedek Broadcasting, senior secured notes, 11.875%, 03/01/05................................. 2,650,000
6,500,000 Granite Broadcasting Corp., senior sub. notes, Series A, 10.375%, 05/15/05.................... 6,321,250
4,000,000 Heritage Media Corp., senior sub. notes, 8.75%, 02/15/06...................................... 3,740,000
925,000 Infinity Broadcasting Corp., senior sub. notes, 10.375%, 03/15/02............................. 981,656
2,500,000 K-III Communications Corp., senior notes, 10.25%, 06/01/04.................................... 2,537,500
5,000,000 dNews America Holdings, Inc., deb. (Australia), 8.625%, 02/07/14.............................. 3,271,505
4,000,000 SCI Television, Inc., S.F., senior notes, 11.00%, 06/30/05.................................... 4,180,000
2,000,000 bSFX Broadcasting Inc., senior sub. notes, 10.75%, 05/15/06................................... 1,975,000
2,500,000 Sinclair Broadcast Group Inc., senior sub. notes, 10.00%, 09/30/05............................ 2,437,500
------------
29,811,411
------------
Metals & Mining 2.6%
4,000,000 Algoma Steel, Inc., first mortgage, 12.375%, 07/15/05......................................... 3,920,000
5,000,000 Gulf States Steel, first mortgage, 13.50%, 04/15/03........................................... 4,475,000
1,110,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05.................. 1,265,400
------------
9,660,400
------------
Technology & Information Systems 2.8%
$ 6,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03................................. $ 6,210,000
1,400,000 Bell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion rate 11.50%),
11.50% thereafter, 03/01/05.................................................................. 962,500
2,450,000 Bell & Howell Co., senior notes, 9.25%, 07/15/00.............................................. 2,419,375
800,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02........................................ 856,000
------------
10,447,875
------------
Telecommunications1.8%
2,000,000 bIntelecom Group, Inc., senior disc. notes, 12.50%, 05/01/06.................................. 1,090,000
2,500,000 MFS Communications Co., Inc., senior disc. notes, 8.875%, 01/15/06............................ 1,518,750
6,500,000 Teleport Communications Group, Inc., senior disc. notes, zero coupon to 07/01/01, (original
accretion rate 11.125%), 11.125% thereafter, 07/01/075....................................... 3,818,750
------------
6,427,500
------------
Textiles & Apparel 1.5%
1,500,000 bClark-Schwebel, Inc., senior notes, 10.50%, 04/15/06......................................... 1,552,500
144,200 a,kForstmann Textile, Inc., S.F., senior sub. notes, 14.75%, 04/15/99......................... 41,097
4,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05................................... 3,900,000
------------
5,493,597
------------
Transportation 1.7%
1,600,000 Eletson Holdings, Inc., first mortgage notes, 9.25%, 11/15/03................................. 1,522,000
4,500,000 Gearbulk Holding, Ltd., senior notes, 11.25%, 12/01/04........................................ 4,747,500
------------
6,269,500
------------
Utilities 2.4%
3,000,000 CMS Energy Corp., senior notes, Series B, zero coupon to 10/01/95, (original accretion rate
9.875%), 9.875% thereafter, 10/01/99......................................................... 3,120,000
2,500,000 El Paso Electric Co., first mortgage, 8.90%, 02/01/06......................................... 2,481,250
2,907,617 Midland CoGeneration Venture, S.F., deb., Series C, 10.33%, 07/23/02.......................... 3,031,191
6,000 System Energy Resource, S.F., first mortgage, 11.375%, 09/01/16............................... 6,450
------------
8,638,891
------------
Wireless Communication 1.1%
6,500,000 Dial Call Communications, units, senior disc. notes, zero coupon to 04/15/99, (original accretion
rate 12.25%), 12.25% thereafter, 04/15/04.................................................... 4,160,000
------------
Total Bonds (Cost $324,837,909)......................................................... 325,032,709
------------
Total Investments before Repurchase Agreements (Cost $336,198,296)...................... 337,293,936
------------
g,hReceivables from Repurchase Agreements 7.5%
27,246,541 Joint Repurchase Agreement 5.439%, 07/01/96, (Maturity Value $27,384,069) (Cost $27,371,663)
Chase Securities., Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $3,771,081)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.625% -11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc. (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99......................... $ 27,371,663
------------
Total Investments (Cost $363,569,959) 99.4%........................................ 364,665,599
Other Assets and Liabilities, Net .6%.............................................. 2,320,850
------------
Net Assets 100.0%.................................................................. $366,986,449
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $363,569,959
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 9,419,137
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (8,323,497)
------------
Net unrealized appreciation................................................................. $ 1,095,640
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount is stated in foreign currency and value is stated in U.S. dollars.
dSecurities traded in foreign currency and valued in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding Joint Repurchase Agreement.
kSee Note 7 regarding defaulted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Investment Grade Intermediate Bond Fund (Note 1)
Long Term Investments 77.9%
U.S. Government, Agencies & Instrumentalities 57.5%
<C> <S> <C>
$ 15,000,000 Federal National Mortgage Association, 6.05%, 11/10/97 ...................................... $ 14,985,793
7,000,000 Tennessee Valley Authority, bonds, 8.25%, 11/15/96 .......................................... 7,069,537
12,000,000 lTennessee Valley Authority, bonds, (putable 07/15/01, callable 07/15/20), 6.235%, 07/15/45 . 11,844,780
2,000,000 U.S. Treasury Notes, 7.875%, 07/15/96 ....................................................... 2,003,750
4,000,000 U.S. Treasury Notes, 6.50%, 09/30/96 ........................................................ 4,013,748
5,000,000 U.S. Treasury Notes, 6.50%, 04/30/97 ........................................................ 5,031,250
10,000,000 U.S. Treasury Notes, 6.125%, 05/31/97 ....................................................... 10,031,250
15,000,000 U.S. Treasury Notes, 5.625%, 06/30/97 ....................................................... 14,976,553
8,000,000 U.S. Treasury Notes, 5.25%, 12/31/97 ........................................................ 7,917,495
5,000,000 U.S. Treasury Notes, 5.125%, 04/30/98 ....................................................... 4,917,184
5,000,000 U.S. Treasury Notes, 5.875%,08/15/98 ........................................................ 4,971,875
5,000,000 U.S. Treasury Notes, 5.875%, 03/31/99 ....................................................... 4,951,559
------------
Total U.S. Government, Agencies & Instrumentalities (Cost $93,664,497)................. 92,714,774
------------
Corporate Bonds 20.4%
Consumer Products 3.7%
4,000,000 American Home Products, notes, 6.875%, 04/15/97 ............................................. 4,026,451
2,000,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 .................................................... 1,986,186
------------
6,012,637
------------
Electric Utilities 1.9%
3,000,000 Southern California Edison Co., first mortgage bonds, 6.125%, 07/15/97 ...................... 2,996,061
------------
Financial Services 10.3%
6,400,000 lAssociates Corp. of North America, deb., Series B, (putable 03/03/98), 7.95%, 02/15/10 ..... 6,817,145
7,500,000 lGE Capital Corp., medium term notes (step up to 8.125% or putable 04/01/98), 5.80%, 04/01/08
7,797,053
2,000,000 International Lease Finance Co., notes, 6.375%, 11/01/96 .................................... 2,003,430
------------
16,617,628
------------
Waste Management 4.5%
7,000,000 lWMX Technologies, notes (step up to 8.00% or putable 04/30/97), 6.22%, 04/30/04 ............ 7,259,476
------------
Total Corporate Bonds (Cost $31,912,196)............................................... 32,885,802
------------
Total Long Term Investments (Cost $125,576,693)........................................ 125,600,576
------------
g,hReceivables from Repurchase Agreements 20.8%
33,374,901 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $33,543,910) (Cost $33,528,713)
Chase Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $4,619,356)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... $ 33,528,713
------------
Total Investments (Cost $159,105,406) 98.7% ...................................... 159,129,289
Other Assets and Liabilities, Net 1.3% ........................................... 2,156,794
------------
Net Assets 100.0% ................................................................ $161,286,083
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $159,105,406
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 1,481,685
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (1,457,802)
------------
Net unrealized appreciation ............................................................... $ 23,883
============
</TABLE>
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
lHolder may choose either to redeem at par on any put date or, if more
advantageous, to hold to final stated maturity.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Country* Warrants Precious Metals Fund (Note 1)
Common Stocks and Warrants 93.4%
Gold & Diversified Resources 10.5%
<S> <C> <C> <C>
US 160,718 Freeport-McMoRan Copper & Gold, Inc. .............................................. $ 4,801,450
GB 318,429 RTZ Corp., Plc. ................................................................... 4,712,741
CA 159,100 Teck Corp., Class B................................................................ 3,262,992
------------
12,777,183
------------
Long Life Gold Mines 48.4%
US 210,700 bAshanti Goldfields Co., Ltd. ..................................................... 4,161,325
US 235,595 Barrick Gold Corp. ................................................................ 6,390,514
ZA 125,000 Beatrix Mines, Ltd. ............................................................... 1,002,481
PE 37,404 Compania de Minas Buenaventura, SA................................................. 367,456
PE 112,068 Compania de Minas Buenaventura, SA, Class C........................................ 1,009,208
US 67,000 bCompania de Minas Buenaventura, SA, Sponsored ADR................................. 1,331,625
US 249,500 Driefontein Consolidated Mines, Ltd., ADR.......................................... 3,274,688
US 226,700 Hartebeestfontein Gold Mining Co., Ltd., ADR....................................... 763,866
US 139,488 Homestake Mining Co. .............................................................. 2,388,732
US 259,000 Kloof Gold Mining Co., Ltd., ADR................................................... 2,509,063
US 82,400 Newmont Gold Co. .................................................................. 4,150,900
US 99,755 Newmont Mining Corp. .............................................................. 4,925,403
US 327,500 Placer Dome, Inc. ................................................................. 7,819,063
ZA 340,000 Randgold & Exploration Co., Ltd. .................................................. 1,789,061
US 553,301 Santa Fe Pacific Gold Corp. ....................................................... 7,815,377
CA 522,000 aTVX Gold, Inc. ................................................................... 3,823,476
US 339,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR..................................... 2,712,000
US 40,400 Western Areas Gold Mining, ADR..................................................... 626,200
ZA 143,888 Western Areas Gold Mining Co., Ltd. ............................................... 2,241,505
------------
59,101,943
------------
Medium Life Gold Mines 25.6%
AU 1,243,600 aAcacia Resources, Ltd. ........................................................... 2,932,212
US 328,500 aAmax Gold, Inc. .................................................................. 1,806,750
US 324,500 Battle Mountain Gold Co. .......................................................... 2,352,625
US 568,000 aCampbell Resources, Inc. ......................................................... 710,000
CA 209,000 aCampbell Resources, Inc., warrants................................................ 84,197
US 210,000 aCanyon Resources Corp. ........................................................... 577,500
CA 137,000 aDayton Mining Corp. .............................................................. 822,853
US 208,400 Echo Bay Mines, Ltd. .............................................................. 2,240,300
CA 16,900 Euro-Nevada Mining Corp. .......................................................... 724,153
CA 32,000 Franco-Nevada Mining Corp., Ltd. .................................................. 2,027,467
AU 665,000 aGoldfields, Ltd. ................................................................. 1,515,699
CA 175,000 aGreenstone Resources, Ltd. ....................................................... 2,050,906
US 179,000 Hemlo Gold Mines, Inc. ............................................................ 1,901,875
AU 271,500 Newcrest Mining, Ltd. ............................................................. 1,088,262
AU 895,600 Placer Pacific, Ltd. .............................................................. 1,302,205
AU 632,500 Plutonic Resources, Ltd. .......................................................... 3,231,226
AU 978,071 Poseidon Gold, Ltd. ............................................................... 2,406,069
AU 495,900 Sons Of Gwalia, Ltd. .............................................................. 3,507,761
------------
31,282,060
------------
Mining Finance Companies 3.8%
US 15,000 Anglo American Corp. of South Africa Corp., Unsponsored ADR........................ 948,750
US 109,900 DeBeers Consolidated Mines, Ltd., ADR.............................................. 3,709,125
------------
4,657,875
------------
Platinum Companies 5.1%
ZA 72,900 Impala Platinum Holdings, Ltd. .................................................... $ 1,047,317
US 60,700 Impala Platinum Holdings, Ltd., ADR................................................ 872,047
US 165,090 Rustenburg Platinum Holdings, Ltd., ADR............................................ 2,571,789
US 82,300 a,bStillwater Mining Co. .......................................................... 1,749,903
------------
6,241,056
------------
Total Common Stocks and Warrants (Cost $105,065,412)......................... 114,060,117
------------
Face
Amount
Convertible Bonds .7%
Mining - Precious Metals
US $480,000 Bema Gold Corp., cvt. sub. notes, 7.50%, 02/28/00 (Cost $530,700).................. 864,000
------------
Total Long Term Investments (Cost $105,596,112).............................. 114,924,117
------------
g,hReceivables from Repurchase Agreements 6.1%
US 7,382,013 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $7,419,942) (Cost $7,416,580)
Chase Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,021,806)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............. 7,416,580
------------
Total Investments (Cost $113,012,692) 100.2%............................ 122,340,697
Liabilities in Excess of Other Assets (.2)% ............................ (232,921)
------------
Net Assets 100.0% ...................................................... $122,107,776
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $113,012,692 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 14,087,433
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (4,759,428)
------------
Net unrealized appreciation ..................................................... $ 9,328,005
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
GB - United Kingdom
PE - Peru
US - United States
ZA - South Africa
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Real Estate Securities Fund (Note 1)
Common Stocks 90.8%
Equity REIT - Apartments 23.1%
<S> <C> <C>
150,000 Amli Residential Properties Trust ........................................................... $ 3,093,750
285,000 Bay Apartment Communities, Inc. ............................................................. 7,374,375
110,000 Camden Property Trust ....................................................................... 2,612,500
240,000 Equity Residential Properties Trust ......................................................... 7,890,000
212,000 Evans Withycombe Residential, Inc. .......................................................... 4,425,500
140,000 Gables Residential Trust .................................................................... 3,290,000
145,000 Irvine Apartment Communities, Inc. .......................................................... 2,918,125
215,000 Oasis Residential, Inc. ..................................................................... 4,703,125
175,000 Post Properties, Inc. ....................................................................... 6,190,625
253,500 Security Capital Pacific Trust .............................................................. 5,513,625
220,000 South West Property Trust ................................................................... 2,942,500
160,000 Summit Properties, Inc. ..................................................................... 3,140,000
------------
54,094,125
------------
Equity REIT - Health Care 4.3%
80,000 Health Care Property Investors, Inc. ........................................................ 2,700,000
140,000 Nationwide Health Properties, Inc. .......................................................... 2,957,500
158,000 Omega Healthcare Investors, Inc. ............................................................ 4,364,750
------------
10,022,250
------------
Equity REIT - Hotels 12.6%
500,000 Equity Inns, Inc. ........................................................................... 5,750,000
267,000 FelCor Suite Hotels, Inc. ................................................................... 8,143,500
120,000 aPatriot American Hospitality, Inc. ......................................................... 3,555,000
138,200 Starwood Lodging Trust ...................................................................... 5,027,025
605,000 Winston Hotels, Inc. ........................................................................ 7,033,125
------------
29,508,650
------------
Equity REIT - Industrial 8.7%
105,000 CenterPoint Properties Corp. ................................................................ 2,546,250
112,500 Duke Realty Investments, Inc. ............................................................... 3,403,125
175,000 Liberty Property Trust ...................................................................... 3,478,125
302,283 Security Capital Industrial Trust ........................................................... 5,327,738
100,000 Spieker Properties, Inc. .................................................................... 2,725,000
110,000 Weeks Corp. ................................................................................. 2,860,000
------------
20,340,238
------------
Equity REIT - Mixed Property Type 1.2%
115,000 Colonial Properties Trust ................................................................... 2,788,750
------------
Equity REIT - Office 4.3%
90,000 Beacon Properties Corp. ..................................................................... 2,306,250
90,000 Crescent Real Estate Equities, Inc. ......................................................... 3,307,500
164,600 Highwoods Properties, Inc. .................................................................. 4,547,075
------------
10,160,825
------------
Equity REIT - Residential Communities 4.3%
185,000 Manufactured Home Communities, Inc. ......................................................... 3,561,250
125,000 ROC Communities, Inc. ....................................................................... 2,984,375
130,000 Sun Communities, Inc. ....................................................................... 3,493,750
------------
10,039,375
------------
Equity REIT - Retail - Community Centers 4.1%
102,000 Developers Diversified Realty Corp. ......................................................... $ 3,251,250
97,500 Kimco Realty Corp. .......................................................................... 2,754,375
90,000 Vornado Realty Trust ........................................................................ 3,678,750
------------
9,684,375
------------
Equity REIT - Retail - Outlet Centers 1.8%
75,000 Chelsea GCA Realty, Inc. .................................................................... 2,381,250
80,000 Tanger Factory Outlet Centers, Inc. ......................................................... 1,860,000
------------
4,241,250
------------
Equity REIT - Retail - Regional Malls 4.9%
174,300 DeBartolo Realty Corp. ...................................................................... 2,810,588
118,500 Simon Property Group, Inc. .................................................................. 2,903,250
140,000 The Macerich Co. ............................................................................ 2,940,000
155,000 The Mills Corp. ............................................................................. 2,712,500
------------
11,366,338
------------
Equity REIT - Storage 7.5%
280,000 Public Storage, Inc. ........................................................................ 5,775,000
370,000 jStorage Trust Realty ....................................................................... 7,585,000
130,000 Storage USA, Inc. ........................................................................... 4,192,500
------------
17,552,500
------------
Home Builders 6.9%
100,000 aBeazer Homes USA, Inc. ..................................................................... 1,600,000
180,000 aBelmont Homes, Inc.......................................................................... 3,892,500
75,000 Centex Corp. ................................................................................ 2,334,375
85,000 Kaufman & Broad Home Corp. .................................................................. 1,232,500
70,000 Lennar Corp. ................................................................................ 1,750,000
137,570 a,mNVR, Inc. ................................................................................ 1,530,466
178,000 aSouthern Energy Homes, Inc. ................................................................ 3,827,000
------------
16,166,841
------------
Hotels 4.7%
505,000 aHost Marriott Corp. ........................................................................ 6,628,125
6,100 aInterstate Hotels Co. ...................................................................... 135,725
195,000 aRed Lion Hotels, Inc. ...................................................................... 4,095,000
------------
10,858,850
------------
Mixed Property Type 2.4%
500,000 Security Capital US Realty .................................................................. 5,700,000
------------
Total Common Stocks (Cost $180,672,920) ............................................... 212,524,367
------------
Convertible Preferred Stocks .5%
20,000 bCatellus Development Corp., $3.625 cvt. pfd., Series B (Cost $1,000,000).................... 1,052,500
------------
Face
Amount
Bonds .8%
$ 2,000,000 US Home Corp., cvt. sub. notes, 4.875%, 11/01/05 (Cost $1,970,000)........................... 1,785,000
------------
Total Long Term Investments (Cost $183,642,920) ............................................. 215,361,867
------------
g,hReceivables from Repurchase Agreements 7.5%
$ 17,423,712 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $17,512,149) (Cost $17,504,215)
Chase Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $2,411,613)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... $ 17,504,215
------------
Total Investments (Cost $201,147,135) 99.6% ...................................... 232,866,082
Other Assets and Liabilities, Net .4%............................................. 1,047,940
------------
Net Assets 100.0 % ............................................................... $233,914,022
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $201,147,135
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 33,191,670
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (1,472,723)
------------
Net unrealized appreciation ............................................................... $ 31,718,947
============
</TABLE>
PORTFOLIO ABBREVIATION:
REIT - Real Estate Investment Trust
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
mSee Note 9 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount U.S. Government Securities Fund (Note 1)
Mortgage-Backed Securities 76.0%
Federal Home Loan Mortgage Corp. (FHLMC) 12.6%
<C> <S> <C>
$ 24,056,840 FHLMC, 6.50%, 06/01/08 - 01/01/24 ........................................................... $ 22,677,643
18,148,522 FHLMC, 7.00%, 04/01/24 ...................................................................... 17,496,171
19,876,506 FHLMC, PL, 7.00%, 09/17/31 .................................................................. 18,944,892
6,320,316 FHLMC, 7.50%, 11/01/22 - 05/01/24 ........................................................... 6,251,145
4,766,797 FHLMC, 8.00%, 05/01/16 - 05/01/22 ........................................................... 4,815,708
1,462,504 FHLMC, 8.50%, 04/01/18 - 03/01/22 ........................................................... 1,503,419
1,314,549 FHLMC, 9.00%, 03/01/03 - 01/01/21 ........................................................... 1,365,182
411,685 FHLMC, 9.50%, 06/01/16 - 08/01/20 ........................................................... 437,801
216,001 FHLMC, 10.00%, 08/01/20 - 10/01/20 .......................................................... 233,348
------------
73,725,309
------------
Federal National Mortgage Association (FNMA) 10.4%
7,300,987 FNMA, 6.00%, 10/01/23 - 04/01/24 ............................................................ 6,639,290
16,960,448 FNMA, 6.50%, 01/01/24 - 06/01/24 ............................................................ 15,884,396
2,030,825 FNMA, 7.00%, 05/01/24 ....................................................................... 1,956,558
8,451,862 FNMA, PL, 7.00%, 03/17/35 ................................................................... 8,021,325
12,328,722 FNMA, 7.50%, 04/01/23 - 08/01/25 ............................................................ 12,186,080
14,306,632 FNMA, 8.00%, 07/01/16 - 02/01/25 ............................................................ 14,446,935
1,320,638 FNMA, 8.50%, 10/01/19 - 03/01/22 ............................................................ 1,356,952
247,607 FNMA, 9.00%, 09/01/18 - 03/01/21 ............................................................ 258,439
105,958 FNMA, 9.50%, 07/01/19 - 08/01/20 ............................................................ 112,880
40,481 FNMA, 10.00%, 10/01/20 ...................................................................... 43,947
------------
60,906,802
------------
Government National Mortgage Association (GNMA) 53.0%
13,272,043 GNMA I, SF, 6.00%, 12/15/23 - 01/15/24 ...................................................... 12,011,108
2,366,224 GNMA II, 6.00%, 01/20/24 - 10/20/24 ......................................................... 2,129,586
59,759,442 GNMA I, SF, 6.50%, 05/15/23 - 05/15/24 ...................................................... 55,669,254
3,930,348 GNMA II, 6.50%, 01/20/26 .................................................................... 3,641,684
8,734,911 GNMA, PL, 6.50%, 09/15/28 ................................................................... 8,093,375
54,170,704 GNMA I, SF, 7.00%, 03/15/22 - 07/15/25 ...................................................... 52,020,454
14,831,318 GNMA II, 7.00%, 01/20/24 - 03/20/26 ......................................................... 14,168,432
1,992,397 GNMA I, SF, 7.25%, 11/15/25 ................................................................. 1,939,459
2,257,498 GNMA, PL, 7.25%, 05/15/22 - 08/15/22 ........................................................ 2,186,229
45,135,465 GNMA I, SF, 7.50%, 02/15/17 - 06/15/23 ...................................................... 44,528,658
35,019,491 GNMA II, 7.50%, 11/20/16 - 12/20/25 ......................................................... 34,373,559
31,151,172 GNMA I, SF, 8.00%, 04/15/05 - 06/15/25 ...................................................... 31,462,518
1,470,769 GNMA II, 8.00%, 02/20/16 - 05/20/17 ......................................................... 1,478,116
2,600,668 GNMA I, SF, 8.25%, 04/15/25 ................................................................. 2,651,849
12,265,096 GNMA I, SF, 8.50%, 08/15/21 - 12/15/24 ...................................................... 12,625,317
4,732,209 GNMA I, SF, 9.00%, 04/15/16 - 02/15/21 ...................................................... 4,956,978
11,885,062 GNMA I, SF, 9.50%, 10/15/15 - 12/15/21 ...................................................... 12,713,297
2,652,028 GNMA II, 9.50%, 04/20/25 .................................................................... 2,816,939
9,847,753 GNMA I, SF, 10.00%, 08/15/17 - 08/15/21 ..................................................... 10,740,198
322,930 GNMA II, 10.00%, 07/20/19 - 02/20/21 ........................................................ 348,967
------------
310,555,977
------------
Total Mortgage-Backed Securities (Cost $449,977,063) .................................. 445,188,088
------------
Other Government & Agency Securities 21.7%
2,000,000 Federal Agriculture Mortgage Corp., 6.91%, 07/15/97 ......................................... 2,018,116
5,000,000 Federal Farm Credit Bank, 5.80%, 09/16/03 ................................................... 4,639,870
10,000,000 Federal Farm Credit Bank, 7.95%, 04/01/02 ................................................... 10,055,769
8,199,448 FHA Project Loan, 7.00%, 02/01/29 ........................................................... 7,748,479
$ 3,876,000 FICO Strips, 0.00%, 11/11/01 ................................................................ $ 2,712,793
10,000,000 FICO Strips, 0.00%, 03/07/02 ................................................................ 6,838,309
1,925,000 FICO Strips, 0.00%, 05/11/02 ................................................................ 1,299,577
10,000,000 FICO Strips, 0.00%, 05/11/13 ................................................................ 2,857,069
15,000,000 FICO Strips, Series 1, 0.00%, 05/11/99 ...................................................... 12,476,264
1,758,000 FICO Strips, Series 1, 0.00%, 05/11/09 ...................................................... 691,588
11,024,000 FICO Strips, Series 13, 0.00%, 06/27/09 ..................................................... 4,292,679
5,000,000 FICO Strips, Series 15, 0.00%, 09/07/98 ..................................................... 4,360,495
3,202,000 FICO Strips, Series 16, 0.00%, 04/05/09 ..................................................... 1,269,673
4,745,000 FICO Strips, Series 16, 0.00%, 10/05/10 ..................................................... 1,667,938
2,060,000 FICO Strips, Series A, 0.00%, 02/08/09 ...................................................... 827,183
7,000,000 FICO Strips, Series D, 0.00%, 09/26/01 ...................................................... 4,940,845
5,000,000 Housing Urban Development, Series 96-A, 7.63%, 08/01/14 ..................................... 4,991,244
5,000,000 Housing Urban Development, Series 96-A, 7.66%, 08/01/15 ..................................... 4,980,308
4,926,717 Small Business Administration, 6.45%, 12/01/15 .............................................. 4,646,627
15,000,000 Student Loan Marketing Association, 0.00%, 05/15/14 ......................................... 3,370,468
10,000,000 Tennessee Valley Authority, 0.00%, 04/15/03 ................................................. 6,339,119
6,000,000 Tennessee Valley Authority, 0.00%, 04/15/42 ................................................. 1,733,118
5,000,000 Tennessee Valley Authority, 6.125%, 07/15/03 ................................................ 4,828,885
10,000,000 Tennessee Valley Authority, 7.25%, 07/15/43 ................................................. 9,290,340
1,000,000 Tennessee Valley Authority, 8.375%, 10/01/99 ................................................ 1,051,388
12,000,000 Tennessee Valley Authority, 8.625%, 11/15/29 ................................................ 12,764,974
5,000,000 U.S. Treasury Notes, 5.75%, 08/15/03 ........................................................ 4,759,375
------------
Total Other Government & Agency Securities (Cost $126,268,902)......................... 127,452,493
------------
Total Long Term Investments (Cost $576,245,965) ....................................... 572,640,581
------------
g,hReceivables from Repurchase Agreements 1.8%
10,284,118 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $10,336,017) (Cost $10,331,334)
Chase Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,423,377)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 10,331,334
------------
Total Investments (Cost $586,577,299) 99.5% ...................................... 582,971,915
Other Assets and Liabilities, Net .5% ............................................ 2,748,732
------------
Net Assets 100.0% ................................................................ $585,720,647
============
At June 30, 1996 the net unrealized depreciation based on the
cost of investments for income tax purposes of $586,577,299
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 9,865,916
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (13,471,300)
------------
Net unrealized depreciation ............................................................... $ (3,605,384)
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
FHA - Federal Housing Authority
FICO - Financing Corp.
PL - Project Loan
SF - Single Family
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2000 (Note 1)
Long Term Investments 100.2%
U.S. Government & Agency Securities 98.9%
<C> <S> <C>
$ 7,567,000 FHLB Strips, Series A-1, 0.00%, 02/25/01 ...................................................... $ 5,576,901
2,884,000 FHLB Strips, Series A-1, 0.00%, 08/25/01 ...................................................... 2,051,790
465,000 FHLB Strips, Series A-1, 0.00%, 02/25/02 ...................................................... 319,674
16,175,000 FHLMC, notes, 0.00%, 05/15/00 ................................................................. 12,574,201
9,023,000 FICO Strips, 0.00%, 03/26/01 .................................................................. 6,596,714
2,000,000 FICO Strips, 0.00%, 04/06/01 .................................................................. 1,459,184
1,139,000 FICO Strips, Series 1, 0.00%, 11/11/00 ........................................................ 854,846
1,000,000 FICO Strips, Series 7, 0.00%, 02/03/01 ........................................................ 738,696
17,390,000 FICO Strips, Series 12, 0.00%, 12/06/00 ....................................................... 12,988,589
6,000,000 FICO Strips, Series 12, 0.00%, 06/06/01 ....................................................... 4,325,861
4,000,000 FICO Strips, Series 13, 0.00%, 06/27/01 ....................................................... 2,872,332
148,000 FICO Strips, Series 15, 0.00%, 09/07/00 ....................................................... 112,408
5,000,000 FICO Strips, Series 15, 0.00%, 03/07/01 ....................................................... 3,669,074
5,875,000 FICO Strips, Series 17, 0.00%, 10/05/00 ....................................................... 4,438,932
6,200,000 FICO Strips, Series 18, 0.00%, 10/06/00 ....................................................... 4,683,622
4,965,000 FICO Strips, Series D, 0.00%, 09/26/00 ........................................................ 3,757,909
5,550,000 FICO Strips, Series D, 0.00%, 02/03/01 ........................................................ 4,099,763
3,800,000 FNMA Strips, 0.00%, 11/22/99 .................................................................. 3,048,386
1,000,000 FNMA Strips, 0.00%, 02/12/02 .................................................................. 687,857
500,000 FNMA Strips, Series 1, 0.00%, 02/12/00 ........................................................ 395,026
1,875,000 FNMA Strips, Series 1, 0.00%, 02/01/01 ........................................................ 1,386,461
1,000,000 FNMA Strips, Series 1, 0.00%, 02/01/02 ........................................................ 689,344
3,000,000 FNMA Strips, Series 2, 0.00%, 08/12/01 ........................................................ 2,136,132
9,195,000 REFCO Strips, 0.00%, 01/15/01 ................................................................. 6,872,499
3,320,000 Tennessee Valley Authority, 0.00%, 07/15/00 ................................................... 2,555,809
2,500,000 Tennessee Valley Authority, 0.00%, 10/15/00 ................................................... 1,892,245
65,000 Tennessee Valley Authority, 0.00%, 01/01/01 ................................................... 48,004
10,500,000 Tennessee Valley Authority, 0.00%, 04/15/01 ................................................... 7,676,308
1,000,000 Tennessee Valley Authority, 0.00%, 04/15/02 ................................................... 681,683
1,110,375 U.S. Treasury Strips, 0.00%, 11/15/00 ......................................................... 835,927
2,778,750 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 2,057,150
15,000,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 11,164,588
21,895,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 16,318,493
------------
129,566,408
------------
Other Securities - "AAA" Rated 1.3%
220,000 InterAmerican Development Bank, 0.00%, 12/16/00 ............................................... 163,631
405,000 International Bank for Reconstruction and Development, 0.00%, 02/15/00 ........................ 319,729
945,000 International Bank for Reconstruction and Development, 0.00%, 08/15/00 ........................ 720,513
735,000 International Bank for Reconstruction and Development, 0.00%, 02/15/01 ........................ 540,929
------------
1,744,802
------------
Total Investments (Cost $125,920,919) 100.2%........................................ 131,311,210
Liabilities in Excess of Other Assets (.2%)......................................... (238,450)
------------
Net Assets 100.0%................................................................... $131,072,760
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $125,920,919 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 5,783,816
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (393,525)
------------
Net unrealized appreciation ................................................................. $ 5,390,291
============
</TABLE>
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.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2005 (Note 1)
Long Term Investments 99.5%
Government & Agency Securities 96.4%
<C> <S> <C>
$ 1,000,000 FHLB Strips, Series A-1, 0.00%, 08/25/02 ...................................................... $ 663,419
800,000 FHLB Strips, Series A-1, 0.00%, 02/25/04 ...................................................... 475,262
9,110,000 FHLB Strips, Series A-1P, 0.00%, 02/25/04 ..................................................... 5,412,050
11,400,000 FICO Strips, 0.00%, 10/06/05 .................................................................. 5,944,666
3,500,000 FICO Strips, Series 1, 0.00%, 05/11/05 ........................................................ 1,878,474
829,000 FICO Strips, Series 1, 0.00%, 11/11/05 ........................................................ 429,335
3,509,000 FICO Strips, Series 2, 0.00%, 11/02/05 ........................................................ 1,820,448
11,055,000 FICO Strips, Series 12, 0.00%, 12/06/05 ....................................................... 5,693,180
2,755,000 FICO Strips, Series 13, 0.00%, 12/27/05 ....................................................... 1,412,097
2,620,000 FICO Strips, Series 15, 0.00%, 09/07/05 ....................................................... 1,374,030
6,000,000 FICO Strips, Series 16, 0.00%, 04/05/06 ....................................................... 3,009,803
10,000,000 FICO Strips, Series 19, 0.00%, 12/06/05 ....................................................... 5,149,869
6,799,000 FICO Strips, Series D, 0.00%, 09/26/05 ........................................................ 3,552,620
1,763,000 FICO Strips, Series D, 0.00%, 03/26/06 ........................................................ 886,108
5,000,000 FICO Strips, Series F, 0.00%, 03/26/05 ........................................................ 2,711,020
120,000 FNMA Strips, 0.00%, 02/12/08 .................................................................. 52,494
450,000 FNMA Strips, Series 1, 0.00%, 08/01/04 ........................................................ 257,604
1,000,000 FNMA Strips, Series 1, 0.00%, 02/12/05 ........................................................ 549,654
875,000 FNMA Strips, Series 1, 0.00%, 08/12/05 ........................................................ 462,787
4,307,000 FNMA Strips, Series 1, 0.00%, 02/01/06 ........................................................ 2,198,267
250,000 FNMA Strips, Series 1, 0.00%, 02/12/06 ........................................................ 127,281
1,730,000 FNMA Strips, Series 1, 0.00%, 02/01/08 ........................................................ 758,448
6,000,000 FNMA Strips, Series 2, 0.00%, 02/01/05 ........................................................ 3,305,417
530,000 FNMA Strips, Series 9, 0.00%, 08/01/06 ........................................................ 260,493
6,500,000 REFCO Strips, 0.00%, 01/15/06 ................................................................. 3,387,670
3,000,000 REFCO Strips, Series R, 0.00%, 04/15/06 ....................................................... 1,534,521
6,200,000 Tennessee Valley Authority, 0.00%, 10/15/04 ................................................... 3,508,927
2,260,000 Tennessee Valley Authority, 0.00%, 04/15/05 ................................................... 1,231,528
1,000,000 Tennessee Valley Authority, 0.00%, 10/15/05 ................................................... 525,703
34,140,000 U.S. Treasury Strips, 0.00%, 02/15/06 ......................................................... 17,871,709
------------
76,444,884
------------
Other Securities - "AAA" Rated 3.1%
1,500,000 Exxon Corp., 0.00%, 11/15/04 .................................................................. 849,669
541,000 International Bank of Reconstruction and Development, 0.00%, 02/15/07 ......................... 253,874
2,500,000 International Bank of Reconstruction and Development, 0.00%, 08/15/07 ......................... 1,127,117
459,000 International Bank of Reconstruction and Development, Series 2, 0.00%, 02/15/07 ............... 214,953
------------
2,445,613
------------
Total Long Term Investments (Cost $74,761,492) .......................................... 78,890,497
------------
g,hReceivables from Repurchase Agreements .4%
$ 340,772 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $342,207) (Cost $342,052)
Chase Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $47,127)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ......................... $ 342,052
------------
Total Investments (Cost $75,103,544) 99.9% ......................................... 79,232,549
Other Assets and Liabilities, Net .1%............................................... 63,942
------------
Net Assets 100.0% .................................................................. $79,296,491
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $75,107,712 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 5,081,274
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (956,437)
------------
Net unrealized appreciation ................................................................. $ 4,124,837
============
</TABLE>
PORTFOLIOABBREVIATIONS
FHLB - Federal Home Loan Bank
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2010 (Note 1)
Long Term Investments 96.6%
Government & Agency Securities 91.9%
<C> <S> <C>
$ 4,450,000 FHLMC, capital deb., 0.00%, 11/29/19 .......................................................... $ 802,949
4,040,000 FICO Strips, 0.00%, 10/06/10 .................................................................. 1,419,756
16,246,000 FICO Strips, Series 1, 0.00%, 11/11/10 ........................................................ 5,659,828
2,000,000 FICO Strips, Series 3, 0.00%, 05/30/10 ........................................................ 723,016
1,528,000 FICO Strips, Series 4, 0.00%, 10/06/10 ........................................................ 536,977
3,021,000 FICO Strips, Series 8, 0.00%, 08/03/10 ........................................................ 1,077,796
2,837,000 FICO Strips, Series 11, 0.00%, 02/08/11 ....................................................... 969,434
4,550,000 FICO Strips, Series 12, 0.00%, 06/06/09 ....................................................... 1,779,887
7,500,000 FICO Strips, Series 12, 0.00%, 12/06/10 ....................................................... 2,598,097
3,000,000 FICO Strips, Series 19, 0.00%, 06/06/10 ....................................................... 1,082,994
2,080,000 FICO Strips, Series 19, 0.00%, 12/06/10 ....................................................... 720,539
7,000,000 FICO Strips, Series A, 0.00%, 08/08/10 ........................................................ 2,494,855
860,000 FICO Strips, Series D, 0.00%, 03/26/10 ........................................................ 315,319
4,000,000 FICO Strips, Series D, 0.00%, 03/26/11 ........................................................ 1,352,676
12,412,000 FICO Strips, Series E, 0.00%, 11/02/10 ........................................................ 4,333,698
860,000 FICO Strips, Series F, 0.00%, 09/26/10 ........................................................ 302,992
5,311,000 FICO Strips, Series F, 0.00%, 02/08/11 ........................................................ 1,814,827
1,975,000 FNMA Strips, 0.00%, 08/12/09 .................................................................. 769,171
5,000,000 FNMA Strips, Series 1, 0.00%, 02/01/10 ........................................................ 1,876,810
8,250,000 FNMA Strips, Series 1, 0.00%, 08/01/10 ........................................................ 2,980,313
1,230,000 FNMA Strips, Series 1, 0.00%, 08/12/10 ........................................................ 443,353
4,450,000 FNMA Strips, Series 1, 0.00%, 02/01/11 ........................................................ 1,541,048
3,281,000 FNMA, sub. deb., 0.00%, 02/01/12 .............................................................. 1,049,559
20,000,000 REFCO Strips, 0.00%, 10/15/10 ................................................................. 7,309,137
8,000,000 REFCO Strips, 0.00%, 01/15/11 ................................................................. 2,866,111
8,650,000 SLMA, 0.00%, 05/15/14 ......................................................................... 1,943,637
412,000 Tennessee Valley Authority, 0.00%, 01/01/10 ................................................... 152,379
12,000,000 Tennessee Valley Authority, 0.00%, 04/15/10 ................................................... 4,467,947
1,320,000 Tennessee Valley Authority, 0.00%, 10/15/10 ................................................... 472,329
9,525,000 Tennessee Valley Authority, 0.00%, 04/15/11 ................................................... 3,273,066
7,295,000 Tennessee Valley Authority, 0.00%, 10/15/11 ................................................... 2,408,968
31,190,000 U.S. Treasury Strips, 0.00%, 11/15/10 ......................................................... 11,522,334
------------
71,061,802
------------
Other Securities - "AAA" Rated 4.7%
1,392,000 International Bank for Reconstruction and Development, 0.00%, 02/15/11 ........................ 477,631
2,800,000 International Bank for Reconstruction and Development, 0.00%, 02/15/12 ........................ 886,766
3,287,000 International Bank for Reconstruction and Development, 0.00%, 02/15/13 ........................ 961,960
4,100,000 International Bank for Reconstruction and Development, 0.00%, 08/15/13 ........................ 1,154,429
500,000 nternational Bank for Reconstruction and Development, Series 2, 0.00%, 02/15/11 ............... 171,563
------------
3,652,349
------------
Total Long Term Investments (Cost $69,766,814)........................................... 74,714,151
------------
g,hReceivables from Repurchase Agreements 2.5%
$ 1,955,977 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $1,965,596) (Cost $1,964,705)
Chase Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $270,686)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ......................... $ 1,964,705
------------
Total Investments (Cost $71,731,519) 99.1%.......................................... 76,678,856
Other Assets and Liabilities, Net .9% .............................................. 671,101
------------
Net Assets 100.0% .................................................................. $77,349,957
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $71,982,308 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 5,932,017
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (1,235,469)
------------
Net unrealized appreciation ................................................................. $ 4,696,548
============
</TABLE>
PORTFOLIOABBREVIATIONS
FHLMC - Federal Home Loan Mortgage Corp.
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
SLMA - Student Loan Marketing Association
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Money Market Fund (Note 1)
fShort Term Investments 87.4%
Certificates of Deposit 10.5%
<S> <C> <C>
5,000,000 Bayerische Landesbank, New York Branch, 5.06%, 07/08/96 ........................................ $ 5,000,060
10,000,000 Dresdner Bank AG, New York Branch, 4.94%, 01/06/97 ............................................. 9,965,079
10,000,000 Lloyds Bank, Plc., New York Branch, 5.70%, 09/11/96 ............................................ 10,000,194
20,000,000 Societe Generale, New York Branch, 5.36% - 5.51%, 08/15/96 - 10/02/96 .......................... 20,000,260
------------
Total Certificates of Deposit (Cost $44,965,593).......................................... 44,965,593
------------
Commercial Paper 76.6%
10,000,000 ABN-AMRO North American Finance, Inc., 4.975%, 08/26/96 ........................................ 9,919,848
20,000,000 American Express Credit Corp., 4.88% - 5.27%, 07/18/96 - 08/09/96 .............................. 19,902,726
20,000,000 Associates Corp. of North America, 5.28% - 5.29%, 07/15/96 - 07/17/96 .......................... 19,951,535
10,000,000 Barclays U.S. Funding Corp., 5.27%, 08/20/96 ................................................... 9,923,878
15,000,000 Canadian Imperial Holdings, Inc., 5.27%, 07/02/96 .............................................. 14,993,413
10,000,000 Cheltnham & Gloucester Building Society, 5.27%, 07/03/96 ....................................... 9,994,144
19,500,000 CIESCO, L.P., 5.27%, 07/25/96 .................................................................. 19,425,781
10,000,000 Commerzbank U.S. Finance, Inc., 5.40%, 09/27/96 ................................................ 9,865,000
15,000,000 Disney (Walt) Co., 5.25%, 07/29/96 ............................................................. 14,934,376
10,000,000 Dupont (E.I.) De Nemours, Inc., 5.35%, 08/29/96 ................................................ 9,909,347
16,825,000 Export Development Corp., 5.30%, 09/04/96 ...................................................... 16,659,040
18,900,000 General Electric Capital Corp., 5.27% - 5.40%, 07/18/96 - 09/16/96 ............................. 18,759,364
15,000,000 Halifax Building Society, 4.88%, 08/08/96 ...................................................... 14,918,666
10,000,000 Hewlett-Packard, 5.37%, 08/29/96 ............................................................... 9,909,008
14,000,000 Kingdom of Sweden, 5.28% - 5.30%, 08/22/96 - 09/23/96 .......................................... 13,870,046
10,000,000 MetLife Funding, Inc., 5.28%, 08/27/96 ......................................................... 9,913,466
15,000,000 National Rural Utilities Cooperative Finance Corp., 5.29% - 5.37%, 08/19/96 - 08/26/96 ......... 14,881,800
10,000,000 PepsiCo, Inc., 5.38%, 09/25/96 ................................................................. 9,868,489
15,850,000 Province of British Columbia, 5.35%, 12/27/96 .................................................. 15,423,657
15,000,000 Prudential Funding Corp., 5.27%, 07/26/96 ...................................................... 14,940,712
20,520,000 Schering Corp., 5.25% - 5.27%, 08/13/96 - 09/23/96 ............................................. 20,363,874
10,000,000 Svenska Handelsbanken, Inc., 4.98% - 5.29%, 07/01/96 - 08/28/96 ................................ 9,954,534
15,000,000 Toyota Motor Credit Corp., 5.29%, 09/06/96 ..................................................... 14,847,912
5,800,000 U.S. Central Credit Union, 5.40%, 09/16/96 ..................................................... 5,731,270
------------
Total Commercial Paper (Cost $328,861,886)................................................ 328,861,886
------------
Medium Term Notes .3%
1,200,000 General Electric Capital Corp., 7.625%, 01/10/97 (Cost $1,211,935) ............................. 1,211,935
------------
Total Short Term Investments (Cost $375,039,414).......................................... 375,039,414
------------
gReceivables from Repurchase Agreements 13.3%..................................................
$ 17,725,000 B.T. Securities Corp., 5.35%, 07/01/96, (Maturity Value $17,207,668)
Collateral: U.S. Treasury Bills, 09/05/96 ..................................................... $ 17,200,000
20,025,000 SBC Capital Markets, Inc., 5.47%, 07/01/96, (Maturity Value $20,009,117)
Collateral: U.S. Treasury Notes, 6.75%, 04/30/00 .............................................. 20,000,000
20,534,000 UBS Securities, Inc., 5.43%, 07/01/96, (Maturity Value $20,009,050)
Collateral: U.S. Treasury Bills, 08/22/96 ..................................................... 20,000,000
------------
Total Receivables from Repurchase Agreements (Cost $57,200,000)........................... 57,200,000
------------
Total Investments (Cost $432,239,414) 100.7% ........................................ 432,239,414
Liabilities in Excess of Other Assets (.7)% ......................................... (3,008,825)
------------
Net Assets 100.0% ................................................................... $429,230,589
============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
fCertain 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.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Growth and Income Fund (Note 1)
Common Stocks 93.6%
Automobile 1.1%
<S> <C> <C>
184,500 Chrysler Corp. .............................................................................. $ 11,439,000
------------
Chemicals, Basic 2.3%
184,300 Dow Chemical Co. ............................................................................ 14,006,800
64,500 Du Pont, (E.I.), De Nemours & Co............................................................. 5,103,563
104,500 Goodrich (B.F.) Co. ......................................................................... 3,905,688
------------
23,016,051
------------
Commercial Services .9%
512,300 Ogden Corp. ................................................................................. 9,285,438
------------
Electrical Equipment 1.6%
183,100 General Electric Co. ........................................................................ 15,838,150
------------
Financial Services 7.8%
98,500 Bank of Boston Corp. ........................................................................ 4,875,750
195,800 Christiania Bank, ADS........................................................................ 4,615,887
1,895,000 Christiania Bank Og Kreditkasse (Norway) .................................................... 4,467,377
347,000 Great Western Financial Corp. ............................................................... 8,284,625
262,000 H & R Block, Inc. ........................................................................... 8,547,750
111,000 J. P. Morgan & Co., Inc. .................................................................... 9,393,375
270,000 National City Corp. ......................................................................... 9,483,750
231,500 Nordbanken AB (Sweden) ...................................................................... 4,475,457
119,700 Nordbanken AB - Sponsored ADR ............................................................... 4,628,189
304,900 PNC Bank Corp. .............................................................................. 9,070,775
510,000 Roosevelt Financial Corp. ................................................................... 9,817,500
------------
77,660,435
------------
Forest Products & Paper 4.8%
119,000 Georgia-Pacific Corp. ....................................................................... 8,449,000
1,020,000 Portucel Industrial, SA...................................................................... 6,535,038
454,700 Potlatch Corp. .............................................................................. 17,790,138
145,000 Union Camp Corp. ............................................................................ 7,068,750
175,000 Weyerhaeuser Co. ............................................................................ 7,437,500
------------
47,280,426
------------
Insurance 2.2%
301,900 Lincoln National Corp. ...................................................................... 13,962,875
89,500 St. Paul Cos., Inc. ......................................................................... 4,788,250
100,100 Zenith National Insurance ................................................................... 2,740,238
------------
21,491,363
------------
Medical Supplies .7%
243,800 Glaxo Wellcome Plc., Sponsored ADR .......................................................... 6,521,650
------------
Miscellaneous Manufacturing 4.1%
127,300 Cooper Industries, Inc. ..................................................................... 5,282,950
1,310,000 Hanson, Plc. ................................................................................ 18,667,500
239,500 Minnesota Mining & Manufacturing Co. ........................................................ 16,525,500
------------
40,475,950
------------
Oil/Gas Transmission 3.9%
253,000 Consolidated Natural Gas Co. ................................................................ 13,219,250
320,000 National Fuel Gas Co. ....................................................................... 11,520,000
479,800 Pacific Enterprises ......................................................................... 14,214,075
------------
38,953,325
------------
Petroleum, Integrated 15.9%
233,700 Amoco Corp. ................................................................................. $ 16,914,038
192,000 Atlantic Richfield Co. ...................................................................... 22,752,000
288,000 Chevron Corp. ............................................................................... 16,992,000
213,500 Exxon Corp. ................................................................................. 18,547,813
128,000 Mobil Corp. ................................................................................. 14,352,000
100,000 Occidental Petroleum Corp. .................................................................. 2,475,000
92,900 Royal Dutch Petroleum Co., ADR............................................................... 14,283,375
256,200 Texaco, Inc. ................................................................................ 21,488,775
336,900 Ultramar Corp. .............................................................................. 9,770,100
885,000 YPF Sociedad Anonima ........................................................................ 19,912,500
------------
157,487,601
------------
Pharmaceuticals 3.7%
266,000 American Home Products Corp. ................................................................ 15,993,250
231,500 Bristol-Myers Squibb Co. .................................................................... 20,835,000
------------
36,828,250
------------
Printing & Publishing 2.0%
315,000 Dun & Bradstreet Corp. ...................................................................... 19,687,500
------------
Real Estate Investment Trust 4.0%
515,300 Equity Residential Properties Trust ......................................................... 16,940,488
410,000 FelCor Suite Hotels, Inc. ................................................................... 12,505,000
484,400 Oasis Residential, Inc. ..................................................................... 10,596,250
------------
40,041,738
------------
Retail 2.0%
375,900 Penney (J.C.) Co., Inc. ..................................................................... 19,734,750
------------
Metals .9%
335,000 British Steel Plc., Sponsored ADR ........................................................... 8,500,625
------------
Telecommunications 11.2%
142,000 Ameritech Corp. ............................................................................. 8,431,250
195,800 BellSouth Corp. ............................................................................. 8,297,025
58,300 British Telecom Plc., Sponsored ADR ......................................................... 3,133,625
447,500 GTE Corp. ................................................................................... 20,025,625
390,000 NYNEX Corp. ................................................................................. 18,525,000
434,900 Southern New England Telecommunications Corp. ............................................... 18,265,800
106,400 Sprint Corp. ................................................................................ 4,468,800
360,000 Telefonos de Mexico, SA, ADR................................................................. 12,060,000
559,100 US West Communications Group................................................................. 17,821,310
------------
111,028,435
------------
Tobacco 6.6%
365,100 American Brands, Inc. ....................................................................... 16,566,410
220,600 Philip Morris Cos., Inc. .................................................................... 22,942,400
393,560 RJR Nabisco Holdings Corp. .................................................................. 12,200,360
415,000 UST, Inc. ................................................................................... 14,213,750
------------
65,922,920
------------
Utilities 17.9%
223,000 American Electric Power Co. ................................................................. 9,505,375
686,100 Central & South West Corp. .................................................................. 19,896,900
483,000 CINergy Corp. ............................................................................... 15,456,000
477,000 Dominion Resources, Inc. .................................................................... 19,080,000
Utilities (cont.)
590,000 Enova Corp. ................................................................................. $ 13,643,750
425,300 General Public Utilities Corp. .............................................................. 14,991,825
376,400 New England Electric System ................................................................. 13,691,550
353,000 Oklahoma Gas & Electric Co. ................................................................. 13,987,625
200,000 Pacific Gas & Electric Co. .................................................................. 4,650,000
670,000 PacifiCorp .................................................................................. 14,907,500
409,900 PECO Energy Co. ............................................................................. 10,657,400
338,000 Public Service Co. of Colorado .............................................................. 12,421,500
200,000 Public Service Enterprise Group, Inc. ....................................................... 5,475,000
230,000 Texas Utilities Co. ......................................................................... 9,832,500
------------
178,196,925
------------
Total Long Term Investments (Cost $815,964,222) ....................................... 929,390,532
------------
Face
Amount
g,h Receivables from Repurchase Agreements 5.6%
$55,644,228 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $55,925,733) (Cost $55,900,396)
Chase Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,701,573)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
USB Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 55,900,396
------------
Total Investments (Cost $871,864,618) 99.2%....................................... 985,290,928
Other Assets & Liabilities, Net .8%............................................... 7,843,783
------------
Net Assets 100.0%................................................................ $993,134,711
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $871,874,395
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an excess
of value over tax cost ..................................................................... $124,709,942
Aggregate gross unrealized depreciation for all investments in which there was an excess
of tax cost over value ..................................................................... (11,293,409)
------------
Net unrealized appreciation ............................................................... $113,416,533
============
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
dSecurities traded in foreign currency and valued in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Shares/ Value
Warrants Income Securities Fund (Note 1)
Common Stocks 31.5%
Telecommunications .9%
<S> <C> <C>
355,000 US West Communications Group............................................................... $ 11,315,625
------------
Conglomerates .4%
380,000 Hanson, Plc., ADR.......................................................................... 5,415,000
------------
Consumer Products 1.4%
180,000 Phillip Morris Cos., Inc. ................................................................. 18,720,000
93,750 a,bSpecialty Foods Corp. .................................................................. 46,875
------------
18,766,875
------------
Energy 1.4%
576,500 dAthabasca Oil Sands Trust, (Canada)....................................................... 5,763,944
30,000 Atlantic Richfield Co. .................................................................... 3,555,000
50,000 BP Prudhoe Bay Royalty Trust .............................................................. 750,000
500,000 dCanadian Oil Sands Trust - Units (Canada)................................................. 5,200,513
125,000 Ultramar Corp. ............................................................................ 3,625,000
------------
18,894,457
------------
Home Builders
3,088 a,mNVR, Inc. .............................................................................. 34,354
------------
Metals 1.6%
185,200 Driefontein Consolidated Mines, Ltd., ADR.................................................. 2,430,750
390,000 Free State Consolidated Gold Mines, Ltd., ADR.............................................. 3,607,500
620,000 Hartebeestfontein Gold Mining Co., Ltd., ADR............................................... 2,089,090
216,500 Impala Platinum Holdings, Ltd., ADR........................................................ 3,110,347
60,000 Kinross Mines, Ltd., ADR................................................................... 636,972
217,084 Rustenburg Platinum Holdings, Ltd., ADR.................................................... 3,381,756
19,000 St. Helena Gold Mines, Ltd., ADR........................................................... 103,313
256,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR............................................. 2,048,000
102,500 Western Deep Levels, Ltd., ADR............................................................. 3,715,625
------------
21,123,353
------------
Pharmaceuticals 2.4%
150,000 American Home Products Corp. .............................................................. 9,018,750
85,000 Bristol-Myers Squibb Co. .................................................................. 7,650,000
147,600 Merck & Co., Inc. ......................................................................... 9,538,650
105,000 Pharmacia & Upjohn, Inc. .................................................................. 4,659,375
------------
30,866,775
------------
Real Estate Investment Trust 2.6%
200,000 Equity Residential Properties Trust, Inc. ................................................. 6,575,000
125,000 FelCor Suite Hotels, Inc. ................................................................. 3,812,500
150,000 Gables Residential Trust .................................................................. 3,525,000
145,000 Meditrust Corp. ........................................................................... 4,839,375
200,000 Post Properties, Inc. ..................................................................... 7,075,000
360,400 iTanger Factory Outlet Centers, Inc. ...................................................... 8,379,300
------------
34,206,175
------------
Retail
8,000 aFederated Department Stores, Inc. ........................................................ 273,000
------------
Utilities 20.8%
390,000 American Electric Power Co., Inc. ......................................................... 16,623,750
650,000 Central & South West Corp. ................................................................ 18,850,000
511,000 CINergy Corp. ............................................................................. 16,352,000
450,200 Delmarva Power & Light Co. ................................................................ 9,454,200
Utilities (cont.)
330,000 Dominion Resources, Inc. .................................................................. $ 13,200,000
610,000 Edison International ...................................................................... 10,751,250
470,000 Enova Corp. ............................................................................... 10,868,750
435,000 Entergy Corp. ............................................................................. 12,343,125
355,000 Florida Progress Corp. .................................................................... 12,336,250
240,000 FPL Group, Inc. ........................................................................... 11,040,000
320,000 General Public Utilities Corp. ............................................................ 11,280,000
142,000 Hawaiian Electric Industries, Inc. ........................................................ 5,041,000
300,000 Houston Industries, Inc. .................................................................. 7,387,500
400,000 Long Island Lighting Co. .................................................................. 6,700,000
175,000 Nevada Power Co. .......................................................................... 3,850,000
260,000 New England Electric System ............................................................... 9,457,500
300,000 New York State Electric & Gas Corp. ....................................................... 7,312,500
385,000 Ohio Edison Co. ........................................................................... 8,421,875
610,000 Pacific Gas & Electric Co. ................................................................ 14,182,500
120,000 PacifiCorp ................................................................................ 2,670,000
240,000 PECO Energy Co. ........................................................................... 6,240,000
195,000 Potomac Electric Power Co. ................................................................ 5,167,500
337,900 Public Service Enterprise Group, Inc. ..................................................... 9,250,013
135,000 Scana Corp. ............................................................................... 3,796,875
460,000 Southern Co. .............................................................................. 11,327,500
400,000 Southwestern Public Services Co. .......................................................... 13,050,000
320,000 Texas Utilities Co. ....................................................................... 13,680,000
74,200 Western Resources, Inc. ................................................................... 2,226,000
------------
272,860,088
------------
Total Common Stocks (Cost $371,567,768).............................................. 413,755,702
------------
Preferred Stocks .5%
Automotive
14,640 Harvard Industries, Inc., 14.25% pfd., PIK................................................. 388,875
------------
Cable Systems .4%
31,272 bCablevision Systems Corp., 11.125% pfd., PIK, Series L ................................... 2,931,769
2,453 Time Warner, Inc., 10.25% pfd., Series K .................................................. 2,404,409
------------
5,336,178
------------
Consumer Products .1%
11,000 Pantry Pride, Inc., $14.875 pfd., Series B ................................................ 1,102,750
------------
Total Preferred Stocks (Cost $7,168,710)............................................. 6,827,803
------------
Convertible Preferred Stocks 9.2%
Apparel/Textile .1%
40,000 Fieldcrest Cannon, Inc., $3.00 cvt. pfd., Series A......................................... 1,800,000
------------
Cable Systems .5%
240,000 Cablevision Systems Corp., 8.50% cvt. pfd. ................................................ 6,240,000
------------
Communications .5%
140,000 dNortel Inversora, SA, cvt. pfd. (Argentina)............................................... 6,440,000
------------
Consumer Products .2%
300,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd., Series C.................................... 1,950,000
------------
Energy 4.1%
50,000 bDevon Financing Trust, $3.25 cvt. pfd. ................................................... 2,562,500
159,800 Enron Oil & Gas, 6.25% cvt. pfd. .......................................................... 4,134,825
Energy (cont.)
75,000 Gerrity Oil & Gas, $1.50 cvt. pfd., Series G............................................... $ 937,500
138,000 Maxus Energy Corp., $4.00 cum. cvt. pfd. .................................................. 6,865,500
235,000 bMcDermott International, Inc., $2.875 cvt. pfd., Series C................................. 9,752,500
209,700 Noble Drilling Corp., $1.50 cvt. pfd. ..................................................... 7,391,925
75,000 bOccidental Petroleum Corp., $3.875 cvt. pfd. ............................................. 4,500,000
170,000 bParker & Parsley Capital, 6.25% cvt. pfd. ................................................ 9,477,500
66,923 Santa Fe Energy Resources, Inc., 7.00% cvt. pfd. .......................................... 1,463,941
450,000 Santa Fe Energy Resources, Inc., 8.25% cvt. pfd. .......................................... 4,950,000
100,000 Snyder Oil Corp., $1.50 cvt. exch. pfd. ................................................... 1,900,000
------------
53,936,191
------------
Metals 2.6%
138,500 Amax Gold, Inc., $3.75 cvt. pfd., Series B................................................. 7,098,125
65,000 Armco, Inc., $3.625 cum. cvt. pfd., Series A............................................... 3,079,375
61,000 Battle Mountain Gold Co., $3.25 cvt. pfd. ................................................. 2,989,000
190,000 Coeur D' Alene Mines Corp, 7.00% cum. cvt. pfd. ........................................... 3,752,500
55,000 Cyprus Minerals, $4.00 cvt. pfd., Series A................................................. 3,018,125
108,800 Freeport-McMoRan Copper & Gold, Inc., $1.25 cum. cvt. pfd. ................................ 3,753,600
90,000 Freeport-McMoRan Copper & Gold, Inc., $1.75 cvt. pfd. ..................................... 2,790,000
60,000 bFreeport-McMoRan, Inc., 4.375% cvt. exch. pfd. ........................................... 3,990,000
70,000 Hecla Mining Co., $3.50 cvt. pfd., Series B................................................ 2,948,750
------------
33,419,475
------------
Real Estate Investment Trust 1.0%
135,000 Security Cap Industrial, 7.00%, cvt. pfd. ................................................. 3,121,875
400,000 Security Capital Pacific Trust, 1.75% cvt. pfd., Series A.................................. 10,500,000
------------
13,621,875
------------
Restaurants .3%
210,000 Flagstar Cos., $2.25 cvt. pfd., Series A................................................... 2,690,625
------------
Total Convertible Preferred Stocks (Cost $116,562,871)............................... 120,098,166
------------
Warrants
3,128 a,mNVR, Inc. (Cost $13,294)................................................................ 6,647
------------
Miscellaneous
30,814 aMiscellaneous Securities (Cost $10,477)................................................... 10,477
------------
Total Common Stocks, Preferred Stocks, Convertible Preferred Stocks, Warrants
and Miscellaneous Securities (Cost $495,323,120).......................................... 540,698,795
------------
Face
Amount
Corporate Bonds 28.9%
Automotive 1.4%
$ 4,000,000 Collins & Aikman Products, senior sub. notes, 11.50%, 04/15/05 ............................ 4,080,000
400,000 Exide Corp., senior notes, 10.75%, 12/15/02 ............................................... 408,000
5,000,000 Harvard Industries, Inc., senior notes, 11.125%, 08/01/05 ................................. 4,750,000
8,350,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00 ............................... 8,663,125
------------
17,901,125
------------
Building Products .8%
9,250,000 Inter-City Products Corp., senior notes, 9.75%, 03/01/00 .................................. 8,671,875
2,000,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 ......................................... 1,910,000
------------
10,581,875
------------
Cable Systems 1.8%
$ 150,000 Cablevision Industries Corp., guaranteed senior sub. notes, 10.75%, 01/30/02 .............. $ 161,250
3,000,000 Cablevision Systems Corp., senior sub. deb., 9.875%, 04/01/23 ............................. 2,760,000
8,000,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 ............................... 8,747,144
7,300,000 Helicon Group L.P. Corp., S.F., senior secured notes, Series B, 9.00%, 11/01/03 ........... 7,263,500
5,000,000 Storer Communiciations, Inc., sub. deb., 10.00%, 05/15/03 ................................. 5,037,500
------------
23,969,394
------------
Chemicals 1.3%
8,000,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02 .................... 8,120,000
3,250,000 IMC Fertilizer Group, Inc., notes, Series B, 10.75%, 06/15/03 ............................. 3,485,625
725,000 UCC Investors, senior notes, 10.50%, 05/01/02 ............................................. 764,875
4,150,000 UCC Investors, senior notes, 11.00%, 05/01/03 ............................................. 4,378,250
------------
16,748,750
------------
Consumer Products 2.8%
2,250,000 Calmar, Inc., senior sub. notes, 11.50%, 08/15/05 ......................................... 2,205,000
7,750,000 Hines Horticulture, senior sub. notes, 11.75%, 10/15/05 ................................... 8,060,000
5,050,000 Mafco, Inc., senior sub. notes, 11.875%, 11/15/02 ......................................... 5,327,750
2,000,000 bPackaging Resources, Inc., senior notes, 11.625%, 05/01/03 ............................... 2,022,500
8,000,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ......................... 7,520,000
5,000,000 Revlon Consumer Product Corp., senior sub. notes, Series B, 10.50%, 02/15/03 .............. 5,037,500
5,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13 ................................................. 5,000,000
1,150,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ........................................... 1,132,750
------------
36,305,500
------------
Energy 2.2%
3,250,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ........................................... 3,371,875
9,835,000 Gerrity Oil & Gas Corp., senior sub. notes, 11.75%, 07/15/04 .............................. 10,425,100
1,000,000 Global Marine, Inc., senior secured notes, 12.75%, 12/15/99 ............................... 1,086,250
10,000,000 Mesa Capital Corp., disc. notes, 12.75%, 06/30/98 ......................................... 10,050,000
1,000,000 Mesa Operating Co., guaranteed, 10.625%, 07/01/06 ......................................... 1,021,250
1,000,000 bPlains Resources, Inc., senior sub. notes, 10.25%, 03/15/06 .............................. 990,000
1,752,000 Tesoro Petroleum Corp., S.F., sub. deb., 12.75%, 03/15/01 ................................. 1,760,760
------------
28,705,235
------------
Entertainment .1%
650,000 bAMF Group, Inc., senior sub. notes, 10.875%, 03/15/06 .................................... 648,375
------------
Food & Beverages 1.8%
3,900,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ............................ 3,802,500
5,283,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ....................................... 4,226,400
1,600,000 Doane Products Co., senior notes, 10.625%, 03/01/06 ....................................... 1,608,000
1,010,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ...................... 1,052,925
6,000,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ..................... 5,910,000
4,000,000 Specialty Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 ...................... 3,470,000
4,000,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 ................. 3,755,000
------------
23,824,825
------------
Food Retailing 2.7%
1,000,000 Americold Corp., senior sub. notes, 12.875%, 05/01/08 ..................................... 1,020,000
9,000,000 Americold Corp., senior sub. notes, Series B, 11.50%, 03/01/05 ............................ 9,146,250
6,000,000 Bruno's, Inc., 10.50%, 08/01/05 ........................................................... 5,955,000
7,000,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04 ............................ 6,571,250
Food Retailing (cont.)
$ 10,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05 ................................... $ 9,250,000
4,000,000 Smith's Food & Drug, senior sub. notes, 11.25%, 05/15/07 .................................. 4,070,000
------------
36,012,500
------------
Gaming & Leisure 1.5%
8,500,000 Aztar Corp., senior sub. notes, 11.00%, 10/01/02 .......................................... 8,861,250
2,200,000 Harveys Casinos Resorts, senior sub. notes, 10.625%, 06/01/06 ............................. 2,211,000
8,000,000 Rio Hotel & Casino, Inc., senior sub. notes, 10.625%, 07/15/05 ............................ 8,360,000
------------
19,432,250
------------
Health Care Services .6%
3,000,000 bDade International, Inc., senior sub. notes, 11.125%, 05/01/06 ........................... 3,090,000
1,500,000 OrNda Healthcorp., Inc., senior sub. notes, 12.25%, 05/15/02 .............................. 1,629,375
4,000,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03 3,660,000
------------
8,379,375
------------
Industrial Products 1.9%
8,650,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01 ..................................... 8,736,500
8,450,000 bRBX Corp., senior sub. notes, 11.25%, 10/15/05 ........................................... 8,027,500
5,030,000 RHI Holdings, Inc., senior sub. deb., 11.875%, 03/01/99 ................................... 4,954,550
2,696,000 Thermadyne Industries, Inc., notes, 10.75%, 11/01/03 ...................................... 2,669,040
246,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ............................... 243,540
------------
24,631,130
------------
Information Technology .5%
4,625,000 a,kAnacomp, Inc., senior sub. notes, 15.00%, 11/01/00 ..................................... 5,185,781
1,600,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 .................................... 1,712,000
------------
6,897,781
------------
Media & Broadcasting .2%
2,000,000 bBenedek Broadcasting, senior secured notes, 11.875%, 03/01/05 ............................ 2,120,000
------------
Metals 1.0%
1,000,000 Armco Steel, Inc., senior notes, 11.375%, 10/15/99 ........................................ 1,032,500
6,020,000 Jorgensen, Earle M. Co., senior notes, 10.75%, 03/01/00 ................................... 5,959,800
6,000,000 Republic Engineered Steel, first mortgage, 9.875%, 12/15/01 ............................... 5,625,000
815,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05 .............. 929,100
------------
13,546,400
------------
Paper & Forest Products .9%
600,000 bFour M Corp., senior notes, 12.00%, 06/01/06 ............................................. 613,500
7,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05 ........................... 7,525,000
4,000,000 Riverwood International, senior sub. notes, 10.875%, 04/01/08 ............................. 3,960,000
------------
12,098,500
------------
Railroads .5%
6,000,000 Southern Pacific Rail Co., senior notes, 9.375%, 08/15/05 ................................. 6,270,000
------------
Restaurants .5%
10,000,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 .................................. 6,600,000
------------
Retail .7%
9,940,000 Levitz Furniture Corp., senior notes, 13.375%, 10/15/98 ................................... 9,542,400
------------
Textiles & Apparels 2.0%
7,000,000 a,kBibb Co., senior sub. notes, 14.00%, 10/01/99 .......................................... 3,185,000
10,000,000 Consoltex Group, Inc., senior sub. notes, Series B, 11.00%, 10/01/03 ...................... 9,150,000
175,000 a,kForstmann Textile, Inc., S.F., senior sub. notes, 14.75%, 04/15/99 ..................... 49,875
Textiles & Apparels (cont.)
$ 8,300,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ...................................... $ 7,947,250
5,000,000 JPS Textile Group, Inc., S.F., sub. notes, 7.00%, 05/15/00 ................................ 1,425,000
1,000,000 Polysindo International Finance, guaranteed, 11.325%, 06/15/06 ............................ 1,022,500
5,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ............................... 4,875,000
------------
27,654,625
------------
Utilities 3.2%
195,782,500 cESCOM, E168, utility deb., 11.00%, 06/01/08, (South Africa)............................... 35,690,883
4,153,739 Midland CoGeneration Venture, S.F., sub. deb., Series C, 10.33%, 07/23/02 ................. 4,330,273
2,000,000 Texas, New Mexico Power, secured deb., 10.75%, 09/15/03 ................................... 2,093,454
------------
42,114,610
------------
Wireless Communications .4%
5,000,000 CommNet Cellular, Inc., sub. notes, 11.25%, 07/01/05 ...................................... 5,350,000
------------
Total Corporate Bonds (Cost $381,443,454)............................................ 379,334,650
------------
Convertible Corporate Bonds 4.3%
Automotive .1%
2,000,000 bExide Corp., cvt. senior sub. notes, 2.90%, 12/15/05 ..................................... 1,100,000
------------
Biotechnology .1%
2,000,000 Centocor, Inc., Eurobonds, cvt. sub. deb., 6.75%, 10/16/01 ................................ 1,850,000
------------
Computer/Technology .6%
1,500,000 bAltera Corp., cvt. sub. notes, 5.75%, 06/15/02 ........................................... 1,515,000
3,000,000 Conner Peripherals, Inc., cvt. sub. deb., 6.75%, 03/01/01 ................................. 3,030,000
2,815,000 Maxtor Corp., cvt. sub. deb., 5.75%, 03/01/12 ............................................. 1,984,575
1,000,000 bXilinx, Inc., cvt. sub. notes, 5.25%, 11/01/02 ........................................... 922,500
------------
7,452,075
------------
Energy 1.5%
4,500,000 Ashland, Inc., S.F., cvt. deb., 6.75%, 07/01/14 ........................................... 4,494,375
9,000,000 Oryx Energy Co., cvt. sub. deb., 7.50%, 05/15/14 .......................................... 7,920,000
276,000 Pogo Producing Co., cvt. sub. deb., 8.00%, 12/31/05 ....................................... 281,520
7,250,000 Snyder Oil Corp., cvt. sub. notes, 7.00%, 05/15/01 ........................................ 6,633,750
------------
19,329,645
------------
Health Care Services .3%
3,000,000 Grancare, Inc., cvt. sub. deb., 6.50%, 01/15/03 ........................................... 2,865,000
1,000,000 bMedical Care International, Inc., cvt. sub. deb., 6.75%, 10/01/06 ........................ 1,005,000
------------
3,870,000
------------
Metals 1.4%
5,000,000 Ashanti Capital, Ltd., cvt. notes, 5.50%, 03/15/03 ........................................ 4,750,000
100,000 Coeur D'Alene Mines Corp., cvt. senior sub. deb., 6.00%, 06/10/02 ......................... 94,875
6,000,000 Coeur D'Alene Mines Corp., cvt. sub. deb., 6.375%, 01/31/04 ............................... 5,940,000
1,800,000 FMC Corp., Eurobonds, cvt. senior sub. deb., 6.75%, 01/16/05 .............................. 1,656,000
5,850,000 bHomestake Mining Co., cvt. sub. deb., 5.50%, 06/23/00 .................................... 6,040,125
------------
18,481,000
------------
Pollution Control .2%
3,610,000 Air & Water Technology Corp., cvt. sub. deb., 8.00%, 05/15/15 ............................. 3,176,800
------------
Retail .1%
1,180,000 Drug Emporium, Inc., cvt. sub. deb., 7.75%, 10/01/14 ...................................... 951,375
------------
Total Convertible Corporate Bonds (Cost $55,339,910)................................. 56,210,895
------------
Zero Coupon/Step-up Bonds 2.8%............................................................
$ 2,000,000 bAMF Group, Inc., senior disc. notes, zero coupon to 03/15/01, (original accretion rate 12.25%),
12.25%, 03/15/06 ......................................................................... $ 1,085,000
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 .............................................................. 6,875,000
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 .......................... 2,171,000
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 .............................................................. 850,000
10,000,000 Food 4 Less Supermarkets, Inc., zero coupon to 06/15/00, (original accretion rate 13.625%),
13.625% thereafter, 07/15/05 ............................................................. 4,700,000
1,300,000 bL.F.C. Holding Corp., senior deb., zero coupon to 06/15/97, (original accretion rate 15.00%),
15.00% thereafter, 06/15/02 .............................................................. 975,000
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 ..................................................... 8,645,000
1,300,000 jMesa Operating Co., senior sub. notes, zero coupon to 07/01/01, (original accretion rate
11.625%), 11.625% thereafter, 07/01/06.................................................... 773,500
8,000,000 Revlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion rate 12.00%),
0.00%, 03/15/98 .......................................................................... 6,700,000
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 ............................ 2,781,250
1,500,000 UCC Investors, senior notes, zero coupon to 05/01/98, (original accretion rate 12.00%), 12.00%
thereafter, 05/01/05 ..................................................................... 1,252,500
------------
Total Zero Coupon/Step-up Bonds (Cost $37,513,992)................................... 36,808,250
------------
Total Bonds (Cost $474,297,356)...................................................... 472,353,795
------------
U.S. Government Securities 7.1%
75,000,000 U.S. Treasury Bonds, 6.25% - 7.125%, 02/15/23 - 08/15/23 .................................. 69,009,369
24,390,000 U.S. Treasury Notes, 6.00% - 6.875%, 04/30/97 - 08/15/02 .................................. 24,306,680
------------
Total U.S. Government Securities (Cost $96,236,585).................................. 93,316,049
------------
Foreign Government & Agency Securities 11.4%
14,000,000 cCanadian Government, first coupon deb., 8.00%, 06/01/23 .................................. 10,136,605
110,000,000 Republic of Argentina, Series L, 5.25%, 03/31/23 .......................................... 60,362,500
22,552,500 Republic of Brazil, 6.375%, 01/01/01 ...................................................... 21,142,969
36,000,000 Republic of Brazil, 5.00%, 04/15/24 ....................................................... 19,935,000
36,000,000 Republic of Ecuador, 3.25%, 02/28/25 ...................................................... 12,937,500
25,000,000 cRepublic of South Africa, 12.00%, 02/28/05 ............................................... 5,015,000
30,000,000 United Mexican States, Series B, 6.25%, 12/31/19 .......................................... 19,481,250
------------
Total Foreign Government & Agency Securities (Cost $137,817,862)..................... 149,010,824
------------
Total Long Term Investments (Cost $1,203,674,923).................................... 1,255,379,463
------------
g,hReceivables from Repurchase Agreement 3.3%
43,487,247 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $43,707,900) (Cost $43,688,098)
Chase Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $6,019,044)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ..................... $ 43,688,098
------------
Total Investments (Cost $1,247,363,021) 99.1% .................................. 1,299,067,561
Other Assets and Liabilities, Net .9% .......................................... 11,982,141
------------
Net Assets 100.0%............................................................... $1,311,049,702
============
At June 30, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$1,247,363,021 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................. $ 92,178,033
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (40,473,493)
------------
Net unrealized appreciation.............................................................. $ 51,704,540
============
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-In-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount is stated in foreign currency and value is stated in U.S. dollars.
dSecurities traded in foreign currency and valued in U. S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement
iSee Note 8 regarding holdings of 5% or more of voting securities.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
kSee Note 7 regarding defaulted securities.
mSee Note 9 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Shares/ Value
Country* Warrants Templeton International Equity Fund (Note 1)
Common Stocks & Warrants 79.6%
Argentina 1.9%
<S> <C> <C>
AR 588,699 aCiadea, SA...................................................................... $ 4,151,861
US 2,217,000 Transportadora de Gas del Sur, SA, Class B, ADR.................................. 2,715,825
AR 56,000 YPF Sociedad Anonima ............................................................ 1,263,267
US 495,000 YPF Sociedad Anonima, ADR........................................................ 11,137,500
------------
19,268,453
------------
Australia 5.0%
AU 338,674 Australia & New Zealand Banking Group, Ltd. ..................................... 1,602,403
AU 1,359,235 Email, Ltd. ..................................................................... 3,525,347
AU 1,497,533 Gio Australia Holdings, Ltd. .................................................... 3,683,954
AU 1,003,000 National Foods, Ltd. ............................................................ 1,135,159
AU 1,984,500 News International, Plc. ........................................................ 12,820,723
AU 6,527,766 Pacific Dunlop, Ltd. ............................................................ 14,673,172
AU 4,519,236 Pioneer International, Ltd. ..................................................... 13,141,960
------------
50,582,718
------------
Austria .6%
AT 33,000 Boehler Uddeholm, AG............................................................. 2,558,976
US 27,055 bBoehler Uddeholm, AG............................................................ 2,097,973
AT 39,400 aMayr-Melnhof Karton, AG......................................................... 1,696,959
------------
6,353,908
------------
Belgium .5%
BE 9,054 Solvay, SA ...................................................................... 5,604,244
------------
Bermuda 2.6%
US 547,000 Ace, Ltd. ....................................................................... 25,709,000
------------
Brazil .7%
US 276,365 Companhia Siderurgica Nacional, ADR.............................................. 7,045,704
------------
Canada 2.0%
CA 205,800 Bank of Montreal ................................................................ 5,034,770
CA 92,700 Canadian Imperial Bank of Commerce .............................................. 2,990,980
CA 29,400 Gendis, Inc., Class A ........................................................... 179,813
CA 357,000 Hudsons Bay Co. ................................................................. 5,412,855
CA 127,000 London Insurance Group, Inc. .................................................... 2,660,465
CA 447,000 National Bank of Canada ......................................................... 3,732,503
------------
20,011,386
------------
China .7%
CN 6,960,000 Maanshan Iron & Steel Co., Ltd., Class H ........................................ 1,222,827
US 338,300 Shandong Huaneng Power, ADR...................................................... 2,790,975
CN 8,400,000 Shanghai Hai Xing Shipping Co., Class H.......................................... 553,435
CN 1,494,000 Shenzhen China Bicycles Co. (Holdings), Ltd., Class B............................ 345,478
CN 8,728,000 Yizheng Chemical Fibre Co., Ltd., Class H........................................ 1,928,092
------------
6,840,807
------------
Colombia .3%
US 159,000 Banco Ganadero, SA, Class C, ADR ................................................ 3,100,500
------------
Czech Republic .3%
US 120,000 a,bKomercni Banka, AS, GDR....................................................... 3,240,000
------------
Ecuador .1%
US 200 bLa Cemento Nacional CA, GDR..................................................... 36,200
------------
Finland 2.4%
FI 111,562 Amer Group, Ltd., Class A ....................................................... $ 1,878,817
FI 1,754,300 aEnso Oy, Class R................................................................ 13,673,658
FI 153,200 Nokia, AB, Class A............................................................... 5,656,249
FI 171,000 Outokumpu Oy, Class A............................................................ 2,879,813
------------
24,088,537
------------
France 5.3%
FR 27,323 Alcatel Cable, SA................................................................ 2,326,379
FR 13,009 Cie de Saint Gobain ............................................................. 1,742,373
FR 70,710 Ecco, SA ........................................................................ 17,800,350
FR 14,850 Labinal, SA ..................................................................... 2,170,812
FR 13,915 aMarine Wendel .................................................................. 1,152,314
FR 315,590 aPechiney, SA, Class A........................................................... 12,754,271
FR 148,024 Societe Elf Aquitane, SA......................................................... 10,894,083
FR 60,833 Total, SA, Class B .............................................................. 4,514,952
------------
53,355,534
------------
Greece 1.0%
GR 115,733 bAlpha Credit Bank .............................................................. 6,110,202
GR 69,970 Ergo Bank, SA ................................................................... 3,854,095
------------
9,964,297
------------
Hong Kong 6.6%
HK 5,961,000 C.P. Pokphand Co., Ltd. ......................................................... 2,367,997
HK 846,000 Cathay Pacific Airways, Ltd. .................................................... 1,551,943
HK 623,000 Cheung Kong Holdings, Ltd. ...................................................... 4,486,936
HK 2,086,000 Consolidated Electric Power Asia, Ltd. .......................................... 3,449,382
HK 9,123,000 Dairy Farm International Holdings, Ltd. ......................................... 7,708,935
HK 9,922,000 aGreat Wall Electronic International, Ltd. ...................................... 717,801
HK 779,000 Hang Lung Development Co., Ltd. ................................................. 1,464,257
HK 122,338 HSBC Holdings, Plc. ............................................................. 1,849,116
HK 905,200 Jardine Matheson Holdings, Ltd. ................................................. 6,653,220
HK 2,864,250 Jardine Strategic Holdings, Ltd. ................................................ 9,165,600
HK 318,250 aJardine Strategic Holdings, Ltd., warrants...................................... 98,658
HK 873,700 Melco International Development, Ltd. ........................................... 242,671
HK 5,999,000 Oriental Press Group, Ltd. ...................................................... 3,216,206
HK 7,155,000 Peregrine Investments Holdings, Ltd. ............................................ 10,306,269
HK 715,500 aPeregrine Investments Holdings, Ltd., warrants.................................. 88,736
HK 17,474,000 Shun Tak Holdings ............................................................... 10,722,669
HK 3,172,400 Sing Tao Holdings, Ltd. ......................................................... 1,874,977
HK 1,974,000 Yue Yuen Industrial (Holdings), Ltd. ............................................ 561,031
------------
66,526,404
------------
India .1%
US 109,700 bGujarat Narmada Valley Fertilizers Co., Ltd., GDR .............................. 713,050
------------
Indonesia .4%
ID 167,500 PT Barito Pacific Timber, fgn. .................................................. 109,748
ID 4,193,750 PT Indah Kiat Pulp & Paper Corp., fgn. .......................................... 4,099,154
ID 503,250 aPT Indah Kiat Pulp & Paper Corp., warrants...................................... 254,057
------------
4,462,959
------------
Italy 2.0%
IT 148,000 Banco di Sardegna, SpA, di Risp.................................................. 938,485
IT 696,200 Cartiere Burgo, SpA ............................................................. 3,806,545
Italy (cont.)
IT 904,000 Sasib, SpA, di Risp.............................................................. $ 1,798,852
IT 1,833,800 Sirti, SpA ...................................................................... 11,883,335
IT 468,000 Unione Cementi Marchino Emiliane (Unicem), di Risp............................... 1,524,609
------------
19,951,826
------------
Luxembourg .1%
LU 10,650 aArbed, SA....................................................................... 1,219,758
------------
Mexico 1.2%
MX 396,400 aConsorcio G Grupo Dina, SA de CV................................................ 253,466
US 42,800 aConsorcio G Grupo Dina, SA de CV, ADR........................................... 107,000
US 275,600 Telmex-Telefonos de Mexico, SA, Class L, ADR..................................... 9,232,600
MX 1,274,640 Vitro, SA ....................................................................... 2,957,635
------------
12,550,701
------------
Netherlands 8.5%
NL 93,700 ABN AMRO, NV..................................................................... 5,032,495
NL 32,300 Akzo Nobel, NV................................................................... 3,872,970
NL 126,700 DSM, NV.......................................................................... 12,591,996
NL 768,885 Ing Groep, NV.................................................................... 22,947,081
NL 240,308 Internatio-Mueller, NV........................................................... 5,297,907
NL 147,900 Koninklijke Bijenkorf Beheer, NV (KBB)........................................... 12,504,943
NL 63,000 NV Holdingsmij de Telegraaf ..................................................... 10,583,113
NL 375,807 Philips Electronics, NV ......................................................... 12,229,427
------------
85,059,932
------------
New Zealand 1.2%
NZ 1,267,106 Fisher & Paykel, Ltd. ........................................................... 4,079,874
NZ 6,020,000 Fletcher Challenge, Ltd., Forestry Division...................................... 7,496,577
US 47,765 aTranz Rail Holdings, Ltd., ADR.................................................. 662,739
------------
12,239,190
------------
Norway 2.7%
NO 13,200 Elkem, AS........................................................................ 182,032
NO 143,000 aFokus Bank, AS.................................................................. 779,994
NO 176,200 aFokus Bank, AS.................................................................. 961,084
NO 705,960 Hafslund ASA, Class B............................................................ 4,514,193
NO 134,000 Helikopter Services Group, ASA................................................... 1,548,524
NO 705,960 aNycomed ASA, Class B............................................................ 9,789,817
NO 199,000 bUnion Bank of Norway, Primary Capital Certificate............................... 4,875,309
NO 295,000 Unitor, AS....................................................................... 4,772,691
------------
27,423,644
------------
Peru .5%
PE 2,445,602 Telefonica de Peru, Class B...................................................... 4,965,283
------------
Portugal .6%
PT 321,978 BPI Socieda de Gestora de Participacoes Socias, SA............................... 4,082,570
US 239,400 bPortucel Industrial Empresa Product de Celulose, ADR............................ 1,533,812
------------
5,616,382
------------
South Korea 1.0%
KR 44,500 Byucksan Development Co., Ltd. .................................................. 565,027
KR 109,900 Daegu Bank Co., Ltd. ............................................................ 1,622,759
KR 30,600 Daehan Synthetic Fiber Co., Ltd. ................................................ 2,942,308
KR 19,110 Keumkang Co., Ltd. .............................................................. 1,264,200
South Korea (cont.)
KR 155,990 Pacific Chemical Co., Ltd. ...................................................... $ 2,942,119
KR 7,870 Pohang Iron & Steel Co., Ltd. ................................................... 641,960
------------
9,978,373
------------
Spain 6.4%
ES 172,300 Banco Bilbao Vizcaya ............................................................ 6,985,954
ES 15,600 Banco Popular Espanol ........................................................... 2,783,516
ES 734,000 Compania Sevillana de Electricidad .............................................. 6,766,298
ES 318,000 Dragados y Construcciones, SA.................................................... 4,210,851
ES 174,450 Huarte, SA ...................................................................... 387,046
ES 1,863,800 Iberdrola, SA.................................................................... 19,146,885
ES 1,238,100 Telefonica de Espana, SA ........................................................ 22,826,577
ES 52,200 Unipapel, SA .................................................................... 958,322
------------
64,065,449
------------
Sweden 10.8%
SE 80,600 Asea, AB, Class A ............................................................... 8,557,892
SE 43,200 Autoliv.......................................................................... 1,317,988
SE 515,500 aCelsius, AB, Class B............................................................ 6,773,675
SE 382,000 Electrolux, AB, Class B ......................................................... 19,241,353
SE 522,100 aEnator, AB, Class B............................................................. 12,025,412
SE 158,500 Esselte, AB, Class B ............................................................ 3,243,732
SE 1,490 aFastighets, AB Tornet, Class A.................................................. 12,152
SE 31,180 Fastighets Naeckebro, AB, Class A................................................ 386,159
SE 210,000 Marieberg Tidnings, AB, Class A ................................................. 5,265,066
SE 96,400 Sparbanken Sverige, AB, Class A.................................................. 1,252,137
US 14,900 bSparbanken Sverige, AB, Class A................................................. 193,536
SE 77,000 Stadshypotek, AB, Class A........................................................ 1,721,190
US 176,000 bStadsyhpotek, AS, Class A....................................................... 3,934,149
SE 1,288,000 Stena Line, AB, Class B, free.................................................... 6,127,775
SE 804,250 Stora Kopparbergs Bergslags, AB, Class B......................................... 10,628,587
SE 311,800 Svenska Handelsbanken, Class A................................................... 6,522,323
SE 831,000 aSwedish Match, AB .............................................................. 2,585,501
SE 831,000 Volvo, AB, Class B............................................................... 18,951,971
------------
108,740,598
------------
Switzerland 5.0%
CH 3,690 Baloise-Holding ................................................................. 8,027,834
CH 12,800 Bucher Holding, AG............................................................... 9,982,004
CH 11,000 Ciba-Geigy, AG................................................................... 13,417,317
CH 3,570 Kuoni Reisen Holding, AG, Class B................................................ 8,195,081
CH 15,400 aSMH, AG, br. ................................................................... 10,716,257
------------
50,338,493
------------
Thailand .1%
TH 17,400 Chareon Pokphand Feedmill Public Co., Ltd., fgn. ................................ 92,524
------------
Turkey .4%
TR 13,125,825 bTofas Turk Otomobil Fabrikasi, AS, GDR.......................................... 4,462,781
------------
United Kingdom 8.6%
GB 6,312,400 Albert Fisher Group, Plc. ....................................................... 4,607,448
GB 2,536,000 Anglian Group, Plc. ............................................................. 7,620,760
GB 1,635,473 Argyll Group, Plc. .............................................................. 8,813,348
GB 7,123,000 aCordiant, Plc. ................................................................. 12,057,507
United Kingdom (cont.)
GB 2,493,900 Hillsdown Holdings, Plc. ........................................................ $ 6,739,014
GB 1,330,900 Kwik Save Group, Plc. ........................................................... 9,362,929
GB 902,000 Lex Service, Plc. ............................................................... 5,252,982
GB 1,890,000 London Pacific Group, Ltd. ...................................................... 7,558,004
GB 410,350 aMcBride, Plc. .................................................................. 834,822
GB 2,614,971 Meggitt, Plc. ................................................................... 3,898,578
GB 632,341 National Westminster Bank, Plc. ................................................. 6,049,231
GB 824,500 aRailtrack Group, Plc. .......................................................... 2,804,160
GB 6,171,300 aRaine, Plc. .................................................................... 1,293,834
GB 738,900 Thames Water Group, Plc. ........................................................ 6,506,341
GB 1,306,000 Wace Group, Plc. ................................................................ 3,488,508
------------
86,887,466
------------
Total Common Stocks & Warrants (Cost $716,487,095)......................... 800,496,101
------------
Preferred Stocks .1%
NL 2,547 ABN AMRO, NV, cvt., pfd. ........................................................ 125,446
NL 6,910 Ballast Nedam, NV, cvt. pfd. .................................................... 331,420
------------
Total Preferred Stocks (Cost $401,801)..................................... 456,866
------------
Face
Amount
Bonds 5.3%
Finland .3%
US $ 3,050,000 Amer Group, Ltd., cvt., 6.25%, 06/15/03 ......................................... 2,729,750
------------
Hong Kong .2%
US 1,531,000 Jardine Strategic Holdings, Ltd., cvt., 7.50%, 05/07/49 ......................... 1,668,790
------------
United States 4.8%
US 48,000,000 U.S. Treasury Notes, 7.50%, 12/31/96 ............................................ 48,465,120
------------
Total Bonds (Cost $52,563,961)............................................. 52,863,660
------------
Total Long Term Investments (Cost $769,452,857)............................ 853,816,627
------------
gReceivables from Repurchase Agreements 14.6%
US 32,564,365 BA Securities, Inc., 5.40%, 07/01/96, (Maturity Value $31,934,364)
Collateral: U.S. Treasury Bills, 09/26/96 ..................................... 31,920,000
US 25,500,322 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $25,011,146)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 25,000,000
US 47,020,203 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $45,897,453)
Collateral: U.S. Treasury Notes, 6.125%, 12/31/96............................... 45,877,000
US 44,501,094 Smith Barney, Inc., 5.27%, 07/01/96, (Maturity Value $44,126,370)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99 ............................... 44,107,000
------------
Total Receivables from Repurchase Agreements (Cost $146,904,000)........... 146,904,000
------------
Total Investments (Cost $916,356,857) 99.6%........................... 1,000,720,627
Other Assets and Liablities, Net .4%.................................. 3,566,652
------------
Net Assets 100.0% .................................................... $1,004,287,279
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $916,356,857 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 155,547,017
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................... (71,183,247)
------------
Net unrealized appreciation ................................................... $ 84,363,770
============
</TABLE>
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
BE - Belgium
CA - Canada
CH - Switzerland
CN - China
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
HK - Hong Kong
ID - Indonesia
IT - Italy
KR - South Korea
LU - Luxembourg
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
PE - Peru
PT - Portugal
SE - Sweden
TH - Thailand
TR - Turkey
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares,
Warrants Value
Country* & Rights Templeton Pacific Growth Fund (Note 1)
Common Stocks, Warrants & Rights 96.8%
Australia 15.7%
<S> <C> <C> <C>
AU 1,000,000 Australia & New Zealand Banking Group, Ltd. ....................................... $ 4,731,403
AU 1,706,264 Australian Gas & Light Co. ........................................................ 7,094,067
AU 680,000 Brambles Industries, Ltd. ......................................................... 9,448,972
AU 1,981,000 Capral Aluminium, Ltd. ............................................................ 5,729,618
AU 1,080,000 Coles Myer, Ltd., Class A.......................................................... 3,921,562
AU 875,000 Email, Ltd. ....................................................................... 2,269,423
AU 2,399,145 Gio Austrailia Holdings, Ltd. ..................................................... 5,901,933
AU 5,997,391 Goodman Fielder, Ltd. ............................................................. 6,080,587
AU 919,000 Mayne Nickless, Ltd. .............................................................. 5,366,582
AU 3,547,000 National Foods, Ltd. .............................................................. 4,014,367
AU 2,061,877 Pacific Dunlop, Ltd. .............................................................. 4,634,706
US 118,100 bQantas Airways, Ltd., ADR......................................................... 2,015,081
------------
61,208,301
------------
China 1.8%
US 181,500 aGuangshen Railway Co., Ltd., ADR.................................................. 3,471,188
HK 3,216,000 Maanshan Iron & Steel Co., Ltd., Class H .......................................... 565,031
US 225,000 Shandong Huaneng Power, ADR........................................................ 1,856,250
HK 17,658,000 Shanghai Hai Xing Shipping Co., Class H............................................ 1,163,399
------------
7,055,868
------------
Hong Kong 17.0%
HK 3,000,000 Cathay Pacific Airways, Ltd. ...................................................... 5,503,343
HK 800,000 Cheung Kong Holdings, Ltd. ........................................................ 5,761,716
HK 4,197,727 Dairy Farm International Holdings, Ltd. ........................................... 3,547,079
HK 5,415,000 Grand Hotel Holdings, Ltd. ........................................................ 2,133,611
HK 169,800 aHang Lung Development Co., Ltd., warrants......................................... 40,143
HK 4,909,454 Hon Kwok Land Investment Co., Ltd. ................................................ 1,712,434
HK 1,900,000 Hong Kong Telecommunications Co., Ltd. ............................................ 3,411,814
HK 250,000 HSBC Holdings, Plc. ............................................................... 3,778,704
HK 496,000 Hualing Holdings, Ltd. ............................................................ 51,261
HK 632,031 Jardine Matheson Holdings, Ltd. ................................................... 4,645,428
HK 1,000,000 Jardine Strategic Holdings, Ltd. .................................................. 3,200,000
HK 2,846,000 Lai Sun Development Co., Ltd. ..................................................... 580,910
HK 284,600 aLai Sun Development Co., Ltd., warrants........................................... 18,751
HK 160,500 Melco International Development, Ltd. ............................................. 44,579
HK 3,860,000 National Mutual Asia, Ltd. ........................................................ 3,390,886
HK 1,574,667 New World Development Co., Ltd. ................................................... 7,302,980
HK 1,050,000 Peregrine Investments Holdings, Ltd. .............................................. 1,512,450
HK 105,000 aPeregrine Investments Holdings, Ltd., warrants.................................... 13,022
HK 3,210,000 Shun Tak Holdings ................................................................. 1,969,770
HK 2,201,100 Sing Tao Holdings, Ltd. .......................................................... 1,300,912
HK 4,888,000 South China Morning Post (Holdings), Ltd. ......................................... 3,346,756
HK 645,000 Swire Pacific, Ltd., Class A ...................................................... 5,520,298
HK 3,100,000 Wheelock & Co., Ltd. .............................................................. 6,127,313
HK 5,522,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 1,569,409
------------
66,483,569
------------
India .3%
US 156,100 Great Eastern Shipping Co., Ltd., GDR.............................................. 1,326,850
------------
Indonesia 4.5%
US 300,000 aAsia Pacific Resources International, Class A..................................... 2,250,000
ID 1,567,000 PT Bank Bali ...................................................................... 3,450,430
Indonesia(cont.)
ID 950,000 PT Barito Pacific Timber, fgn. .................................................... $ 622,449
ID 1,015,940 PT Indorama Synthetics, fgn. ...................................................... 2,575,315
US 155,500 PT Indosat, ADR.................................................................... 5,209,250
ID 129,000 PT Inti Indorayon Utama ........................................................... 124,705
ID 637,625 PT Pabrik Kertas Tjiwi Kimia ...................................................... 650,638
ID 3,423,000 PT Panasia Indosyntec ............................................................. 919,173
ID 2,060,875 aPT Panin Bank .................................................................... 1,903,708
------------
17,705,668
------------
Japan 18.8%
JP 1,011,000 Daicel Chemical Industries, Ltd. .................................................. 6,235,893
JP 409,000 Daito Trust Construction Co., Ltd. ................................................ 6,129,300
JP 1,200 East Japan Railway Co. ............................................................ 6,305,113
JP 582,800 Hitachi, Ltd. ..................................................................... 5,432,046
JP 254,000 Hokuetsu Paper Mills, Ltd. ........................................................ 2,146,937
JP 308,000 Matsushita Electric Industrial Co., Ltd. .......................................... 5,741,490
JP 824,000 Mitsubishi Heavy Industries, Ltd. ................................................. 7,175,693
JP 250,000 Mitsubishi Oil Co., Ltd. .......................................................... 2,135,971
JP 821 Nippon Telegraph & Telephone Corp. ................................................ 6,091,762
JP 700,000 Nisshinbo Industries, Inc. ........................................................ 6,908,210
JP 220,000 Nittetsu Mining Co., Ltd. ......................................................... 2,251,565
JP 550,000 Rengo Co., Ltd. ................................................................... 3,869,877
JP 50,000 Sony Corp. ........................................................................ 3,294,193
JP 70,000 Tenma Corp. ....................................................................... 1,458,400
JP 371,000 Toda Corp. ........................................................................ 3,627,450
JP 330,000 Wacoal Corp. ...................................................................... 4,493,078
------------
73,296,978
------------
Malaysia 5.0%
MY 655,000 Commerce Asset Holdings ........................................................... 3,991,181
MY 16,667 aCommerce Asset Holdings, warrants................................................. 60,133
MY 3,342,667 Malaysian International Shipping Corp., Bhd., fgn. ................................ 10,385,115
MY 100,000 Public Finance .................................................................... 180,397
MY 32,000 aPublic Finance, rights............................................................ 17,960
MY 1,798,800 Sime Darby Berhad ................................................................. 4,975,634
------------
19,610,420
------------
New Zealand 2.1%
NZ 894,353 Brierley Investments, Ltd. ........................................................ 849,134
NZ 2,411,800 Carter Holt Harvey, Ltd. .......................................................... 5,525,524
NZ 192,500 aFletcher Challenge Building, Ltd. ................................................ 377,454
NZ 192,500 aFletcher Challenge Energy, Ltd. .................................................. 426,456
NZ 109,252 Fletcher Challenge, Ltd., Forestry Division........................................ 136,049
NZ 385,000 aFletcher Challenge Paper, Ltd. ................................................... 746,961
------------
8,061,578
------------
Pakistan 3.7%
PK 2,818,000 Fauji Fertilizer Co., Ltd. ........................................................ 7,245,251
PK 38,900 aPakistan Telecom Corp. ........................................................... 4,590,200
US 1,300,000 aPakistan Telecom Corp., GDR....................................................... 1,485,502
US 11,100 a,bPakistan Telecom Corp., GDR..................................................... 1,309,800
------------
14,630,753
------------
Philippines 7.0%
PH 20,625,000 aFilinvest Land, Inc. ............................................................. $ 8,462,548
PH 116,000 Philippine Long Distance Telephone Co. ............................................ 6,906,870
US 4,400 Philippine Long Distance Telephone Co., ADR........................................ 255,750
PH 700,000 aPhilippine National Bank ......................................................... 11,688,931
------------
27,314,099
------------
Singapore 7.6%
SG 888,600 aCity Developments, Ltd. .......................................................... 6,927,427
SG 518,000 Development Bank of Singapore, Ltd., fgn. ......................................... 6,461,233
US 68,000 GP Batteries International, Ltd. .................................................. 199,920
SG 393,800 Overseas Union Bank, Ltd. ......................................................... 2,707,201
SG 1,217,000 Parkway Holdings, Ltd. ............................................................ 3,622,537
SG 882,000 Singapore Airlines, Ltd. .......................................................... 9,313,820
SG 78,500 Singapore Bus Service, Ltd. ....................................................... 556,343
------------
29,788,481
------------
South Korea .5%
KR 99,030 Pacific Chemical Co., Ltd. ........................................................ 1,867,800
------------
Thailand 8.7%
TH 622,000 Bangkok Bank Public Co., Ltd. ..................................................... 8,427,919
TH 829,400 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 4,410,312
TH 2,783,133 Industrial Finance Corp. of Thailand .............................................. 12,497,131
TH 186,600 aMDX Public Co., Ltd. ............................................................. 304,103
TH 51,750 Oriental Hotel, Ltd. .............................................................. 254,796
TH 36,570 Thai Farmers Bank, Ltd. ........................................................... 270,804
TH 733,440 Thai Farmers Bank, Ltd., fgn. ..................................................... 8,031,208
------------
34,196,273
------------
United States 4.1%
US 69,000 American International Group, Inc. ................................................ 6,805,125
US 150,000 APL, Ltd. ......................................................................... 3,918,750
US 85,000 Motorola, Inc. ................................................................... 5,344,375
------------
16,068,250
------------
Total Common Stocks, Warrants & Rights (Cost $332,166,422)................... 378,614,888
------------
Preferred Stocks
US 31,000 Dairy Farm International Holdings, Ltd., 6.50%, cvt. pfd. ......................... 22,706
US 22,000 Jardine Strategic Holdings, Ltd., 7.50%, cvt. pfd. ................................ 23,980
------------
Total Preferred Stocks (Cost $53,440)........................................ 46,686
------------
Total Common Stocks, Warrants & Rights and Preferred Stocks
(Cost $332,219,862)............................................................... 378,661,574
------------
Face
Amount
Convertible Bonds .3%
US $1,307,000 MDX Public Co., Ltd., cvt., 4.75%, 09/17/03 ....................................... 614,290
US 360,000 PT Inti Indorayon Utama, cvt., 5.50%, 10/01/02 .................................... 415,800
------------
Total Convertible Bonds (Cost $1,941,281).................................... 1,030,090
------------
Total Long Term Investments (Cost $334,161,143).............................. 379,691,664
------------
gReceivables from Repurchase Agreements 2.5%......................................
US $6,030,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $6,002,675)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ................................. $ 6,000,000
US 3,550,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $3,712,654)
Collateral: U.S. Treasury Notes, 8.00%, 05/15/01 ................................. 3,711,000
------------
Total Receivables from Repurchase Agreements (Cost $9,711,000)............... 9,711,000
------------
Total Investments (Cost $343,872,143) 99.6%............................. 389,402,664
Other Assets and Liabilities, Net .4%................................... 1,442,464
------------
Net Assets 100.0% ...................................................... $390,845,128
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $347,427,376 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 67,168,215
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (25,192,927)
------------
Net unrealized appreciation........................................................ $ 41,975,288
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
HK - Hong Kong
ID - Indonesia
JP - Japan
KR - South Korea
MY - Malaysia
NZ - New Zealand
PH - Philippines
PK - Pakistan
SG - Singapore
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Rising Dividends Fund (Note 1)
Common Stocks 89.0%
Financial Services 11.6%
<S> <C> <C>
220,000 Banc One Corp. .............................................................................. $ 7,480,000
197,400 CoreStates Financial Corp. .................................................................. 7,599,900
279,650 Mercantile Bankshares Corp. ................................................................. 7,131,075
263,000 National Commerce Bancorp. .................................................................. 8,284,500
205,200 State Street Boston Corp. ................................................................... 10,465,200
516,720 TrustCo Bank Corp., New York................................................................. 9,946,860
232,000 Wilmington Trust Corp. ...................................................................... 7,525,500
------------
58,433,035
------------
Consumer Products 14.3%
222,000 Alberto-Culver Co., Class A.................................................................. 8,880,000
65,771 Block Drug Co., Inc., Class A................................................................ 2,762,382
715,000 Dimon, Inc. ................................................................................. 13,227,500
169,000 Philip Morris Cos., Inc. .................................................................... 17,576,000
102,000 Roto-Rooter, Inc. ........................................................................... 3,519,000
265,000 Stanhome, Inc. .............................................................................. 7,022,500
410,700 Stride Rite Corp. ........................................................................... 3,388,275
325,000 Universal Corp. ............................................................................. 8,612,500
205,500 UST, Inc. ................................................................................... 7,038,375
------------
72,026,532
------------
Health Care Services 7.7%
380,000 Bard (C.R.), Inc. ........................................................................... 12,920,000
52,500 Bristol-Myers Squibb Co. ................................................................... 4,725,000
182,000 Merck & Co., Inc. ........................................................................... 11,761,750
135,000 Pfizer, Inc. ................................................................................ 9,635,625
------------
39,042,375
------------
Energy 1.8%
59,500 Royal Dutch Petroleum Co., New York Shares, ADR.............................................. 9,148,125
------------
Financial Services 2.9%
440,000 Federal National Mortgage Association ....................................................... 14,740,000
------------
Industrial 16.6%
116,200 Avery-Dennison Corp. ........................................................................ 6,376,475
41,850 Diebold, Inc. ............................................................................... 2,019,263
160,600 General Electric Co. ........................................................................ 13,891,900
134,000 Kaydon Corp. ................................................................................ 5,762,000
154,800 Kimball International, Inc., Class B......................................................... 4,276,350
200,400 Loctite Corp. ............................................................................... 9,318,600
380,000 Monsanto Co. ................................................................................ 12,350,000
220,000 Myers Industries, Inc. ...................................................................... 4,097,500
385,000 Newell Co. .................................................................................. 11,790,625
81,800 Rockwell International Corp. ................................................................ 4,683,050
300,000 Superior Industries International, Inc. ..................................................... 7,912,500
123,000 Superior Surgical Manufacturing Co., Inc. ................................................... 1,460,625
------------
83,938,888
------------
Insurance - Life & Health 1.1%
112,500 Jefferson-Pilot Corp. ....................................................................... 5,807,813
------------
Insurance - Property Casualty 15.9%
301,900 Allied Group, Inc. .......................................................................... 13,132,650
53,700 American International Group, Inc. .......................................................... 5,296,163
206,200 Chubb Corp. ................................................................................. 10,284,225
Insurance - Property Casualty (cont.)
17,640 Cincinnati Financial Corp. .................................................................. $ 1,012,095
302,000 Mercury General Corp. ....................................................................... 13,212,500
175,000 MMI Cos., Inc. .............................................................................. 5,403,125
324,325 RLI Corp. ................................................................................... 7,905,422
202,000 SAFECO Corp. ................................................................................ 7,145,750
208,000 Selective Insurance Group, Inc. ............................................................. 6,760,000
188,400 St. Paul Companies, Inc. .................................................................... 10,079,400
------------
80,231,330
------------
Retail 10.9%
77,000 Albertson's, Inc. ........................................................................... 3,185,875
832,000 Family Dollar Stores, Inc. .................................................................. 14,456,000
372,000 Rite Aid Corp. .............................................................................. 11,067,000
171,328 The Limited, Inc. ........................................................................... 3,683,551
272,000 Walgreen Co. ................................................................................ 9,112,000
527,000 Wal-Mart Stores, Inc. ....................................................................... 13,372,624
------------
54,877,050
------------
Miscellaneous .4%
128,000 Bob Evans Farms, Inc. ....................................................................... 2,176,000
------------
Printing & Publishing 2.0%
390,000 Ennis Business Forms......................................................................... 4,436,250
73,100 Reader's Digest Association, Inc., Class A................................................... 3,106,750
101,600 Standard Register Co. ....................................................................... 2,501,900
------------
10,044,900
------------
Transportation 3.8%
500,000 Arnold Industries, Inc. ..................................................................... 7,125,000
620,000 Harper Group, Inc. .......................................................................... 12,090,000
------------
19,215,000
------------
Total Long Term Investments (Cost $343,283,118)........................................ 449,681,048
------------
Face
Amount
g,hReceivables from Repurchase Agreements 10.8%
$ 54,405,812 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $54,682,008) (Cost $54,657,235)
Chase Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,530,300)
Collateral: U. S. Treasury Bills, 05/29/97
U. S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
g,hReceivables from Repurchase Agreements (cont.)
Joint Repurchase Agreement, (cont.)
SBC Capital Markets, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ...................... $ 54,657,235
------------
Total Investments (Cost $397,940,353) 99.8%...................................... 504,338,283
Other Assets and Liabilities, Net .2%............................................ 1,021,412
------------
Net Assets 100.0% ............................................................... $505,359,695
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $398,287,124
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $112,563,031
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (6,511,872)
------------
Net unrealized appreciation ............................................................... $106,051,159
============
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Value
Country* Shares Utility Equity Fund (Note 1)
Common Stocks 99.1%
<S> <C> <C> <C>
US 1,445,000 aAES Corp. ........................................................................ $ 40,821,250
US 846,100 aAirTouch Communications, Inc. .................................................... 23,902,325
US 1,000,000 Allegheny Power System, Inc. ...................................................... 30,875,000
US 1,000,230 American Electric Power Co., Inc. ................................................. 42,634,804
US 100,000 Ameritech Corp. ................................................................... 5,937,500
US 120,000 AT&T Corp. ........................................................................ 7,440,000
GB 2,000,000 British Telecom, Plc. ............................................................. 10,746,677
US 158,600 bBSES, Ltd., GDR................................................................... 3,053,050
US 1,496,700 Central & South West Corp. ........................................................ 43,404,300
US 1,223,900 CINergy Corp. ..................................................................... 39,164,800
US 382,710 CIPSCO, Inc. ...................................................................... 14,782,174
US 137,600 Compania Boliviana de Energia Electricia .......................................... 5,400,800
HK 4,000,000 Consolidated Electric Power Asia, Ltd. ............................................ 6,614,346
US 880,000 Dominion Resources, Inc. .......................................................... 35,200,000
US 716,000 DPL, Inc. ......................................................................... 17,452,500
US 745,000 Duke Power Co. .................................................................... 38,181,250
US 763,600 Edison International .............................................................. 13,458,450
US 350,000 Endesa Corp. ...................................................................... 7,525,000
US 91,800 Enersis SA, ADR.................................................................... 2,845,800
US 1,032,560 Enova Corp. ....................................................................... 23,877,950
US 1,200,000 Enron Corp. ....................................................................... 49,050,000
US 880,000 Enron Global Power & Pipelines L.L.C. ............................................. 21,340,000
US 1,654,000 Entergy Corp. ..................................................................... 46,932,250
US 370,900 Ericsson (L.M.) Telecommunications, ADR............................................ 7,974,350
US 195,000 bEspoon Sahko Oy, ADS ............................................................. 3,578,718
US 853,000 Florida Progress Corp. ............................................................ 29,641,750
US 1,201,300 FPL Group, Inc. ................................................................... 55,259,800
US 1,221,100 General Public Utilities Corp. .................................................... 43,043,775
MX 55,600 aGrupo Iusacell, SA, Class D....................................................... 51,165
US 144,440 aGrupo Iusacell, SA, Class L, ADR.................................................. 1,552,730
US 790,840 GTE Corp. ......................................................................... 35,390,090
GR 400,000 Hellenic Telecommunications Organization, SA....................................... 6,634,795
HK 2,500,000 Hong Kong Electric Holdings, Ltd. ................................................. 7,622,000
US 138,000 aHuaneng Power International, Inc., ADR ........................................... 2,466,750
US 388,400 aIntelCom Group, Inc. ............................................................. 9,710,000
KR 50,500 Korea Electric Power Corp. ........................................................ 2,056,854
KR 215 Korea Mobile Telecommunications Corp. ............................................. 264,615
NO 468,600 aNetCom, ASA....................................................................... 4,945,894
US 582,450 New England Electric System ....................................................... 21,186,619
JP 2,870 Nippon Telegraph & Telephone Corp. ................................................ 21,295,198
US 749,900 NIPSCO Industries, Inc. ........................................................... 30,183,475
US 323,000 aNynex Cablecomms Group, ADR ...................................................... 5,248,750
US 229,600 Pacific Enterprises ............................................................... 6,801,900
US 1,123,150 Pacific Gas & Electric Co. ........................................................ 26,113,238
US 1,702,400 PacifiCorp. ....................................................................... 37,878,400
US 349,100 Panenergy Corp. ................................................................... 11,476,663
US 166,600 PECO Energy Co. ................................................................... 4,331,600
US 843,000 Pinnacle West Capital Corp. ....................................................... 25,606,125
US 330,000 Portugal Telecom, SA, ADR ......................................................... 8,662,500
US 100,000 Public Service Co. of Colorado .................................................... 3,675,000
US 104,200 Public Service Enterprise Group, Inc. ............................................. 2,852,475
US 1,745,844 Scana Corp. ....................................................................... 49,101,863
GB 590,000 Scottish Power, Plc. .............................................................. $ 2,785,439
ES 618,600 Sevillana de Electricidad ......................................................... 5,702,496
GB 198,300 Southern Electric, Plc. ........................................................... 2,192,657
US 1,966,790 Southern Indiana Gas & Electric Co. ............................................... 48,432,204
US 442,700 Southwestern Public Service Co. ................................................... 14,443,088
IT 1,675,000 STET - Societa Finanziaria Telefonica ............................................. 5,680,839
US 2,074,850 TECO Energy, Inc. ................................................................. 52,389,963
US 315,000 Tele Danmark, AS, ADS.............................................................. 7,993,125
US 233,500 Telecom Brasileiras, ADR........................................................... 16,257,438
US 115,000 Telecom de Argentina SA, ADR....................................................... 5,390,625
IT 11,000,000 aTelecom Italia, SpA............................................................... 18,901,257
US 170,000 Telefonos de Mexico, SA, ADR ...................................................... 5,695,000
US 69,000 aTelewest Communications, Plc., ADR................................................ 1,720,688
US 1,239,850 Texas Utilities Co. ............................................................... 53,003,585
US 370,000 Transportadora de Gas del Sur, SA, ADR............................................. 4,532,500
US 1,084,800 US West, Inc. ..................................................................... 34,578,000
US 218,500 Williams Cos., Inc. ............................................................... 10,815,750
US 1,029,200 Wisconsin Energy Corp. ............................................................ 29,718,150
------------
Total Long Term Investments (Cost $1,213,133,094) ........................... 1,315,480,122
------------
Face
Amount
g,hReceivables from Repurchase Agreements .4%
US $4,623,975 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $4,647,184)
(Cost $4,645,079)
Chase Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.375% , 11/30/97
Daiwa Securities America, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $639,967)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............. 4,645,079
------------
Total Investments (Cost $1,217,778,173) 99.5%........................... 1,320,125,201
Other Assets and Liabilities, Net .5%................................... 6,702,554
------------
Net Assets 100.0%....................................................... $1,326,827,755
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $1,217,778,173 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 151,376,938
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (49,029,910)
------------
Net unrealized appreciation ..................................................... $ 102,347,028
============
</TABLE>
COUNTRY LEGEND:
ES - Spain
GB - United Kingdom
GR - Greece
HK - Hong Kong
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NO - Norway
US - United States
*Securities traded in foreign currency and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee note 1(h) regarding joint repurchase agreements.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/
Warrants & Value
Country* Rights Templeton Developing Markets Equity Fund (Note 1)
Common Stocks, Warrants & Rights 82.0%
Argentina 12.8%
<S> <C> <C> <C>
AR 180,876 Aluar Aluminio Argentino, SA, Class B............................................. $ 452,357
AR 410,470 Astra Cia Argentina de Petroleo, SA............................................... 973,174
AR 375,000 Atanor Cia Nacional Para la Industria Quimica, SA, Class D........................ 994,118
AR 276,952 aBanco Bansud, SA, Class B........................................................ 3,227,685
AR 512,120 Banco de Galicia y Buenos Aires, SA, Class B...................................... 3,278,781
AR 129,970 Banco Frances del Rio de la Plata, SA............................................. 1,232,572
US 50,400 Buenos Aires Embotelladora, SA, ADR............................................... 667,800
AR 15,555 Capex, SA, Class A................................................................ 126,042
AR 134,420 Central Costanera, SA, Class B.................................................... 494,849
AR 323,332 aCiadea, SA....................................................................... 2,280,337
AR 32,480 Juan Minetti, SA.................................................................. 149,463
AR 313,152 Molinos Rio de Plata, SA, Class B................................................. 3,320,640
AR 23,430 Nobleza Piccardo Sdad Industrial Comercial y Financial ........................... 89,067
AR 674,968 Perez Companc, SA, Class B........................................................ 4,429,429
AR 76,000 aQuilmes Industrial, SA .......................................................... 779,000
AR 4,000 Quilmes Industrial, SA, reg. ..................................................... 41,000
AR 460,144 aSevel Argentina, SA, Class C..................................................... 1,334,912
AR 22,230 aSiderar, Class A................................................................. 57,375
AR 1,290,000 aSociedad Comercial del Plata Cadelplata Come .................................... 3,987,575
AR 367,224 Transportadora de Gas del Sur, SA, Class B........................................ 903,705
US 150,410 YPF Sociedad Anonima, ADR......................................................... 3,384,225
AR 2,840 aZanella Hermanos, SA............................................................. 1,085
------------
32,205,191
------------
Brazil 2.3%
BR 77,613,291 Banco Bradesco, SA................................................................ 555,733
BR 70,662,976 aBanco do Brasil, SA.............................................................. 577,042
BR 9,982,000 Eletroas-Centrais Eletricas Brasileiras, SA....................................... 2,684,001
BR 2,124,000 aMannesmann, SA................................................................... 281,303
BR 29,560,000 Telebras-Telecomunicacoes Brasileiras, SA......................................... 1,736,832
------------
5,834,911
------------
China 3.2%
CN 1,281,800 China Southern Glass Co., Ltd., Class B........................................... 753,440
CN 816,000 aChina Textile Machinery Co., Ltd., Class B....................................... 110,976
CN 1,134,000 Chiwan Wharf Holdings, Ltd., Class B ............................................. 498,091
CN 400,000 Foshan Electrical and Lighting Co., Ltd., Class B................................. 335,885
CN 1,177,000 Guangzhou Shipyard International Co., Ltd., Class H .............................. 285,859
CN 687,000 Luoyang Glass Co., Ltd., Class H.................................................. 163,302
CN 212,000 Qing Ling Motors Co., Ltd., Class H............................................... 71,208
CN 96,000 Shandong Huaneng Power ........................................................... 792,000
CN 1,269,000 Shanghai Chlor-Alkali Chemical Co., Ltd., Class B................................. 309,636
CN 400,000 Shanghai Dazhong Taxi Shareholding Co., Ltd., Class B............................. 292,000
CN 252,000 aShanghai Industrial Sewing Machine Corp. ........................................ 34,776
CN 1,732,500 aShanghai Jin Jiang Tower Co., Ltd., Class B...................................... 492,030
CN 410,000 Shanghai Jinqiao Export Processing Zone Development, Class B...................... 159,900
CN 862,000 aShanghai Lujiaxui Finance & Trade Zone Development Stock Co., Ltd., Class B ..... 641,328
CN 2,304,000 Shanghai Pechemical Co., Ltd., Class H............................................ 654,820
CN 489,600 Shanghai Refrigerator Compressor Co., Ltd., Class B .............................. 226,195
CN 150,000 aShanghai Shangling Electric Appliance, Class B................................... 79,200
CN 1,212,000 Shanghai Tyre & Rubber Co., Ltd., Class B ........................................ 303,000
CN 1,890,361 aShanghai Vacuum Electron Devices Co., Ltd., Class B.............................. 340,265
CN 540,000 aShanghai Yaohua Pilkington Glass, Class B........................................ 324,000
China (cont.)
CN 314,400 Shenzhen Gintian Industry Co., Ltd., Class B...................................... $ 103,571
CN 275,000 Shenzhen Properties & Resources Development (Group), Ltd., Class B................ 112,618
CN 1,710,158 Shenzhen Vanke Co., Ltd., Class B................................................. 733,485
CN 586,000 Zhuhai Sez Lizhu Pharmaceutical Group, Inc., Class B.............................. 198,343
------------
8,015,928
------------
Croatia
US 500 a,bPliva DD, GDR, reg S........................................................... 19,875
------------
Czech Republic 1.8%
CS 600 aCEZ ............................................................................. 23,880
CS 65,330 bCEZ, GDR......................................................................... 2,735,694
CS 23,500 aChemopetrol Group, AS............................................................ 1,118,926
CS 17 aElektrarny Opatovice, AS......................................................... 2,855
CS 1,000 Komercni Banka, AS................................................................ 81,598
CS 6,000 aSPT Telecom, AS.................................................................. 732,745
------------
4,695,698
------------
Greece 3.8%
GR 38,666 Alpha Credit Bank ................................................................ 2,041,398
GR 32,000 Alpha Leasing, SA ................................................................ 649,179
GR 57,000 Delta Dairy, SA .................................................................. 696,654
GR 2,000 Elais Oleaginous Co. ............................................................. 64,851
GR 12,000 Ergo Bank, SA .................................................................... 660,985
GR 32,200 Etba Leasing ..................................................................... 455,124
GR 28,950 Hellas Can - Container Manufacturers ............................................. 619,798
GR 68,750 Hellenic Telecommunications Organizations ........................................ 1,140,355
GR 100,000 aHellenic Telecommunications Organizations OTE ................................... 1,658,699
GR 29,000 Intracom, SA, reg. ............................................................... 513,935
GR 5,170 National Bank of Greece, SA ...................................................... 254,255
GR 16,170 Titan Cement Co., reg. ........................................................... 799,257
------------
9,554,490
------------
Hong Kong 10.8%
HK 582,000 Cheung Kong Holdings, Ltd. ....................................................... 4,191,648
HK 4,496,000 China Overseas Land & Investment, Ltd. ........................................... 1,086,138
HK 81,000 Cross Harbour Tunnel Co., Ltd. ................................................... 160,624
HK 263,939 Dairy Farm International Holdings, Ltd. .......................................... 223,028
HK 94,000 Dickson Concepts (International), Ltd. ........................................... 120,221
HK 1,154,000 aEast Asiatic Co. (Hong Kong), Ltd. (The)......................................... 150,572
HK 2,044,000 aFu Hui Jewellery Co. (H.K.), Ltd. ............................................... 51,227
HK 566,000 aGreat Wall Electronic International, Ltd. ....................................... 40,947
HK 1,101,000 Hang Lung Development Co., Ltd. .................................................. 2,069,509
HK 595,000 Hongkong Electric Holdings, Ltd. ................................................. 1,814,036
HK 430,951 Hopewell Holdings, Ltd. .......................................................... 233,827
HK 211,476 HSBC Holdings, Plc. .............................................................. 3,196,421
HK 7,000 IMC Holdings, Ltd. ............................................................... 3,934
HK 216,000 Jardine International Motor Holdings, Ltd. ....................................... 265,091
HK 34,000 Jardine Matheson Holdings, Ltd. .................................................. 249,900
HK 194,625 Jardine Strategic Holdings, Ltd. ................................................. 622,800
HK 21,625 aJardine Strategic Holdings, Ltd., warrants....................................... 6,704
HK 119,000 JCG Holdings, Ltd. ............................................................... 96,851
HK 1,978,240 K Wah International Holdings, Ltd. ............................................... 365,453
HK 187,320 aK Wah International Holdings, Ltd., warrants..................................... 8,954
Hong Kong (cont.)
HK 6,634,000 Lai Sun Development Co., Ltd. .................................................... $ 1,354,096
HK 216,200 aLai Sun Development Co., Ltd., warrants.......................................... 14,244
HK 234,000 Lai Sun Garment International, Ltd. .............................................. 281,136
HK 1,450,000 aLaws International Holdings, Ltd. ............................................... 164,842
HK 435,000 aLinkful International Holdings, Ltd. ............................................ 19,107
HK 700,000 aLuks Industrial Co., Ltd. ....................................................... 77,770
HK 754,886 New World Development Co., Ltd. .................................................. 3,501,005
HK 516,000 NG Fund Hong, Ltd. ............................................................... 238,310
HK 34,000 Orient Overseas International, Ltd. .............................................. 25,036
HK 1,626,000 aS. Megga International Holdings, Ltd. ........................................... 64,067
HK 240,388 Semi-Tech (Global) Co., Ltd. ..................................................... 371,106
HK 1,280,658 Stelux International Holdings, Ltd. .............................................. 286,218
HK 1,351,000 Sun Hung Kai & Co., Ltd. ......................................................... 488,686
HK 319,000 Sun Hung Kai Properties, Ltd. .................................................... 3,224,720
HK 2,123,000 Tian An China Investments Co., Ltd. .............................................. 287,976
HK 1,364,000 Tungtex (Holdings) Co., Ltd. ..................................................... 121,585
HK 184,000 Wheelock & Co., Ltd. ............................................................. 363,686
HK 1,228,000 Wing Shan International, Ltd. .................................................... 168,159
HK 3,582,000 Wo Kee Hong Holdings, Ltd. ....................................................... 462,746
HK 716,400 aWo Kee Hong Holdings, Ltd., warrants............................................. 21,286
HK 300,000 aYaohan Hongkong Corp., Ltd. ..................................................... 14,727
HK 2,298,000 Yue Yuen Industrial (Holdings), Ltd. ............................................. 653,115
------------
27,161,508
------------
India .3%
IN 20,000 Arvind Mills, Ltd. ............................................................... 79,478
IN 1,950 Grasim Industries, Ltd. Ord. ..................................................... 31,674
IN 25,000 ITC Bhadrachalam Paperboards, Ltd. ............................................... 75,220
US 45,000 a,bSteel Authority of India, Ltd., GDR, reg. S.................................... 663,750
------------
850,122
------------
Indonesia 5.5%
US 9,200 aAsia Pulp & Paper Co., Ltd., ADR................................................. 112,700
ID 790,000 PT Anwar Sierad, fgn. ............................................................ 746,724
ID 68,250 aPT Aqua Golden Mississippi, fgn. ................................................ 65,977
ID 430,000 PT Astra International, fgn. ..................................................... 623,523
ID 506,000 PT Bank Dagang Nasional Indonesia, fgn. .......................................... 423,931
ID 371,000 PT Bank PDFCI, fgn. .............................................................. 346,692
ID 1,755,500 PT Barito Pacific Timber, fgn. ................................................... 1,150,220
ID 150,000 PT BBL Dharmala Finance, fgn. .................................................... 209,452
ID 922,500 PT Charoen Pokphand Indonesia, fgn. .............................................. 1,783,566
ID 1,007,500 PT Dharmala Intiland, fgn. ....................................................... 779,162
ID 394,500 PT Duta Anggada Realty, fgn. ..................................................... 271,192
ID 1,688,000 PT Gadjah Tunggal, fgn. .......................................................... 834,028
ID 435,000 PT Gajah Surya Multi Finance, fgn. ............................................... 191,568
ID 829,600 aPT Ganda Wangsa Utama, fgn. ..................................................... 249,504
ID 12,000 PT Inter-Pacific Bank, fgn. ...................................................... 7,991
ID 352,000 PT Jakarta International Hotel & Development, fgn. ............................... 302,470
ID 528,000 aPT Jakarta International Hotel & Development, rights, fgn. ...................... 119,098
ID 337,500 PT Japfa Comfeed Indonesia, fgn. ................................................. 195,757
ID 441,750 PT Multieeder Adirama, fgn. ...................................................... 163,699
ID 149,000 PT Paik Kertas Tjiwi Kimia, fgn. ................................................. 152,041
ID 778,400 PT Panasia Indosyntec............................................................. 209,023
Indonesia (cont.)
ID 1,005,000 PT Polysindo Eka Perkasa, fgn. ................................................... $ 474,973
ID 468,000 aPT Pudjiadi Prestige, Ltd., fgn. ................................................ 402,148
ID 514,000 aPT Sinar Mas Agro Resources & Technology Corp., fgn. ............................ 375,424
ID 1,205,500 PT Sinar Mas Multi Artha, fgn. ................................................... 1,476,122
ID 221,000 PT Sumalindo Lestari Jaya, fgn. .................................................. 265,865
ID 316,500 PT Summarecon Agung, fgn. ....................................................... 176,778
ID 325,500 PT Tambang Timah (Persero), fgn. ................................................. 601,353
ID 292,000 PT Ultra Jaya Milk, fgn. ......................................................... 166,230
ID 68,200 PT Unggul Indah Corp., fgn. ...................................................... 70,324
ID 543,000 PT United Tractors, fgn. ......................................................... 857,368
------------
13,804,903
------------
Israel 1.2%
IL 6,968 Agis Industries, Ltd. ............................................................ 48,514
IL 449,844 Bank Hapoalim BM ................................................................. 659,665
IL 182,727 Clal Industries, Ltd. ............................................................ 941,254
IL 16,748 Discount Investment Corp. ........................................................ 1,129,958
IL 2,732 The First International Bank of Israel ........................................... 303,001
------------
3,082,392
------------
Malaysia 2.9%
MY 628,000 Aokam Perdana, Bhd. .............................................................. 1,052,331
MY 418,000 Berjaya Singer, Bhd. ............................................................. 432,327
MY 28,000 Berjaya Singer, Bhd., fgn. ....................................................... 28,960
MY 154,000 Boustead Holdings, Bhd., fgn. .................................................... 336,460
MY 50,000 Federal Flour Mills, Bhd. ........................................................ 133,293
MY 108,000 Hong Leong Industries, Bhd. ...................................................... 523,873
MY 140,000 IOI Corp., Bhd. .................................................................. 194,187
MY 25,000 Island & Peninsula, Bhd., fgn. ................................................... 70,655
MY 126,000 Leader Universal Holdings, Bhd. .................................................. 356,103
MY 282,666 Malaysian International Shipping Corp., Bhd., fgn. ............................... 878,197
MY 421,000 MBF Capital, Bhd. ................................................................ 580,573
MY 6,600 Oriental Holdings, Bhd., fgn. .................................................... 43,127
MY 190,000 Perlis Plantations, Bhd., fgn. ................................................... 731,209
MY 677,000 Renong, Bhd. ..................................................................... 1,080,160
MY 16,750 aRenong, Bhd., warrants........................................................... 2,686
MY 732,000 Shangri-La Hotels (Malaysia), Bhd. ............................................... 760,024
MY 123,000 Shangri-La Hotels (Malaysia), Bhd., fgn. ......................................... 127,709
------------
7,331,874
------------
Mexico 11.7%
MX 1,418,000 Cemex, SA, Class B................................................................ 5,599,090
MX 3,241,085 aCifra, SA, Class C .............................................................. 4,623,407
US 19,400 Coca Cola Femsa, SA de CV, ADR.................................................... 555,325
MX 219,938 Cydea, SA de CV................................................................... 547,453
MX 110,034 aDESC, SA, Class B................................................................ 593,328
MX 2,292 aDESC, SA, Class C................................................................ 11,936
MX 250,000 Fomento Economico Mexicano, SA de CV, Class B..................................... 718,523
MX 13,429 Grupo Carso, SA de CV............................................................. 95,251
MX 899,000 aGrupo Financiero Banamex Accival, SA, Class B.................................... 1,867,929
MX 785,138 aGrupo Financiero Banamex Accival, SA, Class L.................................... 1,490,571
MX 5,650,000 aGrupo Financiero Bancomer, SA de CV, Class B..................................... 2,458,141
MX 209,259 aGrupo Financiero Bancomer, SA de CV, Class L..................................... 69,799
Mexico (cont.)
MX 1,196,816 aGrupo Financiero Serfin, SA, Class B............................................. $ 732,133
MX 403,056 Grupo Industrial Maseca, SA de CV, Class B........................................ 420,857
US 2,600 Grupo Industrial Maseca, SA de CV, Class B, ADR................................... 40,950
MX 97,000 Telmex-Telefonos de Mexico, SA, Class L........................................... 164,203
US 228,200 Telmex-Telefonos de Mexico, SA, Class L, ADR...................................... 7,644,700
MX 839,849 Vitro, SA ........................................................................ 1,948,760
------------
29,582,356
------------
Morocco .1%
US 21,750 a,bBanque Marocaine de Commerce Exterieur, GDR.................................... 309,938
------------
Philippines .3%
PH 18,000 aBelle Corp. ..................................................................... 4,328
PH 500,000 aKeppel Philippine Holdings, Inc., Class B........................................ 124,046
PH 1,542,000 aPhilex Mining Corp., Class B .................................................... 197,164
US 8,800 Philippine Long Distance Telephone Co., ADR....................................... 511,500
------------
837,038
------------
Poland 1.3%
PL 60,000 Bank Gdanski, SA.................................................................. 746,302
PL 13,012 aBank Przemyslowo-Handlowy, SA.................................................... 938,527
PL 120,000 Elektrim Towarzystwo Handlowe, SA................................................. 984,765
PL 10,000 aRaciborska Fayka Kotlow, SA...................................................... 59,248
PL 10,000 Warta, SA......................................................................... 206,079
PL 1,242 Wielkopolski Bank Kredytowy, SA................................................... 6,719
PL 9,000 aZaklady Cementowo Wapiennicze Gorazdze Chorula .................................. 235,151
------------
3,176,791
------------
Portugal 4.5%
PT 48,500 Banco Chemical (Portugal) ........................................................ 502,194
PT 313,000 aBanco Comercial Portugues, SA.................................................... 3,698,818
PT 73,194 Banco Comercial Portugues, SA, new................................................ 834,566
PT 162,680 Banco Espirito Santo e Comercial de Lisboa ....................................... 2,612,440
PT 63,454 Banco Totta & Acores, SA.......................................................... 1,241,518
PT 36,248 BPI Socieda de Gestora de Participacoes Socias, SA................................ 459,612
US 99,840 Espirito Santo Financial Holding, SA, ADR......................................... 1,272,960
PT 75,000 Portucel Industrial Empresa Product de Celulose, SA............................... 480,517
PT 7,010 aSociedade Portuguesa de Celulose, SA ............................................ 154,619
------------
11,257,244
------------
Singapore 2.6%
SG 110,000 aAcer Computer International, Ltd. ............................................... 213,400
SG 48,000 Acma, Ltd. ....................................................................... 140,156
SG 136,000 Acma, Ltd., fgn. ................................................................. 397,108
SG 18,000 British American Tobacco, Ltd. ................................................... 70,801
SG 101,000 First Capital Corp., Ltd. ........................................................ 250,532
SG 158,000 First Capital Corp., Ltd., fgn. .................................................. 391,921
SG 72,000 GP Batteries International, Ltd. ................................................. 211,680
SG 18,000 aGP Batteries International, Ltd., warrants....................................... 15,300
SG 1,064,000 Hai Sun Hup Group, Ltd. .......................................................... 806,860
SG 167,000 Hinds Hotels International, Ltd. ................................................. 195,287
SG 191,000 Hinds Hotels International, Ltd., fgn. ........................................... 223,352
SG 100,000 Hour Glass, Ltd. ................................................................. 87,881
SG 199,000 Inchcape, Bhd., fgn. ............................................................. 634,656
Singapore (cont.)
SG 107,500 Isetan (Singapore), Ltd., fgn. ................................................... $ 239,227
SG 97,000 Jurong Shipyard, fgn. ............................................................ 491,531
SG 78,000 Natsteel, Ltd. ................................................................... 154,784
SG 476,000 Natsteel, Ltd., fgn. ............................................................. 944,578
SG 165,000 Osprey Maritime, Ltd. ............................................................ 291,225
SG 85,000 Sembawang Corp., Ltd. ............................................................ 421,687
SG 112,000 WBL Corp., Ltd. .................................................................. 265,117
------------
6,447,083
------------
Slovak Republic
SS 10 aSlovnaft, AS .................................................................... 291
------------
South Africa 3.9%
ZA 10,541 Anglo American Industrial Corp., Ltd. ............................................ 423,294
ZA 26,901 Anglo American Platinum Corp., Ltd. .............................................. 167,627
ZA 13,000 Anglovaal Industries, Ltd. ....................................................... 63,005
ZA 488,000 BTR Dunlop, Ltd. ................................................................. 658,851
ZA 925,600 Del Monte Royal Foods, Ltd. ...................................................... 1,110,805
ZA 389,067 Engen, Ltd. ...................................................................... 2,648,852
ZA 76,200 First National Bank Holdings, Ltd. ............................................... 549,562
ZA 32,100 Malbak, Ltd. ..................................................................... 159,278
ZA 97,000 Palabora Mining Co., Ltd. ........................................................ 1,522,271
ZA 10,000 Potgietersrust Platinums, Ltd. ................................................... 50,196
ZA 311,500 aRainbow Chicken, Ltd. ........................................................... 103,522
ZA 127,270 Remandt Group, Ltd. .............................................................. 1,195,451
ZA 20,000 Sappi, Ltd. ...................................................................... 221,094
ZA 723,515 South African Iron & Steel Industrial Corp., Ltd. ................................ 566,055
ZA 278,685 Sun International (South Africa), Ltd. ........................................... 299,073
------------
9,738,936
------------
South Korea 2.5%
KR 10,000 Asia Cement Co., Ltd. ............................................................ 368,590
KR 33,940 Boram Bank Co., Ltd. ............................................................. 401,657
KR 5,430 aBoram Bank Co., Ltd., rights..................................................... 11,714
KR 1,050 BYC Co., Ltd. .................................................................... 129,438
KR 22,000 aCentral Investment & Finance Corp. .............................................. 390,533
KR 5,677 Dae Duck Electronics Co., Ltd. ................................................... 207,149
KR 46,682 Daegu Bank Co., Ltd. ............................................................. 689,296
KR 2,910 Daehan Synthetic Fiber Co., Ltd. ................................................. 279,808
KR 21,000 Dongkuk Steel Mill Co., Ltd. ..................................................... 447,855
KR 1,000 Hae In Corp., Ltd. ............................................................... 52,268
KR 3,950 Hankook Cosmetics Co., Ltd. ...................................................... 107,125
KR 1,000 Korea Iron & Steel Works Co., Ltd. ............................................... 161,489
KR 48,000 Korea Kumho Petrochemical ........................................................ 418,935
KR 16,000 Kyong Nam Bank ................................................................... 207,101
KR 1,000 Moon Bae Steel Co., Ltd. ......................................................... 32,421
KR 75,000 Ssangyong Oil Refining Co., Ltd. ................................................. 1,738,166
KR 39,790 Tong Yang Investment and Finance Co., Ltd. ....................................... 686,711
KR 1,000 Yuhwa ............................................................................ 63,979
------------
6,394,235
------------
Sri Lanka
LK 36,000 Associated Motorways, Ltd. ....................................................... $ 26,592
LK 8,000 John Keells Holdings, Ltd. ....................................................... 20,899
------------
47,491
------------
Thailand 2.8%
TH 30,800 American Standard Sanitaryware (THB) Public Co., Ltd., fgn. ...................... 487,695
TH 42,600 Ayudhya Insurance Public Co., Ltd., fgn. ......................................... 318,812
TH 3,300 Bangkok Land Public Co., Ltd. .................................................... 3,607
TH 580,500 Bangkok Land Public Co., Ltd., fgn. .............................................. 731,684
TH 125,500 Charoen Pokphand Feedmill Public Co., Ltd. ....................................... 514,101
TH 253,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. ................................. 1,345,321
TH 16,000 Hua Thai Manufacturing Public Co., Ltd. .......................................... 34,189
TH 83,100 Karat Sanitaryware Public Co., Ltd., fgn. ........................................ 239,762
TH 50,700 Kian Gwan (Thailand) Public Co., Ltd., fgn. ...................................... 134,299
TH 25,600 Regional Container Lines Public Co., Ltd., fgn. .................................. 375,106
TH 313,500 aRoyal Ceramic Industry Public Co., Ltd., fgn. ................................... 351,928
TH 100 Saha Pathanapibul Public Co., Ltd. ............................................... 244
TH 80,600 Saha Pathanapibul Public Co, Ltd., fgn. .......................................... 208,738
TH 120,600 Saha Union Public Co., Ltd. ...................................................... 166,260
TH 460,000 Saha Union Public Co., Ltd., fgn. ................................................ 720,222
TH 1,400 Sanyo Universal Electric Public Co., Ltd. ........................................ 4,853
TH 3,800 Sanyo Universal Electric Public Co., Ltd., fgn. .................................. 12,573
TH 2,000 Siam Cement Co., Ltd. (The), fgn. ................................................ 98,157
TH 104,100 Sino-Thai Engineering & Construction Public Co. .................................. 475,642
TH 116,410 Thai Asahi Glass Public Co., Ltd. ................................................ 270,529
TH 43,000 Thai Rayon Public Co., Ltd. ...................................................... 221,876
TH 2,200 Thai Rayon Public Co., Ltd., fgn. ................................................ 12,305
TH 26,400 Thai Wacoal Public Co., Ltd., fgn. ............................................... 174,957
TH 8,450 Thai Wah Public Co., Ltd., fgn. .................................................. 8,071
TH 4,500 United Motor Works (Siam) Public Co., Ltd. ....................................... 18,966
------------
6,929,897
------------
Turkey 5.7%
TR 12,266,500 Akbank ........................................................................... 1,478,791
TR 24,715,000 aAkbank, new...................................................................... 2,979,524
TR 1,704,000 Alarko Sanayii ve Ticaret, SA..................................................... 264,564
TR 2,075,000 aAlcatel Teletas Endustri Tic, AS................................................. 136,447
TR 4,688,000 Anadolu Anonim Turk Sigorta Sirketi .............................................. 156,990
TR 4,324,971 Arcelik, AS ...................................................................... 400,265
TR 312,000 Bagfas ........................................................................... 84,535
TR 4,348,086 Bekoteknik, AS.................................................................... 275,329
TR 1,580,000 Borusan, AS....................................................................... 130,833
TR 2,792,070 Cimentas Izmir Cimento Faikasi Turk, AS........................................... 611,998
TR 267,000 Cimsa Cimento Sanayi ve Ticaret, AS............................................... 152,813
TR 9,000 Compagnie Financiere Ottomane, SA................................................. 621,972
TR 16,560,000 Eregli Demir ve Celik Faikalari, AS .............................................. 1,835,071
TR 1,970,571 Izocam Ticaret ve Sanayii, AS..................................................... 167,974
TR 2,575,000 Koc Holding, AS................................................................... 627,131
TR 3,446,800 Koc Yatirim ve Sanayii Mamullesi Pazarlanca, AS................................... 556,139
TR 1,620,528 Marshall Boya ve Vernik Sanayii, AS............................................... 140,109
TR 1,594,000 Netas Northern Electric Telekomunic Asyon, AS..................................... 378,507
TR 433,200 Otosan Otomobil Sanayii, AS ...................................................... 147,706
TR 1,183,615 Tat Konserve Sanayii, AS.......................................................... 277,455
Turkey (cont.)
TR 887,933 aTat Konserve Sanayii, AS, rights................................................. $ 131,619
TR 14,349,350 Tofas Turk Otomobil Fabrikasi, AS................................................. 690,209
TR 4,366,432 Trakya Cam Sanayii, AS............................................................ 239,271
TR 4,169,996 Turk Demir Dokum ................................................................. 253,896
TR 21,335,400 Turkiye Garanti Bankasi, AS ...................................................... 1,454,923
TR 1,784,454 Vakif Finansal Kiralama, AS ...................................................... 84,746
------------
14,278,817
------------
Venezuela 1.9%
VE 3,700 Banco Venezolano de Credito ...................................................... 133,289
VE 256,080 Ceramica Carabobo CA, Class A..................................................... 264,743
VE 154,000 Ceramica Carabobo CA, Class A, ADR................................................ 159,210
VE 250,000 Consolidada Carabobo, Class A..................................................... 8,899
VE 3,250,000 Consolidada Carabobo, Class B..................................................... 114,307
VE 1,026,873 Electricidad de Caracas .......................................................... 853,666
VE 60,000 Industrias Ventane ............................................................... 26,219
VE 10,000 aManufacturera de Aparatos Domesticos, SA......................................... 7,055
VE 387,000 Mavesa, SA, ADR................................................................... 1,534,372
VE 50,000 Siderurgica Venezolana Sivensa Saica Svs ......................................... 33,040
VE 241,650 Siderurgica Venezolana Sivensa Saica Svs, ADR..................................... 798,408
VE 361,600 Vencemos de Cementos, SA.......................................................... 689,856
VE 110,240 Venezolana de Cementos-Vencemos, #2 .............................................. 188,226
------------
4,811,290
Zimbabwe .1%
ZW 25,000 Ta Holdings ...................................................................... 3,669
ZW 700,000 Transarchipel Shipping, Ltd. - TSL................................................ 244,433
ZW 72,000 Zimbabwe Sun, Ltd. ............................................................... 25,506
------------
273,608
------------
Total Common Stocks, Warrants & Rights (Cost $192,355,409).................. 206,641,907
------------
Preferred Stocks 6.9%
Brazil 6.9%
BR 110,000,000 Banco do Brazil, SA, pfd. ........................................................ 870,886
BR 264,298,700 aBanespa-Banco do Estado de Sao Paulo, SA, pfd. .................................. 987,024
BR 4,496,000 Brasmotor, SA, pfd. .............................................................. 1,405,909
BR 7,484,000 aCia Mesbla, SA, pfd. ............................................................ 40,992
BR 2,678,700 Copene-Petroquimica do Nordeste, SA, Class A, pfd. ............................... 1,291,106
BR 44,944,800 Duratex, SA, pfd. ................................................................ 1,942,543
BR 11,529,000 Eletroas-Centrais Eletricas Brasileiras, SA, Class B, pfd. ....................... 3,295,148
BR 1,384,200 Itausa-Investimentos Itau, SA, pfd. .............................................. 1,061,429
BR 362,700 aMannesmann, SA, pfd. ............................................................ 48,762
BR 45,845,000 Petrobras-Petroleo Brasileiro, SA, pfd. .......................................... 5,638,458
BR 93,810 aTelerj-Telecomunicacoes do Rio de Janeiro, SA, pfd. ............................. 10,557
BR 30,878,000 Unibanco-Uniao de Bancos Brasileiros, SA, pfd. ................................... 836,103
------------
17,428,917
------------
Malaysia
MY 26,800 Renong, cvt. pfd. ................................................................ 10,099
------------
Total Preferred Stocks (Cost $18,995,862)................................... 17,439,016
------------
Total Long Term Investments (Cost $211,351,271)............................. 224,080,923
------------
fShort Term Investments 10.7%....................................................
US $27,039,000 U.S. Treasury Bills, 4.83% - 5.10%, 09/12/96 (Cost $26,873,658)................... $ 26,880,325
------------
Total Investments (Cost $238,224,929) 99.6%............................ 250,961,248
Other Asset and Liabilities, Net .4%................................... 972,292
------------
Net Assets 100.0%...................................................... $251,933,540
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $237,543,060 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 33,752,046
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... (20,333,858)
------------
Net unrealized appreciation .................................................... $ 13,418,188
============
</TABLE>
CURRENCY LEGEND:
AR - Argentina
BR - Brazil
CN - China
CS - Czech Republic
GR - Greece
HK - Hong Kong
ID - Indonesia
IL - Israel
IN - India
KR - South Korea
LK - Sri Lanka
MX - Mexico
MY - Malaysia
PH - Philippines
PL - Poland
PT - Portugal
SG - Singapore
SS - Slovak Republic
TH - Thailand
TR - Turkey
US - United States
VE - Venezuela
ZA - South Africa
ZW - Zimbabwe
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
fSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Country* Shares Templeton Global Growth Fund (Note 1)
Common Stocks 82.1%
Argentina 2.5%
<S> <C> <C> <C>
AR 397,481 Inversiones y Representacion .................................................... $ 1,312,173
US 50,000 Telecom Argentina Stet France, SA, ADR........................................... 2,343,750
US 386,900 Transportadora de Gas del Sur, SA, Class B, ADR.................................. 4,739,525
US 155,000 YPF Sociedad Anonima, ADR........................................................ 3,487,500
------------
11,882,948
------------
Australia 3.2%
AU 494,553 Coles Myer, Ltd., Class A........................................................ 1,795,760
AU 2,129,730 HIH Winterthur International Holdings, Ltd. ..................................... 4,017,253
AU 150,000 News International, Plc. ........................................................ 969,064
AU 33,730 Pacific BBA, Ltd. ............................................................... 83,507
AU 2,149,000 Pacific Dunlop, Ltd. ............................................................ 4,830,542
AU 700,000 RGC, Ltd. ....................................................................... 3,383,503
------------
15,079,629
------------
Austria 1.9%
AT 30,000 Boehler Uddeholm, AG............................................................. 2,326,342
AT 35,400 Evn Energie-Versorgung Niederoesterreich, AG..................................... 4,894,847
AT 8,480 aMayr-Melnhof Karton, AG......................................................... 365,234
AT 13,000 bVA Technologies, AG, Bearer certificate......................................... 1,598,356
------------
9,184,779
------------
Bermuda 2.4%
US 80,000 Ace, Ltd. ....................................................................... 3,760,000
US 255,000 Partnerre, Ltd. ................................................................. 7,618,125
------------
11,378,125
------------
Brazil .7%
BR 129,100,000 Companhia Siderurgica Nacional .................................................. 3,291,301
------------
Canada 1.0%
CA 119,700 Intrawest Corp. ................................................................. 1,266,922
CA 37,000 aNewbridge Networks Corp. ....................................................... 2,423,500
CA 195,000 Primex Forest Products, Ltd. .................................................... 1,035,525
------------
4,725,947
------------
China .3%
HK 23,000,000 Shanghai Hai Xing Shipping Co., Class H ......................................... 1,515,357
------------
Czech Republic 1.0%
US 171,000 a,bKomercni Banka, AS, GDR....................................................... 4,617,000
------------
Denmark .2%
DK 20,000 Tele Danmark, AS, Class B........................................................ 1,007,170
------------
Ecuador
US 200 bLa Cemento Nacional, CA, GDR.................................................... 36,200
------------
Finland 2.3%
FI 8,300 Amer Group, Ltd., Class A ....................................................... 139,780
FI 145,000 aEnso Oy, Class R................................................................ 1,130,183
FI 270,000 Metsa Serla Oy, Class B.......................................................... 1,923,762
FI 130,000 Nokia, AB, Class A............................................................... 4,799,689
FI 65,000 Outokumpu Oy, Class A............................................................ 1,094,666
FI 88,000 aUPM-Kymmene Corp. .............................................................. 1,833,511
------------
10,921,591
------------
France 5.9%
FR 30,000 Alcatel Alsthom, SA.............................................................. $ 2,618,458
FR 148,702 AXA, SA.......................................................................... 8,140,056
FR 126,500 Banque Nationale de Paris ....................................................... 4,443,515
FR 9,783 Compagnie Generale D' Industrie et de Participation ............................. 2,251,654
FR 45,000 aCredit Foncier de France, SA.................................................... 293,046
US 111,110 Pechiney, SA, ADR................................................................ 2,243,033
FR 5,388 Sa des Galeries Lafayette ....................................................... 1,839,205
FR 41,972 Societe Elf Aquitane, SA......................................................... 3,089,002
FR 32,029 Union du Credit Bail Immobilier Unibail ......................................... 3,200,254
------------
28,118,223
------------
Germany .5%
DD 6,300 Volkswagen, AG .................................................................. 2,347,453
------------
Greece .5%
GR 36,266 Alpha Credit Bank ............................................................... 1,914,688
GR 5,867 bAlpha Credit Bank .............................................................. 309,735
------------
2,224,423
------------
Hong Kong 3.6%
HK 800,000 Cheung Kong Holdings, Ltd. ...................................................... 5,761,716
HK 278,149 HSBC Holdings, Plc. ............................................................. 4,204,171
HK 800,000 Jardine Strategic Holdings, Ltd. ................................................ 2,560,000
HK 180,000 Melco International Development, Ltd. ........................................... 49,995
HK 2,299,000 Oriental Press Group, Ltd. ...................................................... 1,232,549
HK 3,600,000 Shun Tak Holdings ............................................................... 2,209,088
HK 150,000 Swire Pacific, Ltd., Class A .................................................... 1,283,790
HK 75,000 Swire Pacific, Ltd., Class B .................................................... 103,188
------------
17,404,497
------------
Hungary .6%
US 256,358 bMOL Magyar Olay - Es Gazipari RT, GDS........................................... 2,832,756
------------
India .5%
US 33,600 Gujarat Ambuja Cements, Ltd., GDR................................................ 420,000
GB 720,000 aIndia Fund, (The), Class B ..................................................... 1,380,917
US 37,000 bLarsen and Toubro, Ltd., GDR.................................................... 693,750
------------
2,494,667
------------
Indonesia .5%
US 305,700 aAsia Pacific Resources International, Class A................................... 2,292,750
------------
Italy 1.6%
IT 896,800 aBanca Fideuram, SpA............................................................. 1,951,971
IT 1,745,200 Fiat, SpA........................................................................ 5,888,163
------------
7,840,134
------------
Japan 1.6%
JP 230,000 Daito Trust Construction Co., Ltd. .............................................. 3,446,795
JP 48,000 Hitachi, Ltd. ................................................................... 447,389
JP 200,000 Matsushita Electric Industrial Co., Ltd. ........................................ 3,728,241
------------
7,622,425
------------
Mexico 1.3%
MX 1,900,000 aCifra, SA, Class B ............................................................. 2,750,428
MX 400,000 aConsorcio G Grupo Dina, SA de CV................................................ 255,768
Mexico (cont.)
US 86,400 Telefonos de Mexico, ADR......................................................... $ 2,894,400
US 24,000 Vitro, SA, ADR .................................................................. 165,000
------------
6,065,596
------------
Netherlands 1.6%
NL 56,500 European Vinyls Corp., International, NV......................................... 1,755,790
NL 50,000 Frans Maas Groep ................................................................ 1,990,619
NL 103,595 Ing Groep, NV.................................................................... 3,091,753
NL 40,000 Koninklijke Nedlloyd, NV......................................................... 921,724
------------
7,759,886
------------
New Zealand .4%
NZ 560,000 Fisher & Paykel, Ltd. ........................................................... 1,803,108
US 15,607 Fletcher Challenge, Ltd., Forestry Division, ADR................................. 193,137
------------
1,996,245
------------
Norway .6%
NO 45,000 Hafslund, AS, Class B............................................................ 287,748
NO 180,600 Helikopter Services Group, ASA................................................... 2,087,041
NO 45,000 aNycomed, AS, Class B............................................................ 624,032
------------
2,998,821
------------
Philippines 1.0%
PH 5,375,000 Metro Pacific Corp., MDI......................................................... 1,600,191
PH 199,890 aPhilippine National Bank ....................................................... 3,337,858
------------
4,938,049
------------
South Korea 1.3%
KR 17,000 Byucksan Development Co., Ltd. .................................................. 215,853
KR 11,227 Keumkang Co., Ltd. .............................................................. 742,709
KR 100,000 Pacific Chemical Co., Ltd. ...................................................... 1,886,095
KR 123,920 Shinhan Bank Co., Ltd. .......................................................... 2,837,389
KR 1,000 Tae Kwang Industrial Co., Ltd. .................................................. 567,061
------------
6,249,107
------------
Spain 2.7%
ES 4,400 Banco Popular Espanol ........................................................... 785,094
ES 75,000 Banco Santander, SA.............................................................. 3,503,769
ES 63,900 Cristaleria Espanola, SA ........................................................ 4,013,562
ES 450,000 Iberdrola, SA.................................................................... 4,622,866
------------
12,925,291
------------
Sweden 2.8%
SE 35,000 Asea, AB, Class A ............................................................... 3,716,206
SE 50,000 Assidomaen, AB................................................................... 1,166,742
SE 163,000 Munksjo, AB...................................................................... 1,280,169
SE 12,400 bNordbanken, AB.................................................................. 239,722
SE 190,000 Skandia Foersaekrings, AB........................................................ 5,036,248
SE 68,000 aSwedish Match, AB............................................................... 211,569
SE 68,000 Volvo, AB, Class B............................................................... 1,550,823
------------
13,201,479
------------
Switzerland 3.6%
CH 3,900 Ciba-Geigy, AG................................................................... $ 4,757,049
CH 2,200 Kuoni Reisen Holding, AG, Class B................................................ 5,050,190
CH 3,000 Societe Generale de Surveillance Holdings, Ltd., bearer certificate.............. 7,186,563
------------
16,993,802
------------
Thailand .7%
TH 724,466 Industrial Finance Corp. of Thailand ............................................ 3,253,077
TH 89,700 aMDX Public Co., Ltd. ........................................................... 146,185
------------
3,399,262
------------
Turkey .2%
US 75,000 aTurkish Growth Fund ............................................................ 984,375
------------
United Kingdom 3.6%
GB 220,000 Argyll Group, Plc. .............................................................. 1,185,551
GB 1,000,000 British Gas, Plc. ............................................................... 2,795,378
GB 135,000 BTR, Plc., Class A............................................................... 518,843
GB 1,455,000 aCordiant, Plc. ................................................................. 2,462,961
GB 1,396,100 Dawson International, Plc. ...................................................... 1,777,864
GB 466,666 Lex Service, Plc. ............................................................... 2,717,725
GB 256,000 London Pacific Group, Ltd. ...................................................... 1,023,730
GB 320,554 National Power, Plc. ............................................................ 2,583,668
GB 275,300 W.H. Smith Group ................................................................ 2,026,523
------------
17,092,243
------------
United States 31.5%
US 89,000 A.G. Edwards, Inc. .............................................................. 2,414,125
US 15,000 Aflac, Inc. ..................................................................... 448,125
US 280,000 Archer Daniels Midland Co. ...................................................... 5,355,000
US 339,000 aBanner Aerospace, Inc. ......................................................... 2,839,125
US 230,000 aBay Networks, Inc. ............................................................. 5,922,500
US 27,000 Citicorp ........................................................................ 2,230,875
US 56,500 Dayton-Hudson Corp. ............................................................. 5,826,563
US 109,300 Dean Witter Discover & Co. ...................................................... 6,257,425
US 84,800 aDSC Communications Corp. ....................................................... 2,554,600
US 58,500 Entergy Corp. ................................................................... 1,659,938
US 156,000 Federal National Mortgage Association ........................................... 5,226,000
US 90,000 Ford Motor Co. .................................................................. 2,913,750
US 124,500 aFruit of the Loom, Inc., Class A................................................ 3,174,750
US 89,000 General Growth Properties ....................................................... 2,147,125
US 60,000 General Motors Corp. ............................................................ 3,142,500
US 66,000 General Motors Corp., Class H.................................................... 3,968,250
US 34,000 Georgia-Pacific Corp. ........................................................... 2,414,000
US 70,000 Goodyear Tire & Rubber Co. ...................................................... 3,377,500
US 251,100 Highwood Properties, Inc., REIT.................................................. 6,936,638
US 34,700 Horizon Group, Inc. ............................................................. 711,350
US 52,800 Houghton Mifflin Co. ............................................................ 2,626,800
US 56,500 International Business Machines Corp. ........................................... 5,593,500
US 48,900 aLandstar System, Inc. .......................................................... 1,418,100
US 97,902 Limited, Inc. ................................................................... 2,104,893
US 42,000 Merrill Lynch & Co., Inc. ....................................................... 2,735,250
US 20,000 Mobil Corp. ..................................................................... 2,242,500
US 75,000 Motorola, Inc. .................................................................. 4,715,625
US 32,000 National Health Investors, Inc. ................................................. 1,048,000
United States (cont.)
US 30,400 Nike, Inc., Class B ............................................................. $ 3,123,600
US 157,000 aOMI Corp. ...................................................................... 1,354,125
US 50,000 aOwens Corning .................................................................. 2,150,000
US 70,000 PECO Energy Co. ................................................................. 1,820,000
US 151,700 Pharmacia & Upjohn, Inc. ........................................................ 6,731,688
US 150,000 aPinnacle Systems, Inc. ......................................................... 3,112,500
US 150,000 Post Properties, Inc. ........................................................... 5,306,250
US 24,000 Reliastar Financial Corp. ....................................................... 1,035,000
US 80,000 Rouse Co. ....................................................................... 2,070,000
US 130,000 aSyms Corp. ..................................................................... 958,750
US 30,000 Texaco, Inc. .................................................................... 2,516,250
US 120,000 Torchmark Corp. ................................................................. 5,250,000
US 350 aTransport Holdings, Inc., Class A............................................... 16,100
US 157,500 Travelers, Inc. ................................................................. 7,185,938
US 114,200 UNUM Corp. ...................................................................... 7,108,950
US 81,000 Valero Energy Corp. ............................................................. 2,025,000
US 115,000 Weeks Corp. ..................................................................... 2,990,000
US 240,000 Wheelabrator Technologies, Inc. ................................................. 3,660,000
------------
150,418,958
------------
Total Common Stocks (Cost $344,051,708).................................... 391,840,489
------------
Preferred Stocks 3.7%
Brazil 2.5%
BR 258,441,822 Banco Bradesco, SA, pfd. ........................................................ 2,110,465
BR 151,938,238 Cemig-Cia Energetica de Minas Gerais, pfd. ...................................... 4,039,985
BR 1,952,000 Coteminas Cia Tecidos Norte de Minas, pfd. ...................................... 770,769
US 75,000 Telebras-Telecomunicacoes Brasileiras, SA, pfd., ADR............................. 5,221,875
------------
12,143,094
------------
Greece .4%
GR 219,110 aMichaniki, SA, pfd. ............................................................ 1,821,742
------------
Italy .8%
IT 2,203,300 Concessioni e Costruzioni Autostrade, SpA, Class B, pfd. ........................ 3,819,005
------------
Mexico
US 6,500 Nacional Financiera, SA, 11.25%, 05/15/98, cvt. pfd. ............................ 222,625
------------
Total Preferred Stocks (Cost $13,799,210).................................. 18,006,466
------------
Total Common Stocks and Preferred Stocks (Cost $357,850,918)............... 409,846,955
------------
Face
Amount
Bonds 1.6%
India .4%
US 2,000,000 Essar Gujarat, Ltd., cvt., 5.50%, 08/05/98 ...................................... 1,970,000
------------
Italy .6%
IT 2,950,000,000 b,eSofte, SA, cvt., 4.25%, 07/30/98 ............................................. 2,932,185
------------
Mexico .2%
US 1,210,000 Empresas ICA Sociedad Controladora, SA, cvt., 5.00%, 03/15/04 ................... 768,350
------------
Switzerland .1%
US 365,000 C.S. Holding Finance BV, cvt., 4.875%, 11/19/02 ................................. 525,600
------------
Thailand .3%
US 3,602,000 MDX Public Co., Ltd., cvt., 4.75%, 09/17/03 ..................................... $ 1,692,940
------------
Total Bonds (Cost $6,793,375).............................................. 7,889,075
------------
Total Long Term Investments (Cost $364,644,293)............................ 417,736,030
------------
gReceivables from Repurchase Agreements 14.3%
US 25,122,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $25,011,146)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 25,000,000
US 16,060,000 Morgan Stanley & Co., Inc., 5.25%, 07/01/96, (Maturity Value $15,854,934)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97 ............................... 15,848,000
US 27,299,000 UBS Securities, Inc., 5.37%, 07/01/96, (Maturity Value $27,484,294)
Collateral: U.S. Treasury Notes, 5.875%, 07/31/97 .............................. 27,472,000
------------
Total Receivables from Repurchase Agreements (Cost $68,320,000)............ 68,320,000
------------
Total Investments (Cost $432,964,293) 101.7% ......................... 486,056,030
Liabilities in Excess of Other Assets (1.7)% ......................... (8,073,070)
------------
Net Assets 100.0% .................................................... $477,982,960
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $433,820,184 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 68,289,204
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (16,053,358)
------------
Net unrealized appreciation ................................................... $ 52,235,846
============
</TABLE>
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
BR - Brazil
CA - Canada
CH - Switzerland
DD - Germany
DK - Denmark
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
PORTFOLIO ABBREVIATIONS:
REIT - Real Estate Investment Trust
HK - Hong Kong
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
PH - Philippines
SE - Sweden
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Country* Shares Templeton Global Asset Allocation Fund (Note 1)
Common Stocks 44.1%
Argentina .5%
<S> <C> <C> <C>
US 2,000 Telecom Argentina Stet France, SA, ADR............................................. $ 93,750
US 6,900 Transportadora de Gas del Sur, SA, Class B, ADR.................................... 84,525
------------
178,275
------------
Australia 1.2%
AU 26,433 Coles Myer, Ltd., Class A.......................................................... 95,980
AU 93,062 HIH Winterthur International Holdings, Ltd. ....................................... 175,540
AU 41,881 Pacific BBA, Ltd. ................................................................. 103,686
AU 2,550 Pacific Dunlop, Ltd. ............................................................. 5,732
AU 10,000 RGC, Ltd. ......................................................................... 48,336
------------
429,274
------------
Austria .2%
AT 1,060 Boehler Uddeholm, AG............................................................... 82,197
------------
Bermuda 1.2%
US 10,000 Partnerre, Ltd. ................................................................... 298,750
US 7,000 Sea Containers, Ltd., Class A...................................................... 133,000
------------
431,750
------------
Brazil 1.8%
US 7,500 Cia Energetica de Minas Gerais, ADR................................................ 199,422
US 7,700 Companhia Siderurgica Nacional, ADR................................................ 196,305
US 12,600 Lojas Americanas, SA, ADR.......................................................... 248,449
------------
644,176
------------
Canada .5%
CA 12,000 Hudsons Bay Co. ................................................................... 181,945
------------
Chile .4%
US 4,800 Madeco Manufacturera de Cobre, SA, ADR............................................. 135,000
------------
Colombia .2%
US 5,000 a,bCementos Paz del Rio, SA, ADR................................................... 66,250
------------
Denmark .3%
DK 2,000 Tele Danmark, AS, Class B.......................................................... 100,717
------------
Finland 1.2%
FI 10,000 aEnso Oy, Class R.................................................................. 77,944
FI 3,750 Metsa Serla Oy, Class B............................................................ 26,719
FI 5,000 Nokia, AB, Class A................................................................. 184,603
FI 2,400 Outokumpu Oy, Class A.............................................................. 40,418
FI 4,200 aUPM-Kymmene Corp. ................................................................ 87,509
------------
417,193
------------
France 5.1%
FR 11,731 AXA, SA............................................................................ 642,164
FR 9,000 Banque Nationale de Paris ......................................................... 316,139
FR 9,700 Rhone-Poulenc, SA, Class A ........................................................ 255,122
FR 1,805 Societe Elf Aquitane, SA........................................................... 132,842
FR 2,556 Total, SA, Class B ................................................................ 189,703
FR 2,500 Union du Credit Bail Immobilier Unibail ........................................... 249,793
------------
1,785,763
------------
Germany .4%
DD 360 Volkswagen, AG .................................................................... 134,140
------------
Greece .5%
GR 3,066 Alpha Credit Bank ................................................................. $ 161,872
------------
Hong Kong 2.4%
HK 32,000 Cheung Kong Holdings, Ltd. ........................................................ 230,469
HK 111,000 Grand Hotel Holdings, Ltd. ........................................................ 43,736
HK 1,013,600 Hon Kwok Land Investment Co., Ltd. ................................................ 353,547
HK 12,200 Melco International Development, Ltd. ............................................. 3,389
HK 244,000 Shun Tak Holdings ................................................................. 149,727
HK 164,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 46,610
------------
827,478
------------
Hungary .4%
US 12,107 bMOL Magyar Olay - Es Gazipari RT, GDS............................................. 133,782
------------
Indonesia .4%
US 19,300 aAsia Pacific Resources International, Class A..................................... 144,750
------------
Italy .6%
IT 74,700 aBanca Fideuram, SpA............................................................... 162,592
IT 10,000 STET (Sta Finanziaria Telefonica Torino), SpA...................................... 33,915
------------
196,507
------------
Japan .8%
JP 12,000 Daito Trust Construction Co., Ltd. ................................................ 179,833
JP 5,000 Matsushita Electric Industrial Co., Ltd. .......................................... 93,206
------------
273,039
------------
Mexico .5%
MX 96,200 aCifra, SA, Class B ............................................................... 139,259
US 3,000 aEmpresas ICA Sociedad Controladora, SA, ADR....................................... 41,625
------------
180,884
------------
Netherlands .4%
NL 5,020 Ing Groep, NV...................................................................... 149,820
------------
New Zealand .5%
NZ 51,300 Ceramico Corp., Ltd. .............................................................. 64,942
US 9,000 aTranz Rail Holdings, Ltd., ADR.................................................... 124,875
------------
189,817
------------
Norway .7%
NO 14,800 Elkem, AS.......................................................................... 204,097
NO 1,700 Hafslund, AS, Class B.............................................................. 10,870
NO 1,700 aNycomed, AS, Class B.............................................................. 23,575
------------
238,542
------------
Spain 1.1%
ES 9,500 Dragados y Construcciones, SA...................................................... 125,796
ES 20,500 Iberdrola, SA...................................................................... 210,597
ES 1,750 Telefonica de Espana, SA .......................................................... 32,264
------------
368,657
------------
Sweden 2.8%
SE 2,300 Electrolux, AB, Class B ........................................................... 115,851
SE 165 aFastighets Naeckebro, AB Tornet, Class A.......................................... 2,043
SE 5,000 Marieberg Tidnings, AB, Class A ................................................... 125,359
SE 18,000 bNordbanken, AB.................................................................... 347,984
Sweden (cont.)
SE 13,800 Skandia Foersaekrings, AB.......................................................... $ 365,791
SE 1,650 Svenska Handelsbanken, Class A..................................................... 34,515
------------
991,543
------------
Switzerland 1.3%
CH 70 Kuoni Reisen Holding, AG, Class B.................................................. 160,688
CH 115 Societe Generale de Surveillance Holdings, Ltd., br. .............................. 275,485
------------
436,173
------------
Thailand .5%
TH 30,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 159,524
------------
Turkey .3%
US 7,500 aTurkish Growth Fund .............................................................. 98,438
------------
United Kingdom 2.1%
GB 40,000 British Gas, Plc. ................................................................. 111,815
GB 45,000 aCordiant, Plc. ................................................................... 76,174
GB 13,500 Dawson International, Plc. ........................................................ 17,192
GB 21,666 Lex Service, Plc. ................................................................ 126,176
GB 118,414 aRailtrack Group, Plc. ............................................................ 402,731
GB 2,200 W.H. Smith Group .................................................................. 16,195
------------
750,283
------------
United States 15.8%
US 2,860 AK Steel Holding Corp. ............................................................ 111,898
US 16,000 Archer Daniels Midland Co. ........................................................ 306,000
US 10,100 aBay Networks, Inc. ............................................................... 260,075
US 5,900 Beacon Properties Corp. ........................................................... 151,188
US 6,800 Carramerica Realty Corp. .......................................................... 163,200
US 2,400 Citicorp .......................................................................... 198,300
US 2,700 Dayton-Hudson Corp. ............................................................... 278,438
US 5,000 Dean Witter Discover & Co. ........................................................ 286,250
US 6,950 aFruit of the Loom, Inc., Class A.................................................. 177,225
US 2,700 General Motors Corp. .............................................................. 141,413
US 3,100 General Motors Corp., Class H ..................................................... 186,388
US 2,500 Georgia-Pacific Corp. ............................................................. 177,500
US 3,600 Goodyear Tire & Rubber Co. ........................................................ 173,700
US 15,300 Highwood Properties, Inc., REIT.................................................... 422,663
US 12,000 Horizon Group, Inc. ............................................................... 246,000
US 3,200 Houghton Mifflin Co. .............................................................. 159,200
US 3,500 International Business Machines Corp. ............................................. 346,500
US 3,000 aLandstar System, Inc. ............................................................ 87,000
US 3,300 Motorola, Inc. .................................................................... 207,488
US 1,800 Peco Energy Co. ................................................................... 46,800
US 5,200 aPinnacle Systems, Inc. ........................................................... 107,900
US 4,400 Post Properties, Inc. ............................................................. 155,650
US 3,200 Summit Properties, Inc., REIT...................................................... 62,800
US 1,400 Texas Utilties Electric Co. ....................................................... 59,850
US 2,121 The Limited, Inc. ................................................................. 45,602
US 7,000 Torchmark Corp. ................................................................... 306,250
US 4,000 UNUM Corp. ........................................................................ 249,000
US 2,400 Valero Energy Corp. ............................................................... 60,000
United States (cont.)
US 7,500 Weeks Corp. ....................................................................... $ 195,000
US 10,000 Wheelabrator Technologies, Inc. ................................................... 152,500
------------
5,521,778
------------
Total Common Stocks (Cost $14,101,438)....................................... 15,409,567
------------
Preferred Stocks 1.2%
Argentina .8%
US 4,700 Cia de Inversiones en Telecomunicaciones, SA, 7.00%, cvt. pfd. .................... 272,600
------------
Greece .4%
GR 18,740 aMichaniki, SA, pfd. .............................................................. 155,810
------------
Total Preferred Stocks (Cost $423,186)....................................... 428,410
------------
Total Common Stocks and Preferred Stocks (Cost $14,524,624).................. 15,837,977
------------
Face
Amount
Bonds 24.4%
Argentina 1.6%
US 65,000 Bocon Previsionales II, FRN, 5.063%, 04/01/01 ..................................... 74,230
US 100,000 Bridas Corp., Yankee, 12.50%, 11/18/99 ............................................ 104,500
US 100,000 bIndustrias Metalurgicas Pescarmona, 11.75%, 03/27/98 ............................. 100,875
US 500,000 Republic of Argentina, Series L, VRN, 5.25%, 03/31/23 ............................. 274,375
------------
553,980
------------
Australia 1.7%
AU 570,000 eGovernment of Australia, 7.00%, 04/15/00 ......................................... 427,450
AU 205,000 eRepublic of Australia, 12.00%, 11/15/01 .......................................... 184,053
------------
611,503
------------
Brazil 1.1%
US 150,000 bCentrais Electricas Brasileiras, SA, 10.00%, 10/30/98 ............................ 153,000
US 395,000 Government of Brazil, 4.25%, 04/15/24 ............................................. 218,731
------------
371,731
------------
Canada .7%
CA 80,000 eGovernment of Canada, 5.75%, 03/01/99 ............................................ 57,683
CA 60,000 eGovernment of Canada, 10.50%, 03/01/01 ........................................... 50,044
CA 90,000 eGovernment of Canada, 9.00%, 12/01/04 ............................................ 71,822
CA 100,000 eGovernment of Canada, 8.75%, 12/01/05 ............................................ 78,843
------------
258,392
------------
Denmark .8%
DK 235,000 eGovernment of Denmark, 8.00%, 05/15/03 ........................................... 42,463
DK 790,000 eKingdom of Denmark, 9.00%, 11/15/00 .............................................. 149,018
DK 500,000 eKingdom of Denmark, 8.00%, 11/15/01 .............................................. 91,200
------------
282,681
------------
Ecuador .3%
US 290,000 Republic of Ecuador, FRN, 3.25%, 02/28/25 ......................................... 104,219
------------
Germany 1.6%
DD 100,000 eDeutsche Bundespost, 7.75%, 10/01/04 ............................................. 70,589
DD 150,000 eFederal Republic of Germany, 8.00%, 07/22/02 ..................................... 108,597
DD 85,000 eFederal Republic of Germany, 7.125%, 12/20/02 .................................... 58,905
DD 90,000 eFederal Republic of Germany, 6.50%, 07/15/03 ..................................... 60,032
Germany (cont.)
DD 80,000 eFederal Republic of Germany, Bundes, 8.25%, 09/20/01 ............................. $ 58,523
DD 85,000 eFederal Republic of Germany, Bundesobl, 6.625%, 01/20/98 ......................... 58,061
DD 200,000 eTreuhandanstalt, 7.125%, 01/29/03 ................................................ 138,534
------------
553,241
------------
India .4%
US 150,000 Essar Gujarat, Ltd., cvt., 5.50%, 08/05/98 ........................................ 147,750
------------
Indonesia .3%
ID 87,000 PT Polysindo Intl. Finance Co., Series B, 11.375%, 06/15/06 ....................... 88,523
------------
Ireland .1%
IR 35,000 eRepublic of Ireland, 6.25%, 10/18/04 ............................................. 51,725
------------
Italy 1.7%
IT 85,000,000 eBuoni Poliennali del Tes, 8.50%, 08/01/99 ........................................ 55,620
IT 195,000,000 eBuoni Poliennali del Tes, 10.50%, 09/01/05 ....................................... 137,248
IT 570,000,000 eGovernment of Italy, 10.50%, 07/15/00 ............................................ 395,195
------------
588,063
------------
Mexico 1.8%
US 130,000 Bancomer, SA, 8.00%, 07/07/98 ..................................................... 128,375
US 335,000 United Mexican States, 9.75%, 02/06/01 ............................................ 333,325
US 250,000 United Mexican States, Series B, 6.25%, 12/31/19 .................................. 162,344
------------
624,044
------------
Philippines .9%
US 170,000 Phillipine Long Distance Telephone Co., 9.25%, 06/30/06 ........................... 170,638
US 180,000 Phillippine Pars, Series B, FRN, 5.75%, 12/01/17 .................................. 143,550
------------
314,188
------------
Poland .4%
US 180,000 Government of Poland, PDI, FRN, 3.75%, 10/27/14 ................................... 137,025
------------
Spain 1.2%
ES 29,010,000 eGovernment of Spain, 12.25%, 03/25/00 ............................................ 257,567
ES 8,100,000 eGovernment of Spain, 11.30%, 01/15/02 ............................................ 71,252
ES 11,020,000 eGovernment of Spain, 10.00%, 02/28/05 ............................................ 91,945
------------
420,764
------------
Sweden 1.0%
SE 1,200,000 eKingdom of Sweden, 13.00%, 06/15/01 .............................................. 220,739
SE 700,000 eKingdom of Sweden, 10.25%, 05/05/03 .............................................. 119,280
------------
340,019
------------
Trinidad and Tobago .5%
US 170,000 bSei Holdings IX Inc., 11.00%, 11/30/00 ........................................... 178,500
------------
United Kingdom 1.7%
GB 230,000 eUnited Kingdom, 12.00%, 11/20/98 ................................................. 398,376
GB 80,000 eUnited Kingdom, cvt., 9.50%, 10/25/04 ............................................ 136,896
GB 40,000 eUnited Kingdom, ln., 9.50%, 01/15/99 ............................................. 66,041
------------
601,313
------------
United States 5.7%
US 405,000 U.S. Treasury Bonds, 6.375%, 08/15/02 ............................................. 401,772
US 810,000 U.S. Treasury Notes, 6.125%, 07/31/00 ............................................. 801,017
US 810,000 U S Treasury Notes, 6.25%, 08/31/00 ............................................... 804,306
------------
2,007,095
------------
Venezuela .9%
US 250,000 Republic of Venezuela, Par Bond, Series B, 6.75%, 03/31/20 ........................ $ 153,750
US 250,000 Republic of Venezuela, Series A, 6.75%, 03/31/20 .................................. 153,750
------------
307,500
------------
Total Bonds (Cost $8,415,927)................................................ 8,542,256
------------
Total Long Term Investments (Cost $22,940,551)............................... 24,380,233
------------
fShort Term Securities 13.5%
United States
US 1,150,000 Federal Farm Credit Bank, 5.25% - 5.30%, 07/09/96 - 08/09/96 ...................... 1,145,974
US 1,200,000 Federal Home Loan Bank, 5.25% - 5.29%, 07/08/96 - 08/07/96 ........................ 1,196,025
US 1,200,000 Federal Home Loan Mortgage Corp., 5.25% - 5.29%, 07/05/96 - 07/31/96 .............. 1,197,082
US 1,200,000 Federal National Mortgage Association, 5.25% - 5.30%, 07/11/96 - 08/08/96 ......... 1,196,111
------------
Total Short Term Securities (Cost $4,734,746)................................ 4,735,192
------------
Total Investments before Repurchase Agreements (Cost $27,675,297) ........... 29,115,425
------------
gReceivables from Repurchase Agreements 16.9%
US 5,920,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $5,900,630) (Cost $5,898,000)
Collateral: U.S. Treasury Notes, 7.00%, 09/30/96 ................................. 5,898,000
------------
Total Investments (Cost $33,573,297) 100.1%............................. 35,013,425
Liabilities in Excess of Other Assets (.1)% ............................ (26,385)
------------
Net Assets 100.0% ...................................................... $34,987,040
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $33,573,297 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over cost ..................................................... $ 1,893,526
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ................................................. (453,398)
------------
Net unrealized appreciation ..................................................... $ 1,440,128
============
</TABLE>
COUNTRY LEGEND:
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
ID - Indonesia
IR - Ireland
IT - Italy
JP - Japan
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States
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.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
fCertain 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 upon maturity.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Small Cap Fund (Note 1)
Common Stocks 92.2%
Commercial Services 4.9%
<S> <C> <C>
16,900 aAffiliated Computer Services, Inc. .......................................................... $ 794,300
17,300 aLabor Ready, Inc. ........................................................................... 484,400
35,000 Norrell Corp. ................................................................................ 1,719,375
100,000 aRent-Way, Inc. .............................................................................. 1,362,500
20,000 aRobert Half International, Inc. ............................................................. 557,500
------------
4,918,075
------------
Consumer Products Durables 4.0%
36,500 aBelmont Homes, Inc. ......................................................................... 789,313
40,000 aCannondale Corp. ............................................................................ 810,000
35,000 aK-2, Inc. ................................................................................... 949,375
50,000 aMorrow Snowboards, Inc. ..................................................................... 525,000
43,200 aSouthern Energy Homes, Inc. ................................................................. 928,800
------------
4,002,488
------------
Consumer Products Non-Durables .7%
6,900 aDonna Karan International, Inc. ............................................................. 193,200
9,000 aTommy Hilfiger Corp. ........................................................................ 482,625
------------
675,825
------------
Consumer Services 2.7%
45,000 aPrime Hospitality Corp. ..................................................................... 742,500
39,400 aRed Lion Hotels, Inc. ....................................................................... 827,400
40,000 aStarbucks Corp. ............................................................................. 1,130,000
------------
2,699,900
------------
Electronic Technology 12.4%
60,000 aCognex Corp. ................................................................................ 967,500
19,600 aDuPont Photomasks, Inc. ..................................................................... 401,800
50,100 aEtec Systems, Inc. .......................................................................... 1,114,725
20,300 aKomag, Inc. ................................................................................. 535,413
35,000 aLexmark International Group, Inc., Class A................................................... 704,375
46,400 Logicon, Inc. ................................................................................ 1,386,200
24,800 aNatural Microsystems Corp. .................................................................. 868,000
1,600 aShiva Corp. ................................................................................. 128,000
24,000 aSilicon Graphics, Inc. ...................................................................... 576,000
95,100 aTekelec ..................................................................................... 1,248,188
75,000 aTracor, Inc. ................................................................................ 1,293,750
25,000 aUCAR International, Inc. .................................................................... 1,040,625
25,000 aVerilink Corp. .............................................................................. 637,500
150,000 aVisioneer, Inc. ............................................................................. 1,518,750
------------
12,420,826
------------
Energy/Minerals 5.2%
103,000 aBarrett Resources Corp. ..................................................................... 3,064,250
146,400 aCairn Energy USA, Inc. ...................................................................... 2,104,500
------------
5,168,750
------------
Financial Services 5.4%
61,200 aAmeriCredit Corp. ........................................................................... 956,250
26,300 Chartwell Re Corp. ........................................................................... 581,888
6,200 aContiFinancial Corp. ........................................................................ 182,900
9,400 Executive Risk, Inc. ......................................................................... 359,550
46,300 IPC Holdings, Ltd. .......................................................................... 931,788
Financial Services (cont.)
60,000 aRisk Capital Holdings, Inc. ................................................................. $ 1,177,500
44,900 aSilicon Valley Bancshares ................................................................... 1,156,175
------------
5,346,051
------------
Health Care Services 4.0%
12,900 aAccess Health, Inc. ......................................................................... 609,525
51,800 aMecon, Inc. ................................................................................. 1,171,975
1,000 aMedic Computer Systems, Inc. ................................................................ 81,125
32,600 aSierra Health Services, Inc. ................................................................ 1,026,900
90,000 aU.S. Diagnostic Labs, Inc. .................................................................. 1,102,500
------------
3,992,025
------------
Health Technology 7.0%
12,400 aHeartport, Inc. ............................................................................. 375,100
68,200 Mentor Corp. ................................................................................. 1,739,100
205,000 aNeurobiological Technologies, Inc. .......................................................... 1,358,125
70,600 aNoven Pharmaceuticals, Inc. ................................................................. 1,129,600
57,600 aOptical Sensors, Inc. ....................................................................... 597,600
37,500 aPenederm, Inc. .............................................................................. 637,500
17,800 aPharmacopeia, Inc. .......................................................................... 364,900
2,700 aSerologicals Corp. .......................................................................... 71,550
27,000 aTransition Systems, Inc. .................................................................... 769,500
------------
7,042,975
------------
Industrial Services .2%
6,600 aWaters Corp. ................................................................................ 217,800
------------
Oil/Gas - Equipment & Services 1.2%
10,000 aCarbo Ceramics, Inc. ........................................................................ 220,000
56,600 aVarco International, Inc. ................................................................... 1,025,875
------------
1,245,875
------------
Printing & Publishing 1.2%
20,000 aScholastic Corp. ............................................................................ 1,240,000
------------
Producer Manufacturing 4.6%
15,100 aAmerican Buildings Co. ...................................................................... 441,675
10,000 Butler Manufacturing Co. ..................................................................... 337,500
17,900 aCastech Aluminum Group, Inc. ................................................................ 264,025
27,400 aCentury Aluminum Co. ........................................................................ 431,550
68,400 Easco, Inc. .................................................................................. 564,300
40,000 aGentex Corp. ................................................................................ 780,000
13,000 Pittston Brink's Group ....................................................................... 378,625
28,700 Roper Industries, Inc. ....................................................................... 1,399,125
------------
4,596,800
------------
Real Estate Investment Trust 5.6%
40,000 Bay Apartment Communities, Inc. .............................................................. 1,035,000
90,300 Equity Inns, Inc. ............................................................................ 1,038,450
35,000 FelCor Suite Hotels, Inc. .................................................................... 1,067,500
27,400 OMEGA Healthcare Investors, Inc. ............................................................. 756,925
26,000 Storage Trust Realty ......................................................................... 533,000
98,000 Winston Hotels, Inc. ......................................................................... 1,139,250
------------
5,570,125
------------
Retail .5%
7,500 aBorders Group, Inc. ......................................................................... $ 241,875
9,000 aDesigner Holdings, Ltd. ..................................................................... 239,625
------------
481,500
------------
Semiconductors 8.0%
12,000 aAdaptec, Inc. ............................................................................... 568,500
24,800 aAltera Corp. ................................................................................ 942,400
15,900 aExar Corp. .................................................................................. 206,700
50,000 aLattice Semiconductor Corp. ................................................................. 1,206,250
45,000 Linear Technology Corp. ...................................................................... 1,350,000
87,600 aMicro Linear Corp. .......................................................................... 657,000
110,000 aSierra Semiconductor Corp. .................................................................. 1,278,750
26,200 aUniphase Corp. .............................................................................. 930,100
26,000 aXilinx, Inc. ................................................................................ 825,500
------------
7,965,200
------------
Technology Services 12.7%
79,600 aAcclaim Entertainment, Inc. ................................................................. 766,150
62,000 aAmisys Managed Care Systems ................................................................. 1,596,500
3,000 aBusiness Objects, SA, ADR.................................................................... 120,750
8,100 aCitrix Systems, Inc. ........................................................................ 307,800
25,700 aFractal Design Corp. ........................................................................ 375,863
34,400 aFulcrum Technology, Inc. .................................................................... 442,900
7,500 ai2 Technologies, Inc. ....................................................................... 320,625
22,500 aIDT Corp. ................................................................................... 216,560
5,600 aIntegrated Systems, Inc. .................................................................... 224,350
68,900 aMapinfo Corp. ............................................................................... 723,450
5,000 aMcAfee Associates, Inc. ..................................................................... 245,000
15,000 aMercury Interactive Corp. ................................................................... 206,250
6,000 aMetaTools, Inc. ............................................................................. 141,000
85,000 aPhoenix Technologies, Ltd. .................................................................. 1,423,750
100,000 aQuantum Corp. ............................................................................... 1,462,500
20,000 aRainbow Technologies, Inc. .................................................................. 400,000
12,500 aSapient Corp. ............................................................................... 528,125
35,500 aScopus Technology, Inc. ..................................................................... 550,250
11,300 aSecure Computing Corp. ..................................................................... 259,900
18,500 aSterling Software, Inc. ..................................................................... 1,424,500
17,000 aSymantec Corp. .............................................................................. 212,500
19,000 aSynopsys, Inc. .............................................................................. 755,250
------------
12,703,973
------------
Telecommunications 6.5%
36,000 aCommNet Cellular ............................................................................ 1,080,000
26,300 aGlenayre Technologies, Inc. ................................................................. 1,315,000
26,000 IntelCom Group, Inc. ......................................................................... 650,000
16,000 aNewbridge Networks Corp. .................................................................... 1,048,000
25,000 aRural Cellular Corp., Class A................................................................ 318,750
23,000 aSilver King Communications .................................................................. 690,000
150,000 aSpectralink Corp. ........................................................................... 1,443,750
------------
6,545,500
------------
Transportation 4.5%
50,000 Air Express International Corp. .............................................................. 1,412,500
30,000 Expeditors International of Washington, Inc. ................................................. 930,000
Transportation (cont.)
41,000 Harper Group, Inc. ........................................................................... $ 799,500
46,000 aLandstar System, Inc. ....................................................................... 1,334,000
------------
4,476,000
------------
Utilities .9%
31,400 aAES Corp. ................................................................................... 887,050
------------
Total Common Stocks (Cost $89,706,386).................................................. 92,196,738
------------
Face
Amount
Convertible Corporate Bonds 1.0%
$ 400,000 bQuantum Corp., cvt. sub. notes, 5.00%, 03/01/03 ............................................. 366,500
425,000 bU.S. Diagnostic Labs, Inc., cvt. sub. deb., 9.00%, 03/31/03 ................................. 639,625
------------
Total Convertible Corporate Bonds (Cost $855,254)....................................... 1,006,125
------------
Total Long Term Investments (Cost $90,561,640).......................................... 93,202,863
------------
g,hReceivables from Repurchase Agreement 1.8%
1,836,845 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $1,846,400) (Cost $1,845,563)
Chase Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $254,270)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/96 - 11/30/99 ........................ 1,845,563
------------
Total Investments (Cost $92,407,203) 95.0%......................................... 95,048,426
Other Assets and Liabilities, Net 5.0%............................................. 5,012,048
------------
Net Assets 100.0%.................................................................. $100,060,474
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $92,416,162 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 7,764,366
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (5,132,102)
------------
Net unrealized appreciation ................................................................ $ 2,632,264
============
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Value
Shares Capital Growth Fund (Note 1)
Common Stocks 82.1%
Commercial Services 2.6%
2,500 Equifax, Inc. ..................................................................................... $ 65,625
2,200 aRobert Half International, Inc. .................................................................. 61,325
------------
126,950
------------
Consumer Products Durables 2.3%
1,500 Duracell International, Inc. ...................................................................... 64,688
1,800 Mattel, Inc. ...................................................................................... 51,524
------------
116,212
------------
Consumer Products Non-Durables 4.3%
700 Campbell Soup Co. ................................................................................. 49,350
1,000 Coca-Cola Co. ..................................................................................... 48,875
300 aDonna Karan International, Inc. .................................................................. 8,400
600 Hershey Foods Corp. ............................................................................... 44,025
700 Proctor & Gamble Co. .............................................................................. 63,438
------------
214,088
------------
Consumer Services 3.4%
1,200 aCUC International, Inc. .......................................................................... 42,600
1,000 Disney (Walt) Co. ................................................................................. 62,875
1,200 aMirage Resorts, Inc. ............................................................................. 64,800
------------
170,275
------------
Electronic Technology 12.2%
900 aBay Networks...................................................................................... 23,175
1,000 aCabletron Systems, Inc. .......................................................................... 68,625
1,700 aCisco Systems, Inc. .............................................................................. 96,263
600 aCompaq Computer Corp. ............................................................................ 29,550
600 Hewlett-Packard Co. ............................................................................... 59,775
1,200 Intel Corp. ....................................................................................... 88,124
1,900 Linear Technology Corp. ........................................................................... 57,000
1,300 Molex, Inc. ....................................................................................... 41,275
2,000 aSilicon Graphics, Inc. ........................................................................... 48,000
400 United Technologies Corp. ......................................................................... 46,000
1,600 aXilinx, Inc. ..................................................................................... 50,800
------------
608,587
------------
Energy/Minerals 4.0%
3,000 aBarrett Resources Corp. .......................................................................... 89,250
700 Royal Dutch Petroleum Co., New York Shares......................................................... 107,625
------------
196,875
------------
Financial Services 7.4%
900 American International Group, Inc. ................................................................ 88,763
800 Citicorp .......................................................................................... 66,100
2,200 Federal National Mortgage Association.............................................................. 73,700
2,800 Schwab (Charles) Corp. ............................................................................ 68,600
300 Wells Fargo & Co. ................................................................................. 71,963
------------
369,126
------------
Health Care Services 1.6%
1,200 aPacificare Health Systems, Inc., Class B.......................................................... 81,300
------------
Health Technology 13.2%
1,300 Abbott Laboratories................................................................................ 56,550
1,300 Allergan, Inc. .................................................................................... 51,025
Health Technology (cont.)
1,000 American Home Products Corp. ...................................................................... $ 60,125
1,300 aAmgen, Inc. ...................................................................................... 70,200
2,000 Baxter International, Inc. ........................................................................ 94,500
1,900 aBoston Scientific Corp. .......................................................................... 85,500
1,000 aGenzyme Corp. .................................................................................... 50,250
1,500 Johnson & Johnson.................................................................................. 74,250
900 Lilly (Eli) & Co. ................................................................................. 58,500
900 Merck & Co., Inc. ................................................................................. 58,163
------------
659,063
------------
Industrial Services 2.9%
2,300 Browning-Ferris Industries, Inc. .................................................................. 66,700
900 Schlumberger, Ltd. ................................................................................ 75,825
------------
142,525
------------
Process Industries 3.8%
1,500 Air Products and Chemicals, Inc. .................................................................. 86,625
1,200 Millipore Corp. ................................................................................... 50,250
1,000 Sigma-Aldrich Corp. ............................................................................... 53,500
------------
190,375
------------
Producer Manufacturing 3.4%
700 Emerson Electric Co. .............................................................................. 63,263
800 Minnesota Mining & Manufacturing Co. .............................................................. 55,200
1,500 aU.S. Filter Corp. ................................................................................ 52,125
------------
170,588
------------
Retail 2.1%
1,200 McDonald's Corp. .................................................................................. 56,100
2,400 aOffice Depot, Inc. ............................................................................... 48,900
100 aSaks Holdings, Inc. .............................................................................. 3,412
------------
108,412
------------
Technology Services 11.5%
1,500 Adobe Systems, Inc. ............................................................................... 53,813
100 aAspect Development, Inc. ......................................................................... 2,550
1,300 Automatic Data Processing, Inc. ................................................................... 50,213
500 aBroderbund Software, Inc. ........................................................................ 16,125
1,400 Electronic Data Systems Corp. ..................................................................... 75,250
1,200 First Data Corp. .................................................................................. 95,550
3,200 aInformix Corp. ................................................................................... 72,000
900 aIntuit, Inc. ..................................................................................... 42,525
300 aMicrosoft Corp. .................................................................................. 36,038
1,300 aOracle Corp. ..................................................................................... 51,269
1,000 aSterling Software, Inc. .......................................................................... 77,000
------------
572,333
------------
Transportation 3.7%
2,500 Air Express International Corp. ................................................................... 70,624
1,600 aFritz Cos., Inc. ................................................................................. 51,600
2,100 Southwest Airlines Co. ............................................................................ 61,162
------------
183,386
------------
Utilities 3.7%
1,800 aAES Corp. ........................................................................................ $ 50,850
2,300 aAirTouch Communications, Inc. .................................................................... 64,974
1,400 GTE Corp. ......................................................................................... 62,650
------------
178,474
------------
Total Long Term Investments (Cost $4,101,739)............................................... 4,088,569
------------
Face
Amount
g,hReceivables from Repurchase Agreements 5.4%
$ 270,124 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $271,483) (Cost $271,360)
Chase Securities, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $39,016)
Collateral: U..S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $37,387)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc. (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............................. 271,360
------------
Total Investments (Cost $4,373,099) 87.5%............................................... 4,359,929
Other Assets and Liabilities, Net 12.5%................................................. 622,861
------------
Net Assets 100.0% ...................................................................... $4,982,790
============
At June 30, 1996, the net unrealized depreciation based on the
cost of investments for income tax purposes of $4,373,099 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................... $ 91,917
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................... (105,087)
------------
Net unrealized depreciation ..................................................................... $ (13,170)
============
aNon icome producing.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Shares/ Value
Country* Warrants Templeton International Smaller Companies Fund (Note 1)
Common Stocks & Warrants 41.4%
Argentina .6%
<S> <C> <C> <C>
US 100 bComercial Industrial Financiera Inmobiliari Agropecuaria, ADR ....................... $ 280
AR 12,300 Mirgor, SA, Comercial Industrial Financiera Inmobi, Class C, ADR ..................... 34,440
------------
34,720
------------
Austria 1.6%
AT 1,153 Boehler Uddeholm, AG.................................................................. 89,409
------------
Bermuda
US 100 Sea Containers, Ltd., Class A......................................................... 1,900
------------
Canada .4%
CA 1,480 Hudsons Bay Co. ...................................................................... 22,440
------------
China 1.7%
CN 131,000 Dongfang Electrical Machinery Co., Ltd., Class H...................................... 32,832
US 92,000 bGuangdong Electric Power Development Co., Ltd., Class B.............................. 58,832
------------
91,664
------------
Denmark 1.7%
DK 1,247 Det Danske Traelastkompagni, AS....................................................... 91,748
------------
France 2.2%
FR 706 aMarine Wendel ....................................................................... 58,464
FR 179 Sa des Galeries Lafayette ............................................................ 61,102
------------
119,566
------------
Germany 1.0%
DD 1,316 Moebel Walther, AG.................................................................... 56,263
------------
Hong Kong 6.4%
HK 361,000 Baltrans Holdings, Ltd. .............................................................. 48,968
HK 70,000 C.P. Pokphand Co., Ltd. .............................................................. 27,807
HK 120,000 Hung Hing Printing Group, Ltd. ....................................................... 31,780
HK 60,000 Kumagai Gumi Hong Kong, Ltd. ......................................................... 53,871
HK 7,800 aKumagai Gumi Hong Kong, Ltd., warrants............................................... 1,189
HK 210,000 Sinocan Holdings, Ltd. ............................................................... 92,239
HK 23,000 Swank International Manufacturing Co., Ltd. ......................................... 4,011
HK 656,000 Techtronic Industries Co., Ltd. ...................................................... 90,679
------------
350,544
------------
Indonesia 1.3%
ID 39,500 PT Steady Safe, fgn. ................................................................. 54,307
ID 9,500 PT Tambang Timah (Persero), fgn. ..................................................... 17,551
------------
71,858
------------
Italy 3.0%
IT 6,250 Cartiere Burgo, SPA .................................................................. 34,173
US 3,600 a,bEsaote Biomedica, SPA, ADR......................................................... 129,381
------------
163,554
------------
Netherlands 4.8%
NL 1,103 Crown-Van Gelder Papier, SA........................................................... 95,716
NL 1,046 De Boer Winkelbedrijven, NV........................................................... 53,358
NL 315 Hollandsche Beton Groep, NV .......................................................... 60,396
NL 2,416 Internatio-Mueller, NV................................................................ 53,264
------------
262,734
------------
New Zealand 1.9%
NZ 800 Helicopter Line (The) ................................................................ $ 1,541
US 7,200 aTranz Rail Holdings, Ltd., ADR....................................................... 99,900
------------
101,441
------------
Norway 1.8%
NO 4,015 bUnion Bank of Norway, Primary Capital Certificate.................................... 98,364
------------
Spain 4.0%
ES 831 Cristaleria Espanola, SA ............................................................. 52,195
ES 3,755 Dragados y Construcciones, SA......................................................... 49,722
ES 11,095 aEnergia e Industrias Aragonesas Eia S ............................................... 54,693
ES 1,080 Gesa-Gas y Electricidad, SA........................................................... 59,904
------------
216,514
------------
Sweden 4.7%
US 6,300 a,bDahl International, AB............................................................. 88,015
SE 3,000 Foereningsbanken, AB, Class A......................................................... 9,878
SE 1,260 Marieberg Tidnings, AB, Class A ...................................................... 31,590
SE 7,995 Munksjo, AB........................................................................... 62,791
SE 5,675 Scribona, AB, Class B................................................................. 59,570
SE 1,200 Stena Line, AB, Class B, free......................................................... 5,709
------------
257,553
------------
Switzerland 2.5%
CH 52 Sarna Kunststoff Holding, AG.......................................................... 54,901
CH 100 aSwisslog Holding, AG................................................................. 29,594
CH 120 Zehnder Holding, AG................................................................... 49,430
------------
133,925
------------
Turkey .6%
TH 98,875 bTofas Turk Otomobil Fabrikasi, AS, GDR............................................... 33,618
------------
United Kingdom 1.2%
GB 9,400 Lex Service, Plc. .................................................................... 54,743
GB 5,270 aMcBride, Plc. ...................................................................... 10,721
------------
65,464
------------
Total Long Term Investments (Cost $2,164,464)................................... 2,263,279
------------
Face
Amount
fShort Term Investments 18.1%
US $1,000,000 U.S. Treasury Bills, 5.12%, 09/19/96 (Cost $988,480).................................. 988,760
------------
Total Investments before Repurchase Agreements (Cost $3,152,944)................ 3,252,039
------------
gReceivables from Repurchase Agreements 43.4%
US $ 828,660 BA Securities, Inc., 5.40%, 07/01/96, (Maturity Value $800,360)
Collateral: U.S. Treasury Bills, 09/26/96 ........................................... $ 800,000
US 786,907 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $768,342)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01 .................................... 768,000
US 817,590 Smith Barney, Inc., 5.27%, 07/01/96, (Maturity Value $800,351)
Collateral: U.S. Treasury Notes, 6.875%, 10/31/96 ................................... 800,000
------------
Total Receivables from Repurchase Agreements (Cost $2,368,000).................. 2,368,000
------------
Total Investments (Cost $5,520,944) 102.9%................................. 5,620,039
Liabilities in Excess of Other Assets (2.9)% .............................. (157,938)
------------
Net Assets 100.0% ........................................................ $5,462,101
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $5,520,944 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ....................................................... $ 126,934
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ....................................................... (27,839)
------------
Net unrealized appreciation ........................................................ $ 99,095
============
</TABLE>
CURRENCY LEGEND:
AR - Argentina
AT - Austria
CA - Canada
CH - Switzerland
CN - China
DD - Germany
DK - Denmark
ES - Spain
FR - France
GB - United Kingdom
HK - Hong Kong
ID - Indonesia
IT - Italy
NL - Netherlands
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
fCertain short-term securities are traded on a discount basis; the rates shown
are the discount rate at the time of purchase by the Fund. Other securities bear
interest at the rates shown, payable at fixed dates or upon maturity.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements
Statements of Assets and Liabilities
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Templeton Investment Grade
Adjustable U.S. Global Income High Intermediate Precious
Government Fund Securities Fund Income Fund Bond Fund Metals Fund
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost.............................. $186,098,338 $211,454,138 $336,198,296 $125,576,693 $105,596,112
=========== ========== ========== ========== ==========
At value........................................ 185,421,610 210,433,794 337,293,936 125,600,576 114,924,117
Receivables from repurchase agreements,
at value and cost.............................. 6,852,696 7,455,000 27,371,663 33,528,713 7,416,580
Cash........................................... -- 462 271,855 648,448 --
Foreign currencies (Cost $247)................. -- 247 -- -- --
Receivables:
Dividends and interest.......................... 1,755,955 5,562,872 7,022,109 1,594,207 187,831
Investment securities sold...................... 438,418 -- -- -- 1,360,019
Capital shares sold............................. 1,442 20,624 -- -- 24,228
----------- ---------- ---------- ---------- ----------
Total assets.................................... 194,470,121 223,472,999 371,959,563 161,371,944 123,912,775
----------- ---------- ---------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................... -- -- 4,807,365 -- --
When-issued basis (Note 1)..................... 20,059,653 -- -- -- --
Capital shares repurchased...................... 339,406 35,306 -- -- 1,724,546
Management fees................................. 81,874 99,857 154,404 76,086 63,846
Accrued expenses and other liabilities......... 8,985 18,636 11,345 9,775 16,607
Unrealized loss on forward foreign currency
contracts (Note 2)............................. -- 81,229 -- -- --
----------- ---------- ---------- ---------- ----------
Total liabilities............................... 20,489,918 235,028 4,973,114 85,861 1,804,999
----------- ---------- ---------- ---------- ----------
Net assets, at value............................ $173,980,203 $223,237,971 $366,986,449 $161,286,083 $122,107,776
=========== ========== ========== ========== ==========
Net assets consist of:
Undistributed net investment income............ $ 5,728,864 $ 5,710,199 $ 16,995,921 $ 4,370,290 $ 788,752
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies.. (676,728) (1,123,123) 1,096,650 23,883 9,328,212
Undistributed net realized gain (loss) from
investments and foreign currency transactions.. (13,843,348) (7,017,017) 456,693 (629,048) 1,730,651
Capital shares................................. 182,771,415 225,667,912 348,437,185 157,520,958 110,260,161
----------- ---------- ---------- ---------- ----------
Net assets, at value............................ $173,980,203 $223,237,971 $366,986,449 $161,286,083 $122,107,776
=========== ========== ========== ========== ==========
Shares outstanding.............................. 17,015,354 17,747,988 28,448,771 12,038,869 8,182,324
=========== ========== ========== ========== ==========
Net asset value per share....................... $10.22 $12.58 $12.90 $13.40 $14.92
=========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Real Estate U.S. Government Zero Coupon Zero Coupon Zero Coupon
Securities Fund Securities Fund Fund - 2000 Fund - 2005 Fund - 2010
---------- ---------- ---------- --------- ----------
Assets:
Investments in securities:
At identified cost................................ $183,642,920 $576,245,965 $125,920,919 $74,761,492 $69,766,814
========== ========== ========== ========= ==========
At value.......................................... 215,361,867 572,640,581 131,311,210 78,890,497 74,714,151
Receivables from repurchase agreements,
at value and cost................................ 17,504,215 10,331,334 -- 342,052 1,964,705
Cash............................................. -- 380 95,271 92,441 726,533
Receivables:
Dividends and interest............................ 1,640,017 4,066,511 14 -- --
Investment securities sold........................ -- 66,189 -- -- --
Capital shares sold............................... 48,738 139,581 43,430 -- --
---------- ---------- ---------- --------- ----------
Total assets...................................... 234,554,837 587,244,576 131,449,925 79,324,990 77,405,389
---------- ---------- ---------- --------- ----------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1)....................... 405,600 -- -- -- --
Capital shares repurchased........................ 113,996 1,246,664 332,082 -- --
Management fees................................... 105,066 235,187 39,778 23,836 15,186
Accrued expenses and other liabilities........... 16,153 42,078 5,305 4,663 40,246
---------- ---------- ---------- --------- ----------
Total liabilities................................. 640,815 1,523,929 377,165 28,499 55,432
---------- ---------- ---------- --------- ----------
Net assets, at value.............................. $233,914,022 $585,720,647 $131,072,760 $79,296,491 $77,349,957
========== ========== ========== ========= ==========
Net assets consist of:
Undistributed net investment income.............. $ 4,931,182 $ 20,284,371 $ 4,012,250 $ 2,397,428 $ 2,365,319
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies.... 31,718,947 (3,605,384) 5,390,291 4,129,005 4,947,337
Undistributed net realized gain (loss) from
investments and foreign currency transactions... 401,968 (15,874,865) 19,385 (6,924) (112,389)
Capital shares................................... 196,861,925 584,916,525 121,650,834 72,776,982 70,149,690
---------- ---------- ---------- --------- ----------
Net assets, at value.............................. $233,914,022 $585,720,647 $131,072,760 $79,296,491 $77,349,957
========== ========== ========== ========= ==========
Shares outstanding................................ 13,067,390 45,724,527 9,025,164 5,169,145 5,170,715
========== ========== ========== ========= ==========
Net asset value per share......................... $17.90 $12.81 $14.52 $15.34 $14.96
========== ========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton Templeton
Money Growth and Income International Pacific
Market Fund Income Fund Securities Fund Equity Fund Growth Fund
--------- --------- ------------ ----------- ----------
Assets:
Investments in securities:
At identified cost............................ $375,039,414 $815,964,222 $1,203,674,923 $ 769,452,857 $334,161,143
========= ========= ============ =========== ==========
At value...................................... 375,039,414 929,390,532 1,255,379,463 853,816,627 379,691,664
Receivables from repurchase agreements,
at value and cost............................ 57,200,000 55,900,396 43,688,098 146,904,000 9,711,000
Cash......................................... 4,240 527,988 -- 4,422 226
Receivables:
Dividends and interest........................ 878,046 3,448,648 19,491,780 5,968,113 1,381,333
Investment securities sold.................... -- 5,196,414 953,028 142,319 --
Capital shares sold........................... 662,642 -- -- 898,871 443,731
From affiliates............................... 17,736 -- -- -- --
Prepaid expenses............................. 6,373 -- -- -- --
--------- --------- ------------ ----------- ----------
Total assets.................................. 433,808,451 994,463,978 1,319,512,369 1,007,734,352 391,227,954
--------- --------- ------------ ----------- ----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................. -- 908,700 6,194,941 2,450,798 1,315
When-issued basis (Note 1)................... -- -- 739,115 -- --
Capital shares repurchased.................... 4,440,525 -- 969,136 -- --
Management fees............................... 137,337 378,322 493,964 -- 278,991
Accrued expenses and other liabilities....... -- 42,245 65,511 996,275 102,520
--------- --------- ------------ ----------- ----------
Total liabilities............................. 4,577,862 1,329,267 8,462,667 3,447,073 382,826
--------- --------- ------------ ----------- ----------
Net assets, at value.......................... $429,230,589 $993,134,711 $1,311,049,702 $1,004,287,279 $390,845,128
========= ========= ============ =========== ==========
Net assets consist of:
Undistributed net investment income.......... $-- $ 19,325,567 $ 47,258,926 $ 19,559,661 $--
Accumulated distributions in excess of
net investment income........................ -- -- -- -- (431,923)
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies............ -- 113,426,310 51,705,376 84,363,770 45,530,521
Undistributed net realized gain (loss)
from investments and foreign
currency transactions........................ -- 17,159,627 10,613,204 11,714,108 (4,238,361)
Capital shares............................... 429,230,589 843,223,207 1,201,472,196 888,649,740 349,984,891
--------- --------- ------------ ----------- ----------
Net assets, at value.......................... $429,230,589 $993,134,711 $1,311,049,702 $1,004,287,279 $390,845,128
========= ========= ============ =========== ==========
Shares outstanding............................ $429,230,589 61,226,096 81,475,748 71,173,798 26,236,248
========= ========= ============ =========== ==========
Net asset value per share..................... $1.00 $16.22 $16.09 $14.11 $14.90
========= ========= ============ =========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton
Developing Templeton
Rising Utility Markets Global
Dividends Fund Equity Fund Equity Fund Growth Fund
---------- ----------- ---------- ----------
Assets:
Investments in securities:
At identified cost............................................ $343,283,118 $1,213,133,094 $238,224,929 $364,644,293
========== =========== ========== ==========
At value...................................................... 449,681,048 1,315,480,122 250,961,248 417,736,030
Receivables from repurchase agreements, at value and cost.... 54,657,235 4,645,079 -- 68,320,000
Cash......................................................... -- 676,256 25,817 116,962
Foreign currencies (Cost $159,280)........................... -- -- 159,280 --
Receivables:
Dividends and interest........................................ 1,079,315 4,241,583 965,677 1,597,260
Investment securities sold.................................... 504,000 2,316,705 30,857 --
Capital shares sold........................................... 119,836 -- 383,627 569,551
---------- ----------- ---------- ----------
Total assets.................................................. 506,041,434 1,327,359,745 252,526,506 488,339,803
---------- ----------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased............................... 26,220 -- 239,777 9,936,080
Capital shares repurchased.................................... 324,706 -- -- --
Management fees............................................... 314,076 494,242 252,916 333,329
Accrued expenses and other liabilities....................... 16,737 37,748 100,273 87,434
---------- ----------- ---------- ----------
Total liabilities............................................. 681,739 531,990 592,966 10,356,843
---------- ----------- ---------- ----------
Net assets, at value.......................................... $505,359,695 $1,326,827,755 $251,933,540 $477,982,960
========== =========== ========== ==========
Net assets consist of:
Undistributed net investment income.......................... $ 5,025,117 $ 29,934,329 $ 2,931,786 $ 4,132,517
Net unrealized appreciation on investments
and translation of assets and liabilities denominated
in foreign currencies........................................ 106,397,930 102,346,510 12,736,319 53,091,737
Undistributed net realized gain (loss) from investments
and foreign currency transactions............................ (14,609,194) 21,881,440 1,402,424 (3,642,714)
Capital shares............................................... 408,545,842 1,172,665,476 234,863,011 424,401,420
---------- ----------- ---------- ----------
Net assets, at value.......................................... $505,359,695 $1,326,827,755 $251,933,540 $477,982,960
========== =========== ========== ==========
Shares outstanding............................................ 38,005,837 74,845,398 22,802,874 37,912,576
========== =========== ========== ==========
Net asset value per share..................................... $13.30 $17.73 $11.05 $12.61
========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton
Templeton International
Global Asset Small Capital Smaller
Allocation Fund Cap Fund Growth Fund Companies Fund
--------- ---------- -------- -----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost................................................. $27,675,297 $ 90,561,640 $4,101,739 $3,152,944
========= ========== ======== ===========
At value........................................................... 29,115,425 93,202,863 4,088,569 3,252,039
Receivables from repurchase agreements, at value and cost......... 5,898,000 1,845,563 271,360 2,368,000
Cash.............................................................. 189,354 1,433,722 751,374 --
Receivables:
Dividends and interest............................................. 266,800 92,857 2,913 9,464
Investment securities sold......................................... -- 4,172,475 -- --
Capital shares sold................................................ 149,862 -- -- 37,161
--------- ---------- -------- -----------
Total assets....................................................... 35,619,441 100,747,480 5,114,216 5,666,664
--------- ---------- -------- -----------
Liabilities:
Payables:
Investment securities purchased.................................... 592,177 619,708 127,134 114,339
Management fees.................................................... 17,964 66,992 2,449 --
Accrued expenses and other liabilities............................ 21,846 306 1,843 5,032
Unrealized loss on forward foreign currency contracts (Note 2).... 414 -- -- --
Bank overdraft.................................................... -- -- -- 1,152
Foreign currency overdraft, at value and cost..................... -- -- -- 84,040
--------- ---------- -------- -----------
Total liabilities.................................................. 632,401 687,006 131,426 204,563
--------- ---------- -------- -----------
Net assets, at value............................................... $34,987,040 $100,060,474 $4,982,790 $5,462,101
========= ========== ======== ===========
Net assets consist of:
Undistributed net investment income............................... $532,431 $225,075 $5,579 $24,325
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies............................................. 1,439,346 2,641,223 (13,170) 99,095
Undistributed net realized gain (loss) from investments
and foreign currency transactions................................. 64,865 3,150,229 -- (2,662)
Capital shares.................................................... 32,950,398 94,043,947 4,990,381 5,341,343
--------- ---------- -------- -----------
Net assets, at value............................................... $34,987,040 $100,060,474 $4,982,790 $5,462,101
========= ========== ======== ===========
Shares outstanding................................................. 3,078,439 8,237,812 489,535 528,897
========= ========== ======== ===========
Net asset value per share.......................................... $11.37 $12.15 $10.18 $10.33
========= ========== ======== ===========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations
for the six months ended June 30, 1996 (unaudited)
Adjustable U.S. Templeton Investment Grade
Government Global Income High Intermediate Precious Real Estate
Fund Securities Fund Income Fund Bond Fund Metals Fund Securities Fund
------------- ------------ ------------- --------------- ------------ -------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest1 (Note 1).................... $6,269,587 $9,157,921 $17,381,075 $4,865,176 $ 424,852 $ 499,132
Dividends............................. -- -- 594,966 -- 790,572 5,087,196
------------- ------------ ------------- --------------- ------------ -------------
Total income........................... 6,269,587 9,157,921 17,976,041 4,865,176 1,215,424 5,586,328
------------- ------------ ------------- --------------- ------------ -------------
Expenses:
Management fees (Note 6).............. 515,424 637,086 936,441 470,692 395,223 617,918
Reports to shareholders............... 14,283 17,000 19,290 10,901 8,085 12,734
Custodian fees........................ 1,923 31,750 13,628 4,122 16,062 5,849
Professional fees..................... 4,067 3,600 5,364 3,582 2,512 4,076
Trustees' fees and expenses........... 722 1,050 1,372 694 638 895
Other................................. 3,848 633 4,957 4,686 4,110 12,207
------------- ------------ ------------- --------------- ------------ -------------
Total expenses......................... 540,267 691,119 981,052 494,677 426,630 653,679
------------- ------------ ------------- --------------- ------------ -------------
Net investment income................. 5,729,320 8,466,802 16,994,989 4,370,499 788,794 4,932,649
------------- ------------ ------------- --------------- ------------ -------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments........................... (966,844) (1,282,676) 460,869 (202,994) 1,760,003 836,912
Foreign currency transactions......... -- (56,009) (1,127) -- (29,352) --
Net unrealized appreciation (depreciation) on:
Investments............................ 323,295 (4,365,517) (3,846,126) (2,984,999) 4,990,330 9,633,065
Translation of assets and liabilities
denominated in foreign currencies..... -- (108,014) 2,858 -- 417 --
------------- ------------ ------------- --------------- ------------ -------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................... (643,549) (5,812,216) (3,383,526) (3,187,993) 6,721,398 10,469,977
------------- ------------ ------------- --------------- ------------ -------------
Net increase in net assets resulting
from operations....................... $5,085,771 $2,654,586 $13,611,463 $1,182,506 $7,510,192 $15,402,626
============= ============ ============= =============== ============ =============
1Net of foreign taxes withheld of $82,507 in the Templeton Global Income
Securities Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
U.S. Government Zero Coupon Zero Coupon Zero Coupon Money Growth and
Securities Fund Fund - 2000 Fund - 2005 Fund - 2010 Market Fund Income Fund
--------------- ------------- ------------ -------------- ------------- ------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest (Note 1)................... $21,942,180 $4,277,963 $2,555,448 $ 2,518,841 $11,712,537 $ 1,942,218
Dividends2.......................... -- -- -- -- -- 19,703,938
--------------- ------------- ------------ -------------- ------------- ------------
Total income......................... 21,942,180 4,277,963 2,555,448 2,518,841 11,712,537 21,646,156
--------------- ------------- ------------ -------------- ------------- ------------
Expenses:
Management fees (Note 6)............ 1,494,980 369,885 247,257 240,468 1,100,542 2,210,098
Reports to shareholders............. 38,605 7,425 4,967 4,502 45,604 47,546
Custodian fees...................... 15,407 3,224 3,061 1,779 16,870 18,229
Professional fees................... 8,053 2,450 1,820 1,520 10,981 12,749
Trustees' fees and expenses......... 2,414 533 303 285 2,727 3,055
Other............................... 31,675 1,694 1,646 1,464 -- 42,637
Management fees waived by
manager (Note 6).................... -- (119,225) (101,435) (96,544) (268,707) --
--------------- ------------- ------------ -------------- ------------- ------------
Total expenses....................... 1,591,134 265,986 157,619 153,474 908,017 2,334,314
--------------- ------------- ------------ -------------- ------------- ------------
Net investment income............... 20,351,046 4,011,977 2,397,829 2,365,367 10,804,520 19,311,842
--------------- ------------- ------------ -------------- ------------- ------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments......................... (165,616) 19,680 -- 76,009 -- 17,308,153
Foreign currency transactions....... -- -- -- -- -- 7,947
Net unrealized appreciation (depreciation) on:
Investments.......................... (29,588,904) (6,905,014) (7,912,643) (11,390,023) -- 13,395,811
--------------- ------------- ------------ -------------- ------------- ------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................. (29,754,520) (6,885,334) (7,912,643) (11,314,014) -- 30,711,911
--------------- ------------- ------------ -------------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations........... $ (9,403,474) $(2,873,357) $(5,514,814) $ (8,948,647) $10,804,520 $50,023,753
=============== ============= ============ ============== ============= ============
2Net of foreign taxes and fees withheld of $426,563 for the Growth and Income Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
Templeton
Income Templeton Templeton Rising Developing
Securities International Pacific Dividends Utility Markets
Fund Equity Fund Growth Fund Fund Equity Fund Equity Fund
------------- -------------- ------------- ------------ ------------- -------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest (Note 1)................... $37,842,015 $ 5,760,211 $ 429,908 $ 1,463,710 $ 1,104,841 $ 711,306
Dividends3.......................... 15,134,941 20,045,205 4,574,674 5,431,833 32,015,299 3,815,049
------------- -------------- ------------- ------------ ------------- -------------
Total income......................... 52,976,956 25,805,416 5,004,582 6,895,543 33,120,140 4,526,355
------------- -------------- ------------- ------------ ------------- -------------
Expenses:
Management fees (Note 6)............ 3,008,518 3,766,436 1,668,116 1,810,335 3,161,268 1,317,027
Reports to shareholders............. 72,784 87,650 30,500 25,998 83,560 4,000
Custodian fees...................... 87,940 335,000 126,500 11,868 45,837 172,000
Professional fees................... 17,281 10,200 6,100 6,015 18,467 2,000
Trustees' fees and expenses......... 4,913 4,750 1,800 1,736 5,553 --
Other............................... 15,521 45,180 13,814 12,920 19,069 1,739
------------- -------------- ------------- ------------ ------------- -------------
Total expenses....................... 3,206,957 4,249,216 1,846,830 1,868,872 3,333,754 1,496,766
------------- -------------- ------------- ------------ ------------- -------------
Net investment income............... 49,769,999 21,556,200 3,157,752 5,026,671 29,786,386 3,029,589
------------- -------------- ------------- ------------ ------------- -------------
Realized and unrealized gain
(loss) from investments and
foreign currency:
Net realized gain (loss) from:
Investments......................... 10,957,132 12,098,187 (3,558,769) 203,185 29,593,403 1,829,137
Foreign currency transactions....... (340,048) (255,705) (10,078) -- (43,501) (171,960)
Net unrealized appreciation (depreciation) on:
Investments.......................... (9,127,495) 72,678,896 42,072,054 27,984,801 (4,177,801) 22,481,561
Translation of assets and
liabilities denominated in
foreign currencies.................. 50,443 -- -- -- (1,069) 48,919
------------- -------------- ------------- ------------ ------------- -------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................. 1,540,032 84,521,378 38,503,207 28,187,986 25,371,032 24,187,657
------------- -------------- ------------- ------------ ------------- -------------
Net increase in net assets
resulting from operations........... $51,310,031 $106,077,578 $41,660,959 $33,214,657 $55,157,418 $27,217,246
============= ============== ============= ============ ============= =============
3Net of foreign taxes and fees withheld of $77,609, $338,257, and $237,059 in
the Income Securities Fund, Templeton Pacific Growth Fund, and Templeton
Developing Markets Equity Fund, respectively.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
Templeton
Templeton Templeton International
Global Global Asset Small Capital Smaller
Growth Fund Allocation Fund Cap Fund Growth Fund* Companies Fund*
------------- -------------- ----------- ------------ ----------------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)................................... $ 1,590,049 $ 425,369 $ 330,028 $ 6,003 $ 17,615
Dividends4.......................................... 5,970,832 245,088 105,086 3,876 12,036
------------- -------------- ----------- ------------ ----------------
Total income......................................... 7,560,881 670,457 435,114 9,879 29,651
------------- -------------- ----------- ------------ ----------------
Expenses:
Management fees (Note 6)............................ 1,787,343 95,790 201,695 2,449 4,763
Reports to shareholders............................. 5,000 4,300 1,128 573 65
Custodian fees...................................... 85,440 10,727 540 328 200
Professional fees................................... 6,000 3,000 4,804 556 150
Trustees' fees and expenses......................... 500 125 62 65 50
Other............................................... 3,991 3,199 1,383 329 98
------------- -------------- ----------- ------------ ----------------
Total expenses....................................... 1,888,274 117,141 209,612 4,300 5,326
------------- -------------- ----------- ------------ ----------------
Net investment income............................... 5,672,607 553,316 225,502 5,579 24,325
------------- -------------- ----------- ------------ ----------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments......................................... (3,981,410) 83,561 3,150,203 -- (2,662)
Foreign currency transactions....................... (8,527) (13,048) -- -- --
Net unrealized appreciation (depreciation) from:
Investments......................................... 38,274,436 1,057,542 2,479,402 (13,170) 99,095
Translation of assets and liabilities denominated
in foreign currencies............................... -- (357) -- -- --
------------- -------------- ----------- ------------ ----------------
Net realized and unrealized gain (loss) from
investments and foreign currencies.................. 34,284,499 1,127,698 5,629,605 (13,170) 96,433
------------- -------------- ----------- ------------ ----------------
Net increase (decrease) in net assets resulting
from operations..................................... $39,957,106 $1,681,014 $5,855,107 $ (7,591) $120,758
============= ============== =========== ============ ================
4Net of foreign taxes withheld of $484,303 and $24,652 in the Templeton Global
Growth Fund and Global Asset Allocation Fund, respectively.
*May 1, 1996 (effective date) to June 30, 1996
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended June 30, 1996
(unaudited) and the year ended December 31, 1995
Adjustable U.S. Templeton Global
Government Fund Income Securities Fund High Income Fund
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 5,729,320 $ 13,331,187 $ 8,466,802 $ 18,687,112 $ 16,994,989 $ 31,021,484
Net realized gain (loss) from
investments and foreign
currency transactions ............ (966,844) (1,954,776) (1,338,685) (7,995,904) 459,742 1,770,719
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................ 323,295 7,421,084 (4,473,531) 22,864,210 (3,843,268) 22,884,579
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 5,085,771 18,797,495 2,654,586 33,555,418 13,611,463 55,676,782
Distributions to shareholders from:
Undistributed net
investment income................. (13,329,910) (13,455,726) (17,028,466) (9,275,583) (31,018,152) (21,305,944)
Net realized capital gains........ -- -- -- -- (1,646,547) --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... (7,875,255) (54,937,609) (5,582,233) (35,396,559) 25,136,139 71,496,259
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets..................... (16,119,394) (49,595,840) (19,956,113) (11,116,724) 6,082,903 105,867,097
Net assets:
Beginning of period............... 190,099,597 239,695,437 243,194,084 254,310,808 360,903,546 255,036,449
---------- ---------- ---------- ---------- ---------- ----------
End of period..................... $173,980,203 $190,099,597 $223,237,971 $243,194,084 $366,986,449 $360,903,546
========== ========== ========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 13,329,454 $ 13,453,993 $ 14,271,863 $ 20,717,930 $ 31,020,827 $ 21,367,505
========== ========== ========== ========== ========== ==========
End of period...................... $ 5,728,864 $ 13,329,454 $ 5,710,199 $ 14,271,863 $ 16,995,921 $ 31,020,827
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Investment Grade Real Estate
Intermediate Bond Fund Precious Metals Fund Securities Fund
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 4,370,499 $ 8,616,354 $ 788,794 $ 1,615,339 $ 4,932,649 $ 9,336,142
Net realized gain (loss) from
investments and foreign
currency transactions............. (202,994) 656,832 1,730,651 1,438,861 836,912 1,068,152
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................ (2,984,999) 6,077,509 4,990,747 (1,361,730) 9,633,065 21,851,218
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 1,182,506 15,350,695 7,510,192 1,692,470 15,402,626 32,255,512
Distributions to shareholders from:
Undistributed net
investment income................. (8,616,357) (6,603,637) (1,593,438) (1,664,388) (9,336,429) (6,411,953)
Net realized capital gains........ -- -- (1,460,667) (1,232,041) -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... 2,816,940 2,257,200 12,542,875 (18,765,586) 14,374,474 (8,066,883)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets........................ (4,616,911) 11,004,258 16,998,962 (19,969,545) 20,440,671 17,776,676
Net assets:
Beginning of period............... 165,902,994 154,898,736 105,108,814 125,078,359 213,473,351 195,696,675
---------- ---------- ---------- ---------- ---------- ----------
End of period..................... $161,286,083 $165,902,994 $122,107,776 $105,108,814 $233,914,022 $213,473,351
========== ========== ========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 8,616,148 $ 6,603,431 $ 1,615,202 $ 1,682,044 $ 9,334,962 $ 6,410,773
========== ========== ========== ========== ========== ==========
End of period...................... $ 4,370,290 $ 8,616,148 $ 788,752 $ 1,615,202 $ 4,931,182 $ 9,334,962
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
U.S. Government
Securities Fund Zero Coupon Fund - 2000 Zero Coupon Fund - 2005
---------------------- ---------------------- --------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............... $ 20,351,046 $ 41,653,906 $ 4,011,977 $ 7,341,344 $ 2,397,829 $ 4,217,941
Net realized gain (loss) from
investments and foreign
currency transactions............... (165,616) (891,143) 19,680 72,202 -- 27,440
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies.................. (29,588,904) 68,885,320 (6,905,014) 14,631,144 (7,912,643) 14,450,466
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets resulting
from operations..................... (9,403,474) 109,648,083 (2,873,357) 22,044,690 (5,514,814) 18,695,847
Distributions to shareholders from:
Undistributed net
investment income................... (41,654,771) (43,440,615) (7,341,063) (5,282,540) (4,218,190) (2,941,626)
Net realized capital gains.......... -- -- (72,481) -- -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3)............................ (6,386,579) (2,081,082) 4,002,940 26,364,407 5,807,792 15,968,605
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets....................... (57,444,824) 64,126,386 (6,283,961) 43,126,557 (3,925,212) 31,722,826
Net assets:
Beginning of period................. 643,165,471 579,039,085 137,356,721 94,230,164 83,221,703 51,498,877
---------- ---------- ---------- ---------- --------- ---------
End of period....................... $585,720,647 $643,165,471 $131,072,760 $137,356,721 $79,296,491 $83,221,703
========== ========== ========== ========== ========= =========
Undistributed net investment
income included in net assets:
Beginning of period.................. $ 41,588,096 $ 43,374,805 $ 7,341,344 $ 5,282,540 $ 4,217,789 $ 2,941,474
========== ========== ========== ========== ========= =========
End of period........................ $ 20,284,371 $ 41,588,096 $ 4,012,250 $ 7,341,344 $ 2,397,428 $ 4,217,789
========== ========== ========== ========== ========= =========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Zero Coupon Fund - 2010 Money Market Fund Growth and Income Fund
-------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
--------- --------- ---------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.............. $ 2,365,367 $ 4,092,137 $ 10,804,520 $ 25,363,309 $ 19,311,842 $ 22,234,234
Net realized gain from
investments and foreign
currency transactions.............. 76,009 1,268,380 -- 289 17,316,100 79,239,315
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................. (11,390,023) 17,390,706 -- -- 13,395,811 91,264,881
--------- --------- ---------- ----------- ---------- ----------
Net increase (decrease)
in net assets resulting
from operations.................... (8,948,647) 22,751,223 10,804,520 25,363,598 50,023,753 192,738,430
Distributions to shareholders from:
Undistributed net
investment income.................. (4,092,016) (2,074,389) (10,804,520) (25,363,598)+ (22,225,405) (8,012,262)
Net realized capital gains......... (1,109,315) -- -- -- (78,719,995) (17,435,234)
Increase (decrease) in net assets
from capital share transactions
(Note 3)........................... 5,867,143 19,594,876 (316,264) (89,071,533) 154,568,890 204,319,488
--------- --------- ---------- ----------- ---------- ----------
Net increase (decrease)
in net assets...................... (8,282,835) 40,271,710 (316,264) (89,071,533) 103,647,243 371,610,422
Net assets:
Beginning of period................ 85,632,792 45,361,082 429,546,853 518,618,386 889,487,468 517,877,046
--------- --------- ---------- ----------- ---------- ----------
End of period...................... $77,349,957 $85,632,792 $429,230,589 $429,546,853 $993,134,711 $889,487,468
========= ========= ========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................. $ 4,091,968 $ 2,074,248 $-- $-- $ 22,239,184 $ 8,017,077
========= ========= ========== =========== ========== ==========
End of period....................... $ 2,365,319 $ 4,091,968 $-- $-- $ 19,325,567 $ 22,239,184
========= ========= ========== =========== ========== ==========
+Distributions were increased by a net realized gain from security transactions of $289.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Templeton
Income Securities Fund International Equity Fund Pacific Growth Fund
------------------------ ----------------------- ----------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income........ $ 49,769,999 $ 91,009,891 $ 21,556,200 $ 23,458,911 $ 3,157,752 $ 7,241,924
Net realized gain (loss) from
investments and foreign
currency transactions........ 10,617,084 (15,464,708) 11,842,482 30,984,955 (3,568,847) 6,009,137
Net unrealized appreciation
(depreciation) on
investments and translation
of assets and liabilities
denominated in foreign
currencies................... (9,077,052) 152,006,805 72,678,896 26,564,752 42,072,054 12,826,175
----------- ----------- ----------- ---------- ---------- ----------
Net increase in
net assets resulting
from operations.............. 51,310,031 227,551,988 106,077,578 81,008,618 41,660,959 26,077,236
Distributions to shareholders
from:
Undistributed net
investment income............ (66,923,858) (63,454,170) (25,386,301) (13,634,404) (10,559,889) (6,625,094)
In excess of net investment
income....................... (431,923)
Net realized capital gains.. (11,129,687) (5,103,693) (31,064,816) (16,891,097) (6,370,263) (2,753,036)
Increase (decrease) in net
assets from capital share
transactions (Note 3)........ 71,255,714 107,540,999 104,544,196 14,509,031 34,610,363 (60,595,295)
----------- ----------- ----------- ---------- ---------- ----------
Net increase (decrease)
in net assets................ 44,512,200 266,535,124 154,170,657 64,992,148 58,909,247 (43,896,189)
Net assets:
Beginning of period.......... 1,266,537,502 1,000,002,378 850,116,622 785,124,474 331,935,881 375,832,070
----------- ----------- ----------- ---------- ---------- ----------
End of period................ $1,311,049,702 $1,266,537,502 $1,004,287,279 $850,116,622 $390,845,128 $331,935,881
=========== =========== =========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period........... $ 91,003,300 $ 67,603,145 $ 23,389,762 $ 13,466,616 $ 7,402,137 $ 6,796,802
=========== =========== =========== ========== ========== ==========
End of period................. $ 47,258,926 $ 91,003,300 $ 19,559,661 $ 23,389,762 $ (431,923) $ 7,402,137
=========== =========== =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Developing
Rising Dividends Fund Utility Equity Fund Markets Equity Fund
--------------------- ------------------------ ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......... $ 5,026,671 $ 10,367,695 $ 29,786,386 $ 65,692,968 $ 3,029,589 $ 2,632,898
Net realized gain from
investments and foreign
currency transactions.......... 203,185 251,515 29,549,902 2,816,631 1,657,177 3,236,155
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated
in foreign currencies.......... 27,984,801 88,320,864 (4,178,870) 282,539,662 22,530,480 (2,382,349)
---------- ---------- ----------- ----------- ---------- ----------
Net increase in
net assets resulting
from operations................ 33,214,657 98,940,074 55,157,418 351,049,261 27,217,246 3,486,704
Distributions to shareholders from:
Undistributed net
investment income.............. (10,368,611) (8,063,908) (65,540,030) (70,961,297) (2,182,460) (489,978)
Net realized capital gains..... -- -- -- -- (4,037,551) (115,132)
Increase (decrease) in net
assets from capital share
transactions (Note 3).......... 19,260,372 62,448,084 (86,235,833) (11,752,253) 72,852,463 57,013,367
---------- ---------- ----------- ----------- ---------- ----------
Net increase (decrease)
in net assets.................. 42,106,418 153,324,250 (96,618,445) 268,335,711 93,849,698 59,894,961
Net assets:
Beginning of period............ 463,253,277 309,929,027 1,423,446,200 1,155,110,489 158,083,842 98,188,881
---------- ---------- ----------- ----------- ---------- ----------
End of period.................. $505,359,695 $463,253,277 $1,326,827,755 $1,423,446,200 $251,933,540 $158,083,842
========== ========== =========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period............. $ 10,367,057 $ 8,063,270 $ 65,687,973 $ 70,953,514 $ 2,084,657 $ 758,368
========== ========== =========== =========== ========== ==========
End of period................... $ 5,025,117 $ 10,367,057 $ 29,934,329 $ 65,687,973 $ 2,931,786 $ 2,084,657
========== ========== =========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Global Templeton Global
Growth Fund Asset Allocation Fund
---------------------- ---------------------
1996 1995 1996 1995**
---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income........................................... $ 5,672,607 $ 6,108,912 $ 553,316 $ 251,964
Net realized gain (loss) from investments and foreign
currency transactions .......................................... (3,989,937) 7,733,119 70,513 11,985
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies........ 38,274,436 15,482,583 1,057,185 382,161
---------- ---------- --------- ---------
Net increase in net assets resulting from operations............. 39,957,106 29,324,614 1,681,014 646,110
Distributions to shareholders from:
Undistributed net investment income............................. (7,356,653) (1,324,712) (14,807) (246,062)
Net realized capital gains...................................... (7,356,653) -- (29,613) --
Increase in net assets from capital share transactions (Note 3).. 113,984,043 151,899,127 18,621,743 13,828,655
---------- ---------- --------- ---------
Net increase in net assets....................................... 139,227,843 179,899,029 20,258,337 14,228,703
Net assets:
Beginning of period............................................. 338,755,117 158,856,088 14,728,703 500,000
---------- ---------- --------- ---------
End of period................................................... $477,982,960 $338,755,117 $34,987,040 $14,728,703
========== ========== ========= =========
Undistributed net investment income included in net assets:
Beginning of period............................................. $ 5,816,563 $ 1,454,896 $ (6,078) $--
========== ========== ========= =========
End of period................................................... $ 4,132,517 $ 5,816,563 $ 532,431 $ (6,078)
========== ========== ========= =========
**April 19, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton
International
Capital Smaller
Small Cap Fund Growth Fund Companies Fund
--------------------- -------- -----------
1996 1995*** 1996* 1996*
---------- --------- -------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income............................................ $ 225,502 $ 33,213 $ 5,579 $ 24,325
Net realized gain (loss) from investments and foreign
currency transactions ........................................... 3,150,203 2,754 -- (2,662)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies............................................ 2,479,402 161,821 (13,170) 99,095
---------- --------- -------- -----------
Net increase (decrease) in net assets resulting
from operations ................................................. 5,855,107 197,788 (7,591) 120,758
Distributions to shareholders from:
Undistributed net investment income.............................. (33,640) -- -- --
Net realized capital gains....................................... (2,728) -- -- --
Increase in net assets from capital share transactions (Note 3)... 80,940,257 12,853,690 4,990,381 5,341,343
---------- --------- -------- -----------
Net increase in net assets........................................ 86,758,996 13,051,478 4,982,790 5,462,101
Net assets:
Beginning of period.............................................. 13,301,478 250,000 -- --
---------- --------- -------- -----------
End of period.................................................... $100,060,474 $13,301,478 $4,982,790 $5,462,101
========== ========= ======== ===========
Undistributed net investment income included in net assets:
Beginning of period.............................................. $ 33,213 $-- $-- $--
========== ========= ======== ===========
End of period.................................................... $ 225,075 $ 33,213 $ 5,579 $ 24,325
========== ========= ======== ===========
</TABLE>
*May 1, 1996 (effective date) to June 30, 1996.
***November 1, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Valuemark Funds (the Trust) is an open-end management investment
company (mutual fund) registered under the Investment Company Act of 1940, as
amended. The Trust currently consists of twenty-three separate funds (the
Funds), all of which are diversified except for the Templeton Global Income
Securities Fund. 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.
The investment objectives of each Fund are as follows:
Capital Growth
Precious Metals Fund
Templeton Developing Markets
Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton Pacific Growth Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Growth and Income
Growth and Income Fund
Income Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
Current Income
Adjustable U.S. Government Fund
Templeton Global Income Securities Fund
High Income Fund
Investment Grade Intermediate Bond Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Capital Preservation and Income
Money Market Fund
The Capital Growth Fund and the Templeton International Smaller Companies Fund
became effective on May 1, 1996.
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 price, 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 of Trustees
(the Board). Securities for which market quotations are not available, and
securities restricted as to resale, 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. 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 and will, therefore, not be reflected in the computation
of the Fund's net asset value, unless material. 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.
Portfolio securities in the Money Market Fund are valued at amortized cost,
which approximates value. The 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 trustees have 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
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.
Original issue discount is 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
distribution is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and any changes in unrealized
portfolio appreciation or depreciation.
For the Money Market Fund, distributions are normally declared 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 preceding day. Such distributions are declared and
reinvested daily in additional shares of the Fund at net asset value.
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 tax basis mark to market of unrealized gains with respect to passive
foreign investment company (PFIC) shares, differing treatments of foreign
currency transactions and defaulted securities - see Note 7.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to tax basis mark to market of unrealized gains with
respect to passive foreign investment company (PFIC) shares, differing treatment
of wash sale and foreign currency transactions.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
f. 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.
g. 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 fluctuations 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
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 Funds' 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 arise
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.
h. Repurchase Agreements:
The Funds may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System. A repurchase agreement is accounted for as a loan by the
Fund to the seller, collateralized by underlying U.S. government securities,
which are delivered to the Fund's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1996, all outstanding repurchase agreements held by the Funds had been
entered into on June 28, 1996.
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 Fund to the seller, collateralized by underlying U.S.
government securities, which are delivered to the Fund's custodian. The market
value, including accrued interest, of the
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
h. Repurchase Agreements: (cont.)
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At June 30, 1996, all
outstanding repurchase agreements held by the Funds, had been entered into on
June 28, 1996.
i. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may trade 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.
j. Mortgage Dollar Rolls:
The U.S. Government Securities Fund may enter into mortgage dollar rolls in
which the Fund 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 Templeton Global Income Securities Fund and Templeton 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 fund value. The 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 June 30, 1996, the Templeton Global Income Securities Fund had the
following forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
In Unrealized
Contracts to Sell (Foreign exchange currency) Exchange for Settlement Date Gain (Loss)
---------------------------- --------- ---------- -------
<S> <C> <C> <C>
394,000,000 Japanese Yen............ U.S. $ 3,612,260 07/15/96 U.S. $ 3,100
323,695,000 Japanese Yen............ 2,966,957 07/15/96 1,812
21,231,000 Deutsche Mark........... 13,948,355 07/23/96 (36,813)
10,573,000 Deutsche Mark........... 6,928,571 07/19/96 (34,372)
24,088,000 Deutsche Mark........... 15,860,934 08/01/96 (14,956)
--------- ---------- -------
U.S. $43,317,077 U.S. $(81,229)
========= =======
The Templeton Global Asset Allocation Fund had the following forward foreign
currency contracts outstanding:
In Unrealized
Contracts to Sell (Foreign exchange currency) Exchange for Settlement Date Gain (Loss)
- ---------------------------- --------- ---------- -------
<S> <C> <C> <C>
52,000 Deutsche Mark............... U.S. $ 34,076 07/19/96 U.S. $(169)
104,000 Deutsche Mark............... 68,326 07/23/96 (180)
104,000 Deutsche Mark............... 68,480 08/01/96 (65)
--------- -------
U.S. $170,882 U.S. $(414)
========= =======
3. TRUST SHARES
At June 30, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the six months ended June 30, 1996 and the year ended December 31, 1995 were as
follows:
Adjustable U.S. Templeton Global
Government Fund Income Securities Fund High Income Fund
------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Six months ended June 30, 1996
Shares sold................................. 2,425,163 $26,297,757 853,401 $11,343,371 5,714,936 $79,649,599
Shares issued in reinvestment of distributions 1,311,999 13,329,910 1,374,372 17,028,466 2,553,925
32,664,699
Shares redeemed............................. (4,387,128) (47,502,922) (2,550,831) (33,954,070) (6,241,198) (87,178,159)
-------- ---------- -------- ---------- -------- ----------
Net increase (decrease)................ (649,966) $ (7,875,255) (323,058) $ (5,582,233) 2,027,663 $25,136,139
======== ========== ======== ========== ======== ==========
Year ended December 31, 1995
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
======== ========== ======== ========== ======== ==========
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
-------- ---------- -------- --------- -------- --------- -------- ----------
Six months ended
June 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 856,663 $12,019,630 3,654,798 $60,460,047 1,530,457 $27,463,704 2,178,004 $29,950,797
Shares issued in
reinvestment of
distributions....... 647,360 8,616,357 200,532 3,054,106 521,297 9,336,429 3,298,081 41,654,771
Shares redeemed..... (1,271,344) (17,819,047) (3,140,697) (50,971,278) (1,250,944) (22,425,659) (5,696,202) (77,992,147)
-------- ---------- -------- --------- -------- --------- -------- ----------
Net increase
(decrease).......... 232,679 $ 2,816,940 714,633 $12,542,875 800,810 $14,374,474 (220,117) $ (6,386,579)
======== ========== ======== ========= ======== ========= ======== ==========
Year ended
December 31, 1995
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)
======== ========== ======== ========= ======== ========= ======== ==========
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 799,679 $12,335,361 614,698 $10,056,763 1,661,927 $27,105,481
Shares issued in reinvestment of distributions 517,344 7,413,544 282,342 4,218,190 361,958 5,201,331
Shares redeemed.............................. (1,022,008) (15,745,965) (516,320) (8,467,161) (1,600,406) (26,439,669)
-------- ---------- -------- --------- -------- ----------
Net increase ........................... 295,015 $ 4,002,940 380,720 $ 5,807,792 423,479 $ 5,867,143
======== ========== ======== ========= ======== ==========
3. TRUST SHARES (cont.)
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Year ended December 31, 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
======== ========== ======== ========= ======== ==========
Money Market Fund Growth and Income Fund Income Securities Fund
---------------------- --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
---------- ----------- -------- ---------- --------- -----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.......................... 299,789,423 $299,789,423 9,709,215 $169,556,522 7,460,586 $124,166,549
Shares issued in reinvestment
of distributions..................... 10,804,350 10,804,350 6,313,033 100,945,399 4,981,081 78,053,545
Shares redeemed...................... (310,910,037) (310,910,037) (6,694,390) (115,933,031) (7,878,933) (130,964,380)
---------- ----------- -------- ---------- --------- -----------
Net increase (decrease)......... (316,264) $ (316,264) 9,327,858 $154,568,890 4,562,734 $ 71,255,714
========== =========== ======== ========== ========= ===========
Year ended December 31, 1995
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
========== =========== ======== ========== ========= ===========
Templeton Templeton Rising
International Equity Fund Pacific Growth Fund Dividends Fund
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 5,089,140 $ 72,641,913 6,141,423 $92,160,402 4,649,806 $61,143,078
Shares issued in reinvestment of distributions 4,023,601 56,451,117 1,175,496 17,362,075 776,094 10,368,611
Shares redeemed............................. (1,739,985) (24,548,834) (4,950,771) (74,912,114) (4,008,624) (52,251,317)
-------- ---------- -------- --------- -------- ----------
Net increase........................... 7,372,756 $104,544,196 2,366,148 $34,610,363 1,417,276 $19,260,372
======== ========== ======== ========= ======== ==========
Year ended December 31, 1995
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
======== ========== ======== ========= ======== ==========
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund Global Growth Fund
--------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............................. 3,308,929 $ 59,205,881 8,261,997 $90,119,617 9,952,737 $124,748,935
Shares issued in reinvestment
of distributions......................... 3,882,703 65,540,030 568,038 6,220,011 1,172,375 14,713,306
Shares redeemed.......................... (11,879,902) (210,981,744) (2,185,380) (23,487,165) (2,052,821) (25,478,198)
--------- ---------- -------- --------- -------- ----------
Net increase (decrease)............. (4,688,270) $ (86,235,833) 6,644,655 $72,852,463 9,072,291 $113,984,043
========= ========== ======== ========= ======== ==========
3. TRUST SHARES (cont.)
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund Global Growth Fund
--------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- -------- --------- -------- ----------
Year ended December 31, 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
========= ========== ======== ========= ======== ==========
Templeton
Templeton Global Asset International Smaller
Allocation Fund Small Cap Fund Capital Growth Fund** Companies Fund**
------------------ ------------------- --------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------- --------- -------- ---------- ------ -------- ------ --------
Six months ended
June 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.................. 1,878,207 $20,827,524 8,766,894 $102,663,292 579,958 $5,894,657 536,166 $5,415,731
Shares issued in
reinvestment of distributions 3,931 44,420 2,914 36,368 -- -- -- --
Shares redeemed............. (203,649) (2,250,201) (1,830,784) (21,759,403) (90,423) (904,276) (7,269) (74,388)
------- --------- -------- ---------- ------ -------- ------ --------
Net increase ........... 1,678,489 $18,621,743 6,939,024 $ 80,940,257 489,535 $4,990,381 528,897 $5,341,343
======= ========= ======== ========== ====== ======== ====== ========
Year ended
December 31, 1995*
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 April 19, 1995 (effective date) to December 31, 1995 and for the
period November 1, 1995 (effective date) to December 31, 1995 for the Templeton
Global Asset Allocation Fund and Small Cap Fund, respectively.
**For the period May 1, 1996 (effective date) to June 30, 1996.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At December 31, 1995, for tax purposes, the Trust 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 Developing Templeton Templeton
International Pacific Markets Global Global Asset Small
Equity Fund Growth Fund Equity Fund Growth Fund Allocation Fund Cap Fund
--------- -------- -------- -------- ---------- ------
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
Templeton Investment Grade
Adjustable U.S. Global Income Intermediate Real Estate U.S. Government Zero Coupon
Government Fund Securities Fund Bond Fund Securities Fund Securities Fund Fund - 2005
----------- ---------- ----------- ---------- ---------- --------
Capital loss carryovers
Expiring in:
<S> <C> <C> <C> <C> <C> <C>
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
Expiring in:
2001............................. $ 2,985,091 $--
2002............................. 11,480,517 7,515,804
---------- --------
$14,465,608 $7,515,804
========== ========
</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 June 30, 1996 by $4,168 in Zero Coupon Fund - 2005,
$250,789 in Zero Coupon Fund - 2010, $9,777 in Growth and Income Fund,
$3,555,233 in Templeton Pacific Growth Fund, $346,771 in Rising Dividends Fund,
$855,891 in Templeton Global Growth Fund and $8,959 in Small Cap Fund.
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Templeton Investment Grade
Adjustable U.S. Global Income High Intermediate Precious Real Estate U.S. Government
Government Fund Securities Fund Income Fund Bond Fund Metals Fund Securities FundSecurities Fund**
----------- ---------- --------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases........... $98,747,502 $182,372,186 $39,204,226 $13,013,438 $19,647,671 $16,601,532 $25,553,980
Sales............... $83,632,612 $196,347,200 $44,031,345 $22,500,000 $ 6,620,755 $ 9,527,461 $51,071,570
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....................... $ 764,880 $2,227,312 $8,639,430 $194,693,340 $248,370,798 $82,815,367 $33,007,843
Sales........................... $3,060,034 -- $7,804,103 $ 99,433,417 $107,396,964 $41,773,155 $10,393,311
Templeton Templeton
Rising Developing Templeton Templeton International
Dividends Utility Markets Global Global Asset Small Capital Smaller
Fund Equity Fund Equity Fund Growth Fund Allocation Fund Cap Fund Growth Fund* Companies Fund*
--------- ---------- -------- --------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases....... $35,751,410 $231,608,449 $71,021,155 $88,806,660 $13,297,493 $97,354,289 $4,101,739 $2,164,464
Sales........... $19,180,812 $236,952,708 $ 8,552,443 $16,452,342 $ 4,100,444 $18,138,705 -- --
*For the period May 1, 1996 (effective date) to June 30, 1996.
**Excludes purchase and sales of mortgage dollar roll transactions, which aggregated $16,432,748 and $16,433,354,
respectively.
</TABLE>
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
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 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 as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.625 of 1% First $100 million
0.500 of 1% over $100 million, up to and including $250 million
0.450 of 1% over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
Under the terms of a separate management agreement with 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
Fees are further reduced on net assets 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
------------- ----------------------------------
0.750 of 1% First $500 million
0.625 of 1% over $500 million, up to and including $1 billion
0.500 of 1% over $1 billion
Templeton Global Advisers Ltd. (TGAL) 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
Fees are further reduced on net assets over $500 million.
TGAL 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
------------- ----------------------------------
0.650 of 1% First $200 million
0.585 of 1% over $200 million, up to and including $1.3 billion
0.520 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
Fees are further reduced on net assets over $500 million.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
a. Management Agreement: (cont.)
Under a subadvisory agreement, TICI provides services to the Templeton Global
Asset Allocation Fund and receives from TGAL fees computed monthly based on the
average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.250 of 1% First $200 million
0.225 of 1% over $200 million, up to and including $1.3 billion
0.200 of 1% over $1.3 billion
Under a subadvisory agreement, TICI provides services to the Templeton Global
Income Securities Fund and receives from Advisers fees computed monthly based on
the average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.350 of 1% First $100 million
0.250 of 1% over $100 million, up to and including $250 million
0.200 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
Fees are further reduced on net assets over $10 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
------------- ----------------------------------
0.150 of 1% First $200 million
0.135 of 1% over $200 million, up to and including $700 million
0.100 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets 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
------------- ----------------------------------
0.150 of 1% First $200 million
0.135 of 1% over $200 million, up to and including $700 million
0.100 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets over $1.2 billion.
Global Investors serves as the business manager for the Templeton Global Growth
Fund and receives from TGAL fees computed monthly based on the average daily net
assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.050 of 1% First $200 million
0.045 of 1% over $200 million, up to and including $700 million
0.033 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets 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. For the six months ended June 30,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees for the Zero Coupon Fund - 2000, Zero
Coupon Fund - 2005, Zero Coupon Fund - 2010, and Money Market Fund, aggregating
$585,911.
b. Distribution Plans:
The management agreements between the Funds, Advisers, TGAL 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.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Shareholder Services Agreement:
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.
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Advisers, Investor Services, TGAL, TAML, TICI, Global Investors, TQA (all
wholly-owned subsidiaries of Franklin Resources, Inc.), and/or Allianz Life.
7. CREDIT RISK AND DEFAULTED SECURITIES
The High Income Fund and the Income Securities Fund have 91.7% and 45.7%,
respectively, of their portfolios invested in lower rated and comparable quality
unrated securities. At June 30, 1996, the High Income Fund held one defaulted
security issued by one company with a value aggregating $41,097 representing
.01% of the Fund's net assets. The Income Securities Fund held three defaulted
securities issued by three companies with a value aggregating $8,420,656
representing .64% of the Fund's net assets.
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 the
Funds more significantly to economic changes occurring in certain industries or
sectors, as follows:
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 Equity Fund has investments in excess of
10% of its net assets in Argentina, Hong Kong and Mexico.
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.
8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investment of 5% or more of an issuer's outstanding voting securities held by
any of the Funds are defined in the Investment Company Act of 1940 as affiliated
companies. The investments in such companies at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Purchase Market Dividend
Fund Affiliate Cost Value Income
- ------------------------------ -------------------------- -------- -------- -------
<S> <C> <C> <C>
Income Securities Fund Tanger Factory Outlet Centers, Inc. $9,812,592 $8,379,300 $562,224
</TABLE>
9. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933. The
Fund may purchase restricted securities through a private offering and they
cannot be sold without prior registration under the Securities Act of 1933
unless such sale is pursuant to an exemption therefrom. Subsequent costs of
registration of such securities are borne by the issuer. A secondary market
exists for certain privately placed securities. For the Real Estate Securities
Fund and the Income Securities Fund restricted securities are currently valued
as disclosed in Note 1. At June 30, 1996, the Funds held restricted securities
with a value aggregating $1,530,466 and $41,001, respectively, representing .65%
and less than .01% of the respective Fund's net assets. Such securities are:
Real Estate Securities Fund
Shares Security Acquisition Date Cost Value
- ------ ------------- ------------ -------- --------
137,570 NVR, Inc. 4/8/94 $1,107,439 $1,530,466
Income Securities Fund
Shares/
Warrants
- ------
3,088 NVR, Inc. 10/17/89, 9/29/93 $63,831 $34,354
3,128 NVR, Inc. warrants 9/29/93 13,294 6,647
10. 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 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.
11. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate 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%6 7.19% 43.31% --
1992 10.86 .36 .12 .48 (.24) -- (.24) 11.10 4.45 256,980 .6046 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 --
1996** 10.76 .42 (.12) .30 (.84) -- (.84) 10.22 2.82 173,980 .59* 6.31* 49.69 --
Templeton Global Income Securities 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 --
1996** 13.46 .57 (.41) .16 (1.04) -- (1.04) 12.58 1.27 223,238 .60* 7.40* 83.65 --
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 --
1996** 13.66 .62 (.12) .50 (1.20) (.06) (1.26) 12.90 3.77 366,986 .54* 9.40* 10.86 --
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 --
1996** 14.05 .39 (.29) .10 (.75) -- (.75) 13.40 .77 161,286 .60* 5.34* 9.55 --
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 --
1996** 14.08 .08 1.14 1.22 (.20) (.18) (.38) 14.92 10.07 122,108 .64* 1.18* 5.68 .0305
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 --
1996** 17.40 .37 .88 1.25 (.75) -- (.75) 17.90 7.18 233,914 .59* 4.43* 4.52 .0531
11. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate 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*** --
1996** 14.00 .51 (.73) (.22) (.97) -- (.97) 12.81 (1.46) 585,721 .52* 6.66* 4.26*** --
Zero Coupon Fund - 2000
1991 11.40 .57 1.67 2.24 (.38) -- (.38) 13.26 20.19 27,699 .256 7.88 19.15 --
1992 13.26 .57 .58 1.15 (.53) -- (.53) 13.88 9.04 48,217 .256 6.97 9.10 --
1993 13.88 .66 1.55 2.21 (.62) (.03) (.65) 15.44 16.15 76,916 .376 5.88 7.02 --
1994 15.44 .68 (1.71) (1.03) (.69) (.10) (.79) 13.62 (6.76) 94,230 .406 6.37 -- --
1995 13.62 .75 2.03 2.78 (.67) -- (.67) 15.73 20.67 137,357 .406 6.14 1.63 --
1996** 15.73 .46 (.80) (.34) (.86) (.01) (.87) 14.52 (2.09) 131,073 .406* 6.01* .57 --
Zero Coupon Fund - 2005
1991 11.15 .54 1.65 2.19 (.43) -- (.43) 12.91 20.37 11,299 .256 8.00 4.54 --
1992 12.91 .65 .67 1.32 (.61) -- (.61) 13.62 10.81 18,295 .256 7.46 19.48 --
1993 13.62 .44 2.55 2.99 (.52) (.01) (.53) 16.08 22.21 42,998 .376 5.67 16.59 --
1994 16.08 .71 (2.24) (1.53) (.60) (.19) (.79) 13.76 (9.60) 51,499 .406 6.53 2.00 --
1995 13.76 .78 3.53 4.31 (.69) -- (.69) 17.38 31.76 83,222 .406 6.19 1.72 --
1996** 17.38 .44 (1.62) (1.18) (.86) -- (.86) 15.34 (6.65) 79,296 .406* 6.04* -- --
Zero Coupon Fund - 2010
1991 11.25 .56 1.58 2.14 (.55) -- (.55) 12.84 20.09 15,610 .256 8.05 22.44 --
1992 12.84 1.21 .03 1.24 (.73) -- (.73) 13.35 10.31 13,431 .256 7.64 54.50 --
1993 13.35 .50 2.81 3.31 (.94) (.04) (.98) 15.68 25.47 29,189 .256 5.89 36.63 --
1994 15.68 .55 (2.27) (1.72) (.63) (.31) (.94) 13.02 (10.97) 45,361 .406 6.57 4.34 --
1995 13.02 .76 4.75 5.51 (.49) -- (.49) 18.04 42.79 85,633 .406 6.41 31.45 --
1996** 18.04 .47 (2.43) (1.96) (.88) (.24) (1.12) 14.96 (10.63) 77,350 .406* 6.13* 10.11 --
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 .466 4.05 -- --
1995 1.00 .06 -- .06 (.06) -- (.06) 1.00 5.74 429,547 .406 5.58 -- --
1996** 1.00 .02 -- .02 (.02) -- (.02) 1.00 2.51 429,231 .426* 4.97* -- --
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 --
1996** 17.14 .29 .63 .92 (.40) (1.44) (1.84) 16.22 5.54 993,135 .50* 4.16* 11.57 .0462
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 --
1996** 16.47 .62 .02 .64 (.87) (.15) (1.02) 16.09 4.04 1,311,050 .50* 7.73* 9.01 .0521
11. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate Rate****
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 --
1996** 13.32 .29 1.35 1.64 (.38) (.47) (.85) 14.11 12.31 1,004,287 .91* 4.62* 5.31 .0158
Templeton Pacific Growth Fund
19921 10.00 -- (.12) (.12) -- -- -- 9.88 (1.20) 5,788 1.316* -- 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 --
1996** 13.91 .11 1.58 1.69 (.44) (.26) (.70) 14.90 12.16 390,845 .98* 1.68* 2.88 .0134
Rising Dividends Fund
19921 10.00 .06 .92 .98 -- -- -- 10.98 9.80 97,687 .676* 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 --
1996** 12.66 .13 .79 .92 (.28) -- (.28) 13.30 7.25 505,360 .77* 2.08* 4.48 .0497
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 --
1996** 17.90 .49 .26 .75 (.92) -- (.92) 17.73 4.42 1,326,828 .49* 4.40* 17.57 .0197
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 --
1996** 9.78 .10 1.46 1.56 (.10) (.19) (.29) 11.05 15.93 251,934 1.42* 2.87* 4.68 .0020
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 --
1996** 11.75 .11 1.16 1.27 (.20) (.21) (.41) 12.61 10.83 477,983 .94* 2.81* 4.58 .0097
Templeton Global Asset Allocation Fund
19953 10.00 .18 .52 .70 (.18) -- (.18) 10.52 7.01 14,729 .90* 3.84* 30.00 --
1996** 10.52 .18 .69 .87 (.01) (.01) (.02) 11.37 8.13 34,987 .97* 4.60* 25.16 .0135
Small Cap Fund
19954 10.00 .03 .21 .24 -- -- -- 10.24 2.30 13,301 .90* 2.70* 16.04 --
1996** 10.24 .01 1.90 1.91 -- -- -- 12.15 18.69 100,060 .78* .84* 34.47 .0519
Capital Growth Fund
19965 10.00 .01 .17 .18 -- -- -- 10.18 1.80 4,983 .32* .42* -- .0574
Templeton International Smaller Companies Fund
19965 10.00 .05 .28 .33 -- -- -- 10.33 3.30 5,462 .74* 3.37* -- .0075
</TABLE>
*Annualized.
**For the six months ended June 30, 1996.
***The portfolio turnover rate excludes mortgage dollar roll transactions.
****Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities. +Total return measures the change in value of an investment over the
periods indicated. It is not annualized. It assumes reinvestment of dividends
and capital gains at net asset value. ++Per share amounts have been calculated
using the average shares outstanding during the period.
11. FINANCIAL HIGHLIGHTS (cont.)
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. 5For the period May 1, 1996
(effective date) to June 30, 1996.
6During the periods indicated below, Advisers agreed to waive in advance a
portion of its management fees and made payments of other expenses incurred by
the Funds in the Trust. Had such action not been taken, the ratio of expenses to
average net assets would have been as follows:
Ratio of
expenses
to average
net assets
------
Adjustable U.S. Government Fund
1991........................... .66%
1992........................... .62
Zero Coupon Fund - 2000
1991........................... .68
1992........................... .68
1993........................... .67
1994........................... .66
1995........................... .63
1996**......................... .58*
Ratio of
expenses
to average
net assets
------
Zero Coupon Fund - 2005
1991........................... .71%
1992........................... .69
1993........................... .67
1994........................... .68
1995........................... .66
1996**......................... .65*
Zero Coupon Fund - 2010
1991........................... .70
1992........................... .69
1993........................... .68
1994........................... .68
1995........................... .66
1996**......................... .65*
Ratio of
expenses
to average
net assets
------
Money Market Fund
1994........................... .54%
1995........................... .53
1996**......................... .54*
Templeton Pacific Growth Fund
19921.......................... 2.57*
Rising Dividends Fund
19921.......................... .76*
THE INVESTMENT STRATEGY PYRAMID
As a Franklin ValuemarkSM contract owner, you can invest in up to nine
investment options at one time, or up to all 11 options under Franklin Templeton
Valuemark Income Plus (VIP). When selecting an option, there are two things you
may wish to consider: your investment objective and the degree of risk with
which you feel comfortable. Before you make these decisions, you may want to
review 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 Franklin Valuemark Funds prospectus
for more information about a specific option.
Capital Growth Fund*+
Precious Metals Fund
Small Cap Fund+
Templeton Developing Markets Equity Fund+
Templeton Global Growth Fund+
Templeton International Equity Fund+
Templeton International Smaller Companies Fund*+
Templeton Pacific Growth Fund+
Growth and Income Fund**,+
Income Securities Fund+
Real Estate Securities Fund
Rising Dividends Fund+
Templeton Global Asset Allocation Fund+
Utility Equity Fund+
Adjustable U.S. Government Fund++
High Income Fund
Investment Grade Intermediate
Bond Fund++
Templeton Global Income
Securities Fund++++
U.S. Government Securities Fund
Three Zero Coupon Funds
maturing in 2000, 2005, 2010
Money Market Fund+
Allianz Life Fixed Account++
High
Risk/Reward
Potential
Low
*As of June 30, 1996, the Capital Growth Fund and the Templeton International
Smaller Companies Fund were not available in California. They became available
on July 9, 1996.
**Formerly Equity Growth Fund.
+Investment options available under Valuemark Investment Plus (VIP).
++As of June 30, 1996, the Fixed Account is not available in Oregon and
Washington.
++Subject to regulatory approval, shares of the Adjustable U.S. Government Fund
and the Investment Grade Intermediate Bond Fund will be replaced by shares of
the U.S. Government Fund on October 25, 1996, or shortly thereafter. After the
substitution, the Adjustable U.S. Government Securities Fund and the Investment
Grade Intermediate Bond Fund will no longer be available.
++++Effective May 1, 1996, the Global Income Fund's name changed to the
Templeton Global Income Securities Fund. The portfolio's objective and
investment strategy remain unchanged.
Table of ContentsPage
Letter to Contract Owners 2
Economic Overview 3
Change in Unit Price Table 5
Franklin Valuemark Total Returns 6
Portfolio Objectives 10
Portfolio Profiles
Portfolios Seeking Capital Growth
Capital Growth Fund 15
Precious Metals Fund 15
Small Cap Fund 16
Templeton Developing Markets
Equity Fund 17
Templeton Global Growth Fund 17
Templeton International Equity Fund 19
Templeton International
Smaller Companies Fund 19
Templeton Pacific Growth Fund 20
Portfolios Seeking Growth and Income
Growth and Income Fund 20
Income Securities Fund 21
Real Estate Securities Fund 23
Rising Dividends Fund 25
Templeton Global Asset Allocation Fund 25
Utility Equity Fund 26
Portfolios Seeking Current Income
Adjustable U.S. Government Fund 27
High Income Fund 28
Investment Grade Intermediate
Bond Fund 29
Templeton Global Income
Securities Fund 29
U.S. Government Securities Fund 30
Zero Coupon Funds 31
Portfolio Seeking Capital Preservation and Income
Money Market Fund 32
Allianz Variable Account B
Financial Statements and Notes 33
Franklin Valuemark Funds
Statement of Investments 53
Financial Statements and Notes 138
For service regarding your contract, please contact your investment
representative. You may also call 1-800/624-0197 (Valuemark deferred variable
annuity), 1-800/774-5001 (VIP), or 1-800/342-FUND (Franklin Valuemark Funds). 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
August 15, 1996
Dear Contract Owner:
This semi-annual report covers the six months ended June 30, 1996, for the
Franklin Valuemark flexible premium deferred variable annuity, Franklin
Templeton Valuemark Income Plus (VIP), an immediate variable annuity, and the 23
Franklin Valuemark Funds available under the Valuemark variable annuities.
Currently, 11 of the Valuemark portfolios are available with VIP.
We introduced two new investment options over the reporting period. On May 1,
1996, we added the Capital Growth Fund and the Templeton International Smaller
Companies Fund. The Capital Growth Fund seeks capital appreciation, with current
income as a secondary objective, investing primarily in large- or mid-cap U.S.
companies. The Templeton International Smaller Companies Fund seeks long-term
capital appreciation through a flexible policy of investing primarily in equity
securities of smaller companies outside the U.S.
After October 25, 1996, shares of the Adjustable U.S. Government Fund and the
Investment Grade Intermediate Bond Fund will no longer be available and will be
replaced by shares of the U.S. Government Securities Fund. The substitution is
designed to benefit contract owners by consolidating the assets of portfolios
with similar investment objectives, strategies, and risks, thereby potentially
lowering operating costs.*
On the following pages you will find a summary covering global market conditions
over the past six months as well as discussions of each portfolio's performance.
The portfolios' performance tables, presented on pages 6 through 9, show
cumulative and average annual total returns. It is important to remember that
financial markets fluctuate daily, and past investment conditions and results
are not indicative of future trends.
We look to the future with confidence and believe Franklin Valuemark and VIP
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 you 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
*Substitution of shares is subject to regulatory approval.
ECONOMIC OVERVIEW
During the six-month reporting period, economic stability, relatively low
interest rates and moderate inflation contributed to strong performances for
most equity markets. Taking advantage of these favorable conditions, investors
poured record amounts of capital into the equity market, which ultimately led to
even higher stock prices in developed and developing countries.
The United States
No market epitomized the demand for equity securities more than the U.S., where
inflows of capital into mutual funds reached record levels. Despite potentially
troublesome concerns about the federal budget and debate over tax reform in the
first quarter of 1996, news of all-time market highs appeared nearly every week,
further encouraging new investments and pushing U.S. stock prices even higher.
The Dow Jones Industrial Average(R) rose more than 10% during the six-month
period, from 5117.12 on December 31, 1995, to 5654.63 on June 30, 1996.
Domestic bond markets had rallied through most of 1995 but began to decline in
February and March of 1996 amid signs of moderately accelerating economic
growth. Interest rates, which had been falling until January 1996, began to rise
and continued to do so throughout the reporting period, with the yield of the
30-year U.S. Treasury bond climbing from 5.96% on December 31, 1995, to 6.90% on
June 30, 1996.
It appears that the economy has continued to grow slowly. For the first quarter
of 1996, it grew at an annualized rate of approximately 2.8% with roughly 2%
inflation (second quarter growth is estimated to be around 3.5% to 4.05%).
Still, uncertainty and confusion followed a much stronger-than-expected
employment report released in early March. While well-known economists disagreed
on the market's direction, investors reacted to their mixed messages. Nervous
investors, fearing inflation might accelerate, caused a 3% decline in bond
prices and a short-lived 120-point drop in the Dow Jones Industrial Average on
March 8, 1996. Another positive employment report released in early June also
caused investors to over-react to imagined concerns of increasing inflation.
However, the U.S. Federal Reserve Board remained neutral in its stance on
monetary policy and chose not to raise the federal funds rate at its Open Market
Committee meeting in early July.
International
Consumer spending and confidence in the core European countries of France and
the United Kingdom remained relatively low due to their uncertain economic
prospects. Although historically low inflation levels resulted in lower interest
rates in these countries, economic growth was depressed, in part by the spending
restrictions required for membership in the European Monetary Union. This
depressed economic situation came at a time when growth was already faltering
and unemployment was rising. The German stock index (DAX), however, responding
to possibilities of further interest rate cuts and a more competitive local
currency, performed well in the first half of 1996.
Latin American equity markets continued to recover from the "Tequila Effect,"
which depressed stock prices following Mexico's December 1994 currency
devaluation. From December 1995 through June 1996, Mexico's
Bolsa Index rose more than 17% in U.S. dollar terms, and the Mexican peso
appreciated versus the U.S. dollar. Although Mexico has not entirely recovered,
there is evidence that the government's austerity program has been largely
successful in restoring investor confidence after significant amounts of capital
fled the country only 18 months ago.
Many Pacific Rim equity markets strengthened in response to improved economic
fundamentals, moderate inflation and low interest rates. A significant
development was the tremendous amount of Japanese equity securities purchased by
foreign investors (an estimated $36.9 billion in stock) as market sentiment
improved following the Japanese government's intervention in the country's
crippling banking crisis. Thailand, however, did not fare as well as other
countries in the region mainly because of concerns regarding political
leadership, economic stability, and lackluster corporate earnings.
Franklin Valuemark Variable Annuity
Change in Unit Prices
<TABLE>
<CAPTION>
% Change
Unit Price* Unit Price* in Unit Price
Portfolio Name 12/31/95 6/30/96 12/31/95 to 6/30/96
<S> <C> <C> <C>
Adjustable U.S. Government Fund $11.95 $12.20 2.10%
Capital Growth Fund $10.00** $10.16 1.57%
Growth and Income Fund+ $17.31 $18.14 4.81%
High Income Fund $17.25 $17.78 3.05%
Income Securities Fund $19.79 $20.44 3.31%
Investment Grade Intermediate Bond Fund $15.46 $15.47 0.07%
Money Market Fund $12.88 $13.12 1.80%
Precious Metals Fund $14.11 $15.21 7.83%
Real Estate Securities Fund $18.07 $19.23 6.43%
Rising Dividends Fund $12.50 $13.31 6.50%
Small Cap Fund $10.15 $11.97 17.98%
Templeton Developing Markets Equity Fund $ 9.58 $11.03 15.12%
Templeton Global Asset Allocation Fund $10.59 $11.38 7.47%
Templeton Global Growth Fund $11.34 $12.48 10.05%
Templeton Global Income Securities Fund++ $15.52 $15.61 0.56%
Templeton International Equity Fund $13.26 $14.79 11.53%
Templeton International Smaller Companies Fund $10.00** $10.31 3.07%
Templeton Pacific Growth Fund $13.63 $15.18 11.38%
U.S. Government Securities Fund $16.30 $15.95 -2.15%
Utility Equity Fund $19.56 $20.29 3.69%
Zero Coupon Fund - 2000 $18.29 $17.79 -2.77%
Zero Coupon Fund - 2005 $20.91 $19.39 -7.30%
Zero Coupon Fund - 2010 $22.43 $19.91 -11.25%
</TABLE>
*The unit prices have been rounded to the nearest hundredth. Percent change is
calculated using actual unit prices.
**Unit price at inception on May 1, 1996.
+Formerly Equity Growth Fund.
++Effective May 1, 1996, the Global Income Fund's name changed to the Templeton
Global Income Securities Fund. The portfolio's objective and investment strategy
remain unchanged.
Note: The unit value for each sub-account that invests in a
particular portfolio is the total value of assets of the sub-account (net assets
of the portfolio), minus the daily charges for mortality and expense risk and
administrative expenses (annualized at 1.4% of the account's average daily net
assets), plus or minus a charge or credit for any taxes reserved, divided by the
total number of outstanding units for the fund at the end of the valuation
period. The unit value does not take into account the contingent deferred sales
charge that declines from 6% to 1.5% over five years for Valuemark III, and 5%
to 1.5% over five years for Valuemark II, or the annual contract maintenance fee
of $30.
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 Valuemark contract owners only and may not be
used as sales literature.
Franklin Valuemark II
Total Return for the period ended June 30, 1996:
Without Contingent Deferred Sales Charge or Annual Contract Maintenance Fee
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Inception 1- 5- Since 3- 5- Since Unit Price
Portfolio Name Date Year Year Inception Year Year Inception 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adjustable U.S. Government Fund* 12/03/90 5.11% 3.33% 3.63% 8.56% 17.82% 22.03% $12.20
Capital Growth Fund+ 5/01/96 N/A N/A 1.57% N/A N/A 1.57% $10.16
Growth and Income Fund* 1/24/89 20.05% 11.53% 8.34% 40.87% 72.54% 81.42% $18.14
High Income Fund* 1/24/89 8.11% 10.96% 8.04% 24.03% 68.23% 77.77% $17.78
Income Securities Fund* 1/24/89 12.05% 11.13% 10.09% 22.76% 69.51% 104.41% $20.44
Investment Grade Int. Bond Fund* 1/24/89 3.27% 5.63% 6.05% 9.26% 31.51% 54.75% $15.47
Money Market Fund** 1/24/89 3.91% 2.60% 3.72% 9.33% 13.68% 31.16% $13.12
Precious Metals Fund* 1/24/89 8.54% 6.89% 5.81% 17.62% 39.56% 52.13% $15.21
Real Estate Securities Fund* 1/24/89 19.18% 12.33% 9.20% 30.70% 78.85% 92.35% $19.23
Rising Dividends Fund 1/27/92 20.62% N/A 6.67% 30.20% N/A 33.11% $13.31
Small Cap Fund+ 11/01/95 N/A N/A 19.71% N/A N/A 19.71% $11.97
Templeton Developing Markets Equity Fund* 3/15/94 13.97% N/A 4.36% N/A N/A 10.30% $11.03
Templeton Global Asset Allocation Fund+ 5/01/95 12.74% N/A 11.73% N/A N/A 13.82% $11.38
Templeton Global Growth Fund* 3/15/94 14.96% N/A 10.13% N/A N/A 24.79% $12.48
Templeton Global Income Securities Fund* 1/24/89 6.01% 5.46% 6.17% 12.21% 30.45% 56.10% $15.61
Templeton International Equity Fund 1/27/92 13.74% N/A 9.25% 47.52% N/A 47.92% $14.79
Templeton International
Smaller Companies Fund+ 5/1/96 N/A N/A 3.07% N/A N/A 3.07% $10.31
Templeton Pacific Growth Fund 1/27/92 16.64% N/A 9.89% 39.40% N/A 51.81% $15.18
U.S. Government Securities Fund 3/14/89 3.22% 6.51% 6.60% 10.19% 37.09% 59.48% $15.95
Utility Equity Fund 1/24/89 20.00% 10.21% 9.98% 16.59% 62.61% 102.87% $20.29
Zero Coupon - 2000** 3/14/89 2.41% 8.89% 8.21% 9.04% 53.12% 77.86% $17.79
Zero Coupon - 2005** 3/14/89 1.71% 11.04% 9.49% 11.15% 68.83% 93.87% $19.39
Zero Coupon - 2010** 3/14/89 1.59% 12.49% 9.89% 17.08% 80.13% 99.07% $19.91
</TABLE>
The above figures represent past performance of the portfolios whose inception
dates may have preceded the effective dates of the subaccounts, contracts, or
their availability in all states. The unit price (rounded to the nearest
hundredth) is the net asset value of the underlying sub-account divided by the
number of outstanding units at the end of the valuation period. The unit price
reflects all recurring fees except the contingent deferred sales charge, which
declines from 5% to 1.5% over five years for each purchase payment, or the
annual contract maintenance fee of $30. All unit prices were $10.00 at
inception. Total return is the cumulative or average annual percent change in
the unit price of the sub-account, assuming reinvestment of dividends and
capital gains. These figures assume the contract owner is still invested at the
end of the reporting period. Past performance is not indicative of future
performance.
Standardized performance data and other important disclosures are
on page 7. Please review this information and a Franklin Valuemark prospectus
before investing.
*Past expense reductions by the portfolio's manager increased the portfolio's
total returns.
**The manager agreed in advance to waive a portion of management fees and to
assume responsibility for other expenses. Without these reductions, the
portfolios' total returns would have been lower. The fee waiver may be
discontinued at any time upon notice to the portfolios' Board of Trustees. For
the Zero Coupon Funds, until at least December 31, 1996, the manager has agreed
to keep total expenses to a maximum of 0.40% of each portfolio's average monthly
net assets, which has the effect of increasing total return to contract holders.
+Figures for these time periods are not available due to the portfolios' recent
inception dates.
Franklin Valuemark II
Total Return for the period ended June 30, 1996:
With Contingent Deferred Sales Charge and Other Charges
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Inception 1- 5- Since 3- 5- Since
Portfolio Name Date Year Year Inception Year Year Inception
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable U.S. Government Fund* 12/03/90 0.76% 3.17% 3.54% 6.04% 16.91% 21.38%
Capital Growth Fund+ 5/1/96 N/A N/A -2.78% N/A N/A -2.78%
Growth and Income Fund* 1/24/89 15.70% 11.39% 8.25% 38.31% 71.51% 80.29%
High Income Fund* 1/24/89 3.76% 10.83% 7.95% 21.50% 67.26% 76.68%
Income Securities Fund* 1/24/89 7.70% 11.00% 10.01% 20.23% 68.54% 103.29%
Investment Grade Int. Bond Fund* 1/24/89 -1.08% 5.48% 5.96% 6.75% 30.59% 53.81%
Money Market Fund** 1/24/89 -0.44% 2.43% 3.62% 6.81% 12.77% 30.28%
Precious Metals Fund* 1/24/89 4.19% 6.75% 5.71% 15.10% 38.61% 51.14%
Real Estate Securities Fund* 1/24/89 14.83% 12.20% 9.11% 28.16% 77.84% 91.20%
Rising Dividends Fund 1/27/92 16.27% N/A 6.50% 27.64% N/A 32.14%
Small Cap Fund+ 11/01/95 N/A N/A 15.36% N/A N/A 15.36%
Templeton Developing Markets Equity Fund*+ 3/15/94 9.62% N/A 3.31% N/A N/A 7.77%
Templeton Global Asset Allocation Fund+ 5/01/95 8.39% N/A 8.61% N/A N/A 10.12%
Templeton Global Growth Fund* 3/15/94 10.61% N/A 9.15% N/A N/A 22.26%
Templeton Global Income Securities Fund* 1/24/89 1.66% 5.31% 6.09% 9.69% 29.52% 55.16%
Templeton International Equity Fund 1/27/92 9.39% N/A 9.08% 44.98% N/A 46.94%
Templeton International
Smaller Companies Fund+ 5/1/96 N/A N/A -1.28% N/A N/A -1.28%
Templeton Pacific Growth Fund 1/27/92 12.29% N/A 9.73% 36.87% N/A 50.84%
U.S.Government Securities Fund 3/14/89 -1.13% 6.37% 6.51% 7.67% 36.17% 58.52%
Utility Equity Fund 1/24/89 15.65% 10.08% 9.90% 14.03% 61.62% 101.80%
Zero Coupon - 2000** 3/14/89 -1.94% 8.76% 8.12% 6.52% 52.18% 76.86%
Zero Coupon - 2005** 3/14/89 -2.64% 10.92% 9.41% 8.62% 67.88% 92.82%
Zero Coupon - 2010** 3/14/89 -2.76% 12.37% 9.81% 14.55% 79.16% 97.98%
</TABLE>
The above figures represent past performance of the portfolios whose inception
dates may have preceded the effective dates of the subaccounts, contracts, or
their availability in all states. They are based on a $1,000 hypothetical
investment and represent the cumulative or average annual change in value of an
investment over the indicated periods. They reflect the deduction of an annual
asset charge of 1.4%, fund charges, an annual contract maintenance charge of $30
(prorated, based on an approximate average contract size of $30,000), and
applicable declining contingent deferred sales charges, assuming the account is
liquidated at the end of the reporting period, according to the following
schedule:
Years since deposit: 1 2 3 4 5 6
Charge: 5% 5% 4% 3% 1.5% 0%
The figures also assume reinvestment of dividends and capital gains and reflect
the application of an annual 15% cumulative free withdrawal privilege.
Investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when units are sold. Past performance does not
guarantee future results.
*Past expense reductions by the portfolio's manager increased the portfolio's
total returns.
**The manager agreed in advance to waive a portion of management fees and to
assume responsibility for other expenses. Without these reductions, the
portfolios' total returns would have been lower. The fee waiver may be
discontinued at any time upon notice to the portfolios' Board of Trustees. For
the Zero Coupon Funds, until at least December 31, 1996, the manager has agreed
to keep total expenses to a maximum of 0.40% of each portfolio's average monthly
net assets, which has the effect of increasing total return to contract holders.
+Figures for these time periods are not available due to the portfolios' recent
inception dates.
Franklin Valuemark III
Total Return for the period ended June 30, 1996:
Without Contingent Deferred Sales Charge or Annual Contract Maintenance Fee
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Inception 1- 5- Since 3- 5- Since Unit Price
Portfolio Name Date Year Year Inception Year Year Inception 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adjustable U.S. Government Fund* 12/03/90 5.11% 3.33% 3.63% 8.56% 17.82% 22.03% $12.20
Capital Growth Fund+ 5/01/96 N/A N/A 1.57% N/A N/A 1.57% $10.16
Growth and Income Fund* 1/24/89 20.05% 11.53% 8.34% 40.87% 72.54% 81.42% $18.14
High Income Fund* 1/24/89 8.11% 10.96% 8.04% 24.03% 68.23% 77.77% $17.78
Income Securities Fund* 1/24/89 12.05% 11.13% 10.09% 22.76% 69.51% 104.41% $20.44
Investment Grade Int. Bond Fund* 1/24/89 3.27% 5.63% 6.05% 9.26% 31.51% 54.75% $15.47
Money Market Fund** 1/24/89 3.91% 2.60% 3.72% 9.33% 13.68% 31.16% $13.12
Precious Metals Fund* 1/24/89 8.54% 6.89% 5.81% 17.62% 39.56% 52.13% $15.21
Real Estate Securities Fund* 1/24/89 19.18% 12.33% 9.20% 30.70% 78.85% 92.35% $19.23
Rising Dividends Fund 1/27/92 20.62% N/A 6.67% 30.20% N/A 33.11% $13.31
Small Cap Fund+ 11/01/95 N/A N/A 19.71% N/A N/A 19.71% $11.97
Templeton Developing Markets Equity Fund* 3/15/94 13.97% N/A 4.36% N/A N/A 10.30% $11.03
Templeton Global Asset Allocation Fund+ 5/01/95 12.74% N/A 11.73% N/A N/A 13.82% $11.38
Templeton Global Growth Fund* 3/15/94 14.96% N/A 10.13% N/A N/A 24.79% $12.48
Templeton Global Income Securities Fund* 1/24/89 6.01% 5.46% 6.17% 12.21% 30.45% 56.10% $15.61
Templeton International Equity Fund 1/27/92 13.74% N/A 9.25% 47.52% N/A 47.92% $14.79
Templeton International
Smaller Companies Fund+ 5/1/96 N/A N/A 3.07% N/A N/A 3.07% $10.31
Templeton Pacific Growth Fund 1/27/92 16.64% N/A 9.89% 39.40% N/A 51.81% $15.18
U.S. Government Securities Fund 3/14/89 3.22% 6.51% 6.60% 10.19% 37.09% 59.48% $15.95
Utility Equity Fund 1/24/89 20.00% 10.21% 9.98% 16.59% 62.61% 102.87% $20.29
Zero Coupon - 2000** 3/14/89 2.41% 8.89% 8.21% 9.04% 53.12% 77.86% $17.79
Zero Coupon - 2005** 3/14/89 1.71% 11.04% 9.49% 11.15% 68.83% 93.87% $19.39
Zero Coupon - 2010** 3/14/89 1.59% 12.49% 9.89% 17.08% 80.13% 99.07% $19.91
</TABLE>
The above figures represent past performance of the portfolios whose inception
dates may have preceded the effective dates of the subaccounts, contracts, or
their availability in all states. The unit price (rounded to the nearest
hundredth) is the net asset value of the underlying sub-account divided by the
number of outstanding units at the end of the valuation period. The unit price
reflects all recurring fees except the contingent deferred sales charge, which
declines from 6% to 1.5% over five years for each purchase payment, or the
annual contract maintenance fee of $30. All unit prices were $10.00 at
inception. Total return is the cumulative or average annual percent change in
the unit price of the sub-account, assuming reinvestment of dividends and
capital gains. These figures assume the contract owner is still invested at the
end of the reporting period. Past performance is not indicative of future
performance.
Standardized performance data and other important disclosures are
on page 9. Please review this information and a Franklin Valuemark prospectus
before investing.
*Past expense reductions by the portfolio's manager increased the portfolio's
total returns.
**The manager agreed in advance to waive a portion of management fees and to
assume responsibility for other expenses. Without these reductions, the
portfolios' total returns would have been lower. The fee waiver may be
discontinued at any time upon notice to the portfolios' Board of Trustees. For
the Zero Coupon Funds, until at least December 31, 1996, the manager has agreed
to keep total expenses to a maximum of 0.40% of each portfolio's average monthly
net assets, which has the effect of increasing total return to contract holders.
+Figures for these time periods are not available due to the portfolios' recent
inception dates.
Franklin Valuemark III
Total Return for the period ended June 30, 1996:
With Contingent Deferred Sales Charge and Other Charges
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Inception 1- 5- Since 3- 5- Since
Portfolio Name Date Year Year Inception Year Year Inception
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable U.S. Government Fund* 12/03/90 -0.09% 3.17% 3.54% 6.04% 16.91% 21.38%
Capital Growth Fund+ 5/1/96 N/A N/A -3.63% N/A N/A -3.63%
Growth and Income Fund* 1/24/89 14.85% 11.39% 8.25% 38.31% 71.51% 80.29%
High Income Fund* 1/24/89 2.91% 10.83% 7.95% 21.50% 67.26% 76.68%
Income Securities Fund* 1/24/89 6.85% 11.00% 10.01% 20.23% 68.54% 103.29%
Investment Grade Int. Bond Fund* 1/24/89 -1.93% 5.48% 5.96% 6.75% 30.59% 53.81%
Money Market Fund ** 1/24/89 -1.29% 2.43% 3.62% 6.81% 12.77% 30.28%
Precious Metals Fund* 1/24/89 3.34% 6.75% 5.71% 15.10% 38.61% 51.14%
Real Estate Securities Fund* 1/24/89 13.98% 12.20% 9.11% 28.16% 77.84% 91.20%
Rising Dividends Fund 1/27/92 15.42% N/A 6.50% 27.64% N/A 32.14%
Small Cap Fund+ 11/01/95 N/A N/A 14.51% N/A N/A 14.51%
Templeton Developing Markets Equity Fund*+ 3/15/94 8.77% N/A 3.31% N/A N/A 7.77%
Templeton Global Asset Allocation Fund+ 5/01/95 7.54% N/A 8.61% N/A N/A 10.12%
Templeton Global Growth Fund* 3/15/94 9.76% N/A 9.15% N/A N/A 22.26%
Templeton Global Income Securities Fund* 1/24/89 0.81% 5.31% 6.09% 9.69% 29.52% 55.16%
Templeton International Equity Fund 1/27/92 8.54% N/A 9.08% 44.98% N/A 46.94%
Templeton International
Smaller Companies Fund+ 5/1/96 N/A N/A -2.13% N/A N/A -2.13%
Templeton Pacific Growth Fund 1/27/92 11.44% N/A 9.73% 36.87% N/A 50.84%
U.S. Government Securities Fund 3/14/89 -1.98% 6.37% 6.51% 7.67% 36.17% 58.52%
Utility Equity Fund 1/24/89 14.80% 10.08% 9.90% 14.03% 61.62% 101.80%
Zero Coupon - 2000** 3/14/89 -2.79% 8.76% 8.12% 6.52% 52.18% 76.86%
Zero Coupon - 2005** 3/14/89 -3.49% 10.92% 9.41% 8.62% 67.88% 92.82%
Zero Coupon - 2010** 3/14/89 -3.61% 12.37% 9.81% 14.55% 79.16% 97.98%
</TABLE>
The above figures represent past performance of the portfolios whose inception
dates may have preceded the effective dates of the subaccounts, contracts, or
their availability in all states. They are based on a $1,000 hypothetical
investment and represent the cumulative or average annual increase in value of
an investment over the indicated periods. They reflect the deduction of an
annual asset charge of 1.4%, fund charges, an annual contract maintenance charge
of $30 (prorated, based on an approximate average contract size of $30,000), and
applicable declining contingent deferred sales charges, assuming the account is
liquidated at the end of the reporting period, according to the following
schedule:
Years since deposit: 1 2 3 4 5 6
Charge: 6% 5% 4% 3% 1.5% 0%
The figures also assume reinvestment of dividends and capital gains and reflect
the application of an annual 15% cumulative free withdrawal privilege.
Investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when units are sold. Past performance does not
guarantee future results.
*Past expense reductions by the portfolio's manager increased the portfolio's
total returns.
**The manager agreed in advance to waive a portion of management fees and to
assume responsibility for other expenses. Without these reductions, the
portfolios' total returns would have been lower. The fee waiver may be
discontinued at any time upon notice to the portfolios' Board of Trustees. For
the Zero Coupon Funds, until at least December 31, 1996, the manager has agreed
to keep total expenses to a maximum of 0.40% of each portfolio's average monthly
net assets, which has the effect of increasing total return to contract holders.
+Figures for these time periods are not available due to the portfolios' recent
inception dates.
PORTFOLIOOBJECTIVES
Portfolio Description
Portfolios Seeking Capital Growth
Capital Growth Fund*
Seeks capital appreciation with current income as a
secondary consideration. The portfolio invests primarily in
equity securities, including common stocks and securities
convertible into common stocks.
Precious Metals Fund
Seeks capital appreciation through concentration of its
investments in securities of issuers, including those in
developing markets, engaged in mining, processing or dealing
in gold and other precious metals. The portfolio's secondary
objective is to provide current income return through the
receipt of dividends or interest from its investments.
Small Cap Fund
Seeks long-term capital growth. The portfolio invests
primarily in equity securities of small capitalization
growth companies. Investments in small capitalization
companies may involve greater risks and greater volatility
than investments in larger and more established companies.
Templeton Developing Markets Equity Fund
Seeks long-term capital appreciation. The portfolio seeks to
achieve this objective by investing primarily in equity
securities of issuers in countries having developing markets
under normal market conditions.
Templeton Global Growth Fund
Seeks long-term capital growth; any income realized will be
incidental. The portfolio seeks to achieve its objective
through a flexible policy of investing in stocks and debt
obligations of companies and governments of any nation,
including developing markets under normal market conditions.
Templeton International Equity Fund
Seeks long-term capital growth. Under normal market
conditions, the portfolio will invest at least 65% of its
total assets in an internationally diversified portfolio of
equity securities. These equity securities will trade on
markets in countries other than the U.S., including
developing markets, and be issued by companies domiciled in
countries other than the U.S., or 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 International Smaller Companies Fund*
Seeks long-term capital appreciation. The portfolio seeks to
achieve this objective by investing primarily in equity
securities of smaller companies outside the U.S., including
developing markets under normal market conditions.
Templeton Pacific Growth Fund
Seeks long-term capital growth. Under normal conditions, the
portfolio will invest at least 65% of its assets in equity
securities which trade on markets in the Pacific Rim,
including developing markets, and which are issued by
companies domiciled in the Pacific Rim or companies that
derived at least 50% of either their revenues or pre-tax
income from activities in the Pacific Rim. For purposes of
the portfolio's 65% investment policy, the countries in the
Pacific Rim are Australia, Hong Kong, Indonesia, Japan,
Korea, Malaysia, New Zealand, Singapore and Thailand.
Portfolios Seeking Growth and Income
Growth and Income Fund
(Formerly Equity Growth Fund)
Seeks capital appreciation. The portfolio's secondary
objective is to provide current income return. The portfolio
pursues capital appreciation by investing primarily in
domestic common stocks, securities convertible into common
stocks and preferred stocks.
Income Securities Fund
Seeks to maximize income while maintaining prospects for
capital appreciation. The portfolio will pursue its
objective by investing in a diversified portfolio of
domestic and foreign (including developing markets) debt
obligations, which may include high yield, high risk,
lower-rated bonds, as well as equity securities, selected
with particular consideration of current income production
along with capital appreciation.
Real Estate Securities Fund
Seeks capital appreciation, with a secondary objective of
earning current income on its investments. The portfolio
pursues its principal objective by investing primarily in
securities of companies in the real estate industry,
primarily equity real estate investment trusts (REITs).
Rising Dividends Fund
Seeks capital appreciation and current income incidental to
capital appreciation. In seeking capital appreciation, the
portfolio invests with a long-term investment horizon.
Preservation of capital, while not an objective, is also an
important consideration. The portfolio seeks to achieve its
investment objectives by investing, as a fundamental policy,
at least 65% of its net assets in financially sound
companies that have paid consistently rising dividends based
on the investment philosophy that the securities of such
companies, because of their dividend record, have a strong
potential to increase in value.
Templeton Global Asset Allocation Fund
Seeks a high level of total return through a flexible policy
of investing in the following market segments: equity
securities of issuers of any nation, debt obligations of
companies and governments of any nation, and Money Market
Instruments. The mix of investments among these three market
segments will be adjusted in an attempt to capitalize on
total return potential produced by changing economic
conditions throughout the world.
Utility Equity Fund
Seeks both capital appreciation and current income by
concentrating investments in the securities of companies in
the public utilities industry. The portfolio pursues its
objective by investing, under normal conditions, at least
65% of the portfolio's total assets in securities of issuers
engaged in the public utilities industry, which includes the
manufacture, production, generation, transmission and sale
of gas and electric energy and water. Assets may also be
invested in issuers engaged in the communications field,
including entities such as telephone, telegraph, satellite,
microwave and other companies providing communication
facilities for the public benefit.
Portfolios Seeking Current Income
Adjustable U.S. Government Fund**
Seeks a high level of current income, consistent with lower
volatility of principal. The portfolio pursues its
investment objective by investing primarily in adjustable
rate securities with interest rates that reset at periodic
intervals and which are issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
High Income Fund
Seeks a high level of current return. As a secondary
objective, the portfolio seeks capital appreciation to the
extent consistent with its principal objective. The
portfolio may invest in both debt obligations and
dividend-paying common or preferred stocks, including high
risk securities, and will seek to invest in whatever type of
investment is offering the highest yield and expected total
return without excessive risk at the time of purchase.
Investment Grade Intermediate Bond Fund**
Seeks current income, consistent with preservation of
capital, primarily through investments in intermediate-term
investment grade corporate obligations and U.S. government
securities.
Templeton Global Income
Securities Fund+
(Formerly Global Income Fund)
Seeks high current income, consistent with preservation of
capital, with capital appreciation as a secondary
consideration. The portfolio will pursue its objectives by
investing at least 65% of its net assets in both domestic
and foreign debt obligations including those in developing
markets and related foreign currency transactions.
U.S. Government Securities Fund
Seeks to earn income through investments in a portfolio
limited to securities which are obligations of the U.S.
government, its agencies or instrumentalities. These
obligations may include fixed-rate or adjustable-rate
mortgage backed securities.
Three Zero Coupon Funds
(maturity dates: 2000, 2005, 2010)
Seek to provide as high an investment return as is
consistent with the preservation of capital. Each portfolio
seeks to return a reasonably assured targeted dollar amount,
predictable at the time of investment, on a specific target
date in the future by investing primarily in zero coupon
securities that pay no cash income but are acquired by the
portfolio at substantial discounts from their value at
maturity.
Portfolio Seeking Preservation of Capital and Income
Money Market Fund
Seeks to obtain as high a level of current income (in the
context of the type of investment available to the
portfolio) consistent with capital preservation and
liquidity. The portfolio will seek to maintain a $1 per
share net asset value, but there is no guarantee that it
will be successful in doing so.
*As of June 30, 1996, the Capital Growth Fund and the Templeton International
Smaller Companies Fund were not available in California. They became available
on July 9, 1996.
**Subject to regulatory approval, shares of the Adjustable U.S. Government Fund
and the Investment Grade Intermediate Bond Fund will be replaced by shares of
the U.S. Government Securities Fund on October 25, 1996, or shortly thereafter.
After the substitution, the Adjustable U.S. Government Fund and Investment Grade
Intermediate Bond Fund will no longer be available.
+Effective May 1, 1996, the name of the Global Income Fund changed to the
Templeton Global Income Securities Fund. The portfolio's objective and current
investment strategy remain unchanged.
PORTFOLIO PROFILES
Portfolios Seeking Capital Growth
NEW! Capital Growth Fund
The Franklin Valuemark Funds Trust added a new portfolio on May 1, 1996: the
Capital Growth Fund. The fund was created for investors seeking capital
appreciation in a diversified portfolio of primarily large- and
mid-capitalization equity securities, in what we consider to be generally
stable-growth companies with strong appreciation prospects over the long term.
The portfolio consists predominately of domestic equity securities, including
common stocks and securities convertible into common stocks. The mix of
securities is within sectors that we believe offer growth potential over the
longer term. Some of our top sectors as of June 30, 1996, included health
technology (13.2% of total net assets), electronic technology (12.2%),
technology services (11.5%), financial (7.4%), and consumer non-durables (4.1%).
Of course, these holdings will change as market conditions warrant.
The basic investment strategy of the fund is to buy what we believe are good
solid growth companies -- trading at attractive valuations -- and hold such
securities over the long term. This involves a "bottom-up" investment selection
process, with a continual review of fundamental criteria such as market
position, product cycles, strength of management, quality of earnings, potential
revenue and earnings growth, and valuation. Our adherence to a buy-and-hold
strategy within the fund, in securities which we believe offer significant
opportunities for future growth, should benefit you with solid growth of capital
over the long term.
Although most of the companies in which we invest are domestically domiciled,
many are globally competitive -- selling products or services throughout the
world. With favorable prospects for renewed economic growth worldwide, coupled
with increased moves toward capitalism in developing nations, we remain very
optimistic about the opportunities for growth through the fund's investments.
Precious Metals Fund
The Precious Metals Fund invests in quality mining companies with attractive
reserve, production and growth, with the objective of long-term capital
appreciation. This strategy was evident in the fund's top five holdings over the
reporting period: all are large capitalization, established, low-cost producers.
Our five largest positions as a percentage of total net assets on June 30, 1996,
were as follows: Placer Dome, Inc. (U.S./6.4% of total net assets), Santa Fe
Pacific Gold Corp. (U.S./6.4%), Barrick Gold Corp. (U.S./5.2%), Newmont Mining
Corp. (Canada/4.0%), and Freeport-McMoRan Copper & Gold, Inc. (U.S./3.9%). Of
course, these holdings will change as market conditions warrant.
For the first half of 1996, the gold market experienced increased volatility and
exceeded our forecasted trading range for the first time in two years. Gold
prices began 1996 at $387 an ounce, climbed strongly to peak at $416.25 by early
February, and have since retreated back to the $380 level by the end of the
reporting period. While both gold bullion and platinum experienced strong upward
movements before retracing and ending the period on a negative note -- down 1.0%
and 4.9%, respectively -- copper plunged with the announcement of the Sumitomo
scandal and never recovered -- dropping 27.5% by the end of the reporting
period.
Within our conservative investment policy, we increased exposure to smaller U.S.
companies with international exploration and mining potential, as well as to
South African companies where valuations appeared attractive. The new holdings
added during the period continue to focus on quality operations and uphold our
emphasis on diversifying geographically. Looking forward, our long-term outlook
for gold and the Precious Metals Fund remains optimistic. With demand exceeding
supply in all sectors, we believe gold fundamentals continue to improve and
support a gradual increase in the gold price. Given the difficulty of predicting
future gold prices, we will continue to invest in mining companies that should
be able to increase reserves, production, cash flow and earnings over the long
term.
Small Cap Fund
During the six months ended June 30, 1996, the stock market proved to be very
volatile, and solid gains made early in the year were partially offset by
profit-taking during the second quarter of 1996. We think the sell-off was due
in part to the fact that the economy appeared to be picking up steam, causing
investors to fear that interest rates may increase.
We continue to search for small capitalization companies in their emerging
growth phase. Our positive performance during the period was helped by our
exposure to the health services sector (4.0% of total net assets)
and energy sectors (5.2%); however, we continue to find many of the best growth
companies in the electronic technology sector (12.4%). Technology stocks were
volatile during the second quarter, but this volatility gave us the opportunity
to purchase what we believe are several solid growth companies at very
attractive prices. We picked up shares of Etec Systems, a leader in
semiconductor equipment manufacturing, and Verilink Corp., a manufacturer of
telecommunications network access products. We also purchased attractive names
outside the technology sector, including Norrell Corp., a provider of temporary
personnel and outsourcing services, and Designer Holdings, an apparel company
that sells sportswear under the Calvin Klein label.
We remain very optimistic about the long-term prospects for the fund, and for
small cap stocks in general. The economy continues to show signs of strength
and, at this time, there appears to us to be little threat of inflationary
pressure. We believe these conditions will provide an excellent opportunity for
small companies to grow and will provide ample investment opportunities for the
fund.
Templeton Developing Markets Equity Fund
We typically take a value-oriented approach when selecting securities for our
emerging markets portfolio, choosing individual stocks based on intrinsic value
and do not purchase solely on sectors of the economy or individual countries.
Nevertheless, the 1994 peso crisis in Mexico -- which had strong ramifications
for Latin American emerging markets -- brought to our attention a great number
of bargains in this region, particularly in the relatively high-liquidity
markets of Brazil, Argentina and Mexico. As of June 30, 1996, the fund held
35.6% of its total net assets in Latin America, including 12.8% in Argentina,
11.7% in Mexico, and 9.2% in Brazil. We also found many bargain stocks in Hong
Kong, where uncertainty over the prospect for the economy after the reversion to
Chinese rule in 1997 has suppressed the long-term growth in stock prices.
By industry, we were most heavily invested in the finance sector (27.9% of total
net assets on June 30, 1996).
Although we have stated that we do not choose securities based on sector or
country, it just so happens that many banks in emerging market countries have
strong valuations. We think this is a result of strong earnings growth due to
the new technology available to them. Also, we believe many of these banks have
high absolute earnings levels, as the shortage of good financing in emerging
markets provides an opportunity for very favorable profit margins.
We expect emerging market equities to resume their rally later this year. These
markets continue to show strong fundamentals (e.g.: high economic and earnings
growth) and, after a poor performance in 1995, these stocks are looking
undervalued to us. With foreign investors once again prepared to accept the
higher risk of investing in emerging markets, vis-a-vis their developed
counterparts, we think this could lead to increased liquidity, which should help
support further gains.
Templeton Global Growth Fund
On June 30, 1996, equities and debt obligations represented 87.4% of the fund's
total net assets. The remaining assets were concentrated in short-term
obligations.
During the past six months, the fund continued to show significant asset growth,
with total assets topping the $477 million mark by June 30, 1996. We adhered to
an investment philosophy of "bottom-up" selection, long-term investment decision
and discount price purchasing. Our top five holdings at the end of the reporting
period were AXA SA (France/1.7% of total net assets), Partnerre Ltd.
(Bermuda/1.6%), Societe Generale de Surveillance Holdings, SA Ltd.
(Switzerland/1.5%), Travelers, Inc. (U.S./ 1.5%), and UNUM Corp (U.S./ 1.49%).
Of course, these holdings will change as market conditions warrant.
The U.S. markets performed well during the six-month period, and the fund reaped
the benefits as its largest geographical weighting was in the U.S. (31.5% of
total net assets). Pharmacia & Upjohn and Nike, have been outstanding U.S.
performers and should continue to do so over the long run.
Not all European markets had such a favorable six months. France, in particular,
has been the victim of union disputes, which caused some French stocks
to lag behind their usual performance. However, with increased emphasis on
corporate restructuring and equities in general, we believe the future for
Europe looks quite favorable.
Latin American markets are still recovering from the Mexican peso devaluation,
which negatively affected some of the fund's Mexican holdings. On the whole, we
think investor confidence is being restored by the government's stringent
economic program, and the Mexican Bolsa index continues to rise.
In general, Asia seems to us to be an area of untapped investment and economic
growth. Potential bargain stocks are constantly being evaluated in this region,
with Hong Kong performing particularly well in the past six months.
Regarding investment sectors, real estate holdings form a large weighting in the
fund (5.7% of total net assets), particularly shares in real estate investment
trusts (REITs). Performance in this area has been good, with the exception of
Credit Foncier de France, which is currently undergoing restructuring, and MDX
Public Co., a Thai industry park developer that suffered construction delays on
several projects because of floods.
Another sizable sector is energy sources (4.4%). During the reporting period, we
made purchases in companies we believe to be undervalued such as Transportadora
de Gas del Sur (Argentina) and Societe Elf Aquitaine (France).
Templeton International Equity Fund
We continued to look for undervalued stocks using our disciplined approach of
detailed research of individual companies. With analysts and other research
sources around the world, we uncovered value in a wide range of places -- we
currently hold stocks in 32 countries. On June 30, 1996, our assets were
allocated in Europe (54.8% of total net assets), Asia (9.3%), Australia/New
Zealand (6.2%), North America (4.6%), and Latin America (4.7%), with the
remaining 20.4% of the fund invested in short-term and fixed-income securities.
Of course, these holdings will change as market conditions warrant.
European equity markets turned in mixed performances during the period. The
Netherlands (8.5% of total net assets), Sweden (10.8%), and Norway (2.7%) led
the way on the strength of stocks in the cyclical and banking sectors. The stock
market of the U.K. (8.6%), however, posted relatively lackluster returns
primarily because of the country's uncertain economic prospects and low levels
of consumer spending. Although low inflation resulted in lower interest rates in
these countries, economic growth was depressed in part by spending restrictions
required for membership in the European Monetary Union. This came at a time when
growth was already faltering and unemployment was rising.
Looking forward, 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. We are cautious in our outlook -- today's relatively high market
valuation levels make identifying investment bargains a particular challenge.
NEW! Templeton International
Smaller Companies Fund
On May 1, 1996, we introduced the Templeton International Smaller Companies
Fund. This fund seeks long-term capital appreciation by investing primarily in
the equity securities of smaller companies outside the U.S., including
developing markets. We invest in companies whose outstanding common stock has,
at the time of purchase by the portfolio, a market value of not more than $1
billion.
The portfolio managers' value-oriented strategy along with portfolio
diversification across numerous industries and in many markets are designed to
help manage the risks associated with foreign investments in smaller companies.
On June 30, 1996, 41.4% of the fund's total net assets were invested in equity
securities from Europe, North America and Asia, with the remaining 58.6% in
short-term securities. Of course, these holdings will change as market
conditions warrant.
Templeton Pacific Growth Fund
On June 30, 1996, the fund's top five geographic allocations were Japan (18.8%
of total net assets), Hong Kong (17.0%), Australia (15.7%), Thailand (8.9%), and
Singapore (7.6%). Of course, these holdings will change as market conditions
warrant.
The most notable development during the reporting period was the tremendous
amount of Japanese equities purchased by foreign investors. The Gaijin (a
Japanese term for foreigners) bought an estimated $36.9 billion in Japanese
stocks as market sentiment improved following that government's intervention in
the country's crippling banking crisis. These efforts resulted in the Nikkei 225
Index rebounding almost 7%, from $191.944 on December 31, 1995, to $205.348 on
June 30, 1996. Taking advantage of this rising equity market, we sold our shares
of Nintendo Corp., Ltd. following strong performance by the company's stock.
Another important development in this region was the improvement in
Chinese-British relations as the two countries reached an agreement regarding
the technical issues of Hong Kong's upcoming reversion to China. Real estate in
Hong Kong became more affordable, which boosted sales and propelled property
stocks higher. As a result of these developments, we maintained our relatively
large weighting in Hong Kong during the reporting period.
We remain optimistic about the Pacific Rim equity market's potential. Although
possibilities of higher interest rates in the U.S. and Japan could prove
problematic in the near future, the tremendous growth potential in this region
may lead to continued inflows of capital, which would be beneficial to stock
prices.
Portfolios Seeking Growth and Income
Growth and Income Fund
Our strategy has always been to buy stocks when they are out of favor and
represent bargains based on their longer-term prospects. An area that we
identified as having excellent valuations is international stocks. Many overseas
stocks are trading at significant discounts to their U.S. counterparts. We
purchased equity securities in the U.K. during the reporting period;
specifically, we purchased shares in British Steel, British Telecom and the
pharmaceutical company Glaxo Welcome Plc. All of these stocks had dividend
yields in excess of 4% and are trading near their recent lows. These purchases
boosted the fund's international stock holdings to 11% of total net assets by
June 30, 1996.
In the U.S., we selectively put cash to work. One area that drew our interest
during the reporting period was the basic materials sector, most notably the
forest/paper products companies. Although this industry's fundamentals are weak
in the near term, the stock prices of many industry leaders have been extremely
depressed and their long-term growth potential is excellent in our opinion.
Recent investments in this area include Union Camp, Weyerhauser, and Georgia
Pacific. Investments in the basic materials sector comprised 11.5% of the fund's
total net assets on June 30, 1996, down slightly from 10% six months ago.
We also continued to find excellent values in the electric utilities group.
These stocks performed well for us in late 1995, but their performance has been
adversely affected thus far in 1996 because of their sensitivity to higher
interest rates. We took advantage of specific weaknesses in these stocks to
initiate positions in Peco Energy, Pacific Gas & Electric, and Public Service
Enterprises. With these purchases, and additions to existing positions, 17.9% of
the portfolio's total net assets were in electric utilities on June 30 -- which
makes this sector the fund's largest. The fund's second largest sector -- at
15.9% of total net assets at the end of the reporting period -- was the energy
sector. During the period, we added to our holdings of industry leaders such as
Mobil Corp., Exxon Corp., and Atlantic Richfield Co. We believe these
well-managed, financially strong companies will benefit from a worldwide boost
in energy consumption in the years ahead.
We maintain a long-term perspective when managing the fund and will continue to
take advantage of investment opportunities as they arise in the months ahead. Of
course, the holdings previously described will change as market conditions
warrant.
Income Securities Fund
The first half of 1996 was generally characterized by an improving economic
outlook, rising interest rates, and a buoyant stock market. The sectors in which
the fund invests provided varied results in this environment, with most sectors
performing relatively well.
In response to market volatility, resulting from rising interest rates, we
utilized our cash position in purchasing securities we believed to be
undervalued. On June 30, 1996, bonds accounted for the largest portion of the
fund, representing 54.5% of total net assets. This can be broken down into
corporate straight bonds (28.9%), foreign government bonds (11.4%), U.S.
Treasuries (7.1%), and corporate convertible bonds (4.3%). Stocks represented
41.3% of the fund's total net assets, with the largest portions being common
stock (31.6%) and convertible preferred stock (9.2%). Cash equivalents made up
the remaining 4.2% of the portfolio's total net assets.
As indications of stronger economic growth led to rising long-term interest
rates, we increased our U.S. Treasury exposure over the reporting period, from
2.8% to 7.1% of total net assets, in response to what we considered to be
attractive yields. Corporate bonds, which represented the largest segment of
bonds in the fund, exhibited solid performance despite the rise in interest
rates. When purchasing corporate bonds, we focus on companies with significant
underlying assets and ample cash flow to service debt. We also seek bonds with
attractive yields and the potential for capital appreciation through improved
company operations and enhanced credit ratings. We initiated several corporate
bond positions during the period that met this criteria, including Harvey's
Casino Resorts (gaming), Plains Resources (energy), Riverwood International
(packaging), and Smith's Food & Drug (food retailing).
In addition, several corporate bond positions benefited from announced mergers
and acquisitions, including Motor Wheel Corp., Pace Industries, and Uniroyal
Chemical. These bonds experienced significant appreciation due to the
recognition that the combined entities would be stronger financially than the
companies on a stand-alone basis. Although the possibility of mergers or
acquisitions is not an overriding investment criteria, our value-oriented
approach can identify the securities of companies which are also attractive to
potential acquirers or partners.
Dollar-denominated Latin American bonds experienced some weakness due to the
rise in U.S. interest rates, which began in February. We took advantage of
market declines by initiating positions in dollar-denominated, collateralized
Brazilian and Ecuadorian Brady bonds. Subsequently, strength in the fund's Latin
American positions helped to offset weakness in our Canadian and South African
bonds.
Utilities represented our largest equity sector (20.8% of total net assets),
followed by energy (5.7%), metals (4.2%), real estate investment trusts (REITs)
(3.6%), and pharmaceuticals (2.4%). The interest-rate sensitive utility sector
was adversely affected by the rise in rates between February and June, while
strength in most other equity sectors of the fund offset this weak area. Gold
and energy stocks were especially strong during the period. Taking a contrarian
approach, we selectively added to the fund's existing utility positions in
Central & SouthWest, Entergy, General Public Utility, Potomac Energy, and
ScanaCorp., while initiating new positions in Peco and Western Resources.
Along with purchases in the utility sector, we also initiated common stock
positions in Canadian Oil Sands Trust (a Canadian oil project), Meditrust (a
health care REIT), and FelCor Suites (a hotel REIT). We also added several new
convertible securities to the portfolio, including Ashanti Goldfields Co., Ltd.
(metals), Cablevision Systems Corp. (cable systems), Nortel Inversora
(telecommunications), and Security Capital Industrial (industrial REIT).
Finally, we sold or reduced several of the fund's holdings in the energy,
airline, REIT and pharmaceutical sectors due to price appreciation, low relative
yields and limited appreciation potential.
In the future, we will continue to follow our value-oriented approach as we seek
income and growth from a diversified mix of stocks, bonds and cash. With the
stock market near all-time highs, we remain selective and opportunistic as we
search for additional investments for you. Of course, the previously mentioned
holdings will change as market conditions warrant.
Real Estate Securities Fund
The Real Estate Securities Fund seeks capital appreciation with current income
as a secondary objective. The portfolio invests in the securities of companies
operating in the real estate industry and focuses primarily on equity real
estate investment trusts (REITs). Equity
REITs are real estate companies that own and manage income-producing properties
such as apartments or hotels. This income, primarily rent from these properties,
is generally passed on to investors in the form of dividends. These companies
provide experienced property management teams and generally concentrate on a
specific geographic region and property type.
In general, the U.S. real estate market continued to improve during the
reporting period. Limited new property development and strong demand for space
resulted in rising occupancy levels and rental rates. Real estate fundamentals,
however, typically vary according to property type or geographic region. Over
the past year, for example, the retail sector experienced a period of weak
demand and overbuilding, while hotel properties enjoyed stronger demand and
limited new development. Although demand for real estate in general remained
weak in the Northeast, strong job growth caused demand to rise in the West.
Within this environment, we remained committed to our long-term investment
strategy: focusing on property types and geographic regions with strong supply
and demand fundamentals. We target stocks with significant growth prospects and
attractive valuations within each property sector. As a result, we maintained
the majority of the fund's investments during the reporting period in the
apartment, hotel, industrial and self-storage property types, where we
anticipated the most favorable supply and demand characteristics. Our large
positions in the apartment and hotel sectors contributed significantly
to our performance.
The largest property-type weighting continued to be in the apartment sector
(23.1% of total net assets at the end of the period). We maintained large
positions in apartment operators, such as Equity Residential Properties Trust
and Security Capital Pacific Trust, where we expect continued strong cash flow
growth. In addition, recognizing the continued rebound of the California
economy, we added to our holdings in Bay Apartment Communities, Inc. and Irvine
Apartment Communities, Inc., two California-based equity REITs.
In the hotel sector, growing demand for rooms continued to outpace construction,
driving room and occupancy rates higher. Anticipating that this trend should
continue, we maintained our overweighted position in this sector, roughly 17.3%
of total net assets on June 30, 1996. Our core holdings in this property type
include FelCor Suite Hotels, Inc., Winston Hotels, Inc. and Host Marriott
Corporation.
During the reporting period, we added two new positions to the fund. In Belmont
Homes, Inc., a manufactured-home builder located in the Southeast, we see an
opportunity to participate in the continued growth of this industry as home
buyers seek more affordable alternatives to traditional single family homes. The
other addition, Interstate Hotels Co., is the largest independent hotel
management company in the U.S. and should benefit as the hotel industry
continues to improve.
We also sold several securities during the six-month period in accordance with
our disciplined approach to valuation. We sold two positions in the apartment
sector and two positions in the hotel sector as the securities had become
overvalued relative to their growth prospects.
Looking forward, we will remain focused on those property types and geographic
areas exhibiting the most favorable supply and demand fundamentals. Within each
sector, we will continue to emphasize attractively valued securities of
well-managed companies generating strong cash flow and dividend growth. In our
opinion, the real estate industry should continue to benefit from limited new
development and steady demand for space from both new and existing tenants.
Therefore, we believe that the portfolio offers attractive return potential. Of
course, the previously mentioned holdings will change as market conditions
warrant.
Rising Dividends Fund
Our investment strategy is based on our belief that companies with consistently
rising dividends should, over time, realize increases in their share prices. We
select portfolio securities based on several criteria. To be eligible for
purchase, stocks must pass certain investment "screens," or screening
procedures, including consistent and substantial dividend increases, strong
balance sheets and relatively low price/earnings ratios. We seek fundamentally
sound companies that meet our standards and attempt to acquire them at
attractive prices, often when they are out of favor with investors.
The fund's top 10 company holdings on June 30, 1996, were: Philip Morris Cos.,
Inc. (3.48% of total net assets), Federal National Mortgage Association (2.92%),
Family Dollar Stores Inc. (2.86%), General Electric Co. (2.75%), Wal-Mart
Stores, Inc. (2.65%), DIMON Inc. (2.62%), Mercury General Corp. (2.61%), Allied
Group, Inc. (2.60%), Bard (C.R.), Inc. (2.56%), and Monsanto Co. (2.44%). Of
course, these holdings will change as market conditions warrant.
It is interesting to note how these 10 companies would, in the aggregate,
illustrate the fund's screening criteria. To do this, we take a simple average
of statistical measures. On average, these 10 companies have raised their
dividends 18 years in a row, and by 438% in the last 10 years, have long-term
debt that is only 22% of capital, and sell at a 13.7 price/earnings ratio. 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
On June 30, 1996, equities (including convertible and preferred securities)
accounted for 45.3% of the portfolio's total net assets, with 24.4% in
fixed-income and 30.3% in short-term and other obligations.
During the past six months, the fund continued to show tremendous asset growth,
with assets climbing to $35 million on June 30, 1996, from $14.7 million on
December 31, 1995. While such an inflow of funds has made it difficult to remain
fully invested, we were able to find securities in roughly 30 countries, with
four of these countries having larger-than-average weightings in the equity
portion of the portfolio: U.S. (15.8%), France (5.1%), Sweden (2.8%), and Hong
Kong (2.4%).
European markets turned in mixed performances for the equity and fixed-income
portions of the fund during the six-month period. Some of the best bond
performers so far in 1996 have been the higher-yielding markets in Europe. In
May, however, Spain and Sweden showed mild signs of vulnerability, and foreign
investors paused to question the prospects for the European Monetary Union in
1999.
While European bonds dipped in May, the equity markets of Sweden, Norway and the
Netherlands rose on the strength of stocks in cyclical and banking sectors. The
stock markets of core European countries, such as the U.K. and France, however,
posted relatively lackluster returns due primarily to these countries' uncertain
economic prospects and low levels of consumer spending.
Economic conditions in Europe may continue to be a mix of modest growth and low
inflation, with the added benefit of further fiscal reform as countries work to
qualify for entrance into the European Monetary Union. We believe the
combination of these factors could lead to strong fund performance through the
end of the next reporting period.
Utility Equity Fund
During the reporting period, we found attractive values in several domestic and
foreign utility stocks. We purchased shares in Pacific Enterprises (a domestic
natural gas distributor), Enron Global Power, and ENDESA of Chile -- both
electric power generation companies. We also acquired shares of several
telecommunications companies, among these: Intelcom Group, Nippon Telephone &
Telegraph, and Hellenic Telecommunications (the recently privatized telephone
utility of Greece). These stocks were bought at attractive valuations, and we
believe they offer excellent capital appreciation potential. Of course, these
holdings will change as market conditions warrant.
In addition to our investments in domestic utility stocks (82.1% of total net
assets on June 30, 1996), we also sought investment opportunities outside the
U.S. Over the past six months, we took advantage of opportunities in foreign
markets to build up our small foreign component. At the end of the reporting
period, 15.8% of the portfolio's holdings were in foreign electric, gas and
telecommunications companies. These foreign holdings have many of the same
characteristics that we traditionally look for in domestic securities: strong
economic growth, strong demographics, favorable political and regulatory
environments and superior entrepreneurial management.
Looking forward, one of our principle concerns is the changing regulatory
environment of the domestic utility industry. For this reason, we have been
focusing specifically on those utilities that are best positioned to handle
increasing competition. Such utilities have low production costs, strong
entrepreneurial management teams and service territories located in regions with
positive demographic trends. We believe that these utilities will produce higher
returns than their peers as they work to capture a larger part of the more
competitive marketplace.
Portfolios Seeking Current Income
Adjustable U.S. Government Fund
On June 30, 1996, 30.4% of the fund's total net assets were invested in
obligations of the Federal National Mortgage Association (FNMA), 22.4% in
obligations of the Federal Home Loan Mortgage Corporations (FHLMC), 18.8% in
obligations of the Government National Mortgage Association (GNMA), 17.5% in
obligations of Small Business Association (SBA) and 10.9% in cash and other
short-term obligations.
Prices of adjustable rate mortgage-backed securities (ARMs) moved modestly over
the reporting period. ARMs have interest payments (also known as "coupons") that
adjust periodically within preset limits to reflect current rates. These
coupons, which can often adjust to higher rates and compensate for the negative
effects these rates have on the value of most bonds, usually enable ARMs to have
greater price stability than fixed-rate securities. Interest rate changes in the
near term will likely occur within the preset limits of ARMs, and the securities
should continue to adjust accordingly.
Though we are experiencing a period of higher interest rates, of some concern
(especially in a low interest rate environment) to us is prepayment risk. When
interest rates drop, it is likely that homeowners will try to replace their
adjustable-rate mortgages -- prepaying them -- with competitive, fixed-rate
loans. For investors in ARMs, such prepayment brings the risk of reducing future
income streams. In an effort to reduce this risk, we have maintained an
overweighting in seasoned, non-convertible ARMs, which are less likely to
experience high levels of prepayment.
Looking forward, we anticipate a return to slow growth and low inflation. This
should lead to stable, or slightly lower, interest rate volatility -- both of
which should benefit ARMs securities in general. Our efforts continue to focus
on stability of principal while maintaining a yield that is competitive with
short-term investment alternatives. We will, of course, take into consideration
the proposed substitution in making portfolio investment decisions.
High Income Fund
With signs of stronger economic growth and fears of inflation increasing over
the past six months, interest rates, as measured by the 30-year U.S. Treasury
bond, increased from 5.99% on December 31, 1995, to 6.90% on June 30, 1996.
Despite rising interest rates, the high yield market performed very well
compared to other fixed-income sectors having similar maturities. We believe
this strong performance can be attributed to the hybrid nature of these
securities: high yield bonds have both debt and equity characteristics. While
the "debt" component of these securities was negatively impacted by rising
interest rates, the "equity" component was positively impacted by expectations
of economic growth.
During the past two quarters of 1996, the fund increased its exposure to the
media/broadcasting and utilities sectors. Recent regulatory changes have
brightened the prospects for the media sector, and we increased our
exposure to 11.22% of total net assets at period end, up from 9.5% on December
31, 1995. We increased our holdings in the utility sector (to 2.35% from 1.8%
six months ago) to benefit from the stable cash flow generated by utility
operations and the generally positive outlook for this sector. As part of
repositioning the fund, we decreased our exposure to forest/paper products,
transportation, and food retailing industries.
In addition to these strategic changes, we also benefited from mergers in
several industries. Specifically, Pace Industries (industrial products) was
purchased by Leggett and Platt, an investment-grade industrial conglomerate. In
the gaming sector, Bally's Casino agreed to be bought by Hilton, another
investment grade company. In general, mergers and consolidations positively
impact the price of the company being purchased.
We continued to increase the overall credit quality of the fund's portfolio
during the period by purchasing higher-rated securities and receiving ratings
upgrades on securities already in the portfolio. Additionally, the average
maturity of the portfolio decreased from 9 years to 8.2 years over the reporting
period.
Given the current outlook for the economy -- moderate growth with low inflation
- -- we believe high yield bonds should continue to benefit from the earnings
improvement of corporations.
Investment Grade Intermediate Bond Fund
With long-term interest rates up almost 100 basis points since year-end 1995,
the fund has been well-served by its emphasis on short and intermediate
maturities. As of June 30, 1996, 77% of the fund's assets were invested in
securities having average maturities of under 2 years -- a factor contributing
stability to the fund's performance. The weighted average quality of the
portfolio was AA+, with approximately 57.5% of the assets in AAA-rated, U.S.
Government-related securities.
We continued our strategic emphasis on "putable" bonds, which represented
approximately 21.2% of the total net assets at the end of the six-month
reporting period. A "putable" bond grants the holder (the portfolio) the right,
but not the obligation, to choose a specified early redemption date (the
"effective maturity") on which the bond will be redeemed by the issuer at full
face value regardless of the level of interest rates. In a rising bond market,
such bonds would tend to increase in price because of their long-term final
stated maturities; however, in a falling bond market, they would be supported in
price because of the ability to sell them at par (face value) value much earlier
on the "putable" date.
We maintain our belief that this approach will produce a better total return
than that available from a money market fund, without having to assume the risks
potentially associated with lower quality or longer term investments. We will,
of course, take into consideration the proposed substitution in making portfolio
investment decisions.
Templeton Global Income Securities Fund
(Formerly Global Income Fund)
On May 1, 1996, the Global Income Fund's name was changed to Templeton Global
Income Securities Fund. The fund's objective and investment strategy remain
the same.
Some of the best bond performers so far during 1996 have been in the
higher-yielding markets of Europe. In May, however, Spain and Sweden showed mild
signs of vulnerability, and foreign investors paused to question the prospects
for the European Monetary Union in 1999. Italy was the exception to the rule as
investors continued to support both the Lira and the Italian bond market. Two
other markets demonstrating a distinct positive trend in May were the Canadian
and Australian bond markets. Despite the influence of a poor U.S. market, both
of these dollar-linked markets rallied in May and generated positive returns for
the reporting period.
Looking forward, we feel these are the most important factors influencing global
fixed-income markets: the sustainability of U.S. economic growth, the prospects
for a rebound in core European economies, and the course of the U.S. dollar.
Although we perceive the risk of sustained current-trend global growth to be
relatively small, we believe the U.S. economy is in a mild but renewed rebound,
which is likely to persist through the end of summer. We also believe that the
European economies are past the down point in their business cycle, although any
renewed growth will be slow to arrive and sluggish. We think the near-term
direction of the U.S. dollar will be influenced primarily by the outlook for the
monetary policy in major markets, but also by the constraints placed on domestic
policies in European countries relative to the European Monetary Union. We feel
this backdrop supports a somewhat higher U.S. dollar over the balance of the
year.
Given this global outlook, we feel that the Templeton Global Income Securities
Fund is positioned conservatively with respect to both currency and
interest-rate risk. The portfolio holds approximately 63.7% of its assets in
intermediate maturities in the dollar block of bond markets (U.S., Canada, and
Australia), while holding roughly 36.3% of net assets in intermediate bonds
from Italy, Spain, Sweden, Denmark, Ireland and the United Kingdom. Core
European markets and Japan are still underweighted. Turnover in the fund during
the last six months was minimal. However, we continued to shift assets from the
core European markets (France and Germany) to Italy, Spain and Sweden. We have
also reduced our exposure in New Zealand and reinvested the proceeds in the U.S.
Of course, these holdings will change as market conditions warrant.
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 or "Ginnie Mae") mortgage passthroughs as our largest
positions. Some issuers held by the portfolio 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 June 30, 1996,
the fund's investments consisted of 77.2% of total net assets in mortgage-backed
securities (of which approximately 53% were Ginnie Maes), 20.4% in other U.S.
government and agency securities, and 2.4% in short-term investments. Of course,
these holdings will change as market conditions warrant.
In Washington D.C., talk of a balanced budget package has been replaced by
political positioning in this presidential election year. Elections are known
events with unknown outcomes: as the rhetoric heats up going into the elections,
the potential exists for increased volatility, with each side trying to "please"
everyone. Currently, economists are generally divided into the two camps of
slower growth and faster growth. We think that current interest rate levels
adequately discount election rhetoric and economic uncertainty.
We believe investing in Ginnie Mae securities through the portfolio is a
reasonable way to invest, especially in a period of economic uncertainty. Ginnie
Maes generally have the price volatility of an intermediate-term bond, with more
income than a 30-year U.S. Treasury bond. The portfolio continues to use Ginnie
Maes as the investment vehicle of choice -- highest credit quality, moderate
volatility and high current income.
Three Zero Coupon Funds
(maturity dates: 2000, 2005, 2010)
Increased economic growth and rising interest rates adversely affected the
Franklin Valuemark Zero Coupon Funds during the six-month reporting period.
Interest rates on 5- to 15-year U.S. Treasury securities have increased more
than 100 basis points during this period, which is significant because the
valuation of the portfolio's zero coupon securities move in the opposite
direction of interest rates.
We began 1996 with very slow economic growth; in fact, the Federal Reserve Board
(the Fed) lowered the target for the federal funds rate in January as insurance
against economic recession. Soon, however, the economy had resumed a more
moderate growth pattern. The Gross Domestic Product (GDP) grew at an annualized
rate of 2.8% in the first quarter of 1996, compared to only .50% in the fourth
quarter of 1995. In our view, bond markets now anticipate the Fed could reverse
its course and raise interest rate benchmarks to curb potential inflation.
Zero coupon investments, especially those with longer maturities, are volatile
in price primarily due to their interest rate sensitivity and the fact that they
have no current income. Holding these securities to maturity, however, may bring
an investor a fixed return because the final value is known. Therefore, zero
coupon investments can be attractive for both aggressive and risk averse
investors. In each portfolio, we maintain -- at all times -- a duration within
12 months of the target maturity. We do not try to time the market; instead, our
portfolio activity mirrors shareholder activity. We make purchases when money
flows into the portfolios, and sell securities to meet redemptions.
Additionally, we primarily hold only top-rated U.S. Treasury and agency zero
coupon and stripped securities as well as top-rated corporate securities. We
believe this strategy keeps default risk at a minimum.
Portfolio Seeking Capital Preservation
and Income
Money Market Fund
The economy was weak throughout most of 1995, and continued to lose momentum in
early 1996. With prospects for continued slow growth and low inflation, the
Federal Reserve Board (the Fed) lowered the federal funds rate to 5.25% in
January.
To the surprise of many investors, the economic reports turned sharply positive
in March 1996. Annualized Gross Domestic Product (GDP) growth rebounded to 2.8%
in the first quarter, compared with only .50% in the fourth quarter of 1995.
Since March, the majority of economic data released has remained stronger than
expected, with the index of leading economic indicators, consumer confidence and
industrial production all up significantly. As a result of the recent growth,
many economists estimate second quarter 1996 GDP growth at or around 4.2%.
These trends were also reflected in short-term interest rates during the
six-month reporting period. For example, the 90-day U.S. Treasury bill rate
declined from 4.91% on December 31, 1995, to 4.86% on February 29, 1996, (the
middle of the first quarter) as economic growth continued to slow. Since then,
Treasury bill rates have steadily risen to 5.10% by June 30, 1996, as the
economy improves. Since we maintained a relatively short weighted average
maturity during the reporting period, the portfolio's 7-day yield mirrored the
movements in Treasury bill rates in lag fashion. The portfolio's 7-day yield
began the period at 5.43%, declined to 4.81% at the end of the February 1996,
then rose to 4.93% as of June 30, 1996.
We continue to invest the portfolio's assets in securities
that are among the highest quality available to money market portfolios. Since
the portfolio's objective is to provide you with a high quality conservative
investment, we do not invest in leveraged derivatives or other potentially
volatile securities that, we believe, involve undue risk.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Adjustable U.S. Government Fund (Note 1)
Adjustable Rate Mortgage Securities 89.1%
<C> <S> <C>
Federal Home Loan Mortgage Corp. (FHLMC) 22.4%
$ 569,357 FHLMC, Cap 12.34%, Margin 2.00% + CMT, Resets Semi-Annually, 7.109%, 11/01/18 ............... $ 565,588
5,707,488 FHLMC, Cap 12.522%, Margin 2.105% + CMT, Resets Annually, 7.664%, 06/01/22 .................. 5,944,405
383,799 FHLMC, Cap 13.00%, Margin 2.00% + CMT, Resets Semi-Annually, 8.00%, 07/01/18 ................ 394,691
2,773,023 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.542%, 09/01/19 ................... 2,847,835
3,437,845 FHLMC, Cap 13.125%, Margin 2.00% + CMT, Resets Annually, 7.551%, 07/01/18 ................... 3,558,032
707,234 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.687%, 07/01/19 .................. 727,530
8,459,301 FHLMC, Cap 13.458%, Margin 2.195% + CMT, Resets Annually, 7.735%, 02/01/19 .................. 8,701,784
6,184,848 FHLMC, Cap 13.50%, Margin 2.03% + CMT, Resets Annually, 7.551%, 05/01/18 .................... 6,426,058
1,798,102 FHLMC, Cap 13.605%, Margin 2.20% + CMT, Resets Annually, 7.559%, 02/01/19 ................... 1,867,114
7,648,300 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.662%, 04/01/18 .................. 7,960,962
------------
Total Federal Home Loan Mortgage Corp. (Cost $38,948,224) ............................ 38,993,999
------------
Federal National Mortgage Association (FNMA) 30.4%
7,549,309 FNMA, Cap 12.22%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 6.794%, 06/01/18 ......... 7,678,629
1,187,131 FNMA, Cap 12.248%, Margin 1.749% + COFI, Resets Annually, 6.869%, 02/01/28 .................. 1,180,756
708,314 FNMA, Cap 12.323%, Margin 1.66% + CMT, Resets Annually, 6.667%, 03/01/21 .................... 720,681
2,375,281 FNMA, Cap 12.49%, Margin 2.00% + CMT, Resets Annually, 7.686%, 02/01/19 ..................... 2,467,941
797,968 FNMA, Cap 12.75%, Margin 2.125% + CMT, Resets Annually, 8.125%, 06/01/18 .................... 833,846
4,413,854 FNMA, Cap 12.786%, Margin 1.25% + COFI, Resets Monthly, 6.225%, 02/01/03 .................... 4,409,484
7,352,292 FNMA, Cap 12.819%, Margin 2.127% + CMT, Resets Annually, 7.661%, 09/01/18 ................... 7,698,879
660,593 FNMA, Cap 12.981%, Margin 2.011% + CMT, Resets Annually, 7.531%, 08/01/20 ................... 681,877
869,633 FNMA, Cap 13.099%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.108%, 07/01/20 ........ 882,904
4,716,932 FNMA, Cap 13.313%, Margin 2.126% + CMT, Resets Annually, 7.664%, 07/01/19 ................... 4,884,666
376,033 FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.652%, 01/01/18 ................... 388,911
748,908 FNMA, Cap 13.793%, Margin 2.167% + CMT, Resets Annually, 7.904%, 06/01/18 ................... 776,794
1,220,305 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.787%, 07/01/24 ......... 1,216,803
439,716 FNMA, Cap 13.843%, Margin 1.25% + COFI, Resets Monthly, 6.124%, 02/01/17 .................... 436,396
893,416 FNMA, Cap 14.071%, Margin 1.25% + COFI, Resets Monthly, 6.225%, 12/01/18 .................... 886,385
1,427,253 FNMA, Cap 14.428%, Margin 2.125% + CMT, Resets Annually, 7.25%, 04/01/19 .................... 1,481,147
6,330,773 FNMA, Cap 14.625%, Margin 1.25% + COFI, Resets Monthly, 6.31%, 06/01/02 ..................... 6,310,579
3,812,289 FNMA, Cap 14.808%, Margin 1.825% + 3CMT, Resets Tri-Annually, 8.489%, 07/01/20 .............. 3,920,482
5,743,226 FNMA, Cap 15.156%, Margin 2.284% + 3CMT, Resets Tri-Annually, 8.52%, 03/01/20 ............... 5,972,495
------------
Total Federal National Mortgage Association (Cost $53,042,036) ........................ 52,829,655
------------
Government National Mortgage Association (GNMA) 18.8%
15,000,000 jGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 06/01/26 ..................... 15,060,938
5,000,000 jGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.00%, 06/01/26 ..................... 5,070,313
4,006,662 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.25%, 07/20/17 ...................... 4,065,280
3,563,800 GNMA, Cap 11.50%, Margin 2.50% + CMT, Resets Annually, 6.50%, 07/20/25 ...................... 3,639,353
4,808,343 GNMA, Cap 14.00%, Margin 1.50% + CMT, Resets Annually, 6.50%, 01/20/16 ...................... 4,832,145
------------
Total Government National Mortgage Association (Cost $32,655,173) ..................... 32,668,029
------------
Small Business Administration (SBA) 17.5%
9,116,252 SBA, Cap 10.50%, Margin Prime - 0.50%, Resets Quarterly, 7.75%, 03/25/19 .................... 9,469,507
8,067,712 SBA, Cap 10.85%, Margin Prime - 0.40%, Resets Quarterly, 7.85%, 06/25/19 .................... 8,430,760
11,876,352 SBA, Cap 10.875%, Margin Prime - 0.125%, Resets Quarterly, 8.125%, 03/25/18 ................. 12,603,778
------------
Total Small Business Administration (Cost $30,915,918) ................................ 30,504,045
------------
Total Adjustable Rate Mortgage Securities (Cost $155,561,351).......................... 154,995,728
------------
Government Securities 14.1%
25,000,000 U.S. Treasury Notes, 5.125%, 03/31/98 - 06/30/98 (Cost $24,690,357).......................... 24,579,672
------------
Total Long Term Investments (Cost $180,251,708) ....................................... 179,575,400
------------
f Short Term Investments 3.4%.................................................................
Government Securities
$ 6,000,000 U.S. Treasury Bills, 4.99% - 5.19%, 10/17/96 - 01/09/97 (Cost $5,846,630).................... $ 5,846,210
------------
Total Investments before Repurchase Agreements (Cost $186,098,338) .................... 185,421,610
------------
g,hReceivables from Repurchase Agreements 3.9%
6,821,225 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $6,855,802) (Cost $6,852,696)
Chase Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $944,116)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 6,852,696
------------
Total Investments (Cost $192,951,034) 110.5% ..................................... 192,274,306
Liabilities in Excess of Other Assets (10.5)%..................................... (18,294,103)
------------
Net Assets100.0% .................................................................. $173,980,203
============
At June 30, 1996, the net unrealized depreciation based on the
cost of investments for income tax purposes of $192,951,034
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 604,202
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (1,280,930)
------------
Net unrealized depreciation ............................................................... $ (676,728)
============
</TABLE>
PORTFOLIOABBREVIATIONS
3 CMT - 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
fSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Face Value
Country* Amount Templeton Global Income Securities Fund (Note 1)
Bonds 94.3%
<S> <C> <C> <C>
Argentina 5.7%
US 2,500,000 bHidroelectrica Alicura, SA, 8.375%, 03/15/99 ................................... $ 2,425,000
US 2,895,000 Republic of Argentina, 10.95%, 11/01/99 ......................................... 3,021,656
US 3,620,000 Republic of Argentina, 8.375%, 12/20/03 ......................................... 3,140,350
US 7,690,000 Republic of Argentina, Series L, VRN, 5.25%, 03/31/23 ........................... 4,219,888
------------
12,806,894
------------
Australia 6.9%
AU 14,290,000 eGovernment of Australia, 7.00%, 04/15/00 ....................................... 10,716,236
AU 5,120,000 eRepublic of Australia, 12.00%, 11/15/01 ........................................ 4,596,833
------------
15,313,069
------------
Brazil 1.0%
US 4,100,000 Government of Brazil, 4.25%, 04/15/24 ........................................... 2,270,375
------------
Canada 4.4%
CA 11,910,000 eGovernment of Canada, 10.50%, 03/01/01 ......................................... 9,933,651
------------
Denmark 5.6%
DK 25,917,000 eGovernment of Denmark, 8.00%, 05/15/03 ......................................... 4,683,022
DK 43,000,000 eKingdom of Denmark, 8.00%, 11/15/01 ............................................ 7,843,206
------------
12,526,228
------------
Germany 5.0%
DD 5,350,000 eFederal Republic of Germany, Bundesobl, 5.375%, 02/22/99 ....................... 3,591,416
DD 10,000,000 eFederal Republic of Germany, Unity, 8.75%, 08/20/01 ............................ 7,483,145
------------
11,074,561
------------
Ireland 1.1%
IR 1,600,000 eRepublic of Ireland, 6.25%, 10/18/04 ........................................... 2,364,551
------------
Italy 8.6%
IT 4,885,000,000 eBuoni Poliennali del Tes, 8.50%, 08/01/99 ...................................... 3,196,498
IT 11,165,000,000 eBuoni Poliennali del Tes, 10.50%, 09/01/05 ..................................... 7,858,323
IT 11,620,000,000 eGovernment of Italy, 10.50%, 07/15/00 .......................................... 8,056,432
------------
19,111,253
------------
Japan 3.1%
JP 505,000,000 eEuropean Investment Bank, 5.875%, 11/26/99 ..................................... 5,208,743
JP 154,000,000 eInternational Bank for Reconstruction and Development, 6.75%, 03/15/00 ......... 1,644,392
------------
6,853,135
------------
Mexico 4.6%
US 9,715,000 United Mexican States, 9.75%, 02/06/01 .......................................... 9,666,425
US 300,000 United Mexican States, FRN, 7.609%, 03/31/08 .................................... 286,875
US 400,000 United Mexican States, Series D, FRN, 6.547%, 12/31/19 .......................... 315,000
------------
10,268,300
------------
Spain 7.2%
ES 779,230,000 eGovernment of Spain, 12.25%, 03/25/00 .......................................... 6,918,440
ES 462,400,000 eGovernment of Spain, 11.30%, 01/15/02 .......................................... 4,067,516
ES 616,890,000 eGovernment of Spain, 10.00%, 02/28/05 .......................................... 5,146,975
------------
16,132,931
------------
Sweden 5.0%
SE 41,400,000 eKingdom of Sweden, 13.00%, 06/15/01 ............................................ $ 7,615,493
SE 19,700,000 eKingdom of Sweden, 10.25%, 05/05/03 ............................................ 3,356,879
SE 1,100,000 eSweden National Housing Finance Corp., 12.50%, 01/23/97 ........................ 171,945
------------
11,144,317
------------
United Kingdom 8.8%
GB 5,805,000 eUnited Kingdom, 9.50%, 10/25/04 ................................................ 9,933,508
GB 2,850,000 eUnited Kingdom, ln., 12.00%, 11/20/98 .......................................... 4,936,394
GB 2,925,000 eUnited Kingdom, ln., 9.50%, 01/15/99 ........................................... 4,829,234
------------
19,699,136
------------
United States 27.3%
US 10,880,000 U.S. Treasury Bonds, 6.375%, 08/15/02 ........................................... 10,793,286
US 28,835,000 U.S. Treasury Notes, 6.125%, 07/31/00 ........................................... 28,515,220
US 21,780,000 U.S. Treasury Notes, 6.25%, 08/31/00 ............................................ 21,626,887
------------
60,935,393
------------
Total Long Term Investments (Cost $211,454,138) ........................... 210,433,794
------------
gReceivables from Repurchase Agreements 3.3%
US 4,020,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $4,001,783)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 4,000,000
US 3,390,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $3,456,540)
Collateral: U.S. Treasury Notes, 6.75%, 06/30/99 ............................... 3,455,000
------------
Total Receivables from Repurchase Agreements (Cost $7,455,000)............. 7,455,000
------------
Total Investments (Cost $218,909,138) 97.6%........................... 217,888,794
Other Assets and Liabilities, Net 2.4%................................ 5,349,177
------------
Net Assets 100.0% .................................................... $223,237,971
============
At June 30, 1996, the net unrealized depreciation
based on the cost of investments for income tax
purposes of $218,909,138 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over cost ...................................................... $ 2,881,315
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (3,901,659)
------------
Net unrealized depreciation ................................................... $ (1,020,344)
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
DD - Germany
DK - Denmark
ES - Spain
GB - United Kingdom
IR - Ireland
IT - Italy
JP - Japan
SE - Sweden
US - United States
PORTFOLIO ABBREVIATIONS:
FRN - Floating Rate Notes
VRN - Variable Rate Notes
*Securities traded in currency of country indicated and valued in U.S. dollars.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Warrants High Income Fund (Note 1)
Common Stocks & Warrants .2%
<S> <C> <C>
33,568 aBucyrus-Erie Co.............................................................................. $ 344,072
6,900 aEmpire Gas Corp., warrants................................................................... 6,900
70 aFoodmaker, Inc., warrants.................................................................... 1,616
5,000 aGulf States Steel, warrants.................................................................. 25,000
19,386 aKash N'Karry Food Stores, Inc. .............................................................. 504,036
6,500 aNextel Communications, warrants.............................................................. 65
395 aThermadyne Holdings Corp. ................................................................... 8,493
------------
Total Common Stocks & Warrants (Cost $1,197,658)........................................ 890,182
------------
Preferred Stocks 3.1%
7,920 PanAmSat Corp., 12.75%, pfd., PIK............................................................. 9,267,187
2,146 Time Warner, Inc., 10.25%, pfd., Series K .................................................... 2,103,858
------------
Total Preferred Stocks (Cost $10,162,729)..................................................... 11,371,045
------------
Total Common Stocks & Warrants, and Preferred Stocks (Cost $11,360,387)................. 12,261,227
------------
Face
Amount
Bonds 88.6%
Automotive 1.6%
$ 1,000,000 Collins & Aikman Products, senior sub. notes, 11.50%, 04/15/06................................ 1,020,000
125,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00................................... 129,688
4,500,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02................................................ 4,792,500
------------
5,942,188
------------
Cable Television 10.8%
4,000,000 Cablevision Industries Corp., senior sub. deb., 9.25%, 04/01/08............................... 4,050,000
1,500,000 Cablevision System Corp., senior sub. deb., 9.25%, 11/01/05................................... 1,391,250
3,000,000 Cablevision System Corp., senior sub. deb., 10.50%, 05/15/16.................................. 2,925,000
2,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23.................................. 1,840,000
2,000,000 Comcast Corp., senior sub. deb., 9.125%, 10/15/06............................................. 1,900,000
2,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08.............................................. 1,930,000
500,000 Continental Cablevision, Inc., senior deb., 8.875%, 09/15/05.................................. 536,715
1,500,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13................................... 1,640,089
1,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07............................. 1,133,185
2,900,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08.............................. 3,162,313
2,700,000 Diamond Cable Communications Co., senior disc. notes, zero coupon to 12/15/00,
(original accretion rate 11.75%), 11.75% thereafter, 12/15/05................................ 1,603,125
2,200,000 Le Groupe Videotron Ltee, senior notes, 10.625%, 02/15/05..................................... 2,315,500
4,500,000 cRogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14..................... 2,877,989
1,500,000 Rogers Communications, Inc., senior deb., 10.875%, 04/15/04................................... 1,530,000
8,000,000 Telewest Plc., senior deb., zero coupon to 10/01/00, (original accretion rate 11.00%),
11.00% thereafter, 10/01/07.................................................................. 4,760,000
1,500,000 Time Warner, Inc., senior notes, 10.15%, 05/01/12............................................. 1,731,354
1,500,000 Time Warner, Inc., sub. deb., 9.125%, 01/15/13................................................ 1,545,000
3,000,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24............................... 2,842,500
------------
39,714,020
------------
Chemicals 5.1%
3,750,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02........................ 3,806,250
5,000,000 Arcadian Partners L.P., senior notes, Series B, 10.75%, 05/01/05.............................. 5,431,250
2,500,000 Harris Chemical of North America, senior sub. notes, 10.75%, 10/15/03......................... 2,443,750
3,000,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00............................................... 3,082,500
1,200,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01................................... 1,272,000
2,425,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03.................................... 2,600,813
------------
18,636,563
------------
Consumer Products 4.7%
$ 4,250,000 Coleman Holdings, Inc., senior secured disc. notes, (original accretion rate 10.875%),
0.00%, 05/27/98.............................................................................. $ 3,580,625
5,800,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03............................. 5,452,000
5,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03................. 5,037,500
3,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13..................................................... 3,000,000
------------
17,070,125
------------
Containers & Packaging 1.6%
3,500,000 Container Corp., senior notes, Series A, 11.25%, 05/01/04..................................... 3,622,500
1,000,000 Owens-Illinois, Inc., senior sub. notes, 10.00%, 08/01/02..................................... 1,025,000
1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04...................................... 1,007,500
------------
5,655,000
------------
Energy 1.5%
5,000,000 Empire Gas Corp., units, senior secured notes, 7.00% coupon to 07/15/99, 12.875%
thereafter, 07/15/04......................................................................... 4,375,000
1,800,000 Mesa Operating Co., senior sub. notes, zero coupon to 07/01/01, (original accretion rate 11.625%),
11.625% thereafter, 07/01/06................................................................. 1,071,000
------------
5,446,000
------------
Food & Beverage 3.8%
3,000,000 Coca Cola Bottling Group Southwest, Inc., senior sub. notes, 9.00%, 11/15/03.................. 2,925,000
700,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05................................ 682,500
1,570,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02........................................... 1,256,000
250,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00.......................... 260,625
4,700,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03......................... 4,629,500
1,230,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01..................... 1,154,663
3,000,000 Texas Bottling Group, Inc., senior sub. notes, 9.00%, 11/15/03................................ 2,925,000
------------
13,833,288
------------
Food Retailing 8.0%
2,000,000 Bruno's Inc., senior sub. notes, 10.50%, 08/01/05............................................. 1,985,000
1,700,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05.................................. 1,806,250
3,691,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04................................ 3,464,926
4,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03.................................... 3,775,000
1,000,000 Pathmark Stores, Inc., S.F., sub. notes, 11.625%, 06/15/02.................................... 1,000,000
3,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03.............................................. 2,497,500
1,500,000 Penn Traffic Co., senior sub. notes, 9.625%, 04/15/05......................................... 1,087,500
6,500,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03...................................... 5,768,750
3,750,000 Ralphs Grocery Co., senior notes, 10.45%, 06/15/04............................................ 3,609,375
2,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05....................................... 1,850,000
2,500,000 Smith's Food & Drug, senior sub. notes, 11.25%, 05/15/07...................................... 2,543,750
------------
29,388,051
------------
Forest & Paper Products 3.7%
3,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05............................... 3,225,000
2,000,000 Repap New Brunswick, senior notes, second priority, 10.625%, 04/15/05......................... 1,895,000
3,000,000 Repap Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02.................................. 2,842,500
2,300,000 S.D. Warren Co., senior sub. notes, Series B, 12.00%, 12/15/04................................ 2,449,500
3,500,000 Tembec Finance Corp., senior notes, 9.875%. 09/30/05.......................................... 3,272,500
------------
13,684,500
------------
Gaming & Leisure 8.3%
3,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04.............................................. 3,457,500
4,500,000 Bally's Grand, first mortgage, Series B, 10.375%, 12/15/03.................................... 4,955,625
Gaming & Leisure (cont.)
$ 5,900,000 Players International, Inc., senior notes, 10.875%, 04/15/05.................................. $ 6,003,250
3,000,000 Rio Hotel and Casino Inc., senior sub. notes, 10.625%, 07/15/05............................... 3,135,000
7,500,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09........................................... 8,662,500
5,000,000 Six Flags Theme Parks, senior sub. notes, zero coupon to 06/15/98, (original accretion rate 12.25%),
12.25% thereafter, 06/15/05.................................................................. 4,262,500
------------
30,476,375
------------
Health Care Services 8.9%
7,770,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02.............................. 8,003,100
5,500,000 Integrated Health Services, Inc., senior sub. notes, 9.625%, 05/31/02......................... 5,472,500
1,000,000 IVAC Corp., senior notes, 9.25%, 12/01/02..................................................... 1,000,000
5,500,000 Mariner Health Group Inc., senior sub. notes, 9.50%, 04/01/06................................. 5,321,250
1,000,000 Regency Health Services Inc., senior sub. notes, 9.875%, 10/15/02............................. 962,500
5,500,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03.... 5,032,500
850,000 Tenet Healthcare Corp., senior notes, 9.625%, 09/01/02........................................ 903,125
2,400,000 Tenet Healthcare Corp., senior notes, 8.625%, 12/01/03........................................ 2,436,000
3,400,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05.................................. 3,604,000
------------
32,734,975
------------
Industrial Products 5.5%
8,500,000 American Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98, (original accretion
rate 10.50%), 10.50% thereafter, 06/01/05.................................................... 7,395,000
1,000,000 Day International Group, senior sub. notes, 11.125%, 06/01/05................................. 1,025,000
6,500,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01......................................... 6,565,000
5,500,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04............................................. 5,252,500
------------
20,237,500
------------
Lodging 3.1%
8,000,000 HMH Properties, Inc., senior secured notes, 9.50%, 05/15/05................................... 7,640,000
1,500,000 John Q. Hammons Hotels L.P., first mortgage, 9.75%, 10/01/05.................................. 1,453,125
2,310,000 Red Roof Inns Inc., senior notes, 9.625%, 12/15/03............................................ 2,211,825
------------
11,304,950
------------
Media & Broadcasting 8.1%
1,700,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04................................ 1,717,000
2,500,000 Benedek Broadcasting, senior secured notes, 11.875%, 03/01/05................................. 2,650,000
6,500,000 Granite Broadcasting Corp., senior sub. notes, Series A, 10.375%, 05/15/05.................... 6,321,250
4,000,000 Heritage Media Corp., senior sub. notes, 8.75%, 02/15/06...................................... 3,740,000
925,000 Infinity Broadcasting Corp., senior sub. notes, 10.375%, 03/15/02............................. 981,656
2,500,000 K-III Communications Corp., senior notes, 10.25%, 06/01/04.................................... 2,537,500
5,000,000 dNews America Holdings, Inc., deb. (Australia), 8.625%, 02/07/14.............................. 3,271,505
4,000,000 SCI Television, Inc., S.F., senior notes, 11.00%, 06/30/05.................................... 4,180,000
2,000,000 bSFX Broadcasting Inc., senior sub. notes, 10.75%, 05/15/06................................... 1,975,000
2,500,000 Sinclair Broadcast Group Inc., senior sub. notes, 10.00%, 09/30/05............................ 2,437,500
------------
29,811,411
------------
Metals & Mining 2.6%
4,000,000 Algoma Steel, Inc., first mortgage, 12.375%, 07/15/05......................................... 3,920,000
5,000,000 Gulf States Steel, first mortgage, 13.50%, 04/15/03........................................... 4,475,000
1,110,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05.................. 1,265,400
------------
9,660,400
------------
Technology & Information Systems 2.8%
$ 6,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03................................. $ 6,210,000
1,400,000 Bell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion rate 11.50%),
11.50% thereafter, 03/01/05.................................................................. 962,500
2,450,000 Bell & Howell Co., senior notes, 9.25%, 07/15/00.............................................. 2,419,375
800,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02........................................ 856,000
------------
10,447,875
------------
Telecommunications1.8%
2,000,000 bIntelecom Group, Inc., senior disc. notes, 12.50%, 05/01/06.................................. 1,090,000
2,500,000 MFS Communications Co., Inc., senior disc. notes, 8.875%, 01/15/06............................ 1,518,750
6,500,000 Teleport Communications Group, Inc., senior disc. notes, zero coupon to 07/01/01, (original
accretion rate 11.125%), 11.125% thereafter, 07/01/075....................................... 3,818,750
------------
6,427,500
------------
Textiles & Apparel 1.5%
1,500,000 bClark-Schwebel, Inc., senior notes, 10.50%, 04/15/06......................................... 1,552,500
144,200 a,kForstmann Textile, Inc., S.F., senior sub. notes, 14.75%, 04/15/99......................... 41,097
4,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05................................... 3,900,000
------------
5,493,597
------------
Transportation 1.7%
1,600,000 Eletson Holdings, Inc., first mortgage notes, 9.25%, 11/15/03................................. 1,522,000
4,500,000 Gearbulk Holding, Ltd., senior notes, 11.25%, 12/01/04........................................ 4,747,500
------------
6,269,500
------------
Utilities 2.4%
3,000,000 CMS Energy Corp., senior notes, Series B, zero coupon to 10/01/95, (original accretion rate
9.875%), 9.875% thereafter, 10/01/99......................................................... 3,120,000
2,500,000 El Paso Electric Co., first mortgage, 8.90%, 02/01/06......................................... 2,481,250
2,907,617 Midland CoGeneration Venture, S.F., deb., Series C, 10.33%, 07/23/02.......................... 3,031,191
6,000 System Energy Resource, S.F., first mortgage, 11.375%, 09/01/16............................... 6,450
------------
8,638,891
------------
Wireless Communication 1.1%
6,500,000 Dial Call Communications, units, senior disc. notes, zero coupon to 04/15/99, (original accretion
rate 12.25%), 12.25% thereafter, 04/15/04.................................................... 4,160,000
------------
Total Bonds (Cost $324,837,909)......................................................... 325,032,709
------------
Total Investments before Repurchase Agreements (Cost $336,198,296)...................... 337,293,936
------------
g,hReceivables from Repurchase Agreements 7.5%
27,246,541 Joint Repurchase Agreement 5.439%, 07/01/96, (Maturity Value $27,384,069) (Cost $27,371,663)
Chase Securities., Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $3,771,081)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.625% -11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc. (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99......................... $ 27,371,663
------------
Total Investments (Cost $363,569,959) 99.4%........................................ 364,665,599
Other Assets and Liabilities, Net .6%.............................................. 2,320,850
------------
Net Assets 100.0%.................................................................. $366,986,449
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $363,569,959
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 9,419,137
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (8,323,497)
------------
Net unrealized appreciation................................................................. $ 1,095,640
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount is stated in foreign currency and value is stated in U.S. dollars.
dSecurities traded in foreign currency and valued in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding Joint Repurchase Agreement.
kSee Note 7 regarding defaulted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Investment Grade Intermediate Bond Fund (Note 1)
Long Term Investments 77.9%
U.S. Government, Agencies & Instrumentalities 57.5%
<C> <S> <C>
$ 15,000,000 Federal National Mortgage Association, 6.05%, 11/10/97 ...................................... $ 14,985,793
7,000,000 Tennessee Valley Authority, bonds, 8.25%, 11/15/96 .......................................... 7,069,537
12,000,000 lTennessee Valley Authority, bonds, (putable 07/15/01, callable 07/15/20), 6.235%, 07/15/45 . 11,844,780
2,000,000 U.S. Treasury Notes, 7.875%, 07/15/96 ....................................................... 2,003,750
4,000,000 U.S. Treasury Notes, 6.50%, 09/30/96 ........................................................ 4,013,748
5,000,000 U.S. Treasury Notes, 6.50%, 04/30/97 ........................................................ 5,031,250
10,000,000 U.S. Treasury Notes, 6.125%, 05/31/97 ....................................................... 10,031,250
15,000,000 U.S. Treasury Notes, 5.625%, 06/30/97 ....................................................... 14,976,553
8,000,000 U.S. Treasury Notes, 5.25%, 12/31/97 ........................................................ 7,917,495
5,000,000 U.S. Treasury Notes, 5.125%, 04/30/98 ....................................................... 4,917,184
5,000,000 U.S. Treasury Notes, 5.875%,08/15/98 ........................................................ 4,971,875
5,000,000 U.S. Treasury Notes, 5.875%, 03/31/99 ....................................................... 4,951,559
------------
Total U.S. Government, Agencies & Instrumentalities (Cost $93,664,497)................. 92,714,774
------------
Corporate Bonds 20.4%
Consumer Products 3.7%
4,000,000 American Home Products, notes, 6.875%, 04/15/97 ............................................. 4,026,451
2,000,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 .................................................... 1,986,186
------------
6,012,637
------------
Electric Utilities 1.9%
3,000,000 Southern California Edison Co., first mortgage bonds, 6.125%, 07/15/97 ...................... 2,996,061
------------
Financial Services 10.3%
6,400,000 lAssociates Corp. of North America, deb., Series B, (putable 03/03/98), 7.95%, 02/15/10 ..... 6,817,145
7,500,000 lGE Capital Corp., medium term notes (step up to 8.125% or putable 04/01/98), 5.80%, 04/01/08
7,797,053
2,000,000 International Lease Finance Co., notes, 6.375%, 11/01/96 .................................... 2,003,430
------------
16,617,628
------------
Waste Management 4.5%
7,000,000 lWMX Technologies, notes (step up to 8.00% or putable 04/30/97), 6.22%, 04/30/04 ............ 7,259,476
------------
Total Corporate Bonds (Cost $31,912,196)............................................... 32,885,802
------------
Total Long Term Investments (Cost $125,576,693)........................................ 125,600,576
------------
g,hReceivables from Repurchase Agreements 20.8%
33,374,901 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $33,543,910) (Cost $33,528,713)
Chase Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $4,619,356)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... $ 33,528,713
------------
Total Investments (Cost $159,105,406) 98.7% ...................................... 159,129,289
Other Assets and Liabilities, Net 1.3% ........................................... 2,156,794
------------
Net Assets 100.0% ................................................................ $161,286,083
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $159,105,406
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 1,481,685
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (1,457,802)
------------
Net unrealized appreciation ............................................................... $ 23,883
============
</TABLE>
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
lHolder may choose either to redeem at par on any put date or, if more
advantageous, to hold to final stated maturity.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Country* Warrants Precious Metals Fund (Note 1)
Common Stocks and Warrants 93.4%
Gold & Diversified Resources 10.5%
<S> <C> <C> <C>
US 160,718 Freeport-McMoRan Copper & Gold, Inc. .............................................. $ 4,801,450
GB 318,429 RTZ Corp., Plc. ................................................................... 4,712,741
CA 159,100 Teck Corp., Class B................................................................ 3,262,992
------------
12,777,183
------------
Long Life Gold Mines 48.4%
US 210,700 bAshanti Goldfields Co., Ltd. ..................................................... 4,161,325
US 235,595 Barrick Gold Corp. ................................................................ 6,390,514
ZA 125,000 Beatrix Mines, Ltd. ............................................................... 1,002,481
PE 37,404 Compania de Minas Buenaventura, SA................................................. 367,456
PE 112,068 Compania de Minas Buenaventura, SA, Class C........................................ 1,009,208
US 67,000 bCompania de Minas Buenaventura, SA, Sponsored ADR................................. 1,331,625
US 249,500 Driefontein Consolidated Mines, Ltd., ADR.......................................... 3,274,688
US 226,700 Hartebeestfontein Gold Mining Co., Ltd., ADR....................................... 763,866
US 139,488 Homestake Mining Co. .............................................................. 2,388,732
US 259,000 Kloof Gold Mining Co., Ltd., ADR................................................... 2,509,063
US 82,400 Newmont Gold Co. .................................................................. 4,150,900
US 99,755 Newmont Mining Corp. .............................................................. 4,925,403
US 327,500 Placer Dome, Inc. ................................................................. 7,819,063
ZA 340,000 Randgold & Exploration Co., Ltd. .................................................. 1,789,061
US 553,301 Santa Fe Pacific Gold Corp. ....................................................... 7,815,377
CA 522,000 aTVX Gold, Inc. ................................................................... 3,823,476
US 339,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR..................................... 2,712,000
US 40,400 Western Areas Gold Mining, ADR..................................................... 626,200
ZA 143,888 Western Areas Gold Mining Co., Ltd. ............................................... 2,241,505
------------
59,101,943
------------
Medium Life Gold Mines 25.6%
AU 1,243,600 aAcacia Resources, Ltd. ........................................................... 2,932,212
US 328,500 aAmax Gold, Inc. .................................................................. 1,806,750
US 324,500 Battle Mountain Gold Co. .......................................................... 2,352,625
US 568,000 aCampbell Resources, Inc. ......................................................... 710,000
CA 209,000 aCampbell Resources, Inc., warrants................................................ 84,197
US 210,000 aCanyon Resources Corp. ........................................................... 577,500
CA 137,000 aDayton Mining Corp. .............................................................. 822,853
US 208,400 Echo Bay Mines, Ltd. .............................................................. 2,240,300
CA 16,900 Euro-Nevada Mining Corp. .......................................................... 724,153
CA 32,000 Franco-Nevada Mining Corp., Ltd. .................................................. 2,027,467
AU 665,000 aGoldfields, Ltd. ................................................................. 1,515,699
CA 175,000 aGreenstone Resources, Ltd. ....................................................... 2,050,906
US 179,000 Hemlo Gold Mines, Inc. ............................................................ 1,901,875
AU 271,500 Newcrest Mining, Ltd. ............................................................. 1,088,262
AU 895,600 Placer Pacific, Ltd. .............................................................. 1,302,205
AU 632,500 Plutonic Resources, Ltd. .......................................................... 3,231,226
AU 978,071 Poseidon Gold, Ltd. ............................................................... 2,406,069
AU 495,900 Sons Of Gwalia, Ltd. .............................................................. 3,507,761
------------
31,282,060
------------
Mining Finance Companies 3.8%
US 15,000 Anglo American Corp. of South Africa Corp., Unsponsored ADR........................ 948,750
US 109,900 DeBeers Consolidated Mines, Ltd., ADR.............................................. 3,709,125
------------
4,657,875
------------
Platinum Companies 5.1%
ZA 72,900 Impala Platinum Holdings, Ltd. .................................................... $ 1,047,317
US 60,700 Impala Platinum Holdings, Ltd., ADR................................................ 872,047
US 165,090 Rustenburg Platinum Holdings, Ltd., ADR............................................ 2,571,789
US 82,300 a,bStillwater Mining Co. .......................................................... 1,749,903
------------
6,241,056
------------
Total Common Stocks and Warrants (Cost $105,065,412)......................... 114,060,117
------------
Face
Amount
Convertible Bonds .7%
Mining - Precious Metals
US $480,000 Bema Gold Corp., cvt. sub. notes, 7.50%, 02/28/00 (Cost $530,700).................. 864,000
------------
Total Long Term Investments (Cost $105,596,112).............................. 114,924,117
------------
g,hReceivables from Repurchase Agreements 6.1%
US 7,382,013 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $7,419,942) (Cost $7,416,580)
Chase Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,021,806)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............. 7,416,580
------------
Total Investments (Cost $113,012,692) 100.2%............................ 122,340,697
Liabilities in Excess of Other Assets (.2)% ............................ (232,921)
------------
Net Assets 100.0% ...................................................... $122,107,776
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $113,012,692 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 14,087,433
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (4,759,428)
------------
Net unrealized appreciation ..................................................... $ 9,328,005
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
GB - United Kingdom
PE - Peru
US - United States
ZA - South Africa
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Real Estate Securities Fund (Note 1)
Common Stocks 90.8%
Equity REIT - Apartments 23.1%
<S> <C> <C>
150,000 Amli Residential Properties Trust ........................................................... $ 3,093,750
285,000 Bay Apartment Communities, Inc. ............................................................. 7,374,375
110,000 Camden Property Trust ....................................................................... 2,612,500
240,000 Equity Residential Properties Trust ......................................................... 7,890,000
212,000 Evans Withycombe Residential, Inc. .......................................................... 4,425,500
140,000 Gables Residential Trust .................................................................... 3,290,000
145,000 Irvine Apartment Communities, Inc. .......................................................... 2,918,125
215,000 Oasis Residential, Inc. ..................................................................... 4,703,125
175,000 Post Properties, Inc. ....................................................................... 6,190,625
253,500 Security Capital Pacific Trust .............................................................. 5,513,625
220,000 South West Property Trust ................................................................... 2,942,500
160,000 Summit Properties, Inc. ..................................................................... 3,140,000
------------
54,094,125
------------
Equity REIT - Health Care 4.3%
80,000 Health Care Property Investors, Inc. ........................................................ 2,700,000
140,000 Nationwide Health Properties, Inc. .......................................................... 2,957,500
158,000 Omega Healthcare Investors, Inc. ............................................................ 4,364,750
------------
10,022,250
------------
Equity REIT - Hotels 12.6%
500,000 Equity Inns, Inc. ........................................................................... 5,750,000
267,000 FelCor Suite Hotels, Inc. ................................................................... 8,143,500
120,000 aPatriot American Hospitality, Inc. ......................................................... 3,555,000
138,200 Starwood Lodging Trust ...................................................................... 5,027,025
605,000 Winston Hotels, Inc. ........................................................................ 7,033,125
------------
29,508,650
------------
Equity REIT - Industrial 8.7%
105,000 CenterPoint Properties Corp. ................................................................ 2,546,250
112,500 Duke Realty Investments, Inc. ............................................................... 3,403,125
175,000 Liberty Property Trust ...................................................................... 3,478,125
302,283 Security Capital Industrial Trust ........................................................... 5,327,738
100,000 Spieker Properties, Inc. .................................................................... 2,725,000
110,000 Weeks Corp. ................................................................................. 2,860,000
------------
20,340,238
------------
Equity REIT - Mixed Property Type 1.2%
115,000 Colonial Properties Trust ................................................................... 2,788,750
------------
Equity REIT - Office 4.3%
90,000 Beacon Properties Corp. ..................................................................... 2,306,250
90,000 Crescent Real Estate Equities, Inc. ......................................................... 3,307,500
164,600 Highwoods Properties, Inc. .................................................................. 4,547,075
------------
10,160,825
------------
Equity REIT - Residential Communities 4.3%
185,000 Manufactured Home Communities, Inc. ......................................................... 3,561,250
125,000 ROC Communities, Inc. ....................................................................... 2,984,375
130,000 Sun Communities, Inc. ....................................................................... 3,493,750
------------
10,039,375
------------
Equity REIT - Retail - Community Centers 4.1%
102,000 Developers Diversified Realty Corp. ......................................................... $ 3,251,250
97,500 Kimco Realty Corp. .......................................................................... 2,754,375
90,000 Vornado Realty Trust ........................................................................ 3,678,750
------------
9,684,375
------------
Equity REIT - Retail - Outlet Centers 1.8%
75,000 Chelsea GCA Realty, Inc. .................................................................... 2,381,250
80,000 Tanger Factory Outlet Centers, Inc. ......................................................... 1,860,000
------------
4,241,250
------------
Equity REIT - Retail - Regional Malls 4.9%
174,300 DeBartolo Realty Corp. ...................................................................... 2,810,588
118,500 Simon Property Group, Inc. .................................................................. 2,903,250
140,000 The Macerich Co. ............................................................................ 2,940,000
155,000 The Mills Corp. ............................................................................. 2,712,500
------------
11,366,338
------------
Equity REIT - Storage 7.5%
280,000 Public Storage, Inc. ........................................................................ 5,775,000
370,000 jStorage Trust Realty ....................................................................... 7,585,000
130,000 Storage USA, Inc. ........................................................................... 4,192,500
------------
17,552,500
------------
Home Builders 6.9%
100,000 aBeazer Homes USA, Inc. ..................................................................... 1,600,000
180,000 aBelmont Homes, Inc.......................................................................... 3,892,500
75,000 Centex Corp. ................................................................................ 2,334,375
85,000 Kaufman & Broad Home Corp. .................................................................. 1,232,500
70,000 Lennar Corp. ................................................................................ 1,750,000
137,570 a,mNVR, Inc. ................................................................................ 1,530,466
178,000 aSouthern Energy Homes, Inc. ................................................................ 3,827,000
------------
16,166,841
------------
Hotels 4.7%
505,000 aHost Marriott Corp. ........................................................................ 6,628,125
6,100 aInterstate Hotels Co. ...................................................................... 135,725
195,000 aRed Lion Hotels, Inc. ...................................................................... 4,095,000
------------
10,858,850
------------
Mixed Property Type 2.4%
500,000 Security Capital US Realty .................................................................. 5,700,000
------------
Total Common Stocks (Cost $180,672,920) ............................................... 212,524,367
------------
Convertible Preferred Stocks .5%
20,000 bCatellus Development Corp., $3.625 cvt. pfd., Series B (Cost $1,000,000).................... 1,052,500
------------
Face
Amount
Bonds .8%
$ 2,000,000 US Home Corp., cvt. sub. notes, 4.875%, 11/01/05 (Cost $1,970,000)........................... 1,785,000
------------
Total Long Term Investments (Cost $183,642,920) ............................................. 215,361,867
------------
g,hReceivables from Repurchase Agreements 7.5%
$ 17,423,712 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $17,512,149) (Cost $17,504,215)
Chase Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $2,411,613)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... $ 17,504,215
------------
Total Investments (Cost $201,147,135) 99.6% ...................................... 232,866,082
Other Assets and Liabilities, Net .4%............................................. 1,047,940
------------
Net Assets 100.0 % ............................................................... $233,914,022
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $201,147,135
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 33,191,670
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (1,472,723)
------------
Net unrealized appreciation ............................................................... $ 31,718,947
============
</TABLE>
PORTFOLIO ABBREVIATION:
REIT - Real Estate Investment Trust
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
mSee Note 9 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount U.S. Government Securities Fund (Note 1)
Mortgage-Backed Securities 76.0%
Federal Home Loan Mortgage Corp. (FHLMC) 12.6%
<C> <S> <C>
$ 24,056,840 FHLMC, 6.50%, 06/01/08 - 01/01/24 ........................................................... $ 22,677,643
18,148,522 FHLMC, 7.00%, 04/01/24 ...................................................................... 17,496,171
19,876,506 FHLMC, PL, 7.00%, 09/17/31 .................................................................. 18,944,892
6,320,316 FHLMC, 7.50%, 11/01/22 - 05/01/24 ........................................................... 6,251,145
4,766,797 FHLMC, 8.00%, 05/01/16 - 05/01/22 ........................................................... 4,815,708
1,462,504 FHLMC, 8.50%, 04/01/18 - 03/01/22 ........................................................... 1,503,419
1,314,549 FHLMC, 9.00%, 03/01/03 - 01/01/21 ........................................................... 1,365,182
411,685 FHLMC, 9.50%, 06/01/16 - 08/01/20 ........................................................... 437,801
216,001 FHLMC, 10.00%, 08/01/20 - 10/01/20 .......................................................... 233,348
------------
73,725,309
------------
Federal National Mortgage Association (FNMA) 10.4%
7,300,987 FNMA, 6.00%, 10/01/23 - 04/01/24 ............................................................ 6,639,290
16,960,448 FNMA, 6.50%, 01/01/24 - 06/01/24 ............................................................ 15,884,396
2,030,825 FNMA, 7.00%, 05/01/24 ....................................................................... 1,956,558
8,451,862 FNMA, PL, 7.00%, 03/17/35 ................................................................... 8,021,325
12,328,722 FNMA, 7.50%, 04/01/23 - 08/01/25 ............................................................ 12,186,080
14,306,632 FNMA, 8.00%, 07/01/16 - 02/01/25 ............................................................ 14,446,935
1,320,638 FNMA, 8.50%, 10/01/19 - 03/01/22 ............................................................ 1,356,952
247,607 FNMA, 9.00%, 09/01/18 - 03/01/21 ............................................................ 258,439
105,958 FNMA, 9.50%, 07/01/19 - 08/01/20 ............................................................ 112,880
40,481 FNMA, 10.00%, 10/01/20 ...................................................................... 43,947
------------
60,906,802
------------
Government National Mortgage Association (GNMA) 53.0%
13,272,043 GNMA I, SF, 6.00%, 12/15/23 - 01/15/24 ...................................................... 12,011,108
2,366,224 GNMA II, 6.00%, 01/20/24 - 10/20/24 ......................................................... 2,129,586
59,759,442 GNMA I, SF, 6.50%, 05/15/23 - 05/15/24 ...................................................... 55,669,254
3,930,348 GNMA II, 6.50%, 01/20/26 .................................................................... 3,641,684
8,734,911 GNMA, PL, 6.50%, 09/15/28 ................................................................... 8,093,375
54,170,704 GNMA I, SF, 7.00%, 03/15/22 - 07/15/25 ...................................................... 52,020,454
14,831,318 GNMA II, 7.00%, 01/20/24 - 03/20/26 ......................................................... 14,168,432
1,992,397 GNMA I, SF, 7.25%, 11/15/25 ................................................................. 1,939,459
2,257,498 GNMA, PL, 7.25%, 05/15/22 - 08/15/22 ........................................................ 2,186,229
45,135,465 GNMA I, SF, 7.50%, 02/15/17 - 06/15/23 ...................................................... 44,528,658
35,019,491 GNMA II, 7.50%, 11/20/16 - 12/20/25 ......................................................... 34,373,559
31,151,172 GNMA I, SF, 8.00%, 04/15/05 - 06/15/25 ...................................................... 31,462,518
1,470,769 GNMA II, 8.00%, 02/20/16 - 05/20/17 ......................................................... 1,478,116
2,600,668 GNMA I, SF, 8.25%, 04/15/25 ................................................................. 2,651,849
12,265,096 GNMA I, SF, 8.50%, 08/15/21 - 12/15/24 ...................................................... 12,625,317
4,732,209 GNMA I, SF, 9.00%, 04/15/16 - 02/15/21 ...................................................... 4,956,978
11,885,062 GNMA I, SF, 9.50%, 10/15/15 - 12/15/21 ...................................................... 12,713,297
2,652,028 GNMA II, 9.50%, 04/20/25 .................................................................... 2,816,939
9,847,753 GNMA I, SF, 10.00%, 08/15/17 - 08/15/21 ..................................................... 10,740,198
322,930 GNMA II, 10.00%, 07/20/19 - 02/20/21 ........................................................ 348,967
------------
310,555,977
------------
Total Mortgage-Backed Securities (Cost $449,977,063) .................................. 445,188,088
------------
Other Government & Agency Securities 21.7%
2,000,000 Federal Agriculture Mortgage Corp., 6.91%, 07/15/97 ......................................... 2,018,116
5,000,000 Federal Farm Credit Bank, 5.80%, 09/16/03 ................................................... 4,639,870
10,000,000 Federal Farm Credit Bank, 7.95%, 04/01/02 ................................................... 10,055,769
8,199,448 FHA Project Loan, 7.00%, 02/01/29 ........................................................... 7,748,479
$ 3,876,000 FICO Strips, 0.00%, 11/11/01 ................................................................ $ 2,712,793
10,000,000 FICO Strips, 0.00%, 03/07/02 ................................................................ 6,838,309
1,925,000 FICO Strips, 0.00%, 05/11/02 ................................................................ 1,299,577
10,000,000 FICO Strips, 0.00%, 05/11/13 ................................................................ 2,857,069
15,000,000 FICO Strips, Series 1, 0.00%, 05/11/99 ...................................................... 12,476,264
1,758,000 FICO Strips, Series 1, 0.00%, 05/11/09 ...................................................... 691,588
11,024,000 FICO Strips, Series 13, 0.00%, 06/27/09 ..................................................... 4,292,679
5,000,000 FICO Strips, Series 15, 0.00%, 09/07/98 ..................................................... 4,360,495
3,202,000 FICO Strips, Series 16, 0.00%, 04/05/09 ..................................................... 1,269,673
4,745,000 FICO Strips, Series 16, 0.00%, 10/05/10 ..................................................... 1,667,938
2,060,000 FICO Strips, Series A, 0.00%, 02/08/09 ...................................................... 827,183
7,000,000 FICO Strips, Series D, 0.00%, 09/26/01 ...................................................... 4,940,845
5,000,000 Housing Urban Development, Series 96-A, 7.63%, 08/01/14 ..................................... 4,991,244
5,000,000 Housing Urban Development, Series 96-A, 7.66%, 08/01/15 ..................................... 4,980,308
4,926,717 Small Business Administration, 6.45%, 12/01/15 .............................................. 4,646,627
15,000,000 Student Loan Marketing Association, 0.00%, 05/15/14 ......................................... 3,370,468
10,000,000 Tennessee Valley Authority, 0.00%, 04/15/03 ................................................. 6,339,119
6,000,000 Tennessee Valley Authority, 0.00%, 04/15/42 ................................................. 1,733,118
5,000,000 Tennessee Valley Authority, 6.125%, 07/15/03 ................................................ 4,828,885
10,000,000 Tennessee Valley Authority, 7.25%, 07/15/43 ................................................. 9,290,340
1,000,000 Tennessee Valley Authority, 8.375%, 10/01/99 ................................................ 1,051,388
12,000,000 Tennessee Valley Authority, 8.625%, 11/15/29 ................................................ 12,764,974
5,000,000 U.S. Treasury Notes, 5.75%, 08/15/03 ........................................................ 4,759,375
------------
Total Other Government & Agency Securities (Cost $126,268,902)......................... 127,452,493
------------
Total Long Term Investments (Cost $576,245,965) ....................................... 572,640,581
------------
g,hReceivables from Repurchase Agreements 1.8%
10,284,118 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $10,336,017) (Cost $10,331,334)
Chase Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,423,377)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 10,331,334
------------
Total Investments (Cost $586,577,299) 99.5% ...................................... 582,971,915
Other Assets and Liabilities, Net .5% ............................................ 2,748,732
------------
Net Assets 100.0% ................................................................ $585,720,647
============
At June 30, 1996 the net unrealized depreciation based on the
cost of investments for income tax purposes of $586,577,299
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 9,865,916
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (13,471,300)
------------
Net unrealized depreciation ............................................................... $ (3,605,384)
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
FHA - Federal Housing Authority
FICO - Financing Corp.
PL - Project Loan
SF - Single Family
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2000 (Note 1)
Long Term Investments 100.2%
U.S. Government & Agency Securities 98.9%
<C> <S> <C>
$ 7,567,000 FHLB Strips, Series A-1, 0.00%, 02/25/01 ...................................................... $ 5,576,901
2,884,000 FHLB Strips, Series A-1, 0.00%, 08/25/01 ...................................................... 2,051,790
465,000 FHLB Strips, Series A-1, 0.00%, 02/25/02 ...................................................... 319,674
16,175,000 FHLMC, notes, 0.00%, 05/15/00 ................................................................. 12,574,201
9,023,000 FICO Strips, 0.00%, 03/26/01 .................................................................. 6,596,714
2,000,000 FICO Strips, 0.00%, 04/06/01 .................................................................. 1,459,184
1,139,000 FICO Strips, Series 1, 0.00%, 11/11/00 ........................................................ 854,846
1,000,000 FICO Strips, Series 7, 0.00%, 02/03/01 ........................................................ 738,696
17,390,000 FICO Strips, Series 12, 0.00%, 12/06/00 ....................................................... 12,988,589
6,000,000 FICO Strips, Series 12, 0.00%, 06/06/01 ....................................................... 4,325,861
4,000,000 FICO Strips, Series 13, 0.00%, 06/27/01 ....................................................... 2,872,332
148,000 FICO Strips, Series 15, 0.00%, 09/07/00 ....................................................... 112,408
5,000,000 FICO Strips, Series 15, 0.00%, 03/07/01 ....................................................... 3,669,074
5,875,000 FICO Strips, Series 17, 0.00%, 10/05/00 ....................................................... 4,438,932
6,200,000 FICO Strips, Series 18, 0.00%, 10/06/00 ....................................................... 4,683,622
4,965,000 FICO Strips, Series D, 0.00%, 09/26/00 ........................................................ 3,757,909
5,550,000 FICO Strips, Series D, 0.00%, 02/03/01 ........................................................ 4,099,763
3,800,000 FNMA Strips, 0.00%, 11/22/99 .................................................................. 3,048,386
1,000,000 FNMA Strips, 0.00%, 02/12/02 .................................................................. 687,857
500,000 FNMA Strips, Series 1, 0.00%, 02/12/00 ........................................................ 395,026
1,875,000 FNMA Strips, Series 1, 0.00%, 02/01/01 ........................................................ 1,386,461
1,000,000 FNMA Strips, Series 1, 0.00%, 02/01/02 ........................................................ 689,344
3,000,000 FNMA Strips, Series 2, 0.00%, 08/12/01 ........................................................ 2,136,132
9,195,000 REFCO Strips, 0.00%, 01/15/01 ................................................................. 6,872,499
3,320,000 Tennessee Valley Authority, 0.00%, 07/15/00 ................................................... 2,555,809
2,500,000 Tennessee Valley Authority, 0.00%, 10/15/00 ................................................... 1,892,245
65,000 Tennessee Valley Authority, 0.00%, 01/01/01 ................................................... 48,004
10,500,000 Tennessee Valley Authority, 0.00%, 04/15/01 ................................................... 7,676,308
1,000,000 Tennessee Valley Authority, 0.00%, 04/15/02 ................................................... 681,683
1,110,375 U.S. Treasury Strips, 0.00%, 11/15/00 ......................................................... 835,927
2,778,750 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 2,057,150
15,000,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 11,164,588
21,895,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 16,318,493
------------
129,566,408
------------
Other Securities - "AAA" Rated 1.3%
220,000 InterAmerican Development Bank, 0.00%, 12/16/00 ............................................... 163,631
405,000 International Bank for Reconstruction and Development, 0.00%, 02/15/00 ........................ 319,729
945,000 International Bank for Reconstruction and Development, 0.00%, 08/15/00 ........................ 720,513
735,000 International Bank for Reconstruction and Development, 0.00%, 02/15/01 ........................ 540,929
------------
1,744,802
------------
Total Investments (Cost $125,920,919) 100.2%........................................ 131,311,210
Liabilities in Excess of Other Assets (.2%)......................................... (238,450)
------------
Net Assets 100.0%................................................................... $131,072,760
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $125,920,919 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 5,783,816
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (393,525)
------------
Net unrealized appreciation ................................................................. $ 5,390,291
============
</TABLE>
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.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2005 (Note 1)
Long Term Investments 99.5%
Government & Agency Securities 96.4%
<C> <S> <C>
$ 1,000,000 FHLB Strips, Series A-1, 0.00%, 08/25/02 ...................................................... $ 663,419
800,000 FHLB Strips, Series A-1, 0.00%, 02/25/04 ...................................................... 475,262
9,110,000 FHLB Strips, Series A-1P, 0.00%, 02/25/04 ..................................................... 5,412,050
11,400,000 FICO Strips, 0.00%, 10/06/05 .................................................................. 5,944,666
3,500,000 FICO Strips, Series 1, 0.00%, 05/11/05 ........................................................ 1,878,474
829,000 FICO Strips, Series 1, 0.00%, 11/11/05 ........................................................ 429,335
3,509,000 FICO Strips, Series 2, 0.00%, 11/02/05 ........................................................ 1,820,448
11,055,000 FICO Strips, Series 12, 0.00%, 12/06/05 ....................................................... 5,693,180
2,755,000 FICO Strips, Series 13, 0.00%, 12/27/05 ....................................................... 1,412,097
2,620,000 FICO Strips, Series 15, 0.00%, 09/07/05 ....................................................... 1,374,030
6,000,000 FICO Strips, Series 16, 0.00%, 04/05/06 ....................................................... 3,009,803
10,000,000 FICO Strips, Series 19, 0.00%, 12/06/05 ....................................................... 5,149,869
6,799,000 FICO Strips, Series D, 0.00%, 09/26/05 ........................................................ 3,552,620
1,763,000 FICO Strips, Series D, 0.00%, 03/26/06 ........................................................ 886,108
5,000,000 FICO Strips, Series F, 0.00%, 03/26/05 ........................................................ 2,711,020
120,000 FNMA Strips, 0.00%, 02/12/08 .................................................................. 52,494
450,000 FNMA Strips, Series 1, 0.00%, 08/01/04 ........................................................ 257,604
1,000,000 FNMA Strips, Series 1, 0.00%, 02/12/05 ........................................................ 549,654
875,000 FNMA Strips, Series 1, 0.00%, 08/12/05 ........................................................ 462,787
4,307,000 FNMA Strips, Series 1, 0.00%, 02/01/06 ........................................................ 2,198,267
250,000 FNMA Strips, Series 1, 0.00%, 02/12/06 ........................................................ 127,281
1,730,000 FNMA Strips, Series 1, 0.00%, 02/01/08 ........................................................ 758,448
6,000,000 FNMA Strips, Series 2, 0.00%, 02/01/05 ........................................................ 3,305,417
530,000 FNMA Strips, Series 9, 0.00%, 08/01/06 ........................................................ 260,493
6,500,000 REFCO Strips, 0.00%, 01/15/06 ................................................................. 3,387,670
3,000,000 REFCO Strips, Series R, 0.00%, 04/15/06 ....................................................... 1,534,521
6,200,000 Tennessee Valley Authority, 0.00%, 10/15/04 ................................................... 3,508,927
2,260,000 Tennessee Valley Authority, 0.00%, 04/15/05 ................................................... 1,231,528
1,000,000 Tennessee Valley Authority, 0.00%, 10/15/05 ................................................... 525,703
34,140,000 U.S. Treasury Strips, 0.00%, 02/15/06 ......................................................... 17,871,709
------------
76,444,884
------------
Other Securities - "AAA" Rated 3.1%
1,500,000 Exxon Corp., 0.00%, 11/15/04 .................................................................. 849,669
541,000 International Bank of Reconstruction and Development, 0.00%, 02/15/07 ......................... 253,874
2,500,000 International Bank of Reconstruction and Development, 0.00%, 08/15/07 ......................... 1,127,117
459,000 International Bank of Reconstruction and Development, Series 2, 0.00%, 02/15/07 ............... 214,953
------------
2,445,613
------------
Total Long Term Investments (Cost $74,761,492) .......................................... 78,890,497
------------
g,hReceivables from Repurchase Agreements .4%
$ 340,772 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $342,207) (Cost $342,052)
Chase Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $47,127)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ......................... $ 342,052
------------
Total Investments (Cost $75,103,544) 99.9% ......................................... 79,232,549
Other Assets and Liabilities, Net .1%............................................... 63,942
------------
Net Assets 100.0% .................................................................. $79,296,491
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $75,107,712 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 5,081,274
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (956,437)
------------
Net unrealized appreciation ................................................................. $ 4,124,837
============
</TABLE>
PORTFOLIOABBREVIATIONS
FHLB - Federal Home Loan Bank
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2010 (Note 1)
Long Term Investments 96.6%
Government & Agency Securities 91.9%
<C> <S> <C>
$ 4,450,000 FHLMC, capital deb., 0.00%, 11/29/19 .......................................................... $ 802,949
4,040,000 FICO Strips, 0.00%, 10/06/10 .................................................................. 1,419,756
16,246,000 FICO Strips, Series 1, 0.00%, 11/11/10 ........................................................ 5,659,828
2,000,000 FICO Strips, Series 3, 0.00%, 05/30/10 ........................................................ 723,016
1,528,000 FICO Strips, Series 4, 0.00%, 10/06/10 ........................................................ 536,977
3,021,000 FICO Strips, Series 8, 0.00%, 08/03/10 ........................................................ 1,077,796
2,837,000 FICO Strips, Series 11, 0.00%, 02/08/11 ....................................................... 969,434
4,550,000 FICO Strips, Series 12, 0.00%, 06/06/09 ....................................................... 1,779,887
7,500,000 FICO Strips, Series 12, 0.00%, 12/06/10 ....................................................... 2,598,097
3,000,000 FICO Strips, Series 19, 0.00%, 06/06/10 ....................................................... 1,082,994
2,080,000 FICO Strips, Series 19, 0.00%, 12/06/10 ....................................................... 720,539
7,000,000 FICO Strips, Series A, 0.00%, 08/08/10 ........................................................ 2,494,855
860,000 FICO Strips, Series D, 0.00%, 03/26/10 ........................................................ 315,319
4,000,000 FICO Strips, Series D, 0.00%, 03/26/11 ........................................................ 1,352,676
12,412,000 FICO Strips, Series E, 0.00%, 11/02/10 ........................................................ 4,333,698
860,000 FICO Strips, Series F, 0.00%, 09/26/10 ........................................................ 302,992
5,311,000 FICO Strips, Series F, 0.00%, 02/08/11 ........................................................ 1,814,827
1,975,000 FNMA Strips, 0.00%, 08/12/09 .................................................................. 769,171
5,000,000 FNMA Strips, Series 1, 0.00%, 02/01/10 ........................................................ 1,876,810
8,250,000 FNMA Strips, Series 1, 0.00%, 08/01/10 ........................................................ 2,980,313
1,230,000 FNMA Strips, Series 1, 0.00%, 08/12/10 ........................................................ 443,353
4,450,000 FNMA Strips, Series 1, 0.00%, 02/01/11 ........................................................ 1,541,048
3,281,000 FNMA, sub. deb., 0.00%, 02/01/12 .............................................................. 1,049,559
20,000,000 REFCO Strips, 0.00%, 10/15/10 ................................................................. 7,309,137
8,000,000 REFCO Strips, 0.00%, 01/15/11 ................................................................. 2,866,111
8,650,000 SLMA, 0.00%, 05/15/14 ......................................................................... 1,943,637
412,000 Tennessee Valley Authority, 0.00%, 01/01/10 ................................................... 152,379
12,000,000 Tennessee Valley Authority, 0.00%, 04/15/10 ................................................... 4,467,947
1,320,000 Tennessee Valley Authority, 0.00%, 10/15/10 ................................................... 472,329
9,525,000 Tennessee Valley Authority, 0.00%, 04/15/11 ................................................... 3,273,066
7,295,000 Tennessee Valley Authority, 0.00%, 10/15/11 ................................................... 2,408,968
31,190,000 U.S. Treasury Strips, 0.00%, 11/15/10 ......................................................... 11,522,334
------------
71,061,802
------------
Other Securities - "AAA" Rated 4.7%
1,392,000 International Bank for Reconstruction and Development, 0.00%, 02/15/11 ........................ 477,631
2,800,000 International Bank for Reconstruction and Development, 0.00%, 02/15/12 ........................ 886,766
3,287,000 International Bank for Reconstruction and Development, 0.00%, 02/15/13 ........................ 961,960
4,100,000 International Bank for Reconstruction and Development, 0.00%, 08/15/13 ........................ 1,154,429
500,000 nternational Bank for Reconstruction and Development, Series 2, 0.00%, 02/15/11 ............... 171,563
------------
3,652,349
------------
Total Long Term Investments (Cost $69,766,814)........................................... 74,714,151
------------
g,hReceivables from Repurchase Agreements 2.5%
$ 1,955,977 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $1,965,596) (Cost $1,964,705)
Chase Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $270,686)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ......................... $ 1,964,705
------------
Total Investments (Cost $71,731,519) 99.1%.......................................... 76,678,856
Other Assets and Liabilities, Net .9% .............................................. 671,101
------------
Net Assets 100.0% .................................................................. $77,349,957
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $71,982,308 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 5,932,017
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (1,235,469)
------------
Net unrealized appreciation ................................................................. $ 4,696,548
============
</TABLE>
PORTFOLIOABBREVIATIONS
FHLMC - Federal Home Loan Mortgage Corp.
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
SLMA - Student Loan Marketing Association
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Money Market Fund (Note 1)
fShort Term Investments 87.4%
Certificates of Deposit 10.5%
<S> <C> <C>
5,000,000 Bayerische Landesbank, New York Branch, 5.06%, 07/08/96 ........................................ $ 5,000,060
10,000,000 Dresdner Bank AG, New York Branch, 4.94%, 01/06/97 ............................................. 9,965,079
10,000,000 Lloyds Bank, Plc., New York Branch, 5.70%, 09/11/96 ............................................ 10,000,194
20,000,000 Societe Generale, New York Branch, 5.36% - 5.51%, 08/15/96 - 10/02/96 .......................... 20,000,260
------------
Total Certificates of Deposit (Cost $44,965,593).......................................... 44,965,593
------------
Commercial Paper 76.6%
10,000,000 ABN-AMRO North American Finance, Inc., 4.975%, 08/26/96 ........................................ 9,919,848
20,000,000 American Express Credit Corp., 4.88% - 5.27%, 07/18/96 - 08/09/96 .............................. 19,902,726
20,000,000 Associates Corp. of North America, 5.28% - 5.29%, 07/15/96 - 07/17/96 .......................... 19,951,535
10,000,000 Barclays U.S. Funding Corp., 5.27%, 08/20/96 ................................................... 9,923,878
15,000,000 Canadian Imperial Holdings, Inc., 5.27%, 07/02/96 .............................................. 14,993,413
10,000,000 Cheltnham & Gloucester Building Society, 5.27%, 07/03/96 ....................................... 9,994,144
19,500,000 CIESCO, L.P., 5.27%, 07/25/96 .................................................................. 19,425,781
10,000,000 Commerzbank U.S. Finance, Inc., 5.40%, 09/27/96 ................................................ 9,865,000
15,000,000 Disney (Walt) Co., 5.25%, 07/29/96 ............................................................. 14,934,376
10,000,000 Dupont (E.I.) De Nemours, Inc., 5.35%, 08/29/96 ................................................ 9,909,347
16,825,000 Export Development Corp., 5.30%, 09/04/96 ...................................................... 16,659,040
18,900,000 General Electric Capital Corp., 5.27% - 5.40%, 07/18/96 - 09/16/96 ............................. 18,759,364
15,000,000 Halifax Building Society, 4.88%, 08/08/96 ...................................................... 14,918,666
10,000,000 Hewlett-Packard, 5.37%, 08/29/96 ............................................................... 9,909,008
14,000,000 Kingdom of Sweden, 5.28% - 5.30%, 08/22/96 - 09/23/96 .......................................... 13,870,046
10,000,000 MetLife Funding, Inc., 5.28%, 08/27/96 ......................................................... 9,913,466
15,000,000 National Rural Utilities Cooperative Finance Corp., 5.29% - 5.37%, 08/19/96 - 08/26/96 ......... 14,881,800
10,000,000 PepsiCo, Inc., 5.38%, 09/25/96 ................................................................. 9,868,489
15,850,000 Province of British Columbia, 5.35%, 12/27/96 .................................................. 15,423,657
15,000,000 Prudential Funding Corp., 5.27%, 07/26/96 ...................................................... 14,940,712
20,520,000 Schering Corp., 5.25% - 5.27%, 08/13/96 - 09/23/96 ............................................. 20,363,874
10,000,000 Svenska Handelsbanken, Inc., 4.98% - 5.29%, 07/01/96 - 08/28/96 ................................ 9,954,534
15,000,000 Toyota Motor Credit Corp., 5.29%, 09/06/96 ..................................................... 14,847,912
5,800,000 U.S. Central Credit Union, 5.40%, 09/16/96 ..................................................... 5,731,270
------------
Total Commercial Paper (Cost $328,861,886)................................................ 328,861,886
------------
Medium Term Notes .3%
1,200,000 General Electric Capital Corp., 7.625%, 01/10/97 (Cost $1,211,935) ............................. 1,211,935
------------
Total Short Term Investments (Cost $375,039,414).......................................... 375,039,414
------------
gReceivables from Repurchase Agreements 13.3%..................................................
$ 17,725,000 B.T. Securities Corp., 5.35%, 07/01/96, (Maturity Value $17,207,668)
Collateral: U.S. Treasury Bills, 09/05/96 ..................................................... $ 17,200,000
20,025,000 SBC Capital Markets, Inc., 5.47%, 07/01/96, (Maturity Value $20,009,117)
Collateral: U.S. Treasury Notes, 6.75%, 04/30/00 .............................................. 20,000,000
20,534,000 UBS Securities, Inc., 5.43%, 07/01/96, (Maturity Value $20,009,050)
Collateral: U.S. Treasury Bills, 08/22/96 ..................................................... 20,000,000
------------
Total Receivables from Repurchase Agreements (Cost $57,200,000)........................... 57,200,000
------------
Total Investments (Cost $432,239,414) 100.7% ........................................ 432,239,414
Liabilities in Excess of Other Assets (.7)% ......................................... (3,008,825)
------------
Net Assets 100.0% ................................................................... $429,230,589
============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
fCertain 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.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Growth and Income Fund (Note 1)
Common Stocks 93.6%
Automobile 1.1%
<S> <C> <C>
184,500 Chrysler Corp. .............................................................................. $ 11,439,000
------------
Chemicals, Basic 2.3%
184,300 Dow Chemical Co. ............................................................................ 14,006,800
64,500 Du Pont, (E.I.), De Nemours & Co............................................................. 5,103,563
104,500 Goodrich (B.F.) Co. ......................................................................... 3,905,688
------------
23,016,051
------------
Commercial Services .9%
512,300 Ogden Corp. ................................................................................. 9,285,438
------------
Electrical Equipment 1.6%
183,100 General Electric Co. ........................................................................ 15,838,150
------------
Financial Services 7.8%
98,500 Bank of Boston Corp. ........................................................................ 4,875,750
195,800 Christiania Bank, ADS........................................................................ 4,615,887
1,895,000 Christiania Bank Og Kreditkasse (Norway) .................................................... 4,467,377
347,000 Great Western Financial Corp. ............................................................... 8,284,625
262,000 H & R Block, Inc. ........................................................................... 8,547,750
111,000 J. P. Morgan & Co., Inc. .................................................................... 9,393,375
270,000 National City Corp. ......................................................................... 9,483,750
231,500 Nordbanken AB (Sweden) ...................................................................... 4,475,457
119,700 Nordbanken AB - Sponsored ADR ............................................................... 4,628,189
304,900 PNC Bank Corp. .............................................................................. 9,070,775
510,000 Roosevelt Financial Corp. ................................................................... 9,817,500
------------
77,660,435
------------
Forest Products & Paper 4.8%
119,000 Georgia-Pacific Corp. ....................................................................... 8,449,000
1,020,000 Portucel Industrial, SA...................................................................... 6,535,038
454,700 Potlatch Corp. .............................................................................. 17,790,138
145,000 Union Camp Corp. ............................................................................ 7,068,750
175,000 Weyerhaeuser Co. ............................................................................ 7,437,500
------------
47,280,426
------------
Insurance 2.2%
301,900 Lincoln National Corp. ...................................................................... 13,962,875
89,500 St. Paul Cos., Inc. ......................................................................... 4,788,250
100,100 Zenith National Insurance ................................................................... 2,740,238
------------
21,491,363
------------
Medical Supplies .7%
243,800 Glaxo Wellcome Plc., Sponsored ADR .......................................................... 6,521,650
------------
Miscellaneous Manufacturing 4.1%
127,300 Cooper Industries, Inc. ..................................................................... 5,282,950
1,310,000 Hanson, Plc. ................................................................................ 18,667,500
239,500 Minnesota Mining & Manufacturing Co. ........................................................ 16,525,500
------------
40,475,950
------------
Oil/Gas Transmission 3.9%
253,000 Consolidated Natural Gas Co. ................................................................ 13,219,250
320,000 National Fuel Gas Co. ....................................................................... 11,520,000
479,800 Pacific Enterprises ......................................................................... 14,214,075
------------
38,953,325
------------
Petroleum, Integrated 15.9%
233,700 Amoco Corp. ................................................................................. $ 16,914,038
192,000 Atlantic Richfield Co. ...................................................................... 22,752,000
288,000 Chevron Corp. ............................................................................... 16,992,000
213,500 Exxon Corp. ................................................................................. 18,547,813
128,000 Mobil Corp. ................................................................................. 14,352,000
100,000 Occidental Petroleum Corp. .................................................................. 2,475,000
92,900 Royal Dutch Petroleum Co., ADR............................................................... 14,283,375
256,200 Texaco, Inc. ................................................................................ 21,488,775
336,900 Ultramar Corp. .............................................................................. 9,770,100
885,000 YPF Sociedad Anonima ........................................................................ 19,912,500
------------
157,487,601
------------
Pharmaceuticals 3.7%
266,000 American Home Products Corp. ................................................................ 15,993,250
231,500 Bristol-Myers Squibb Co. .................................................................... 20,835,000
------------
36,828,250
------------
Printing & Publishing 2.0%
315,000 Dun & Bradstreet Corp. ...................................................................... 19,687,500
------------
Real Estate Investment Trust 4.0%
515,300 Equity Residential Properties Trust ......................................................... 16,940,488
410,000 FelCor Suite Hotels, Inc. ................................................................... 12,505,000
484,400 Oasis Residential, Inc. ..................................................................... 10,596,250
------------
40,041,738
------------
Retail 2.0%
375,900 Penney (J.C.) Co., Inc. ..................................................................... 19,734,750
------------
Metals .9%
335,000 British Steel Plc., Sponsored ADR ........................................................... 8,500,625
------------
Telecommunications 11.2%
142,000 Ameritech Corp. ............................................................................. 8,431,250
195,800 BellSouth Corp. ............................................................................. 8,297,025
58,300 British Telecom Plc., Sponsored ADR ......................................................... 3,133,625
447,500 GTE Corp. ................................................................................... 20,025,625
390,000 NYNEX Corp. ................................................................................. 18,525,000
434,900 Southern New England Telecommunications Corp. ............................................... 18,265,800
106,400 Sprint Corp. ................................................................................ 4,468,800
360,000 Telefonos de Mexico, SA, ADR................................................................. 12,060,000
559,100 US West Communications Group................................................................. 17,821,310
------------
111,028,435
------------
Tobacco 6.6%
365,100 American Brands, Inc. ....................................................................... 16,566,410
220,600 Philip Morris Cos., Inc. .................................................................... 22,942,400
393,560 RJR Nabisco Holdings Corp. .................................................................. 12,200,360
415,000 UST, Inc. ................................................................................... 14,213,750
------------
65,922,920
------------
Utilities 17.9%
223,000 American Electric Power Co. ................................................................. 9,505,375
686,100 Central & South West Corp. .................................................................. 19,896,900
483,000 CINergy Corp. ............................................................................... 15,456,000
477,000 Dominion Resources, Inc. .................................................................... 19,080,000
Utilities (cont.)
590,000 Enova Corp. ................................................................................. $ 13,643,750
425,300 General Public Utilities Corp. .............................................................. 14,991,825
376,400 New England Electric System ................................................................. 13,691,550
353,000 Oklahoma Gas & Electric Co. ................................................................. 13,987,625
200,000 Pacific Gas & Electric Co. .................................................................. 4,650,000
670,000 PacifiCorp .................................................................................. 14,907,500
409,900 PECO Energy Co. ............................................................................. 10,657,400
338,000 Public Service Co. of Colorado .............................................................. 12,421,500
200,000 Public Service Enterprise Group, Inc. ....................................................... 5,475,000
230,000 Texas Utilities Co. ......................................................................... 9,832,500
------------
178,196,925
------------
Total Long Term Investments (Cost $815,964,222) ....................................... 929,390,532
------------
Face
Amount
g,h Receivables from Repurchase Agreements 5.6%
$55,644,228 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $55,925,733) (Cost $55,900,396)
Chase Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,701,573)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
USB Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 55,900,396
------------
Total Investments (Cost $871,864,618) 99.2%....................................... 985,290,928
Other Assets & Liabilities, Net .8%............................................... 7,843,783
------------
Net Assets 100.0%................................................................ $993,134,711
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $871,874,395
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an excess
of value over tax cost ..................................................................... $124,709,942
Aggregate gross unrealized depreciation for all investments in which there was an excess
of tax cost over value ..................................................................... (11,293,409)
------------
Net unrealized appreciation ............................................................... $113,416,533
============
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
dSecurities traded in foreign currency and valued in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Shares/ Value
Warrants Income Securities Fund (Note 1)
Common Stocks 31.5%
Telecommunications .9%
<S> <C> <C>
355,000 US West Communications Group............................................................... $ 11,315,625
------------
Conglomerates .4%
380,000 Hanson, Plc., ADR.......................................................................... 5,415,000
------------
Consumer Products 1.4%
180,000 Phillip Morris Cos., Inc. ................................................................. 18,720,000
93,750 a,bSpecialty Foods Corp. .................................................................. 46,875
------------
18,766,875
------------
Energy 1.4%
576,500 dAthabasca Oil Sands Trust, (Canada)....................................................... 5,763,944
30,000 Atlantic Richfield Co. .................................................................... 3,555,000
50,000 BP Prudhoe Bay Royalty Trust .............................................................. 750,000
500,000 dCanadian Oil Sands Trust - Units (Canada)................................................. 5,200,513
125,000 Ultramar Corp. ............................................................................ 3,625,000
------------
18,894,457
------------
Home Builders
3,088 a,mNVR, Inc. .............................................................................. 34,354
------------
Metals 1.6%
185,200 Driefontein Consolidated Mines, Ltd., ADR.................................................. 2,430,750
390,000 Free State Consolidated Gold Mines, Ltd., ADR.............................................. 3,607,500
620,000 Hartebeestfontein Gold Mining Co., Ltd., ADR............................................... 2,089,090
216,500 Impala Platinum Holdings, Ltd., ADR........................................................ 3,110,347
60,000 Kinross Mines, Ltd., ADR................................................................... 636,972
217,084 Rustenburg Platinum Holdings, Ltd., ADR.................................................... 3,381,756
19,000 St. Helena Gold Mines, Ltd., ADR........................................................... 103,313
256,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR............................................. 2,048,000
102,500 Western Deep Levels, Ltd., ADR............................................................. 3,715,625
------------
21,123,353
------------
Pharmaceuticals 2.4%
150,000 American Home Products Corp. .............................................................. 9,018,750
85,000 Bristol-Myers Squibb Co. .................................................................. 7,650,000
147,600 Merck & Co., Inc. ......................................................................... 9,538,650
105,000 Pharmacia & Upjohn, Inc. .................................................................. 4,659,375
------------
30,866,775
------------
Real Estate Investment Trust 2.6%
200,000 Equity Residential Properties Trust, Inc. ................................................. 6,575,000
125,000 FelCor Suite Hotels, Inc. ................................................................. 3,812,500
150,000 Gables Residential Trust .................................................................. 3,525,000
145,000 Meditrust Corp. ........................................................................... 4,839,375
200,000 Post Properties, Inc. ..................................................................... 7,075,000
360,400 iTanger Factory Outlet Centers, Inc. ...................................................... 8,379,300
------------
34,206,175
------------
Retail
8,000 aFederated Department Stores, Inc. ........................................................ 273,000
------------
Utilities 20.8%
390,000 American Electric Power Co., Inc. ......................................................... 16,623,750
650,000 Central & South West Corp. ................................................................ 18,850,000
511,000 CINergy Corp. ............................................................................. 16,352,000
450,200 Delmarva Power & Light Co. ................................................................ 9,454,200
Utilities (cont.)
330,000 Dominion Resources, Inc. .................................................................. $ 13,200,000
610,000 Edison International ...................................................................... 10,751,250
470,000 Enova Corp. ............................................................................... 10,868,750
435,000 Entergy Corp. ............................................................................. 12,343,125
355,000 Florida Progress Corp. .................................................................... 12,336,250
240,000 FPL Group, Inc. ........................................................................... 11,040,000
320,000 General Public Utilities Corp. ............................................................ 11,280,000
142,000 Hawaiian Electric Industries, Inc. ........................................................ 5,041,000
300,000 Houston Industries, Inc. .................................................................. 7,387,500
400,000 Long Island Lighting Co. .................................................................. 6,700,000
175,000 Nevada Power Co. .......................................................................... 3,850,000
260,000 New England Electric System ............................................................... 9,457,500
300,000 New York State Electric & Gas Corp. ....................................................... 7,312,500
385,000 Ohio Edison Co. ........................................................................... 8,421,875
610,000 Pacific Gas & Electric Co. ................................................................ 14,182,500
120,000 PacifiCorp ................................................................................ 2,670,000
240,000 PECO Energy Co. ........................................................................... 6,240,000
195,000 Potomac Electric Power Co. ................................................................ 5,167,500
337,900 Public Service Enterprise Group, Inc. ..................................................... 9,250,013
135,000 Scana Corp. ............................................................................... 3,796,875
460,000 Southern Co. .............................................................................. 11,327,500
400,000 Southwestern Public Services Co. .......................................................... 13,050,000
320,000 Texas Utilities Co. ....................................................................... 13,680,000
74,200 Western Resources, Inc. ................................................................... 2,226,000
------------
272,860,088
------------
Total Common Stocks (Cost $371,567,768).............................................. 413,755,702
------------
Preferred Stocks .5%
Automotive
14,640 Harvard Industries, Inc., 14.25% pfd., PIK................................................. 388,875
------------
Cable Systems .4%
31,272 bCablevision Systems Corp., 11.125% pfd., PIK, Series L ................................... 2,931,769
2,453 Time Warner, Inc., 10.25% pfd., Series K .................................................. 2,404,409
------------
5,336,178
------------
Consumer Products .1%
11,000 Pantry Pride, Inc., $14.875 pfd., Series B ................................................ 1,102,750
------------
Total Preferred Stocks (Cost $7,168,710)............................................. 6,827,803
------------
Convertible Preferred Stocks 9.2%
Apparel/Textile .1%
40,000 Fieldcrest Cannon, Inc., $3.00 cvt. pfd., Series A......................................... 1,800,000
------------
Cable Systems .5%
240,000 Cablevision Systems Corp., 8.50% cvt. pfd. ................................................ 6,240,000
------------
Communications .5%
140,000 dNortel Inversora, SA, cvt. pfd. (Argentina)............................................... 6,440,000
------------
Consumer Products .2%
300,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd., Series C.................................... 1,950,000
------------
Energy 4.1%
50,000 bDevon Financing Trust, $3.25 cvt. pfd. ................................................... 2,562,500
159,800 Enron Oil & Gas, 6.25% cvt. pfd. .......................................................... 4,134,825
Energy (cont.)
75,000 Gerrity Oil & Gas, $1.50 cvt. pfd., Series G............................................... $ 937,500
138,000 Maxus Energy Corp., $4.00 cum. cvt. pfd. .................................................. 6,865,500
235,000 bMcDermott International, Inc., $2.875 cvt. pfd., Series C................................. 9,752,500
209,700 Noble Drilling Corp., $1.50 cvt. pfd. ..................................................... 7,391,925
75,000 bOccidental Petroleum Corp., $3.875 cvt. pfd. ............................................. 4,500,000
170,000 bParker & Parsley Capital, 6.25% cvt. pfd. ................................................ 9,477,500
66,923 Santa Fe Energy Resources, Inc., 7.00% cvt. pfd. .......................................... 1,463,941
450,000 Santa Fe Energy Resources, Inc., 8.25% cvt. pfd. .......................................... 4,950,000
100,000 Snyder Oil Corp., $1.50 cvt. exch. pfd. ................................................... 1,900,000
------------
53,936,191
------------
Metals 2.6%
138,500 Amax Gold, Inc., $3.75 cvt. pfd., Series B................................................. 7,098,125
65,000 Armco, Inc., $3.625 cum. cvt. pfd., Series A............................................... 3,079,375
61,000 Battle Mountain Gold Co., $3.25 cvt. pfd. ................................................. 2,989,000
190,000 Coeur D' Alene Mines Corp, 7.00% cum. cvt. pfd. ........................................... 3,752,500
55,000 Cyprus Minerals, $4.00 cvt. pfd., Series A................................................. 3,018,125
108,800 Freeport-McMoRan Copper & Gold, Inc., $1.25 cum. cvt. pfd. ................................ 3,753,600
90,000 Freeport-McMoRan Copper & Gold, Inc., $1.75 cvt. pfd. ..................................... 2,790,000
60,000 bFreeport-McMoRan, Inc., 4.375% cvt. exch. pfd. ........................................... 3,990,000
70,000 Hecla Mining Co., $3.50 cvt. pfd., Series B................................................ 2,948,750
------------
33,419,475
------------
Real Estate Investment Trust 1.0%
135,000 Security Cap Industrial, 7.00%, cvt. pfd. ................................................. 3,121,875
400,000 Security Capital Pacific Trust, 1.75% cvt. pfd., Series A.................................. 10,500,000
------------
13,621,875
------------
Restaurants .3%
210,000 Flagstar Cos., $2.25 cvt. pfd., Series A................................................... 2,690,625
------------
Total Convertible Preferred Stocks (Cost $116,562,871)............................... 120,098,166
------------
Warrants
3,128 a,mNVR, Inc. (Cost $13,294)................................................................ 6,647
------------
Miscellaneous
30,814 aMiscellaneous Securities (Cost $10,477)................................................... 10,477
------------
Total Common Stocks, Preferred Stocks, Convertible Preferred Stocks, Warrants
and Miscellaneous Securities (Cost $495,323,120).......................................... 540,698,795
------------
Face
Amount
Corporate Bonds 28.9%
Automotive 1.4%
$ 4,000,000 Collins & Aikman Products, senior sub. notes, 11.50%, 04/15/05 ............................ 4,080,000
400,000 Exide Corp., senior notes, 10.75%, 12/15/02 ............................................... 408,000
5,000,000 Harvard Industries, Inc., senior notes, 11.125%, 08/01/05 ................................. 4,750,000
8,350,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00 ............................... 8,663,125
------------
17,901,125
------------
Building Products .8%
9,250,000 Inter-City Products Corp., senior notes, 9.75%, 03/01/00 .................................. 8,671,875
2,000,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 ......................................... 1,910,000
------------
10,581,875
------------
Cable Systems 1.8%
$ 150,000 Cablevision Industries Corp., guaranteed senior sub. notes, 10.75%, 01/30/02 .............. $ 161,250
3,000,000 Cablevision Systems Corp., senior sub. deb., 9.875%, 04/01/23 ............................. 2,760,000
8,000,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 ............................... 8,747,144
7,300,000 Helicon Group L.P. Corp., S.F., senior secured notes, Series B, 9.00%, 11/01/03 ........... 7,263,500
5,000,000 Storer Communiciations, Inc., sub. deb., 10.00%, 05/15/03 ................................. 5,037,500
------------
23,969,394
------------
Chemicals 1.3%
8,000,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02 .................... 8,120,000
3,250,000 IMC Fertilizer Group, Inc., notes, Series B, 10.75%, 06/15/03 ............................. 3,485,625
725,000 UCC Investors, senior notes, 10.50%, 05/01/02 ............................................. 764,875
4,150,000 UCC Investors, senior notes, 11.00%, 05/01/03 ............................................. 4,378,250
------------
16,748,750
------------
Consumer Products 2.8%
2,250,000 Calmar, Inc., senior sub. notes, 11.50%, 08/15/05 ......................................... 2,205,000
7,750,000 Hines Horticulture, senior sub. notes, 11.75%, 10/15/05 ................................... 8,060,000
5,050,000 Mafco, Inc., senior sub. notes, 11.875%, 11/15/02 ......................................... 5,327,750
2,000,000 bPackaging Resources, Inc., senior notes, 11.625%, 05/01/03 ............................... 2,022,500
8,000,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ......................... 7,520,000
5,000,000 Revlon Consumer Product Corp., senior sub. notes, Series B, 10.50%, 02/15/03 .............. 5,037,500
5,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13 ................................................. 5,000,000
1,150,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ........................................... 1,132,750
------------
36,305,500
------------
Energy 2.2%
3,250,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ........................................... 3,371,875
9,835,000 Gerrity Oil & Gas Corp., senior sub. notes, 11.75%, 07/15/04 .............................. 10,425,100
1,000,000 Global Marine, Inc., senior secured notes, 12.75%, 12/15/99 ............................... 1,086,250
10,000,000 Mesa Capital Corp., disc. notes, 12.75%, 06/30/98 ......................................... 10,050,000
1,000,000 Mesa Operating Co., guaranteed, 10.625%, 07/01/06 ......................................... 1,021,250
1,000,000 bPlains Resources, Inc., senior sub. notes, 10.25%, 03/15/06 .............................. 990,000
1,752,000 Tesoro Petroleum Corp., S.F., sub. deb., 12.75%, 03/15/01 ................................. 1,760,760
------------
28,705,235
------------
Entertainment .1%
650,000 bAMF Group, Inc., senior sub. notes, 10.875%, 03/15/06 .................................... 648,375
------------
Food & Beverages 1.8%
3,900,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ............................ 3,802,500
5,283,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ....................................... 4,226,400
1,600,000 Doane Products Co., senior notes, 10.625%, 03/01/06 ....................................... 1,608,000
1,010,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ...................... 1,052,925
6,000,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ..................... 5,910,000
4,000,000 Specialty Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 ...................... 3,470,000
4,000,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 ................. 3,755,000
------------
23,824,825
------------
Food Retailing 2.7%
1,000,000 Americold Corp., senior sub. notes, 12.875%, 05/01/08 ..................................... 1,020,000
9,000,000 Americold Corp., senior sub. notes, Series B, 11.50%, 03/01/05 ............................ 9,146,250
6,000,000 Bruno's, Inc., 10.50%, 08/01/05 ........................................................... 5,955,000
7,000,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04 ............................ 6,571,250
Food Retailing (cont.)
$ 10,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05 ................................... $ 9,250,000
4,000,000 Smith's Food & Drug, senior sub. notes, 11.25%, 05/15/07 .................................. 4,070,000
------------
36,012,500
------------
Gaming & Leisure 1.5%
8,500,000 Aztar Corp., senior sub. notes, 11.00%, 10/01/02 .......................................... 8,861,250
2,200,000 Harveys Casinos Resorts, senior sub. notes, 10.625%, 06/01/06 ............................. 2,211,000
8,000,000 Rio Hotel & Casino, Inc., senior sub. notes, 10.625%, 07/15/05 ............................ 8,360,000
------------
19,432,250
------------
Health Care Services .6%
3,000,000 bDade International, Inc., senior sub. notes, 11.125%, 05/01/06 ........................... 3,090,000
1,500,000 OrNda Healthcorp., Inc., senior sub. notes, 12.25%, 05/15/02 .............................. 1,629,375
4,000,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03 3,660,000
------------
8,379,375
------------
Industrial Products 1.9%
8,650,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01 ..................................... 8,736,500
8,450,000 bRBX Corp., senior sub. notes, 11.25%, 10/15/05 ........................................... 8,027,500
5,030,000 RHI Holdings, Inc., senior sub. deb., 11.875%, 03/01/99 ................................... 4,954,550
2,696,000 Thermadyne Industries, Inc., notes, 10.75%, 11/01/03 ...................................... 2,669,040
246,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ............................... 243,540
------------
24,631,130
------------
Information Technology .5%
4,625,000 a,kAnacomp, Inc., senior sub. notes, 15.00%, 11/01/00 ..................................... 5,185,781
1,600,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 .................................... 1,712,000
------------
6,897,781
------------
Media & Broadcasting .2%
2,000,000 bBenedek Broadcasting, senior secured notes, 11.875%, 03/01/05 ............................ 2,120,000
------------
Metals 1.0%
1,000,000 Armco Steel, Inc., senior notes, 11.375%, 10/15/99 ........................................ 1,032,500
6,020,000 Jorgensen, Earle M. Co., senior notes, 10.75%, 03/01/00 ................................... 5,959,800
6,000,000 Republic Engineered Steel, first mortgage, 9.875%, 12/15/01 ............................... 5,625,000
815,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05 .............. 929,100
------------
13,546,400
------------
Paper & Forest Products .9%
600,000 bFour M Corp., senior notes, 12.00%, 06/01/06 ............................................. 613,500
7,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05 ........................... 7,525,000
4,000,000 Riverwood International, senior sub. notes, 10.875%, 04/01/08 ............................. 3,960,000
------------
12,098,500
------------
Railroads .5%
6,000,000 Southern Pacific Rail Co., senior notes, 9.375%, 08/15/05 ................................. 6,270,000
------------
Restaurants .5%
10,000,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 .................................. 6,600,000
------------
Retail .7%
9,940,000 Levitz Furniture Corp., senior notes, 13.375%, 10/15/98 ................................... 9,542,400
------------
Textiles & Apparels 2.0%
7,000,000 a,kBibb Co., senior sub. notes, 14.00%, 10/01/99 .......................................... 3,185,000
10,000,000 Consoltex Group, Inc., senior sub. notes, Series B, 11.00%, 10/01/03 ...................... 9,150,000
175,000 a,kForstmann Textile, Inc., S.F., senior sub. notes, 14.75%, 04/15/99 ..................... 49,875
Textiles & Apparels (cont.)
$ 8,300,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ...................................... $ 7,947,250
5,000,000 JPS Textile Group, Inc., S.F., sub. notes, 7.00%, 05/15/00 ................................ 1,425,000
1,000,000 Polysindo International Finance, guaranteed, 11.325%, 06/15/06 ............................ 1,022,500
5,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ............................... 4,875,000
------------
27,654,625
------------
Utilities 3.2%
195,782,500 cESCOM, E168, utility deb., 11.00%, 06/01/08, (South Africa)............................... 35,690,883
4,153,739 Midland CoGeneration Venture, S.F., sub. deb., Series C, 10.33%, 07/23/02 ................. 4,330,273
2,000,000 Texas, New Mexico Power, secured deb., 10.75%, 09/15/03 ................................... 2,093,454
------------
42,114,610
------------
Wireless Communications .4%
5,000,000 CommNet Cellular, Inc., sub. notes, 11.25%, 07/01/05 ...................................... 5,350,000
------------
Total Corporate Bonds (Cost $381,443,454)............................................ 379,334,650
------------
Convertible Corporate Bonds 4.3%
Automotive .1%
2,000,000 bExide Corp., cvt. senior sub. notes, 2.90%, 12/15/05 ..................................... 1,100,000
------------
Biotechnology .1%
2,000,000 Centocor, Inc., Eurobonds, cvt. sub. deb., 6.75%, 10/16/01 ................................ 1,850,000
------------
Computer/Technology .6%
1,500,000 bAltera Corp., cvt. sub. notes, 5.75%, 06/15/02 ........................................... 1,515,000
3,000,000 Conner Peripherals, Inc., cvt. sub. deb., 6.75%, 03/01/01 ................................. 3,030,000
2,815,000 Maxtor Corp., cvt. sub. deb., 5.75%, 03/01/12 ............................................. 1,984,575
1,000,000 bXilinx, Inc., cvt. sub. notes, 5.25%, 11/01/02 ........................................... 922,500
------------
7,452,075
------------
Energy 1.5%
4,500,000 Ashland, Inc., S.F., cvt. deb., 6.75%, 07/01/14 ........................................... 4,494,375
9,000,000 Oryx Energy Co., cvt. sub. deb., 7.50%, 05/15/14 .......................................... 7,920,000
276,000 Pogo Producing Co., cvt. sub. deb., 8.00%, 12/31/05 ....................................... 281,520
7,250,000 Snyder Oil Corp., cvt. sub. notes, 7.00%, 05/15/01 ........................................ 6,633,750
------------
19,329,645
------------
Health Care Services .3%
3,000,000 Grancare, Inc., cvt. sub. deb., 6.50%, 01/15/03 ........................................... 2,865,000
1,000,000 bMedical Care International, Inc., cvt. sub. deb., 6.75%, 10/01/06 ........................ 1,005,000
------------
3,870,000
------------
Metals 1.4%
5,000,000 Ashanti Capital, Ltd., cvt. notes, 5.50%, 03/15/03 ........................................ 4,750,000
100,000 Coeur D'Alene Mines Corp., cvt. senior sub. deb., 6.00%, 06/10/02 ......................... 94,875
6,000,000 Coeur D'Alene Mines Corp., cvt. sub. deb., 6.375%, 01/31/04 ............................... 5,940,000
1,800,000 FMC Corp., Eurobonds, cvt. senior sub. deb., 6.75%, 01/16/05 .............................. 1,656,000
5,850,000 bHomestake Mining Co., cvt. sub. deb., 5.50%, 06/23/00 .................................... 6,040,125
------------
18,481,000
------------
Pollution Control .2%
3,610,000 Air & Water Technology Corp., cvt. sub. deb., 8.00%, 05/15/15 ............................. 3,176,800
------------
Retail .1%
1,180,000 Drug Emporium, Inc., cvt. sub. deb., 7.75%, 10/01/14 ...................................... 951,375
------------
Total Convertible Corporate Bonds (Cost $55,339,910)................................. 56,210,895
------------
Zero Coupon/Step-up Bonds 2.8%............................................................
$ 2,000,000 bAMF Group, Inc., senior disc. notes, zero coupon to 03/15/01, (original accretion rate 12.25%),
12.25%, 03/15/06 ......................................................................... $ 1,085,000
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 .............................................................. 6,875,000
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 .......................... 2,171,000
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 .............................................................. 850,000
10,000,000 Food 4 Less Supermarkets, Inc., zero coupon to 06/15/00, (original accretion rate 13.625%),
13.625% thereafter, 07/15/05 ............................................................. 4,700,000
1,300,000 bL.F.C. Holding Corp., senior deb., zero coupon to 06/15/97, (original accretion rate 15.00%),
15.00% thereafter, 06/15/02 .............................................................. 975,000
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 ..................................................... 8,645,000
1,300,000 jMesa Operating Co., senior sub. notes, zero coupon to 07/01/01, (original accretion rate
11.625%), 11.625% thereafter, 07/01/06.................................................... 773,500
8,000,000 Revlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion rate 12.00%),
0.00%, 03/15/98 .......................................................................... 6,700,000
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 ............................ 2,781,250
1,500,000 UCC Investors, senior notes, zero coupon to 05/01/98, (original accretion rate 12.00%), 12.00%
thereafter, 05/01/05 ..................................................................... 1,252,500
------------
Total Zero Coupon/Step-up Bonds (Cost $37,513,992)................................... 36,808,250
------------
Total Bonds (Cost $474,297,356)...................................................... 472,353,795
------------
U.S. Government Securities 7.1%
75,000,000 U.S. Treasury Bonds, 6.25% - 7.125%, 02/15/23 - 08/15/23 .................................. 69,009,369
24,390,000 U.S. Treasury Notes, 6.00% - 6.875%, 04/30/97 - 08/15/02 .................................. 24,306,680
------------
Total U.S. Government Securities (Cost $96,236,585).................................. 93,316,049
------------
Foreign Government & Agency Securities 11.4%
14,000,000 cCanadian Government, first coupon deb., 8.00%, 06/01/23 .................................. 10,136,605
110,000,000 Republic of Argentina, Series L, 5.25%, 03/31/23 .......................................... 60,362,500
22,552,500 Republic of Brazil, 6.375%, 01/01/01 ...................................................... 21,142,969
36,000,000 Republic of Brazil, 5.00%, 04/15/24 ....................................................... 19,935,000
36,000,000 Republic of Ecuador, 3.25%, 02/28/25 ...................................................... 12,937,500
25,000,000 cRepublic of South Africa, 12.00%, 02/28/05 ............................................... 5,015,000
30,000,000 United Mexican States, Series B, 6.25%, 12/31/19 .......................................... 19,481,250
------------
Total Foreign Government & Agency Securities (Cost $137,817,862)..................... 149,010,824
------------
Total Long Term Investments (Cost $1,203,674,923).................................... 1,255,379,463
------------
g,hReceivables from Repurchase Agreement 3.3%
43,487,247 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $43,707,900) (Cost $43,688,098)
Chase Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $6,019,044)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ..................... $ 43,688,098
------------
Total Investments (Cost $1,247,363,021) 99.1% .................................. 1,299,067,561
Other Assets and Liabilities, Net .9% .......................................... 11,982,141
------------
Net Assets 100.0%............................................................... $1,311,049,702
============
At June 30, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$1,247,363,021 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................. $ 92,178,033
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (40,473,493)
------------
Net unrealized appreciation.............................................................. $ 51,704,540
============
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-In-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount is stated in foreign currency and value is stated in U.S. dollars.
dSecurities traded in foreign currency and valued in U. S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement
iSee Note 8 regarding holdings of 5% or more of voting securities.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
kSee Note 7 regarding defaulted securities.
mSee Note 9 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Shares/ Value
Country* Warrants Templeton International Equity Fund (Note 1)
Common Stocks & Warrants 79.6%
Argentina 1.9%
<S> <C> <C>
AR 588,699 aCiadea, SA...................................................................... $ 4,151,861
US 2,217,000 Transportadora de Gas del Sur, SA, Class B, ADR.................................. 2,715,825
AR 56,000 YPF Sociedad Anonima ............................................................ 1,263,267
US 495,000 YPF Sociedad Anonima, ADR........................................................ 11,137,500
------------
19,268,453
------------
Australia 5.0%
AU 338,674 Australia & New Zealand Banking Group, Ltd. ..................................... 1,602,403
AU 1,359,235 Email, Ltd. ..................................................................... 3,525,347
AU 1,497,533 Gio Australia Holdings, Ltd. .................................................... 3,683,954
AU 1,003,000 National Foods, Ltd. ............................................................ 1,135,159
AU 1,984,500 News International, Plc. ........................................................ 12,820,723
AU 6,527,766 Pacific Dunlop, Ltd. ............................................................ 14,673,172
AU 4,519,236 Pioneer International, Ltd. ..................................................... 13,141,960
------------
50,582,718
------------
Austria .6%
AT 33,000 Boehler Uddeholm, AG............................................................. 2,558,976
US 27,055 bBoehler Uddeholm, AG............................................................ 2,097,973
AT 39,400 aMayr-Melnhof Karton, AG......................................................... 1,696,959
------------
6,353,908
------------
Belgium .5%
BE 9,054 Solvay, SA ...................................................................... 5,604,244
------------
Bermuda 2.6%
US 547,000 Ace, Ltd. ....................................................................... 25,709,000
------------
Brazil .7%
US 276,365 Companhia Siderurgica Nacional, ADR.............................................. 7,045,704
------------
Canada 2.0%
CA 205,800 Bank of Montreal ................................................................ 5,034,770
CA 92,700 Canadian Imperial Bank of Commerce .............................................. 2,990,980
CA 29,400 Gendis, Inc., Class A ........................................................... 179,813
CA 357,000 Hudsons Bay Co. ................................................................. 5,412,855
CA 127,000 London Insurance Group, Inc. .................................................... 2,660,465
CA 447,000 National Bank of Canada ......................................................... 3,732,503
------------
20,011,386
------------
China .7%
CN 6,960,000 Maanshan Iron & Steel Co., Ltd., Class H ........................................ 1,222,827
US 338,300 Shandong Huaneng Power, ADR...................................................... 2,790,975
CN 8,400,000 Shanghai Hai Xing Shipping Co., Class H.......................................... 553,435
CN 1,494,000 Shenzhen China Bicycles Co. (Holdings), Ltd., Class B............................ 345,478
CN 8,728,000 Yizheng Chemical Fibre Co., Ltd., Class H........................................ 1,928,092
------------
6,840,807
------------
Colombia .3%
US 159,000 Banco Ganadero, SA, Class C, ADR ................................................ 3,100,500
------------
Czech Republic .3%
US 120,000 a,bKomercni Banka, AS, GDR....................................................... 3,240,000
------------
Ecuador .1%
US 200 bLa Cemento Nacional CA, GDR..................................................... 36,200
------------
Finland 2.4%
FI 111,562 Amer Group, Ltd., Class A ....................................................... $ 1,878,817
FI 1,754,300 aEnso Oy, Class R................................................................ 13,673,658
FI 153,200 Nokia, AB, Class A............................................................... 5,656,249
FI 171,000 Outokumpu Oy, Class A............................................................ 2,879,813
------------
24,088,537
------------
France 5.3%
FR 27,323 Alcatel Cable, SA................................................................ 2,326,379
FR 13,009 Cie de Saint Gobain ............................................................. 1,742,373
FR 70,710 Ecco, SA ........................................................................ 17,800,350
FR 14,850 Labinal, SA ..................................................................... 2,170,812
FR 13,915 aMarine Wendel .................................................................. 1,152,314
FR 315,590 aPechiney, SA, Class A........................................................... 12,754,271
FR 148,024 Societe Elf Aquitane, SA......................................................... 10,894,083
FR 60,833 Total, SA, Class B .............................................................. 4,514,952
------------
53,355,534
------------
Greece 1.0%
GR 115,733 bAlpha Credit Bank .............................................................. 6,110,202
GR 69,970 Ergo Bank, SA ................................................................... 3,854,095
------------
9,964,297
------------
Hong Kong 6.6%
HK 5,961,000 C.P. Pokphand Co., Ltd. ......................................................... 2,367,997
HK 846,000 Cathay Pacific Airways, Ltd. .................................................... 1,551,943
HK 623,000 Cheung Kong Holdings, Ltd. ...................................................... 4,486,936
HK 2,086,000 Consolidated Electric Power Asia, Ltd. .......................................... 3,449,382
HK 9,123,000 Dairy Farm International Holdings, Ltd. ......................................... 7,708,935
HK 9,922,000 aGreat Wall Electronic International, Ltd. ...................................... 717,801
HK 779,000 Hang Lung Development Co., Ltd. ................................................. 1,464,257
HK 122,338 HSBC Holdings, Plc. ............................................................. 1,849,116
HK 905,200 Jardine Matheson Holdings, Ltd. ................................................. 6,653,220
HK 2,864,250 Jardine Strategic Holdings, Ltd. ................................................ 9,165,600
HK 318,250 aJardine Strategic Holdings, Ltd., warrants...................................... 98,658
HK 873,700 Melco International Development, Ltd. ........................................... 242,671
HK 5,999,000 Oriental Press Group, Ltd. ...................................................... 3,216,206
HK 7,155,000 Peregrine Investments Holdings, Ltd. ............................................ 10,306,269
HK 715,500 aPeregrine Investments Holdings, Ltd., warrants.................................. 88,736
HK 17,474,000 Shun Tak Holdings ............................................................... 10,722,669
HK 3,172,400 Sing Tao Holdings, Ltd. ......................................................... 1,874,977
HK 1,974,000 Yue Yuen Industrial (Holdings), Ltd. ............................................ 561,031
------------
66,526,404
------------
India .1%
US 109,700 bGujarat Narmada Valley Fertilizers Co., Ltd., GDR .............................. 713,050
------------
Indonesia .4%
ID 167,500 PT Barito Pacific Timber, fgn. .................................................. 109,748
ID 4,193,750 PT Indah Kiat Pulp & Paper Corp., fgn. .......................................... 4,099,154
ID 503,250 aPT Indah Kiat Pulp & Paper Corp., warrants...................................... 254,057
------------
4,462,959
------------
Italy 2.0%
IT 148,000 Banco di Sardegna, SpA, di Risp.................................................. 938,485
IT 696,200 Cartiere Burgo, SpA ............................................................. 3,806,545
Italy (cont.)
IT 904,000 Sasib, SpA, di Risp.............................................................. $ 1,798,852
IT 1,833,800 Sirti, SpA ...................................................................... 11,883,335
IT 468,000 Unione Cementi Marchino Emiliane (Unicem), di Risp............................... 1,524,609
------------
19,951,826
------------
Luxembourg .1%
LU 10,650 aArbed, SA....................................................................... 1,219,758
------------
Mexico 1.2%
MX 396,400 aConsorcio G Grupo Dina, SA de CV................................................ 253,466
US 42,800 aConsorcio G Grupo Dina, SA de CV, ADR........................................... 107,000
US 275,600 Telmex-Telefonos de Mexico, SA, Class L, ADR..................................... 9,232,600
MX 1,274,640 Vitro, SA ....................................................................... 2,957,635
------------
12,550,701
------------
Netherlands 8.5%
NL 93,700 ABN AMRO, NV..................................................................... 5,032,495
NL 32,300 Akzo Nobel, NV................................................................... 3,872,970
NL 126,700 DSM, NV.......................................................................... 12,591,996
NL 768,885 Ing Groep, NV.................................................................... 22,947,081
NL 240,308 Internatio-Mueller, NV........................................................... 5,297,907
NL 147,900 Koninklijke Bijenkorf Beheer, NV (KBB)........................................... 12,504,943
NL 63,000 NV Holdingsmij de Telegraaf ..................................................... 10,583,113
NL 375,807 Philips Electronics, NV ......................................................... 12,229,427
------------
85,059,932
------------
New Zealand 1.2%
NZ 1,267,106 Fisher & Paykel, Ltd. ........................................................... 4,079,874
NZ 6,020,000 Fletcher Challenge, Ltd., Forestry Division...................................... 7,496,577
US 47,765 aTranz Rail Holdings, Ltd., ADR.................................................. 662,739
------------
12,239,190
------------
Norway 2.7%
NO 13,200 Elkem, AS........................................................................ 182,032
NO 143,000 aFokus Bank, AS.................................................................. 779,994
NO 176,200 aFokus Bank, AS.................................................................. 961,084
NO 705,960 Hafslund ASA, Class B............................................................ 4,514,193
NO 134,000 Helikopter Services Group, ASA................................................... 1,548,524
NO 705,960 aNycomed ASA, Class B............................................................ 9,789,817
NO 199,000 bUnion Bank of Norway, Primary Capital Certificate............................... 4,875,309
NO 295,000 Unitor, AS....................................................................... 4,772,691
------------
27,423,644
------------
Peru .5%
PE 2,445,602 Telefonica de Peru, Class B...................................................... 4,965,283
------------
Portugal .6%
PT 321,978 BPI Socieda de Gestora de Participacoes Socias, SA............................... 4,082,570
US 239,400 bPortucel Industrial Empresa Product de Celulose, ADR............................ 1,533,812
------------
5,616,382
------------
South Korea 1.0%
KR 44,500 Byucksan Development Co., Ltd. .................................................. 565,027
KR 109,900 Daegu Bank Co., Ltd. ............................................................ 1,622,759
KR 30,600 Daehan Synthetic Fiber Co., Ltd. ................................................ 2,942,308
KR 19,110 Keumkang Co., Ltd. .............................................................. 1,264,200
South Korea (cont.)
KR 155,990 Pacific Chemical Co., Ltd. ...................................................... $ 2,942,119
KR 7,870 Pohang Iron & Steel Co., Ltd. ................................................... 641,960
------------
9,978,373
------------
Spain 6.4%
ES 172,300 Banco Bilbao Vizcaya ............................................................ 6,985,954
ES 15,600 Banco Popular Espanol ........................................................... 2,783,516
ES 734,000 Compania Sevillana de Electricidad .............................................. 6,766,298
ES 318,000 Dragados y Construcciones, SA.................................................... 4,210,851
ES 174,450 Huarte, SA ...................................................................... 387,046
ES 1,863,800 Iberdrola, SA.................................................................... 19,146,885
ES 1,238,100 Telefonica de Espana, SA ........................................................ 22,826,577
ES 52,200 Unipapel, SA .................................................................... 958,322
------------
64,065,449
------------
Sweden 10.8%
SE 80,600 Asea, AB, Class A ............................................................... 8,557,892
SE 43,200 Autoliv.......................................................................... 1,317,988
SE 515,500 aCelsius, AB, Class B............................................................ 6,773,675
SE 382,000 Electrolux, AB, Class B ......................................................... 19,241,353
SE 522,100 aEnator, AB, Class B............................................................. 12,025,412
SE 158,500 Esselte, AB, Class B ............................................................ 3,243,732
SE 1,490 aFastighets, AB Tornet, Class A.................................................. 12,152
SE 31,180 Fastighets Naeckebro, AB, Class A................................................ 386,159
SE 210,000 Marieberg Tidnings, AB, Class A ................................................. 5,265,066
SE 96,400 Sparbanken Sverige, AB, Class A.................................................. 1,252,137
US 14,900 bSparbanken Sverige, AB, Class A................................................. 193,536
SE 77,000 Stadshypotek, AB, Class A........................................................ 1,721,190
US 176,000 bStadsyhpotek, AS, Class A....................................................... 3,934,149
SE 1,288,000 Stena Line, AB, Class B, free.................................................... 6,127,775
SE 804,250 Stora Kopparbergs Bergslags, AB, Class B......................................... 10,628,587
SE 311,800 Svenska Handelsbanken, Class A................................................... 6,522,323
SE 831,000 aSwedish Match, AB .............................................................. 2,585,501
SE 831,000 Volvo, AB, Class B............................................................... 18,951,971
------------
108,740,598
------------
Switzerland 5.0%
CH 3,690 Baloise-Holding ................................................................. 8,027,834
CH 12,800 Bucher Holding, AG............................................................... 9,982,004
CH 11,000 Ciba-Geigy, AG................................................................... 13,417,317
CH 3,570 Kuoni Reisen Holding, AG, Class B................................................ 8,195,081
CH 15,400 aSMH, AG, br. ................................................................... 10,716,257
------------
50,338,493
------------
Thailand .1%
TH 17,400 Chareon Pokphand Feedmill Public Co., Ltd., fgn. ................................ 92,524
------------
Turkey .4%
TR 13,125,825 bTofas Turk Otomobil Fabrikasi, AS, GDR.......................................... 4,462,781
------------
United Kingdom 8.6%
GB 6,312,400 Albert Fisher Group, Plc. ....................................................... 4,607,448
GB 2,536,000 Anglian Group, Plc. ............................................................. 7,620,760
GB 1,635,473 Argyll Group, Plc. .............................................................. 8,813,348
GB 7,123,000 aCordiant, Plc. ................................................................. 12,057,507
United Kingdom (cont.)
GB 2,493,900 Hillsdown Holdings, Plc. ........................................................ $ 6,739,014
GB 1,330,900 Kwik Save Group, Plc. ........................................................... 9,362,929
GB 902,000 Lex Service, Plc. ............................................................... 5,252,982
GB 1,890,000 London Pacific Group, Ltd. ...................................................... 7,558,004
GB 410,350 aMcBride, Plc. .................................................................. 834,822
GB 2,614,971 Meggitt, Plc. ................................................................... 3,898,578
GB 632,341 National Westminster Bank, Plc. ................................................. 6,049,231
GB 824,500 aRailtrack Group, Plc. .......................................................... 2,804,160
GB 6,171,300 aRaine, Plc. .................................................................... 1,293,834
GB 738,900 Thames Water Group, Plc. ........................................................ 6,506,341
GB 1,306,000 Wace Group, Plc. ................................................................ 3,488,508
------------
86,887,466
------------
Total Common Stocks & Warrants (Cost $716,487,095)......................... 800,496,101
------------
Preferred Stocks .1%
NL 2,547 ABN AMRO, NV, cvt., pfd. ........................................................ 125,446
NL 6,910 Ballast Nedam, NV, cvt. pfd. .................................................... 331,420
------------
Total Preferred Stocks (Cost $401,801)..................................... 456,866
------------
Face
Amount
Bonds 5.3%
Finland .3%
US $ 3,050,000 Amer Group, Ltd., cvt., 6.25%, 06/15/03 ......................................... 2,729,750
------------
Hong Kong .2%
US 1,531,000 Jardine Strategic Holdings, Ltd., cvt., 7.50%, 05/07/49 ......................... 1,668,790
------------
United States 4.8%
US 48,000,000 U.S. Treasury Notes, 7.50%, 12/31/96 ............................................ 48,465,120
------------
Total Bonds (Cost $52,563,961)............................................. 52,863,660
------------
Total Long Term Investments (Cost $769,452,857)............................ 853,816,627
------------
gReceivables from Repurchase Agreements 14.6%
US 32,564,365 BA Securities, Inc., 5.40%, 07/01/96, (Maturity Value $31,934,364)
Collateral: U.S. Treasury Bills, 09/26/96 ..................................... 31,920,000
US 25,500,322 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $25,011,146)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 25,000,000
US 47,020,203 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $45,897,453)
Collateral: U.S. Treasury Notes, 6.125%, 12/31/96............................... 45,877,000
US 44,501,094 Smith Barney, Inc., 5.27%, 07/01/96, (Maturity Value $44,126,370)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99 ............................... 44,107,000
------------
Total Receivables from Repurchase Agreements (Cost $146,904,000)........... 146,904,000
------------
Total Investments (Cost $916,356,857) 99.6%........................... 1,000,720,627
Other Assets and Liablities, Net .4%.................................. 3,566,652
------------
Net Assets 100.0% .................................................... $1,004,287,279
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $916,356,857 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 155,547,017
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................... (71,183,247)
------------
Net unrealized appreciation ................................................... $ 84,363,770
============
</TABLE>
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
BE - Belgium
CA - Canada
CH - Switzerland
CN - China
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
HK - Hong Kong
ID - Indonesia
IT - Italy
KR - South Korea
LU - Luxembourg
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
PE - Peru
PT - Portugal
SE - Sweden
TH - Thailand
TR - Turkey
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares,
Warrants Value
Country* & Rights Templeton Pacific Growth Fund (Note 1)
Common Stocks, Warrants & Rights 96.8%
Australia 15.7%
<S> <C> <C> <C>
AU 1,000,000 Australia & New Zealand Banking Group, Ltd. ....................................... $ 4,731,403
AU 1,706,264 Australian Gas & Light Co. ........................................................ 7,094,067
AU 680,000 Brambles Industries, Ltd. ......................................................... 9,448,972
AU 1,981,000 Capral Aluminium, Ltd. ............................................................ 5,729,618
AU 1,080,000 Coles Myer, Ltd., Class A.......................................................... 3,921,562
AU 875,000 Email, Ltd. ....................................................................... 2,269,423
AU 2,399,145 Gio Austrailia Holdings, Ltd. ..................................................... 5,901,933
AU 5,997,391 Goodman Fielder, Ltd. ............................................................. 6,080,587
AU 919,000 Mayne Nickless, Ltd. .............................................................. 5,366,582
AU 3,547,000 National Foods, Ltd. .............................................................. 4,014,367
AU 2,061,877 Pacific Dunlop, Ltd. .............................................................. 4,634,706
US 118,100 bQantas Airways, Ltd., ADR......................................................... 2,015,081
------------
61,208,301
------------
China 1.8%
US 181,500 aGuangshen Railway Co., Ltd., ADR.................................................. 3,471,188
HK 3,216,000 Maanshan Iron & Steel Co., Ltd., Class H .......................................... 565,031
US 225,000 Shandong Huaneng Power, ADR........................................................ 1,856,250
HK 17,658,000 Shanghai Hai Xing Shipping Co., Class H............................................ 1,163,399
------------
7,055,868
------------
Hong Kong 17.0%
HK 3,000,000 Cathay Pacific Airways, Ltd. ...................................................... 5,503,343
HK 800,000 Cheung Kong Holdings, Ltd. ........................................................ 5,761,716
HK 4,197,727 Dairy Farm International Holdings, Ltd. ........................................... 3,547,079
HK 5,415,000 Grand Hotel Holdings, Ltd. ........................................................ 2,133,611
HK 169,800 aHang Lung Development Co., Ltd., warrants......................................... 40,143
HK 4,909,454 Hon Kwok Land Investment Co., Ltd. ................................................ 1,712,434
HK 1,900,000 Hong Kong Telecommunications Co., Ltd. ............................................ 3,411,814
HK 250,000 HSBC Holdings, Plc. ............................................................... 3,778,704
HK 496,000 Hualing Holdings, Ltd. ............................................................ 51,261
HK 632,031 Jardine Matheson Holdings, Ltd. ................................................... 4,645,428
HK 1,000,000 Jardine Strategic Holdings, Ltd. .................................................. 3,200,000
HK 2,846,000 Lai Sun Development Co., Ltd. ..................................................... 580,910
HK 284,600 aLai Sun Development Co., Ltd., warrants........................................... 18,751
HK 160,500 Melco International Development, Ltd. ............................................. 44,579
HK 3,860,000 National Mutual Asia, Ltd. ........................................................ 3,390,886
HK 1,574,667 New World Development Co., Ltd. ................................................... 7,302,980
HK 1,050,000 Peregrine Investments Holdings, Ltd. .............................................. 1,512,450
HK 105,000 aPeregrine Investments Holdings, Ltd., warrants.................................... 13,022
HK 3,210,000 Shun Tak Holdings ................................................................. 1,969,770
HK 2,201,100 Sing Tao Holdings, Ltd. .......................................................... 1,300,912
HK 4,888,000 South China Morning Post (Holdings), Ltd. ......................................... 3,346,756
HK 645,000 Swire Pacific, Ltd., Class A ...................................................... 5,520,298
HK 3,100,000 Wheelock & Co., Ltd. .............................................................. 6,127,313
HK 5,522,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 1,569,409
------------
66,483,569
------------
India .3%
US 156,100 Great Eastern Shipping Co., Ltd., GDR.............................................. 1,326,850
------------
Indonesia 4.5%
US 300,000 aAsia Pacific Resources International, Class A..................................... 2,250,000
ID 1,567,000 PT Bank Bali ...................................................................... 3,450,430
Indonesia(cont.)
ID 950,000 PT Barito Pacific Timber, fgn. .................................................... $ 622,449
ID 1,015,940 PT Indorama Synthetics, fgn. ...................................................... 2,575,315
US 155,500 PT Indosat, ADR.................................................................... 5,209,250
ID 129,000 PT Inti Indorayon Utama ........................................................... 124,705
ID 637,625 PT Pabrik Kertas Tjiwi Kimia ...................................................... 650,638
ID 3,423,000 PT Panasia Indosyntec ............................................................. 919,173
ID 2,060,875 aPT Panin Bank .................................................................... 1,903,708
------------
17,705,668
------------
Japan 18.8%
JP 1,011,000 Daicel Chemical Industries, Ltd. .................................................. 6,235,893
JP 409,000 Daito Trust Construction Co., Ltd. ................................................ 6,129,300
JP 1,200 East Japan Railway Co. ............................................................ 6,305,113
JP 582,800 Hitachi, Ltd. ..................................................................... 5,432,046
JP 254,000 Hokuetsu Paper Mills, Ltd. ........................................................ 2,146,937
JP 308,000 Matsushita Electric Industrial Co., Ltd. .......................................... 5,741,490
JP 824,000 Mitsubishi Heavy Industries, Ltd. ................................................. 7,175,693
JP 250,000 Mitsubishi Oil Co., Ltd. .......................................................... 2,135,971
JP 821 Nippon Telegraph & Telephone Corp. ................................................ 6,091,762
JP 700,000 Nisshinbo Industries, Inc. ........................................................ 6,908,210
JP 220,000 Nittetsu Mining Co., Ltd. ......................................................... 2,251,565
JP 550,000 Rengo Co., Ltd. ................................................................... 3,869,877
JP 50,000 Sony Corp. ........................................................................ 3,294,193
JP 70,000 Tenma Corp. ....................................................................... 1,458,400
JP 371,000 Toda Corp. ........................................................................ 3,627,450
JP 330,000 Wacoal Corp. ...................................................................... 4,493,078
------------
73,296,978
------------
Malaysia 5.0%
MY 655,000 Commerce Asset Holdings ........................................................... 3,991,181
MY 16,667 aCommerce Asset Holdings, warrants................................................. 60,133
MY 3,342,667 Malaysian International Shipping Corp., Bhd., fgn. ................................ 10,385,115
MY 100,000 Public Finance .................................................................... 180,397
MY 32,000 aPublic Finance, rights............................................................ 17,960
MY 1,798,800 Sime Darby Berhad ................................................................. 4,975,634
------------
19,610,420
------------
New Zealand 2.1%
NZ 894,353 Brierley Investments, Ltd. ........................................................ 849,134
NZ 2,411,800 Carter Holt Harvey, Ltd. .......................................................... 5,525,524
NZ 192,500 aFletcher Challenge Building, Ltd. ................................................ 377,454
NZ 192,500 aFletcher Challenge Energy, Ltd. .................................................. 426,456
NZ 109,252 Fletcher Challenge, Ltd., Forestry Division........................................ 136,049
NZ 385,000 aFletcher Challenge Paper, Ltd. ................................................... 746,961
------------
8,061,578
------------
Pakistan 3.7%
PK 2,818,000 Fauji Fertilizer Co., Ltd. ........................................................ 7,245,251
PK 38,900 aPakistan Telecom Corp. ........................................................... 4,590,200
US 1,300,000 aPakistan Telecom Corp., GDR....................................................... 1,485,502
US 11,100 a,bPakistan Telecom Corp., GDR..................................................... 1,309,800
------------
14,630,753
------------
Philippines 7.0%
PH 20,625,000 aFilinvest Land, Inc. ............................................................. $ 8,462,548
PH 116,000 Philippine Long Distance Telephone Co. ............................................ 6,906,870
US 4,400 Philippine Long Distance Telephone Co., ADR........................................ 255,750
PH 700,000 aPhilippine National Bank ......................................................... 11,688,931
------------
27,314,099
------------
Singapore 7.6%
SG 888,600 aCity Developments, Ltd. .......................................................... 6,927,427
SG 518,000 Development Bank of Singapore, Ltd., fgn. ......................................... 6,461,233
US 68,000 GP Batteries International, Ltd. .................................................. 199,920
SG 393,800 Overseas Union Bank, Ltd. ......................................................... 2,707,201
SG 1,217,000 Parkway Holdings, Ltd. ............................................................ 3,622,537
SG 882,000 Singapore Airlines, Ltd. .......................................................... 9,313,820
SG 78,500 Singapore Bus Service, Ltd. ....................................................... 556,343
------------
29,788,481
------------
South Korea .5%
KR 99,030 Pacific Chemical Co., Ltd. ........................................................ 1,867,800
------------
Thailand 8.7%
TH 622,000 Bangkok Bank Public Co., Ltd. ..................................................... 8,427,919
TH 829,400 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 4,410,312
TH 2,783,133 Industrial Finance Corp. of Thailand .............................................. 12,497,131
TH 186,600 aMDX Public Co., Ltd. ............................................................. 304,103
TH 51,750 Oriental Hotel, Ltd. .............................................................. 254,796
TH 36,570 Thai Farmers Bank, Ltd. ........................................................... 270,804
TH 733,440 Thai Farmers Bank, Ltd., fgn. ..................................................... 8,031,208
------------
34,196,273
------------
United States 4.1%
US 69,000 American International Group, Inc. ................................................ 6,805,125
US 150,000 APL, Ltd. ......................................................................... 3,918,750
US 85,000 Motorola, Inc. ................................................................... 5,344,375
------------
16,068,250
------------
Total Common Stocks, Warrants & Rights (Cost $332,166,422)................... 378,614,888
------------
Preferred Stocks
US 31,000 Dairy Farm International Holdings, Ltd., 6.50%, cvt. pfd. ......................... 22,706
US 22,000 Jardine Strategic Holdings, Ltd., 7.50%, cvt. pfd. ................................ 23,980
------------
Total Preferred Stocks (Cost $53,440)........................................ 46,686
------------
Total Common Stocks, Warrants & Rights and Preferred Stocks
(Cost $332,219,862)............................................................... 378,661,574
------------
Face
Amount
Convertible Bonds .3%
US $1,307,000 MDX Public Co., Ltd., cvt., 4.75%, 09/17/03 ....................................... 614,290
US 360,000 PT Inti Indorayon Utama, cvt., 5.50%, 10/01/02 .................................... 415,800
------------
Total Convertible Bonds (Cost $1,941,281).................................... 1,030,090
------------
Total Long Term Investments (Cost $334,161,143).............................. 379,691,664
------------
gReceivables from Repurchase Agreements 2.5%......................................
US $6,030,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $6,002,675)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ................................. $ 6,000,000
US 3,550,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $3,712,654)
Collateral: U.S. Treasury Notes, 8.00%, 05/15/01 ................................. 3,711,000
------------
Total Receivables from Repurchase Agreements (Cost $9,711,000)............... 9,711,000
------------
Total Investments (Cost $343,872,143) 99.6%............................. 389,402,664
Other Assets and Liabilities, Net .4%................................... 1,442,464
------------
Net Assets 100.0% ...................................................... $390,845,128
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $347,427,376 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 67,168,215
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (25,192,927)
------------
Net unrealized appreciation........................................................ $ 41,975,288
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
HK - Hong Kong
ID - Indonesia
JP - Japan
KR - South Korea
MY - Malaysia
NZ - New Zealand
PH - Philippines
PK - Pakistan
SG - Singapore
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Rising Dividends Fund (Note 1)
Common Stocks 89.0%
Financial Services 11.6%
<S> <C> <C>
220,000 Banc One Corp. .............................................................................. $ 7,480,000
197,400 CoreStates Financial Corp. .................................................................. 7,599,900
279,650 Mercantile Bankshares Corp. ................................................................. 7,131,075
263,000 National Commerce Bancorp. .................................................................. 8,284,500
205,200 State Street Boston Corp. ................................................................... 10,465,200
516,720 TrustCo Bank Corp., New York................................................................. 9,946,860
232,000 Wilmington Trust Corp. ...................................................................... 7,525,500
------------
58,433,035
------------
Consumer Products 14.3%
222,000 Alberto-Culver Co., Class A.................................................................. 8,880,000
65,771 Block Drug Co., Inc., Class A................................................................ 2,762,382
715,000 Dimon, Inc. ................................................................................. 13,227,500
169,000 Philip Morris Cos., Inc. .................................................................... 17,576,000
102,000 Roto-Rooter, Inc. ........................................................................... 3,519,000
265,000 Stanhome, Inc. .............................................................................. 7,022,500
410,700 Stride Rite Corp. ........................................................................... 3,388,275
325,000 Universal Corp. ............................................................................. 8,612,500
205,500 UST, Inc. ................................................................................... 7,038,375
------------
72,026,532
------------
Health Care Services 7.7%
380,000 Bard (C.R.), Inc. ........................................................................... 12,920,000
52,500 Bristol-Myers Squibb Co. ................................................................... 4,725,000
182,000 Merck & Co., Inc. ........................................................................... 11,761,750
135,000 Pfizer, Inc. ................................................................................ 9,635,625
------------
39,042,375
------------
Energy 1.8%
59,500 Royal Dutch Petroleum Co., New York Shares, ADR.............................................. 9,148,125
------------
Financial Services 2.9%
440,000 Federal National Mortgage Association ....................................................... 14,740,000
------------
Industrial 16.6%
116,200 Avery-Dennison Corp. ........................................................................ 6,376,475
41,850 Diebold, Inc. ............................................................................... 2,019,263
160,600 General Electric Co. ........................................................................ 13,891,900
134,000 Kaydon Corp. ................................................................................ 5,762,000
154,800 Kimball International, Inc., Class B......................................................... 4,276,350
200,400 Loctite Corp. ............................................................................... 9,318,600
380,000 Monsanto Co. ................................................................................ 12,350,000
220,000 Myers Industries, Inc. ...................................................................... 4,097,500
385,000 Newell Co. .................................................................................. 11,790,625
81,800 Rockwell International Corp. ................................................................ 4,683,050
300,000 Superior Industries International, Inc. ..................................................... 7,912,500
123,000 Superior Surgical Manufacturing Co., Inc. ................................................... 1,460,625
------------
83,938,888
------------
Insurance - Life & Health 1.1%
112,500 Jefferson-Pilot Corp. ....................................................................... 5,807,813
------------
Insurance - Property Casualty 15.9%
301,900 Allied Group, Inc. .......................................................................... 13,132,650
53,700 American International Group, Inc. .......................................................... 5,296,163
206,200 Chubb Corp. ................................................................................. 10,284,225
Insurance - Property Casualty (cont.)
17,640 Cincinnati Financial Corp. .................................................................. $ 1,012,095
302,000 Mercury General Corp. ....................................................................... 13,212,500
175,000 MMI Cos., Inc. .............................................................................. 5,403,125
324,325 RLI Corp. ................................................................................... 7,905,422
202,000 SAFECO Corp. ................................................................................ 7,145,750
208,000 Selective Insurance Group, Inc. ............................................................. 6,760,000
188,400 St. Paul Companies, Inc. .................................................................... 10,079,400
------------
80,231,330
------------
Retail 10.9%
77,000 Albertson's, Inc. ........................................................................... 3,185,875
832,000 Family Dollar Stores, Inc. .................................................................. 14,456,000
372,000 Rite Aid Corp. .............................................................................. 11,067,000
171,328 The Limited, Inc. ........................................................................... 3,683,551
272,000 Walgreen Co. ................................................................................ 9,112,000
527,000 Wal-Mart Stores, Inc. ....................................................................... 13,372,624
------------
54,877,050
------------
Miscellaneous .4%
128,000 Bob Evans Farms, Inc. ....................................................................... 2,176,000
------------
Printing & Publishing 2.0%
390,000 Ennis Business Forms......................................................................... 4,436,250
73,100 Reader's Digest Association, Inc., Class A................................................... 3,106,750
101,600 Standard Register Co. ....................................................................... 2,501,900
------------
10,044,900
------------
Transportation 3.8%
500,000 Arnold Industries, Inc. ..................................................................... 7,125,000
620,000 Harper Group, Inc. .......................................................................... 12,090,000
------------
19,215,000
------------
Total Long Term Investments (Cost $343,283,118)........................................ 449,681,048
------------
Face
Amount
g,hReceivables from Repurchase Agreements 10.8%
$ 54,405,812 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $54,682,008) (Cost $54,657,235)
Chase Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,530,300)
Collateral: U. S. Treasury Bills, 05/29/97
U. S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
g,hReceivables from Repurchase Agreements (cont.)
Joint Repurchase Agreement, (cont.)
SBC Capital Markets, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ...................... $ 54,657,235
------------
Total Investments (Cost $397,940,353) 99.8%...................................... 504,338,283
Other Assets and Liabilities, Net .2%............................................ 1,021,412
------------
Net Assets 100.0% ............................................................... $505,359,695
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $398,287,124
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $112,563,031
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (6,511,872)
------------
Net unrealized appreciation ............................................................... $106,051,159
============
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Value
Country* Shares Utility Equity Fund (Note 1)
Common Stocks 99.1%
<S> <C> <C> <C>
US 1,445,000 aAES Corp. ........................................................................ $ 40,821,250
US 846,100 aAirTouch Communications, Inc. .................................................... 23,902,325
US 1,000,000 Allegheny Power System, Inc. ...................................................... 30,875,000
US 1,000,230 American Electric Power Co., Inc. ................................................. 42,634,804
US 100,000 Ameritech Corp. ................................................................... 5,937,500
US 120,000 AT&T Corp. ........................................................................ 7,440,000
GB 2,000,000 British Telecom, Plc. ............................................................. 10,746,677
US 158,600 bBSES, Ltd., GDR................................................................... 3,053,050
US 1,496,700 Central & South West Corp. ........................................................ 43,404,300
US 1,223,900 CINergy Corp. ..................................................................... 39,164,800
US 382,710 CIPSCO, Inc. ...................................................................... 14,782,174
US 137,600 Compania Boliviana de Energia Electricia .......................................... 5,400,800
HK 4,000,000 Consolidated Electric Power Asia, Ltd. ............................................ 6,614,346
US 880,000 Dominion Resources, Inc. .......................................................... 35,200,000
US 716,000 DPL, Inc. ......................................................................... 17,452,500
US 745,000 Duke Power Co. .................................................................... 38,181,250
US 763,600 Edison International .............................................................. 13,458,450
US 350,000 Endesa Corp. ...................................................................... 7,525,000
US 91,800 Enersis SA, ADR.................................................................... 2,845,800
US 1,032,560 Enova Corp. ....................................................................... 23,877,950
US 1,200,000 Enron Corp. ....................................................................... 49,050,000
US 880,000 Enron Global Power & Pipelines L.L.C. ............................................. 21,340,000
US 1,654,000 Entergy Corp. ..................................................................... 46,932,250
US 370,900 Ericsson (L.M.) Telecommunications, ADR............................................ 7,974,350
US 195,000 bEspoon Sahko Oy, ADS ............................................................. 3,578,718
US 853,000 Florida Progress Corp. ............................................................ 29,641,750
US 1,201,300 FPL Group, Inc. ................................................................... 55,259,800
US 1,221,100 General Public Utilities Corp. .................................................... 43,043,775
MX 55,600 aGrupo Iusacell, SA, Class D....................................................... 51,165
US 144,440 aGrupo Iusacell, SA, Class L, ADR.................................................. 1,552,730
US 790,840 GTE Corp. ......................................................................... 35,390,090
GR 400,000 Hellenic Telecommunications Organization, SA....................................... 6,634,795
HK 2,500,000 Hong Kong Electric Holdings, Ltd. ................................................. 7,622,000
US 138,000 aHuaneng Power International, Inc., ADR ........................................... 2,466,750
US 388,400 aIntelCom Group, Inc. ............................................................. 9,710,000
KR 50,500 Korea Electric Power Corp. ........................................................ 2,056,854
KR 215 Korea Mobile Telecommunications Corp. ............................................. 264,615
NO 468,600 aNetCom, ASA....................................................................... 4,945,894
US 582,450 New England Electric System ....................................................... 21,186,619
JP 2,870 Nippon Telegraph & Telephone Corp. ................................................ 21,295,198
US 749,900 NIPSCO Industries, Inc. ........................................................... 30,183,475
US 323,000 aNynex Cablecomms Group, ADR ...................................................... 5,248,750
US 229,600 Pacific Enterprises ............................................................... 6,801,900
US 1,123,150 Pacific Gas & Electric Co. ........................................................ 26,113,238
US 1,702,400 PacifiCorp. ....................................................................... 37,878,400
US 349,100 Panenergy Corp. ................................................................... 11,476,663
US 166,600 PECO Energy Co. ................................................................... 4,331,600
US 843,000 Pinnacle West Capital Corp. ....................................................... 25,606,125
US 330,000 Portugal Telecom, SA, ADR ......................................................... 8,662,500
US 100,000 Public Service Co. of Colorado .................................................... 3,675,000
US 104,200 Public Service Enterprise Group, Inc. ............................................. 2,852,475
US 1,745,844 Scana Corp. ....................................................................... 49,101,863
GB 590,000 Scottish Power, Plc. .............................................................. $ 2,785,439
ES 618,600 Sevillana de Electricidad ......................................................... 5,702,496
GB 198,300 Southern Electric, Plc. ........................................................... 2,192,657
US 1,966,790 Southern Indiana Gas & Electric Co. ............................................... 48,432,204
US 442,700 Southwestern Public Service Co. ................................................... 14,443,088
IT 1,675,000 STET - Societa Finanziaria Telefonica ............................................. 5,680,839
US 2,074,850 TECO Energy, Inc. ................................................................. 52,389,963
US 315,000 Tele Danmark, AS, ADS.............................................................. 7,993,125
US 233,500 Telecom Brasileiras, ADR........................................................... 16,257,438
US 115,000 Telecom de Argentina SA, ADR....................................................... 5,390,625
IT 11,000,000 aTelecom Italia, SpA............................................................... 18,901,257
US 170,000 Telefonos de Mexico, SA, ADR ...................................................... 5,695,000
US 69,000 aTelewest Communications, Plc., ADR................................................ 1,720,688
US 1,239,850 Texas Utilities Co. ............................................................... 53,003,585
US 370,000 Transportadora de Gas del Sur, SA, ADR............................................. 4,532,500
US 1,084,800 US West, Inc. ..................................................................... 34,578,000
US 218,500 Williams Cos., Inc. ............................................................... 10,815,750
US 1,029,200 Wisconsin Energy Corp. ............................................................ 29,718,150
------------
Total Long Term Investments (Cost $1,213,133,094) ........................... 1,315,480,122
------------
Face
Amount
g,hReceivables from Repurchase Agreements .4%
US $4,623,975 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $4,647,184)
(Cost $4,645,079)
Chase Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.375% , 11/30/97
Daiwa Securities America, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $639,967)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............. 4,645,079
------------
Total Investments (Cost $1,217,778,173) 99.5%........................... 1,320,125,201
Other Assets and Liabilities, Net .5%................................... 6,702,554
------------
Net Assets 100.0%....................................................... $1,326,827,755
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $1,217,778,173 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 151,376,938
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (49,029,910)
------------
Net unrealized appreciation ..................................................... $ 102,347,028
============
</TABLE>
COUNTRY LEGEND:
ES - Spain
GB - United Kingdom
GR - Greece
HK - Hong Kong
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NO - Norway
US - United States
*Securities traded in foreign currency and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee note 1(h) regarding joint repurchase agreements.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/
Warrants & Value
Country* Rights Templeton Developing Markets Equity Fund (Note 1)
Common Stocks, Warrants & Rights 82.0%
Argentina 12.8%
<S> <C> <C> <C>
AR 180,876 Aluar Aluminio Argentino, SA, Class B............................................. $ 452,357
AR 410,470 Astra Cia Argentina de Petroleo, SA............................................... 973,174
AR 375,000 Atanor Cia Nacional Para la Industria Quimica, SA, Class D........................ 994,118
AR 276,952 aBanco Bansud, SA, Class B........................................................ 3,227,685
AR 512,120 Banco de Galicia y Buenos Aires, SA, Class B...................................... 3,278,781
AR 129,970 Banco Frances del Rio de la Plata, SA............................................. 1,232,572
US 50,400 Buenos Aires Embotelladora, SA, ADR............................................... 667,800
AR 15,555 Capex, SA, Class A................................................................ 126,042
AR 134,420 Central Costanera, SA, Class B.................................................... 494,849
AR 323,332 aCiadea, SA....................................................................... 2,280,337
AR 32,480 Juan Minetti, SA.................................................................. 149,463
AR 313,152 Molinos Rio de Plata, SA, Class B................................................. 3,320,640
AR 23,430 Nobleza Piccardo Sdad Industrial Comercial y Financial ........................... 89,067
AR 674,968 Perez Companc, SA, Class B........................................................ 4,429,429
AR 76,000 aQuilmes Industrial, SA .......................................................... 779,000
AR 4,000 Quilmes Industrial, SA, reg. ..................................................... 41,000
AR 460,144 aSevel Argentina, SA, Class C..................................................... 1,334,912
AR 22,230 aSiderar, Class A................................................................. 57,375
AR 1,290,000 aSociedad Comercial del Plata Cadelplata Come .................................... 3,987,575
AR 367,224 Transportadora de Gas del Sur, SA, Class B........................................ 903,705
US 150,410 YPF Sociedad Anonima, ADR......................................................... 3,384,225
AR 2,840 aZanella Hermanos, SA............................................................. 1,085
------------
32,205,191
------------
Brazil 2.3%
BR 77,613,291 Banco Bradesco, SA................................................................ 555,733
BR 70,662,976 aBanco do Brasil, SA.............................................................. 577,042
BR 9,982,000 Eletroas-Centrais Eletricas Brasileiras, SA....................................... 2,684,001
BR 2,124,000 aMannesmann, SA................................................................... 281,303
BR 29,560,000 Telebras-Telecomunicacoes Brasileiras, SA......................................... 1,736,832
------------
5,834,911
------------
China 3.2%
CN 1,281,800 China Southern Glass Co., Ltd., Class B........................................... 753,440
CN 816,000 aChina Textile Machinery Co., Ltd., Class B....................................... 110,976
CN 1,134,000 Chiwan Wharf Holdings, Ltd., Class B ............................................. 498,091
CN 400,000 Foshan Electrical and Lighting Co., Ltd., Class B................................. 335,885
CN 1,177,000 Guangzhou Shipyard International Co., Ltd., Class H .............................. 285,859
CN 687,000 Luoyang Glass Co., Ltd., Class H.................................................. 163,302
CN 212,000 Qing Ling Motors Co., Ltd., Class H............................................... 71,208
CN 96,000 Shandong Huaneng Power ........................................................... 792,000
CN 1,269,000 Shanghai Chlor-Alkali Chemical Co., Ltd., Class B................................. 309,636
CN 400,000 Shanghai Dazhong Taxi Shareholding Co., Ltd., Class B............................. 292,000
CN 252,000 aShanghai Industrial Sewing Machine Corp. ........................................ 34,776
CN 1,732,500 aShanghai Jin Jiang Tower Co., Ltd., Class B...................................... 492,030
CN 410,000 Shanghai Jinqiao Export Processing Zone Development, Class B...................... 159,900
CN 862,000 aShanghai Lujiaxui Finance & Trade Zone Development Stock Co., Ltd., Class B ..... 641,328
CN 2,304,000 Shanghai Pechemical Co., Ltd., Class H............................................ 654,820
CN 489,600 Shanghai Refrigerator Compressor Co., Ltd., Class B .............................. 226,195
CN 150,000 aShanghai Shangling Electric Appliance, Class B................................... 79,200
CN 1,212,000 Shanghai Tyre & Rubber Co., Ltd., Class B ........................................ 303,000
CN 1,890,361 aShanghai Vacuum Electron Devices Co., Ltd., Class B.............................. 340,265
CN 540,000 aShanghai Yaohua Pilkington Glass, Class B........................................ 324,000
China (cont.)
CN 314,400 Shenzhen Gintian Industry Co., Ltd., Class B...................................... $ 103,571
CN 275,000 Shenzhen Properties & Resources Development (Group), Ltd., Class B................ 112,618
CN 1,710,158 Shenzhen Vanke Co., Ltd., Class B................................................. 733,485
CN 586,000 Zhuhai Sez Lizhu Pharmaceutical Group, Inc., Class B.............................. 198,343
------------
8,015,928
------------
Croatia
US 500 a,bPliva DD, GDR, reg S........................................................... 19,875
------------
Czech Republic 1.8%
CS 600 aCEZ ............................................................................. 23,880
CS 65,330 bCEZ, GDR......................................................................... 2,735,694
CS 23,500 aChemopetrol Group, AS............................................................ 1,118,926
CS 17 aElektrarny Opatovice, AS......................................................... 2,855
CS 1,000 Komercni Banka, AS................................................................ 81,598
CS 6,000 aSPT Telecom, AS.................................................................. 732,745
------------
4,695,698
------------
Greece 3.8%
GR 38,666 Alpha Credit Bank ................................................................ 2,041,398
GR 32,000 Alpha Leasing, SA ................................................................ 649,179
GR 57,000 Delta Dairy, SA .................................................................. 696,654
GR 2,000 Elais Oleaginous Co. ............................................................. 64,851
GR 12,000 Ergo Bank, SA .................................................................... 660,985
GR 32,200 Etba Leasing ..................................................................... 455,124
GR 28,950 Hellas Can - Container Manufacturers ............................................. 619,798
GR 68,750 Hellenic Telecommunications Organizations ........................................ 1,140,355
GR 100,000 aHellenic Telecommunications Organizations OTE ................................... 1,658,699
GR 29,000 Intracom, SA, reg. ............................................................... 513,935
GR 5,170 National Bank of Greece, SA ...................................................... 254,255
GR 16,170 Titan Cement Co., reg. ........................................................... 799,257
------------
9,554,490
------------
Hong Kong 10.8%
HK 582,000 Cheung Kong Holdings, Ltd. ....................................................... 4,191,648
HK 4,496,000 China Overseas Land & Investment, Ltd. ........................................... 1,086,138
HK 81,000 Cross Harbour Tunnel Co., Ltd. ................................................... 160,624
HK 263,939 Dairy Farm International Holdings, Ltd. .......................................... 223,028
HK 94,000 Dickson Concepts (International), Ltd. ........................................... 120,221
HK 1,154,000 aEast Asiatic Co. (Hong Kong), Ltd. (The)......................................... 150,572
HK 2,044,000 aFu Hui Jewellery Co. (H.K.), Ltd. ............................................... 51,227
HK 566,000 aGreat Wall Electronic International, Ltd. ....................................... 40,947
HK 1,101,000 Hang Lung Development Co., Ltd. .................................................. 2,069,509
HK 595,000 Hongkong Electric Holdings, Ltd. ................................................. 1,814,036
HK 430,951 Hopewell Holdings, Ltd. .......................................................... 233,827
HK 211,476 HSBC Holdings, Plc. .............................................................. 3,196,421
HK 7,000 IMC Holdings, Ltd. ............................................................... 3,934
HK 216,000 Jardine International Motor Holdings, Ltd. ....................................... 265,091
HK 34,000 Jardine Matheson Holdings, Ltd. .................................................. 249,900
HK 194,625 Jardine Strategic Holdings, Ltd. ................................................. 622,800
HK 21,625 aJardine Strategic Holdings, Ltd., warrants....................................... 6,704
HK 119,000 JCG Holdings, Ltd. ............................................................... 96,851
HK 1,978,240 K Wah International Holdings, Ltd. ............................................... 365,453
HK 187,320 aK Wah International Holdings, Ltd., warrants..................................... 8,954
Hong Kong (cont.)
HK 6,634,000 Lai Sun Development Co., Ltd. .................................................... $ 1,354,096
HK 216,200 aLai Sun Development Co., Ltd., warrants.......................................... 14,244
HK 234,000 Lai Sun Garment International, Ltd. .............................................. 281,136
HK 1,450,000 aLaws International Holdings, Ltd. ............................................... 164,842
HK 435,000 aLinkful International Holdings, Ltd. ............................................ 19,107
HK 700,000 aLuks Industrial Co., Ltd. ....................................................... 77,770
HK 754,886 New World Development Co., Ltd. .................................................. 3,501,005
HK 516,000 NG Fund Hong, Ltd. ............................................................... 238,310
HK 34,000 Orient Overseas International, Ltd. .............................................. 25,036
HK 1,626,000 aS. Megga International Holdings, Ltd. ........................................... 64,067
HK 240,388 Semi-Tech (Global) Co., Ltd. ..................................................... 371,106
HK 1,280,658 Stelux International Holdings, Ltd. .............................................. 286,218
HK 1,351,000 Sun Hung Kai & Co., Ltd. ......................................................... 488,686
HK 319,000 Sun Hung Kai Properties, Ltd. .................................................... 3,224,720
HK 2,123,000 Tian An China Investments Co., Ltd. .............................................. 287,976
HK 1,364,000 Tungtex (Holdings) Co., Ltd. ..................................................... 121,585
HK 184,000 Wheelock & Co., Ltd. ............................................................. 363,686
HK 1,228,000 Wing Shan International, Ltd. .................................................... 168,159
HK 3,582,000 Wo Kee Hong Holdings, Ltd. ....................................................... 462,746
HK 716,400 aWo Kee Hong Holdings, Ltd., warrants............................................. 21,286
HK 300,000 aYaohan Hongkong Corp., Ltd. ..................................................... 14,727
HK 2,298,000 Yue Yuen Industrial (Holdings), Ltd. ............................................. 653,115
------------
27,161,508
------------
India .3%
IN 20,000 Arvind Mills, Ltd. ............................................................... 79,478
IN 1,950 Grasim Industries, Ltd. Ord. ..................................................... 31,674
IN 25,000 ITC Bhadrachalam Paperboards, Ltd. ............................................... 75,220
US 45,000 a,bSteel Authority of India, Ltd., GDR, reg. S.................................... 663,750
------------
850,122
------------
Indonesia 5.5%
US 9,200 aAsia Pulp & Paper Co., Ltd., ADR................................................. 112,700
ID 790,000 PT Anwar Sierad, fgn. ............................................................ 746,724
ID 68,250 aPT Aqua Golden Mississippi, fgn. ................................................ 65,977
ID 430,000 PT Astra International, fgn. ..................................................... 623,523
ID 506,000 PT Bank Dagang Nasional Indonesia, fgn. .......................................... 423,931
ID 371,000 PT Bank PDFCI, fgn. .............................................................. 346,692
ID 1,755,500 PT Barito Pacific Timber, fgn. ................................................... 1,150,220
ID 150,000 PT BBL Dharmala Finance, fgn. .................................................... 209,452
ID 922,500 PT Charoen Pokphand Indonesia, fgn. .............................................. 1,783,566
ID 1,007,500 PT Dharmala Intiland, fgn. ....................................................... 779,162
ID 394,500 PT Duta Anggada Realty, fgn. ..................................................... 271,192
ID 1,688,000 PT Gadjah Tunggal, fgn. .......................................................... 834,028
ID 435,000 PT Gajah Surya Multi Finance, fgn. ............................................... 191,568
ID 829,600 aPT Ganda Wangsa Utama, fgn. ..................................................... 249,504
ID 12,000 PT Inter-Pacific Bank, fgn. ...................................................... 7,991
ID 352,000 PT Jakarta International Hotel & Development, fgn. ............................... 302,470
ID 528,000 aPT Jakarta International Hotel & Development, rights, fgn. ...................... 119,098
ID 337,500 PT Japfa Comfeed Indonesia, fgn. ................................................. 195,757
ID 441,750 PT Multieeder Adirama, fgn. ...................................................... 163,699
ID 149,000 PT Paik Kertas Tjiwi Kimia, fgn. ................................................. 152,041
ID 778,400 PT Panasia Indosyntec............................................................. 209,023
Indonesia (cont.)
ID 1,005,000 PT Polysindo Eka Perkasa, fgn. ................................................... $ 474,973
ID 468,000 aPT Pudjiadi Prestige, Ltd., fgn. ................................................ 402,148
ID 514,000 aPT Sinar Mas Agro Resources & Technology Corp., fgn. ............................ 375,424
ID 1,205,500 PT Sinar Mas Multi Artha, fgn. ................................................... 1,476,122
ID 221,000 PT Sumalindo Lestari Jaya, fgn. .................................................. 265,865
ID 316,500 PT Summarecon Agung, fgn. ....................................................... 176,778
ID 325,500 PT Tambang Timah (Persero), fgn. ................................................. 601,353
ID 292,000 PT Ultra Jaya Milk, fgn. ......................................................... 166,230
ID 68,200 PT Unggul Indah Corp., fgn. ...................................................... 70,324
ID 543,000 PT United Tractors, fgn. ......................................................... 857,368
------------
13,804,903
------------
Israel 1.2%
IL 6,968 Agis Industries, Ltd. ............................................................ 48,514
IL 449,844 Bank Hapoalim BM ................................................................. 659,665
IL 182,727 Clal Industries, Ltd. ............................................................ 941,254
IL 16,748 Discount Investment Corp. ........................................................ 1,129,958
IL 2,732 The First International Bank of Israel ........................................... 303,001
------------
3,082,392
------------
Malaysia 2.9%
MY 628,000 Aokam Perdana, Bhd. .............................................................. 1,052,331
MY 418,000 Berjaya Singer, Bhd. ............................................................. 432,327
MY 28,000 Berjaya Singer, Bhd., fgn. ....................................................... 28,960
MY 154,000 Boustead Holdings, Bhd., fgn. .................................................... 336,460
MY 50,000 Federal Flour Mills, Bhd. ........................................................ 133,293
MY 108,000 Hong Leong Industries, Bhd. ...................................................... 523,873
MY 140,000 IOI Corp., Bhd. .................................................................. 194,187
MY 25,000 Island & Peninsula, Bhd., fgn. ................................................... 70,655
MY 126,000 Leader Universal Holdings, Bhd. .................................................. 356,103
MY 282,666 Malaysian International Shipping Corp., Bhd., fgn. ............................... 878,197
MY 421,000 MBF Capital, Bhd. ................................................................ 580,573
MY 6,600 Oriental Holdings, Bhd., fgn. .................................................... 43,127
MY 190,000 Perlis Plantations, Bhd., fgn. ................................................... 731,209
MY 677,000 Renong, Bhd. ..................................................................... 1,080,160
MY 16,750 aRenong, Bhd., warrants........................................................... 2,686
MY 732,000 Shangri-La Hotels (Malaysia), Bhd. ............................................... 760,024
MY 123,000 Shangri-La Hotels (Malaysia), Bhd., fgn. ......................................... 127,709
------------
7,331,874
------------
Mexico 11.7%
MX 1,418,000 Cemex, SA, Class B................................................................ 5,599,090
MX 3,241,085 aCifra, SA, Class C .............................................................. 4,623,407
US 19,400 Coca Cola Femsa, SA de CV, ADR.................................................... 555,325
MX 219,938 Cydea, SA de CV................................................................... 547,453
MX 110,034 aDESC, SA, Class B................................................................ 593,328
MX 2,292 aDESC, SA, Class C................................................................ 11,936
MX 250,000 Fomento Economico Mexicano, SA de CV, Class B..................................... 718,523
MX 13,429 Grupo Carso, SA de CV............................................................. 95,251
MX 899,000 aGrupo Financiero Banamex Accival, SA, Class B.................................... 1,867,929
MX 785,138 aGrupo Financiero Banamex Accival, SA, Class L.................................... 1,490,571
MX 5,650,000 aGrupo Financiero Bancomer, SA de CV, Class B..................................... 2,458,141
MX 209,259 aGrupo Financiero Bancomer, SA de CV, Class L..................................... 69,799
Mexico (cont.)
MX 1,196,816 aGrupo Financiero Serfin, SA, Class B............................................. $ 732,133
MX 403,056 Grupo Industrial Maseca, SA de CV, Class B........................................ 420,857
US 2,600 Grupo Industrial Maseca, SA de CV, Class B, ADR................................... 40,950
MX 97,000 Telmex-Telefonos de Mexico, SA, Class L........................................... 164,203
US 228,200 Telmex-Telefonos de Mexico, SA, Class L, ADR...................................... 7,644,700
MX 839,849 Vitro, SA ........................................................................ 1,948,760
------------
29,582,356
------------
Morocco .1%
US 21,750 a,bBanque Marocaine de Commerce Exterieur, GDR.................................... 309,938
------------
Philippines .3%
PH 18,000 aBelle Corp. ..................................................................... 4,328
PH 500,000 aKeppel Philippine Holdings, Inc., Class B........................................ 124,046
PH 1,542,000 aPhilex Mining Corp., Class B .................................................... 197,164
US 8,800 Philippine Long Distance Telephone Co., ADR....................................... 511,500
------------
837,038
------------
Poland 1.3%
PL 60,000 Bank Gdanski, SA.................................................................. 746,302
PL 13,012 aBank Przemyslowo-Handlowy, SA.................................................... 938,527
PL 120,000 Elektrim Towarzystwo Handlowe, SA................................................. 984,765
PL 10,000 aRaciborska Fayka Kotlow, SA...................................................... 59,248
PL 10,000 Warta, SA......................................................................... 206,079
PL 1,242 Wielkopolski Bank Kredytowy, SA................................................... 6,719
PL 9,000 aZaklady Cementowo Wapiennicze Gorazdze Chorula .................................. 235,151
------------
3,176,791
------------
Portugal 4.5%
PT 48,500 Banco Chemical (Portugal) ........................................................ 502,194
PT 313,000 aBanco Comercial Portugues, SA.................................................... 3,698,818
PT 73,194 Banco Comercial Portugues, SA, new................................................ 834,566
PT 162,680 Banco Espirito Santo e Comercial de Lisboa ....................................... 2,612,440
PT 63,454 Banco Totta & Acores, SA.......................................................... 1,241,518
PT 36,248 BPI Socieda de Gestora de Participacoes Socias, SA................................ 459,612
US 99,840 Espirito Santo Financial Holding, SA, ADR......................................... 1,272,960
PT 75,000 Portucel Industrial Empresa Product de Celulose, SA............................... 480,517
PT 7,010 aSociedade Portuguesa de Celulose, SA ............................................ 154,619
------------
11,257,244
------------
Singapore 2.6%
SG 110,000 aAcer Computer International, Ltd. ............................................... 213,400
SG 48,000 Acma, Ltd. ....................................................................... 140,156
SG 136,000 Acma, Ltd., fgn. ................................................................. 397,108
SG 18,000 British American Tobacco, Ltd. ................................................... 70,801
SG 101,000 First Capital Corp., Ltd. ........................................................ 250,532
SG 158,000 First Capital Corp., Ltd., fgn. .................................................. 391,921
SG 72,000 GP Batteries International, Ltd. ................................................. 211,680
SG 18,000 aGP Batteries International, Ltd., warrants....................................... 15,300
SG 1,064,000 Hai Sun Hup Group, Ltd. .......................................................... 806,860
SG 167,000 Hinds Hotels International, Ltd. ................................................. 195,287
SG 191,000 Hinds Hotels International, Ltd., fgn. ........................................... 223,352
SG 100,000 Hour Glass, Ltd. ................................................................. 87,881
SG 199,000 Inchcape, Bhd., fgn. ............................................................. 634,656
Singapore (cont.)
SG 107,500 Isetan (Singapore), Ltd., fgn. ................................................... $ 239,227
SG 97,000 Jurong Shipyard, fgn. ............................................................ 491,531
SG 78,000 Natsteel, Ltd. ................................................................... 154,784
SG 476,000 Natsteel, Ltd., fgn. ............................................................. 944,578
SG 165,000 Osprey Maritime, Ltd. ............................................................ 291,225
SG 85,000 Sembawang Corp., Ltd. ............................................................ 421,687
SG 112,000 WBL Corp., Ltd. .................................................................. 265,117
------------
6,447,083
------------
Slovak Republic
SS 10 aSlovnaft, AS .................................................................... 291
------------
South Africa 3.9%
ZA 10,541 Anglo American Industrial Corp., Ltd. ............................................ 423,294
ZA 26,901 Anglo American Platinum Corp., Ltd. .............................................. 167,627
ZA 13,000 Anglovaal Industries, Ltd. ....................................................... 63,005
ZA 488,000 BTR Dunlop, Ltd. ................................................................. 658,851
ZA 925,600 Del Monte Royal Foods, Ltd. ...................................................... 1,110,805
ZA 389,067 Engen, Ltd. ...................................................................... 2,648,852
ZA 76,200 First National Bank Holdings, Ltd. ............................................... 549,562
ZA 32,100 Malbak, Ltd. ..................................................................... 159,278
ZA 97,000 Palabora Mining Co., Ltd. ........................................................ 1,522,271
ZA 10,000 Potgietersrust Platinums, Ltd. ................................................... 50,196
ZA 311,500 aRainbow Chicken, Ltd. ........................................................... 103,522
ZA 127,270 Remandt Group, Ltd. .............................................................. 1,195,451
ZA 20,000 Sappi, Ltd. ...................................................................... 221,094
ZA 723,515 South African Iron & Steel Industrial Corp., Ltd. ................................ 566,055
ZA 278,685 Sun International (South Africa), Ltd. ........................................... 299,073
------------
9,738,936
------------
South Korea 2.5%
KR 10,000 Asia Cement Co., Ltd. ............................................................ 368,590
KR 33,940 Boram Bank Co., Ltd. ............................................................. 401,657
KR 5,430 aBoram Bank Co., Ltd., rights..................................................... 11,714
KR 1,050 BYC Co., Ltd. .................................................................... 129,438
KR 22,000 aCentral Investment & Finance Corp. .............................................. 390,533
KR 5,677 Dae Duck Electronics Co., Ltd. ................................................... 207,149
KR 46,682 Daegu Bank Co., Ltd. ............................................................. 689,296
KR 2,910 Daehan Synthetic Fiber Co., Ltd. ................................................. 279,808
KR 21,000 Dongkuk Steel Mill Co., Ltd. ..................................................... 447,855
KR 1,000 Hae In Corp., Ltd. ............................................................... 52,268
KR 3,950 Hankook Cosmetics Co., Ltd. ...................................................... 107,125
KR 1,000 Korea Iron & Steel Works Co., Ltd. ............................................... 161,489
KR 48,000 Korea Kumho Petrochemical ........................................................ 418,935
KR 16,000 Kyong Nam Bank ................................................................... 207,101
KR 1,000 Moon Bae Steel Co., Ltd. ......................................................... 32,421
KR 75,000 Ssangyong Oil Refining Co., Ltd. ................................................. 1,738,166
KR 39,790 Tong Yang Investment and Finance Co., Ltd. ....................................... 686,711
KR 1,000 Yuhwa ............................................................................ 63,979
------------
6,394,235
------------
Sri Lanka
LK 36,000 Associated Motorways, Ltd. ....................................................... $ 26,592
LK 8,000 John Keells Holdings, Ltd. ....................................................... 20,899
------------
47,491
------------
Thailand 2.8%
TH 30,800 American Standard Sanitaryware (THB) Public Co., Ltd., fgn. ...................... 487,695
TH 42,600 Ayudhya Insurance Public Co., Ltd., fgn. ......................................... 318,812
TH 3,300 Bangkok Land Public Co., Ltd. .................................................... 3,607
TH 580,500 Bangkok Land Public Co., Ltd., fgn. .............................................. 731,684
TH 125,500 Charoen Pokphand Feedmill Public Co., Ltd. ....................................... 514,101
TH 253,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. ................................. 1,345,321
TH 16,000 Hua Thai Manufacturing Public Co., Ltd. .......................................... 34,189
TH 83,100 Karat Sanitaryware Public Co., Ltd., fgn. ........................................ 239,762
TH 50,700 Kian Gwan (Thailand) Public Co., Ltd., fgn. ...................................... 134,299
TH 25,600 Regional Container Lines Public Co., Ltd., fgn. .................................. 375,106
TH 313,500 aRoyal Ceramic Industry Public Co., Ltd., fgn. ................................... 351,928
TH 100 Saha Pathanapibul Public Co., Ltd. ............................................... 244
TH 80,600 Saha Pathanapibul Public Co, Ltd., fgn. .......................................... 208,738
TH 120,600 Saha Union Public Co., Ltd. ...................................................... 166,260
TH 460,000 Saha Union Public Co., Ltd., fgn. ................................................ 720,222
TH 1,400 Sanyo Universal Electric Public Co., Ltd. ........................................ 4,853
TH 3,800 Sanyo Universal Electric Public Co., Ltd., fgn. .................................. 12,573
TH 2,000 Siam Cement Co., Ltd. (The), fgn. ................................................ 98,157
TH 104,100 Sino-Thai Engineering & Construction Public Co. .................................. 475,642
TH 116,410 Thai Asahi Glass Public Co., Ltd. ................................................ 270,529
TH 43,000 Thai Rayon Public Co., Ltd. ...................................................... 221,876
TH 2,200 Thai Rayon Public Co., Ltd., fgn. ................................................ 12,305
TH 26,400 Thai Wacoal Public Co., Ltd., fgn. ............................................... 174,957
TH 8,450 Thai Wah Public Co., Ltd., fgn. .................................................. 8,071
TH 4,500 United Motor Works (Siam) Public Co., Ltd. ....................................... 18,966
------------
6,929,897
------------
Turkey 5.7%
TR 12,266,500 Akbank ........................................................................... 1,478,791
TR 24,715,000 aAkbank, new...................................................................... 2,979,524
TR 1,704,000 Alarko Sanayii ve Ticaret, SA..................................................... 264,564
TR 2,075,000 aAlcatel Teletas Endustri Tic, AS................................................. 136,447
TR 4,688,000 Anadolu Anonim Turk Sigorta Sirketi .............................................. 156,990
TR 4,324,971 Arcelik, AS ...................................................................... 400,265
TR 312,000 Bagfas ........................................................................... 84,535
TR 4,348,086 Bekoteknik, AS.................................................................... 275,329
TR 1,580,000 Borusan, AS....................................................................... 130,833
TR 2,792,070 Cimentas Izmir Cimento Faikasi Turk, AS........................................... 611,998
TR 267,000 Cimsa Cimento Sanayi ve Ticaret, AS............................................... 152,813
TR 9,000 Compagnie Financiere Ottomane, SA................................................. 621,972
TR 16,560,000 Eregli Demir ve Celik Faikalari, AS .............................................. 1,835,071
TR 1,970,571 Izocam Ticaret ve Sanayii, AS..................................................... 167,974
TR 2,575,000 Koc Holding, AS................................................................... 627,131
TR 3,446,800 Koc Yatirim ve Sanayii Mamullesi Pazarlanca, AS................................... 556,139
TR 1,620,528 Marshall Boya ve Vernik Sanayii, AS............................................... 140,109
TR 1,594,000 Netas Northern Electric Telekomunic Asyon, AS..................................... 378,507
TR 433,200 Otosan Otomobil Sanayii, AS ...................................................... 147,706
TR 1,183,615 Tat Konserve Sanayii, AS.......................................................... 277,455
Turkey (cont.)
TR 887,933 aTat Konserve Sanayii, AS, rights................................................. $ 131,619
TR 14,349,350 Tofas Turk Otomobil Fabrikasi, AS................................................. 690,209
TR 4,366,432 Trakya Cam Sanayii, AS............................................................ 239,271
TR 4,169,996 Turk Demir Dokum ................................................................. 253,896
TR 21,335,400 Turkiye Garanti Bankasi, AS ...................................................... 1,454,923
TR 1,784,454 Vakif Finansal Kiralama, AS ...................................................... 84,746
------------
14,278,817
------------
Venezuela 1.9%
VE 3,700 Banco Venezolano de Credito ...................................................... 133,289
VE 256,080 Ceramica Carabobo CA, Class A..................................................... 264,743
VE 154,000 Ceramica Carabobo CA, Class A, ADR................................................ 159,210
VE 250,000 Consolidada Carabobo, Class A..................................................... 8,899
VE 3,250,000 Consolidada Carabobo, Class B..................................................... 114,307
VE 1,026,873 Electricidad de Caracas .......................................................... 853,666
VE 60,000 Industrias Ventane ............................................................... 26,219
VE 10,000 aManufacturera de Aparatos Domesticos, SA......................................... 7,055
VE 387,000 Mavesa, SA, ADR................................................................... 1,534,372
VE 50,000 Siderurgica Venezolana Sivensa Saica Svs ......................................... 33,040
VE 241,650 Siderurgica Venezolana Sivensa Saica Svs, ADR..................................... 798,408
VE 361,600 Vencemos de Cementos, SA.......................................................... 689,856
VE 110,240 Venezolana de Cementos-Vencemos, #2 .............................................. 188,226
------------
4,811,290
Zimbabwe .1%
ZW 25,000 Ta Holdings ...................................................................... 3,669
ZW 700,000 Transarchipel Shipping, Ltd. - TSL................................................ 244,433
ZW 72,000 Zimbabwe Sun, Ltd. ............................................................... 25,506
------------
273,608
------------
Total Common Stocks, Warrants & Rights (Cost $192,355,409).................. 206,641,907
------------
Preferred Stocks 6.9%
Brazil 6.9%
BR 110,000,000 Banco do Brazil, SA, pfd. ........................................................ 870,886
BR 264,298,700 aBanespa-Banco do Estado de Sao Paulo, SA, pfd. .................................. 987,024
BR 4,496,000 Brasmotor, SA, pfd. .............................................................. 1,405,909
BR 7,484,000 aCia Mesbla, SA, pfd. ............................................................ 40,992
BR 2,678,700 Copene-Petroquimica do Nordeste, SA, Class A, pfd. ............................... 1,291,106
BR 44,944,800 Duratex, SA, pfd. ................................................................ 1,942,543
BR 11,529,000 Eletroas-Centrais Eletricas Brasileiras, SA, Class B, pfd. ....................... 3,295,148
BR 1,384,200 Itausa-Investimentos Itau, SA, pfd. .............................................. 1,061,429
BR 362,700 aMannesmann, SA, pfd. ............................................................ 48,762
BR 45,845,000 Petrobras-Petroleo Brasileiro, SA, pfd. .......................................... 5,638,458
BR 93,810 aTelerj-Telecomunicacoes do Rio de Janeiro, SA, pfd. ............................. 10,557
BR 30,878,000 Unibanco-Uniao de Bancos Brasileiros, SA, pfd. ................................... 836,103
------------
17,428,917
------------
Malaysia
MY 26,800 Renong, cvt. pfd. ................................................................ 10,099
------------
Total Preferred Stocks (Cost $18,995,862)................................... 17,439,016
------------
Total Long Term Investments (Cost $211,351,271)............................. 224,080,923
------------
fShort Term Investments 10.7%....................................................
US $27,039,000 U.S. Treasury Bills, 4.83% - 5.10%, 09/12/96 (Cost $26,873,658)................... $ 26,880,325
------------
Total Investments (Cost $238,224,929) 99.6%............................ 250,961,248
Other Asset and Liabilities, Net .4%................................... 972,292
------------
Net Assets 100.0%...................................................... $251,933,540
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $237,543,060 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 33,752,046
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... (20,333,858)
------------
Net unrealized appreciation .................................................... $ 13,418,188
============
</TABLE>
CURRENCY LEGEND:
AR - Argentina
BR - Brazil
CN - China
CS - Czech Republic
GR - Greece
HK - Hong Kong
ID - Indonesia
IL - Israel
IN - India
KR - South Korea
LK - Sri Lanka
MX - Mexico
MY - Malaysia
PH - Philippines
PL - Poland
PT - Portugal
SG - Singapore
SS - Slovak Republic
TH - Thailand
TR - Turkey
US - United States
VE - Venezuela
ZA - South Africa
ZW - Zimbabwe
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
fSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Country* Shares Templeton Global Growth Fund (Note 1)
Common Stocks 82.1%
Argentina 2.5%
<S> <C> <C> <C>
AR 397,481 Inversiones y Representacion .................................................... $ 1,312,173
US 50,000 Telecom Argentina Stet France, SA, ADR........................................... 2,343,750
US 386,900 Transportadora de Gas del Sur, SA, Class B, ADR.................................. 4,739,525
US 155,000 YPF Sociedad Anonima, ADR........................................................ 3,487,500
------------
11,882,948
------------
Australia 3.2%
AU 494,553 Coles Myer, Ltd., Class A........................................................ 1,795,760
AU 2,129,730 HIH Winterthur International Holdings, Ltd. ..................................... 4,017,253
AU 150,000 News International, Plc. ........................................................ 969,064
AU 33,730 Pacific BBA, Ltd. ............................................................... 83,507
AU 2,149,000 Pacific Dunlop, Ltd. ............................................................ 4,830,542
AU 700,000 RGC, Ltd. ....................................................................... 3,383,503
------------
15,079,629
------------
Austria 1.9%
AT 30,000 Boehler Uddeholm, AG............................................................. 2,326,342
AT 35,400 Evn Energie-Versorgung Niederoesterreich, AG..................................... 4,894,847
AT 8,480 aMayr-Melnhof Karton, AG......................................................... 365,234
AT 13,000 bVA Technologies, AG, Bearer certificate......................................... 1,598,356
------------
9,184,779
------------
Bermuda 2.4%
US 80,000 Ace, Ltd. ....................................................................... 3,760,000
US 255,000 Partnerre, Ltd. ................................................................. 7,618,125
------------
11,378,125
------------
Brazil .7%
BR 129,100,000 Companhia Siderurgica Nacional .................................................. 3,291,301
------------
Canada 1.0%
CA 119,700 Intrawest Corp. ................................................................. 1,266,922
CA 37,000 aNewbridge Networks Corp. ....................................................... 2,423,500
CA 195,000 Primex Forest Products, Ltd. .................................................... 1,035,525
------------
4,725,947
------------
China .3%
HK 23,000,000 Shanghai Hai Xing Shipping Co., Class H ......................................... 1,515,357
------------
Czech Republic 1.0%
US 171,000 a,bKomercni Banka, AS, GDR....................................................... 4,617,000
------------
Denmark .2%
DK 20,000 Tele Danmark, AS, Class B........................................................ 1,007,170
------------
Ecuador
US 200 bLa Cemento Nacional, CA, GDR.................................................... 36,200
------------
Finland 2.3%
FI 8,300 Amer Group, Ltd., Class A ....................................................... 139,780
FI 145,000 aEnso Oy, Class R................................................................ 1,130,183
FI 270,000 Metsa Serla Oy, Class B.......................................................... 1,923,762
FI 130,000 Nokia, AB, Class A............................................................... 4,799,689
FI 65,000 Outokumpu Oy, Class A............................................................ 1,094,666
FI 88,000 aUPM-Kymmene Corp. .............................................................. 1,833,511
------------
10,921,591
------------
France 5.9%
FR 30,000 Alcatel Alsthom, SA.............................................................. $ 2,618,458
FR 148,702 AXA, SA.......................................................................... 8,140,056
FR 126,500 Banque Nationale de Paris ....................................................... 4,443,515
FR 9,783 Compagnie Generale D' Industrie et de Participation ............................. 2,251,654
FR 45,000 aCredit Foncier de France, SA.................................................... 293,046
US 111,110 Pechiney, SA, ADR................................................................ 2,243,033
FR 5,388 Sa des Galeries Lafayette ....................................................... 1,839,205
FR 41,972 Societe Elf Aquitane, SA......................................................... 3,089,002
FR 32,029 Union du Credit Bail Immobilier Unibail ......................................... 3,200,254
------------
28,118,223
------------
Germany .5%
DD 6,300 Volkswagen, AG .................................................................. 2,347,453
------------
Greece .5%
GR 36,266 Alpha Credit Bank ............................................................... 1,914,688
GR 5,867 bAlpha Credit Bank .............................................................. 309,735
------------
2,224,423
------------
Hong Kong 3.6%
HK 800,000 Cheung Kong Holdings, Ltd. ...................................................... 5,761,716
HK 278,149 HSBC Holdings, Plc. ............................................................. 4,204,171
HK 800,000 Jardine Strategic Holdings, Ltd. ................................................ 2,560,000
HK 180,000 Melco International Development, Ltd. ........................................... 49,995
HK 2,299,000 Oriental Press Group, Ltd. ...................................................... 1,232,549
HK 3,600,000 Shun Tak Holdings ............................................................... 2,209,088
HK 150,000 Swire Pacific, Ltd., Class A .................................................... 1,283,790
HK 75,000 Swire Pacific, Ltd., Class B .................................................... 103,188
------------
17,404,497
------------
Hungary .6%
US 256,358 bMOL Magyar Olay - Es Gazipari RT, GDS........................................... 2,832,756
------------
India .5%
US 33,600 Gujarat Ambuja Cements, Ltd., GDR................................................ 420,000
GB 720,000 aIndia Fund, (The), Class B ..................................................... 1,380,917
US 37,000 bLarsen and Toubro, Ltd., GDR.................................................... 693,750
------------
2,494,667
------------
Indonesia .5%
US 305,700 aAsia Pacific Resources International, Class A................................... 2,292,750
------------
Italy 1.6%
IT 896,800 aBanca Fideuram, SpA............................................................. 1,951,971
IT 1,745,200 Fiat, SpA........................................................................ 5,888,163
------------
7,840,134
------------
Japan 1.6%
JP 230,000 Daito Trust Construction Co., Ltd. .............................................. 3,446,795
JP 48,000 Hitachi, Ltd. ................................................................... 447,389
JP 200,000 Matsushita Electric Industrial Co., Ltd. ........................................ 3,728,241
------------
7,622,425
------------
Mexico 1.3%
MX 1,900,000 aCifra, SA, Class B ............................................................. 2,750,428
MX 400,000 aConsorcio G Grupo Dina, SA de CV................................................ 255,768
Mexico (cont.)
US 86,400 Telefonos de Mexico, ADR......................................................... $ 2,894,400
US 24,000 Vitro, SA, ADR .................................................................. 165,000
------------
6,065,596
------------
Netherlands 1.6%
NL 56,500 European Vinyls Corp., International, NV......................................... 1,755,790
NL 50,000 Frans Maas Groep ................................................................ 1,990,619
NL 103,595 Ing Groep, NV.................................................................... 3,091,753
NL 40,000 Koninklijke Nedlloyd, NV......................................................... 921,724
------------
7,759,886
------------
New Zealand .4%
NZ 560,000 Fisher & Paykel, Ltd. ........................................................... 1,803,108
US 15,607 Fletcher Challenge, Ltd., Forestry Division, ADR................................. 193,137
------------
1,996,245
------------
Norway .6%
NO 45,000 Hafslund, AS, Class B............................................................ 287,748
NO 180,600 Helikopter Services Group, ASA................................................... 2,087,041
NO 45,000 aNycomed, AS, Class B............................................................ 624,032
------------
2,998,821
------------
Philippines 1.0%
PH 5,375,000 Metro Pacific Corp., MDI......................................................... 1,600,191
PH 199,890 aPhilippine National Bank ....................................................... 3,337,858
------------
4,938,049
------------
South Korea 1.3%
KR 17,000 Byucksan Development Co., Ltd. .................................................. 215,853
KR 11,227 Keumkang Co., Ltd. .............................................................. 742,709
KR 100,000 Pacific Chemical Co., Ltd. ...................................................... 1,886,095
KR 123,920 Shinhan Bank Co., Ltd. .......................................................... 2,837,389
KR 1,000 Tae Kwang Industrial Co., Ltd. .................................................. 567,061
------------
6,249,107
------------
Spain 2.7%
ES 4,400 Banco Popular Espanol ........................................................... 785,094
ES 75,000 Banco Santander, SA.............................................................. 3,503,769
ES 63,900 Cristaleria Espanola, SA ........................................................ 4,013,562
ES 450,000 Iberdrola, SA.................................................................... 4,622,866
------------
12,925,291
------------
Sweden 2.8%
SE 35,000 Asea, AB, Class A ............................................................... 3,716,206
SE 50,000 Assidomaen, AB................................................................... 1,166,742
SE 163,000 Munksjo, AB...................................................................... 1,280,169
SE 12,400 bNordbanken, AB.................................................................. 239,722
SE 190,000 Skandia Foersaekrings, AB........................................................ 5,036,248
SE 68,000 aSwedish Match, AB............................................................... 211,569
SE 68,000 Volvo, AB, Class B............................................................... 1,550,823
------------
13,201,479
------------
Switzerland 3.6%
CH 3,900 Ciba-Geigy, AG................................................................... $ 4,757,049
CH 2,200 Kuoni Reisen Holding, AG, Class B................................................ 5,050,190
CH 3,000 Societe Generale de Surveillance Holdings, Ltd., bearer certificate.............. 7,186,563
------------
16,993,802
------------
Thailand .7%
TH 724,466 Industrial Finance Corp. of Thailand ............................................ 3,253,077
TH 89,700 aMDX Public Co., Ltd. ........................................................... 146,185
------------
3,399,262
------------
Turkey .2%
US 75,000 aTurkish Growth Fund ............................................................ 984,375
------------
United Kingdom 3.6%
GB 220,000 Argyll Group, Plc. .............................................................. 1,185,551
GB 1,000,000 British Gas, Plc. ............................................................... 2,795,378
GB 135,000 BTR, Plc., Class A............................................................... 518,843
GB 1,455,000 aCordiant, Plc. ................................................................. 2,462,961
GB 1,396,100 Dawson International, Plc. ...................................................... 1,777,864
GB 466,666 Lex Service, Plc. ............................................................... 2,717,725
GB 256,000 London Pacific Group, Ltd. ...................................................... 1,023,730
GB 320,554 National Power, Plc. ............................................................ 2,583,668
GB 275,300 W.H. Smith Group ................................................................ 2,026,523
------------
17,092,243
------------
United States 31.5%
US 89,000 A.G. Edwards, Inc. .............................................................. 2,414,125
US 15,000 Aflac, Inc. ..................................................................... 448,125
US 280,000 Archer Daniels Midland Co. ...................................................... 5,355,000
US 339,000 aBanner Aerospace, Inc. ......................................................... 2,839,125
US 230,000 aBay Networks, Inc. ............................................................. 5,922,500
US 27,000 Citicorp ........................................................................ 2,230,875
US 56,500 Dayton-Hudson Corp. ............................................................. 5,826,563
US 109,300 Dean Witter Discover & Co. ...................................................... 6,257,425
US 84,800 aDSC Communications Corp. ....................................................... 2,554,600
US 58,500 Entergy Corp. ................................................................... 1,659,938
US 156,000 Federal National Mortgage Association ........................................... 5,226,000
US 90,000 Ford Motor Co. .................................................................. 2,913,750
US 124,500 aFruit of the Loom, Inc., Class A................................................ 3,174,750
US 89,000 General Growth Properties ....................................................... 2,147,125
US 60,000 General Motors Corp. ............................................................ 3,142,500
US 66,000 General Motors Corp., Class H.................................................... 3,968,250
US 34,000 Georgia-Pacific Corp. ........................................................... 2,414,000
US 70,000 Goodyear Tire & Rubber Co. ...................................................... 3,377,500
US 251,100 Highwood Properties, Inc., REIT.................................................. 6,936,638
US 34,700 Horizon Group, Inc. ............................................................. 711,350
US 52,800 Houghton Mifflin Co. ............................................................ 2,626,800
US 56,500 International Business Machines Corp. ........................................... 5,593,500
US 48,900 aLandstar System, Inc. .......................................................... 1,418,100
US 97,902 Limited, Inc. ................................................................... 2,104,893
US 42,000 Merrill Lynch & Co., Inc. ....................................................... 2,735,250
US 20,000 Mobil Corp. ..................................................................... 2,242,500
US 75,000 Motorola, Inc. .................................................................. 4,715,625
US 32,000 National Health Investors, Inc. ................................................. 1,048,000
United States (cont.)
US 30,400 Nike, Inc., Class B ............................................................. $ 3,123,600
US 157,000 aOMI Corp. ...................................................................... 1,354,125
US 50,000 aOwens Corning .................................................................. 2,150,000
US 70,000 PECO Energy Co. ................................................................. 1,820,000
US 151,700 Pharmacia & Upjohn, Inc. ........................................................ 6,731,688
US 150,000 aPinnacle Systems, Inc. ......................................................... 3,112,500
US 150,000 Post Properties, Inc. ........................................................... 5,306,250
US 24,000 Reliastar Financial Corp. ....................................................... 1,035,000
US 80,000 Rouse Co. ....................................................................... 2,070,000
US 130,000 aSyms Corp. ..................................................................... 958,750
US 30,000 Texaco, Inc. .................................................................... 2,516,250
US 120,000 Torchmark Corp. ................................................................. 5,250,000
US 350 aTransport Holdings, Inc., Class A............................................... 16,100
US 157,500 Travelers, Inc. ................................................................. 7,185,938
US 114,200 UNUM Corp. ...................................................................... 7,108,950
US 81,000 Valero Energy Corp. ............................................................. 2,025,000
US 115,000 Weeks Corp. ..................................................................... 2,990,000
US 240,000 Wheelabrator Technologies, Inc. ................................................. 3,660,000
------------
150,418,958
------------
Total Common Stocks (Cost $344,051,708).................................... 391,840,489
------------
Preferred Stocks 3.7%
Brazil 2.5%
BR 258,441,822 Banco Bradesco, SA, pfd. ........................................................ 2,110,465
BR 151,938,238 Cemig-Cia Energetica de Minas Gerais, pfd. ...................................... 4,039,985
BR 1,952,000 Coteminas Cia Tecidos Norte de Minas, pfd. ...................................... 770,769
US 75,000 Telebras-Telecomunicacoes Brasileiras, SA, pfd., ADR............................. 5,221,875
------------
12,143,094
------------
Greece .4%
GR 219,110 aMichaniki, SA, pfd. ............................................................ 1,821,742
------------
Italy .8%
IT 2,203,300 Concessioni e Costruzioni Autostrade, SpA, Class B, pfd. ........................ 3,819,005
------------
Mexico
US 6,500 Nacional Financiera, SA, 11.25%, 05/15/98, cvt. pfd. ............................ 222,625
------------
Total Preferred Stocks (Cost $13,799,210).................................. 18,006,466
------------
Total Common Stocks and Preferred Stocks (Cost $357,850,918)............... 409,846,955
------------
Face
Amount
Bonds 1.6%
India .4%
US 2,000,000 Essar Gujarat, Ltd., cvt., 5.50%, 08/05/98 ...................................... 1,970,000
------------
Italy .6%
IT 2,950,000,000 b,eSofte, SA, cvt., 4.25%, 07/30/98 ............................................. 2,932,185
------------
Mexico .2%
US 1,210,000 Empresas ICA Sociedad Controladora, SA, cvt., 5.00%, 03/15/04 ................... 768,350
------------
Switzerland .1%
US 365,000 C.S. Holding Finance BV, cvt., 4.875%, 11/19/02 ................................. 525,600
------------
Thailand .3%
US 3,602,000 MDX Public Co., Ltd., cvt., 4.75%, 09/17/03 ..................................... $ 1,692,940
------------
Total Bonds (Cost $6,793,375).............................................. 7,889,075
------------
Total Long Term Investments (Cost $364,644,293)............................ 417,736,030
------------
gReceivables from Repurchase Agreements 14.3%
US 25,122,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $25,011,146)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 25,000,000
US 16,060,000 Morgan Stanley & Co., Inc., 5.25%, 07/01/96, (Maturity Value $15,854,934)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97 ............................... 15,848,000
US 27,299,000 UBS Securities, Inc., 5.37%, 07/01/96, (Maturity Value $27,484,294)
Collateral: U.S. Treasury Notes, 5.875%, 07/31/97 .............................. 27,472,000
------------
Total Receivables from Repurchase Agreements (Cost $68,320,000)............ 68,320,000
------------
Total Investments (Cost $432,964,293) 101.7% ......................... 486,056,030
Liabilities in Excess of Other Assets (1.7)% ......................... (8,073,070)
------------
Net Assets 100.0% .................................................... $477,982,960
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $433,820,184 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 68,289,204
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (16,053,358)
------------
Net unrealized appreciation ................................................... $ 52,235,846
============
</TABLE>
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
BR - Brazil
CA - Canada
CH - Switzerland
DD - Germany
DK - Denmark
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
PORTFOLIO ABBREVIATIONS:
REIT - Real Estate Investment Trust
HK - Hong Kong
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
PH - Philippines
SE - Sweden
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Country* Shares Templeton Global Asset Allocation Fund (Note 1)
Common Stocks 44.1%
Argentina .5%
<S> <C> <C> <C>
US 2,000 Telecom Argentina Stet France, SA, ADR............................................. $ 93,750
US 6,900 Transportadora de Gas del Sur, SA, Class B, ADR.................................... 84,525
------------
178,275
------------
Australia 1.2%
AU 26,433 Coles Myer, Ltd., Class A.......................................................... 95,980
AU 93,062 HIH Winterthur International Holdings, Ltd. ....................................... 175,540
AU 41,881 Pacific BBA, Ltd. ................................................................. 103,686
AU 2,550 Pacific Dunlop, Ltd. ............................................................. 5,732
AU 10,000 RGC, Ltd. ......................................................................... 48,336
------------
429,274
------------
Austria .2%
AT 1,060 Boehler Uddeholm, AG............................................................... 82,197
------------
Bermuda 1.2%
US 10,000 Partnerre, Ltd. ................................................................... 298,750
US 7,000 Sea Containers, Ltd., Class A...................................................... 133,000
------------
431,750
------------
Brazil 1.8%
US 7,500 Cia Energetica de Minas Gerais, ADR................................................ 199,422
US 7,700 Companhia Siderurgica Nacional, ADR................................................ 196,305
US 12,600 Lojas Americanas, SA, ADR.......................................................... 248,449
------------
644,176
------------
Canada .5%
CA 12,000 Hudsons Bay Co. ................................................................... 181,945
------------
Chile .4%
US 4,800 Madeco Manufacturera de Cobre, SA, ADR............................................. 135,000
------------
Colombia .2%
US 5,000 a,bCementos Paz del Rio, SA, ADR................................................... 66,250
------------
Denmark .3%
DK 2,000 Tele Danmark, AS, Class B.......................................................... 100,717
------------
Finland 1.2%
FI 10,000 aEnso Oy, Class R.................................................................. 77,944
FI 3,750 Metsa Serla Oy, Class B............................................................ 26,719
FI 5,000 Nokia, AB, Class A................................................................. 184,603
FI 2,400 Outokumpu Oy, Class A.............................................................. 40,418
FI 4,200 aUPM-Kymmene Corp. ................................................................ 87,509
------------
417,193
------------
France 5.1%
FR 11,731 AXA, SA............................................................................ 642,164
FR 9,000 Banque Nationale de Paris ......................................................... 316,139
FR 9,700 Rhone-Poulenc, SA, Class A ........................................................ 255,122
FR 1,805 Societe Elf Aquitane, SA........................................................... 132,842
FR 2,556 Total, SA, Class B ................................................................ 189,703
FR 2,500 Union du Credit Bail Immobilier Unibail ........................................... 249,793
------------
1,785,763
------------
Germany .4%
DD 360 Volkswagen, AG .................................................................... 134,140
------------
Greece .5%
GR 3,066 Alpha Credit Bank ................................................................. $ 161,872
------------
Hong Kong 2.4%
HK 32,000 Cheung Kong Holdings, Ltd. ........................................................ 230,469
HK 111,000 Grand Hotel Holdings, Ltd. ........................................................ 43,736
HK 1,013,600 Hon Kwok Land Investment Co., Ltd. ................................................ 353,547
HK 12,200 Melco International Development, Ltd. ............................................. 3,389
HK 244,000 Shun Tak Holdings ................................................................. 149,727
HK 164,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 46,610
------------
827,478
------------
Hungary .4%
US 12,107 bMOL Magyar Olay - Es Gazipari RT, GDS............................................. 133,782
------------
Indonesia .4%
US 19,300 aAsia Pacific Resources International, Class A..................................... 144,750
------------
Italy .6%
IT 74,700 aBanca Fideuram, SpA............................................................... 162,592
IT 10,000 STET (Sta Finanziaria Telefonica Torino), SpA...................................... 33,915
------------
196,507
------------
Japan .8%
JP 12,000 Daito Trust Construction Co., Ltd. ................................................ 179,833
JP 5,000 Matsushita Electric Industrial Co., Ltd. .......................................... 93,206
------------
273,039
------------
Mexico .5%
MX 96,200 aCifra, SA, Class B ............................................................... 139,259
US 3,000 aEmpresas ICA Sociedad Controladora, SA, ADR....................................... 41,625
------------
180,884
------------
Netherlands .4%
NL 5,020 Ing Groep, NV...................................................................... 149,820
------------
New Zealand .5%
NZ 51,300 Ceramico Corp., Ltd. .............................................................. 64,942
US 9,000 aTranz Rail Holdings, Ltd., ADR.................................................... 124,875
------------
189,817
------------
Norway .7%
NO 14,800 Elkem, AS.......................................................................... 204,097
NO 1,700 Hafslund, AS, Class B.............................................................. 10,870
NO 1,700 aNycomed, AS, Class B.............................................................. 23,575
------------
238,542
------------
Spain 1.1%
ES 9,500 Dragados y Construcciones, SA...................................................... 125,796
ES 20,500 Iberdrola, SA...................................................................... 210,597
ES 1,750 Telefonica de Espana, SA .......................................................... 32,264
------------
368,657
------------
Sweden 2.8%
SE 2,300 Electrolux, AB, Class B ........................................................... 115,851
SE 165 aFastighets Naeckebro, AB Tornet, Class A.......................................... 2,043
SE 5,000 Marieberg Tidnings, AB, Class A ................................................... 125,359
SE 18,000 bNordbanken, AB.................................................................... 347,984
Sweden (cont.)
SE 13,800 Skandia Foersaekrings, AB.......................................................... $ 365,791
SE 1,650 Svenska Handelsbanken, Class A..................................................... 34,515
------------
991,543
------------
Switzerland 1.3%
CH 70 Kuoni Reisen Holding, AG, Class B.................................................. 160,688
CH 115 Societe Generale de Surveillance Holdings, Ltd., br. .............................. 275,485
------------
436,173
------------
Thailand .5%
TH 30,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 159,524
------------
Turkey .3%
US 7,500 aTurkish Growth Fund .............................................................. 98,438
------------
United Kingdom 2.1%
GB 40,000 British Gas, Plc. ................................................................. 111,815
GB 45,000 aCordiant, Plc. ................................................................... 76,174
GB 13,500 Dawson International, Plc. ........................................................ 17,192
GB 21,666 Lex Service, Plc. ................................................................ 126,176
GB 118,414 aRailtrack Group, Plc. ............................................................ 402,731
GB 2,200 W.H. Smith Group .................................................................. 16,195
------------
750,283
------------
United States 15.8%
US 2,860 AK Steel Holding Corp. ............................................................ 111,898
US 16,000 Archer Daniels Midland Co. ........................................................ 306,000
US 10,100 aBay Networks, Inc. ............................................................... 260,075
US 5,900 Beacon Properties Corp. ........................................................... 151,188
US 6,800 Carramerica Realty Corp. .......................................................... 163,200
US 2,400 Citicorp .......................................................................... 198,300
US 2,700 Dayton-Hudson Corp. ............................................................... 278,438
US 5,000 Dean Witter Discover & Co. ........................................................ 286,250
US 6,950 aFruit of the Loom, Inc., Class A.................................................. 177,225
US 2,700 General Motors Corp. .............................................................. 141,413
US 3,100 General Motors Corp., Class H ..................................................... 186,388
US 2,500 Georgia-Pacific Corp. ............................................................. 177,500
US 3,600 Goodyear Tire & Rubber Co. ........................................................ 173,700
US 15,300 Highwood Properties, Inc., REIT.................................................... 422,663
US 12,000 Horizon Group, Inc. ............................................................... 246,000
US 3,200 Houghton Mifflin Co. .............................................................. 159,200
US 3,500 International Business Machines Corp. ............................................. 346,500
US 3,000 aLandstar System, Inc. ............................................................ 87,000
US 3,300 Motorola, Inc. .................................................................... 207,488
US 1,800 Peco Energy Co. ................................................................... 46,800
US 5,200 aPinnacle Systems, Inc. ........................................................... 107,900
US 4,400 Post Properties, Inc. ............................................................. 155,650
US 3,200 Summit Properties, Inc., REIT...................................................... 62,800
US 1,400 Texas Utilties Electric Co. ....................................................... 59,850
US 2,121 The Limited, Inc. ................................................................. 45,602
US 7,000 Torchmark Corp. ................................................................... 306,250
US 4,000 UNUM Corp. ........................................................................ 249,000
US 2,400 Valero Energy Corp. ............................................................... 60,000
United States (cont.)
US 7,500 Weeks Corp. ....................................................................... $ 195,000
US 10,000 Wheelabrator Technologies, Inc. ................................................... 152,500
------------
5,521,778
------------
Total Common Stocks (Cost $14,101,438)....................................... 15,409,567
------------
Preferred Stocks 1.2%
Argentina .8%
US 4,700 Cia de Inversiones en Telecomunicaciones, SA, 7.00%, cvt. pfd. .................... 272,600
------------
Greece .4%
GR 18,740 aMichaniki, SA, pfd. .............................................................. 155,810
------------
Total Preferred Stocks (Cost $423,186)....................................... 428,410
------------
Total Common Stocks and Preferred Stocks (Cost $14,524,624).................. 15,837,977
------------
Face
Amount
Bonds 24.4%
Argentina 1.6%
US 65,000 Bocon Previsionales II, FRN, 5.063%, 04/01/01 ..................................... 74,230
US 100,000 Bridas Corp., Yankee, 12.50%, 11/18/99 ............................................ 104,500
US 100,000 bIndustrias Metalurgicas Pescarmona, 11.75%, 03/27/98 ............................. 100,875
US 500,000 Republic of Argentina, Series L, VRN, 5.25%, 03/31/23 ............................. 274,375
------------
553,980
------------
Australia 1.7%
AU 570,000 eGovernment of Australia, 7.00%, 04/15/00 ......................................... 427,450
AU 205,000 eRepublic of Australia, 12.00%, 11/15/01 .......................................... 184,053
------------
611,503
------------
Brazil 1.1%
US 150,000 bCentrais Electricas Brasileiras, SA, 10.00%, 10/30/98 ............................ 153,000
US 395,000 Government of Brazil, 4.25%, 04/15/24 ............................................. 218,731
------------
371,731
------------
Canada .7%
CA 80,000 eGovernment of Canada, 5.75%, 03/01/99 ............................................ 57,683
CA 60,000 eGovernment of Canada, 10.50%, 03/01/01 ........................................... 50,044
CA 90,000 eGovernment of Canada, 9.00%, 12/01/04 ............................................ 71,822
CA 100,000 eGovernment of Canada, 8.75%, 12/01/05 ............................................ 78,843
------------
258,392
------------
Denmark .8%
DK 235,000 eGovernment of Denmark, 8.00%, 05/15/03 ........................................... 42,463
DK 790,000 eKingdom of Denmark, 9.00%, 11/15/00 .............................................. 149,018
DK 500,000 eKingdom of Denmark, 8.00%, 11/15/01 .............................................. 91,200
------------
282,681
------------
Ecuador .3%
US 290,000 Republic of Ecuador, FRN, 3.25%, 02/28/25 ......................................... 104,219
------------
Germany 1.6%
DD 100,000 eDeutsche Bundespost, 7.75%, 10/01/04 ............................................. 70,589
DD 150,000 eFederal Republic of Germany, 8.00%, 07/22/02 ..................................... 108,597
DD 85,000 eFederal Republic of Germany, 7.125%, 12/20/02 .................................... 58,905
DD 90,000 eFederal Republic of Germany, 6.50%, 07/15/03 ..................................... 60,032
Germany (cont.)
DD 80,000 eFederal Republic of Germany, Bundes, 8.25%, 09/20/01 ............................. $ 58,523
DD 85,000 eFederal Republic of Germany, Bundesobl, 6.625%, 01/20/98 ......................... 58,061
DD 200,000 eTreuhandanstalt, 7.125%, 01/29/03 ................................................ 138,534
------------
553,241
------------
India .4%
US 150,000 Essar Gujarat, Ltd., cvt., 5.50%, 08/05/98 ........................................ 147,750
------------
Indonesia .3%
ID 87,000 PT Polysindo Intl. Finance Co., Series B, 11.375%, 06/15/06 ....................... 88,523
------------
Ireland .1%
IR 35,000 eRepublic of Ireland, 6.25%, 10/18/04 ............................................. 51,725
------------
Italy 1.7%
IT 85,000,000 eBuoni Poliennali del Tes, 8.50%, 08/01/99 ........................................ 55,620
IT 195,000,000 eBuoni Poliennali del Tes, 10.50%, 09/01/05 ....................................... 137,248
IT 570,000,000 eGovernment of Italy, 10.50%, 07/15/00 ............................................ 395,195
------------
588,063
------------
Mexico 1.8%
US 130,000 Bancomer, SA, 8.00%, 07/07/98 ..................................................... 128,375
US 335,000 United Mexican States, 9.75%, 02/06/01 ............................................ 333,325
US 250,000 United Mexican States, Series B, 6.25%, 12/31/19 .................................. 162,344
------------
624,044
------------
Philippines .9%
US 170,000 Phillipine Long Distance Telephone Co., 9.25%, 06/30/06 ........................... 170,638
US 180,000 Phillippine Pars, Series B, FRN, 5.75%, 12/01/17 .................................. 143,550
------------
314,188
------------
Poland .4%
US 180,000 Government of Poland, PDI, FRN, 3.75%, 10/27/14 ................................... 137,025
------------
Spain 1.2%
ES 29,010,000 eGovernment of Spain, 12.25%, 03/25/00 ............................................ 257,567
ES 8,100,000 eGovernment of Spain, 11.30%, 01/15/02 ............................................ 71,252
ES 11,020,000 eGovernment of Spain, 10.00%, 02/28/05 ............................................ 91,945
------------
420,764
------------
Sweden 1.0%
SE 1,200,000 eKingdom of Sweden, 13.00%, 06/15/01 .............................................. 220,739
SE 700,000 eKingdom of Sweden, 10.25%, 05/05/03 .............................................. 119,280
------------
340,019
------------
Trinidad and Tobago .5%
US 170,000 bSei Holdings IX Inc., 11.00%, 11/30/00 ........................................... 178,500
------------
United Kingdom 1.7%
GB 230,000 eUnited Kingdom, 12.00%, 11/20/98 ................................................. 398,376
GB 80,000 eUnited Kingdom, cvt., 9.50%, 10/25/04 ............................................ 136,896
GB 40,000 eUnited Kingdom, ln., 9.50%, 01/15/99 ............................................. 66,041
------------
601,313
------------
United States 5.7%
US 405,000 U.S. Treasury Bonds, 6.375%, 08/15/02 ............................................. 401,772
US 810,000 U.S. Treasury Notes, 6.125%, 07/31/00 ............................................. 801,017
US 810,000 U S Treasury Notes, 6.25%, 08/31/00 ............................................... 804,306
------------
2,007,095
------------
Venezuela .9%
US 250,000 Republic of Venezuela, Par Bond, Series B, 6.75%, 03/31/20 ........................ $ 153,750
US 250,000 Republic of Venezuela, Series A, 6.75%, 03/31/20 .................................. 153,750
------------
307,500
------------
Total Bonds (Cost $8,415,927)................................................ 8,542,256
------------
Total Long Term Investments (Cost $22,940,551)............................... 24,380,233
------------
fShort Term Securities 13.5%
United States
US 1,150,000 Federal Farm Credit Bank, 5.25% - 5.30%, 07/09/96 - 08/09/96 ...................... 1,145,974
US 1,200,000 Federal Home Loan Bank, 5.25% - 5.29%, 07/08/96 - 08/07/96 ........................ 1,196,025
US 1,200,000 Federal Home Loan Mortgage Corp., 5.25% - 5.29%, 07/05/96 - 07/31/96 .............. 1,197,082
US 1,200,000 Federal National Mortgage Association, 5.25% - 5.30%, 07/11/96 - 08/08/96 ......... 1,196,111
------------
Total Short Term Securities (Cost $4,734,746)................................ 4,735,192
------------
Total Investments before Repurchase Agreements (Cost $27,675,297) ........... 29,115,425
------------
gReceivables from Repurchase Agreements 16.9%
US 5,920,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $5,900,630) (Cost $5,898,000)
Collateral: U.S. Treasury Notes, 7.00%, 09/30/96 ................................. 5,898,000
------------
Total Investments (Cost $33,573,297) 100.1%............................. 35,013,425
Liabilities in Excess of Other Assets (.1)% ............................ (26,385)
------------
Net Assets 100.0% ...................................................... $34,987,040
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $33,573,297 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over cost ..................................................... $ 1,893,526
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ................................................. (453,398)
------------
Net unrealized appreciation ..................................................... $ 1,440,128
============
</TABLE>
COUNTRY LEGEND:
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
ID - Indonesia
IR - Ireland
IT - Italy
JP - Japan
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States
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.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
fCertain 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 upon maturity.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Small Cap Fund (Note 1)
Common Stocks 92.2%
Commercial Services 4.9%
<S> <C> <C>
16,900 aAffiliated Computer Services, Inc. .......................................................... $ 794,300
17,300 aLabor Ready, Inc. ........................................................................... 484,400
35,000 Norrell Corp. ................................................................................ 1,719,375
100,000 aRent-Way, Inc. .............................................................................. 1,362,500
20,000 aRobert Half International, Inc. ............................................................. 557,500
------------
4,918,075
------------
Consumer Products Durables 4.0%
36,500 aBelmont Homes, Inc. ......................................................................... 789,313
40,000 aCannondale Corp. ............................................................................ 810,000
35,000 aK-2, Inc. ................................................................................... 949,375
50,000 aMorrow Snowboards, Inc. ..................................................................... 525,000
43,200 aSouthern Energy Homes, Inc. ................................................................. 928,800
------------
4,002,488
------------
Consumer Products Non-Durables .7%
6,900 aDonna Karan International, Inc. ............................................................. 193,200
9,000 aTommy Hilfiger Corp. ........................................................................ 482,625
------------
675,825
------------
Consumer Services 2.7%
45,000 aPrime Hospitality Corp. ..................................................................... 742,500
39,400 aRed Lion Hotels, Inc. ....................................................................... 827,400
40,000 aStarbucks Corp. ............................................................................. 1,130,000
------------
2,699,900
------------
Electronic Technology 12.4%
60,000 aCognex Corp. ................................................................................ 967,500
19,600 aDuPont Photomasks, Inc. ..................................................................... 401,800
50,100 aEtec Systems, Inc. .......................................................................... 1,114,725
20,300 aKomag, Inc. ................................................................................. 535,413
35,000 aLexmark International Group, Inc., Class A................................................... 704,375
46,400 Logicon, Inc. ................................................................................ 1,386,200
24,800 aNatural Microsystems Corp. .................................................................. 868,000
1,600 aShiva Corp. ................................................................................. 128,000
24,000 aSilicon Graphics, Inc. ...................................................................... 576,000
95,100 aTekelec ..................................................................................... 1,248,188
75,000 aTracor, Inc. ................................................................................ 1,293,750
25,000 aUCAR International, Inc. .................................................................... 1,040,625
25,000 aVerilink Corp. .............................................................................. 637,500
150,000 aVisioneer, Inc. ............................................................................. 1,518,750
------------
12,420,826
------------
Energy/Minerals 5.2%
103,000 aBarrett Resources Corp. ..................................................................... 3,064,250
146,400 aCairn Energy USA, Inc. ...................................................................... 2,104,500
------------
5,168,750
------------
Financial Services 5.4%
61,200 aAmeriCredit Corp. ........................................................................... 956,250
26,300 Chartwell Re Corp. ........................................................................... 581,888
6,200 aContiFinancial Corp. ........................................................................ 182,900
9,400 Executive Risk, Inc. ......................................................................... 359,550
46,300 IPC Holdings, Ltd. .......................................................................... 931,788
Financial Services (cont.)
60,000 aRisk Capital Holdings, Inc. ................................................................. $ 1,177,500
44,900 aSilicon Valley Bancshares ................................................................... 1,156,175
------------
5,346,051
------------
Health Care Services 4.0%
12,900 aAccess Health, Inc. ......................................................................... 609,525
51,800 aMecon, Inc. ................................................................................. 1,171,975
1,000 aMedic Computer Systems, Inc. ................................................................ 81,125
32,600 aSierra Health Services, Inc. ................................................................ 1,026,900
90,000 aU.S. Diagnostic Labs, Inc. .................................................................. 1,102,500
------------
3,992,025
------------
Health Technology 7.0%
12,400 aHeartport, Inc. ............................................................................. 375,100
68,200 Mentor Corp. ................................................................................. 1,739,100
205,000 aNeurobiological Technologies, Inc. .......................................................... 1,358,125
70,600 aNoven Pharmaceuticals, Inc. ................................................................. 1,129,600
57,600 aOptical Sensors, Inc. ....................................................................... 597,600
37,500 aPenederm, Inc. .............................................................................. 637,500
17,800 aPharmacopeia, Inc. .......................................................................... 364,900
2,700 aSerologicals Corp. .......................................................................... 71,550
27,000 aTransition Systems, Inc. .................................................................... 769,500
------------
7,042,975
------------
Industrial Services .2%
6,600 aWaters Corp. ................................................................................ 217,800
------------
Oil/Gas - Equipment & Services 1.2%
10,000 aCarbo Ceramics, Inc. ........................................................................ 220,000
56,600 aVarco International, Inc. ................................................................... 1,025,875
------------
1,245,875
------------
Printing & Publishing 1.2%
20,000 aScholastic Corp. ............................................................................ 1,240,000
------------
Producer Manufacturing 4.6%
15,100 aAmerican Buildings Co. ...................................................................... 441,675
10,000 Butler Manufacturing Co. ..................................................................... 337,500
17,900 aCastech Aluminum Group, Inc. ................................................................ 264,025
27,400 aCentury Aluminum Co. ........................................................................ 431,550
68,400 Easco, Inc. .................................................................................. 564,300
40,000 aGentex Corp. ................................................................................ 780,000
13,000 Pittston Brink's Group ....................................................................... 378,625
28,700 Roper Industries, Inc. ....................................................................... 1,399,125
------------
4,596,800
------------
Real Estate Investment Trust 5.6%
40,000 Bay Apartment Communities, Inc. .............................................................. 1,035,000
90,300 Equity Inns, Inc. ............................................................................ 1,038,450
35,000 FelCor Suite Hotels, Inc. .................................................................... 1,067,500
27,400 OMEGA Healthcare Investors, Inc. ............................................................. 756,925
26,000 Storage Trust Realty ......................................................................... 533,000
98,000 Winston Hotels, Inc. ......................................................................... 1,139,250
------------
5,570,125
------------
Retail .5%
7,500 aBorders Group, Inc. ......................................................................... $ 241,875
9,000 aDesigner Holdings, Ltd. ..................................................................... 239,625
------------
481,500
------------
Semiconductors 8.0%
12,000 aAdaptec, Inc. ............................................................................... 568,500
24,800 aAltera Corp. ................................................................................ 942,400
15,900 aExar Corp. .................................................................................. 206,700
50,000 aLattice Semiconductor Corp. ................................................................. 1,206,250
45,000 Linear Technology Corp. ...................................................................... 1,350,000
87,600 aMicro Linear Corp. .......................................................................... 657,000
110,000 aSierra Semiconductor Corp. .................................................................. 1,278,750
26,200 aUniphase Corp. .............................................................................. 930,100
26,000 aXilinx, Inc. ................................................................................ 825,500
------------
7,965,200
------------
Technology Services 12.7%
79,600 aAcclaim Entertainment, Inc. ................................................................. 766,150
62,000 aAmisys Managed Care Systems ................................................................. 1,596,500
3,000 aBusiness Objects, SA, ADR.................................................................... 120,750
8,100 aCitrix Systems, Inc. ........................................................................ 307,800
25,700 aFractal Design Corp. ........................................................................ 375,863
34,400 aFulcrum Technology, Inc. .................................................................... 442,900
7,500 ai2 Technologies, Inc. ....................................................................... 320,625
22,500 aIDT Corp. ................................................................................... 216,560
5,600 aIntegrated Systems, Inc. .................................................................... 224,350
68,900 aMapinfo Corp. ............................................................................... 723,450
5,000 aMcAfee Associates, Inc. ..................................................................... 245,000
15,000 aMercury Interactive Corp. ................................................................... 206,250
6,000 aMetaTools, Inc. ............................................................................. 141,000
85,000 aPhoenix Technologies, Ltd. .................................................................. 1,423,750
100,000 aQuantum Corp. ............................................................................... 1,462,500
20,000 aRainbow Technologies, Inc. .................................................................. 400,000
12,500 aSapient Corp. ............................................................................... 528,125
35,500 aScopus Technology, Inc. ..................................................................... 550,250
11,300 aSecure Computing Corp. ..................................................................... 259,900
18,500 aSterling Software, Inc. ..................................................................... 1,424,500
17,000 aSymantec Corp. .............................................................................. 212,500
19,000 aSynopsys, Inc. .............................................................................. 755,250
------------
12,703,973
------------
Telecommunications 6.5%
36,000 aCommNet Cellular ............................................................................ 1,080,000
26,300 aGlenayre Technologies, Inc. ................................................................. 1,315,000
26,000 IntelCom Group, Inc. ......................................................................... 650,000
16,000 aNewbridge Networks Corp. .................................................................... 1,048,000
25,000 aRural Cellular Corp., Class A................................................................ 318,750
23,000 aSilver King Communications .................................................................. 690,000
150,000 aSpectralink Corp. ........................................................................... 1,443,750
------------
6,545,500
------------
Transportation 4.5%
50,000 Air Express International Corp. .............................................................. 1,412,500
30,000 Expeditors International of Washington, Inc. ................................................. 930,000
Transportation (cont.)
41,000 Harper Group, Inc. ........................................................................... $ 799,500
46,000 aLandstar System, Inc. ....................................................................... 1,334,000
------------
4,476,000
------------
Utilities .9%
31,400 aAES Corp. ................................................................................... 887,050
------------
Total Common Stocks (Cost $89,706,386).................................................. 92,196,738
------------
Face
Amount
Convertible Corporate Bonds 1.0%
$ 400,000 bQuantum Corp., cvt. sub. notes, 5.00%, 03/01/03 ............................................. 366,500
425,000 bU.S. Diagnostic Labs, Inc., cvt. sub. deb., 9.00%, 03/31/03 ................................. 639,625
------------
Total Convertible Corporate Bonds (Cost $855,254)....................................... 1,006,125
------------
Total Long Term Investments (Cost $90,561,640).......................................... 93,202,863
------------
g,hReceivables from Repurchase Agreement 1.8%
1,836,845 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $1,846,400) (Cost $1,845,563)
Chase Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $254,270)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/96 - 11/30/99 ........................ 1,845,563
------------
Total Investments (Cost $92,407,203) 95.0%......................................... 95,048,426
Other Assets and Liabilities, Net 5.0%............................................. 5,012,048
------------
Net Assets 100.0%.................................................................. $100,060,474
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $92,416,162 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 7,764,366
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (5,132,102)
------------
Net unrealized appreciation ................................................................ $ 2,632,264
============
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Value
Shares Capital Growth Fund (Note 1)
Common Stocks 82.1%
Commercial Services 2.6%
2,500 Equifax, Inc. ..................................................................................... $ 65,625
2,200 aRobert Half International, Inc. .................................................................. 61,325
------------
126,950
------------
Consumer Products Durables 2.3%
1,500 Duracell International, Inc. ...................................................................... 64,688
1,800 Mattel, Inc. ...................................................................................... 51,524
------------
116,212
------------
Consumer Products Non-Durables 4.3%
700 Campbell Soup Co. ................................................................................. 49,350
1,000 Coca-Cola Co. ..................................................................................... 48,875
300 aDonna Karan International, Inc. .................................................................. 8,400
600 Hershey Foods Corp. ............................................................................... 44,025
700 Proctor & Gamble Co. .............................................................................. 63,438
------------
214,088
------------
Consumer Services 3.4%
1,200 aCUC International, Inc. .......................................................................... 42,600
1,000 Disney (Walt) Co. ................................................................................. 62,875
1,200 aMirage Resorts, Inc. ............................................................................. 64,800
------------
170,275
------------
Electronic Technology 12.2%
900 aBay Networks...................................................................................... 23,175
1,000 aCabletron Systems, Inc. .......................................................................... 68,625
1,700 aCisco Systems, Inc. .............................................................................. 96,263
600 aCompaq Computer Corp. ............................................................................ 29,550
600 Hewlett-Packard Co. ............................................................................... 59,775
1,200 Intel Corp. ....................................................................................... 88,124
1,900 Linear Technology Corp. ........................................................................... 57,000
1,300 Molex, Inc. ....................................................................................... 41,275
2,000 aSilicon Graphics, Inc. ........................................................................... 48,000
400 United Technologies Corp. ......................................................................... 46,000
1,600 aXilinx, Inc. ..................................................................................... 50,800
------------
608,587
------------
Energy/Minerals 4.0%
3,000 aBarrett Resources Corp. .......................................................................... 89,250
700 Royal Dutch Petroleum Co., New York Shares......................................................... 107,625
------------
196,875
------------
Financial Services 7.4%
900 American International Group, Inc. ................................................................ 88,763
800 Citicorp .......................................................................................... 66,100
2,200 Federal National Mortgage Association.............................................................. 73,700
2,800 Schwab (Charles) Corp. ............................................................................ 68,600
300 Wells Fargo & Co. ................................................................................. 71,963
------------
369,126
------------
Health Care Services 1.6%
1,200 aPacificare Health Systems, Inc., Class B.......................................................... 81,300
------------
Health Technology 13.2%
1,300 Abbott Laboratories................................................................................ 56,550
1,300 Allergan, Inc. .................................................................................... 51,025
Health Technology (cont.)
1,000 American Home Products Corp. ...................................................................... $ 60,125
1,300 aAmgen, Inc. ...................................................................................... 70,200
2,000 Baxter International, Inc. ........................................................................ 94,500
1,900 aBoston Scientific Corp. .......................................................................... 85,500
1,000 aGenzyme Corp. .................................................................................... 50,250
1,500 Johnson & Johnson.................................................................................. 74,250
900 Lilly (Eli) & Co. ................................................................................. 58,500
900 Merck & Co., Inc. ................................................................................. 58,163
------------
659,063
------------
Industrial Services 2.9%
2,300 Browning-Ferris Industries, Inc. .................................................................. 66,700
900 Schlumberger, Ltd. ................................................................................ 75,825
------------
142,525
------------
Process Industries 3.8%
1,500 Air Products and Chemicals, Inc. .................................................................. 86,625
1,200 Millipore Corp. ................................................................................... 50,250
1,000 Sigma-Aldrich Corp. ............................................................................... 53,500
------------
190,375
------------
Producer Manufacturing 3.4%
700 Emerson Electric Co. .............................................................................. 63,263
800 Minnesota Mining & Manufacturing Co. .............................................................. 55,200
1,500 aU.S. Filter Corp. ................................................................................ 52,125
------------
170,588
------------
Retail 2.1%
1,200 McDonald's Corp. .................................................................................. 56,100
2,400 aOffice Depot, Inc. ............................................................................... 48,900
100 aSaks Holdings, Inc. .............................................................................. 3,412
------------
108,412
------------
Technology Services 11.5%
1,500 Adobe Systems, Inc. ............................................................................... 53,813
100 aAspect Development, Inc. ......................................................................... 2,550
1,300 Automatic Data Processing, Inc. ................................................................... 50,213
500 aBroderbund Software, Inc. ........................................................................ 16,125
1,400 Electronic Data Systems Corp. ..................................................................... 75,250
1,200 First Data Corp. .................................................................................. 95,550
3,200 aInformix Corp. ................................................................................... 72,000
900 aIntuit, Inc. ..................................................................................... 42,525
300 aMicrosoft Corp. .................................................................................. 36,038
1,300 aOracle Corp. ..................................................................................... 51,269
1,000 aSterling Software, Inc. .......................................................................... 77,000
------------
572,333
------------
Transportation 3.7%
2,500 Air Express International Corp. ................................................................... 70,624
1,600 aFritz Cos., Inc. ................................................................................. 51,600
2,100 Southwest Airlines Co. ............................................................................ 61,162
------------
183,386
------------
Utilities 3.7%
1,800 aAES Corp. ........................................................................................ $ 50,850
2,300 aAirTouch Communications, Inc. .................................................................... 64,974
1,400 GTE Corp. ......................................................................................... 62,650
------------
178,474
------------
Total Long Term Investments (Cost $4,101,739)............................................... 4,088,569
------------
Face
Amount
g,hReceivables from Repurchase Agreements 5.4%
$ 270,124 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $271,483) (Cost $271,360)
Chase Securities, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $39,016)
Collateral: U..S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $37,387)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc. (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............................. 271,360
------------
Total Investments (Cost $4,373,099) 87.5%............................................... 4,359,929
Other Assets and Liabilities, Net 12.5%................................................. 622,861
------------
Net Assets 100.0% ...................................................................... $4,982,790
============
At June 30, 1996, the net unrealized depreciation based on the
cost of investments for income tax purposes of $4,373,099 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................... $ 91,917
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................... (105,087)
------------
Net unrealized depreciation ..................................................................... $ (13,170)
============
aNon icome producing.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Shares/ Value
Country* Warrants Templeton International Smaller Companies Fund (Note 1)
Common Stocks & Warrants 41.4%
Argentina .6%
<S> <C> <C> <C>
US 100 bComercial Industrial Financiera Inmobiliari Agropecuaria, ADR ....................... $ 280
AR 12,300 Mirgor, SA, Comercial Industrial Financiera Inmobi, Class C, ADR ..................... 34,440
------------
34,720
------------
Austria 1.6%
AT 1,153 Boehler Uddeholm, AG.................................................................. 89,409
------------
Bermuda
US 100 Sea Containers, Ltd., Class A......................................................... 1,900
------------
Canada .4%
CA 1,480 Hudsons Bay Co. ...................................................................... 22,440
------------
China 1.7%
CN 131,000 Dongfang Electrical Machinery Co., Ltd., Class H...................................... 32,832
US 92,000 bGuangdong Electric Power Development Co., Ltd., Class B.............................. 58,832
------------
91,664
------------
Denmark 1.7%
DK 1,247 Det Danske Traelastkompagni, AS....................................................... 91,748
------------
France 2.2%
FR 706 aMarine Wendel ....................................................................... 58,464
FR 179 Sa des Galeries Lafayette ............................................................ 61,102
------------
119,566
------------
Germany 1.0%
DD 1,316 Moebel Walther, AG.................................................................... 56,263
------------
Hong Kong 6.4%
HK 361,000 Baltrans Holdings, Ltd. .............................................................. 48,968
HK 70,000 C.P. Pokphand Co., Ltd. .............................................................. 27,807
HK 120,000 Hung Hing Printing Group, Ltd. ....................................................... 31,780
HK 60,000 Kumagai Gumi Hong Kong, Ltd. ......................................................... 53,871
HK 7,800 aKumagai Gumi Hong Kong, Ltd., warrants............................................... 1,189
HK 210,000 Sinocan Holdings, Ltd. ............................................................... 92,239
HK 23,000 Swank International Manufacturing Co., Ltd. ......................................... 4,011
HK 656,000 Techtronic Industries Co., Ltd. ...................................................... 90,679
------------
350,544
------------
Indonesia 1.3%
ID 39,500 PT Steady Safe, fgn. ................................................................. 54,307
ID 9,500 PT Tambang Timah (Persero), fgn. ..................................................... 17,551
------------
71,858
------------
Italy 3.0%
IT 6,250 Cartiere Burgo, SPA .................................................................. 34,173
US 3,600 a,bEsaote Biomedica, SPA, ADR......................................................... 129,381
------------
163,554
------------
Netherlands 4.8%
NL 1,103 Crown-Van Gelder Papier, SA........................................................... 95,716
NL 1,046 De Boer Winkelbedrijven, NV........................................................... 53,358
NL 315 Hollandsche Beton Groep, NV .......................................................... 60,396
NL 2,416 Internatio-Mueller, NV................................................................ 53,264
------------
262,734
------------
New Zealand 1.9%
NZ 800 Helicopter Line (The) ................................................................ $ 1,541
US 7,200 aTranz Rail Holdings, Ltd., ADR....................................................... 99,900
------------
101,441
------------
Norway 1.8%
NO 4,015 bUnion Bank of Norway, Primary Capital Certificate.................................... 98,364
------------
Spain 4.0%
ES 831 Cristaleria Espanola, SA ............................................................. 52,195
ES 3,755 Dragados y Construcciones, SA......................................................... 49,722
ES 11,095 aEnergia e Industrias Aragonesas Eia S ............................................... 54,693
ES 1,080 Gesa-Gas y Electricidad, SA........................................................... 59,904
------------
216,514
------------
Sweden 4.7%
US 6,300 a,bDahl International, AB............................................................. 88,015
SE 3,000 Foereningsbanken, AB, Class A......................................................... 9,878
SE 1,260 Marieberg Tidnings, AB, Class A ...................................................... 31,590
SE 7,995 Munksjo, AB........................................................................... 62,791
SE 5,675 Scribona, AB, Class B................................................................. 59,570
SE 1,200 Stena Line, AB, Class B, free......................................................... 5,709
------------
257,553
------------
Switzerland 2.5%
CH 52 Sarna Kunststoff Holding, AG.......................................................... 54,901
CH 100 aSwisslog Holding, AG................................................................. 29,594
CH 120 Zehnder Holding, AG................................................................... 49,430
------------
133,925
------------
Turkey .6%
TH 98,875 bTofas Turk Otomobil Fabrikasi, AS, GDR............................................... 33,618
------------
United Kingdom 1.2%
GB 9,400 Lex Service, Plc. .................................................................... 54,743
GB 5,270 aMcBride, Plc. ...................................................................... 10,721
------------
65,464
------------
Total Long Term Investments (Cost $2,164,464)................................... 2,263,279
------------
Face
Amount
fShort Term Investments 18.1%
US $1,000,000 U.S. Treasury Bills, 5.12%, 09/19/96 (Cost $988,480).................................. 988,760
------------
Total Investments before Repurchase Agreements (Cost $3,152,944)................ 3,252,039
------------
gReceivables from Repurchase Agreements 43.4%
US $ 828,660 BA Securities, Inc., 5.40%, 07/01/96, (Maturity Value $800,360)
Collateral: U.S. Treasury Bills, 09/26/96 ........................................... $ 800,000
US 786,907 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $768,342)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01 .................................... 768,000
US 817,590 Smith Barney, Inc., 5.27%, 07/01/96, (Maturity Value $800,351)
Collateral: U.S. Treasury Notes, 6.875%, 10/31/96 ................................... 800,000
------------
Total Receivables from Repurchase Agreements (Cost $2,368,000).................. 2,368,000
------------
Total Investments (Cost $5,520,944) 102.9%................................. 5,620,039
Liabilities in Excess of Other Assets (2.9)% .............................. (157,938)
------------
Net Assets 100.0% ........................................................ $5,462,101
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $5,520,944 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ....................................................... $ 126,934
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ....................................................... (27,839)
------------
Net unrealized appreciation ........................................................ $ 99,095
============
</TABLE>
CURRENCY LEGEND:
AR - Argentina
AT - Austria
CA - Canada
CH - Switzerland
CN - China
DD - Germany
DK - Denmark
ES - Spain
FR - France
GB - United Kingdom
HK - Hong Kong
ID - Indonesia
IT - Italy
NL - Netherlands
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
fCertain short-term securities are traded on a discount basis; the rates shown
are the discount rate at the time of purchase by the Fund. Other securities bear
interest at the rates shown, payable at fixed dates or upon maturity.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements
Statements of Assets and Liabilities
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Templeton Investment Grade
Adjustable U.S. Global Income High Intermediate Precious
Government Fund Securities Fund Income Fund Bond Fund Metals Fund
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost.............................. $186,098,338 $211,454,138 $336,198,296 $125,576,693 $105,596,112
=========== ========== ========== ========== ==========
At value........................................ 185,421,610 210,433,794 337,293,936 125,600,576 114,924,117
Receivables from repurchase agreements,
at value and cost.............................. 6,852,696 7,455,000 27,371,663 33,528,713 7,416,580
Cash........................................... -- 462 271,855 648,448 --
Foreign currencies (Cost $247)................. -- 247 -- -- --
Receivables:
Dividends and interest.......................... 1,755,955 5,562,872 7,022,109 1,594,207 187,831
Investment securities sold...................... 438,418 -- -- -- 1,360,019
Capital shares sold............................. 1,442 20,624 -- -- 24,228
----------- ---------- ---------- ---------- ----------
Total assets.................................... 194,470,121 223,472,999 371,959,563 161,371,944 123,912,775
----------- ---------- ---------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................... -- -- 4,807,365 -- --
When-issued basis (Note 1)..................... 20,059,653 -- -- -- --
Capital shares repurchased...................... 339,406 35,306 -- -- 1,724,546
Management fees................................. 81,874 99,857 154,404 76,086 63,846
Accrued expenses and other liabilities......... 8,985 18,636 11,345 9,775 16,607
Unrealized loss on forward foreign currency
contracts (Note 2)............................. -- 81,229 -- -- --
----------- ---------- ---------- ---------- ----------
Total liabilities............................... 20,489,918 235,028 4,973,114 85,861 1,804,999
----------- ---------- ---------- ---------- ----------
Net assets, at value............................ $173,980,203 $223,237,971 $366,986,449 $161,286,083 $122,107,776
=========== ========== ========== ========== ==========
Net assets consist of:
Undistributed net investment income............ $ 5,728,864 $ 5,710,199 $ 16,995,921 $ 4,370,290 $ 788,752
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies.. (676,728) (1,123,123) 1,096,650 23,883 9,328,212
Undistributed net realized gain (loss) from
investments and foreign currency transactions.. (13,843,348) (7,017,017) 456,693 (629,048) 1,730,651
Capital shares................................. 182,771,415 225,667,912 348,437,185 157,520,958 110,260,161
----------- ---------- ---------- ---------- ----------
Net assets, at value............................ $173,980,203 $223,237,971 $366,986,449 $161,286,083 $122,107,776
=========== ========== ========== ========== ==========
Shares outstanding.............................. 17,015,354 17,747,988 28,448,771 12,038,869 8,182,324
=========== ========== ========== ========== ==========
Net asset value per share....................... $10.22 $12.58 $12.90 $13.40 $14.92
=========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Real Estate U.S. Government Zero Coupon Zero Coupon Zero Coupon
Securities Fund Securities Fund Fund - 2000 Fund - 2005 Fund - 2010
---------- ---------- ---------- --------- ----------
Assets:
Investments in securities:
At identified cost................................ $183,642,920 $576,245,965 $125,920,919 $74,761,492 $69,766,814
========== ========== ========== ========= ==========
At value.......................................... 215,361,867 572,640,581 131,311,210 78,890,497 74,714,151
Receivables from repurchase agreements,
at value and cost................................ 17,504,215 10,331,334 -- 342,052 1,964,705
Cash............................................. -- 380 95,271 92,441 726,533
Receivables:
Dividends and interest............................ 1,640,017 4,066,511 14 -- --
Investment securities sold........................ -- 66,189 -- -- --
Capital shares sold............................... 48,738 139,581 43,430 -- --
---------- ---------- ---------- --------- ----------
Total assets...................................... 234,554,837 587,244,576 131,449,925 79,324,990 77,405,389
---------- ---------- ---------- --------- ----------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1)....................... 405,600 -- -- -- --
Capital shares repurchased........................ 113,996 1,246,664 332,082 -- --
Management fees................................... 105,066 235,187 39,778 23,836 15,186
Accrued expenses and other liabilities........... 16,153 42,078 5,305 4,663 40,246
---------- ---------- ---------- --------- ----------
Total liabilities................................. 640,815 1,523,929 377,165 28,499 55,432
---------- ---------- ---------- --------- ----------
Net assets, at value.............................. $233,914,022 $585,720,647 $131,072,760 $79,296,491 $77,349,957
========== ========== ========== ========= ==========
Net assets consist of:
Undistributed net investment income.............. $ 4,931,182 $ 20,284,371 $ 4,012,250 $ 2,397,428 $ 2,365,319
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies.... 31,718,947 (3,605,384) 5,390,291 4,129,005 4,947,337
Undistributed net realized gain (loss) from
investments and foreign currency transactions... 401,968 (15,874,865) 19,385 (6,924) (112,389)
Capital shares................................... 196,861,925 584,916,525 121,650,834 72,776,982 70,149,690
---------- ---------- ---------- --------- ----------
Net assets, at value.............................. $233,914,022 $585,720,647 $131,072,760 $79,296,491 $77,349,957
========== ========== ========== ========= ==========
Shares outstanding................................ 13,067,390 45,724,527 9,025,164 5,169,145 5,170,715
========== ========== ========== ========= ==========
Net asset value per share......................... $17.90 $12.81 $14.52 $15.34 $14.96
========== ========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton Templeton
Money Growth and Income International Pacific
Market Fund Income Fund Securities Fund Equity Fund Growth Fund
--------- --------- ------------ ----------- ----------
Assets:
Investments in securities:
At identified cost............................ $375,039,414 $815,964,222 $1,203,674,923 $ 769,452,857 $334,161,143
========= ========= ============ =========== ==========
At value...................................... 375,039,414 929,390,532 1,255,379,463 853,816,627 379,691,664
Receivables from repurchase agreements,
at value and cost............................ 57,200,000 55,900,396 43,688,098 146,904,000 9,711,000
Cash......................................... 4,240 527,988 -- 4,422 226
Receivables:
Dividends and interest........................ 878,046 3,448,648 19,491,780 5,968,113 1,381,333
Investment securities sold.................... -- 5,196,414 953,028 142,319 --
Capital shares sold........................... 662,642 -- -- 898,871 443,731
From affiliates............................... 17,736 -- -- -- --
Prepaid expenses............................. 6,373 -- -- -- --
--------- --------- ------------ ----------- ----------
Total assets.................................. 433,808,451 994,463,978 1,319,512,369 1,007,734,352 391,227,954
--------- --------- ------------ ----------- ----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................. -- 908,700 6,194,941 2,450,798 1,315
When-issued basis (Note 1)................... -- -- 739,115 -- --
Capital shares repurchased.................... 4,440,525 -- 969,136 -- --
Management fees............................... 137,337 378,322 493,964 -- 278,991
Accrued expenses and other liabilities....... -- 42,245 65,511 996,275 102,520
--------- --------- ------------ ----------- ----------
Total liabilities............................. 4,577,862 1,329,267 8,462,667 3,447,073 382,826
--------- --------- ------------ ----------- ----------
Net assets, at value.......................... $429,230,589 $993,134,711 $1,311,049,702 $1,004,287,279 $390,845,128
========= ========= ============ =========== ==========
Net assets consist of:
Undistributed net investment income.......... $-- $ 19,325,567 $ 47,258,926 $ 19,559,661 $--
Accumulated distributions in excess of
net investment income........................ -- -- -- -- (431,923)
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies............ -- 113,426,310 51,705,376 84,363,770 45,530,521
Undistributed net realized gain (loss)
from investments and foreign
currency transactions........................ -- 17,159,627 10,613,204 11,714,108 (4,238,361)
Capital shares............................... 429,230,589 843,223,207 1,201,472,196 888,649,740 349,984,891
--------- --------- ------------ ----------- ----------
Net assets, at value.......................... $429,230,589 $993,134,711 $1,311,049,702 $1,004,287,279 $390,845,128
========= ========= ============ =========== ==========
Shares outstanding............................ $429,230,589 61,226,096 81,475,748 71,173,798 26,236,248
========= ========= ============ =========== ==========
Net asset value per share..................... $1.00 $16.22 $16.09 $14.11 $14.90
========= ========= ============ =========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton
Developing Templeton
Rising Utility Markets Global
Dividends Fund Equity Fund Equity Fund Growth Fund
---------- ----------- ---------- ----------
Assets:
Investments in securities:
At identified cost............................................ $343,283,118 $1,213,133,094 $238,224,929 $364,644,293
========== =========== ========== ==========
At value...................................................... 449,681,048 1,315,480,122 250,961,248 417,736,030
Receivables from repurchase agreements, at value and cost.... 54,657,235 4,645,079 -- 68,320,000
Cash......................................................... -- 676,256 25,817 116,962
Foreign currencies (Cost $159,280)........................... -- -- 159,280 --
Receivables:
Dividends and interest........................................ 1,079,315 4,241,583 965,677 1,597,260
Investment securities sold.................................... 504,000 2,316,705 30,857 --
Capital shares sold........................................... 119,836 -- 383,627 569,551
---------- ----------- ---------- ----------
Total assets.................................................. 506,041,434 1,327,359,745 252,526,506 488,339,803
---------- ----------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased............................... 26,220 -- 239,777 9,936,080
Capital shares repurchased.................................... 324,706 -- -- --
Management fees............................................... 314,076 494,242 252,916 333,329
Accrued expenses and other liabilities....................... 16,737 37,748 100,273 87,434
---------- ----------- ---------- ----------
Total liabilities............................................. 681,739 531,990 592,966 10,356,843
---------- ----------- ---------- ----------
Net assets, at value.......................................... $505,359,695 $1,326,827,755 $251,933,540 $477,982,960
========== =========== ========== ==========
Net assets consist of:
Undistributed net investment income.......................... $ 5,025,117 $ 29,934,329 $ 2,931,786 $ 4,132,517
Net unrealized appreciation on investments
and translation of assets and liabilities denominated
in foreign currencies........................................ 106,397,930 102,346,510 12,736,319 53,091,737
Undistributed net realized gain (loss) from investments
and foreign currency transactions............................ (14,609,194) 21,881,440 1,402,424 (3,642,714)
Capital shares............................................... 408,545,842 1,172,665,476 234,863,011 424,401,420
---------- ----------- ---------- ----------
Net assets, at value.......................................... $505,359,695 $1,326,827,755 $251,933,540 $477,982,960
========== =========== ========== ==========
Shares outstanding............................................ 38,005,837 74,845,398 22,802,874 37,912,576
========== =========== ========== ==========
Net asset value per share..................................... $13.30 $17.73 $11.05 $12.61
========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton
Templeton International
Global Asset Small Capital Smaller
Allocation Fund Cap Fund Growth Fund Companies Fund
--------- ---------- -------- -----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost................................................. $27,675,297 $ 90,561,640 $4,101,739 $3,152,944
========= ========== ======== ===========
At value........................................................... 29,115,425 93,202,863 4,088,569 3,252,039
Receivables from repurchase agreements, at value and cost......... 5,898,000 1,845,563 271,360 2,368,000
Cash.............................................................. 189,354 1,433,722 751,374 --
Receivables:
Dividends and interest............................................. 266,800 92,857 2,913 9,464
Investment securities sold......................................... -- 4,172,475 -- --
Capital shares sold................................................ 149,862 -- -- 37,161
--------- ---------- -------- -----------
Total assets....................................................... 35,619,441 100,747,480 5,114,216 5,666,664
--------- ---------- -------- -----------
Liabilities:
Payables:
Investment securities purchased.................................... 592,177 619,708 127,134 114,339
Management fees.................................................... 17,964 66,992 2,449 --
Accrued expenses and other liabilities............................ 21,846 306 1,843 5,032
Unrealized loss on forward foreign currency contracts (Note 2).... 414 -- -- --
Bank overdraft.................................................... -- -- -- 1,152
Foreign currency overdraft, at value and cost..................... -- -- -- 84,040
--------- ---------- -------- -----------
Total liabilities.................................................. 632,401 687,006 131,426 204,563
--------- ---------- -------- -----------
Net assets, at value............................................... $34,987,040 $100,060,474 $4,982,790 $5,462,101
========= ========== ======== ===========
Net assets consist of:
Undistributed net investment income............................... $532,431 $225,075 $5,579 $24,325
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies............................................. 1,439,346 2,641,223 (13,170) 99,095
Undistributed net realized gain (loss) from investments
and foreign currency transactions................................. 64,865 3,150,229 -- (2,662)
Capital shares.................................................... 32,950,398 94,043,947 4,990,381 5,341,343
--------- ---------- -------- -----------
Net assets, at value............................................... $34,987,040 $100,060,474 $4,982,790 $5,462,101
========= ========== ======== ===========
Shares outstanding................................................. 3,078,439 8,237,812 489,535 528,897
========= ========== ======== ===========
Net asset value per share.......................................... $11.37 $12.15 $10.18 $10.33
========= ========== ======== ===========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations
for the six months ended June 30, 1996 (unaudited)
Adjustable U.S. Templeton Investment Grade
Government Global Income High Intermediate Precious Real Estate
Fund Securities Fund Income Fund Bond Fund Metals Fund Securities Fund
------------- ------------ ------------- --------------- ------------ -------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest1 (Note 1).................... $6,269,587 $9,157,921 $17,381,075 $4,865,176 $ 424,852 $ 499,132
Dividends............................. -- -- 594,966 -- 790,572 5,087,196
------------- ------------ ------------- --------------- ------------ -------------
Total income........................... 6,269,587 9,157,921 17,976,041 4,865,176 1,215,424 5,586,328
------------- ------------ ------------- --------------- ------------ -------------
Expenses:
Management fees (Note 6).............. 515,424 637,086 936,441 470,692 395,223 617,918
Reports to shareholders............... 14,283 17,000 19,290 10,901 8,085 12,734
Custodian fees........................ 1,923 31,750 13,628 4,122 16,062 5,849
Professional fees..................... 4,067 3,600 5,364 3,582 2,512 4,076
Trustees' fees and expenses........... 722 1,050 1,372 694 638 895
Other................................. 3,848 633 4,957 4,686 4,110 12,207
------------- ------------ ------------- --------------- ------------ -------------
Total expenses......................... 540,267 691,119 981,052 494,677 426,630 653,679
------------- ------------ ------------- --------------- ------------ -------------
Net investment income................. 5,729,320 8,466,802 16,994,989 4,370,499 788,794 4,932,649
------------- ------------ ------------- --------------- ------------ -------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments........................... (966,844) (1,282,676) 460,869 (202,994) 1,760,003 836,912
Foreign currency transactions......... -- (56,009) (1,127) -- (29,352) --
Net unrealized appreciation (depreciation) on:
Investments............................ 323,295 (4,365,517) (3,846,126) (2,984,999) 4,990,330 9,633,065
Translation of assets and liabilities
denominated in foreign currencies..... -- (108,014) 2,858 -- 417 --
------------- ------------ ------------- --------------- ------------ -------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................... (643,549) (5,812,216) (3,383,526) (3,187,993) 6,721,398 10,469,977
------------- ------------ ------------- --------------- ------------ -------------
Net increase in net assets resulting
from operations....................... $5,085,771 $2,654,586 $13,611,463 $1,182,506 $7,510,192 $15,402,626
============= ============ ============= =============== ============ =============
1Net of foreign taxes withheld of $82,507 in the Templeton Global Income
Securities Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
U.S. Government Zero Coupon Zero Coupon Zero Coupon Money Growth and
Securities Fund Fund - 2000 Fund - 2005 Fund - 2010 Market Fund Income Fund
--------------- ------------- ------------ -------------- ------------- ------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest (Note 1)................... $21,942,180 $4,277,963 $2,555,448 $ 2,518,841 $11,712,537 $ 1,942,218
Dividends2.......................... -- -- -- -- -- 19,703,938
--------------- ------------- ------------ -------------- ------------- ------------
Total income......................... 21,942,180 4,277,963 2,555,448 2,518,841 11,712,537 21,646,156
--------------- ------------- ------------ -------------- ------------- ------------
Expenses:
Management fees (Note 6)............ 1,494,980 369,885 247,257 240,468 1,100,542 2,210,098
Reports to shareholders............. 38,605 7,425 4,967 4,502 45,604 47,546
Custodian fees...................... 15,407 3,224 3,061 1,779 16,870 18,229
Professional fees................... 8,053 2,450 1,820 1,520 10,981 12,749
Trustees' fees and expenses......... 2,414 533 303 285 2,727 3,055
Other............................... 31,675 1,694 1,646 1,464 -- 42,637
Management fees waived by
manager (Note 6).................... -- (119,225) (101,435) (96,544) (268,707) --
--------------- ------------- ------------ -------------- ------------- ------------
Total expenses....................... 1,591,134 265,986 157,619 153,474 908,017 2,334,314
--------------- ------------- ------------ -------------- ------------- ------------
Net investment income............... 20,351,046 4,011,977 2,397,829 2,365,367 10,804,520 19,311,842
--------------- ------------- ------------ -------------- ------------- ------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments......................... (165,616) 19,680 -- 76,009 -- 17,308,153
Foreign currency transactions....... -- -- -- -- -- 7,947
Net unrealized appreciation (depreciation) on:
Investments.......................... (29,588,904) (6,905,014) (7,912,643) (11,390,023) -- 13,395,811
--------------- ------------- ------------ -------------- ------------- ------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................. (29,754,520) (6,885,334) (7,912,643) (11,314,014) -- 30,711,911
--------------- ------------- ------------ -------------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations........... $ (9,403,474) $(2,873,357) $(5,514,814) $ (8,948,647) $10,804,520 $50,023,753
=============== ============= ============ ============== ============= ============
2Net of foreign taxes and fees withheld of $426,563 for the Growth and Income Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
Templeton
Income Templeton Templeton Rising Developing
Securities International Pacific Dividends Utility Markets
Fund Equity Fund Growth Fund Fund Equity Fund Equity Fund
------------- -------------- ------------- ------------ ------------- -------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest (Note 1)................... $37,842,015 $ 5,760,211 $ 429,908 $ 1,463,710 $ 1,104,841 $ 711,306
Dividends3.......................... 15,134,941 20,045,205 4,574,674 5,431,833 32,015,299 3,815,049
------------- -------------- ------------- ------------ ------------- -------------
Total income......................... 52,976,956 25,805,416 5,004,582 6,895,543 33,120,140 4,526,355
------------- -------------- ------------- ------------ ------------- -------------
Expenses:
Management fees (Note 6)............ 3,008,518 3,766,436 1,668,116 1,810,335 3,161,268 1,317,027
Reports to shareholders............. 72,784 87,650 30,500 25,998 83,560 4,000
Custodian fees...................... 87,940 335,000 126,500 11,868 45,837 172,000
Professional fees................... 17,281 10,200 6,100 6,015 18,467 2,000
Trustees' fees and expenses......... 4,913 4,750 1,800 1,736 5,553 --
Other............................... 15,521 45,180 13,814 12,920 19,069 1,739
------------- -------------- ------------- ------------ ------------- -------------
Total expenses....................... 3,206,957 4,249,216 1,846,830 1,868,872 3,333,754 1,496,766
------------- -------------- ------------- ------------ ------------- -------------
Net investment income............... 49,769,999 21,556,200 3,157,752 5,026,671 29,786,386 3,029,589
------------- -------------- ------------- ------------ ------------- -------------
Realized and unrealized gain
(loss) from investments and
foreign currency:
Net realized gain (loss) from:
Investments......................... 10,957,132 12,098,187 (3,558,769) 203,185 29,593,403 1,829,137
Foreign currency transactions....... (340,048) (255,705) (10,078) -- (43,501) (171,960)
Net unrealized appreciation (depreciation) on:
Investments.......................... (9,127,495) 72,678,896 42,072,054 27,984,801 (4,177,801) 22,481,561
Translation of assets and
liabilities denominated in
foreign currencies.................. 50,443 -- -- -- (1,069) 48,919
------------- -------------- ------------- ------------ ------------- -------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................. 1,540,032 84,521,378 38,503,207 28,187,986 25,371,032 24,187,657
------------- -------------- ------------- ------------ ------------- -------------
Net increase in net assets
resulting from operations........... $51,310,031 $106,077,578 $41,660,959 $33,214,657 $55,157,418 $27,217,246
============= ============== ============= ============ ============= =============
3Net of foreign taxes and fees withheld of $77,609, $338,257, and $237,059 in
the Income Securities Fund, Templeton Pacific Growth Fund, and Templeton
Developing Markets Equity Fund, respectively.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
Templeton
Templeton Templeton International
Global Global Asset Small Capital Smaller
Growth Fund Allocation Fund Cap Fund Growth Fund* Companies Fund*
------------- -------------- ----------- ------------ ----------------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)................................... $ 1,590,049 $ 425,369 $ 330,028 $ 6,003 $ 17,615
Dividends4.......................................... 5,970,832 245,088 105,086 3,876 12,036
------------- -------------- ----------- ------------ ----------------
Total income......................................... 7,560,881 670,457 435,114 9,879 29,651
------------- -------------- ----------- ------------ ----------------
Expenses:
Management fees (Note 6)............................ 1,787,343 95,790 201,695 2,449 4,763
Reports to shareholders............................. 5,000 4,300 1,128 573 65
Custodian fees...................................... 85,440 10,727 540 328 200
Professional fees................................... 6,000 3,000 4,804 556 150
Trustees' fees and expenses......................... 500 125 62 65 50
Other............................................... 3,991 3,199 1,383 329 98
------------- -------------- ----------- ------------ ----------------
Total expenses....................................... 1,888,274 117,141 209,612 4,300 5,326
------------- -------------- ----------- ------------ ----------------
Net investment income............................... 5,672,607 553,316 225,502 5,579 24,325
------------- -------------- ----------- ------------ ----------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments......................................... (3,981,410) 83,561 3,150,203 -- (2,662)
Foreign currency transactions....................... (8,527) (13,048) -- -- --
Net unrealized appreciation (depreciation) from:
Investments......................................... 38,274,436 1,057,542 2,479,402 (13,170) 99,095
Translation of assets and liabilities denominated
in foreign currencies............................... -- (357) -- -- --
------------- -------------- ----------- ------------ ----------------
Net realized and unrealized gain (loss) from
investments and foreign currencies.................. 34,284,499 1,127,698 5,629,605 (13,170) 96,433
------------- -------------- ----------- ------------ ----------------
Net increase (decrease) in net assets resulting
from operations..................................... $39,957,106 $1,681,014 $5,855,107 $ (7,591) $120,758
============= ============== =========== ============ ================
4Net of foreign taxes withheld of $484,303 and $24,652 in the Templeton Global
Growth Fund and Global Asset Allocation Fund, respectively.
*May 1, 1996 (effective date) to June 30, 1996
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended June 30, 1996
(unaudited) and the year ended December 31, 1995
Adjustable U.S. Templeton Global
Government Fund Income Securities Fund High Income Fund
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 5,729,320 $ 13,331,187 $ 8,466,802 $ 18,687,112 $ 16,994,989 $ 31,021,484
Net realized gain (loss) from
investments and foreign
currency transactions ............ (966,844) (1,954,776) (1,338,685) (7,995,904) 459,742 1,770,719
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................ 323,295 7,421,084 (4,473,531) 22,864,210 (3,843,268) 22,884,579
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 5,085,771 18,797,495 2,654,586 33,555,418 13,611,463 55,676,782
Distributions to shareholders from:
Undistributed net
investment income................. (13,329,910) (13,455,726) (17,028,466) (9,275,583) (31,018,152) (21,305,944)
Net realized capital gains........ -- -- -- -- (1,646,547) --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... (7,875,255) (54,937,609) (5,582,233) (35,396,559) 25,136,139 71,496,259
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets..................... (16,119,394) (49,595,840) (19,956,113) (11,116,724) 6,082,903 105,867,097
Net assets:
Beginning of period............... 190,099,597 239,695,437 243,194,084 254,310,808 360,903,546 255,036,449
---------- ---------- ---------- ---------- ---------- ----------
End of period..................... $173,980,203 $190,099,597 $223,237,971 $243,194,084 $366,986,449 $360,903,546
========== ========== ========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 13,329,454 $ 13,453,993 $ 14,271,863 $ 20,717,930 $ 31,020,827 $ 21,367,505
========== ========== ========== ========== ========== ==========
End of period...................... $ 5,728,864 $ 13,329,454 $ 5,710,199 $ 14,271,863 $ 16,995,921 $ 31,020,827
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Investment Grade Real Estate
Intermediate Bond Fund Precious Metals Fund Securities Fund
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 4,370,499 $ 8,616,354 $ 788,794 $ 1,615,339 $ 4,932,649 $ 9,336,142
Net realized gain (loss) from
investments and foreign
currency transactions............. (202,994) 656,832 1,730,651 1,438,861 836,912 1,068,152
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................ (2,984,999) 6,077,509 4,990,747 (1,361,730) 9,633,065 21,851,218
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 1,182,506 15,350,695 7,510,192 1,692,470 15,402,626 32,255,512
Distributions to shareholders from:
Undistributed net
investment income................. (8,616,357) (6,603,637) (1,593,438) (1,664,388) (9,336,429) (6,411,953)
Net realized capital gains........ -- -- (1,460,667) (1,232,041) -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... 2,816,940 2,257,200 12,542,875 (18,765,586) 14,374,474 (8,066,883)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets........................ (4,616,911) 11,004,258 16,998,962 (19,969,545) 20,440,671 17,776,676
Net assets:
Beginning of period............... 165,902,994 154,898,736 105,108,814 125,078,359 213,473,351 195,696,675
---------- ---------- ---------- ---------- ---------- ----------
End of period..................... $161,286,083 $165,902,994 $122,107,776 $105,108,814 $233,914,022 $213,473,351
========== ========== ========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 8,616,148 $ 6,603,431 $ 1,615,202 $ 1,682,044 $ 9,334,962 $ 6,410,773
========== ========== ========== ========== ========== ==========
End of period...................... $ 4,370,290 $ 8,616,148 $ 788,752 $ 1,615,202 $ 4,931,182 $ 9,334,962
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
U.S. Government
Securities Fund Zero Coupon Fund - 2000 Zero Coupon Fund - 2005
---------------------- ---------------------- --------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............... $ 20,351,046 $ 41,653,906 $ 4,011,977 $ 7,341,344 $ 2,397,829 $ 4,217,941
Net realized gain (loss) from
investments and foreign
currency transactions............... (165,616) (891,143) 19,680 72,202 -- 27,440
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies.................. (29,588,904) 68,885,320 (6,905,014) 14,631,144 (7,912,643) 14,450,466
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets resulting
from operations..................... (9,403,474) 109,648,083 (2,873,357) 22,044,690 (5,514,814) 18,695,847
Distributions to shareholders from:
Undistributed net
investment income................... (41,654,771) (43,440,615) (7,341,063) (5,282,540) (4,218,190) (2,941,626)
Net realized capital gains.......... -- -- (72,481) -- -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3)............................ (6,386,579) (2,081,082) 4,002,940 26,364,407 5,807,792 15,968,605
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets....................... (57,444,824) 64,126,386 (6,283,961) 43,126,557 (3,925,212) 31,722,826
Net assets:
Beginning of period................. 643,165,471 579,039,085 137,356,721 94,230,164 83,221,703 51,498,877
---------- ---------- ---------- ---------- --------- ---------
End of period....................... $585,720,647 $643,165,471 $131,072,760 $137,356,721 $79,296,491 $83,221,703
========== ========== ========== ========== ========= =========
Undistributed net investment
income included in net assets:
Beginning of period.................. $ 41,588,096 $ 43,374,805 $ 7,341,344 $ 5,282,540 $ 4,217,789 $ 2,941,474
========== ========== ========== ========== ========= =========
End of period........................ $ 20,284,371 $ 41,588,096 $ 4,012,250 $ 7,341,344 $ 2,397,428 $ 4,217,789
========== ========== ========== ========== ========= =========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Zero Coupon Fund - 2010 Money Market Fund Growth and Income Fund
-------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
--------- --------- ---------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.............. $ 2,365,367 $ 4,092,137 $ 10,804,520 $ 25,363,309 $ 19,311,842 $ 22,234,234
Net realized gain from
investments and foreign
currency transactions.............. 76,009 1,268,380 -- 289 17,316,100 79,239,315
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................. (11,390,023) 17,390,706 -- -- 13,395,811 91,264,881
--------- --------- ---------- ----------- ---------- ----------
Net increase (decrease)
in net assets resulting
from operations.................... (8,948,647) 22,751,223 10,804,520 25,363,598 50,023,753 192,738,430
Distributions to shareholders from:
Undistributed net
investment income.................. (4,092,016) (2,074,389) (10,804,520) (25,363,598)+ (22,225,405) (8,012,262)
Net realized capital gains......... (1,109,315) -- -- -- (78,719,995) (17,435,234)
Increase (decrease) in net assets
from capital share transactions
(Note 3)........................... 5,867,143 19,594,876 (316,264) (89,071,533) 154,568,890 204,319,488
--------- --------- ---------- ----------- ---------- ----------
Net increase (decrease)
in net assets...................... (8,282,835) 40,271,710 (316,264) (89,071,533) 103,647,243 371,610,422
Net assets:
Beginning of period................ 85,632,792 45,361,082 429,546,853 518,618,386 889,487,468 517,877,046
--------- --------- ---------- ----------- ---------- ----------
End of period...................... $77,349,957 $85,632,792 $429,230,589 $429,546,853 $993,134,711 $889,487,468
========= ========= ========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................. $ 4,091,968 $ 2,074,248 $-- $-- $ 22,239,184 $ 8,017,077
========= ========= ========== =========== ========== ==========
End of period....................... $ 2,365,319 $ 4,091,968 $-- $-- $ 19,325,567 $ 22,239,184
========= ========= ========== =========== ========== ==========
+Distributions were increased by a net realized gain from security transactions of $289.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Templeton
Income Securities Fund International Equity Fund Pacific Growth Fund
------------------------ ----------------------- ----------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income........ $ 49,769,999 $ 91,009,891 $ 21,556,200 $ 23,458,911 $ 3,157,752 $ 7,241,924
Net realized gain (loss) from
investments and foreign
currency transactions........ 10,617,084 (15,464,708) 11,842,482 30,984,955 (3,568,847) 6,009,137
Net unrealized appreciation
(depreciation) on
investments and translation
of assets and liabilities
denominated in foreign
currencies................... (9,077,052) 152,006,805 72,678,896 26,564,752 42,072,054 12,826,175
----------- ----------- ----------- ---------- ---------- ----------
Net increase in
net assets resulting
from operations.............. 51,310,031 227,551,988 106,077,578 81,008,618 41,660,959 26,077,236
Distributions to shareholders
from:
Undistributed net
investment income............ (66,923,858) (63,454,170) (25,386,301) (13,634,404) (10,559,889) (6,625,094)
In excess of net investment
income....................... (431,923)
Net realized capital gains.. (11,129,687) (5,103,693) (31,064,816) (16,891,097) (6,370,263) (2,753,036)
Increase (decrease) in net
assets from capital share
transactions (Note 3)........ 71,255,714 107,540,999 104,544,196 14,509,031 34,610,363 (60,595,295)
----------- ----------- ----------- ---------- ---------- ----------
Net increase (decrease)
in net assets................ 44,512,200 266,535,124 154,170,657 64,992,148 58,909,247 (43,896,189)
Net assets:
Beginning of period.......... 1,266,537,502 1,000,002,378 850,116,622 785,124,474 331,935,881 375,832,070
----------- ----------- ----------- ---------- ---------- ----------
End of period................ $1,311,049,702 $1,266,537,502 $1,004,287,279 $850,116,622 $390,845,128 $331,935,881
=========== =========== =========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period........... $ 91,003,300 $ 67,603,145 $ 23,389,762 $ 13,466,616 $ 7,402,137 $ 6,796,802
=========== =========== =========== ========== ========== ==========
End of period................. $ 47,258,926 $ 91,003,300 $ 19,559,661 $ 23,389,762 $ (431,923) $ 7,402,137
=========== =========== =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Developing
Rising Dividends Fund Utility Equity Fund Markets Equity Fund
--------------------- ------------------------ ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......... $ 5,026,671 $ 10,367,695 $ 29,786,386 $ 65,692,968 $ 3,029,589 $ 2,632,898
Net realized gain from
investments and foreign
currency transactions.......... 203,185 251,515 29,549,902 2,816,631 1,657,177 3,236,155
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated
in foreign currencies.......... 27,984,801 88,320,864 (4,178,870) 282,539,662 22,530,480 (2,382,349)
---------- ---------- ----------- ----------- ---------- ----------
Net increase in
net assets resulting
from operations................ 33,214,657 98,940,074 55,157,418 351,049,261 27,217,246 3,486,704
Distributions to shareholders from:
Undistributed net
investment income.............. (10,368,611) (8,063,908) (65,540,030) (70,961,297) (2,182,460) (489,978)
Net realized capital gains..... -- -- -- -- (4,037,551) (115,132)
Increase (decrease) in net
assets from capital share
transactions (Note 3).......... 19,260,372 62,448,084 (86,235,833) (11,752,253) 72,852,463 57,013,367
---------- ---------- ----------- ----------- ---------- ----------
Net increase (decrease)
in net assets.................. 42,106,418 153,324,250 (96,618,445) 268,335,711 93,849,698 59,894,961
Net assets:
Beginning of period............ 463,253,277 309,929,027 1,423,446,200 1,155,110,489 158,083,842 98,188,881
---------- ---------- ----------- ----------- ---------- ----------
End of period.................. $505,359,695 $463,253,277 $1,326,827,755 $1,423,446,200 $251,933,540 $158,083,842
========== ========== =========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period............. $ 10,367,057 $ 8,063,270 $ 65,687,973 $ 70,953,514 $ 2,084,657 $ 758,368
========== ========== =========== =========== ========== ==========
End of period................... $ 5,025,117 $ 10,367,057 $ 29,934,329 $ 65,687,973 $ 2,931,786 $ 2,084,657
========== ========== =========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Global Templeton Global
Growth Fund Asset Allocation Fund
---------------------- ---------------------
1996 1995 1996 1995**
---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income........................................... $ 5,672,607 $ 6,108,912 $ 553,316 $ 251,964
Net realized gain (loss) from investments and foreign
currency transactions .......................................... (3,989,937) 7,733,119 70,513 11,985
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies........ 38,274,436 15,482,583 1,057,185 382,161
---------- ---------- --------- ---------
Net increase in net assets resulting from operations............. 39,957,106 29,324,614 1,681,014 646,110
Distributions to shareholders from:
Undistributed net investment income............................. (7,356,653) (1,324,712) (14,807) (246,062)
Net realized capital gains...................................... (7,356,653) -- (29,613) --
Increase in net assets from capital share transactions (Note 3).. 113,984,043 151,899,127 18,621,743 13,828,655
---------- ---------- --------- ---------
Net increase in net assets....................................... 139,227,843 179,899,029 20,258,337 14,228,703
Net assets:
Beginning of period............................................. 338,755,117 158,856,088 14,728,703 500,000
---------- ---------- --------- ---------
End of period................................................... $477,982,960 $338,755,117 $34,987,040 $14,728,703
========== ========== ========= =========
Undistributed net investment income included in net assets:
Beginning of period............................................. $ 5,816,563 $ 1,454,896 $ (6,078) $--
========== ========== ========= =========
End of period................................................... $ 4,132,517 $ 5,816,563 $ 532,431 $ (6,078)
========== ========== ========= =========
**April 19, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton
International
Capital Smaller
Small Cap Fund Growth Fund Companies Fund
--------------------- -------- -----------
1996 1995*** 1996* 1996*
---------- --------- -------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income............................................ $ 225,502 $ 33,213 $ 5,579 $ 24,325
Net realized gain (loss) from investments and foreign
currency transactions ........................................... 3,150,203 2,754 -- (2,662)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies............................................ 2,479,402 161,821 (13,170) 99,095
---------- --------- -------- -----------
Net increase (decrease) in net assets resulting
from operations ................................................. 5,855,107 197,788 (7,591) 120,758
Distributions to shareholders from:
Undistributed net investment income.............................. (33,640) -- -- --
Net realized capital gains....................................... (2,728) -- -- --
Increase in net assets from capital share transactions (Note 3)... 80,940,257 12,853,690 4,990,381 5,341,343
---------- --------- -------- -----------
Net increase in net assets........................................ 86,758,996 13,051,478 4,982,790 5,462,101
Net assets:
Beginning of period.............................................. 13,301,478 250,000 -- --
---------- --------- -------- -----------
End of period.................................................... $100,060,474 $13,301,478 $4,982,790 $5,462,101
========== ========= ======== ===========
Undistributed net investment income included in net assets:
Beginning of period.............................................. $ 33,213 $-- $-- $--
========== ========= ======== ===========
End of period.................................................... $ 225,075 $ 33,213 $ 5,579 $ 24,325
========== ========= ======== ===========
</TABLE>
*May 1, 1996 (effective date) to June 30, 1996.
***November 1, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Valuemark Funds (the Trust) is an open-end management investment
company (mutual fund) registered under the Investment Company Act of 1940, as
amended. The Trust currently consists of twenty-three separate funds (the
Funds), all of which are diversified except for the Templeton Global Income
Securities Fund. 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.
The investment objectives of each Fund are as follows:
Capital Growth
Precious Metals Fund
Templeton Developing Markets
Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton Pacific Growth Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Growth and Income
Growth and Income Fund
Income Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
Current Income
Adjustable U.S. Government Fund
Templeton Global Income Securities Fund
High Income Fund
Investment Grade Intermediate Bond Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Capital Preservation and Income
Money Market Fund
The Capital Growth Fund and the Templeton International Smaller Companies Fund
became effective on May 1, 1996.
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 price, 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 of Trustees
(the Board). Securities for which market quotations are not available, and
securities restricted as to resale, 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. 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 and will, therefore, not be reflected in the computation
of the Fund's net asset value, unless material. 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.
Portfolio securities in the Money Market Fund are valued at amortized cost,
which approximates value. The 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 trustees have 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
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.
Original issue discount is 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
distribution is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and any changes in unrealized
portfolio appreciation or depreciation.
For the Money Market Fund, distributions are normally declared 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 preceding day. Such distributions are declared and
reinvested daily in additional shares of the Fund at net asset value.
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 tax basis mark to market of unrealized gains with respect to passive
foreign investment company (PFIC) shares, differing treatments of foreign
currency transactions and defaulted securities - see Note 7.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to tax basis mark to market of unrealized gains with
respect to passive foreign investment company (PFIC) shares, differing treatment
of wash sale and foreign currency transactions.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
f. 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.
g. 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 fluctuations 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
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 Funds' 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 arise
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.
h. Repurchase Agreements:
The Funds may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System. A repurchase agreement is accounted for as a loan by the
Fund to the seller, collateralized by underlying U.S. government securities,
which are delivered to the Fund's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1996, all outstanding repurchase agreements held by the Funds had been
entered into on June 28, 1996.
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 Fund to the seller, collateralized by underlying U.S.
government securities, which are delivered to the Fund's custodian. The market
value, including accrued interest, of the
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
h. Repurchase Agreements: (cont.)
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At June 30, 1996, all
outstanding repurchase agreements held by the Funds, had been entered into on
June 28, 1996.
i. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may trade 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.
j. Mortgage Dollar Rolls:
The U.S. Government Securities Fund may enter into mortgage dollar rolls in
which the Fund 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 Templeton Global Income Securities Fund and Templeton 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 fund value. The 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 June 30, 1996, the Templeton Global Income Securities Fund had the
following forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
In Unrealized
Contracts to Sell (Foreign exchange currency) Exchange for Settlement Date Gain (Loss)
---------------------------- --------- ---------- -------
<S> <C> <C> <C>
394,000,000 Japanese Yen............ U.S. $ 3,612,260 07/15/96 U.S. $ 3,100
323,695,000 Japanese Yen............ 2,966,957 07/15/96 1,812
21,231,000 Deutsche Mark........... 13,948,355 07/23/96 (36,813)
10,573,000 Deutsche Mark........... 6,928,571 07/19/96 (34,372)
24,088,000 Deutsche Mark........... 15,860,934 08/01/96 (14,956)
--------- ---------- -------
U.S. $43,317,077 U.S. $(81,229)
========= =======
The Templeton Global Asset Allocation Fund had the following forward foreign
currency contracts outstanding:
In Unrealized
Contracts to Sell (Foreign exchange currency) Exchange for Settlement Date Gain (Loss)
- ---------------------------- --------- ---------- -------
<S> <C> <C> <C>
52,000 Deutsche Mark............... U.S. $ 34,076 07/19/96 U.S. $(169)
104,000 Deutsche Mark............... 68,326 07/23/96 (180)
104,000 Deutsche Mark............... 68,480 08/01/96 (65)
--------- -------
U.S. $170,882 U.S. $(414)
========= =======
3. TRUST SHARES
At June 30, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the six months ended June 30, 1996 and the year ended December 31, 1995 were as
follows:
Adjustable U.S. Templeton Global
Government Fund Income Securities Fund High Income Fund
------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Six months ended June 30, 1996
Shares sold................................. 2,425,163 $26,297,757 853,401 $11,343,371 5,714,936 $79,649,599
Shares issued in reinvestment of distributions 1,311,999 13,329,910 1,374,372 17,028,466 2,553,925
32,664,699
Shares redeemed............................. (4,387,128) (47,502,922) (2,550,831) (33,954,070) (6,241,198) (87,178,159)
-------- ---------- -------- ---------- -------- ----------
Net increase (decrease)................ (649,966) $ (7,875,255) (323,058) $ (5,582,233) 2,027,663 $25,136,139
======== ========== ======== ========== ======== ==========
Year ended December 31, 1995
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
======== ========== ======== ========== ======== ==========
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
-------- ---------- -------- --------- -------- --------- -------- ----------
Six months ended
June 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 856,663 $12,019,630 3,654,798 $60,460,047 1,530,457 $27,463,704 2,178,004 $29,950,797
Shares issued in
reinvestment of
distributions....... 647,360 8,616,357 200,532 3,054,106 521,297 9,336,429 3,298,081 41,654,771
Shares redeemed..... (1,271,344) (17,819,047) (3,140,697) (50,971,278) (1,250,944) (22,425,659) (5,696,202) (77,992,147)
-------- ---------- -------- --------- -------- --------- -------- ----------
Net increase
(decrease).......... 232,679 $ 2,816,940 714,633 $12,542,875 800,810 $14,374,474 (220,117) $ (6,386,579)
======== ========== ======== ========= ======== ========= ======== ==========
Year ended
December 31, 1995
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)
======== ========== ======== ========= ======== ========= ======== ==========
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 799,679 $12,335,361 614,698 $10,056,763 1,661,927 $27,105,481
Shares issued in reinvestment of distributions 517,344 7,413,544 282,342 4,218,190 361,958 5,201,331
Shares redeemed.............................. (1,022,008) (15,745,965) (516,320) (8,467,161) (1,600,406) (26,439,669)
-------- ---------- -------- --------- -------- ----------
Net increase ........................... 295,015 $ 4,002,940 380,720 $ 5,807,792 423,479 $ 5,867,143
======== ========== ======== ========= ======== ==========
3. TRUST SHARES (cont.)
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Year ended December 31, 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
======== ========== ======== ========= ======== ==========
Money Market Fund Growth and Income Fund Income Securities Fund
---------------------- --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
---------- ----------- -------- ---------- --------- -----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.......................... 299,789,423 $299,789,423 9,709,215 $169,556,522 7,460,586 $124,166,549
Shares issued in reinvestment
of distributions..................... 10,804,350 10,804,350 6,313,033 100,945,399 4,981,081 78,053,545
Shares redeemed...................... (310,910,037) (310,910,037) (6,694,390) (115,933,031) (7,878,933) (130,964,380)
---------- ----------- -------- ---------- --------- -----------
Net increase (decrease)......... (316,264) $ (316,264) 9,327,858 $154,568,890 4,562,734 $ 71,255,714
========== =========== ======== ========== ========= ===========
Year ended December 31, 1995
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
========== =========== ======== ========== ========= ===========
Templeton Templeton Rising
International Equity Fund Pacific Growth Fund Dividends Fund
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 5,089,140 $ 72,641,913 6,141,423 $92,160,402 4,649,806 $61,143,078
Shares issued in reinvestment of distributions 4,023,601 56,451,117 1,175,496 17,362,075 776,094 10,368,611
Shares redeemed............................. (1,739,985) (24,548,834) (4,950,771) (74,912,114) (4,008,624) (52,251,317)
-------- ---------- -------- --------- -------- ----------
Net increase........................... 7,372,756 $104,544,196 2,366,148 $34,610,363 1,417,276 $19,260,372
======== ========== ======== ========= ======== ==========
Year ended December 31, 1995
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
======== ========== ======== ========= ======== ==========
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund Global Growth Fund
--------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............................. 3,308,929 $ 59,205,881 8,261,997 $90,119,617 9,952,737 $124,748,935
Shares issued in reinvestment
of distributions......................... 3,882,703 65,540,030 568,038 6,220,011 1,172,375 14,713,306
Shares redeemed.......................... (11,879,902) (210,981,744) (2,185,380) (23,487,165) (2,052,821) (25,478,198)
--------- ---------- -------- --------- -------- ----------
Net increase (decrease)............. (4,688,270) $ (86,235,833) 6,644,655 $72,852,463 9,072,291 $113,984,043
========= ========== ======== ========= ======== ==========
3. TRUST SHARES (cont.)
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund Global Growth Fund
--------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- -------- --------- -------- ----------
Year ended December 31, 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
========= ========== ======== ========= ======== ==========
Templeton
Templeton Global Asset International Smaller
Allocation Fund Small Cap Fund Capital Growth Fund** Companies Fund**
------------------ ------------------- --------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------- --------- -------- ---------- ------ -------- ------ --------
Six months ended
June 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.................. 1,878,207 $20,827,524 8,766,894 $102,663,292 579,958 $5,894,657 536,166 $5,415,731
Shares issued in
reinvestment of distributions 3,931 44,420 2,914 36,368 -- -- -- --
Shares redeemed............. (203,649) (2,250,201) (1,830,784) (21,759,403) (90,423) (904,276) (7,269) (74,388)
------- --------- -------- ---------- ------ -------- ------ --------
Net increase ........... 1,678,489 $18,621,743 6,939,024 $ 80,940,257 489,535 $4,990,381 528,897 $5,341,343
======= ========= ======== ========== ====== ======== ====== ========
Year ended
December 31, 1995*
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 April 19, 1995 (effective date) to December 31, 1995 and for the
period November 1, 1995 (effective date) to December 31, 1995 for the Templeton
Global Asset Allocation Fund and Small Cap Fund, respectively.
**For the period May 1, 1996 (effective date) to June 30, 1996.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At December 31, 1995, for tax purposes, the Trust 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 Developing Templeton Templeton
International Pacific Markets Global Global Asset Small
Equity Fund Growth Fund Equity Fund Growth Fund Allocation Fund Cap Fund
--------- -------- -------- -------- ---------- ------
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
Templeton Investment Grade
Adjustable U.S. Global Income Intermediate Real Estate U.S. Government Zero Coupon
Government Fund Securities Fund Bond Fund Securities Fund Securities Fund Fund - 2005
----------- ---------- ----------- ---------- ---------- --------
Capital loss carryovers
Expiring in:
<S> <C> <C> <C> <C> <C> <C>
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
Expiring in:
2001............................. $ 2,985,091 $--
2002............................. 11,480,517 7,515,804
---------- --------
$14,465,608 $7,515,804
========== ========
</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 June 30, 1996 by $4,168 in Zero Coupon Fund - 2005,
$250,789 in Zero Coupon Fund - 2010, $9,777 in Growth and Income Fund,
$3,555,233 in Templeton Pacific Growth Fund, $346,771 in Rising Dividends Fund,
$855,891 in Templeton Global Growth Fund and $8,959 in Small Cap Fund.
5. PURCHASESANDSALESOFSECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Templeton Investment Grade
Adjustable U.S. Global Income High Intermediate Precious Real Estate U.S. Government
Government Fund Securities Fund Income Fund Bond Fund Metals Fund Securities FundSecurities Fund**
----------- ---------- --------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases........... $98,747,502 $182,372,186 $39,204,226 $13,013,438 $19,647,671 $16,601,532 $25,553,980
Sales............... $83,632,612 $196,347,200 $44,031,345 $22,500,000 $ 6,620,755 $ 9,527,461 $51,071,570
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....................... $ 764,880 $2,227,312 $8,639,430 $194,693,340 $248,370,798 $82,815,367 $33,007,843
Sales........................... $3,060,034 -- $7,804,103 $ 99,433,417 $107,396,964 $41,773,155 $10,393,311
Templeton Templeton
Rising Developing Templeton Templeton International
Dividends Utility Markets Global Global Asset Small Capital Smaller
Fund Equity Fund Equity Fund Growth Fund Allocation Fund Cap Fund Growth Fund* Companies Fund*
--------- ---------- -------- --------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases....... $35,751,410 $231,608,449 $71,021,155 $88,806,660 $13,297,493 $97,354,289 $4,101,739 $2,164,464
Sales........... $19,180,812 $236,952,708 $ 8,552,443 $16,452,342 $ 4,100,444 $18,138,705 -- --
*For the period May 1, 1996 (effective date) to June 30, 1996.
**Excludes purchase and sales of mortgage dollar roll transactions, which aggregated $16,432,748 and $16,433,354,
respectively.
</TABLE>
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
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 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 as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.625 of 1% First $100 million
0.500 of 1% over $100 million, up to and including $250 million
0.450 of 1% over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
Under the terms of a separate management agreement with 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
Fees are further reduced on net assets 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
------------- ----------------------------------
0.750 of 1% First $500 million
0.625 of 1% over $500 million, up to and including $1 billion
0.500 of 1% over $1 billion
Templeton Global Advisers Ltd. (TGAL) 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
Fees are further reduced on net assets over $500 million.
TGAL 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
------------- ----------------------------------
0.650 of 1% First $200 million
0.585 of 1% over $200 million, up to and including $1.3 billion
0.520 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
Fees are further reduced on net assets over $500 million.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
a. Management Agreement: (cont.)
Under a subadvisory agreement, TICI provides services to the Templeton Global
Asset Allocation Fund and receives from TGAL fees computed monthly based on the
average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.250 of 1% First $200 million
0.225 of 1% over $200 million, up to and including $1.3 billion
0.200 of 1% over $1.3 billion
Under a subadvisory agreement, TICI provides services to the Templeton Global
Income Securities Fund and receives from Advisers fees computed monthly based on
the average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.350 of 1% First $100 million
0.250 of 1% over $100 million, up to and including $250 million
0.200 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
Fees are further reduced on net assets over $10 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
------------- ----------------------------------
0.150 of 1% First $200 million
0.135 of 1% over $200 million, up to and including $700 million
0.100 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets 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
------------- ----------------------------------
0.150 of 1% First $200 million
0.135 of 1% over $200 million, up to and including $700 million
0.100 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets over $1.2 billion.
Global Investors serves as the business manager for the Templeton Global Growth
Fund and receives from TGAL fees computed monthly based on the average daily net
assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.050 of 1% First $200 million
0.045 of 1% over $200 million, up to and including $700 million
0.033 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets 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. For the six months ended June 30,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees for the Zero Coupon Fund - 2000, Zero
Coupon Fund - 2005, Zero Coupon Fund - 2010, and Money Market Fund, aggregating
$585,911.
b. Distribution Plans:
The management agreements between the Funds, Advisers, TGAL 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.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Shareholder Services Agreement:
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.
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Advisers, Investor Services, TGAL, TAML, TICI, Global Investors, TQA (all
wholly-owned subsidiaries of Franklin Resources, Inc.), and/or Allianz Life.
7. CREDIT RISK AND DEFAULTED SECURITIES
The High Income Fund and the Income Securities Fund have 91.7% and 45.7%,
respectively, of their portfolios invested in lower rated and comparable quality
unrated securities. At June 30, 1996, the High Income Fund held one defaulted
security issued by one company with a value aggregating $41,097 representing
.01% of the Fund's net assets. The Income Securities Fund held three defaulted
securities issued by three companies with a value aggregating $8,420,656
representing .64% of the Fund's net assets.
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 the
Funds more significantly to economic changes occurring in certain industries or
sectors, as follows:
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 Equity Fund has investments in excess of
10% of its net assets in Argentina, Hong Kong and Mexico.
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.
8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investment of 5% or more of an issuer's outstanding voting securities held by
any of the Funds are defined in the Investment Company Act of 1940 as affiliated
companies. The investments in such companies at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Purchase Market Dividend
Fund Affiliate Cost Value Income
- ------------------------------ -------------------------- -------- -------- -------
<S> <C> <C> <C>
Income Securities Fund Tanger Factory Outlet Centers, Inc. $9,812,592 $8,379,300 $562,224
</TABLE>
9. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933. The
Fund may purchase restricted securities through a private offering and they
cannot be sold without prior registration under the Securities Act of 1933
unless such sale is pursuant to an exemption therefrom. Subsequent costs of
registration of such securities are borne by the issuer. A secondary market
exists for certain privately placed securities. For the Real Estate Securities
Fund and the Income Securities Fund restricted securities are currently valued
as disclosed in Note 1. At June 30, 1996, the Funds held restricted securities
with a value aggregating $1,530,466 and $41,001, respectively, representing .65%
and less than .01% of the respective Fund's net assets. Such securities are:
Real Estate Securities Fund
Shares Security Acquisition Date Cost Value
- ------ ------------- ------------ -------- --------
137,570 NVR, Inc. 4/8/94 $1,107,439 $1,530,466
Income Securities Fund
Shares/
Warrants
- ------
3,088 NVR, Inc. 10/17/89, 9/29/93 $63,831 $34,354
3,128 NVR, Inc. warrants 9/29/93 13,294 6,647
10. 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 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.
11. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate 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%6 7.19% 43.31% --
1992 10.86 .36 .12 .48 (.24) -- (.24) 11.10 4.45 256,980 .6046 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 --
1996** 10.76 .42 (.12) .30 (.84) -- (.84) 10.22 2.82 173,980 .59* 6.31* 49.69 --
Templeton Global Income Securities 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 --
1996** 13.46 .57 (.41) .16 (1.04) -- (1.04) 12.58 1.27 223,238 .60* 7.40* 83.65 --
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 --
1996** 13.66 .62 (.12) .50 (1.20) (.06) (1.26) 12.90 3.77 366,986 .54* 9.40* 10.86 --
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 --
1996** 14.05 .39 (.29) .10 (.75) -- (.75) 13.40 .77 161,286 .60* 5.34* 9.55 --
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 --
1996** 14.08 .08 1.14 1.22 (.20) (.18) (.38) 14.92 10.07 122,108 .64* 1.18* 5.68 .0305
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 --
1996** 17.40 .37 .88 1.25 (.75) -- (.75) 17.90 7.18 233,914 .59* 4.43* 4.52 .0531
11. FINANCIALHIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate 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*** --
1996** 14.00 .51 (.73) (.22) (.97) -- (.97) 12.81 (1.46) 585,721 .52* 6.66* 4.26*** --
Zero Coupon Fund - 2000
1991 11.40 .57 1.67 2.24 (.38) -- (.38) 13.26 20.19 27,699 .256 7.88 19.15 --
1992 13.26 .57 .58 1.15 (.53) -- (.53) 13.88 9.04 48,217 .256 6.97 9.10 --
1993 13.88 .66 1.55 2.21 (.62) (.03) (.65) 15.44 16.15 76,916 .376 5.88 7.02 --
1994 15.44 .68 (1.71) (1.03) (.69) (.10) (.79) 13.62 (6.76) 94,230 .406 6.37 -- --
1995 13.62 .75 2.03 2.78 (.67) -- (.67) 15.73 20.67 137,357 .406 6.14 1.63 --
1996** 15.73 .46 (.80) (.34) (.86) (.01) (.87) 14.52 (2.09) 131,073 .406* 6.01* .57 --
Zero Coupon Fund - 2005
1991 11.15 .54 1.65 2.19 (.43) -- (.43) 12.91 20.37 11,299 .256 8.00 4.54 --
1992 12.91 .65 .67 1.32 (.61) -- (.61) 13.62 10.81 18,295 .256 7.46 19.48 --
1993 13.62 .44 2.55 2.99 (.52) (.01) (.53) 16.08 22.21 42,998 .376 5.67 16.59 --
1994 16.08 .71 (2.24) (1.53) (.60) (.19) (.79) 13.76 (9.60) 51,499 .406 6.53 2.00 --
1995 13.76 .78 3.53 4.31 (.69) -- (.69) 17.38 31.76 83,222 .406 6.19 1.72 --
1996** 17.38 .44 (1.62) (1.18) (.86) -- (.86) 15.34 (6.65) 79,296 .406* 6.04* -- --
Zero Coupon Fund - 2010
1991 11.25 .56 1.58 2.14 (.55) -- (.55) 12.84 20.09 15,610 .256 8.05 22.44 --
1992 12.84 1.21 .03 1.24 (.73) -- (.73) 13.35 10.31 13,431 .256 7.64 54.50 --
1993 13.35 .50 2.81 3.31 (.94) (.04) (.98) 15.68 25.47 29,189 .256 5.89 36.63 --
1994 15.68 .55 (2.27) (1.72) (.63) (.31) (.94) 13.02 (10.97) 45,361 .406 6.57 4.34 --
1995 13.02 .76 4.75 5.51 (.49) -- (.49) 18.04 42.79 85,633 .406 6.41 31.45 --
1996** 18.04 .47 (2.43) (1.96) (.88) (.24) (1.12) 14.96 (10.63) 77,350 .406* 6.13* 10.11 --
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 .466 4.05 -- --
1995 1.00 .06 -- .06 (.06) -- (.06) 1.00 5.74 429,547 .406 5.58 -- --
1996** 1.00 .02 -- .02 (.02) -- (.02) 1.00 2.51 429,231 .426* 4.97* -- --
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 --
1996** 17.14 .29 .63 .92 (.40) (1.44) (1.84) 16.22 5.54 993,135 .50* 4.16* 11.57 .0462
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 --
1996** 16.47 .62 .02 .64 (.87) (.15) (1.02) 16.09 4.04 1,311,050 .50* 7.73* 9.01 .0521
11. FINANCIALHIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate Rate****
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 --
1996** 13.32 .29 1.35 1.64 (.38) (.47) (.85) 14.11 12.31 1,004,287 .91* 4.62* 5.31 .0158
Templeton Pacific Growth Fund
19921 10.00 -- (.12) (.12) -- -- -- 9.88 (1.20) 5,788 1.316* -- 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 --
1996** 13.91 .11 1.58 1.69 (.44) (.26) (.70) 14.90 12.16 390,845 .98* 1.68* 2.88 .0134
Rising Dividends Fund
19921 10.00 .06 .92 .98 -- -- -- 10.98 9.80 97,687 .676* 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 --
1996** 12.66 .13 .79 .92 (.28) -- (.28) 13.30 7.25 505,360 .77* 2.08* 4.48 .0497
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 --
1996** 17.90 .49 .26 .75 (.92) -- (.92) 17.73 4.42 1,326,828 .49* 4.40* 17.57 .0197
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 --
1996** 9.78 .10 1.46 1.56 (.10) (.19) (.29) 11.05 15.93 251,934 1.42* 2.87* 4.68 .0020
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 --
1996** 11.75 .11 1.16 1.27 (.20) (.21) (.41) 12.61 10.83 477,983 .94* 2.81* 4.58 .0097
Templeton Global Asset Allocation Fund
19953 10.00 .18 .52 .70 (.18) -- (.18) 10.52 7.01 14,729 .90* 3.84* 30.00 --
1996** 10.52 .18 .69 .87 (.01) (.01) (.02) 11.37 8.13 34,987 .97* 4.60* 25.16 .0135
Small Cap Fund
19954 10.00 .03 .21 .24 -- -- -- 10.24 2.30 13,301 .90* 2.70* 16.04 --
1996** 10.24 .01 1.90 1.91 -- -- -- 12.15 18.69 100,060 .78* .84* 34.47 .0519
Capital Growth Fund
19965 10.00 .01 .17 .18 -- -- -- 10.18 1.80 4,983 .32* .42* -- .0574
Templeton International Smaller Companies Fund
19965 10.00 .05 .28 .33 -- -- -- 10.33 3.30 5,462 .74* 3.37* -- .0075
</TABLE>
*Annualized.
**For the six months ended June 30, 1996.
***The portfolio turnover rate excludes mortgage dollar roll transactions.
****Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities. +Total return measures the change in value of an investment over the
periods indicated. It is not annualized. It assumes reinvestment of dividends
and capital gains at net asset value. ++Per share amounts have been calculated
using the average shares outstanding during the period.
11. FINANCIAL HIGHLIGHTS (cont.)
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. 5For the period May 1, 1996
(effective date) to June 30, 1996.
6During the periods indicated below, Advisers agreed to waive in advance a
portion of its management fees and made payments of other expenses incurred by
the Funds in the Trust. Had such action not been taken, the ratio of expenses to
average net assets would have been as follows:
Ratio of
expenses
to average
net assets
------
Adjustable U.S. Government Fund
1991........................... .66%
1992........................... .62
Zero Coupon Fund - 2000
1991........................... .68
1992........................... .68
1993........................... .67
1994........................... .66
1995........................... .63
1996**......................... .58*
Ratio of
expenses
to average
net assets
------
Zero Coupon Fund - 2005
1991........................... .71%
1992........................... .69
1993........................... .67
1994........................... .68
1995........................... .66
1996**......................... .65*
Zero Coupon Fund - 2010
1991........................... .70
1992........................... .69
1993........................... .68
1994........................... .68
1995........................... .66
1996**......................... .65*
Ratio of
expenses
to average
net assets
------
Money Market Fund
1994........................... .54%
1995........................... .53
1996**......................... .54*
Templeton Pacific Growth Fund
19921.......................... 2.57*
Rising Dividends Fund
19921.......................... .76*
INVESTMENT STRATEGY PYRAMID
As a Franklin 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: your investment objective and the degree of risk with which you
feel comfortable. Before you make these decisions, you may want to review 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 Franklin Valuemark Funds prospectus for more
information about a specific option.
Capital Growth Fund
Precious Metals Fund
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton International Smaller Companies Fund
Templeton Pacific Growth Fund
Growth and Income Fund*
Income Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
Adjustable U.S. Government Fund**
High Income Fund
Investment Grade Intermediate
Bond Fund**
Templeton Global Income
Securities Fund+
U.S. Government Securities Fund
Three Zero Coupon Funds
maturing in 2000, 2005, 2010
Money Market Fund
High
Risk/Reward
Potential
Low
*Formerly Equity Growth Fund.
**Subject to regulatory approval, shares of the Adjustable U.S. Government
Securities Fund and the Investment Grade Intermediate Bond Fund will be replaced
by shares of the U.S. Government Fund on October 25, 1996, or shortly
thereafter. After the substitution, shares of the Adjustable U.S. Government
Fund and the Investment Grade Intermediate Bond Fund will no longer be
available.
+Effective May 1, 1996, the Global Income Fund's name changed to the Templeton
Global Income Securities Fund. The portfolio's objective and investment strategy
remain unchanged.
Table of Contents Page
Letter to Contract Owners 2
Economic Overview 3
Change in Unit Price Table 5
Franklin Valuemark Total Returns 6
Portfolio Objectives 8
Portfolio Profiles
Portfolios Seeking Capital Growth
Capital Growth Fund 13
Precious Metals Fund 13
Small Cap Fund 14
Templeton Developing Markets
Equity Fund 15
Templeton Global Growth Fund 15
Templeton International Equity Fund 17
Templeton International
Smaller Companies Fund 17
Templeton Pacific Growth Fund 18
Portfolios Seeking Growth and Income
Growth and Income Fund 18
Income Securities Fund 19
Real Estate Securities Fund 21
Rising Dividends Fund 23
Templeton Global Asset Allocation Fund 23
Utility Equity Fund 24
Portfolios Seeking Current Income
Adjustable U.S. Government Fund 25
High Income Fund 26
Investment Grade Intermediate
Bond Fund 27
Templeton Global Income
Securities Fund 27
U.S. Government Securities Fund 28
Zero Coupon Funds 29
Portfolio Seeking Capital Preservation and Income
Money Market Fund 30
Preferred Life Variable Account C
Financial Statements and Notes 31
Franklin Valuemark Funds
Statement of Investments 48
Financial Statements and Notes 133
For service regarding your contract, please contact your investment
representative. You may also call 1-800/624-0197 (Valuemark deferred variable
annuity) or 1-800/342-FUND (Franklin Valuemark Funds). 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
August 15, 1996
Dear Contract Owner:
This semi-annual report covers the six months ended June 30, 1996, for the
Franklin Valuemark flexible premium deferred variable annuity and Franklin
Valuemark Funds.
We introduced two new Valuemark portfolios over the reporting period. On May 1,
1996, we added the Capital Growth Fund and the Templeton International Smaller
Companies Fund. The Capital Growth Fund seeks capital appreciation with current
income as a secondary objective, investing primarily in large- or mid-cap U.S.
companies. The Templeton International Smaller Companies Fund seeks long-term
capital appreciation through a flexible policy of investing primarily in equity
securities of smaller companies outside the U.S.
Additionally, the Small Cap Fund became available to contract owners on June 10,
1996. This portfolio 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.
After October 25, 1996, shares of the Adjustable U.S. Government Fund and the
Investment Grade Intermediate Bond Fund will no longer be available as
investment options and will be replaced by shares of the U.S. Government
Securities Fund. The substitution is designed to benefit contract owners by
consolidating the assets of portfolios with similar investment objectives,
strategies and risks, thereby potentially lowering operating expenses.*
On the following pages you will find a summary covering global market conditions
over the past six months as well as discussions of each portfolio's performance.
The portfolios' performance tables, presented on pages 6 through 7, show
cumulative and average annual total returns. It is important to remember that
financial markets fluctuate daily and past investment conditions and results are
not indicative of future trends.
We look to the future with confidence and believe Franklin Valuemark variable
annuity will continue to be an appropriate vehicle 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 you 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
Preferred Life Insurance Company of New York
*Substitution of shares is subject to regulatory approval.
ECONOMIC OVERVIEW
During the six-month reporting period, economic stability, relatively low
interest rates and moderate inflation contributed to strong performances for
most equity markets. Taking advantage of these favorable conditions, investors
poured record amounts of capital into the equity market, which ultimately led to
even higher stock prices in developed and developing countries.
The United States
No market epitomized the demand for equity securities more than the U.S., where
inflows of capital into mutual funds reached record levels. Despite potentially
troublesome concerns about the federal budget and debate over tax reform in the
first quarter of 1996, news of all-time market highs appeared nearly every week,
further encouraging new investments and pushing U.S. stock prices even higher.
The Dow Jones Industrial Average(R) rose more than 10% during the six-month
period, from 5117.12 on December 31, 1995, to 5654.63 on June 30, 1996.
Domestic bond markets had rallied through most of 1995 but began to decline in
February and March of 1996 amid signs of moderately accelerating economic
growth. Interest rates, which had been falling until January 1996, began to rise
and continued to do so throughout the reporting period, with the yield of the
30-year U.S. Treasury bond climbing from 5.96% on December 31, 1995, to 6.90% on
June 30, 1996.
It appears that the economy has continued to grow slowly. For the first quarter
of 1996, it grew at an annualized rate of approximately 2.8% with roughly 2%
inflation (second quarter growth is estimated to be around 3.5% to 4.05%).
Still, uncertainty and confusion followed a much stronger-than-expected
employment report released in early March. While well-known economists disagreed
on the market's direction, investors reacted to their mixed messages. Nervous
investors, fearing inflation might accelerate, caused a 3% decline in bond
prices and a short-lived 120-point drop in the Dow Jones Industrial Average on
March 8, 1996. Another positive employment report released in early June also
caused investors to over-react to imagined concerns of increasing inflation.
However, the U.S. Federal Reserve Board remained neutral in its stance on
monetary policy and chose not to raise the federal funds rate at its Open Market
Committee meeting in early July.
International
Consumer spending and confidence in the core European countries of France and
the United Kingdom remained relatively low due to their uncertain economic
prospects. Although historically low inflation levels resulted in lower interest
rates in these countries, economic growth was depressed, in part by the spending
restrictions required for membership in the European Monetary Union. This
depressed economic situation came at a time when growth was already faltering
and unemployment was rising. The German stock index (DAX), however, responding
to possibilities of further interest rate cuts and a more competitive local
currency, performed well in the first half of 1996.
Latin American equity markets continued to recover from the "Tequila Effect,"
which depressed stock prices following Mexico's December 1994 currency
devaluation. From December 1995 through June 1996, Mexico's Bolsa Index rose
more than 17% in U.S. dollar terms, and the Mexican peso appreciated versus the
U.S. dollar. Although Mexico has not entirely recovered, there is evidence that
the government's austerity program has been largely successful in restoring
investor confidence after significant amounts of capital fled the country only
18 months ago.
Many Pacific Rim equity markets strengthened in response to improved economic
fundamentals, moderate inflation and low interest rates. A significant
development was the tremendous amount of Japanese equity securities purchased by
foreign investors (an estimated $36.9 billion in stock) as market sentiment
improved following the Japanese government's intervention in the country's
crippling banking crisis. Thailand, however, did not fare as well as other
countries in the region mainly because of concerns regarding political
leadership, economic stability, and lackluster corporate earnings.
<TABLE>
<CAPTION>
Franklin Valuemark Variable Annuity
Change in Unit Prices
% Change
Unit Price* Unit Price* in Unit Price
Portfolio Name 12/31/95 6/30/96 12/31/95 to 6/30/96
<S> <C> <C> <C>
Adjustable U.S. Government Fund $11.95 $12.20 2.10%
Capital Growth Fund $10.00** $10.16 1.57%
Growth and Income Fund+ $17.31 $18.14 4.81%
High Income Fund $17.25 $17.78 3.05%
Income Securities Fund $19.79 $20.44 3.31%
Investment Grade Intermediate Bond Fund $15.46 $15.47 0.07%
Money Market Fund $12.88 $13.12 1.80%
Precious Metals Fund $14.11 $15.21 7.83%
Real Estate Securities Fund $18.07 $19.23 6.43%
Rising Dividends Fund $12.50 $13.31 6.50%
Small Cap Fund $10.15 $11.97 17.98%
Templeton Developing Markets Equity Fund $ 9.58 $11.03 15.12%
Templeton Global Asset Allocation Fund $10.59 $11.38 7.47%
Templeton Global Growth Fund $11.34 $12.48 10.05%
Templeton Global Income Securities Fund++ $15.52 $15.61 0.56%
Templeton International Equity Fund $13.26 $14.79 11.53%
Templeton International Smaller Companies Fund $10.00** $10.31 3.07%
Templeton Pacific Growth Fund $13.63 $15.18 11.38%
U.S. Government Securities Fund $16.30 $15.95 -2.15%
Utility Equity Fund $19.56 $20.29 3.69%
Zero Coupon Fund - 2000 $18.29 $17.79 -2.77%
Zero Coupon Fund - 2005 $20.91 $19.39 -7.30%
Zero Coupon Fund - 2010 $22.43 $19.91 -11.25%
</TABLE>
*The unit prices have been rounded to the nearest hundredth. Percent change is
calculated using actual unit prices.
**Unit price at inception on May 1, 1996.
+Formerly Equity Growth Fund.
++Effective May 1, 1996, the Global Income Fund's name changed to the Templeton
Global Income Securities Fund. The portfolio's objective and investment strategy
remain unchanged.
Note: The unit value for each sub-account that invests in a particular portfolio
is the total value of assets of the sub-account (net assets of the portfolio),
minus the daily charges for mortality and expense risk and administrative
expenses (annualized at 1.4% of the account's average daily net assets), plus or
minus a charge or credit for any taxes reserved, divided by the total number of
outstanding units for the fund at the end of the valuation period. The unit
value does not take into account the contingent deferred sales charge that
declines from 5% to 1.5% over five years, or the annual contract maintenance fee
of $30.
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 Valuemark contract owners only and may not be used as sales
literature.
<TABLE>
<CAPTION>
Franklin Valuemark II
Total Return for the period ended June 30, 1996:
Without Contingent Deferred Sales Charge or Annual Contract Maintenance Fee
Average Annual Total Return Cumulative Total Return
Inception 1- 5- Since 3- 5- Since Unit Price
Portfolio Name Date Year Year Inception Year Year Inception 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adjustable U.S. Government Fund* 12/03/90 5.11% 3.33% 3.63% 8.56% 17.82% 22.03% $12.20
Capital Growth Fund+ 5/01/96 N/A N/A 1.57% N/A N/A 1.57% $10.16
- ------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund* 1/24/89 20.05% 11.53% 8.34% 40.87% 72.54% 81.42% $18.14
- ------------------------------------------------------------------------------------------------------------------------------
High Income Fund* 1/24/89 8.11% 10.96% 8.04% 24.03% 68.23% 77.77% $17.78
- ------------------------------------------------------------------------------------------------------------------------------
Income Securities Fund* 1/24/89 12.05% 11.13% 10.09% 22.76% 69.51% 104.41% $20.44
- ------------------------------------------------------------------------------------------------------------------------------
Investment Grade Int. Bond Fund* 1/24/89 3.27% 5.63% 6.05% 9.26% 31.51% 54.75% $15.47
- ------------------------------------------------------------------------------------------------------------------------------
Money Market Fund** 1/24/89 3.91% 2.60% 3.72% 9.33% 13.68% 31.16% $13.12
- ------------------------------------------------------------------------------------------------------------------------------
Precious Metals Fund* 1/24/89 8.54% 6.89% 5.81% 17.62% 39.56% 52.13% $15.21
- ------------------------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund* 1/24/89 19.18% 12.33% 9.20% 30.70% 78.85% 92.35% $19.23
- ------------------------------------------------------------------------------------------------------------------------------
Rising Dividends Fund 1/27/92 20.62% N/A 6.67% 30.20% N/A 33.11% $13.31
- ------------------------------------------------------------------------------------------------------------------------------
Small Cap Fund+ 11/01/95 N/A N/A 19.71% N/A N/A 19.71% $11.97
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Equity Fund* 3/15/94 13.97% N/A 4.36% N/A N/A 10.30% $11.03
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Global Asset Allocation Fund+ 5/01/95 12.74% N/A 11.73% N/A N/A 13.82% $11.38
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Global Growth Fund* 3/15/94 14.96% N/A 10.13% N/A N/A 24.79% $12.48
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities Fund* 1/24/89 6.01% 5.46% 6.17% 12.21% 30.45% 56.10% $15.61
- ------------------------------------------------------------------------------------------------------------------------------
Templeton International Equity Fund 1/27/92 13.74% N/A 9.25% 47.52% N/A 47.92% $14.79
- ------------------------------------------------------------------------------------------------------------------------------
Templeton International
Smaller Companies Fund+ 5/1/96 N/A N/A 3.07% N/A N/A 3.07% $10.31
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Pacific Growth Fund 1/27/92 16.64% N/A 9.89% 39.40% N/A 51.81% $15.18
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund 3/14/89 3.22% 6.51% 6.60% 10.19% 37.09% 59.48% $15.95
- ------------------------------------------------------------------------------------------------------------------------------
Utility Equity Fund 1/24/89 20.00% 10.21% 9.98% 16.59% 62.61% 102.87% $20.29
- ------------------------------------------------------------------------------------------------------------------------------
Zero Coupon - 2000** 3/14/89 2.41% 8.89% 8.21% 9.04% 53.12% 77.86% $17.79
- ------------------------------------------------------------------------------------------------------------------------------
Zero Coupon - 2005** 3/14/89 1.71% 11.04% 9.49% 11.15% 68.83% 93.87% $19.39
- ------------------------------------------------------------------------------------------------------------------------------
Zero Coupon - 2010** 3/14/89 1.59% 12.49% 9.89% 17.08% 80.13% 99.07% $19.91
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above figures represent past performance of the portfolios whose inception
dates may have preceded the effective dates of the subaccounts or contracts. The
unit price (rounded to the nearest hundredth) is the net asset value of the
underlying sub-account divided by the number of outstanding units at the end of
the valuation period. The unit price reflects all recurring changes except the
contingent deferred sales charge which declines from 5% to 1.5% over five years
for each purchase payment, or the annual contract maintenance fee of $30. All
unit prices were $10.00 at inception. Total return is the cumulative or average
annual percent change in the unit price of the sub-account, assuming
reinvestment of dividends and capital gains. These figures assume the contract
owner is still invested at the end of the reporting period. Past performance is
not indicative of future performance.
Standardized performance data and other important disclosures are on page 7.
Please review this information and a Franklin Valuemark prospectus before
investing.
*Past expense reductions by the portfolio's manager increased the portfolio's
total returns.
**The manager agreed in advance to waive a portion of management fees and to
assume responsibility for other expenses. Without these reductions, the
portfolios' total returns would have been lower. The fee waiver may be
discontinued at any time upon notice to the portfolios' Board of Trustees. For
the Zero Coupon Funds, until at least December 31, 1996, the manager has agreed
to keep total expenses to a maximum of 0.40% of each portfolio's average monthly
net assets, which has the effect of increasing total return to contract holders.
+Figures for these time periods are not available due to the portfolios' recent
inception dates.
<TABLE>
<CAPTION>
Franklin Valuemark II
Total Return for the period ended June 30, 1996:
With Contingent Deferred Sales Charge and Other Charges
Average Annual Total Return Cumulative Total Return
Inception 1- 5- Since 3- 5- Since
Portfolio Name Date Year Year Inception Year Year Inception
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable U.S. Government Fund* 12/03/90 0.76% 3.17% 3.54% 6.04% 16.91% 21.38%
- ---------------------------------------------------------------------------------------------------------------------
Capital Growth Fund+ 5/1/96 N/A N/A -2.78% N/A N/A -2.78%
- ---------------------------------------------------------------------------------------------------------------------
Growth and Income Fund* 1/24/89 15.70% 11.39% 8.25% 38.31% 71.51% 80.29%
- ---------------------------------------------------------------------------------------------------------------------
High Income Fund* 1/24/89 3.76% 10.83% 7.95% 21.50% 67.26% 76.68%
- ---------------------------------------------------------------------------------------------------------------------
Income Securities Fund* 1/24/89 7.70% 11.00% 10.01% 20.23% 68.54% 103.29%
- ---------------------------------------------------------------------------------------------------------------------
Investment Grade Int. Bond Fund* 1/24/89 -1.08% 5.48% 5.96% 6.75% 30.59% 53.81%
- ---------------------------------------------------------------------------------------------------------------------
Money Market Fund** 1/24/89 -0.44% 2.43% 3.62% 6.81% 12.77% 30.28%
- ---------------------------------------------------------------------------------------------------------------------
Precious Metals Fund* 1/24/89 4.19% 6.75% 5.71% 15.10% 38.61% 51.14%
- ---------------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund* 1/24/89 14.83% 12.20% 9.11% 28.16% 77.84% 91.20%
- ---------------------------------------------------------------------------------------------------------------------
Rising Dividends Fund 1/27/92 16.27% N/A 6.50% 27.64% N/A 32.14%
- ---------------------------------------------------------------------------------------------------------------------
Small Cap Fund+ 11/01/95 N/A N/A 15.36% N/A N/A 15.36%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Equity Fund*+ 3/15/94 9.62% N/A 3.31% N/A N/A 7.77%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Global Asset Allocation Fund+ 5/01/95 8.39% N/A 8.61% N/A N/A 10.12%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Global Growth Fund* 3/15/94 10.61% N/A 9.15% N/A N/A 22.26%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Global Income Securities Fund* 1/24/89 1.66% 5.31% 6.09% 9.69% 29.52% 55.16%
- ---------------------------------------------------------------------------------------------------------------------
Templeton International Equity Fund 1/27/92 9.39% N/A 9.08% 44.98% N/A 46.94%
- ---------------------------------------------------------------------------------------------------------------------
Templeton International
Smaller Companies Fund+ 5/1/96 N/A N/A -1.28% N/A N/A -1.28%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Pacific Growth Fund 1/27/92 12.29% N/A 9.73% 36.87% N/A 50.84%
- ---------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund 3/14/89 -1.13% 6.37% 6.51% 7.67% 36.17% 58.52%
- ---------------------------------------------------------------------------------------------------------------------
Utility Equity Fund 1/24/89 15.65% 10.08% 9.90% 14.03% 61.62% 101.80%
- ---------------------------------------------------------------------------------------------------------------------
Zero Coupon - 2000** 3/14/89 -1.94% 8.76% 8.12% 6.52% 52.18% 76.86%
- ---------------------------------------------------------------------------------------------------------------------
Zero Coupon - 2005** 3/14/89 -2.64% 10.92% 9.41% 8.62% 67.88% 92.82%
- ---------------------------------------------------------------------------------------------------------------------
Zero Coupon - 2010** 3/14/89 -2.76% 12.37% 9.81% 14.55% 79.16% 97.98%
</TABLE>
The above figures represent past performance of the portfolios whose inception
dates may have preceded the effective dates of the subaccounts or contracts.
They are based on a $1,000 hypothetical investment and represent the cumulative
or average annual change in value of an investment over the indicated periods.
They reflect the deduction of an annual asset charge of 1.4%, fund charges, an
annual contract maintenance charge of $30 (prorated, based on an approximate
average contract size of $30,000), and applicable declining contingent deferred
sales charges, assuming the account is liquidated at the end of the reporting
period, according to the following schedule:
Years since deposit: 1 2 3 4 5 6
Charge: 5% 5% 4% 3% 1.5% 0%
The figures also assume reinvestment of dividends and capital gains and reflect
the application of an annual 15% cumulative free withdrawal privilege.
Investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when units are sold. Past performance does not
guarantee future results.
*Past expense reductions by the portfolio's manager increased the portfolio's
total returns.
**The manager agreed in advance to waive a portion of management fees and to
assume responsibility for other expenses. Without these reductions, the
portfolios' total returns would have been lower. The fee waiver may be
discontinued at any time upon notice to the portfolios' Board of Trustees. For
the Zero Coupon Funds, until at least December 31, 1996, the manager has agreed
to keep total expenses to a maximum of 0.40% of each portfolio's average monthly
net assets, which has the effect of increasing total return to contract holders.
+Figures for these time periods are not available due to the portfolios' recent
inception dates.
PORTFOLIO OBJECTIVES
Portfolio Description
- --------------------------------------------------------------------------------
Portfolios Seeking Capital Growth
Capital Growth Fund*
Seeks capital appreciation with current income as a secondary
consideration. The portfolio invests primarily in equity securities,
including common stocks and securities convertible into common stocks.
Precious Metals Fund
Seeks capital appreciation through concentration of its investments in
securities of issuers, including those in developing markets, engaged in
mining, processing or dealing in gold and other precious metals. The
portfolio's secondary objective is to provide current income return through
the receipt of dividends or interest from its investments.
Small Cap Fund
Seeks long-term capital growth. The portfolio invests primarily in equity
securities of small capitalization growth companies. Investments in small
capitalization companies may involve greater risks and greater volatility
than investments in larger and more established companies.
Templeton Developing Markets
Equity Fund
Seeks long-term capital appreciation. The portfolio seeks to achieve this
objective by investing primarily in equity securities of issuers in
countries having developing markets under normal market conditions.
Templeton Global Growth Fund
Seeks long-term capital growth; any income realized will be incidental. The
portfolio seeks to achieve its objective through a flexible policy of
investing in stocks and debt obligations of companies and governments of
any nation, including developing markets under normal market conditions.
Templeton International Equity Fund
Seeks long-term capital growth. Under normal market conditions, the
portfolio will invest at least 65% of its total assets in an
internationally diversified portfolio of equity securities. These equity
securities will trade on markets in countries other than the U.S.,
including developing markets, and be issued by companies domiciled in
countries other than the U.S., or 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 International
Smaller Companies Fund*
Seeks long-term capital appreciation. The portfolio seeks to achieve this
objective by investing primarily in equity securities of smaller companies
outside the U.S., including developing markets under normal market
conditions.
Templeton Pacific Growth Fund
Seeks long-term capital growth. Under normal conditions, the portfolio will
invest at least 65% of its assets in equity securities which trade on
markets in the Pacific Rim, including developing markets, and which are
issued by companies domiciled in the Pacific Rim or companies that derived
at least 50% of either their revenues or pre-tax income from activities in
the Pacific Rim. For purposes of the portfolio's 65% investment policy, the
countries in the Pacific Rim are Australia, Hong Kong, Indonesia, Japan,
Korea, Malaysia, New Zealand, Singapore and Thailand.
Portfolios Seeking Growth and Income
Growth and Income Fund
(Formerly Equity Growth Fund)
Seeks capital appreciation. The portfolio's secondary objective is to
provide current income return. The portfolio pursues capital appreciation
by investing primarily in domestic common stocks, securities convertible
into common stocks and preferred stocks.
Income Securities Fund
Seeks to maximize income while maintaining prospects for capital
appreciation. The portfolio will pursue its objective by investing in a
diversified portfolio of domestic and foreign (including developing
markets) debt obligations, which may include high yield, high risk,
lower-rated bonds, as well as equity securities, selected with particular
consideration of current income production along with capital appreciation.
Real Estate Securities Fund
Seeks capital appreciation, with a secondary objective of earning current
income on its investments. The portfolio pursues its principal objective by
investing primarily in securities of companies in the real estate industry,
primarily equity real estate investment trusts (REITs).
Rising Dividends Fund
Seeks capital appreciation and current income incidental to capital
appreciation. In seeking capital appreciation, the portfolio invests with a
long-term investment horizon. Preservation of capital, while not an
objective, is also an important consideration. The portfolio seeks to
achieve its investment objectives by investing, as a fundamental policy, at
least 65% of its net assets in financially sound companies that have paid
consistently rising dividends based on the investment philosophy that the
securities of such companies, because of their dividend record, have a
strong potential to increase in value.
Templeton Global Asset Allocation Fund
Seeks a high level of total return through a flexible policy of investing
in the following market segments: equity securities of issuers of any
nation, debt obligations of companies and governments of any nation, and
Money Market Instruments. The mix of investments among these three market
segments will be adjusted in an attempt to capitalize on total return
potential produced by changing economic conditions throughout the world.
Utility Equity Fund
Seeks both capital appreciation and current income by concentrating
investments in the securities of companies in the public utilities
industry. The portfolio pursues its objective by investing, under normal
conditions, at least 65% of the portfolio's total assets in securities of
issuers engaged in the public utilities industry, which includes the
manufacture, production, generation, transmission and sale of gas and
electric energy and water. Assets may also be invested in issuers engaged
in the communications field, including entities such as telephone,
telegraph, satellite, microwave and other companies providing communication
facilities for the public benefit.
Portfolios Seeking Current Income
Adjustable U.S. Government Fund**
Seeks a high level of current income, consistent with lower volatility of
principal. The portfolio pursues its investment objective by investing
primarily in adjustable rate securities with interest rates that reset at
periodic intervals and which are issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
High Income Fund
Seeks a high level of current return. As a secondary objective, the
portfolio seeks capital appreciation to the extent consistent with its
principal objective. The portfolio may invest in both debt obligations and
dividend-paying common or preferred stocks, including high risk securities,
and will seek to invest in whatever type of investment is offering the
highest yield and expected total return without excessive risk at the time
of purchase.
Investment Grade Intermediate
Bond Fund**
Seeks current income, consistent with preservation of capital, primarily
through investments in intermediate-term investment grade corporate
obligations and U.S. government securities.
Templeton Global Income
Securities Fund+
(Formerly Global Income Fund)
Seeks high current income, consistent with preservation of capital, with
capital appreciation as a secondary consideration. The portfolio will
pursue its objectives by investing at least 65% of its net assets in both
domestic and foreign debt obligations including those in developing markets
and related foreign currency transactions.
U.S. Government Securities Fund
Seeks to earn income through investments in a portfolio limited to
securities which are obligations of the U.S. government, its agencies or
instrumentalities. These obligations may include fixed-rate or
adjustable-rate mortgage backed securities.
Three Zero Coupon Funds
(maturity dates: 2000, 2005, 2010)
Seek to provide as high an investment return as is consistent with the
preservation of capital. Each portfolio seeks to return a reasonably
assured targeted dollar amount, predictable at the time of investment, on a
specific target date in the future by investing primarily in zero coupon
securities that pay no cash income but are acquired by the portfolio at
substantial discounts from their value at maturity.
Portfolio Seeking Preservation of Capital and Income
Money Market Fund
Seeks to obtain as high a level of current income (in the context of the type
of investment available to the portfolio) consistent with capital preservation
and liquidity. The portfolio will seek to maintain a $1 per share net asset
value, but there is no guarantee that it will be successful in doing so.
*As of June 30, 1996, the Capital Growth Fund and the Templeton International
Smaller Companies Fund were not available in California. They became available
on July 9, 1996.
**Subject to regulatory approval, shares of the Adjustable U.S. Government Fund
and the Investment Grade Intermediate Bond Fund will be replaced by shares of
the U.S. Government Securities Fund on October 25, 1996, or shortly thereafter.
After the substitution, the Adjustable U.S. Government Fund and Investment Grade
Intermediate Bond Fund will no longer be available.
+Effective May 1, 1996, the name of the Global Income Fund changed to the
Templeton Global Income Securities Fund. The portfolio's objective and current
investment strategy remain unchanged.
PORTFOLIO PROFILES
Portfolios Seeking Capital Growth
NEW! Capital Growth Fund
The Franklin Valuemark Funds Trust added a new portfolio on May 1, 1996: the
Capital Growth Fund. The fund was created for investors seeking capital
appreciation in a diversified portfolio of primarily large- and
mid-capitalization equity securities, in what we consider to be generally
stable-growth companies with strong appreciation prospects over the long term.
The portfolio consists predominately of domestic equity securities, including
common stocks and securities convertible into common stocks. The mix of
securities is within sectors that we believe offer growth potential over the
longer term. Some of our top sectors as of June 30, 1996, included health
technology (13.2% of total net assets), electronic technology (12.2%),
technology services (11.5%), financial (7.4%), and consumer non-durables (4.1%).
Of course, these holdings will change as market conditions warrant.
The basic investment strategy of the fund is to buy what we believe are good
solid growth companies -- trading at attractive valuations -- and hold such
securities over the long term. This involves a "bottom-up" investment selection
process, with a continual review of fundamental criteria such as market
position, product cycles, strength of management, quality of earnings, potential
revenue and earnings growth, and valuation. Our adherence to a buy-and-hold
strategy within the fund, in securities which we believe offer significant
opportunities for future growth, should benefit you with solid growth of capital
over the long term.
Although most of the companies in which we invest are domestically domiciled,
many are globally competitive -- selling products or services throughout the
world. With favorable prospects for renewed economic growth worldwide, coupled
with increased moves toward capitalism in developing nations, we remain very
optimistic about the opportunities for growth through the fund's investments.
Precious Metals Fund
The Precious Metals Fund invests in quality mining companies with attractive
reserve, production and growth, with the objective of long-term capital
appreciation. This strategy was evident in the fund's top five holdings over the
reporting period: all are large capitalization, established, low-cost producers.
Our five largest positions as a percentage of total net assets on June 30, 1996,
were as follows: Placer Dome, Inc. (U.S./6.4% of total net assets), Santa Fe
Pacific Gold Corp. (U.S./6.4%), Barrick Gold Corp. (U.S./5.2%), Newmont Mining
Corp. (Canada/4.0%), and Freeport-McMoRan Copper & Gold, Inc. (U.S./3.9%). Of
course, these holdings will change as market conditions warrant.
For the first half of 1996, the gold market experienced increased volatility and
exceeded our forecasted trading range for the first time in two years. Gold
prices began 1996 at $387 an ounce, climbed strongly to peak at $416.25 by early
February, and have since retreated back to the $380 level by the end of the
reporting period. While both gold bullion and platinum experienced strong upward
movements before retracing and ending the period on a negative note -- down 1.0%
and 4.9%, respectively -- copper plunged with the announcement of the Sumitomo
scandal and never recovered -- dropping 27.5% by the end of the reporting
period.
Within our conservative investment policy, we increased exposure to smaller U.S.
companies with international exploration and mining potential, as well as to
South African companies where valuations appeared attractive. The new holdings
added during the period continue to focus on quality operations and uphold our
emphasis on diversifying geographically.
Looking forward, our long-term outlook for gold and the Precious Metals Fund
remains optimistic. With demand exceeding supply in all sectors, we believe gold
fundamentals continue to improve and support a gradual increase in the gold
price. Given the difficulty of predicting future gold prices, we will continue
to invest in mining companies that should be able to increase reserves,
production, cash flow and earnings over the long term.
NEW! Small Cap Fund
During the six months ended June 30, 1996, the stock market proved to be very
volatile, and solid gains made early in the year were partially offset by
profit-taking during the second quarter of 1996. We think the sell-off was due
in part to the fact that the economy appeared to be picking up steam, causing
investors to fear that interest rates may increase.
We continue to search for small capitalization companies in their emerging
growth phase. Our positive performance during the period was helped by our
exposure to the health services sector (4.0% of total net assets) and energy
sectors (5.2%); however, we continue to find many of the best growth companies
in the electronic technology sector (12.4%). Technology stocks were volatile
during the second quarter, but this volatility gave us the opportunity to
purchase what we believe are several solid growth companies at very attractive
prices. We picked up shares of Etec Systems, a leader in semiconductor equipment
manufacturing, and Verilink Corp., a manufacturer of telecommunications network
access products. We also purchased attractive names outside the technology
sector, including Norrell Corp., a provider of temporary personnel and
outsourcing services, and Designer Holdings, an apparel company that sells
sportswear under the Calvin Klein label.
We remain very optimistic about the long-term prospects for the fund, and for
small cap stocks in general. The economy continues to show signs of strength
and, at this time, there appears to us to be little threat of inflationary
pressure. We believe these conditions will provide an excellent opportunity for
small companies to grow and will provide ample investment opportunities for the
fund.
Templeton Developing Markets Equity Fund
We typically take a value-oriented approach when selecting securities for our
emerging markets portfolio, choosing individual stocks based on intrinsic value
and do not purchase solely on sectors of the economy or individual countries.
Nevertheless, the 1994 peso crisis in Mexico -- which had strong ramifications
for Latin American emerging markets -- brought to our attention a great number
of bargains in this region, particularly in the relatively high-liquidity
markets of Brazil, Argentina and Mexico. As of June 30, 1996, the fund held
35.6% of its total net assets in Latin America, including 12.8% in Argentina,
11.7% in Mexico, and 9.2% in Brazil. We also found many bargain stocks in Hong
Kong, where uncertainty over the prospect for the economy after the reversion to
Chinese rule in 1997 has suppressed the long-term growth in stock prices.
By industry, we were most heavily invested in the finance sector (27.9% of total
net assets on June 30, 1996).
Although we have stated that we do not choose securities based on sector or
country, it just so happens that many banks in emerging market countries have
strong valuations. We think this is a result of strong earnings growth due to
the new technology available to them. Also, we believe many of these banks have
high absolute earnings levels, as the shortage of good financing in emerging
markets provides an opportunity for very favorable profit margins.
We expect emerging market equities to resume their rally later this year. These
markets continue to show strong fundamentals (e.g.: high economic and earnings
growth) and, after a poor performance in 1995, these stocks are looking
undervalued to us. With foreign investors once again prepared to accept the
higher risk of investing in emerging markets, vis-a-vis their developed
counterparts, we think this could lead to increased liquidity, which should help
support further gains.
Templeton Global Growth Fund
On June 30, 1996, equities and debt obligations represented 87.4% of the fund's
total net assets. The remaining assets were concentrated in short-term
obligations.
During the past six months, the fund continued to show significant asset growth,
with total assets topping the $477 million mark by June 30, 1996. We adhered to
an investment philosophy of "bottom-up" selection, long-term investment decision
and discount price purchasing. Our top five holdings at the end of the reporting
period were AXA SA (France/1.7% of total net assets), Partnerre Ltd.
(Bermuda/1.6%), Societe Generale de Surveillance Holdings, SA Ltd.
(Switzerland/1.5%), Travelers, Inc. (U.S./ 1.5%), and UNUM Corp (U.S./ 1.49%).
Of course, these holdings will change as market conditions warrant.
The U.S. markets performed well during the six-month period, and the fund reaped
the benefits as its largest geographical weighting was in the U.S. (31.5% of
total net assets). Pharmacia & Upjohn and Nike, have been outstanding U.S.
performers and should continue to do so over the long run.
Not all European markets had such a favorable six months. France, in particular,
has been the victim of union disputes, which caused some French stocks to lag
behind their usual performance. However, with increased emphasis on corporate
restructuring and equities in general, we believe the future for Europe looks
quite favorable.
Latin American markets are still recovering from the Mexican peso devaluation,
which negatively affected some of the fund's Mexican holdings. On the whole, we
think investor confidence is being restored by the government's stringent
economic program, and the Mexican Bolsa index continues to rise.
In general, Asia seems to us to be an area of untapped investment and economic
growth. Potential bargain stocks are constantly being evaluated in this region,
with Hong Kong performing particularly well in the past six months.
Regarding investment sectors, real estate holdings form a large weighting in the
fund (5.7% of total net assets), particularly shares in real estate investment
trusts (REITs). Performance in this area has been good, with the exception of
Credit Foncier de France, which is currently undergoing restructuring, and MDX
Public Co., a Thai industry park developer that suffered construction delays on
several projects because of floods.
Another sizable sector is energy sources (4.4%). During the reporting period, we
made purchases in companies we believe to be undervalued such as Transportadora
de Gas del Sur (Argentina) and Societe Elf Aquitaine (France).
Templeton International Equity Fund
We continued to look for undervalued stocks using our disciplined approach of
detailed research of individual companies. With analysts and other research
sources around the world, we uncovered value in a wide range of places -- we
currently hold stocks in 32 countries. On June 30, 1996, our assets were
allocated in Europe (54.8% of total net assets), Asia (9.3%), Australia/New
Zealand (6.2%), North America (4.6%), and Latin America (4.7%), with the
remaining 20.4% of the fund invested in short-term and fixed-income securities.
Of course, these holdings will change as market conditions warrant.
European equity markets turned in mixed performances during the period. The
Netherlands (8.5% of total net assets), Sweden (10.8%), and Norway (2.7%) led
the way on the strength of stocks in the cyclical and banking sectors. The stock
market of the U.K. (8.6%), however, posted relatively lackluster returns
primarily because of the country's uncertain economic prospects and low levels
of consumer spending. Although low inflation resulted in lower interest rates in
these countries, economic growth was depressed in part by spending restrictions
required for membership in the European Monetary Union. This came at a time when
growth was already faltering and unemployment was rising.
Looking forward, 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. We are cautious in our outlook -- today's relatively high market
valuation levels make identifying investment bargains a particular challenge.
NEW! Templeton International
Smaller Companies Fund
On May 1, 1996, we introduced the Templeton International Smaller Companies
Fund. This fund seeks long-term capital appreciation by investing primarily in
the equity securities of smaller companies outside the U.S., including
developing markets. We invest in companies whose outstanding common stock has,
at the time of purchase by the portfolio, a market value of not more than $1
billion.
The portfolio managers' value-oriented strategy along with portfolio
diversification across numerous industries and in many markets are designed to
help manage the risks associated with foreign investments in smaller companies.
On June 30, 1996, 41.4% of the fund's total net assets were invested in equity
securities from Europe, North America and Asia, with the remaining 58.6% in
short-term securities. Of course, these holdings will change as market
conditions warrant.
Templeton Pacific Growth Fund
On June 30, 1996, the fund's top five geographic allocations were Japan (18.8%
of total net assets), Hong Kong (17.0%), Australia (15.7%), Thailand (8.9%), and
Singapore (7.6%). Of course, these holdings will change as market conditions
warrant.
The most notable development during the reporting period was the tremendous
amount of Japanese equities purchased by foreign investors. The Gaijin (a
Japanese term for foreigners) bought an estimated $36.9 billion in Japanese
stocks as market sentiment improved following that government's intervention in
the country's crippling banking crisis. These efforts resulted in the Nikkei 225
Index rebounding almost 7%, from $191.944 on December 31, 1995, to $205.348 on
June 30, 1996. Taking advantage of this rising equity market, we sold our shares
of Nintendo Corp., Ltd. following strong performance by the company's stock.
Another important development in this region was the improvement in
Chinese-British relations as the two countries reached an agreement regarding
the technical issues of Hong Kong's upcoming reversion to China. Real estate in
Hong Kong became more affordable, which boosted sales and propelled property
stocks higher. As a result of these developments, we maintained our relatively
large weighting in Hong Kong during the reporting period.
We remain optimistic about the Pacific Rim equity market's potential. Although
possibilities of higher interest rates in the U.S. and Japan could prove
problematic in the near future, the tremendous growth potential in this region
may lead to continued inflows of capital, which would be beneficial to stock
prices.
Portfolios Seeking Growth and Income
Growth and Income Fund
Our strategy has always been to buy stocks when they are out of favor and
represent bargains based on their longer-term prospects. An area that we
identified as having excellent valuations is international stocks. Many overseas
stocks are trading at significant discounts to their U.S. counterparts. We
purchased equity securities in the U.K. during the reporting period;
specifically, we purchased shares in British Steel, British Telecom and the
pharmaceutical company Glaxo Welcome Plc. All of these stocks had dividend
yields in excess of 4% and are trading near their recent lows. These purchases
boosted the fund's international stock holdings to 11% of total net assets by
June 30, 1996.
In the U.S., we selectively put cash to work. One area that drew our interest
during the reporting period was the basic materials sector, most notably the
forest/paper products companies. Although this industry's fundamentals are weak
in the near term, the stock prices of many industry leaders have been extremely
depressed and their long-term growth potential is excellent in our opinion.
Recent investments in this area include Union Camp, Weyerhauser, and Georgia
Pacific. Investments in the basic materials sector comprised 11.5% of the fund's
total net assets on June 30, 1996, down slightly from 10% six months ago.
We also continued to find excellent values in the electric utilities group.
These stocks performed well for us in late 1995, but their performance has been
adversely affected thus far in 1996 because of their sensitivity to higher
interest rates. We took advantage of specific weaknesses in these stocks to
initiate positions in Peco Energy, Pacific Gas & Electric, and Public Service
Enterprises. With these purchases, and additions to existing positions, 17.9% of
the portfolio's total net assets were in electric utilities on June 30 -- which
makes this sector the fund's largest. The fund's second largest sector -- at
15.9% of total net assets at the end of the reporting period -- was the energy
sector. During the period, we added to our holdings of industry leaders such as
Mobil Corp., Exxon Corp., and Atlantic Richfield Co. We believe these
well-managed, financially strong companies will benefit from a worldwide boost
in energy consumption in the years ahead.
We maintain a long-term perspective when managing the fund and will continue to
take advantage of investment opportunities as they arise in the months ahead. Of
course, the holdings previously described will change as market conditions
warrant.
Income Securities Fund
The first half of 1996 was generally characterized by an improving economic
outlook, rising interest rates, and a buoyant stock market. The sectors in which
the fund invests provided varied results in this environment, with most sectors
performing relatively well.
In response to market volatility, resulting from rising interest rates, we
utilized our cash position in purchasing securities we believed to be
undervalued. On June 30, 1996, bonds accounted for the largest portion of the
fund, representing 54.5% of total net assets. This can be broken down into
corporate straight bonds (28.9%), foreign government bonds (11.4%), U.S.
Treasuries (7.1%), and corporate convertible bonds (4.3%). Stocks represented
41.3% of the fund's total net assets, with the largest portions being common
stock (31.6%) and convertible preferred stock (9.2%). Cash equivalents made up
the remaining 4.2% of the portfolio's total net assets.
As indications of stronger economic growth led to rising long-term interest
rates, we increased our U.S. Treasury exposure over the reporting period, from
2.8% to 7.1% of total net assets, in response to what we considered to be
attractive yields. Corporate bonds, which represented the largest segment of
bonds in the fund, exhibited solid performance despite the rise in interest
rates. When purchasing corporate bonds, we focus on companies with significant
underlying assets and ample cash flow to service debt. We also seek bonds with
attractive yields and the potential for capital appreciation through improved
company operations and enhanced credit ratings. We initiated several corporate
bond positions during the period that met this criteria, including Harvey's
Casino Resorts (gaming), Plains Resources (energy), Riverwood International
(packaging), and Smith's Food & Drug (food retailing).
In addition, several corporate bond positions benefited from announced mergers
and acquisitions, including Motor Wheel Corp., Pace Industries, and Uniroyal
Chemical. These bonds experienced significant appreciation due to the
recognition that the combined entities would be stronger financially than the
companies on a stand-alone basis. Although the possibility of mergers or
acquisitions is not an overriding investment criteria, our value-oriented
approach can identify the securities of companies which are also attractive to
potential acquirers or partners.
Dollar-denominated Latin American bonds experienced some weakness due to the
rise in U.S. interest rates, which began in February. We took advantage of
market declines by initiating positions in dollar-denominated, collateralized
Brazilian and Ecuadorian Brady bonds. Subsequently, strength in the fund's Latin
American positions helped to offset weakness in our Canadian and South African
bonds.
Utilities represented our largest equity sector (20.8% of total net assets),
followed by energy (5.7%), metals (4.2%), real estate investment trusts (REITs)
(3.6%), and pharmaceuticals (2.4%). The interest-rate sensitive utility sector
was adversely affected by the rise in rates between February and June, while
strength in most other equity sectors of the fund offset this weak area. Gold
and energy stocks were especially strong during the period. Taking a contrarian
approach, we selectively added to the fund's existing utility positions in
Central & SouthWest, Entergy, General Public Utility, Potomac Energy, and
ScanaCorp., while initiating new positions in Peco and Western Resources.
Along with purchases in the utility sector, we also initiated common stock
positions in Canadian Oil Sands Trust (a Canadian oil project), Meditrust (a
health care REIT), and FelCor Suites (a hotel REIT). We also added several new
convertible securities to the portfolio, including Ashanti Goldfields Co., Ltd.
(metals), Cablevision Systems Corp. (cable systems), Nortel Inversora
(telecommunications), and Security Capital Industrial (industrial REIT).
Finally, we sold or reduced several of the fund's holdings in the energy,
airline, REIT and pharmaceutical sectors due to price appreciation, low relative
yields and limited appreciation potential.
In the future, we will continue to follow our value-oriented approach as we seek
income and growth from a diversified mix of stocks, bonds and cash. With the
stock market near all-time highs, we remain selective and opportunistic as we
search for additional investments for you. Of course, the previously mentioned
holdings will change as market conditions warrant.
Real Estate Securities Fund
The Real Estate Securities Fund seeks capital appreciation with current income
as a secondary objective. The portfolio invests in the securities of companies
operating in the real estate industry and focuses primarily on equity real
estate investment trusts (REITs). Equity REITs are real estate companies that
own and manage income-producing properties such as apartments or hotels. This
income, primarily rent from these properties, is generally passed on to
investors in the form of dividends. These companies provide experienced property
management teams and generally concentrate on a specific geographic region and
property type.
In general, the U.S. real estate market continued to improve during the
reporting period. Limited new property development and strong demand for space
resulted in rising occupancy levels and rental rates. Real estate fundamentals,
however, typically vary according to property type or geographic region. Over
the past year, for example, the retail sector experienced a period of weak
demand and overbuilding, while hotel properties enjoyed stronger demand and
limited new development. Although demand for real estate in general remained
weak in the Northeast, strong job growth caused demand to rise in the West.
Within this environment, we remained committed to our long-term investment
strategy: focusing on property types and geographic regions with strong supply
and demand fundamentals. We target stocks with significant growth prospects and
attractive valuations within each property sector. As a result, we maintained
the majority of the fund's investments during the reporting period in the
apartment, hotel, industrial and self-storage property types, where we
anticipated the most favorable supply and demand characteristics. Our large
positions in the apartment and hotel sectors contributed significantly to our
performance.
The largest property-type weighting continued to be in the apartment sector
(23.1% of total net assets at the end of the period). We maintained large
positions in apartment operators, such as Equity Residential Properties Trust
and Security Capital Pacific Trust, where we expect continued strong cash flow
growth. In addition, recognizing the continued rebound of the California
economy, we added to our holdings in Bay Apartment Communities, Inc. and Irvine
Apartment Communities, Inc., two California-based equity REITs.
In the hotel sector, growing demand for rooms continued to outpace construction,
driving room and occupancy rates higher. Anticipating that this trend should
continue, we maintained our overweighted position in this sector, roughly 17.3%
of total net assets on June 30, 1996. Our core holdings in this property type
include FelCor Suite Hotels, Inc., Winston Hotels, Inc. and Host Marriott
Corporation.
During the reporting period, we added two new positions to the fund. In Belmont
Homes, Inc., a manufactured-home builder located in the Southeast, we see an
opportunity to participate in the continued growth of this industry as home
buyers seek more affordable alternatives to traditional single family homes. The
other addition, Interstate Hotels Co., is the largest independent hotel
management company in the U.S. and should benefit as the hotel industry
continues to improve.
We also sold several securities during the six-month period in accordance with
our disciplined approach to valuation. We sold two positions in the apartment
sector and two positions in the hotel sector as the securities had become
overvalued relative to their growth prospects.
Looking forward, we will remain focused on those property types and geographic
areas exhibiting the most favorable supply and demand fundamentals. Within each
sector, we will continue to emphasize attractively valued securities of
well-managed companies generating strong cash flow and dividend growth. In our
opinion, the real estate industry should continue to benefit from limited new
development and steady demand for space from both new and existing tenants.
Therefore, we believe that the portfolio offers attractive return potential. Of
course, the previously mentioned holdings will change as market conditions
warrant.
Rising Dividends Fund
Our investment strategy is based on our belief that companies with consistently
rising dividends should, over time, realize increases in their share prices. We
select portfolio securities based on several criteria. To be eligible for
purchase, stocks must pass certain investment "screens," or screening
procedures, including consistent and substantial dividend increases, strong
balance sheets and relatively low price/earnings ratios. We seek fundamentally
sound companies that meet our standards and attempt to acquire them at
attractive prices, often when they are out of favor with investors.
The fund's top 10 company holdings on June 30, 1996, were: Philip Morris Cos.,
Inc. (3.48% of total net assets), Federal National Mortgage Association (2.92%),
Family Dollar Stores Inc. (2.86%), General Electric Co. (2.75%), Wal-Mart
Stores, Inc. (2.65%), DIMON Inc. (2.62%), Mercury General Corp. (2.61%), Allied
Group, Inc. (2.60%), Bard (C.R.), Inc. (2.56%), and Monsanto Co. (2.44%). Of
course, these holdings will change as market conditions warrant.
It is interesting to note how these 10 companies would, in the aggregate,
illustrate the fund's screening criteria. To do this, we take a simple average
of statistical measures. On average, these 10 companies have raised their
dividends 18 years in a row, and by 438% in the last 10 years, have long-term
debt that is only 22% of capital, and sell at a 13.7 price/earnings ratio. 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
On June 30, 1996, equities (including convertible and preferred securities)
accounted for 45.3% of the portfolio's total net assets, with 24.4% in
fixed-income and 30.3% in short-term and other obligations.
During the past six months, the fund continued to show tremendous asset growth,
with assets climbing to $35 million on June 30, 1996, from $14.7 million on
December 31, 1995. While such an inflow of funds has made it difficult to remain
fully invested, we were able to find securities in roughly 30 countries, with
four of these countries having larger-than-average weightings in the equity
portion of the portfolio: U.S. (15.8%), France (5.1%), Sweden (2.8%), and Hong
Kong (2.4%).
European markets turned in mixed performances for the equity and fixed-income
portions of the fund during the six-month period. Some of the best bond
performers so far in 1996 have been the higher-yielding markets in Europe. In
May, however, Spain and Sweden showed mild signs of vulnerability, and foreign
investors paused to question the prospects for the European Monetary Union in
1999.
While European bonds dipped in May, the equity markets of Sweden, Norway and the
Netherlands rose on the strength of stocks in cyclical and banking sectors. The
stock markets of core European countries, such as the U.K. and France, however,
posted relatively lackluster returns due primarily to these countries' uncertain
economic prospects and low levels of consumer spending.
Economic conditions in Europe may continue to be a mix of modest growth and low
inflation, with the added benefit of further fiscal reform as countries work to
qualify for entrance into the European Monetary Union. We believe the
combination of these factors could lead to strong fund performance through the
end of the next reporting period.
Utility Equity Fund
During the reporting period, we found attractive values in several domestic and
foreign utility stocks. We purchased shares in Pacific Enterprises (a domestic
natural gas distributor), Enron Global Power, and ENDESA of Chile -- both
electric power generation companies. We also acquired shares of several
telecommunications companies, among these: Intelcom Group, Nippon Telephone &
Telegraph, and Hellenic Telecommunications (the recently privatized telephone
utility of Greece). These stocks were bought at attractive valuations, and we
believe they offer excellent capital appreciation potential. Of course, these
holdings will change as market conditions warrant.
In addition to our investments in domestic utility stocks (82.1% of total net
assets on June 30, 1996), we also sought investment opportunities outside the
U.S. Over the past six months, we took advantage of opportunities in foreign
markets to build up our small foreign component. At the end of the reporting
period, 15.8% of the portfolio's holdings were in foreign electric, gas and
telecommunications companies. These foreign holdings have many of the same
characteristics that we traditionally look for in domestic securities: strong
economic growth, strong demographics, favorable political and regulatory
environments and superior entrepreneurial management.
Looking forward, one of our principle concerns is the changing regulatory
environment of the domestic utility industry. For this reason, we have been
focusing specifically on those utilities that are best positioned to handle
increasing competition. Such utilities have low production costs, strong
entrepreneurial management teams and service territories located in regions with
positive demographic trends. We believe that these utilities will produce higher
returns than their peers as they work to capture a larger part of the more
competitive marketplace.
Portfolios Seeking Current Income
Adjustable U.S. Government Fund
On June 30, 1996, 30.4% of the fund's total net assets were invested in
obligations of the Federal National Mortgage Association (FNMA), 22.4% in
obligations of the Federal Home Loan Mortgage Corporations (FHLMC), 18.8% in
obligations of the Government National Mortgage Association (GNMA), 17.5% in
obligations of Small Business Association (SBA) and 10.9% in cash and other
short-term obligations.
Prices of adjustable rate mortgage-backed securities (ARMs) moved modestly over
the reporting period. ARMs have interest payments (also known as "coupons") that
adjust periodically within preset limits to reflect current rates. These
coupons, which can often adjust to higher rates and compensate for the negative
effects these rates have on the value of most bonds, usually enable ARMs to have
greater price stability than fixed-rate securities. Interest rate changes in the
near term will likely occur within the preset limits of ARMs, and the securities
should continue to adjust accordingly.
Though we are experiencing a period of higher interest rates, of some concern
(especially in a low interest rate environment) to us is prepayment risk. When
interest rates drop, it is likely that homeowners will try to replace their
adjustable-rate mortgages -- prepaying them -- with competitive, fixed-rate
loans. For investors in ARMs, such prepayment brings the risk of reducing future
income streams. In an effort to reduce this risk, we have maintained an
overweighting in seasoned, non-convertible ARMs, which are less likely to
experience high levels of prepayment.
Looking forward, we anticipate a return to slow growth and low inflation. This
should lead to stable, or slightly lower, interest rate volatility -- both of
which should benefit ARMs securities in general. Our efforts continue to focus
on stability of principal while maintaining a yield that is competitive with
short-term investment alternatives. We will, of course, take into consideration
the proposed substitution in making portfolio investment decisions.
High Income Fund
With signs of stronger economic growth and fears of inflation increasing over
the past six months, interest rates, as measured by the 30-year U.S. Treasury
bond, increased from 5.99% on December 31, 1995, to 6.90% on June 30, 1996.
Despite rising interest rates, the high yield market performed very well
compared to other fixed-income sectors having similar maturities. We believe
this strong performance can be attributed to the hybrid nature of these
securities: high yield bonds have both debt and equity characteristics. While
the "debt" component of these securities was negatively impacted by rising
interest rates, the "equity" component was positively impacted by expectations
of economic growth.
During the past two quarters of 1996, the fund increased its exposure to the
media/broadcasting and utilities sectors. Recent regulatory changes have
brightened the prospects for the media sector, and we increased our exposure to
11.22% of total net assets at period end, up from 9.5% on December 31, 1995. We
increased our holdings in the utility sector (to 2.35% from 1.8% six months ago)
to benefit from the stable cash flow generated by utility operations and the
generally positive outlook for this sector. As part of repositioning the fund,
we decreased our exposure to forest/paper products, transportation, and food
retailing industries.
In addition to these strategic changes, we also benefited from mergers in
several industries. Specifically, Pace Industries (industrial products) was
purchased by Leggett and Platt, an investment-grade industrial conglomerate. In
the gaming sector, Bally's Casino agreed to be bought by Hilton, another
investment grade company. In general, mergers and consolidations positively
impact the price of the company being purchased.
We continued to increase the overall credit quality of the fund's portfolio
during the period by purchasing higher-rated securities and receiving ratings
upgrades on securities already in the portfolio. Additionally, the average
maturity of the portfolio decreased from 9 years to 8.2 years over the reporting
period.
Given the current outlook for the economy -- moderate growth with low inflation
- -- we believe high yield bonds should continue to benefit from the earnings
improvement of corporations.
Investment Grade Intermediate Bond Fund
With long-term interest rates up almost 100 basis points since year-end 1995,
the fund has been well-served by its emphasis on short and intermediate
maturities. As of June 30, 1996, 77% of the fund's assets were invested in
securities having average maturities of under 2 years -- a factor contributing
stability to the fund's performance. The weighted average quality of the
portfolio was AA+, with approximately 57.5% of the assets in AAA-rated, U.S.
Government-related securities.
We continued our strategic emphasis on "putable" bonds, which represented
approximately 21.2% of the total net assets at the end of the six-month
reporting period. A "putable" bond grants the holder (the portfolio) the right,
but not the obligation, to choose a specified early redemption date (the
"effective maturity") on which the bond will be redeemed by the issuer at full
face value regardless of the level of interest rates. In a rising bond market,
such bonds would tend to increase in price because of their long-term final
stated maturities; however, in a falling bond market, they would be supported in
price because of the ability to sell them at par (face value) value much earlier
on the "putable" date.
We maintain our belief that this approach will produce a better total return
than that available from a money market fund, without having to assume the risks
potentially associated with lower quality or longer term investments. We will,
of course, take into consideration the proposed substitution in making portfolio
investment decisions.
Templeton Global Income Securities Fund
(Formerly Global Income Fund)
On May 1, 1996, the Global Income Fund's name was changed to Templeton Global
Income Securities Fund. The fund's objective and investment strategy remain the
same.
Some of the best bond performers so far during 1996 have been in the
higher-yielding markets of Europe. In May, however, Spain and Sweden showed mild
signs of vulnerability, and foreign investors paused to question the prospects
for the European Monetary Union in 1999. Italy was the exception to the rule as
investors continued to support both the Lira and the Italian bond market. Two
other markets demonstrating a distinct positive trend in May were the Canadian
and Australian bond markets. Despite the influence of a poor U.S. market, both
of these dollar-linked markets rallied in May and generated positive returns for
the reporting period.
Looking forward, we feel these are the most important factors influencing global
fixed-income markets: the sustainability of U.S. economic growth, the prospects
for a rebound in core European economies, and the course of the U.S. dollar.
Although we perceive the risk of sustained current-trend global growth to be
relatively small, we believe the U.S. economy is in a mild but renewed rebound,
which is likely to persist through the end of summer. We also believe that the
European economies are past the down point in their business cycle, although any
renewed growth will be slow to arrive and sluggish. We think the near-term
direction of the U.S. dollar will be influenced primarily by the outlook for the
monetary policy in major markets, but also by the constraints placed on domestic
policies in European countries relative to the European Monetary Union. We feel
this backdrop supports a somewhat higher U.S. dollar over the balance of the
year.
Given this global outlook, we feel that the Templeton Global Income Securities
Fund is positioned conservatively with respect to both currency and
interest-rate risk. The portfolio holds approximately 63.7% of its assets in
intermediate maturities in the dollar block of bond markets (U.S., Canada, and
Australia), while holding roughly 36.3% of net assets in intermediate bonds from
Italy, Spain, Sweden, Denmark, Ireland and the United Kingdom. Core European
markets and Japan are still underweighted. Turnover in the fund during the last
six months was minimal. However, we continued to shift assets from the core
European markets (France and Germany) to Italy, Spain and Sweden. We have also
reduced our exposure in New Zealand and reinvested the proceeds in the U.S. Of
course, these holdings will change as market conditions warrant.
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 or "Ginnie Mae") mortgage passthroughs as our largest
positions. Some issuers held by the portfolio 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 June 30, 1996,
the fund's investments consisted of 77.2% of total net assets in mortgage-backed
securities (of which approximately 53% were Ginnie Maes), 20.4% in other U.S.
government and agency securities, and 2.4% in short-term investments. Of course,
these holdings will change as market conditions warrant.
In Washington D.C., talk of a balanced budget package has been replaced by
political positioning in this presidential election year. Elections are known
events with unknown outcomes: as the rhetoric heats up going into the elections,
the potential exists for increased volatility, with each side trying to "please"
everyone. Currently, economists are generally divided into the two camps of
slower growth and faster growth. We think that current interest rate levels
adequately discount election rhetoric and economic uncertainty.
We believe investing in Ginnie Mae securities through the portfolio is a
reasonable way to invest, especially in a period of economic uncertainty. Ginnie
Maes generally have the price volatility of an intermediate-term bond, with more
income than a 30-year U.S. Treasury bond. The portfolio continues to use Ginnie
Maes as the investment vehicle of choice -- highest credit quality, moderate
volatility and high current income.
Three Zero Coupon Funds
(maturity dates: 2000, 2005, 2010)
Increased economic growth and rising interest rates adversely affected the
Franklin Valuemark Zero Coupon Funds during the six-month reporting period.
Interest rates on 5- to 15-year U.S. Treasury securities have increased more
than 100 basis points during this period, which is significant because the
valuation of the portfolio's zero coupon securities move in the opposite
direction of interest rates.
We began 1996 with very slow economic growth;
in fact, the Federal Reserve Board (the Fed) lowered the target for the federal
funds rate in January as insurance against economic recession. Soon, however,
the economy had resumed a more moderate growth pattern. The Gross Domestic
Product (GDP) grew at an annualized rate of 2.8% in the first quarter of 1996,
compared to only .50% in the fourth quarter of 1995. In our view, bond markets
now anticipate the Fed could reverse its course and raise interest rate
benchmarks to curb potential inflation.
Zero coupon investments, especially those with longer maturities, are volatile
in price primarily due to their interest rate sensitivity and the fact that they
have no current income. Holding these securities to maturity, however, may bring
an investor a fixed return because the final value is known. Therefore, zero
coupon investments can be attractive for both aggressive and risk averse
investors. In each portfolio, we maintain -- at all times -- a duration within
12 months of the target maturity. We do not try to time the market; instead, our
portfolio activity mirrors shareholder activity. We make purchases when money
flows into the portfolios, and sell securities to meet redemptions.
Additionally, we primarily hold only top-rated U.S. Treasury and agency zero
coupon and stripped securities as well as top-rated corporate securities. We
believe this strategy keeps default risk at a minimum.
Portfolio Seeking Capital Preservation
and Income
Money Market Fund
The economy was weak throughout most of 1995, and continued to lose momentum in
early 1996. With prospects for continued slow growth and low inflation, the
Federal Reserve Board (the Fed) lowered the federal funds rate to 5.25% in
January.
To the surprise of many investors, the economic reports turned sharply positive
in March 1996. Annualized Gross Domestic Product (GDP) growth rebounded to 2.8%
in the first quarter, compared with only .50% in the fourth quarter of 1995.
Since March, the majority of economic data released has remained stronger than
expected, with the index of leading economic indicators, consumer confidence and
industrial production all up significantly.
As a result of the recent growth, many economists estimate second quarter 1996
GDP growth at or around 4.2%.
These trends were also reflected in short-term interest rates during the
six-month reporting period. For example, the 90-day U.S. Treasury bill rate
declined from 4.91% on December 31, 1995, to 4.86% on February 29, 1996, (the
middle of the first quarter) as economic growth continued to slow. Since then,
Treasury bill rates have steadily risen to 5.10% by June 30, 1996, as the
economy improves. Since we maintained a relatively short weighted average
maturity during the reporting period, the portfolio's 7-day yield mirrored the
movements in Treasury bill rates in lag fashion. The portfolio's 7-day yield
began the period at 5.43%, declined to 4.81% at the end of the February 1996,
then rose to 4.93% as of June 30, 1996.
We continue to invest the portfolio's assets in securities that are among the
highest quality available to money market portfolios. Since the portfolio's
objective is to provide you with a high quality conservative investment, we do
not invest in leveraged derivatives or other potentially volatile securities
that, we believe, involve undue risk.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Adjustable U.S. Government Fund (Note 1)
Adjustable Rate Mortgage Securities 89.1%
<C> <S> <C>
Federal Home Loan Mortgage Corp. (FHLMC) 22.4%
$ 569,357 FHLMC, Cap 12.34%, Margin 2.00% + CMT, Resets Semi-Annually, 7.109%, 11/01/18 ............... $ 565,588
5,707,488 FHLMC, Cap 12.522%, Margin 2.105% + CMT, Resets Annually, 7.664%, 06/01/22 .................. 5,944,405
383,799 FHLMC, Cap 13.00%, Margin 2.00% + CMT, Resets Semi-Annually, 8.00%, 07/01/18 ................ 394,691
2,773,023 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.542%, 09/01/19 ................... 2,847,835
3,437,845 FHLMC, Cap 13.125%, Margin 2.00% + CMT, Resets Annually, 7.551%, 07/01/18 ................... 3,558,032
707,234 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.687%, 07/01/19 .................. 727,530
8,459,301 FHLMC, Cap 13.458%, Margin 2.195% + CMT, Resets Annually, 7.735%, 02/01/19 .................. 8,701,784
6,184,848 FHLMC, Cap 13.50%, Margin 2.03% + CMT, Resets Annually, 7.551%, 05/01/18 .................... 6,426,058
1,798,102 FHLMC, Cap 13.605%, Margin 2.20% + CMT, Resets Annually, 7.559%, 02/01/19 ................... 1,867,114
7,648,300 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.662%, 04/01/18 .................. 7,960,962
------------
Total Federal Home Loan Mortgage Corp. (Cost $38,948,224) ............................ 38,993,999
------------
Federal National Mortgage Association (FNMA) 30.4%
7,549,309 FNMA, Cap 12.22%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 6.794%, 06/01/18 ......... 7,678,629
1,187,131 FNMA, Cap 12.248%, Margin 1.749% + COFI, Resets Annually, 6.869%, 02/01/28 .................. 1,180,756
708,314 FNMA, Cap 12.323%, Margin 1.66% + CMT, Resets Annually, 6.667%, 03/01/21 .................... 720,681
2,375,281 FNMA, Cap 12.49%, Margin 2.00% + CMT, Resets Annually, 7.686%, 02/01/19 ..................... 2,467,941
797,968 FNMA, Cap 12.75%, Margin 2.125% + CMT, Resets Annually, 8.125%, 06/01/18 .................... 833,846
4,413,854 FNMA, Cap 12.786%, Margin 1.25% + COFI, Resets Monthly, 6.225%, 02/01/03 .................... 4,409,484
7,352,292 FNMA, Cap 12.819%, Margin 2.127% + CMT, Resets Annually, 7.661%, 09/01/18 ................... 7,698,879
660,593 FNMA, Cap 12.981%, Margin 2.011% + CMT, Resets Annually, 7.531%, 08/01/20 ................... 681,877
869,633 FNMA, Cap 13.099%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.108%, 07/01/20 ........ 882,904
4,716,932 FNMA, Cap 13.313%, Margin 2.126% + CMT, Resets Annually, 7.664%, 07/01/19 ................... 4,884,666
376,033 FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.652%, 01/01/18 ................... 388,911
748,908 FNMA, Cap 13.793%, Margin 2.167% + CMT, Resets Annually, 7.904%, 06/01/18 ................... 776,794
1,220,305 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.787%, 07/01/24 ......... 1,216,803
439,716 FNMA, Cap 13.843%, Margin 1.25% + COFI, Resets Monthly, 6.124%, 02/01/17 .................... 436,396
893,416 FNMA, Cap 14.071%, Margin 1.25% + COFI, Resets Monthly, 6.225%, 12/01/18 .................... 886,385
1,427,253 FNMA, Cap 14.428%, Margin 2.125% + CMT, Resets Annually, 7.25%, 04/01/19 .................... 1,481,147
6,330,773 FNMA, Cap 14.625%, Margin 1.25% + COFI, Resets Monthly, 6.31%, 06/01/02 ..................... 6,310,579
3,812,289 FNMA, Cap 14.808%, Margin 1.825% + 3CMT, Resets Tri-Annually, 8.489%, 07/01/20 .............. 3,920,482
5,743,226 FNMA, Cap 15.156%, Margin 2.284% + 3CMT, Resets Tri-Annually, 8.52%, 03/01/20 ............... 5,972,495
------------
Total Federal National Mortgage Association (Cost $53,042,036) ........................ 52,829,655
------------
Government National Mortgage Association (GNMA) 18.8%
15,000,000 jGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 06/01/26 ..................... 15,060,938
5,000,000 jGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.00%, 06/01/26 ..................... 5,070,313
4,006,662 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.25%, 07/20/17 ...................... 4,065,280
3,563,800 GNMA, Cap 11.50%, Margin 2.50% + CMT, Resets Annually, 6.50%, 07/20/25 ...................... 3,639,353
4,808,343 GNMA, Cap 14.00%, Margin 1.50% + CMT, Resets Annually, 6.50%, 01/20/16 ...................... 4,832,145
------------
Total Government National Mortgage Association (Cost $32,655,173) ..................... 32,668,029
------------
Small Business Administration (SBA) 17.5%
9,116,252 SBA, Cap 10.50%, Margin Prime - 0.50%, Resets Quarterly, 7.75%, 03/25/19 .................... 9,469,507
8,067,712 SBA, Cap 10.85%, Margin Prime - 0.40%, Resets Quarterly, 7.85%, 06/25/19 .................... 8,430,760
11,876,352 SBA, Cap 10.875%, Margin Prime - 0.125%, Resets Quarterly, 8.125%, 03/25/18 ................. 12,603,778
------------
Total Small Business Administration (Cost $30,915,918) ................................ 30,504,045
------------
Total Adjustable Rate Mortgage Securities (Cost $155,561,351).......................... 154,995,728
------------
Government Securities 14.1%
25,000,000 U.S. Treasury Notes, 5.125%, 03/31/98 - 06/30/98 (Cost $24,690,357).......................... 24,579,672
------------
Total Long Term Investments (Cost $180,251,708) ....................................... 179,575,400
------------
f Short Term Investments 3.4%.................................................................
Government Securities
$ 6,000,000 U.S. Treasury Bills, 4.99% - 5.19%, 10/17/96 - 01/09/97 (Cost $5,846,630).................... $ 5,846,210
------------
Total Investments before Repurchase Agreements (Cost $186,098,338) .................... 185,421,610
------------
g,hReceivables from Repurchase Agreements 3.9%
6,821,225 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $6,855,802) (Cost $6,852,696)
Chase Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $944,116)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $985,281)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 6,852,696
------------
Total Investments (Cost $192,951,034) 110.5% ..................................... 192,274,306
Liabilities in Excess of Other Assets (10.5)%..................................... (18,294,103)
------------
Net Assets100.0% .................................................................. $173,980,203
============
At June 30, 1996, the net unrealized depreciation based on the
cost of investments for income tax purposes of $192,951,034
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 604,202
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (1,280,930)
------------
Net unrealized depreciation ............................................................... $ (676,728)
============
</TABLE>
PORTFOLIOABBREVIATIONS
3 CMT - 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
fSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Face Value
Country* Amount Templeton Global Income Securities Fund (Note 1)
Bonds 94.3%
<S> <C> <C> <C>
Argentina 5.7%
US 2,500,000 bHidroelectrica Alicura, SA, 8.375%, 03/15/99 ................................... $ 2,425,000
US 2,895,000 Republic of Argentina, 10.95%, 11/01/99 ......................................... 3,021,656
US 3,620,000 Republic of Argentina, 8.375%, 12/20/03 ......................................... 3,140,350
US 7,690,000 Republic of Argentina, Series L, VRN, 5.25%, 03/31/23 ........................... 4,219,888
------------
12,806,894
------------
Australia 6.9%
AU 14,290,000 eGovernment of Australia, 7.00%, 04/15/00 ....................................... 10,716,236
AU 5,120,000 eRepublic of Australia, 12.00%, 11/15/01 ........................................ 4,596,833
------------
15,313,069
------------
Brazil 1.0%
US 4,100,000 Government of Brazil, 4.25%, 04/15/24 ........................................... 2,270,375
------------
Canada 4.4%
CA 11,910,000 eGovernment of Canada, 10.50%, 03/01/01 ......................................... 9,933,651
------------
Denmark 5.6%
DK 25,917,000 eGovernment of Denmark, 8.00%, 05/15/03 ......................................... 4,683,022
DK 43,000,000 eKingdom of Denmark, 8.00%, 11/15/01 ............................................ 7,843,206
------------
12,526,228
------------
Germany 5.0%
DD 5,350,000 eFederal Republic of Germany, Bundesobl, 5.375%, 02/22/99 ....................... 3,591,416
DD 10,000,000 eFederal Republic of Germany, Unity, 8.75%, 08/20/01 ............................ 7,483,145
------------
11,074,561
------------
Ireland 1.1%
IR 1,600,000 eRepublic of Ireland, 6.25%, 10/18/04 ........................................... 2,364,551
------------
Italy 8.6%
IT 4,885,000,000 eBuoni Poliennali del Tes, 8.50%, 08/01/99 ...................................... 3,196,498
IT 11,165,000,000 eBuoni Poliennali del Tes, 10.50%, 09/01/05 ..................................... 7,858,323
IT 11,620,000,000 eGovernment of Italy, 10.50%, 07/15/00 .......................................... 8,056,432
------------
19,111,253
------------
Japan 3.1%
JP 505,000,000 eEuropean Investment Bank, 5.875%, 11/26/99 ..................................... 5,208,743
JP 154,000,000 eInternational Bank for Reconstruction and Development, 6.75%, 03/15/00 ......... 1,644,392
------------
6,853,135
------------
Mexico 4.6%
US 9,715,000 United Mexican States, 9.75%, 02/06/01 .......................................... 9,666,425
US 300,000 United Mexican States, FRN, 7.609%, 03/31/08 .................................... 286,875
US 400,000 United Mexican States, Series D, FRN, 6.547%, 12/31/19 .......................... 315,000
------------
10,268,300
------------
Spain 7.2%
ES 779,230,000 eGovernment of Spain, 12.25%, 03/25/00 .......................................... 6,918,440
ES 462,400,000 eGovernment of Spain, 11.30%, 01/15/02 .......................................... 4,067,516
ES 616,890,000 eGovernment of Spain, 10.00%, 02/28/05 .......................................... 5,146,975
------------
16,132,931
------------
Sweden 5.0%
SE 41,400,000 eKingdom of Sweden, 13.00%, 06/15/01 ............................................ $ 7,615,493
SE 19,700,000 eKingdom of Sweden, 10.25%, 05/05/03 ............................................ 3,356,879
SE 1,100,000 eSweden National Housing Finance Corp., 12.50%, 01/23/97 ........................ 171,945
------------
11,144,317
------------
United Kingdom 8.8%
GB 5,805,000 eUnited Kingdom, 9.50%, 10/25/04 ................................................ 9,933,508
GB 2,850,000 eUnited Kingdom, ln., 12.00%, 11/20/98 .......................................... 4,936,394
GB 2,925,000 eUnited Kingdom, ln., 9.50%, 01/15/99 ........................................... 4,829,234
------------
19,699,136
------------
United States 27.3%
US 10,880,000 U.S. Treasury Bonds, 6.375%, 08/15/02 ........................................... 10,793,286
US 28,835,000 U.S. Treasury Notes, 6.125%, 07/31/00 ........................................... 28,515,220
US 21,780,000 U.S. Treasury Notes, 6.25%, 08/31/00 ............................................ 21,626,887
------------
60,935,393
------------
Total Long Term Investments (Cost $211,454,138) ........................... 210,433,794
------------
gReceivables from Repurchase Agreements 3.3%
US 4,020,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $4,001,783)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 4,000,000
US 3,390,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $3,456,540)
Collateral: U.S. Treasury Notes, 6.75%, 06/30/99 ............................... 3,455,000
------------
Total Receivables from Repurchase Agreements (Cost $7,455,000)............. 7,455,000
------------
Total Investments (Cost $218,909,138) 97.6%........................... 217,888,794
Other Assets and Liabilities, Net 2.4%................................ 5,349,177
------------
Net Assets 100.0% .................................................... $223,237,971
============
At June 30, 1996, the net unrealized depreciation
based on the cost of investments for income tax
purposes of $218,909,138 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over cost ...................................................... $ 2,881,315
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (3,901,659)
------------
Net unrealized depreciation ................................................... $ (1,020,344)
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
DD - Germany
DK - Denmark
ES - Spain
GB - United Kingdom
IR - Ireland
IT - Italy
JP - Japan
SE - Sweden
US - United States
PORTFOLIO ABBREVIATIONS:
FRN - Floating Rate Notes
VRN - Variable Rate Notes
*Securities traded in currency of country indicated and valued in U.S. dollars.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Warrants High Income Fund (Note 1)
Common Stocks & Warrants .2%
<S> <C> <C>
33,568 aBucyrus-Erie Co.............................................................................. $ 344,072
6,900 aEmpire Gas Corp., warrants................................................................... 6,900
70 aFoodmaker, Inc., warrants.................................................................... 1,616
5,000 aGulf States Steel, warrants.................................................................. 25,000
19,386 aKash N'Karry Food Stores, Inc. .............................................................. 504,036
6,500 aNextel Communications, warrants.............................................................. 65
395 aThermadyne Holdings Corp. ................................................................... 8,493
------------
Total Common Stocks & Warrants (Cost $1,197,658)........................................ 890,182
------------
Preferred Stocks 3.1%
7,920 PanAmSat Corp., 12.75%, pfd., PIK............................................................. 9,267,187
2,146 Time Warner, Inc., 10.25%, pfd., Series K .................................................... 2,103,858
------------
Total Preferred Stocks (Cost $10,162,729)..................................................... 11,371,045
------------
Total Common Stocks & Warrants, and Preferred Stocks (Cost $11,360,387)................. 12,261,227
------------
Face
Amount
Bonds 88.6%
Automotive 1.6%
$ 1,000,000 Collins & Aikman Products, senior sub. notes, 11.50%, 04/15/06................................ 1,020,000
125,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00................................... 129,688
4,500,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02................................................ 4,792,500
------------
5,942,188
------------
Cable Television 10.8%
4,000,000 Cablevision Industries Corp., senior sub. deb., 9.25%, 04/01/08............................... 4,050,000
1,500,000 Cablevision System Corp., senior sub. deb., 9.25%, 11/01/05................................... 1,391,250
3,000,000 Cablevision System Corp., senior sub. deb., 10.50%, 05/15/16.................................. 2,925,000
2,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23.................................. 1,840,000
2,000,000 Comcast Corp., senior sub. deb., 9.125%, 10/15/06............................................. 1,900,000
2,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08.............................................. 1,930,000
500,000 Continental Cablevision, Inc., senior deb., 8.875%, 09/15/05.................................. 536,715
1,500,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13................................... 1,640,089
1,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07............................. 1,133,185
2,900,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08.............................. 3,162,313
2,700,000 Diamond Cable Communications Co., senior disc. notes, zero coupon to 12/15/00,
(original accretion rate 11.75%), 11.75% thereafter, 12/15/05................................ 1,603,125
2,200,000 Le Groupe Videotron Ltee, senior notes, 10.625%, 02/15/05..................................... 2,315,500
4,500,000 cRogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14..................... 2,877,989
1,500,000 Rogers Communications, Inc., senior deb., 10.875%, 04/15/04................................... 1,530,000
8,000,000 Telewest Plc., senior deb., zero coupon to 10/01/00, (original accretion rate 11.00%),
11.00% thereafter, 10/01/07.................................................................. 4,760,000
1,500,000 Time Warner, Inc., senior notes, 10.15%, 05/01/12............................................. 1,731,354
1,500,000 Time Warner, Inc., sub. deb., 9.125%, 01/15/13................................................ 1,545,000
3,000,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24............................... 2,842,500
------------
39,714,020
------------
Chemicals 5.1%
3,750,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02........................ 3,806,250
5,000,000 Arcadian Partners L.P., senior notes, Series B, 10.75%, 05/01/05.............................. 5,431,250
2,500,000 Harris Chemical of North America, senior sub. notes, 10.75%, 10/15/03......................... 2,443,750
3,000,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00............................................... 3,082,500
1,200,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01................................... 1,272,000
2,425,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03.................................... 2,600,813
------------
18,636,563
------------
Consumer Products 4.7%
$ 4,250,000 Coleman Holdings, Inc., senior secured disc. notes, (original accretion rate 10.875%),
0.00%, 05/27/98.............................................................................. $ 3,580,625
5,800,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03............................. 5,452,000
5,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03................. 5,037,500
3,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13..................................................... 3,000,000
------------
17,070,125
------------
Containers & Packaging 1.6%
3,500,000 Container Corp., senior notes, Series A, 11.25%, 05/01/04..................................... 3,622,500
1,000,000 Owens-Illinois, Inc., senior sub. notes, 10.00%, 08/01/02..................................... 1,025,000
1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04...................................... 1,007,500
------------
5,655,000
------------
Energy 1.5%
5,000,000 Empire Gas Corp., units, senior secured notes, 7.00% coupon to 07/15/99, 12.875%
thereafter, 07/15/04......................................................................... 4,375,000
1,800,000 Mesa Operating Co., senior sub. notes, zero coupon to 07/01/01, (original accretion rate 11.625%),
11.625% thereafter, 07/01/06................................................................. 1,071,000
------------
5,446,000
------------
Food & Beverage 3.8%
3,000,000 Coca Cola Bottling Group Southwest, Inc., senior sub. notes, 9.00%, 11/15/03.................. 2,925,000
700,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05................................ 682,500
1,570,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02........................................... 1,256,000
250,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00.......................... 260,625
4,700,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03......................... 4,629,500
1,230,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01..................... 1,154,663
3,000,000 Texas Bottling Group, Inc., senior sub. notes, 9.00%, 11/15/03................................ 2,925,000
------------
13,833,288
------------
Food Retailing 8.0%
2,000,000 Bruno's Inc., senior sub. notes, 10.50%, 08/01/05............................................. 1,985,000
1,700,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05.................................. 1,806,250
3,691,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04................................ 3,464,926
4,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03.................................... 3,775,000
1,000,000 Pathmark Stores, Inc., S.F., sub. notes, 11.625%, 06/15/02.................................... 1,000,000
3,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03.............................................. 2,497,500
1,500,000 Penn Traffic Co., senior sub. notes, 9.625%, 04/15/05......................................... 1,087,500
6,500,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03...................................... 5,768,750
3,750,000 Ralphs Grocery Co., senior notes, 10.45%, 06/15/04............................................ 3,609,375
2,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05....................................... 1,850,000
2,500,000 Smith's Food & Drug, senior sub. notes, 11.25%, 05/15/07...................................... 2,543,750
------------
29,388,051
------------
Forest & Paper Products 3.7%
3,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05............................... 3,225,000
2,000,000 Repap New Brunswick, senior notes, second priority, 10.625%, 04/15/05......................... 1,895,000
3,000,000 Repap Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02.................................. 2,842,500
2,300,000 S.D. Warren Co., senior sub. notes, Series B, 12.00%, 12/15/04................................ 2,449,500
3,500,000 Tembec Finance Corp., senior notes, 9.875%. 09/30/05.......................................... 3,272,500
------------
13,684,500
------------
Gaming & Leisure 8.3%
3,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04.............................................. 3,457,500
4,500,000 Bally's Grand, first mortgage, Series B, 10.375%, 12/15/03.................................... 4,955,625
Gaming & Leisure (cont.)
$ 5,900,000 Players International, Inc., senior notes, 10.875%, 04/15/05.................................. $ 6,003,250
3,000,000 Rio Hotel and Casino Inc., senior sub. notes, 10.625%, 07/15/05............................... 3,135,000
7,500,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09........................................... 8,662,500
5,000,000 Six Flags Theme Parks, senior sub. notes, zero coupon to 06/15/98, (original accretion rate 12.25%),
12.25% thereafter, 06/15/05.................................................................. 4,262,500
------------
30,476,375
------------
Health Care Services 8.9%
7,770,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02.............................. 8,003,100
5,500,000 Integrated Health Services, Inc., senior sub. notes, 9.625%, 05/31/02......................... 5,472,500
1,000,000 IVAC Corp., senior notes, 9.25%, 12/01/02..................................................... 1,000,000
5,500,000 Mariner Health Group Inc., senior sub. notes, 9.50%, 04/01/06................................. 5,321,250
1,000,000 Regency Health Services Inc., senior sub. notes, 9.875%, 10/15/02............................. 962,500
5,500,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03.... 5,032,500
850,000 Tenet Healthcare Corp., senior notes, 9.625%, 09/01/02........................................ 903,125
2,400,000 Tenet Healthcare Corp., senior notes, 8.625%, 12/01/03........................................ 2,436,000
3,400,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05.................................. 3,604,000
------------
32,734,975
------------
Industrial Products 5.5%
8,500,000 American Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98, (original accretion
rate 10.50%), 10.50% thereafter, 06/01/05.................................................... 7,395,000
1,000,000 Day International Group, senior sub. notes, 11.125%, 06/01/05................................. 1,025,000
6,500,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01......................................... 6,565,000
5,500,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04............................................. 5,252,500
------------
20,237,500
------------
Lodging 3.1%
8,000,000 HMH Properties, Inc., senior secured notes, 9.50%, 05/15/05................................... 7,640,000
1,500,000 John Q. Hammons Hotels L.P., first mortgage, 9.75%, 10/01/05.................................. 1,453,125
2,310,000 Red Roof Inns Inc., senior notes, 9.625%, 12/15/03............................................ 2,211,825
------------
11,304,950
------------
Media & Broadcasting 8.1%
1,700,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04................................ 1,717,000
2,500,000 Benedek Broadcasting, senior secured notes, 11.875%, 03/01/05................................. 2,650,000
6,500,000 Granite Broadcasting Corp., senior sub. notes, Series A, 10.375%, 05/15/05.................... 6,321,250
4,000,000 Heritage Media Corp., senior sub. notes, 8.75%, 02/15/06...................................... 3,740,000
925,000 Infinity Broadcasting Corp., senior sub. notes, 10.375%, 03/15/02............................. 981,656
2,500,000 K-III Communications Corp., senior notes, 10.25%, 06/01/04.................................... 2,537,500
5,000,000 dNews America Holdings, Inc., deb. (Australia), 8.625%, 02/07/14.............................. 3,271,505
4,000,000 SCI Television, Inc., S.F., senior notes, 11.00%, 06/30/05.................................... 4,180,000
2,000,000 bSFX Broadcasting Inc., senior sub. notes, 10.75%, 05/15/06................................... 1,975,000
2,500,000 Sinclair Broadcast Group Inc., senior sub. notes, 10.00%, 09/30/05............................ 2,437,500
------------
29,811,411
------------
Metals & Mining 2.6%
4,000,000 Algoma Steel, Inc., first mortgage, 12.375%, 07/15/05......................................... 3,920,000
5,000,000 Gulf States Steel, first mortgage, 13.50%, 04/15/03........................................... 4,475,000
1,110,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05.................. 1,265,400
------------
9,660,400
------------
Technology & Information Systems 2.8%
$ 6,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03................................. $ 6,210,000
1,400,000 Bell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion rate 11.50%),
11.50% thereafter, 03/01/05.................................................................. 962,500
2,450,000 Bell & Howell Co., senior notes, 9.25%, 07/15/00.............................................. 2,419,375
800,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02........................................ 856,000
------------
10,447,875
------------
Telecommunications1.8%
2,000,000 bIntelecom Group, Inc., senior disc. notes, 12.50%, 05/01/06.................................. 1,090,000
2,500,000 MFS Communications Co., Inc., senior disc. notes, 8.875%, 01/15/06............................ 1,518,750
6,500,000 Teleport Communications Group, Inc., senior disc. notes, zero coupon to 07/01/01, (original
accretion rate 11.125%), 11.125% thereafter, 07/01/075....................................... 3,818,750
------------
6,427,500
------------
Textiles & Apparel 1.5%
1,500,000 bClark-Schwebel, Inc., senior notes, 10.50%, 04/15/06......................................... 1,552,500
144,200 a,kForstmann Textile, Inc., S.F., senior sub. notes, 14.75%, 04/15/99......................... 41,097
4,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05................................... 3,900,000
------------
5,493,597
------------
Transportation 1.7%
1,600,000 Eletson Holdings, Inc., first mortgage notes, 9.25%, 11/15/03................................. 1,522,000
4,500,000 Gearbulk Holding, Ltd., senior notes, 11.25%, 12/01/04........................................ 4,747,500
------------
6,269,500
------------
Utilities 2.4%
3,000,000 CMS Energy Corp., senior notes, Series B, zero coupon to 10/01/95, (original accretion rate
9.875%), 9.875% thereafter, 10/01/99......................................................... 3,120,000
2,500,000 El Paso Electric Co., first mortgage, 8.90%, 02/01/06......................................... 2,481,250
2,907,617 Midland CoGeneration Venture, S.F., deb., Series C, 10.33%, 07/23/02.......................... 3,031,191
6,000 System Energy Resource, S.F., first mortgage, 11.375%, 09/01/16............................... 6,450
------------
8,638,891
------------
Wireless Communication 1.1%
6,500,000 Dial Call Communications, units, senior disc. notes, zero coupon to 04/15/99, (original accretion
rate 12.25%), 12.25% thereafter, 04/15/04.................................................... 4,160,000
------------
Total Bonds (Cost $324,837,909)......................................................... 325,032,709
------------
Total Investments before Repurchase Agreements (Cost $336,198,296)...................... 337,293,936
------------
g,hReceivables from Repurchase Agreements 7.5%
27,246,541 Joint Repurchase Agreement 5.439%, 07/01/96, (Maturity Value $27,384,069) (Cost $27,371,663)
Chase Securities., Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $3,771,081)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.625% -11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc. (Maturity Value $3,935,498)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99......................... $ 27,371,663
------------
Total Investments (Cost $363,569,959) 99.4%........................................ 364,665,599
Other Assets and Liabilities, Net .6%.............................................. 2,320,850
------------
Net Assets 100.0%.................................................................. $366,986,449
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $363,569,959
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 9,419,137
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (8,323,497)
------------
Net unrealized appreciation................................................................. $ 1,095,640
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount is stated in foreign currency and value is stated in U.S. dollars.
dSecurities traded in foreign currency and valued in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding Joint Repurchase Agreement.
kSee Note 7 regarding defaulted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Investment Grade Intermediate Bond Fund (Note 1)
Long Term Investments 77.9%
U.S. Government, Agencies & Instrumentalities 57.5%
<C> <S> <C>
$ 15,000,000 Federal National Mortgage Association, 6.05%, 11/10/97 ...................................... $ 14,985,793
7,000,000 Tennessee Valley Authority, bonds, 8.25%, 11/15/96 .......................................... 7,069,537
12,000,000 lTennessee Valley Authority, bonds, (putable 07/15/01, callable 07/15/20), 6.235%, 07/15/45 . 11,844,780
2,000,000 U.S. Treasury Notes, 7.875%, 07/15/96 ....................................................... 2,003,750
4,000,000 U.S. Treasury Notes, 6.50%, 09/30/96 ........................................................ 4,013,748
5,000,000 U.S. Treasury Notes, 6.50%, 04/30/97 ........................................................ 5,031,250
10,000,000 U.S. Treasury Notes, 6.125%, 05/31/97 ....................................................... 10,031,250
15,000,000 U.S. Treasury Notes, 5.625%, 06/30/97 ....................................................... 14,976,553
8,000,000 U.S. Treasury Notes, 5.25%, 12/31/97 ........................................................ 7,917,495
5,000,000 U.S. Treasury Notes, 5.125%, 04/30/98 ....................................................... 4,917,184
5,000,000 U.S. Treasury Notes, 5.875%,08/15/98 ........................................................ 4,971,875
5,000,000 U.S. Treasury Notes, 5.875%, 03/31/99 ....................................................... 4,951,559
------------
Total U.S. Government, Agencies & Instrumentalities (Cost $93,664,497)................. 92,714,774
------------
Corporate Bonds 20.4%
Consumer Products 3.7%
4,000,000 American Home Products, notes, 6.875%, 04/15/97 ............................................. 4,026,451
2,000,000 Heinz (H.J.) Co., notes, 5.50%, 09/15/97 .................................................... 1,986,186
------------
6,012,637
------------
Electric Utilities 1.9%
3,000,000 Southern California Edison Co., first mortgage bonds, 6.125%, 07/15/97 ...................... 2,996,061
------------
Financial Services 10.3%
6,400,000 lAssociates Corp. of North America, deb., Series B, (putable 03/03/98), 7.95%, 02/15/10 ..... 6,817,145
7,500,000 lGE Capital Corp., medium term notes (step up to 8.125% or putable 04/01/98), 5.80%, 04/01/08
7,797,053
2,000,000 International Lease Finance Co., notes, 6.375%, 11/01/96 .................................... 2,003,430
------------
16,617,628
------------
Waste Management 4.5%
7,000,000 lWMX Technologies, notes (step up to 8.00% or putable 04/30/97), 6.22%, 04/30/04 ............ 7,259,476
------------
Total Corporate Bonds (Cost $31,912,196)............................................... 32,885,802
------------
Total Long Term Investments (Cost $125,576,693)........................................ 125,600,576
------------
g,hReceivables from Repurchase Agreements 20.8%
33,374,901 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $33,543,910) (Cost $33,528,713)
Chase Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $4,619,356)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $4,820,759)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... $ 33,528,713
------------
Total Investments (Cost $159,105,406) 98.7% ...................................... 159,129,289
Other Assets and Liabilities, Net 1.3% ........................................... 2,156,794
------------
Net Assets 100.0% ................................................................ $161,286,083
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $159,105,406
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 1,481,685
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (1,457,802)
------------
Net unrealized appreciation ............................................................... $ 23,883
============
</TABLE>
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
lHolder may choose either to redeem at par on any put date or, if more
advantageous, to hold to final stated maturity.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Country* Warrants Precious Metals Fund (Note 1)
Common Stocks and Warrants 93.4%
Gold & Diversified Resources 10.5%
<S> <C> <C> <C>
US 160,718 Freeport-McMoRan Copper & Gold, Inc. .............................................. $ 4,801,450
GB 318,429 RTZ Corp., Plc. ................................................................... 4,712,741
CA 159,100 Teck Corp., Class B................................................................ 3,262,992
------------
12,777,183
------------
Long Life Gold Mines 48.4%
US 210,700 bAshanti Goldfields Co., Ltd. ..................................................... 4,161,325
US 235,595 Barrick Gold Corp. ................................................................ 6,390,514
ZA 125,000 Beatrix Mines, Ltd. ............................................................... 1,002,481
PE 37,404 Compania de Minas Buenaventura, SA................................................. 367,456
PE 112,068 Compania de Minas Buenaventura, SA, Class C........................................ 1,009,208
US 67,000 bCompania de Minas Buenaventura, SA, Sponsored ADR................................. 1,331,625
US 249,500 Driefontein Consolidated Mines, Ltd., ADR.......................................... 3,274,688
US 226,700 Hartebeestfontein Gold Mining Co., Ltd., ADR....................................... 763,866
US 139,488 Homestake Mining Co. .............................................................. 2,388,732
US 259,000 Kloof Gold Mining Co., Ltd., ADR................................................... 2,509,063
US 82,400 Newmont Gold Co. .................................................................. 4,150,900
US 99,755 Newmont Mining Corp. .............................................................. 4,925,403
US 327,500 Placer Dome, Inc. ................................................................. 7,819,063
ZA 340,000 Randgold & Exploration Co., Ltd. .................................................. 1,789,061
US 553,301 Santa Fe Pacific Gold Corp. ....................................................... 7,815,377
CA 522,000 aTVX Gold, Inc. ................................................................... 3,823,476
US 339,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR..................................... 2,712,000
US 40,400 Western Areas Gold Mining, ADR..................................................... 626,200
ZA 143,888 Western Areas Gold Mining Co., Ltd. ............................................... 2,241,505
------------
59,101,943
------------
Medium Life Gold Mines 25.6%
AU 1,243,600 aAcacia Resources, Ltd. ........................................................... 2,932,212
US 328,500 aAmax Gold, Inc. .................................................................. 1,806,750
US 324,500 Battle Mountain Gold Co. .......................................................... 2,352,625
US 568,000 aCampbell Resources, Inc. ......................................................... 710,000
CA 209,000 aCampbell Resources, Inc., warrants................................................ 84,197
US 210,000 aCanyon Resources Corp. ........................................................... 577,500
CA 137,000 aDayton Mining Corp. .............................................................. 822,853
US 208,400 Echo Bay Mines, Ltd. .............................................................. 2,240,300
CA 16,900 Euro-Nevada Mining Corp. .......................................................... 724,153
CA 32,000 Franco-Nevada Mining Corp., Ltd. .................................................. 2,027,467
AU 665,000 aGoldfields, Ltd. ................................................................. 1,515,699
CA 175,000 aGreenstone Resources, Ltd. ....................................................... 2,050,906
US 179,000 Hemlo Gold Mines, Inc. ............................................................ 1,901,875
AU 271,500 Newcrest Mining, Ltd. ............................................................. 1,088,262
AU 895,600 Placer Pacific, Ltd. .............................................................. 1,302,205
AU 632,500 Plutonic Resources, Ltd. .......................................................... 3,231,226
AU 978,071 Poseidon Gold, Ltd. ............................................................... 2,406,069
AU 495,900 Sons Of Gwalia, Ltd. .............................................................. 3,507,761
------------
31,282,060
------------
Mining Finance Companies 3.8%
US 15,000 Anglo American Corp. of South Africa Corp., Unsponsored ADR........................ 948,750
US 109,900 DeBeers Consolidated Mines, Ltd., ADR.............................................. 3,709,125
------------
4,657,875
------------
Platinum Companies 5.1%
ZA 72,900 Impala Platinum Holdings, Ltd. .................................................... $ 1,047,317
US 60,700 Impala Platinum Holdings, Ltd., ADR................................................ 872,047
US 165,090 Rustenburg Platinum Holdings, Ltd., ADR............................................ 2,571,789
US 82,300 a,bStillwater Mining Co. .......................................................... 1,749,903
------------
6,241,056
------------
Total Common Stocks and Warrants (Cost $105,065,412)......................... 114,060,117
------------
Face
Amount
Convertible Bonds .7%
Mining - Precious Metals
US $480,000 Bema Gold Corp., cvt. sub. notes, 7.50%, 02/28/00 (Cost $530,700).................. 864,000
------------
Total Long Term Investments (Cost $105,596,112).............................. 114,924,117
------------
g,hReceivables from Repurchase Agreements 6.1%
US 7,382,013 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $7,419,942) (Cost $7,416,580)
Chase Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,021,806)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $1,066,356)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............. 7,416,580
------------
Total Investments (Cost $113,012,692) 100.2%............................ 122,340,697
Liabilities in Excess of Other Assets (.2)% ............................ (232,921)
------------
Net Assets 100.0% ...................................................... $122,107,776
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $113,012,692 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 14,087,433
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (4,759,428)
------------
Net unrealized appreciation ..................................................... $ 9,328,005
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
GB - United Kingdom
PE - Peru
US - United States
ZA - South Africa
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Real Estate Securities Fund (Note 1)
Common Stocks 90.8%
Equity REIT - Apartments 23.1%
<S> <C> <C>
150,000 Amli Residential Properties Trust ........................................................... $ 3,093,750
285,000 Bay Apartment Communities, Inc. ............................................................. 7,374,375
110,000 Camden Property Trust ....................................................................... 2,612,500
240,000 Equity Residential Properties Trust ......................................................... 7,890,000
212,000 Evans Withycombe Residential, Inc. .......................................................... 4,425,500
140,000 Gables Residential Trust .................................................................... 3,290,000
145,000 Irvine Apartment Communities, Inc. .......................................................... 2,918,125
215,000 Oasis Residential, Inc. ..................................................................... 4,703,125
175,000 Post Properties, Inc. ....................................................................... 6,190,625
253,500 Security Capital Pacific Trust .............................................................. 5,513,625
220,000 South West Property Trust ................................................................... 2,942,500
160,000 Summit Properties, Inc. ..................................................................... 3,140,000
------------
54,094,125
------------
Equity REIT - Health Care 4.3%
80,000 Health Care Property Investors, Inc. ........................................................ 2,700,000
140,000 Nationwide Health Properties, Inc. .......................................................... 2,957,500
158,000 Omega Healthcare Investors, Inc. ............................................................ 4,364,750
------------
10,022,250
------------
Equity REIT - Hotels 12.6%
500,000 Equity Inns, Inc. ........................................................................... 5,750,000
267,000 FelCor Suite Hotels, Inc. ................................................................... 8,143,500
120,000 aPatriot American Hospitality, Inc. ......................................................... 3,555,000
138,200 Starwood Lodging Trust ...................................................................... 5,027,025
605,000 Winston Hotels, Inc. ........................................................................ 7,033,125
------------
29,508,650
------------
Equity REIT - Industrial 8.7%
105,000 CenterPoint Properties Corp. ................................................................ 2,546,250
112,500 Duke Realty Investments, Inc. ............................................................... 3,403,125
175,000 Liberty Property Trust ...................................................................... 3,478,125
302,283 Security Capital Industrial Trust ........................................................... 5,327,738
100,000 Spieker Properties, Inc. .................................................................... 2,725,000
110,000 Weeks Corp. ................................................................................. 2,860,000
------------
20,340,238
------------
Equity REIT - Mixed Property Type 1.2%
115,000 Colonial Properties Trust ................................................................... 2,788,750
------------
Equity REIT - Office 4.3%
90,000 Beacon Properties Corp. ..................................................................... 2,306,250
90,000 Crescent Real Estate Equities, Inc. ......................................................... 3,307,500
164,600 Highwoods Properties, Inc. .................................................................. 4,547,075
------------
10,160,825
------------
Equity REIT - Residential Communities 4.3%
185,000 Manufactured Home Communities, Inc. ......................................................... 3,561,250
125,000 ROC Communities, Inc. ....................................................................... 2,984,375
130,000 Sun Communities, Inc. ....................................................................... 3,493,750
------------
10,039,375
------------
Equity REIT - Retail - Community Centers 4.1%
102,000 Developers Diversified Realty Corp. ......................................................... $ 3,251,250
97,500 Kimco Realty Corp. .......................................................................... 2,754,375
90,000 Vornado Realty Trust ........................................................................ 3,678,750
------------
9,684,375
------------
Equity REIT - Retail - Outlet Centers 1.8%
75,000 Chelsea GCA Realty, Inc. .................................................................... 2,381,250
80,000 Tanger Factory Outlet Centers, Inc. ......................................................... 1,860,000
------------
4,241,250
------------
Equity REIT - Retail - Regional Malls 4.9%
174,300 DeBartolo Realty Corp. ...................................................................... 2,810,588
118,500 Simon Property Group, Inc. .................................................................. 2,903,250
140,000 The Macerich Co. ............................................................................ 2,940,000
155,000 The Mills Corp. ............................................................................. 2,712,500
------------
11,366,338
------------
Equity REIT - Storage 7.5%
280,000 Public Storage, Inc. ........................................................................ 5,775,000
370,000 jStorage Trust Realty ....................................................................... 7,585,000
130,000 Storage USA, Inc. ........................................................................... 4,192,500
------------
17,552,500
------------
Home Builders 6.9%
100,000 aBeazer Homes USA, Inc. ..................................................................... 1,600,000
180,000 aBelmont Homes, Inc.......................................................................... 3,892,500
75,000 Centex Corp. ................................................................................ 2,334,375
85,000 Kaufman & Broad Home Corp. .................................................................. 1,232,500
70,000 Lennar Corp. ................................................................................ 1,750,000
137,570 a,mNVR, Inc. ................................................................................ 1,530,466
178,000 aSouthern Energy Homes, Inc. ................................................................ 3,827,000
------------
16,166,841
------------
Hotels 4.7%
505,000 aHost Marriott Corp. ........................................................................ 6,628,125
6,100 aInterstate Hotels Co. ...................................................................... 135,725
195,000 aRed Lion Hotels, Inc. ...................................................................... 4,095,000
------------
10,858,850
------------
Mixed Property Type 2.4%
500,000 Security Capital US Realty .................................................................. 5,700,000
------------
Total Common Stocks (Cost $180,672,920) ............................................... 212,524,367
------------
Convertible Preferred Stocks .5%
20,000 bCatellus Development Corp., $3.625 cvt. pfd., Series B (Cost $1,000,000).................... 1,052,500
------------
Face
Amount
Bonds .8%
$ 2,000,000 US Home Corp., cvt. sub. notes, 4.875%, 11/01/05 (Cost $1,970,000)........................... 1,785,000
------------
Total Long Term Investments (Cost $183,642,920) ............................................. 215,361,867
------------
g,hReceivables from Repurchase Agreements 7.5%
$ 17,423,712 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $17,512,149) (Cost $17,504,215)
Chase Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $2,411,613)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $2,516,756)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... $ 17,504,215
------------
Total Investments (Cost $201,147,135) 99.6% ...................................... 232,866,082
Other Assets and Liabilities, Net .4%............................................. 1,047,940
------------
Net Assets 100.0 % ............................................................... $233,914,022
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $201,147,135
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 33,191,670
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (1,472,723)
------------
Net unrealized appreciation ............................................................... $ 31,718,947
============
</TABLE>
PORTFOLIO ABBREVIATION:
REIT - Real Estate Investment Trust
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
mSee Note 9 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount U.S. Government Securities Fund (Note 1)
Mortgage-Backed Securities 76.0%
Federal Home Loan Mortgage Corp. (FHLMC) 12.6%
<C> <S> <C>
$ 24,056,840 FHLMC, 6.50%, 06/01/08 - 01/01/24 ........................................................... $ 22,677,643
18,148,522 FHLMC, 7.00%, 04/01/24 ...................................................................... 17,496,171
19,876,506 FHLMC, PL, 7.00%, 09/17/31 .................................................................. 18,944,892
6,320,316 FHLMC, 7.50%, 11/01/22 - 05/01/24 ........................................................... 6,251,145
4,766,797 FHLMC, 8.00%, 05/01/16 - 05/01/22 ........................................................... 4,815,708
1,462,504 FHLMC, 8.50%, 04/01/18 - 03/01/22 ........................................................... 1,503,419
1,314,549 FHLMC, 9.00%, 03/01/03 - 01/01/21 ........................................................... 1,365,182
411,685 FHLMC, 9.50%, 06/01/16 - 08/01/20 ........................................................... 437,801
216,001 FHLMC, 10.00%, 08/01/20 - 10/01/20 .......................................................... 233,348
------------
73,725,309
------------
Federal National Mortgage Association (FNMA) 10.4%
7,300,987 FNMA, 6.00%, 10/01/23 - 04/01/24 ............................................................ 6,639,290
16,960,448 FNMA, 6.50%, 01/01/24 - 06/01/24 ............................................................ 15,884,396
2,030,825 FNMA, 7.00%, 05/01/24 ....................................................................... 1,956,558
8,451,862 FNMA, PL, 7.00%, 03/17/35 ................................................................... 8,021,325
12,328,722 FNMA, 7.50%, 04/01/23 - 08/01/25 ............................................................ 12,186,080
14,306,632 FNMA, 8.00%, 07/01/16 - 02/01/25 ............................................................ 14,446,935
1,320,638 FNMA, 8.50%, 10/01/19 - 03/01/22 ............................................................ 1,356,952
247,607 FNMA, 9.00%, 09/01/18 - 03/01/21 ............................................................ 258,439
105,958 FNMA, 9.50%, 07/01/19 - 08/01/20 ............................................................ 112,880
40,481 FNMA, 10.00%, 10/01/20 ...................................................................... 43,947
------------
60,906,802
------------
Government National Mortgage Association (GNMA) 53.0%
13,272,043 GNMA I, SF, 6.00%, 12/15/23 - 01/15/24 ...................................................... 12,011,108
2,366,224 GNMA II, 6.00%, 01/20/24 - 10/20/24 ......................................................... 2,129,586
59,759,442 GNMA I, SF, 6.50%, 05/15/23 - 05/15/24 ...................................................... 55,669,254
3,930,348 GNMA II, 6.50%, 01/20/26 .................................................................... 3,641,684
8,734,911 GNMA, PL, 6.50%, 09/15/28 ................................................................... 8,093,375
54,170,704 GNMA I, SF, 7.00%, 03/15/22 - 07/15/25 ...................................................... 52,020,454
14,831,318 GNMA II, 7.00%, 01/20/24 - 03/20/26 ......................................................... 14,168,432
1,992,397 GNMA I, SF, 7.25%, 11/15/25 ................................................................. 1,939,459
2,257,498 GNMA, PL, 7.25%, 05/15/22 - 08/15/22 ........................................................ 2,186,229
45,135,465 GNMA I, SF, 7.50%, 02/15/17 - 06/15/23 ...................................................... 44,528,658
35,019,491 GNMA II, 7.50%, 11/20/16 - 12/20/25 ......................................................... 34,373,559
31,151,172 GNMA I, SF, 8.00%, 04/15/05 - 06/15/25 ...................................................... 31,462,518
1,470,769 GNMA II, 8.00%, 02/20/16 - 05/20/17 ......................................................... 1,478,116
2,600,668 GNMA I, SF, 8.25%, 04/15/25 ................................................................. 2,651,849
12,265,096 GNMA I, SF, 8.50%, 08/15/21 - 12/15/24 ...................................................... 12,625,317
4,732,209 GNMA I, SF, 9.00%, 04/15/16 - 02/15/21 ...................................................... 4,956,978
11,885,062 GNMA I, SF, 9.50%, 10/15/15 - 12/15/21 ...................................................... 12,713,297
2,652,028 GNMA II, 9.50%, 04/20/25 .................................................................... 2,816,939
9,847,753 GNMA I, SF, 10.00%, 08/15/17 - 08/15/21 ..................................................... 10,740,198
322,930 GNMA II, 10.00%, 07/20/19 - 02/20/21 ........................................................ 348,967
------------
310,555,977
------------
Total Mortgage-Backed Securities (Cost $449,977,063) .................................. 445,188,088
------------
Other Government & Agency Securities 21.7%
2,000,000 Federal Agriculture Mortgage Corp., 6.91%, 07/15/97 ......................................... 2,018,116
5,000,000 Federal Farm Credit Bank, 5.80%, 09/16/03 ................................................... 4,639,870
10,000,000 Federal Farm Credit Bank, 7.95%, 04/01/02 ................................................... 10,055,769
8,199,448 FHA Project Loan, 7.00%, 02/01/29 ........................................................... 7,748,479
$ 3,876,000 FICO Strips, 0.00%, 11/11/01 ................................................................ $ 2,712,793
10,000,000 FICO Strips, 0.00%, 03/07/02 ................................................................ 6,838,309
1,925,000 FICO Strips, 0.00%, 05/11/02 ................................................................ 1,299,577
10,000,000 FICO Strips, 0.00%, 05/11/13 ................................................................ 2,857,069
15,000,000 FICO Strips, Series 1, 0.00%, 05/11/99 ...................................................... 12,476,264
1,758,000 FICO Strips, Series 1, 0.00%, 05/11/09 ...................................................... 691,588
11,024,000 FICO Strips, Series 13, 0.00%, 06/27/09 ..................................................... 4,292,679
5,000,000 FICO Strips, Series 15, 0.00%, 09/07/98 ..................................................... 4,360,495
3,202,000 FICO Strips, Series 16, 0.00%, 04/05/09 ..................................................... 1,269,673
4,745,000 FICO Strips, Series 16, 0.00%, 10/05/10 ..................................................... 1,667,938
2,060,000 FICO Strips, Series A, 0.00%, 02/08/09 ...................................................... 827,183
7,000,000 FICO Strips, Series D, 0.00%, 09/26/01 ...................................................... 4,940,845
5,000,000 Housing Urban Development, Series 96-A, 7.63%, 08/01/14 ..................................... 4,991,244
5,000,000 Housing Urban Development, Series 96-A, 7.66%, 08/01/15 ..................................... 4,980,308
4,926,717 Small Business Administration, 6.45%, 12/01/15 .............................................. 4,646,627
15,000,000 Student Loan Marketing Association, 0.00%, 05/15/14 ......................................... 3,370,468
10,000,000 Tennessee Valley Authority, 0.00%, 04/15/03 ................................................. 6,339,119
6,000,000 Tennessee Valley Authority, 0.00%, 04/15/42 ................................................. 1,733,118
5,000,000 Tennessee Valley Authority, 6.125%, 07/15/03 ................................................ 4,828,885
10,000,000 Tennessee Valley Authority, 7.25%, 07/15/43 ................................................. 9,290,340
1,000,000 Tennessee Valley Authority, 8.375%, 10/01/99 ................................................ 1,051,388
12,000,000 Tennessee Valley Authority, 8.625%, 11/15/29 ................................................ 12,764,974
5,000,000 U.S. Treasury Notes, 5.75%, 08/15/03 ........................................................ 4,759,375
------------
Total Other Government & Agency Securities (Cost $126,268,902)......................... 127,452,493
------------
Total Long Term Investments (Cost $576,245,965) ....................................... 572,640,581
------------
g,hReceivables from Repurchase Agreements 1.8%
10,284,118 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $10,336,017) (Cost $10,331,334)
Chase Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,423,377)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $1,485,440)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 10,331,334
------------
Total Investments (Cost $586,577,299) 99.5% ...................................... 582,971,915
Other Assets and Liabilities, Net .5% ............................................ 2,748,732
------------
Net Assets 100.0% ................................................................ $585,720,647
============
At June 30, 1996 the net unrealized depreciation based on the
cost of investments for income tax purposes of $586,577,299
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 9,865,916
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (13,471,300)
------------
Net unrealized depreciation ............................................................... $ (3,605,384)
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
FHA - Federal Housing Authority
FICO - Financing Corp.
PL - Project Loan
SF - Single Family
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2000 (Note 1)
Long Term Investments 100.2%
U.S. Government & Agency Securities 98.9%
<C> <S> <C>
$ 7,567,000 FHLB Strips, Series A-1, 0.00%, 02/25/01 ...................................................... $ 5,576,901
2,884,000 FHLB Strips, Series A-1, 0.00%, 08/25/01 ...................................................... 2,051,790
465,000 FHLB Strips, Series A-1, 0.00%, 02/25/02 ...................................................... 319,674
16,175,000 FHLMC, notes, 0.00%, 05/15/00 ................................................................. 12,574,201
9,023,000 FICO Strips, 0.00%, 03/26/01 .................................................................. 6,596,714
2,000,000 FICO Strips, 0.00%, 04/06/01 .................................................................. 1,459,184
1,139,000 FICO Strips, Series 1, 0.00%, 11/11/00 ........................................................ 854,846
1,000,000 FICO Strips, Series 7, 0.00%, 02/03/01 ........................................................ 738,696
17,390,000 FICO Strips, Series 12, 0.00%, 12/06/00 ....................................................... 12,988,589
6,000,000 FICO Strips, Series 12, 0.00%, 06/06/01 ....................................................... 4,325,861
4,000,000 FICO Strips, Series 13, 0.00%, 06/27/01 ....................................................... 2,872,332
148,000 FICO Strips, Series 15, 0.00%, 09/07/00 ....................................................... 112,408
5,000,000 FICO Strips, Series 15, 0.00%, 03/07/01 ....................................................... 3,669,074
5,875,000 FICO Strips, Series 17, 0.00%, 10/05/00 ....................................................... 4,438,932
6,200,000 FICO Strips, Series 18, 0.00%, 10/06/00 ....................................................... 4,683,622
4,965,000 FICO Strips, Series D, 0.00%, 09/26/00 ........................................................ 3,757,909
5,550,000 FICO Strips, Series D, 0.00%, 02/03/01 ........................................................ 4,099,763
3,800,000 FNMA Strips, 0.00%, 11/22/99 .................................................................. 3,048,386
1,000,000 FNMA Strips, 0.00%, 02/12/02 .................................................................. 687,857
500,000 FNMA Strips, Series 1, 0.00%, 02/12/00 ........................................................ 395,026
1,875,000 FNMA Strips, Series 1, 0.00%, 02/01/01 ........................................................ 1,386,461
1,000,000 FNMA Strips, Series 1, 0.00%, 02/01/02 ........................................................ 689,344
3,000,000 FNMA Strips, Series 2, 0.00%, 08/12/01 ........................................................ 2,136,132
9,195,000 REFCO Strips, 0.00%, 01/15/01 ................................................................. 6,872,499
3,320,000 Tennessee Valley Authority, 0.00%, 07/15/00 ................................................... 2,555,809
2,500,000 Tennessee Valley Authority, 0.00%, 10/15/00 ................................................... 1,892,245
65,000 Tennessee Valley Authority, 0.00%, 01/01/01 ................................................... 48,004
10,500,000 Tennessee Valley Authority, 0.00%, 04/15/01 ................................................... 7,676,308
1,000,000 Tennessee Valley Authority, 0.00%, 04/15/02 ................................................... 681,683
1,110,375 U.S. Treasury Strips, 0.00%, 11/15/00 ......................................................... 835,927
2,778,750 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 2,057,150
15,000,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 11,164,588
21,895,000 U.S. Treasury Strips, 0.00%, 02/15/01 ......................................................... 16,318,493
------------
129,566,408
------------
Other Securities - "AAA" Rated 1.3%
220,000 InterAmerican Development Bank, 0.00%, 12/16/00 ............................................... 163,631
405,000 International Bank for Reconstruction and Development, 0.00%, 02/15/00 ........................ 319,729
945,000 International Bank for Reconstruction and Development, 0.00%, 08/15/00 ........................ 720,513
735,000 International Bank for Reconstruction and Development, 0.00%, 02/15/01 ........................ 540,929
------------
1,744,802
------------
Total Investments (Cost $125,920,919) 100.2%........................................ 131,311,210
Liabilities in Excess of Other Assets (.2%)......................................... (238,450)
------------
Net Assets 100.0%................................................................... $131,072,760
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $125,920,919 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 5,783,816
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (393,525)
------------
Net unrealized appreciation ................................................................. $ 5,390,291
============
</TABLE>
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.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2005 (Note 1)
Long Term Investments 99.5%
Government & Agency Securities 96.4%
<C> <S> <C>
$ 1,000,000 FHLB Strips, Series A-1, 0.00%, 08/25/02 ...................................................... $ 663,419
800,000 FHLB Strips, Series A-1, 0.00%, 02/25/04 ...................................................... 475,262
9,110,000 FHLB Strips, Series A-1P, 0.00%, 02/25/04 ..................................................... 5,412,050
11,400,000 FICO Strips, 0.00%, 10/06/05 .................................................................. 5,944,666
3,500,000 FICO Strips, Series 1, 0.00%, 05/11/05 ........................................................ 1,878,474
829,000 FICO Strips, Series 1, 0.00%, 11/11/05 ........................................................ 429,335
3,509,000 FICO Strips, Series 2, 0.00%, 11/02/05 ........................................................ 1,820,448
11,055,000 FICO Strips, Series 12, 0.00%, 12/06/05 ....................................................... 5,693,180
2,755,000 FICO Strips, Series 13, 0.00%, 12/27/05 ....................................................... 1,412,097
2,620,000 FICO Strips, Series 15, 0.00%, 09/07/05 ....................................................... 1,374,030
6,000,000 FICO Strips, Series 16, 0.00%, 04/05/06 ....................................................... 3,009,803
10,000,000 FICO Strips, Series 19, 0.00%, 12/06/05 ....................................................... 5,149,869
6,799,000 FICO Strips, Series D, 0.00%, 09/26/05 ........................................................ 3,552,620
1,763,000 FICO Strips, Series D, 0.00%, 03/26/06 ........................................................ 886,108
5,000,000 FICO Strips, Series F, 0.00%, 03/26/05 ........................................................ 2,711,020
120,000 FNMA Strips, 0.00%, 02/12/08 .................................................................. 52,494
450,000 FNMA Strips, Series 1, 0.00%, 08/01/04 ........................................................ 257,604
1,000,000 FNMA Strips, Series 1, 0.00%, 02/12/05 ........................................................ 549,654
875,000 FNMA Strips, Series 1, 0.00%, 08/12/05 ........................................................ 462,787
4,307,000 FNMA Strips, Series 1, 0.00%, 02/01/06 ........................................................ 2,198,267
250,000 FNMA Strips, Series 1, 0.00%, 02/12/06 ........................................................ 127,281
1,730,000 FNMA Strips, Series 1, 0.00%, 02/01/08 ........................................................ 758,448
6,000,000 FNMA Strips, Series 2, 0.00%, 02/01/05 ........................................................ 3,305,417
530,000 FNMA Strips, Series 9, 0.00%, 08/01/06 ........................................................ 260,493
6,500,000 REFCO Strips, 0.00%, 01/15/06 ................................................................. 3,387,670
3,000,000 REFCO Strips, Series R, 0.00%, 04/15/06 ....................................................... 1,534,521
6,200,000 Tennessee Valley Authority, 0.00%, 10/15/04 ................................................... 3,508,927
2,260,000 Tennessee Valley Authority, 0.00%, 04/15/05 ................................................... 1,231,528
1,000,000 Tennessee Valley Authority, 0.00%, 10/15/05 ................................................... 525,703
34,140,000 U.S. Treasury Strips, 0.00%, 02/15/06 ......................................................... 17,871,709
------------
76,444,884
------------
Other Securities - "AAA" Rated 3.1%
1,500,000 Exxon Corp., 0.00%, 11/15/04 .................................................................. 849,669
541,000 International Bank of Reconstruction and Development, 0.00%, 02/15/07 ......................... 253,874
2,500,000 International Bank of Reconstruction and Development, 0.00%, 08/15/07 ......................... 1,127,117
459,000 International Bank of Reconstruction and Development, Series 2, 0.00%, 02/15/07 ............... 214,953
------------
2,445,613
------------
Total Long Term Investments (Cost $74,761,492) .......................................... 78,890,497
------------
g,hReceivables from Repurchase Agreements .4%
$ 340,772 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $342,207) (Cost $342,052)
Chase Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $47,127)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $49,180)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ......................... $ 342,052
------------
Total Investments (Cost $75,103,544) 99.9% ......................................... 79,232,549
Other Assets and Liabilities, Net .1%............................................... 63,942
------------
Net Assets 100.0% .................................................................. $79,296,491
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $75,107,712 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 5,081,274
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (956,437)
------------
Net unrealized appreciation ................................................................. $ 4,124,837
============
</TABLE>
PORTFOLIOABBREVIATIONS
FHLB - Federal Home Loan Bank
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Zero Coupon Fund - 2010 (Note 1)
Long Term Investments 96.6%
Government & Agency Securities 91.9%
<C> <S> <C>
$ 4,450,000 FHLMC, capital deb., 0.00%, 11/29/19 .......................................................... $ 802,949
4,040,000 FICO Strips, 0.00%, 10/06/10 .................................................................. 1,419,756
16,246,000 FICO Strips, Series 1, 0.00%, 11/11/10 ........................................................ 5,659,828
2,000,000 FICO Strips, Series 3, 0.00%, 05/30/10 ........................................................ 723,016
1,528,000 FICO Strips, Series 4, 0.00%, 10/06/10 ........................................................ 536,977
3,021,000 FICO Strips, Series 8, 0.00%, 08/03/10 ........................................................ 1,077,796
2,837,000 FICO Strips, Series 11, 0.00%, 02/08/11 ....................................................... 969,434
4,550,000 FICO Strips, Series 12, 0.00%, 06/06/09 ....................................................... 1,779,887
7,500,000 FICO Strips, Series 12, 0.00%, 12/06/10 ....................................................... 2,598,097
3,000,000 FICO Strips, Series 19, 0.00%, 06/06/10 ....................................................... 1,082,994
2,080,000 FICO Strips, Series 19, 0.00%, 12/06/10 ....................................................... 720,539
7,000,000 FICO Strips, Series A, 0.00%, 08/08/10 ........................................................ 2,494,855
860,000 FICO Strips, Series D, 0.00%, 03/26/10 ........................................................ 315,319
4,000,000 FICO Strips, Series D, 0.00%, 03/26/11 ........................................................ 1,352,676
12,412,000 FICO Strips, Series E, 0.00%, 11/02/10 ........................................................ 4,333,698
860,000 FICO Strips, Series F, 0.00%, 09/26/10 ........................................................ 302,992
5,311,000 FICO Strips, Series F, 0.00%, 02/08/11 ........................................................ 1,814,827
1,975,000 FNMA Strips, 0.00%, 08/12/09 .................................................................. 769,171
5,000,000 FNMA Strips, Series 1, 0.00%, 02/01/10 ........................................................ 1,876,810
8,250,000 FNMA Strips, Series 1, 0.00%, 08/01/10 ........................................................ 2,980,313
1,230,000 FNMA Strips, Series 1, 0.00%, 08/12/10 ........................................................ 443,353
4,450,000 FNMA Strips, Series 1, 0.00%, 02/01/11 ........................................................ 1,541,048
3,281,000 FNMA, sub. deb., 0.00%, 02/01/12 .............................................................. 1,049,559
20,000,000 REFCO Strips, 0.00%, 10/15/10 ................................................................. 7,309,137
8,000,000 REFCO Strips, 0.00%, 01/15/11 ................................................................. 2,866,111
8,650,000 SLMA, 0.00%, 05/15/14 ......................................................................... 1,943,637
412,000 Tennessee Valley Authority, 0.00%, 01/01/10 ................................................... 152,379
12,000,000 Tennessee Valley Authority, 0.00%, 04/15/10 ................................................... 4,467,947
1,320,000 Tennessee Valley Authority, 0.00%, 10/15/10 ................................................... 472,329
9,525,000 Tennessee Valley Authority, 0.00%, 04/15/11 ................................................... 3,273,066
7,295,000 Tennessee Valley Authority, 0.00%, 10/15/11 ................................................... 2,408,968
31,190,000 U.S. Treasury Strips, 0.00%, 11/15/10 ......................................................... 11,522,334
------------
71,061,802
------------
Other Securities - "AAA" Rated 4.7%
1,392,000 International Bank for Reconstruction and Development, 0.00%, 02/15/11 ........................ 477,631
2,800,000 International Bank for Reconstruction and Development, 0.00%, 02/15/12 ........................ 886,766
3,287,000 International Bank for Reconstruction and Development, 0.00%, 02/15/13 ........................ 961,960
4,100,000 International Bank for Reconstruction and Development, 0.00%, 08/15/13 ........................ 1,154,429
500,000 nternational Bank for Reconstruction and Development, Series 2, 0.00%, 02/15/11 ............... 171,563
------------
3,652,349
------------
Total Long Term Investments (Cost $69,766,814)........................................... 74,714,151
------------
g,hReceivables from Repurchase Agreements 2.5%
$ 1,955,977 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $1,965,596) (Cost $1,964,705)
Chase Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $270,686)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $282,485)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ......................... $ 1,964,705
------------
Total Investments (Cost $71,731,519) 99.1%.......................................... 76,678,856
Other Assets and Liabilities, Net .9% .............................................. 671,101
------------
Net Assets 100.0% .................................................................. $77,349,957
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $71,982,308 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 5,932,017
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (1,235,469)
------------
Net unrealized appreciation ................................................................. $ 4,696,548
============
</TABLE>
PORTFOLIOABBREVIATIONS
FHLMC - Federal Home Loan Mortgage Corp.
FICO - Financing Corp.
FNMA - Federal National Mortgage Association
REFCO - Resolution Funding Corp.
SLMA - Student Loan Marketing Association
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Face Value
Amount Money Market Fund (Note 1)
fShort Term Investments 87.4%
Certificates of Deposit 10.5%
<S> <C> <C>
5,000,000 Bayerische Landesbank, New York Branch, 5.06%, 07/08/96 ........................................ $ 5,000,060
10,000,000 Dresdner Bank AG, New York Branch, 4.94%, 01/06/97 ............................................. 9,965,079
10,000,000 Lloyds Bank, Plc., New York Branch, 5.70%, 09/11/96 ............................................ 10,000,194
20,000,000 Societe Generale, New York Branch, 5.36% - 5.51%, 08/15/96 - 10/02/96 .......................... 20,000,260
------------
Total Certificates of Deposit (Cost $44,965,593).......................................... 44,965,593
------------
Commercial Paper 76.6%
10,000,000 ABN-AMRO North American Finance, Inc., 4.975%, 08/26/96 ........................................ 9,919,848
20,000,000 American Express Credit Corp., 4.88% - 5.27%, 07/18/96 - 08/09/96 .............................. 19,902,726
20,000,000 Associates Corp. of North America, 5.28% - 5.29%, 07/15/96 - 07/17/96 .......................... 19,951,535
10,000,000 Barclays U.S. Funding Corp., 5.27%, 08/20/96 ................................................... 9,923,878
15,000,000 Canadian Imperial Holdings, Inc., 5.27%, 07/02/96 .............................................. 14,993,413
10,000,000 Cheltnham & Gloucester Building Society, 5.27%, 07/03/96 ....................................... 9,994,144
19,500,000 CIESCO, L.P., 5.27%, 07/25/96 .................................................................. 19,425,781
10,000,000 Commerzbank U.S. Finance, Inc., 5.40%, 09/27/96 ................................................ 9,865,000
15,000,000 Disney (Walt) Co., 5.25%, 07/29/96 ............................................................. 14,934,376
10,000,000 Dupont (E.I.) De Nemours, Inc., 5.35%, 08/29/96 ................................................ 9,909,347
16,825,000 Export Development Corp., 5.30%, 09/04/96 ...................................................... 16,659,040
18,900,000 General Electric Capital Corp., 5.27% - 5.40%, 07/18/96 - 09/16/96 ............................. 18,759,364
15,000,000 Halifax Building Society, 4.88%, 08/08/96 ...................................................... 14,918,666
10,000,000 Hewlett-Packard, 5.37%, 08/29/96 ............................................................... 9,909,008
14,000,000 Kingdom of Sweden, 5.28% - 5.30%, 08/22/96 - 09/23/96 .......................................... 13,870,046
10,000,000 MetLife Funding, Inc., 5.28%, 08/27/96 ......................................................... 9,913,466
15,000,000 National Rural Utilities Cooperative Finance Corp., 5.29% - 5.37%, 08/19/96 - 08/26/96 ......... 14,881,800
10,000,000 PepsiCo, Inc., 5.38%, 09/25/96 ................................................................. 9,868,489
15,850,000 Province of British Columbia, 5.35%, 12/27/96 .................................................. 15,423,657
15,000,000 Prudential Funding Corp., 5.27%, 07/26/96 ...................................................... 14,940,712
20,520,000 Schering Corp., 5.25% - 5.27%, 08/13/96 - 09/23/96 ............................................. 20,363,874
10,000,000 Svenska Handelsbanken, Inc., 4.98% - 5.29%, 07/01/96 - 08/28/96 ................................ 9,954,534
15,000,000 Toyota Motor Credit Corp., 5.29%, 09/06/96 ..................................................... 14,847,912
5,800,000 U.S. Central Credit Union, 5.40%, 09/16/96 ..................................................... 5,731,270
------------
Total Commercial Paper (Cost $328,861,886)................................................ 328,861,886
------------
Medium Term Notes .3%
1,200,000 General Electric Capital Corp., 7.625%, 01/10/97 (Cost $1,211,935) ............................. 1,211,935
------------
Total Short Term Investments (Cost $375,039,414).......................................... 375,039,414
------------
gReceivables from Repurchase Agreements 13.3%..................................................
$ 17,725,000 B.T. Securities Corp., 5.35%, 07/01/96, (Maturity Value $17,207,668)
Collateral: U.S. Treasury Bills, 09/05/96 ..................................................... $ 17,200,000
20,025,000 SBC Capital Markets, Inc., 5.47%, 07/01/96, (Maturity Value $20,009,117)
Collateral: U.S. Treasury Notes, 6.75%, 04/30/00 .............................................. 20,000,000
20,534,000 UBS Securities, Inc., 5.43%, 07/01/96, (Maturity Value $20,009,050)
Collateral: U.S. Treasury Bills, 08/22/96 ..................................................... 20,000,000
------------
Total Receivables from Repurchase Agreements (Cost $57,200,000)........................... 57,200,000
------------
Total Investments (Cost $432,239,414) 100.7% ........................................ 432,239,414
Liabilities in Excess of Other Assets (.7)% ......................................... (3,008,825)
------------
Net Assets 100.0% ................................................................... $429,230,589
============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
fCertain 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.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Growth and Income Fund (Note 1)
Common Stocks 93.6%
Automobile 1.1%
<S> <C> <C>
184,500 Chrysler Corp. .............................................................................. $ 11,439,000
------------
Chemicals, Basic 2.3%
184,300 Dow Chemical Co. ............................................................................ 14,006,800
64,500 Du Pont, (E.I.), De Nemours & Co............................................................. 5,103,563
104,500 Goodrich (B.F.) Co. ......................................................................... 3,905,688
------------
23,016,051
------------
Commercial Services .9%
512,300 Ogden Corp. ................................................................................. 9,285,438
------------
Electrical Equipment 1.6%
183,100 General Electric Co. ........................................................................ 15,838,150
------------
Financial Services 7.8%
98,500 Bank of Boston Corp. ........................................................................ 4,875,750
195,800 Christiania Bank, ADS........................................................................ 4,615,887
1,895,000 Christiania Bank Og Kreditkasse (Norway) .................................................... 4,467,377
347,000 Great Western Financial Corp. ............................................................... 8,284,625
262,000 H & R Block, Inc. ........................................................................... 8,547,750
111,000 J. P. Morgan & Co., Inc. .................................................................... 9,393,375
270,000 National City Corp. ......................................................................... 9,483,750
231,500 Nordbanken AB (Sweden) ...................................................................... 4,475,457
119,700 Nordbanken AB - Sponsored ADR ............................................................... 4,628,189
304,900 PNC Bank Corp. .............................................................................. 9,070,775
510,000 Roosevelt Financial Corp. ................................................................... 9,817,500
------------
77,660,435
------------
Forest Products & Paper 4.8%
119,000 Georgia-Pacific Corp. ....................................................................... 8,449,000
1,020,000 Portucel Industrial, SA...................................................................... 6,535,038
454,700 Potlatch Corp. .............................................................................. 17,790,138
145,000 Union Camp Corp. ............................................................................ 7,068,750
175,000 Weyerhaeuser Co. ............................................................................ 7,437,500
------------
47,280,426
------------
Insurance 2.2%
301,900 Lincoln National Corp. ...................................................................... 13,962,875
89,500 St. Paul Cos., Inc. ......................................................................... 4,788,250
100,100 Zenith National Insurance ................................................................... 2,740,238
------------
21,491,363
------------
Medical Supplies .7%
243,800 Glaxo Wellcome Plc., Sponsored ADR .......................................................... 6,521,650
------------
Miscellaneous Manufacturing 4.1%
127,300 Cooper Industries, Inc. ..................................................................... 5,282,950
1,310,000 Hanson, Plc. ................................................................................ 18,667,500
239,500 Minnesota Mining & Manufacturing Co. ........................................................ 16,525,500
------------
40,475,950
------------
Oil/Gas Transmission 3.9%
253,000 Consolidated Natural Gas Co. ................................................................ 13,219,250
320,000 National Fuel Gas Co. ....................................................................... 11,520,000
479,800 Pacific Enterprises ......................................................................... 14,214,075
------------
38,953,325
------------
Petroleum, Integrated 15.9%
233,700 Amoco Corp. ................................................................................. $ 16,914,038
192,000 Atlantic Richfield Co. ...................................................................... 22,752,000
288,000 Chevron Corp. ............................................................................... 16,992,000
213,500 Exxon Corp. ................................................................................. 18,547,813
128,000 Mobil Corp. ................................................................................. 14,352,000
100,000 Occidental Petroleum Corp. .................................................................. 2,475,000
92,900 Royal Dutch Petroleum Co., ADR............................................................... 14,283,375
256,200 Texaco, Inc. ................................................................................ 21,488,775
336,900 Ultramar Corp. .............................................................................. 9,770,100
885,000 YPF Sociedad Anonima ........................................................................ 19,912,500
------------
157,487,601
------------
Pharmaceuticals 3.7%
266,000 American Home Products Corp. ................................................................ 15,993,250
231,500 Bristol-Myers Squibb Co. .................................................................... 20,835,000
------------
36,828,250
------------
Printing & Publishing 2.0%
315,000 Dun & Bradstreet Corp. ...................................................................... 19,687,500
------------
Real Estate Investment Trust 4.0%
515,300 Equity Residential Properties Trust ......................................................... 16,940,488
410,000 FelCor Suite Hotels, Inc. ................................................................... 12,505,000
484,400 Oasis Residential, Inc. ..................................................................... 10,596,250
------------
40,041,738
------------
Retail 2.0%
375,900 Penney (J.C.) Co., Inc. ..................................................................... 19,734,750
------------
Metals .9%
335,000 British Steel Plc., Sponsored ADR ........................................................... 8,500,625
------------
Telecommunications 11.2%
142,000 Ameritech Corp. ............................................................................. 8,431,250
195,800 BellSouth Corp. ............................................................................. 8,297,025
58,300 British Telecom Plc., Sponsored ADR ......................................................... 3,133,625
447,500 GTE Corp. ................................................................................... 20,025,625
390,000 NYNEX Corp. ................................................................................. 18,525,000
434,900 Southern New England Telecommunications Corp. ............................................... 18,265,800
106,400 Sprint Corp. ................................................................................ 4,468,800
360,000 Telefonos de Mexico, SA, ADR................................................................. 12,060,000
559,100 US West Communications Group................................................................. 17,821,310
------------
111,028,435
------------
Tobacco 6.6%
365,100 American Brands, Inc. ....................................................................... 16,566,410
220,600 Philip Morris Cos., Inc. .................................................................... 22,942,400
393,560 RJR Nabisco Holdings Corp. .................................................................. 12,200,360
415,000 UST, Inc. ................................................................................... 14,213,750
------------
65,922,920
------------
Utilities 17.9%
223,000 American Electric Power Co. ................................................................. 9,505,375
686,100 Central & South West Corp. .................................................................. 19,896,900
483,000 CINergy Corp. ............................................................................... 15,456,000
477,000 Dominion Resources, Inc. .................................................................... 19,080,000
Utilities (cont.)
590,000 Enova Corp. ................................................................................. $ 13,643,750
425,300 General Public Utilities Corp. .............................................................. 14,991,825
376,400 New England Electric System ................................................................. 13,691,550
353,000 Oklahoma Gas & Electric Co. ................................................................. 13,987,625
200,000 Pacific Gas & Electric Co. .................................................................. 4,650,000
670,000 PacifiCorp .................................................................................. 14,907,500
409,900 PECO Energy Co. ............................................................................. 10,657,400
338,000 Public Service Co. of Colorado .............................................................. 12,421,500
200,000 Public Service Enterprise Group, Inc. ....................................................... 5,475,000
230,000 Texas Utilities Co. ......................................................................... 9,832,500
------------
178,196,925
------------
Total Long Term Investments (Cost $815,964,222) ....................................... 929,390,532
------------
Face
Amount
g,h Receivables from Repurchase Agreements 5.6%
$55,644,228 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $55,925,733) (Cost $55,900,396)
Chase Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,701,573)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
USB Securities, Inc., (Maturity Value $8,037,360)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ....................... 55,900,396
------------
Total Investments (Cost $871,864,618) 99.2%....................................... 985,290,928
Other Assets & Liabilities, Net .8%............................................... 7,843,783
------------
Net Assets 100.0%................................................................ $993,134,711
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $871,874,395
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an excess
of value over tax cost ..................................................................... $124,709,942
Aggregate gross unrealized depreciation for all investments in which there was an excess
of tax cost over value ..................................................................... (11,293,409)
------------
Net unrealized appreciation ............................................................... $113,416,533
============
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
dSecurities traded in foreign currency and valued in U.S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Shares/ Value
Warrants Income Securities Fund (Note 1)
Common Stocks 31.5%
Telecommunications .9%
<S> <C> <C>
355,000 US West Communications Group............................................................... $ 11,315,625
------------
Conglomerates .4%
380,000 Hanson, Plc., ADR.......................................................................... 5,415,000
------------
Consumer Products 1.4%
180,000 Phillip Morris Cos., Inc. ................................................................. 18,720,000
93,750 a,bSpecialty Foods Corp. .................................................................. 46,875
------------
18,766,875
------------
Energy 1.4%
576,500 dAthabasca Oil Sands Trust, (Canada)....................................................... 5,763,944
30,000 Atlantic Richfield Co. .................................................................... 3,555,000
50,000 BP Prudhoe Bay Royalty Trust .............................................................. 750,000
500,000 dCanadian Oil Sands Trust - Units (Canada)................................................. 5,200,513
125,000 Ultramar Corp. ............................................................................ 3,625,000
------------
18,894,457
------------
Home Builders
3,088 a,mNVR, Inc. .............................................................................. 34,354
------------
Metals 1.6%
185,200 Driefontein Consolidated Mines, Ltd., ADR.................................................. 2,430,750
390,000 Free State Consolidated Gold Mines, Ltd., ADR.............................................. 3,607,500
620,000 Hartebeestfontein Gold Mining Co., Ltd., ADR............................................... 2,089,090
216,500 Impala Platinum Holdings, Ltd., ADR........................................................ 3,110,347
60,000 Kinross Mines, Ltd., ADR................................................................... 636,972
217,084 Rustenburg Platinum Holdings, Ltd., ADR.................................................... 3,381,756
19,000 St. Helena Gold Mines, Ltd., ADR........................................................... 103,313
256,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR............................................. 2,048,000
102,500 Western Deep Levels, Ltd., ADR............................................................. 3,715,625
------------
21,123,353
------------
Pharmaceuticals 2.4%
150,000 American Home Products Corp. .............................................................. 9,018,750
85,000 Bristol-Myers Squibb Co. .................................................................. 7,650,000
147,600 Merck & Co., Inc. ......................................................................... 9,538,650
105,000 Pharmacia & Upjohn, Inc. .................................................................. 4,659,375
------------
30,866,775
------------
Real Estate Investment Trust 2.6%
200,000 Equity Residential Properties Trust, Inc. ................................................. 6,575,000
125,000 FelCor Suite Hotels, Inc. ................................................................. 3,812,500
150,000 Gables Residential Trust .................................................................. 3,525,000
145,000 Meditrust Corp. ........................................................................... 4,839,375
200,000 Post Properties, Inc. ..................................................................... 7,075,000
360,400 iTanger Factory Outlet Centers, Inc. ...................................................... 8,379,300
------------
34,206,175
------------
Retail
8,000 aFederated Department Stores, Inc. ........................................................ 273,000
------------
Utilities 20.8%
390,000 American Electric Power Co., Inc. ......................................................... 16,623,750
650,000 Central & South West Corp. ................................................................ 18,850,000
511,000 CINergy Corp. ............................................................................. 16,352,000
450,200 Delmarva Power & Light Co. ................................................................ 9,454,200
Utilities (cont.)
330,000 Dominion Resources, Inc. .................................................................. $ 13,200,000
610,000 Edison International ...................................................................... 10,751,250
470,000 Enova Corp. ............................................................................... 10,868,750
435,000 Entergy Corp. ............................................................................. 12,343,125
355,000 Florida Progress Corp. .................................................................... 12,336,250
240,000 FPL Group, Inc. ........................................................................... 11,040,000
320,000 General Public Utilities Corp. ............................................................ 11,280,000
142,000 Hawaiian Electric Industries, Inc. ........................................................ 5,041,000
300,000 Houston Industries, Inc. .................................................................. 7,387,500
400,000 Long Island Lighting Co. .................................................................. 6,700,000
175,000 Nevada Power Co. .......................................................................... 3,850,000
260,000 New England Electric System ............................................................... 9,457,500
300,000 New York State Electric & Gas Corp. ....................................................... 7,312,500
385,000 Ohio Edison Co. ........................................................................... 8,421,875
610,000 Pacific Gas & Electric Co. ................................................................ 14,182,500
120,000 PacifiCorp ................................................................................ 2,670,000
240,000 PECO Energy Co. ........................................................................... 6,240,000
195,000 Potomac Electric Power Co. ................................................................ 5,167,500
337,900 Public Service Enterprise Group, Inc. ..................................................... 9,250,013
135,000 Scana Corp. ............................................................................... 3,796,875
460,000 Southern Co. .............................................................................. 11,327,500
400,000 Southwestern Public Services Co. .......................................................... 13,050,000
320,000 Texas Utilities Co. ....................................................................... 13,680,000
74,200 Western Resources, Inc. ................................................................... 2,226,000
------------
272,860,088
------------
Total Common Stocks (Cost $371,567,768).............................................. 413,755,702
------------
Preferred Stocks .5%
Automotive
14,640 Harvard Industries, Inc., 14.25% pfd., PIK................................................. 388,875
------------
Cable Systems .4%
31,272 bCablevision Systems Corp., 11.125% pfd., PIK, Series L ................................... 2,931,769
2,453 Time Warner, Inc., 10.25% pfd., Series K .................................................. 2,404,409
------------
5,336,178
------------
Consumer Products .1%
11,000 Pantry Pride, Inc., $14.875 pfd., Series B ................................................ 1,102,750
------------
Total Preferred Stocks (Cost $7,168,710)............................................. 6,827,803
------------
Convertible Preferred Stocks 9.2%
Apparel/Textile .1%
40,000 Fieldcrest Cannon, Inc., $3.00 cvt. pfd., Series A......................................... 1,800,000
------------
Cable Systems .5%
240,000 Cablevision Systems Corp., 8.50% cvt. pfd. ................................................ 6,240,000
------------
Communications .5%
140,000 dNortel Inversora, SA, cvt. pfd. (Argentina)............................................... 6,440,000
------------
Consumer Products .2%
300,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd., Series C.................................... 1,950,000
------------
Energy 4.1%
50,000 bDevon Financing Trust, $3.25 cvt. pfd. ................................................... 2,562,500
159,800 Enron Oil & Gas, 6.25% cvt. pfd. .......................................................... 4,134,825
Energy (cont.)
75,000 Gerrity Oil & Gas, $1.50 cvt. pfd., Series G............................................... $ 937,500
138,000 Maxus Energy Corp., $4.00 cum. cvt. pfd. .................................................. 6,865,500
235,000 bMcDermott International, Inc., $2.875 cvt. pfd., Series C................................. 9,752,500
209,700 Noble Drilling Corp., $1.50 cvt. pfd. ..................................................... 7,391,925
75,000 bOccidental Petroleum Corp., $3.875 cvt. pfd. ............................................. 4,500,000
170,000 bParker & Parsley Capital, 6.25% cvt. pfd. ................................................ 9,477,500
66,923 Santa Fe Energy Resources, Inc., 7.00% cvt. pfd. .......................................... 1,463,941
450,000 Santa Fe Energy Resources, Inc., 8.25% cvt. pfd. .......................................... 4,950,000
100,000 Snyder Oil Corp., $1.50 cvt. exch. pfd. ................................................... 1,900,000
------------
53,936,191
------------
Metals 2.6%
138,500 Amax Gold, Inc., $3.75 cvt. pfd., Series B................................................. 7,098,125
65,000 Armco, Inc., $3.625 cum. cvt. pfd., Series A............................................... 3,079,375
61,000 Battle Mountain Gold Co., $3.25 cvt. pfd. ................................................. 2,989,000
190,000 Coeur D' Alene Mines Corp, 7.00% cum. cvt. pfd. ........................................... 3,752,500
55,000 Cyprus Minerals, $4.00 cvt. pfd., Series A................................................. 3,018,125
108,800 Freeport-McMoRan Copper & Gold, Inc., $1.25 cum. cvt. pfd. ................................ 3,753,600
90,000 Freeport-McMoRan Copper & Gold, Inc., $1.75 cvt. pfd. ..................................... 2,790,000
60,000 bFreeport-McMoRan, Inc., 4.375% cvt. exch. pfd. ........................................... 3,990,000
70,000 Hecla Mining Co., $3.50 cvt. pfd., Series B................................................ 2,948,750
------------
33,419,475
------------
Real Estate Investment Trust 1.0%
135,000 Security Cap Industrial, 7.00%, cvt. pfd. ................................................. 3,121,875
400,000 Security Capital Pacific Trust, 1.75% cvt. pfd., Series A.................................. 10,500,000
------------
13,621,875
------------
Restaurants .3%
210,000 Flagstar Cos., $2.25 cvt. pfd., Series A................................................... 2,690,625
------------
Total Convertible Preferred Stocks (Cost $116,562,871)............................... 120,098,166
------------
Warrants
3,128 a,mNVR, Inc. (Cost $13,294)................................................................ 6,647
------------
Miscellaneous
30,814 aMiscellaneous Securities (Cost $10,477)................................................... 10,477
------------
Total Common Stocks, Preferred Stocks, Convertible Preferred Stocks, Warrants
and Miscellaneous Securities (Cost $495,323,120).......................................... 540,698,795
------------
Face
Amount
Corporate Bonds 28.9%
Automotive 1.4%
$ 4,000,000 Collins & Aikman Products, senior sub. notes, 11.50%, 04/15/05 ............................ 4,080,000
400,000 Exide Corp., senior notes, 10.75%, 12/15/02 ............................................... 408,000
5,000,000 Harvard Industries, Inc., senior notes, 11.125%, 08/01/05 ................................. 4,750,000
8,350,000 Motor Wheel Corp., senior notes, Series B, 11.50%, 03/01/00 ............................... 8,663,125
------------
17,901,125
------------
Building Products .8%
9,250,000 Inter-City Products Corp., senior notes, 9.75%, 03/01/00 .................................. 8,671,875
2,000,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 ......................................... 1,910,000
------------
10,581,875
------------
Cable Systems 1.8%
$ 150,000 Cablevision Industries Corp., guaranteed senior sub. notes, 10.75%, 01/30/02 .............. $ 161,250
3,000,000 Cablevision Systems Corp., senior sub. deb., 9.875%, 04/01/23 ............................. 2,760,000
8,000,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 ............................... 8,747,144
7,300,000 Helicon Group L.P. Corp., S.F., senior secured notes, Series B, 9.00%, 11/01/03 ........... 7,263,500
5,000,000 Storer Communiciations, Inc., sub. deb., 10.00%, 05/15/03 ................................. 5,037,500
------------
23,969,394
------------
Chemicals 1.3%
8,000,000 Applied Extrusion Technology, senior notes, Series B, 11.50%, 04/01/02 .................... 8,120,000
3,250,000 IMC Fertilizer Group, Inc., notes, Series B, 10.75%, 06/15/03 ............................. 3,485,625
725,000 UCC Investors, senior notes, 10.50%, 05/01/02 ............................................. 764,875
4,150,000 UCC Investors, senior notes, 11.00%, 05/01/03 ............................................. 4,378,250
------------
16,748,750
------------
Consumer Products 2.8%
2,250,000 Calmar, Inc., senior sub. notes, 11.50%, 08/15/05 ......................................... 2,205,000
7,750,000 Hines Horticulture, senior sub. notes, 11.75%, 10/15/05 ................................... 8,060,000
5,050,000 Mafco, Inc., senior sub. notes, 11.875%, 11/15/02 ......................................... 5,327,750
2,000,000 bPackaging Resources, Inc., senior notes, 11.625%, 05/01/03 ............................... 2,022,500
8,000,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ......................... 7,520,000
5,000,000 Revlon Consumer Product Corp., senior sub. notes, Series B, 10.50%, 02/15/03 .............. 5,037,500
5,000,000 RJR Nabisco, Inc., notes, 9.25%, 08/15/13 ................................................. 5,000,000
1,150,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ........................................... 1,132,750
------------
36,305,500
------------
Energy 2.2%
3,250,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ........................................... 3,371,875
9,835,000 Gerrity Oil & Gas Corp., senior sub. notes, 11.75%, 07/15/04 .............................. 10,425,100
1,000,000 Global Marine, Inc., senior secured notes, 12.75%, 12/15/99 ............................... 1,086,250
10,000,000 Mesa Capital Corp., disc. notes, 12.75%, 06/30/98 ......................................... 10,050,000
1,000,000 Mesa Operating Co., guaranteed, 10.625%, 07/01/06 ......................................... 1,021,250
1,000,000 bPlains Resources, Inc., senior sub. notes, 10.25%, 03/15/06 .............................. 990,000
1,752,000 Tesoro Petroleum Corp., S.F., sub. deb., 12.75%, 03/15/01 ................................. 1,760,760
------------
28,705,235
------------
Entertainment .1%
650,000 bAMF Group, Inc., senior sub. notes, 10.875%, 03/15/06 .................................... 648,375
------------
Food & Beverages 1.8%
3,900,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ............................ 3,802,500
5,283,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ....................................... 4,226,400
1,600,000 Doane Products Co., senior notes, 10.625%, 03/01/06 ....................................... 1,608,000
1,010,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ...................... 1,052,925
6,000,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ..................... 5,910,000
4,000,000 Specialty Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 ...................... 3,470,000
4,000,000 Specialty Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 ................. 3,755,000
------------
23,824,825
------------
Food Retailing 2.7%
1,000,000 Americold Corp., senior sub. notes, 12.875%, 05/01/08 ..................................... 1,020,000
9,000,000 Americold Corp., senior sub. notes, Series B, 11.50%, 03/01/05 ............................ 9,146,250
6,000,000 Bruno's, Inc., 10.50%, 08/01/05 ........................................................... 5,955,000
7,000,000 Grand Union Capital Corp., senior sub. notes, 12.00%, 09/01/04 ............................ 6,571,250
Food Retailing (cont.)
$ 10,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05 ................................... $ 9,250,000
4,000,000 Smith's Food & Drug, senior sub. notes, 11.25%, 05/15/07 .................................. 4,070,000
------------
36,012,500
------------
Gaming & Leisure 1.5%
8,500,000 Aztar Corp., senior sub. notes, 11.00%, 10/01/02 .......................................... 8,861,250
2,200,000 Harveys Casinos Resorts, senior sub. notes, 10.625%, 06/01/06 ............................. 2,211,000
8,000,000 Rio Hotel & Casino, Inc., senior sub. notes, 10.625%, 07/15/05 ............................ 8,360,000
------------
19,432,250
------------
Health Care Services .6%
3,000,000 bDade International, Inc., senior sub. notes, 11.125%, 05/01/06 ........................... 3,090,000
1,500,000 OrNda Healthcorp., Inc., senior sub. notes, 12.25%, 05/15/02 .............................. 1,629,375
4,000,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625% thereafter, 12/15/03 3,660,000
------------
8,379,375
------------
Industrial Products 1.9%
8,650,000 Easco Corp., senior notes, Series B, 10.00%, 03/15/01 ..................................... 8,736,500
8,450,000 bRBX Corp., senior sub. notes, 11.25%, 10/15/05 ........................................... 8,027,500
5,030,000 RHI Holdings, Inc., senior sub. deb., 11.875%, 03/01/99 ................................... 4,954,550
2,696,000 Thermadyne Industries, Inc., notes, 10.75%, 11/01/03 ...................................... 2,669,040
246,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ............................... 243,540
------------
24,631,130
------------
Information Technology .5%
4,625,000 a,kAnacomp, Inc., senior sub. notes, 15.00%, 11/01/00 ..................................... 5,185,781
1,600,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 .................................... 1,712,000
------------
6,897,781
------------
Media & Broadcasting .2%
2,000,000 bBenedek Broadcasting, senior secured notes, 11.875%, 03/01/05 ............................ 2,120,000
------------
Metals 1.0%
1,000,000 Armco Steel, Inc., senior notes, 11.375%, 10/15/99 ........................................ 1,032,500
6,020,000 Jorgensen, Earle M. Co., senior notes, 10.75%, 03/01/00 ................................... 5,959,800
6,000,000 Republic Engineered Steel, first mortgage, 9.875%, 12/15/01 ............................... 5,625,000
815,000 UCAR Global Enterprises, Inc., senior sub. notes, Series B, 12.00%, 01/15/05 .............. 929,100
------------
13,546,400
------------
Paper & Forest Products .9%
600,000 bFour M Corp., senior notes, 12.00%, 06/01/06 ............................................. 613,500
7,000,000 Rapp International Finance Co., secured notes, 13.25%, 12/15/05 ........................... 7,525,000
4,000,000 Riverwood International, senior sub. notes, 10.875%, 04/01/08 ............................. 3,960,000
------------
12,098,500
------------
Railroads .5%
6,000,000 Southern Pacific Rail Co., senior notes, 9.375%, 08/15/05 ................................. 6,270,000
------------
Restaurants .5%
10,000,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 .................................. 6,600,000
------------
Retail .7%
9,940,000 Levitz Furniture Corp., senior notes, 13.375%, 10/15/98 ................................... 9,542,400
------------
Textiles & Apparels 2.0%
7,000,000 a,kBibb Co., senior sub. notes, 14.00%, 10/01/99 .......................................... 3,185,000
10,000,000 Consoltex Group, Inc., senior sub. notes, Series B, 11.00%, 10/01/03 ...................... 9,150,000
175,000 a,kForstmann Textile, Inc., S.F., senior sub. notes, 14.75%, 04/15/99 ..................... 49,875
Textiles & Apparels (cont.)
$ 8,300,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ...................................... $ 7,947,250
5,000,000 JPS Textile Group, Inc., S.F., sub. notes, 7.00%, 05/15/00 ................................ 1,425,000
1,000,000 Polysindo International Finance, guaranteed, 11.325%, 06/15/06 ............................ 1,022,500
5,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ............................... 4,875,000
------------
27,654,625
------------
Utilities 3.2%
195,782,500 cESCOM, E168, utility deb., 11.00%, 06/01/08, (South Africa)............................... 35,690,883
4,153,739 Midland CoGeneration Venture, S.F., sub. deb., Series C, 10.33%, 07/23/02 ................. 4,330,273
2,000,000 Texas, New Mexico Power, secured deb., 10.75%, 09/15/03 ................................... 2,093,454
------------
42,114,610
------------
Wireless Communications .4%
5,000,000 CommNet Cellular, Inc., sub. notes, 11.25%, 07/01/05 ...................................... 5,350,000
------------
Total Corporate Bonds (Cost $381,443,454)............................................ 379,334,650
------------
Convertible Corporate Bonds 4.3%
Automotive .1%
2,000,000 bExide Corp., cvt. senior sub. notes, 2.90%, 12/15/05 ..................................... 1,100,000
------------
Biotechnology .1%
2,000,000 Centocor, Inc., Eurobonds, cvt. sub. deb., 6.75%, 10/16/01 ................................ 1,850,000
------------
Computer/Technology .6%
1,500,000 bAltera Corp., cvt. sub. notes, 5.75%, 06/15/02 ........................................... 1,515,000
3,000,000 Conner Peripherals, Inc., cvt. sub. deb., 6.75%, 03/01/01 ................................. 3,030,000
2,815,000 Maxtor Corp., cvt. sub. deb., 5.75%, 03/01/12 ............................................. 1,984,575
1,000,000 bXilinx, Inc., cvt. sub. notes, 5.25%, 11/01/02 ........................................... 922,500
------------
7,452,075
------------
Energy 1.5%
4,500,000 Ashland, Inc., S.F., cvt. deb., 6.75%, 07/01/14 ........................................... 4,494,375
9,000,000 Oryx Energy Co., cvt. sub. deb., 7.50%, 05/15/14 .......................................... 7,920,000
276,000 Pogo Producing Co., cvt. sub. deb., 8.00%, 12/31/05 ....................................... 281,520
7,250,000 Snyder Oil Corp., cvt. sub. notes, 7.00%, 05/15/01 ........................................ 6,633,750
------------
19,329,645
------------
Health Care Services .3%
3,000,000 Grancare, Inc., cvt. sub. deb., 6.50%, 01/15/03 ........................................... 2,865,000
1,000,000 bMedical Care International, Inc., cvt. sub. deb., 6.75%, 10/01/06 ........................ 1,005,000
------------
3,870,000
------------
Metals 1.4%
5,000,000 Ashanti Capital, Ltd., cvt. notes, 5.50%, 03/15/03 ........................................ 4,750,000
100,000 Coeur D'Alene Mines Corp., cvt. senior sub. deb., 6.00%, 06/10/02 ......................... 94,875
6,000,000 Coeur D'Alene Mines Corp., cvt. sub. deb., 6.375%, 01/31/04 ............................... 5,940,000
1,800,000 FMC Corp., Eurobonds, cvt. senior sub. deb., 6.75%, 01/16/05 .............................. 1,656,000
5,850,000 bHomestake Mining Co., cvt. sub. deb., 5.50%, 06/23/00 .................................... 6,040,125
------------
18,481,000
------------
Pollution Control .2%
3,610,000 Air & Water Technology Corp., cvt. sub. deb., 8.00%, 05/15/15 ............................. 3,176,800
------------
Retail .1%
1,180,000 Drug Emporium, Inc., cvt. sub. deb., 7.75%, 10/01/14 ...................................... 951,375
------------
Total Convertible Corporate Bonds (Cost $55,339,910)................................. 56,210,895
------------
Zero Coupon/Step-up Bonds 2.8%............................................................
$ 2,000,000 bAMF Group, Inc., senior disc. notes, zero coupon to 03/15/01, (original accretion rate 12.25%),
12.25%, 03/15/06 ......................................................................... $ 1,085,000
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 .............................................................. 6,875,000
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 .......................... 2,171,000
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 .............................................................. 850,000
10,000,000 Food 4 Less Supermarkets, Inc., zero coupon to 06/15/00, (original accretion rate 13.625%),
13.625% thereafter, 07/15/05 ............................................................. 4,700,000
1,300,000 bL.F.C. Holding Corp., senior deb., zero coupon to 06/15/97, (original accretion rate 15.00%),
15.00% thereafter, 06/15/02 .............................................................. 975,000
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 ..................................................... 8,645,000
1,300,000 jMesa Operating Co., senior sub. notes, zero coupon to 07/01/01, (original accretion rate
11.625%), 11.625% thereafter, 07/01/06.................................................... 773,500
8,000,000 Revlon Worldwide Corp., senior secured disc. notes, Series B, (original accretion rate 12.00%),
0.00%, 03/15/98 .......................................................................... 6,700,000
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 ............................ 2,781,250
1,500,000 UCC Investors, senior notes, zero coupon to 05/01/98, (original accretion rate 12.00%), 12.00%
thereafter, 05/01/05 ..................................................................... 1,252,500
------------
Total Zero Coupon/Step-up Bonds (Cost $37,513,992)................................... 36,808,250
------------
Total Bonds (Cost $474,297,356)...................................................... 472,353,795
------------
U.S. Government Securities 7.1%
75,000,000 U.S. Treasury Bonds, 6.25% - 7.125%, 02/15/23 - 08/15/23 .................................. 69,009,369
24,390,000 U.S. Treasury Notes, 6.00% - 6.875%, 04/30/97 - 08/15/02 .................................. 24,306,680
------------
Total U.S. Government Securities (Cost $96,236,585).................................. 93,316,049
------------
Foreign Government & Agency Securities 11.4%
14,000,000 cCanadian Government, first coupon deb., 8.00%, 06/01/23 .................................. 10,136,605
110,000,000 Republic of Argentina, Series L, 5.25%, 03/31/23 .......................................... 60,362,500
22,552,500 Republic of Brazil, 6.375%, 01/01/01 ...................................................... 21,142,969
36,000,000 Republic of Brazil, 5.00%, 04/15/24 ....................................................... 19,935,000
36,000,000 Republic of Ecuador, 3.25%, 02/28/25 ...................................................... 12,937,500
25,000,000 cRepublic of South Africa, 12.00%, 02/28/05 ............................................... 5,015,000
30,000,000 United Mexican States, Series B, 6.25%, 12/31/19 .......................................... 19,481,250
------------
Total Foreign Government & Agency Securities (Cost $137,817,862)..................... 149,010,824
------------
Total Long Term Investments (Cost $1,203,674,923).................................... 1,255,379,463
------------
g,hReceivables from Repurchase Agreement 3.3%
43,487,247 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $43,707,900) (Cost $43,688,098)
Chase Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $6,019,044)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $6,281,476)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ..................... $ 43,688,098
------------
Total Investments (Cost $1,247,363,021) 99.1% .................................. 1,299,067,561
Other Assets and Liabilities, Net .9% .......................................... 11,982,141
------------
Net Assets 100.0%............................................................... $1,311,049,702
============
At June 30, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$1,247,363,021 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................. $ 92,178,033
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (40,473,493)
------------
Net unrealized appreciation.............................................................. $ 51,704,540
============
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-In-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount is stated in foreign currency and value is stated in U.S. dollars.
dSecurities traded in foreign currency and valued in U. S. dollars.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement
iSee Note 8 regarding holdings of 5% or more of voting securities.
jSee Note 1(i) regarding securities purchased on a when-issued basis.
kSee Note 7 regarding defaulted securities.
mSee Note 9 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Shares/ Value
Country* Warrants Templeton International Equity Fund (Note 1)
Common Stocks & Warrants 79.6%
Argentina 1.9%
<S> <C> <C>
AR 588,699 aCiadea, SA...................................................................... $ 4,151,861
US 2,217,000 Transportadora de Gas del Sur, SA, Class B, ADR.................................. 2,715,825
AR 56,000 YPF Sociedad Anonima ............................................................ 1,263,267
US 495,000 YPF Sociedad Anonima, ADR........................................................ 11,137,500
------------
19,268,453
------------
Australia 5.0%
AU 338,674 Australia & New Zealand Banking Group, Ltd. ..................................... 1,602,403
AU 1,359,235 Email, Ltd. ..................................................................... 3,525,347
AU 1,497,533 Gio Australia Holdings, Ltd. .................................................... 3,683,954
AU 1,003,000 National Foods, Ltd. ............................................................ 1,135,159
AU 1,984,500 News International, Plc. ........................................................ 12,820,723
AU 6,527,766 Pacific Dunlop, Ltd. ............................................................ 14,673,172
AU 4,519,236 Pioneer International, Ltd. ..................................................... 13,141,960
------------
50,582,718
------------
Austria .6%
AT 33,000 Boehler Uddeholm, AG............................................................. 2,558,976
US 27,055 bBoehler Uddeholm, AG............................................................ 2,097,973
AT 39,400 aMayr-Melnhof Karton, AG......................................................... 1,696,959
------------
6,353,908
------------
Belgium .5%
BE 9,054 Solvay, SA ...................................................................... 5,604,244
------------
Bermuda 2.6%
US 547,000 Ace, Ltd. ....................................................................... 25,709,000
------------
Brazil .7%
US 276,365 Companhia Siderurgica Nacional, ADR.............................................. 7,045,704
------------
Canada 2.0%
CA 205,800 Bank of Montreal ................................................................ 5,034,770
CA 92,700 Canadian Imperial Bank of Commerce .............................................. 2,990,980
CA 29,400 Gendis, Inc., Class A ........................................................... 179,813
CA 357,000 Hudsons Bay Co. ................................................................. 5,412,855
CA 127,000 London Insurance Group, Inc. .................................................... 2,660,465
CA 447,000 National Bank of Canada ......................................................... 3,732,503
------------
20,011,386
------------
China .7%
CN 6,960,000 Maanshan Iron & Steel Co., Ltd., Class H ........................................ 1,222,827
US 338,300 Shandong Huaneng Power, ADR...................................................... 2,790,975
CN 8,400,000 Shanghai Hai Xing Shipping Co., Class H.......................................... 553,435
CN 1,494,000 Shenzhen China Bicycles Co. (Holdings), Ltd., Class B............................ 345,478
CN 8,728,000 Yizheng Chemical Fibre Co., Ltd., Class H........................................ 1,928,092
------------
6,840,807
------------
Colombia .3%
US 159,000 Banco Ganadero, SA, Class C, ADR ................................................ 3,100,500
------------
Czech Republic .3%
US 120,000 a,bKomercni Banka, AS, GDR....................................................... 3,240,000
------------
Ecuador .1%
US 200 bLa Cemento Nacional CA, GDR..................................................... 36,200
------------
Finland 2.4%
FI 111,562 Amer Group, Ltd., Class A ....................................................... $ 1,878,817
FI 1,754,300 aEnso Oy, Class R................................................................ 13,673,658
FI 153,200 Nokia, AB, Class A............................................................... 5,656,249
FI 171,000 Outokumpu Oy, Class A............................................................ 2,879,813
------------
24,088,537
------------
France 5.3%
FR 27,323 Alcatel Cable, SA................................................................ 2,326,379
FR 13,009 Cie de Saint Gobain ............................................................. 1,742,373
FR 70,710 Ecco, SA ........................................................................ 17,800,350
FR 14,850 Labinal, SA ..................................................................... 2,170,812
FR 13,915 aMarine Wendel .................................................................. 1,152,314
FR 315,590 aPechiney, SA, Class A........................................................... 12,754,271
FR 148,024 Societe Elf Aquitane, SA......................................................... 10,894,083
FR 60,833 Total, SA, Class B .............................................................. 4,514,952
------------
53,355,534
------------
Greece 1.0%
GR 115,733 bAlpha Credit Bank .............................................................. 6,110,202
GR 69,970 Ergo Bank, SA ................................................................... 3,854,095
------------
9,964,297
------------
Hong Kong 6.6%
HK 5,961,000 C.P. Pokphand Co., Ltd. ......................................................... 2,367,997
HK 846,000 Cathay Pacific Airways, Ltd. .................................................... 1,551,943
HK 623,000 Cheung Kong Holdings, Ltd. ...................................................... 4,486,936
HK 2,086,000 Consolidated Electric Power Asia, Ltd. .......................................... 3,449,382
HK 9,123,000 Dairy Farm International Holdings, Ltd. ......................................... 7,708,935
HK 9,922,000 aGreat Wall Electronic International, Ltd. ...................................... 717,801
HK 779,000 Hang Lung Development Co., Ltd. ................................................. 1,464,257
HK 122,338 HSBC Holdings, Plc. ............................................................. 1,849,116
HK 905,200 Jardine Matheson Holdings, Ltd. ................................................. 6,653,220
HK 2,864,250 Jardine Strategic Holdings, Ltd. ................................................ 9,165,600
HK 318,250 aJardine Strategic Holdings, Ltd., warrants...................................... 98,658
HK 873,700 Melco International Development, Ltd. ........................................... 242,671
HK 5,999,000 Oriental Press Group, Ltd. ...................................................... 3,216,206
HK 7,155,000 Peregrine Investments Holdings, Ltd. ............................................ 10,306,269
HK 715,500 aPeregrine Investments Holdings, Ltd., warrants.................................. 88,736
HK 17,474,000 Shun Tak Holdings ............................................................... 10,722,669
HK 3,172,400 Sing Tao Holdings, Ltd. ......................................................... 1,874,977
HK 1,974,000 Yue Yuen Industrial (Holdings), Ltd. ............................................ 561,031
------------
66,526,404
------------
India .1%
US 109,700 bGujarat Narmada Valley Fertilizers Co., Ltd., GDR .............................. 713,050
------------
Indonesia .4%
ID 167,500 PT Barito Pacific Timber, fgn. .................................................. 109,748
ID 4,193,750 PT Indah Kiat Pulp & Paper Corp., fgn. .......................................... 4,099,154
ID 503,250 aPT Indah Kiat Pulp & Paper Corp., warrants...................................... 254,057
------------
4,462,959
------------
Italy 2.0%
IT 148,000 Banco di Sardegna, SpA, di Risp.................................................. 938,485
IT 696,200 Cartiere Burgo, SpA ............................................................. 3,806,545
Italy (cont.)
IT 904,000 Sasib, SpA, di Risp.............................................................. $ 1,798,852
IT 1,833,800 Sirti, SpA ...................................................................... 11,883,335
IT 468,000 Unione Cementi Marchino Emiliane (Unicem), di Risp............................... 1,524,609
------------
19,951,826
------------
Luxembourg .1%
LU 10,650 aArbed, SA....................................................................... 1,219,758
------------
Mexico 1.2%
MX 396,400 aConsorcio G Grupo Dina, SA de CV................................................ 253,466
US 42,800 aConsorcio G Grupo Dina, SA de CV, ADR........................................... 107,000
US 275,600 Telmex-Telefonos de Mexico, SA, Class L, ADR..................................... 9,232,600
MX 1,274,640 Vitro, SA ....................................................................... 2,957,635
------------
12,550,701
------------
Netherlands 8.5%
NL 93,700 ABN AMRO, NV..................................................................... 5,032,495
NL 32,300 Akzo Nobel, NV................................................................... 3,872,970
NL 126,700 DSM, NV.......................................................................... 12,591,996
NL 768,885 Ing Groep, NV.................................................................... 22,947,081
NL 240,308 Internatio-Mueller, NV........................................................... 5,297,907
NL 147,900 Koninklijke Bijenkorf Beheer, NV (KBB)........................................... 12,504,943
NL 63,000 NV Holdingsmij de Telegraaf ..................................................... 10,583,113
NL 375,807 Philips Electronics, NV ......................................................... 12,229,427
------------
85,059,932
------------
New Zealand 1.2%
NZ 1,267,106 Fisher & Paykel, Ltd. ........................................................... 4,079,874
NZ 6,020,000 Fletcher Challenge, Ltd., Forestry Division...................................... 7,496,577
US 47,765 aTranz Rail Holdings, Ltd., ADR.................................................. 662,739
------------
12,239,190
------------
Norway 2.7%
NO 13,200 Elkem, AS........................................................................ 182,032
NO 143,000 aFokus Bank, AS.................................................................. 779,994
NO 176,200 aFokus Bank, AS.................................................................. 961,084
NO 705,960 Hafslund ASA, Class B............................................................ 4,514,193
NO 134,000 Helikopter Services Group, ASA................................................... 1,548,524
NO 705,960 aNycomed ASA, Class B............................................................ 9,789,817
NO 199,000 bUnion Bank of Norway, Primary Capital Certificate............................... 4,875,309
NO 295,000 Unitor, AS....................................................................... 4,772,691
------------
27,423,644
------------
Peru .5%
PE 2,445,602 Telefonica de Peru, Class B...................................................... 4,965,283
------------
Portugal .6%
PT 321,978 BPI Socieda de Gestora de Participacoes Socias, SA............................... 4,082,570
US 239,400 bPortucel Industrial Empresa Product de Celulose, ADR............................ 1,533,812
------------
5,616,382
------------
South Korea 1.0%
KR 44,500 Byucksan Development Co., Ltd. .................................................. 565,027
KR 109,900 Daegu Bank Co., Ltd. ............................................................ 1,622,759
KR 30,600 Daehan Synthetic Fiber Co., Ltd. ................................................ 2,942,308
KR 19,110 Keumkang Co., Ltd. .............................................................. 1,264,200
South Korea (cont.)
KR 155,990 Pacific Chemical Co., Ltd. ...................................................... $ 2,942,119
KR 7,870 Pohang Iron & Steel Co., Ltd. ................................................... 641,960
------------
9,978,373
------------
Spain 6.4%
ES 172,300 Banco Bilbao Vizcaya ............................................................ 6,985,954
ES 15,600 Banco Popular Espanol ........................................................... 2,783,516
ES 734,000 Compania Sevillana de Electricidad .............................................. 6,766,298
ES 318,000 Dragados y Construcciones, SA.................................................... 4,210,851
ES 174,450 Huarte, SA ...................................................................... 387,046
ES 1,863,800 Iberdrola, SA.................................................................... 19,146,885
ES 1,238,100 Telefonica de Espana, SA ........................................................ 22,826,577
ES 52,200 Unipapel, SA .................................................................... 958,322
------------
64,065,449
------------
Sweden 10.8%
SE 80,600 Asea, AB, Class A ............................................................... 8,557,892
SE 43,200 Autoliv.......................................................................... 1,317,988
SE 515,500 aCelsius, AB, Class B............................................................ 6,773,675
SE 382,000 Electrolux, AB, Class B ......................................................... 19,241,353
SE 522,100 aEnator, AB, Class B............................................................. 12,025,412
SE 158,500 Esselte, AB, Class B ............................................................ 3,243,732
SE 1,490 aFastighets, AB Tornet, Class A.................................................. 12,152
SE 31,180 Fastighets Naeckebro, AB, Class A................................................ 386,159
SE 210,000 Marieberg Tidnings, AB, Class A ................................................. 5,265,066
SE 96,400 Sparbanken Sverige, AB, Class A.................................................. 1,252,137
US 14,900 bSparbanken Sverige, AB, Class A................................................. 193,536
SE 77,000 Stadshypotek, AB, Class A........................................................ 1,721,190
US 176,000 bStadsyhpotek, AS, Class A....................................................... 3,934,149
SE 1,288,000 Stena Line, AB, Class B, free.................................................... 6,127,775
SE 804,250 Stora Kopparbergs Bergslags, AB, Class B......................................... 10,628,587
SE 311,800 Svenska Handelsbanken, Class A................................................... 6,522,323
SE 831,000 aSwedish Match, AB .............................................................. 2,585,501
SE 831,000 Volvo, AB, Class B............................................................... 18,951,971
------------
108,740,598
------------
Switzerland 5.0%
CH 3,690 Baloise-Holding ................................................................. 8,027,834
CH 12,800 Bucher Holding, AG............................................................... 9,982,004
CH 11,000 Ciba-Geigy, AG................................................................... 13,417,317
CH 3,570 Kuoni Reisen Holding, AG, Class B................................................ 8,195,081
CH 15,400 aSMH, AG, br. ................................................................... 10,716,257
------------
50,338,493
------------
Thailand .1%
TH 17,400 Chareon Pokphand Feedmill Public Co., Ltd., fgn. ................................ 92,524
------------
Turkey .4%
TR 13,125,825 bTofas Turk Otomobil Fabrikasi, AS, GDR.......................................... 4,462,781
------------
United Kingdom 8.6%
GB 6,312,400 Albert Fisher Group, Plc. ....................................................... 4,607,448
GB 2,536,000 Anglian Group, Plc. ............................................................. 7,620,760
GB 1,635,473 Argyll Group, Plc. .............................................................. 8,813,348
GB 7,123,000 aCordiant, Plc. ................................................................. 12,057,507
United Kingdom (cont.)
GB 2,493,900 Hillsdown Holdings, Plc. ........................................................ $ 6,739,014
GB 1,330,900 Kwik Save Group, Plc. ........................................................... 9,362,929
GB 902,000 Lex Service, Plc. ............................................................... 5,252,982
GB 1,890,000 London Pacific Group, Ltd. ...................................................... 7,558,004
GB 410,350 aMcBride, Plc. .................................................................. 834,822
GB 2,614,971 Meggitt, Plc. ................................................................... 3,898,578
GB 632,341 National Westminster Bank, Plc. ................................................. 6,049,231
GB 824,500 aRailtrack Group, Plc. .......................................................... 2,804,160
GB 6,171,300 aRaine, Plc. .................................................................... 1,293,834
GB 738,900 Thames Water Group, Plc. ........................................................ 6,506,341
GB 1,306,000 Wace Group, Plc. ................................................................ 3,488,508
------------
86,887,466
------------
Total Common Stocks & Warrants (Cost $716,487,095)......................... 800,496,101
------------
Preferred Stocks .1%
NL 2,547 ABN AMRO, NV, cvt., pfd. ........................................................ 125,446
NL 6,910 Ballast Nedam, NV, cvt. pfd. .................................................... 331,420
------------
Total Preferred Stocks (Cost $401,801)..................................... 456,866
------------
Face
Amount
Bonds 5.3%
Finland .3%
US $ 3,050,000 Amer Group, Ltd., cvt., 6.25%, 06/15/03 ......................................... 2,729,750
------------
Hong Kong .2%
US 1,531,000 Jardine Strategic Holdings, Ltd., cvt., 7.50%, 05/07/49 ......................... 1,668,790
------------
United States 4.8%
US 48,000,000 U.S. Treasury Notes, 7.50%, 12/31/96 ............................................ 48,465,120
------------
Total Bonds (Cost $52,563,961)............................................. 52,863,660
------------
Total Long Term Investments (Cost $769,452,857)............................ 853,816,627
------------
gReceivables from Repurchase Agreements 14.6%
US 32,564,365 BA Securities, Inc., 5.40%, 07/01/96, (Maturity Value $31,934,364)
Collateral: U.S. Treasury Bills, 09/26/96 ..................................... 31,920,000
US 25,500,322 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $25,011,146)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 25,000,000
US 47,020,203 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $45,897,453)
Collateral: U.S. Treasury Notes, 6.125%, 12/31/96............................... 45,877,000
US 44,501,094 Smith Barney, Inc., 5.27%, 07/01/96, (Maturity Value $44,126,370)
Collateral: U.S. Treasury Notes, 7.50%, 10/31/99 ............................... 44,107,000
------------
Total Receivables from Repurchase Agreements (Cost $146,904,000)........... 146,904,000
------------
Total Investments (Cost $916,356,857) 99.6%........................... 1,000,720,627
Other Assets and Liablities, Net .4%.................................. 3,566,652
------------
Net Assets 100.0% .................................................... $1,004,287,279
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $916,356,857 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 155,547,017
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................... (71,183,247)
------------
Net unrealized appreciation ................................................... $ 84,363,770
============
</TABLE>
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
BE - Belgium
CA - Canada
CH - Switzerland
CN - China
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
HK - Hong Kong
ID - Indonesia
IT - Italy
KR - South Korea
LU - Luxembourg
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
PE - Peru
PT - Portugal
SE - Sweden
TH - Thailand
TR - Turkey
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares,
Warrants Value
Country* & Rights Templeton Pacific Growth Fund (Note 1)
Common Stocks, Warrants & Rights 96.8%
Australia 15.7%
<S> <C> <C> <C>
AU 1,000,000 Australia & New Zealand Banking Group, Ltd. ....................................... $ 4,731,403
AU 1,706,264 Australian Gas & Light Co. ........................................................ 7,094,067
AU 680,000 Brambles Industries, Ltd. ......................................................... 9,448,972
AU 1,981,000 Capral Aluminium, Ltd. ............................................................ 5,729,618
AU 1,080,000 Coles Myer, Ltd., Class A.......................................................... 3,921,562
AU 875,000 Email, Ltd. ....................................................................... 2,269,423
AU 2,399,145 Gio Austrailia Holdings, Ltd. ..................................................... 5,901,933
AU 5,997,391 Goodman Fielder, Ltd. ............................................................. 6,080,587
AU 919,000 Mayne Nickless, Ltd. .............................................................. 5,366,582
AU 3,547,000 National Foods, Ltd. .............................................................. 4,014,367
AU 2,061,877 Pacific Dunlop, Ltd. .............................................................. 4,634,706
US 118,100 bQantas Airways, Ltd., ADR......................................................... 2,015,081
------------
61,208,301
------------
China 1.8%
US 181,500 aGuangshen Railway Co., Ltd., ADR.................................................. 3,471,188
HK 3,216,000 Maanshan Iron & Steel Co., Ltd., Class H .......................................... 565,031
US 225,000 Shandong Huaneng Power, ADR........................................................ 1,856,250
HK 17,658,000 Shanghai Hai Xing Shipping Co., Class H............................................ 1,163,399
------------
7,055,868
------------
Hong Kong 17.0%
HK 3,000,000 Cathay Pacific Airways, Ltd. ...................................................... 5,503,343
HK 800,000 Cheung Kong Holdings, Ltd. ........................................................ 5,761,716
HK 4,197,727 Dairy Farm International Holdings, Ltd. ........................................... 3,547,079
HK 5,415,000 Grand Hotel Holdings, Ltd. ........................................................ 2,133,611
HK 169,800 aHang Lung Development Co., Ltd., warrants......................................... 40,143
HK 4,909,454 Hon Kwok Land Investment Co., Ltd. ................................................ 1,712,434
HK 1,900,000 Hong Kong Telecommunications Co., Ltd. ............................................ 3,411,814
HK 250,000 HSBC Holdings, Plc. ............................................................... 3,778,704
HK 496,000 Hualing Holdings, Ltd. ............................................................ 51,261
HK 632,031 Jardine Matheson Holdings, Ltd. ................................................... 4,645,428
HK 1,000,000 Jardine Strategic Holdings, Ltd. .................................................. 3,200,000
HK 2,846,000 Lai Sun Development Co., Ltd. ..................................................... 580,910
HK 284,600 aLai Sun Development Co., Ltd., warrants........................................... 18,751
HK 160,500 Melco International Development, Ltd. ............................................. 44,579
HK 3,860,000 National Mutual Asia, Ltd. ........................................................ 3,390,886
HK 1,574,667 New World Development Co., Ltd. ................................................... 7,302,980
HK 1,050,000 Peregrine Investments Holdings, Ltd. .............................................. 1,512,450
HK 105,000 aPeregrine Investments Holdings, Ltd., warrants.................................... 13,022
HK 3,210,000 Shun Tak Holdings ................................................................. 1,969,770
HK 2,201,100 Sing Tao Holdings, Ltd. .......................................................... 1,300,912
HK 4,888,000 South China Morning Post (Holdings), Ltd. ......................................... 3,346,756
HK 645,000 Swire Pacific, Ltd., Class A ...................................................... 5,520,298
HK 3,100,000 Wheelock & Co., Ltd. .............................................................. 6,127,313
HK 5,522,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 1,569,409
------------
66,483,569
------------
India .3%
US 156,100 Great Eastern Shipping Co., Ltd., GDR.............................................. 1,326,850
------------
Indonesia 4.5%
US 300,000 aAsia Pacific Resources International, Class A..................................... 2,250,000
ID 1,567,000 PT Bank Bali ...................................................................... 3,450,430
Indonesia(cont.)
ID 950,000 PT Barito Pacific Timber, fgn. .................................................... $ 622,449
ID 1,015,940 PT Indorama Synthetics, fgn. ...................................................... 2,575,315
US 155,500 PT Indosat, ADR.................................................................... 5,209,250
ID 129,000 PT Inti Indorayon Utama ........................................................... 124,705
ID 637,625 PT Pabrik Kertas Tjiwi Kimia ...................................................... 650,638
ID 3,423,000 PT Panasia Indosyntec ............................................................. 919,173
ID 2,060,875 aPT Panin Bank .................................................................... 1,903,708
------------
17,705,668
------------
Japan 18.8%
JP 1,011,000 Daicel Chemical Industries, Ltd. .................................................. 6,235,893
JP 409,000 Daito Trust Construction Co., Ltd. ................................................ 6,129,300
JP 1,200 East Japan Railway Co. ............................................................ 6,305,113
JP 582,800 Hitachi, Ltd. ..................................................................... 5,432,046
JP 254,000 Hokuetsu Paper Mills, Ltd. ........................................................ 2,146,937
JP 308,000 Matsushita Electric Industrial Co., Ltd. .......................................... 5,741,490
JP 824,000 Mitsubishi Heavy Industries, Ltd. ................................................. 7,175,693
JP 250,000 Mitsubishi Oil Co., Ltd. .......................................................... 2,135,971
JP 821 Nippon Telegraph & Telephone Corp. ................................................ 6,091,762
JP 700,000 Nisshinbo Industries, Inc. ........................................................ 6,908,210
JP 220,000 Nittetsu Mining Co., Ltd. ......................................................... 2,251,565
JP 550,000 Rengo Co., Ltd. ................................................................... 3,869,877
JP 50,000 Sony Corp. ........................................................................ 3,294,193
JP 70,000 Tenma Corp. ....................................................................... 1,458,400
JP 371,000 Toda Corp. ........................................................................ 3,627,450
JP 330,000 Wacoal Corp. ...................................................................... 4,493,078
------------
73,296,978
------------
Malaysia 5.0%
MY 655,000 Commerce Asset Holdings ........................................................... 3,991,181
MY 16,667 aCommerce Asset Holdings, warrants................................................. 60,133
MY 3,342,667 Malaysian International Shipping Corp., Bhd., fgn. ................................ 10,385,115
MY 100,000 Public Finance .................................................................... 180,397
MY 32,000 aPublic Finance, rights............................................................ 17,960
MY 1,798,800 Sime Darby Berhad ................................................................. 4,975,634
------------
19,610,420
------------
New Zealand 2.1%
NZ 894,353 Brierley Investments, Ltd. ........................................................ 849,134
NZ 2,411,800 Carter Holt Harvey, Ltd. .......................................................... 5,525,524
NZ 192,500 aFletcher Challenge Building, Ltd. ................................................ 377,454
NZ 192,500 aFletcher Challenge Energy, Ltd. .................................................. 426,456
NZ 109,252 Fletcher Challenge, Ltd., Forestry Division........................................ 136,049
NZ 385,000 aFletcher Challenge Paper, Ltd. ................................................... 746,961
------------
8,061,578
------------
Pakistan 3.7%
PK 2,818,000 Fauji Fertilizer Co., Ltd. ........................................................ 7,245,251
PK 38,900 aPakistan Telecom Corp. ........................................................... 4,590,200
US 1,300,000 aPakistan Telecom Corp., GDR....................................................... 1,485,502
US 11,100 a,bPakistan Telecom Corp., GDR..................................................... 1,309,800
------------
14,630,753
------------
Philippines 7.0%
PH 20,625,000 aFilinvest Land, Inc. ............................................................. $ 8,462,548
PH 116,000 Philippine Long Distance Telephone Co. ............................................ 6,906,870
US 4,400 Philippine Long Distance Telephone Co., ADR........................................ 255,750
PH 700,000 aPhilippine National Bank ......................................................... 11,688,931
------------
27,314,099
------------
Singapore 7.6%
SG 888,600 aCity Developments, Ltd. .......................................................... 6,927,427
SG 518,000 Development Bank of Singapore, Ltd., fgn. ......................................... 6,461,233
US 68,000 GP Batteries International, Ltd. .................................................. 199,920
SG 393,800 Overseas Union Bank, Ltd. ......................................................... 2,707,201
SG 1,217,000 Parkway Holdings, Ltd. ............................................................ 3,622,537
SG 882,000 Singapore Airlines, Ltd. .......................................................... 9,313,820
SG 78,500 Singapore Bus Service, Ltd. ....................................................... 556,343
------------
29,788,481
------------
South Korea .5%
KR 99,030 Pacific Chemical Co., Ltd. ........................................................ 1,867,800
------------
Thailand 8.7%
TH 622,000 Bangkok Bank Public Co., Ltd. ..................................................... 8,427,919
TH 829,400 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 4,410,312
TH 2,783,133 Industrial Finance Corp. of Thailand .............................................. 12,497,131
TH 186,600 aMDX Public Co., Ltd. ............................................................. 304,103
TH 51,750 Oriental Hotel, Ltd. .............................................................. 254,796
TH 36,570 Thai Farmers Bank, Ltd. ........................................................... 270,804
TH 733,440 Thai Farmers Bank, Ltd., fgn. ..................................................... 8,031,208
------------
34,196,273
------------
United States 4.1%
US 69,000 American International Group, Inc. ................................................ 6,805,125
US 150,000 APL, Ltd. ......................................................................... 3,918,750
US 85,000 Motorola, Inc. ................................................................... 5,344,375
------------
16,068,250
------------
Total Common Stocks, Warrants & Rights (Cost $332,166,422)................... 378,614,888
------------
Preferred Stocks
US 31,000 Dairy Farm International Holdings, Ltd., 6.50%, cvt. pfd. ......................... 22,706
US 22,000 Jardine Strategic Holdings, Ltd., 7.50%, cvt. pfd. ................................ 23,980
------------
Total Preferred Stocks (Cost $53,440)........................................ 46,686
------------
Total Common Stocks, Warrants & Rights and Preferred Stocks
(Cost $332,219,862)............................................................... 378,661,574
------------
Face
Amount
Convertible Bonds .3%
US $1,307,000 MDX Public Co., Ltd., cvt., 4.75%, 09/17/03 ....................................... 614,290
US 360,000 PT Inti Indorayon Utama, cvt., 5.50%, 10/01/02 .................................... 415,800
------------
Total Convertible Bonds (Cost $1,941,281).................................... 1,030,090
------------
Total Long Term Investments (Cost $334,161,143).............................. 379,691,664
------------
gReceivables from Repurchase Agreements 2.5%......................................
US $6,030,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $6,002,675)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ................................. $ 6,000,000
US 3,550,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $3,712,654)
Collateral: U.S. Treasury Notes, 8.00%, 05/15/01 ................................. 3,711,000
------------
Total Receivables from Repurchase Agreements (Cost $9,711,000)............... 9,711,000
------------
Total Investments (Cost $343,872,143) 99.6%............................. 389,402,664
Other Assets and Liabilities, Net .4%................................... 1,442,464
------------
Net Assets 100.0% ...................................................... $390,845,128
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $347,427,376 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 67,168,215
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (25,192,927)
------------
Net unrealized appreciation........................................................ $ 41,975,288
============
</TABLE>
COUNTRY LEGEND:
AU - Australia
HK - Hong Kong
ID - Indonesia
JP - Japan
KR - South Korea
MY - Malaysia
NZ - New Zealand
PH - Philippines
PK - Pakistan
SG - Singapore
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Rising Dividends Fund (Note 1)
Common Stocks 89.0%
Financial Services 11.6%
<S> <C> <C>
220,000 Banc One Corp. .............................................................................. $ 7,480,000
197,400 CoreStates Financial Corp. .................................................................. 7,599,900
279,650 Mercantile Bankshares Corp. ................................................................. 7,131,075
263,000 National Commerce Bancorp. .................................................................. 8,284,500
205,200 State Street Boston Corp. ................................................................... 10,465,200
516,720 TrustCo Bank Corp., New York................................................................. 9,946,860
232,000 Wilmington Trust Corp. ...................................................................... 7,525,500
------------
58,433,035
------------
Consumer Products 14.3%
222,000 Alberto-Culver Co., Class A.................................................................. 8,880,000
65,771 Block Drug Co., Inc., Class A................................................................ 2,762,382
715,000 Dimon, Inc. ................................................................................. 13,227,500
169,000 Philip Morris Cos., Inc. .................................................................... 17,576,000
102,000 Roto-Rooter, Inc. ........................................................................... 3,519,000
265,000 Stanhome, Inc. .............................................................................. 7,022,500
410,700 Stride Rite Corp. ........................................................................... 3,388,275
325,000 Universal Corp. ............................................................................. 8,612,500
205,500 UST, Inc. ................................................................................... 7,038,375
------------
72,026,532
------------
Health Care Services 7.7%
380,000 Bard (C.R.), Inc. ........................................................................... 12,920,000
52,500 Bristol-Myers Squibb Co. ................................................................... 4,725,000
182,000 Merck & Co., Inc. ........................................................................... 11,761,750
135,000 Pfizer, Inc. ................................................................................ 9,635,625
------------
39,042,375
------------
Energy 1.8%
59,500 Royal Dutch Petroleum Co., New York Shares, ADR.............................................. 9,148,125
------------
Financial Services 2.9%
440,000 Federal National Mortgage Association ....................................................... 14,740,000
------------
Industrial 16.6%
116,200 Avery-Dennison Corp. ........................................................................ 6,376,475
41,850 Diebold, Inc. ............................................................................... 2,019,263
160,600 General Electric Co. ........................................................................ 13,891,900
134,000 Kaydon Corp. ................................................................................ 5,762,000
154,800 Kimball International, Inc., Class B......................................................... 4,276,350
200,400 Loctite Corp. ............................................................................... 9,318,600
380,000 Monsanto Co. ................................................................................ 12,350,000
220,000 Myers Industries, Inc. ...................................................................... 4,097,500
385,000 Newell Co. .................................................................................. 11,790,625
81,800 Rockwell International Corp. ................................................................ 4,683,050
300,000 Superior Industries International, Inc. ..................................................... 7,912,500
123,000 Superior Surgical Manufacturing Co., Inc. ................................................... 1,460,625
------------
83,938,888
------------
Insurance - Life & Health 1.1%
112,500 Jefferson-Pilot Corp. ....................................................................... 5,807,813
------------
Insurance - Property Casualty 15.9%
301,900 Allied Group, Inc. .......................................................................... 13,132,650
53,700 American International Group, Inc. .......................................................... 5,296,163
206,200 Chubb Corp. ................................................................................. 10,284,225
Insurance - Property Casualty (cont.)
17,640 Cincinnati Financial Corp. .................................................................. $ 1,012,095
302,000 Mercury General Corp. ....................................................................... 13,212,500
175,000 MMI Cos., Inc. .............................................................................. 5,403,125
324,325 RLI Corp. ................................................................................... 7,905,422
202,000 SAFECO Corp. ................................................................................ 7,145,750
208,000 Selective Insurance Group, Inc. ............................................................. 6,760,000
188,400 St. Paul Companies, Inc. .................................................................... 10,079,400
------------
80,231,330
------------
Retail 10.9%
77,000 Albertson's, Inc. ........................................................................... 3,185,875
832,000 Family Dollar Stores, Inc. .................................................................. 14,456,000
372,000 Rite Aid Corp. .............................................................................. 11,067,000
171,328 The Limited, Inc. ........................................................................... 3,683,551
272,000 Walgreen Co. ................................................................................ 9,112,000
527,000 Wal-Mart Stores, Inc. ....................................................................... 13,372,624
------------
54,877,050
------------
Miscellaneous .4%
128,000 Bob Evans Farms, Inc. ....................................................................... 2,176,000
------------
Printing & Publishing 2.0%
390,000 Ennis Business Forms......................................................................... 4,436,250
73,100 Reader's Digest Association, Inc., Class A................................................... 3,106,750
101,600 Standard Register Co. ....................................................................... 2,501,900
------------
10,044,900
------------
Transportation 3.8%
500,000 Arnold Industries, Inc. ..................................................................... 7,125,000
620,000 Harper Group, Inc. .......................................................................... 12,090,000
------------
19,215,000
------------
Total Long Term Investments (Cost $343,283,118)........................................ 449,681,048
------------
Face
Amount
g,hReceivables from Repurchase Agreements 10.8%
$ 54,405,812 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $54,682,008) (Cost $54,657,235)
Chase Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,530,300)
Collateral: U. S. Treasury Bills, 05/29/97
U. S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
g,hReceivables from Repurchase Agreements (cont.)
Joint Repurchase Agreement, (cont.)
SBC Capital Markets, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $7,858,618)
Collateral: U. S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ...................... $ 54,657,235
------------
Total Investments (Cost $397,940,353) 99.8%...................................... 504,338,283
Other Assets and Liabilities, Net .2%............................................ 1,021,412
------------
Net Assets 100.0% ............................................................... $505,359,695
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $398,287,124
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $112,563,031
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (6,511,872)
------------
Net unrealized appreciation ............................................................... $106,051,159
============
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(h) regarding joint repurchase agreement.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
Value
Country* Shares Utility Equity Fund (Note 1)
Common Stocks 99.1%
<S> <C> <C> <C>
US 1,445,000 aAES Corp. ........................................................................ $ 40,821,250
US 846,100 aAirTouch Communications, Inc. .................................................... 23,902,325
US 1,000,000 Allegheny Power System, Inc. ...................................................... 30,875,000
US 1,000,230 American Electric Power Co., Inc. ................................................. 42,634,804
US 100,000 Ameritech Corp. ................................................................... 5,937,500
US 120,000 AT&T Corp. ........................................................................ 7,440,000
GB 2,000,000 British Telecom, Plc. ............................................................. 10,746,677
US 158,600 bBSES, Ltd., GDR................................................................... 3,053,050
US 1,496,700 Central & South West Corp. ........................................................ 43,404,300
US 1,223,900 CINergy Corp. ..................................................................... 39,164,800
US 382,710 CIPSCO, Inc. ...................................................................... 14,782,174
US 137,600 Compania Boliviana de Energia Electricia .......................................... 5,400,800
HK 4,000,000 Consolidated Electric Power Asia, Ltd. ............................................ 6,614,346
US 880,000 Dominion Resources, Inc. .......................................................... 35,200,000
US 716,000 DPL, Inc. ......................................................................... 17,452,500
US 745,000 Duke Power Co. .................................................................... 38,181,250
US 763,600 Edison International .............................................................. 13,458,450
US 350,000 Endesa Corp. ...................................................................... 7,525,000
US 91,800 Enersis SA, ADR.................................................................... 2,845,800
US 1,032,560 Enova Corp. ....................................................................... 23,877,950
US 1,200,000 Enron Corp. ....................................................................... 49,050,000
US 880,000 Enron Global Power & Pipelines L.L.C. ............................................. 21,340,000
US 1,654,000 Entergy Corp. ..................................................................... 46,932,250
US 370,900 Ericsson (L.M.) Telecommunications, ADR............................................ 7,974,350
US 195,000 bEspoon Sahko Oy, ADS ............................................................. 3,578,718
US 853,000 Florida Progress Corp. ............................................................ 29,641,750
US 1,201,300 FPL Group, Inc. ................................................................... 55,259,800
US 1,221,100 General Public Utilities Corp. .................................................... 43,043,775
MX 55,600 aGrupo Iusacell, SA, Class D....................................................... 51,165
US 144,440 aGrupo Iusacell, SA, Class L, ADR.................................................. 1,552,730
US 790,840 GTE Corp. ......................................................................... 35,390,090
GR 400,000 Hellenic Telecommunications Organization, SA....................................... 6,634,795
HK 2,500,000 Hong Kong Electric Holdings, Ltd. ................................................. 7,622,000
US 138,000 aHuaneng Power International, Inc., ADR ........................................... 2,466,750
US 388,400 aIntelCom Group, Inc. ............................................................. 9,710,000
KR 50,500 Korea Electric Power Corp. ........................................................ 2,056,854
KR 215 Korea Mobile Telecommunications Corp. ............................................. 264,615
NO 468,600 aNetCom, ASA....................................................................... 4,945,894
US 582,450 New England Electric System ....................................................... 21,186,619
JP 2,870 Nippon Telegraph & Telephone Corp. ................................................ 21,295,198
US 749,900 NIPSCO Industries, Inc. ........................................................... 30,183,475
US 323,000 aNynex Cablecomms Group, ADR ...................................................... 5,248,750
US 229,600 Pacific Enterprises ............................................................... 6,801,900
US 1,123,150 Pacific Gas & Electric Co. ........................................................ 26,113,238
US 1,702,400 PacifiCorp. ....................................................................... 37,878,400
US 349,100 Panenergy Corp. ................................................................... 11,476,663
US 166,600 PECO Energy Co. ................................................................... 4,331,600
US 843,000 Pinnacle West Capital Corp. ....................................................... 25,606,125
US 330,000 Portugal Telecom, SA, ADR ......................................................... 8,662,500
US 100,000 Public Service Co. of Colorado .................................................... 3,675,000
US 104,200 Public Service Enterprise Group, Inc. ............................................. 2,852,475
US 1,745,844 Scana Corp. ....................................................................... 49,101,863
GB 590,000 Scottish Power, Plc. .............................................................. $ 2,785,439
ES 618,600 Sevillana de Electricidad ......................................................... 5,702,496
GB 198,300 Southern Electric, Plc. ........................................................... 2,192,657
US 1,966,790 Southern Indiana Gas & Electric Co. ............................................... 48,432,204
US 442,700 Southwestern Public Service Co. ................................................... 14,443,088
IT 1,675,000 STET - Societa Finanziaria Telefonica ............................................. 5,680,839
US 2,074,850 TECO Energy, Inc. ................................................................. 52,389,963
US 315,000 Tele Danmark, AS, ADS.............................................................. 7,993,125
US 233,500 Telecom Brasileiras, ADR........................................................... 16,257,438
US 115,000 Telecom de Argentina SA, ADR....................................................... 5,390,625
IT 11,000,000 aTelecom Italia, SpA............................................................... 18,901,257
US 170,000 Telefonos de Mexico, SA, ADR ...................................................... 5,695,000
US 69,000 aTelewest Communications, Plc., ADR................................................ 1,720,688
US 1,239,850 Texas Utilities Co. ............................................................... 53,003,585
US 370,000 Transportadora de Gas del Sur, SA, ADR............................................. 4,532,500
US 1,084,800 US West, Inc. ..................................................................... 34,578,000
US 218,500 Williams Cos., Inc. ............................................................... 10,815,750
US 1,029,200 Wisconsin Energy Corp. ............................................................ 29,718,150
------------
Total Long Term Investments (Cost $1,213,133,094) ........................... 1,315,480,122
------------
Face
Amount
g,hReceivables from Repurchase Agreements .4%
US $4,623,975 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $4,647,184)
(Cost $4,645,079)
Chase Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.375% , 11/30/97
Daiwa Securities America, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $639,967)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $667,870)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............. 4,645,079
------------
Total Investments (Cost $1,217,778,173) 99.5%........................... 1,320,125,201
Other Assets and Liabilities, Net .5%................................... 6,702,554
------------
Net Assets 100.0%....................................................... $1,326,827,755
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $1,217,778,173 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 151,376,938
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (49,029,910)
------------
Net unrealized appreciation ..................................................... $ 102,347,028
============
</TABLE>
COUNTRY LEGEND:
ES - Spain
GB - United Kingdom
GR - Greece
HK - Hong Kong
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NO - Norway
US - United States
*Securities traded in foreign currency and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee note 1(h) regarding joint repurchase agreements.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares/
Warrants & Value
Country* Rights Templeton Developing Markets Equity Fund (Note 1)
Common Stocks, Warrants & Rights 82.0%
Argentina 12.8%
<S> <C> <C> <C>
AR 180,876 Aluar Aluminio Argentino, SA, Class B............................................. $ 452,357
AR 410,470 Astra Cia Argentina de Petroleo, SA............................................... 973,174
AR 375,000 Atanor Cia Nacional Para la Industria Quimica, SA, Class D........................ 994,118
AR 276,952 aBanco Bansud, SA, Class B........................................................ 3,227,685
AR 512,120 Banco de Galicia y Buenos Aires, SA, Class B...................................... 3,278,781
AR 129,970 Banco Frances del Rio de la Plata, SA............................................. 1,232,572
US 50,400 Buenos Aires Embotelladora, SA, ADR............................................... 667,800
AR 15,555 Capex, SA, Class A................................................................ 126,042
AR 134,420 Central Costanera, SA, Class B.................................................... 494,849
AR 323,332 aCiadea, SA....................................................................... 2,280,337
AR 32,480 Juan Minetti, SA.................................................................. 149,463
AR 313,152 Molinos Rio de Plata, SA, Class B................................................. 3,320,640
AR 23,430 Nobleza Piccardo Sdad Industrial Comercial y Financial ........................... 89,067
AR 674,968 Perez Companc, SA, Class B........................................................ 4,429,429
AR 76,000 aQuilmes Industrial, SA .......................................................... 779,000
AR 4,000 Quilmes Industrial, SA, reg. ..................................................... 41,000
AR 460,144 aSevel Argentina, SA, Class C..................................................... 1,334,912
AR 22,230 aSiderar, Class A................................................................. 57,375
AR 1,290,000 aSociedad Comercial del Plata Cadelplata Come .................................... 3,987,575
AR 367,224 Transportadora de Gas del Sur, SA, Class B........................................ 903,705
US 150,410 YPF Sociedad Anonima, ADR......................................................... 3,384,225
AR 2,840 aZanella Hermanos, SA............................................................. 1,085
------------
32,205,191
------------
Brazil 2.3%
BR 77,613,291 Banco Bradesco, SA................................................................ 555,733
BR 70,662,976 aBanco do Brasil, SA.............................................................. 577,042
BR 9,982,000 Eletroas-Centrais Eletricas Brasileiras, SA....................................... 2,684,001
BR 2,124,000 aMannesmann, SA................................................................... 281,303
BR 29,560,000 Telebras-Telecomunicacoes Brasileiras, SA......................................... 1,736,832
------------
5,834,911
------------
China 3.2%
CN 1,281,800 China Southern Glass Co., Ltd., Class B........................................... 753,440
CN 816,000 aChina Textile Machinery Co., Ltd., Class B....................................... 110,976
CN 1,134,000 Chiwan Wharf Holdings, Ltd., Class B ............................................. 498,091
CN 400,000 Foshan Electrical and Lighting Co., Ltd., Class B................................. 335,885
CN 1,177,000 Guangzhou Shipyard International Co., Ltd., Class H .............................. 285,859
CN 687,000 Luoyang Glass Co., Ltd., Class H.................................................. 163,302
CN 212,000 Qing Ling Motors Co., Ltd., Class H............................................... 71,208
CN 96,000 Shandong Huaneng Power ........................................................... 792,000
CN 1,269,000 Shanghai Chlor-Alkali Chemical Co., Ltd., Class B................................. 309,636
CN 400,000 Shanghai Dazhong Taxi Shareholding Co., Ltd., Class B............................. 292,000
CN 252,000 aShanghai Industrial Sewing Machine Corp. ........................................ 34,776
CN 1,732,500 aShanghai Jin Jiang Tower Co., Ltd., Class B...................................... 492,030
CN 410,000 Shanghai Jinqiao Export Processing Zone Development, Class B...................... 159,900
CN 862,000 aShanghai Lujiaxui Finance & Trade Zone Development Stock Co., Ltd., Class B ..... 641,328
CN 2,304,000 Shanghai Pechemical Co., Ltd., Class H............................................ 654,820
CN 489,600 Shanghai Refrigerator Compressor Co., Ltd., Class B .............................. 226,195
CN 150,000 aShanghai Shangling Electric Appliance, Class B................................... 79,200
CN 1,212,000 Shanghai Tyre & Rubber Co., Ltd., Class B ........................................ 303,000
CN 1,890,361 aShanghai Vacuum Electron Devices Co., Ltd., Class B.............................. 340,265
CN 540,000 aShanghai Yaohua Pilkington Glass, Class B........................................ 324,000
China (cont.)
CN 314,400 Shenzhen Gintian Industry Co., Ltd., Class B...................................... $ 103,571
CN 275,000 Shenzhen Properties & Resources Development (Group), Ltd., Class B................ 112,618
CN 1,710,158 Shenzhen Vanke Co., Ltd., Class B................................................. 733,485
CN 586,000 Zhuhai Sez Lizhu Pharmaceutical Group, Inc., Class B.............................. 198,343
------------
8,015,928
------------
Croatia
US 500 a,bPliva DD, GDR, reg S........................................................... 19,875
------------
Czech Republic 1.8%
CS 600 aCEZ ............................................................................. 23,880
CS 65,330 bCEZ, GDR......................................................................... 2,735,694
CS 23,500 aChemopetrol Group, AS............................................................ 1,118,926
CS 17 aElektrarny Opatovice, AS......................................................... 2,855
CS 1,000 Komercni Banka, AS................................................................ 81,598
CS 6,000 aSPT Telecom, AS.................................................................. 732,745
------------
4,695,698
------------
Greece 3.8%
GR 38,666 Alpha Credit Bank ................................................................ 2,041,398
GR 32,000 Alpha Leasing, SA ................................................................ 649,179
GR 57,000 Delta Dairy, SA .................................................................. 696,654
GR 2,000 Elais Oleaginous Co. ............................................................. 64,851
GR 12,000 Ergo Bank, SA .................................................................... 660,985
GR 32,200 Etba Leasing ..................................................................... 455,124
GR 28,950 Hellas Can - Container Manufacturers ............................................. 619,798
GR 68,750 Hellenic Telecommunications Organizations ........................................ 1,140,355
GR 100,000 aHellenic Telecommunications Organizations OTE ................................... 1,658,699
GR 29,000 Intracom, SA, reg. ............................................................... 513,935
GR 5,170 National Bank of Greece, SA ...................................................... 254,255
GR 16,170 Titan Cement Co., reg. ........................................................... 799,257
------------
9,554,490
------------
Hong Kong 10.8%
HK 582,000 Cheung Kong Holdings, Ltd. ....................................................... 4,191,648
HK 4,496,000 China Overseas Land & Investment, Ltd. ........................................... 1,086,138
HK 81,000 Cross Harbour Tunnel Co., Ltd. ................................................... 160,624
HK 263,939 Dairy Farm International Holdings, Ltd. .......................................... 223,028
HK 94,000 Dickson Concepts (International), Ltd. ........................................... 120,221
HK 1,154,000 aEast Asiatic Co. (Hong Kong), Ltd. (The)......................................... 150,572
HK 2,044,000 aFu Hui Jewellery Co. (H.K.), Ltd. ............................................... 51,227
HK 566,000 aGreat Wall Electronic International, Ltd. ....................................... 40,947
HK 1,101,000 Hang Lung Development Co., Ltd. .................................................. 2,069,509
HK 595,000 Hongkong Electric Holdings, Ltd. ................................................. 1,814,036
HK 430,951 Hopewell Holdings, Ltd. .......................................................... 233,827
HK 211,476 HSBC Holdings, Plc. .............................................................. 3,196,421
HK 7,000 IMC Holdings, Ltd. ............................................................... 3,934
HK 216,000 Jardine International Motor Holdings, Ltd. ....................................... 265,091
HK 34,000 Jardine Matheson Holdings, Ltd. .................................................. 249,900
HK 194,625 Jardine Strategic Holdings, Ltd. ................................................. 622,800
HK 21,625 aJardine Strategic Holdings, Ltd., warrants....................................... 6,704
HK 119,000 JCG Holdings, Ltd. ............................................................... 96,851
HK 1,978,240 K Wah International Holdings, Ltd. ............................................... 365,453
HK 187,320 aK Wah International Holdings, Ltd., warrants..................................... 8,954
Hong Kong (cont.)
HK 6,634,000 Lai Sun Development Co., Ltd. .................................................... $ 1,354,096
HK 216,200 aLai Sun Development Co., Ltd., warrants.......................................... 14,244
HK 234,000 Lai Sun Garment International, Ltd. .............................................. 281,136
HK 1,450,000 aLaws International Holdings, Ltd. ............................................... 164,842
HK 435,000 aLinkful International Holdings, Ltd. ............................................ 19,107
HK 700,000 aLuks Industrial Co., Ltd. ....................................................... 77,770
HK 754,886 New World Development Co., Ltd. .................................................. 3,501,005
HK 516,000 NG Fund Hong, Ltd. ............................................................... 238,310
HK 34,000 Orient Overseas International, Ltd. .............................................. 25,036
HK 1,626,000 aS. Megga International Holdings, Ltd. ........................................... 64,067
HK 240,388 Semi-Tech (Global) Co., Ltd. ..................................................... 371,106
HK 1,280,658 Stelux International Holdings, Ltd. .............................................. 286,218
HK 1,351,000 Sun Hung Kai & Co., Ltd. ......................................................... 488,686
HK 319,000 Sun Hung Kai Properties, Ltd. .................................................... 3,224,720
HK 2,123,000 Tian An China Investments Co., Ltd. .............................................. 287,976
HK 1,364,000 Tungtex (Holdings) Co., Ltd. ..................................................... 121,585
HK 184,000 Wheelock & Co., Ltd. ............................................................. 363,686
HK 1,228,000 Wing Shan International, Ltd. .................................................... 168,159
HK 3,582,000 Wo Kee Hong Holdings, Ltd. ....................................................... 462,746
HK 716,400 aWo Kee Hong Holdings, Ltd., warrants............................................. 21,286
HK 300,000 aYaohan Hongkong Corp., Ltd. ..................................................... 14,727
HK 2,298,000 Yue Yuen Industrial (Holdings), Ltd. ............................................. 653,115
------------
27,161,508
------------
India .3%
IN 20,000 Arvind Mills, Ltd. ............................................................... 79,478
IN 1,950 Grasim Industries, Ltd. Ord. ..................................................... 31,674
IN 25,000 ITC Bhadrachalam Paperboards, Ltd. ............................................... 75,220
US 45,000 a,bSteel Authority of India, Ltd., GDR, reg. S.................................... 663,750
------------
850,122
------------
Indonesia 5.5%
US 9,200 aAsia Pulp & Paper Co., Ltd., ADR................................................. 112,700
ID 790,000 PT Anwar Sierad, fgn. ............................................................ 746,724
ID 68,250 aPT Aqua Golden Mississippi, fgn. ................................................ 65,977
ID 430,000 PT Astra International, fgn. ..................................................... 623,523
ID 506,000 PT Bank Dagang Nasional Indonesia, fgn. .......................................... 423,931
ID 371,000 PT Bank PDFCI, fgn. .............................................................. 346,692
ID 1,755,500 PT Barito Pacific Timber, fgn. ................................................... 1,150,220
ID 150,000 PT BBL Dharmala Finance, fgn. .................................................... 209,452
ID 922,500 PT Charoen Pokphand Indonesia, fgn. .............................................. 1,783,566
ID 1,007,500 PT Dharmala Intiland, fgn. ....................................................... 779,162
ID 394,500 PT Duta Anggada Realty, fgn. ..................................................... 271,192
ID 1,688,000 PT Gadjah Tunggal, fgn. .......................................................... 834,028
ID 435,000 PT Gajah Surya Multi Finance, fgn. ............................................... 191,568
ID 829,600 aPT Ganda Wangsa Utama, fgn. ..................................................... 249,504
ID 12,000 PT Inter-Pacific Bank, fgn. ...................................................... 7,991
ID 352,000 PT Jakarta International Hotel & Development, fgn. ............................... 302,470
ID 528,000 aPT Jakarta International Hotel & Development, rights, fgn. ...................... 119,098
ID 337,500 PT Japfa Comfeed Indonesia, fgn. ................................................. 195,757
ID 441,750 PT Multieeder Adirama, fgn. ...................................................... 163,699
ID 149,000 PT Paik Kertas Tjiwi Kimia, fgn. ................................................. 152,041
ID 778,400 PT Panasia Indosyntec............................................................. 209,023
Indonesia (cont.)
ID 1,005,000 PT Polysindo Eka Perkasa, fgn. ................................................... $ 474,973
ID 468,000 aPT Pudjiadi Prestige, Ltd., fgn. ................................................ 402,148
ID 514,000 aPT Sinar Mas Agro Resources & Technology Corp., fgn. ............................ 375,424
ID 1,205,500 PT Sinar Mas Multi Artha, fgn. ................................................... 1,476,122
ID 221,000 PT Sumalindo Lestari Jaya, fgn. .................................................. 265,865
ID 316,500 PT Summarecon Agung, fgn. ....................................................... 176,778
ID 325,500 PT Tambang Timah (Persero), fgn. ................................................. 601,353
ID 292,000 PT Ultra Jaya Milk, fgn. ......................................................... 166,230
ID 68,200 PT Unggul Indah Corp., fgn. ...................................................... 70,324
ID 543,000 PT United Tractors, fgn. ......................................................... 857,368
------------
13,804,903
------------
Israel 1.2%
IL 6,968 Agis Industries, Ltd. ............................................................ 48,514
IL 449,844 Bank Hapoalim BM ................................................................. 659,665
IL 182,727 Clal Industries, Ltd. ............................................................ 941,254
IL 16,748 Discount Investment Corp. ........................................................ 1,129,958
IL 2,732 The First International Bank of Israel ........................................... 303,001
------------
3,082,392
------------
Malaysia 2.9%
MY 628,000 Aokam Perdana, Bhd. .............................................................. 1,052,331
MY 418,000 Berjaya Singer, Bhd. ............................................................. 432,327
MY 28,000 Berjaya Singer, Bhd., fgn. ....................................................... 28,960
MY 154,000 Boustead Holdings, Bhd., fgn. .................................................... 336,460
MY 50,000 Federal Flour Mills, Bhd. ........................................................ 133,293
MY 108,000 Hong Leong Industries, Bhd. ...................................................... 523,873
MY 140,000 IOI Corp., Bhd. .................................................................. 194,187
MY 25,000 Island & Peninsula, Bhd., fgn. ................................................... 70,655
MY 126,000 Leader Universal Holdings, Bhd. .................................................. 356,103
MY 282,666 Malaysian International Shipping Corp., Bhd., fgn. ............................... 878,197
MY 421,000 MBF Capital, Bhd. ................................................................ 580,573
MY 6,600 Oriental Holdings, Bhd., fgn. .................................................... 43,127
MY 190,000 Perlis Plantations, Bhd., fgn. ................................................... 731,209
MY 677,000 Renong, Bhd. ..................................................................... 1,080,160
MY 16,750 aRenong, Bhd., warrants........................................................... 2,686
MY 732,000 Shangri-La Hotels (Malaysia), Bhd. ............................................... 760,024
MY 123,000 Shangri-La Hotels (Malaysia), Bhd., fgn. ......................................... 127,709
------------
7,331,874
------------
Mexico 11.7%
MX 1,418,000 Cemex, SA, Class B................................................................ 5,599,090
MX 3,241,085 aCifra, SA, Class C .............................................................. 4,623,407
US 19,400 Coca Cola Femsa, SA de CV, ADR.................................................... 555,325
MX 219,938 Cydea, SA de CV................................................................... 547,453
MX 110,034 aDESC, SA, Class B................................................................ 593,328
MX 2,292 aDESC, SA, Class C................................................................ 11,936
MX 250,000 Fomento Economico Mexicano, SA de CV, Class B..................................... 718,523
MX 13,429 Grupo Carso, SA de CV............................................................. 95,251
MX 899,000 aGrupo Financiero Banamex Accival, SA, Class B.................................... 1,867,929
MX 785,138 aGrupo Financiero Banamex Accival, SA, Class L.................................... 1,490,571
MX 5,650,000 aGrupo Financiero Bancomer, SA de CV, Class B..................................... 2,458,141
MX 209,259 aGrupo Financiero Bancomer, SA de CV, Class L..................................... 69,799
Mexico (cont.)
MX 1,196,816 aGrupo Financiero Serfin, SA, Class B............................................. $ 732,133
MX 403,056 Grupo Industrial Maseca, SA de CV, Class B........................................ 420,857
US 2,600 Grupo Industrial Maseca, SA de CV, Class B, ADR................................... 40,950
MX 97,000 Telmex-Telefonos de Mexico, SA, Class L........................................... 164,203
US 228,200 Telmex-Telefonos de Mexico, SA, Class L, ADR...................................... 7,644,700
MX 839,849 Vitro, SA ........................................................................ 1,948,760
------------
29,582,356
------------
Morocco .1%
US 21,750 a,bBanque Marocaine de Commerce Exterieur, GDR.................................... 309,938
------------
Philippines .3%
PH 18,000 aBelle Corp. ..................................................................... 4,328
PH 500,000 aKeppel Philippine Holdings, Inc., Class B........................................ 124,046
PH 1,542,000 aPhilex Mining Corp., Class B .................................................... 197,164
US 8,800 Philippine Long Distance Telephone Co., ADR....................................... 511,500
------------
837,038
------------
Poland 1.3%
PL 60,000 Bank Gdanski, SA.................................................................. 746,302
PL 13,012 aBank Przemyslowo-Handlowy, SA.................................................... 938,527
PL 120,000 Elektrim Towarzystwo Handlowe, SA................................................. 984,765
PL 10,000 aRaciborska Fayka Kotlow, SA...................................................... 59,248
PL 10,000 Warta, SA......................................................................... 206,079
PL 1,242 Wielkopolski Bank Kredytowy, SA................................................... 6,719
PL 9,000 aZaklady Cementowo Wapiennicze Gorazdze Chorula .................................. 235,151
------------
3,176,791
------------
Portugal 4.5%
PT 48,500 Banco Chemical (Portugal) ........................................................ 502,194
PT 313,000 aBanco Comercial Portugues, SA.................................................... 3,698,818
PT 73,194 Banco Comercial Portugues, SA, new................................................ 834,566
PT 162,680 Banco Espirito Santo e Comercial de Lisboa ....................................... 2,612,440
PT 63,454 Banco Totta & Acores, SA.......................................................... 1,241,518
PT 36,248 BPI Socieda de Gestora de Participacoes Socias, SA................................ 459,612
US 99,840 Espirito Santo Financial Holding, SA, ADR......................................... 1,272,960
PT 75,000 Portucel Industrial Empresa Product de Celulose, SA............................... 480,517
PT 7,010 aSociedade Portuguesa de Celulose, SA ............................................ 154,619
------------
11,257,244
------------
Singapore 2.6%
SG 110,000 aAcer Computer International, Ltd. ............................................... 213,400
SG 48,000 Acma, Ltd. ....................................................................... 140,156
SG 136,000 Acma, Ltd., fgn. ................................................................. 397,108
SG 18,000 British American Tobacco, Ltd. ................................................... 70,801
SG 101,000 First Capital Corp., Ltd. ........................................................ 250,532
SG 158,000 First Capital Corp., Ltd., fgn. .................................................. 391,921
SG 72,000 GP Batteries International, Ltd. ................................................. 211,680
SG 18,000 aGP Batteries International, Ltd., warrants....................................... 15,300
SG 1,064,000 Hai Sun Hup Group, Ltd. .......................................................... 806,860
SG 167,000 Hinds Hotels International, Ltd. ................................................. 195,287
SG 191,000 Hinds Hotels International, Ltd., fgn. ........................................... 223,352
SG 100,000 Hour Glass, Ltd. ................................................................. 87,881
SG 199,000 Inchcape, Bhd., fgn. ............................................................. 634,656
Singapore (cont.)
SG 107,500 Isetan (Singapore), Ltd., fgn. ................................................... $ 239,227
SG 97,000 Jurong Shipyard, fgn. ............................................................ 491,531
SG 78,000 Natsteel, Ltd. ................................................................... 154,784
SG 476,000 Natsteel, Ltd., fgn. ............................................................. 944,578
SG 165,000 Osprey Maritime, Ltd. ............................................................ 291,225
SG 85,000 Sembawang Corp., Ltd. ............................................................ 421,687
SG 112,000 WBL Corp., Ltd. .................................................................. 265,117
------------
6,447,083
------------
Slovak Republic
SS 10 aSlovnaft, AS .................................................................... 291
------------
South Africa 3.9%
ZA 10,541 Anglo American Industrial Corp., Ltd. ............................................ 423,294
ZA 26,901 Anglo American Platinum Corp., Ltd. .............................................. 167,627
ZA 13,000 Anglovaal Industries, Ltd. ....................................................... 63,005
ZA 488,000 BTR Dunlop, Ltd. ................................................................. 658,851
ZA 925,600 Del Monte Royal Foods, Ltd. ...................................................... 1,110,805
ZA 389,067 Engen, Ltd. ...................................................................... 2,648,852
ZA 76,200 First National Bank Holdings, Ltd. ............................................... 549,562
ZA 32,100 Malbak, Ltd. ..................................................................... 159,278
ZA 97,000 Palabora Mining Co., Ltd. ........................................................ 1,522,271
ZA 10,000 Potgietersrust Platinums, Ltd. ................................................... 50,196
ZA 311,500 aRainbow Chicken, Ltd. ........................................................... 103,522
ZA 127,270 Remandt Group, Ltd. .............................................................. 1,195,451
ZA 20,000 Sappi, Ltd. ...................................................................... 221,094
ZA 723,515 South African Iron & Steel Industrial Corp., Ltd. ................................ 566,055
ZA 278,685 Sun International (South Africa), Ltd. ........................................... 299,073
------------
9,738,936
------------
South Korea 2.5%
KR 10,000 Asia Cement Co., Ltd. ............................................................ 368,590
KR 33,940 Boram Bank Co., Ltd. ............................................................. 401,657
KR 5,430 aBoram Bank Co., Ltd., rights..................................................... 11,714
KR 1,050 BYC Co., Ltd. .................................................................... 129,438
KR 22,000 aCentral Investment & Finance Corp. .............................................. 390,533
KR 5,677 Dae Duck Electronics Co., Ltd. ................................................... 207,149
KR 46,682 Daegu Bank Co., Ltd. ............................................................. 689,296
KR 2,910 Daehan Synthetic Fiber Co., Ltd. ................................................. 279,808
KR 21,000 Dongkuk Steel Mill Co., Ltd. ..................................................... 447,855
KR 1,000 Hae In Corp., Ltd. ............................................................... 52,268
KR 3,950 Hankook Cosmetics Co., Ltd. ...................................................... 107,125
KR 1,000 Korea Iron & Steel Works Co., Ltd. ............................................... 161,489
KR 48,000 Korea Kumho Petrochemical ........................................................ 418,935
KR 16,000 Kyong Nam Bank ................................................................... 207,101
KR 1,000 Moon Bae Steel Co., Ltd. ......................................................... 32,421
KR 75,000 Ssangyong Oil Refining Co., Ltd. ................................................. 1,738,166
KR 39,790 Tong Yang Investment and Finance Co., Ltd. ....................................... 686,711
KR 1,000 Yuhwa ............................................................................ 63,979
------------
6,394,235
------------
Sri Lanka
LK 36,000 Associated Motorways, Ltd. ....................................................... $ 26,592
LK 8,000 John Keells Holdings, Ltd. ....................................................... 20,899
------------
47,491
------------
Thailand 2.8%
TH 30,800 American Standard Sanitaryware (THB) Public Co., Ltd., fgn. ...................... 487,695
TH 42,600 Ayudhya Insurance Public Co., Ltd., fgn. ......................................... 318,812
TH 3,300 Bangkok Land Public Co., Ltd. .................................................... 3,607
TH 580,500 Bangkok Land Public Co., Ltd., fgn. .............................................. 731,684
TH 125,500 Charoen Pokphand Feedmill Public Co., Ltd. ....................................... 514,101
TH 253,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. ................................. 1,345,321
TH 16,000 Hua Thai Manufacturing Public Co., Ltd. .......................................... 34,189
TH 83,100 Karat Sanitaryware Public Co., Ltd., fgn. ........................................ 239,762
TH 50,700 Kian Gwan (Thailand) Public Co., Ltd., fgn. ...................................... 134,299
TH 25,600 Regional Container Lines Public Co., Ltd., fgn. .................................. 375,106
TH 313,500 aRoyal Ceramic Industry Public Co., Ltd., fgn. ................................... 351,928
TH 100 Saha Pathanapibul Public Co., Ltd. ............................................... 244
TH 80,600 Saha Pathanapibul Public Co, Ltd., fgn. .......................................... 208,738
TH 120,600 Saha Union Public Co., Ltd. ...................................................... 166,260
TH 460,000 Saha Union Public Co., Ltd., fgn. ................................................ 720,222
TH 1,400 Sanyo Universal Electric Public Co., Ltd. ........................................ 4,853
TH 3,800 Sanyo Universal Electric Public Co., Ltd., fgn. .................................. 12,573
TH 2,000 Siam Cement Co., Ltd. (The), fgn. ................................................ 98,157
TH 104,100 Sino-Thai Engineering & Construction Public Co. .................................. 475,642
TH 116,410 Thai Asahi Glass Public Co., Ltd. ................................................ 270,529
TH 43,000 Thai Rayon Public Co., Ltd. ...................................................... 221,876
TH 2,200 Thai Rayon Public Co., Ltd., fgn. ................................................ 12,305
TH 26,400 Thai Wacoal Public Co., Ltd., fgn. ............................................... 174,957
TH 8,450 Thai Wah Public Co., Ltd., fgn. .................................................. 8,071
TH 4,500 United Motor Works (Siam) Public Co., Ltd. ....................................... 18,966
------------
6,929,897
------------
Turkey 5.7%
TR 12,266,500 Akbank ........................................................................... 1,478,791
TR 24,715,000 aAkbank, new...................................................................... 2,979,524
TR 1,704,000 Alarko Sanayii ve Ticaret, SA..................................................... 264,564
TR 2,075,000 aAlcatel Teletas Endustri Tic, AS................................................. 136,447
TR 4,688,000 Anadolu Anonim Turk Sigorta Sirketi .............................................. 156,990
TR 4,324,971 Arcelik, AS ...................................................................... 400,265
TR 312,000 Bagfas ........................................................................... 84,535
TR 4,348,086 Bekoteknik, AS.................................................................... 275,329
TR 1,580,000 Borusan, AS....................................................................... 130,833
TR 2,792,070 Cimentas Izmir Cimento Faikasi Turk, AS........................................... 611,998
TR 267,000 Cimsa Cimento Sanayi ve Ticaret, AS............................................... 152,813
TR 9,000 Compagnie Financiere Ottomane, SA................................................. 621,972
TR 16,560,000 Eregli Demir ve Celik Faikalari, AS .............................................. 1,835,071
TR 1,970,571 Izocam Ticaret ve Sanayii, AS..................................................... 167,974
TR 2,575,000 Koc Holding, AS................................................................... 627,131
TR 3,446,800 Koc Yatirim ve Sanayii Mamullesi Pazarlanca, AS................................... 556,139
TR 1,620,528 Marshall Boya ve Vernik Sanayii, AS............................................... 140,109
TR 1,594,000 Netas Northern Electric Telekomunic Asyon, AS..................................... 378,507
TR 433,200 Otosan Otomobil Sanayii, AS ...................................................... 147,706
TR 1,183,615 Tat Konserve Sanayii, AS.......................................................... 277,455
Turkey (cont.)
TR 887,933 aTat Konserve Sanayii, AS, rights................................................. $ 131,619
TR 14,349,350 Tofas Turk Otomobil Fabrikasi, AS................................................. 690,209
TR 4,366,432 Trakya Cam Sanayii, AS............................................................ 239,271
TR 4,169,996 Turk Demir Dokum ................................................................. 253,896
TR 21,335,400 Turkiye Garanti Bankasi, AS ...................................................... 1,454,923
TR 1,784,454 Vakif Finansal Kiralama, AS ...................................................... 84,746
------------
14,278,817
------------
Venezuela 1.9%
VE 3,700 Banco Venezolano de Credito ...................................................... 133,289
VE 256,080 Ceramica Carabobo CA, Class A..................................................... 264,743
VE 154,000 Ceramica Carabobo CA, Class A, ADR................................................ 159,210
VE 250,000 Consolidada Carabobo, Class A..................................................... 8,899
VE 3,250,000 Consolidada Carabobo, Class B..................................................... 114,307
VE 1,026,873 Electricidad de Caracas .......................................................... 853,666
VE 60,000 Industrias Ventane ............................................................... 26,219
VE 10,000 aManufacturera de Aparatos Domesticos, SA......................................... 7,055
VE 387,000 Mavesa, SA, ADR................................................................... 1,534,372
VE 50,000 Siderurgica Venezolana Sivensa Saica Svs ......................................... 33,040
VE 241,650 Siderurgica Venezolana Sivensa Saica Svs, ADR..................................... 798,408
VE 361,600 Vencemos de Cementos, SA.......................................................... 689,856
VE 110,240 Venezolana de Cementos-Vencemos, #2 .............................................. 188,226
------------
4,811,290
Zimbabwe .1%
ZW 25,000 Ta Holdings ...................................................................... 3,669
ZW 700,000 Transarchipel Shipping, Ltd. - TSL................................................ 244,433
ZW 72,000 Zimbabwe Sun, Ltd. ............................................................... 25,506
------------
273,608
------------
Total Common Stocks, Warrants & Rights (Cost $192,355,409).................. 206,641,907
------------
Preferred Stocks 6.9%
Brazil 6.9%
BR 110,000,000 Banco do Brazil, SA, pfd. ........................................................ 870,886
BR 264,298,700 aBanespa-Banco do Estado de Sao Paulo, SA, pfd. .................................. 987,024
BR 4,496,000 Brasmotor, SA, pfd. .............................................................. 1,405,909
BR 7,484,000 aCia Mesbla, SA, pfd. ............................................................ 40,992
BR 2,678,700 Copene-Petroquimica do Nordeste, SA, Class A, pfd. ............................... 1,291,106
BR 44,944,800 Duratex, SA, pfd. ................................................................ 1,942,543
BR 11,529,000 Eletroas-Centrais Eletricas Brasileiras, SA, Class B, pfd. ....................... 3,295,148
BR 1,384,200 Itausa-Investimentos Itau, SA, pfd. .............................................. 1,061,429
BR 362,700 aMannesmann, SA, pfd. ............................................................ 48,762
BR 45,845,000 Petrobras-Petroleo Brasileiro, SA, pfd. .......................................... 5,638,458
BR 93,810 aTelerj-Telecomunicacoes do Rio de Janeiro, SA, pfd. ............................. 10,557
BR 30,878,000 Unibanco-Uniao de Bancos Brasileiros, SA, pfd. ................................... 836,103
------------
17,428,917
------------
Malaysia
MY 26,800 Renong, cvt. pfd. ................................................................ 10,099
------------
Total Preferred Stocks (Cost $18,995,862)................................... 17,439,016
------------
Total Long Term Investments (Cost $211,351,271)............................. 224,080,923
------------
fShort Term Investments 10.7%....................................................
US $27,039,000 U.S. Treasury Bills, 4.83% - 5.10%, 09/12/96 (Cost $26,873,658)................... $ 26,880,325
------------
Total Investments (Cost $238,224,929) 99.6%............................ 250,961,248
Other Asset and Liabilities, Net .4%................................... 972,292
------------
Net Assets 100.0%...................................................... $251,933,540
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $237,543,060 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 33,752,046
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... (20,333,858)
------------
Net unrealized appreciation .................................................... $ 13,418,188
============
</TABLE>
CURRENCY LEGEND:
AR - Argentina
BR - Brazil
CN - China
CS - Czech Republic
GR - Greece
HK - Hong Kong
ID - Indonesia
IL - Israel
IN - India
KR - South Korea
LK - Sri Lanka
MX - Mexico
MY - Malaysia
PH - Philippines
PL - Poland
PT - Portugal
SG - Singapore
SS - Slovak Republic
TH - Thailand
TR - Turkey
US - United States
VE - Venezuela
ZA - South Africa
ZW - Zimbabwe
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
fSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Country* Shares Templeton Global Growth Fund (Note 1)
Common Stocks 82.1%
Argentina 2.5%
<S> <C> <C> <C>
AR 397,481 Inversiones y Representacion .................................................... $ 1,312,173
US 50,000 Telecom Argentina Stet France, SA, ADR........................................... 2,343,750
US 386,900 Transportadora de Gas del Sur, SA, Class B, ADR.................................. 4,739,525
US 155,000 YPF Sociedad Anonima, ADR........................................................ 3,487,500
------------
11,882,948
------------
Australia 3.2%
AU 494,553 Coles Myer, Ltd., Class A........................................................ 1,795,760
AU 2,129,730 HIH Winterthur International Holdings, Ltd. ..................................... 4,017,253
AU 150,000 News International, Plc. ........................................................ 969,064
AU 33,730 Pacific BBA, Ltd. ............................................................... 83,507
AU 2,149,000 Pacific Dunlop, Ltd. ............................................................ 4,830,542
AU 700,000 RGC, Ltd. ....................................................................... 3,383,503
------------
15,079,629
------------
Austria 1.9%
AT 30,000 Boehler Uddeholm, AG............................................................. 2,326,342
AT 35,400 Evn Energie-Versorgung Niederoesterreich, AG..................................... 4,894,847
AT 8,480 aMayr-Melnhof Karton, AG......................................................... 365,234
AT 13,000 bVA Technologies, AG, Bearer certificate......................................... 1,598,356
------------
9,184,779
------------
Bermuda 2.4%
US 80,000 Ace, Ltd. ....................................................................... 3,760,000
US 255,000 Partnerre, Ltd. ................................................................. 7,618,125
------------
11,378,125
------------
Brazil .7%
BR 129,100,000 Companhia Siderurgica Nacional .................................................. 3,291,301
------------
Canada 1.0%
CA 119,700 Intrawest Corp. ................................................................. 1,266,922
CA 37,000 aNewbridge Networks Corp. ....................................................... 2,423,500
CA 195,000 Primex Forest Products, Ltd. .................................................... 1,035,525
------------
4,725,947
------------
China .3%
HK 23,000,000 Shanghai Hai Xing Shipping Co., Class H ......................................... 1,515,357
------------
Czech Republic 1.0%
US 171,000 a,bKomercni Banka, AS, GDR....................................................... 4,617,000
------------
Denmark .2%
DK 20,000 Tele Danmark, AS, Class B........................................................ 1,007,170
------------
Ecuador
US 200 bLa Cemento Nacional, CA, GDR.................................................... 36,200
------------
Finland 2.3%
FI 8,300 Amer Group, Ltd., Class A ....................................................... 139,780
FI 145,000 aEnso Oy, Class R................................................................ 1,130,183
FI 270,000 Metsa Serla Oy, Class B.......................................................... 1,923,762
FI 130,000 Nokia, AB, Class A............................................................... 4,799,689
FI 65,000 Outokumpu Oy, Class A............................................................ 1,094,666
FI 88,000 aUPM-Kymmene Corp. .............................................................. 1,833,511
------------
10,921,591
------------
France 5.9%
FR 30,000 Alcatel Alsthom, SA.............................................................. $ 2,618,458
FR 148,702 AXA, SA.......................................................................... 8,140,056
FR 126,500 Banque Nationale de Paris ....................................................... 4,443,515
FR 9,783 Compagnie Generale D' Industrie et de Participation ............................. 2,251,654
FR 45,000 aCredit Foncier de France, SA.................................................... 293,046
US 111,110 Pechiney, SA, ADR................................................................ 2,243,033
FR 5,388 Sa des Galeries Lafayette ....................................................... 1,839,205
FR 41,972 Societe Elf Aquitane, SA......................................................... 3,089,002
FR 32,029 Union du Credit Bail Immobilier Unibail ......................................... 3,200,254
------------
28,118,223
------------
Germany .5%
DD 6,300 Volkswagen, AG .................................................................. 2,347,453
------------
Greece .5%
GR 36,266 Alpha Credit Bank ............................................................... 1,914,688
GR 5,867 bAlpha Credit Bank .............................................................. 309,735
------------
2,224,423
------------
Hong Kong 3.6%
HK 800,000 Cheung Kong Holdings, Ltd. ...................................................... 5,761,716
HK 278,149 HSBC Holdings, Plc. ............................................................. 4,204,171
HK 800,000 Jardine Strategic Holdings, Ltd. ................................................ 2,560,000
HK 180,000 Melco International Development, Ltd. ........................................... 49,995
HK 2,299,000 Oriental Press Group, Ltd. ...................................................... 1,232,549
HK 3,600,000 Shun Tak Holdings ............................................................... 2,209,088
HK 150,000 Swire Pacific, Ltd., Class A .................................................... 1,283,790
HK 75,000 Swire Pacific, Ltd., Class B .................................................... 103,188
------------
17,404,497
------------
Hungary .6%
US 256,358 bMOL Magyar Olay - Es Gazipari RT, GDS........................................... 2,832,756
------------
India .5%
US 33,600 Gujarat Ambuja Cements, Ltd., GDR................................................ 420,000
GB 720,000 aIndia Fund, (The), Class B ..................................................... 1,380,917
US 37,000 bLarsen and Toubro, Ltd., GDR.................................................... 693,750
------------
2,494,667
------------
Indonesia .5%
US 305,700 aAsia Pacific Resources International, Class A................................... 2,292,750
------------
Italy 1.6%
IT 896,800 aBanca Fideuram, SpA............................................................. 1,951,971
IT 1,745,200 Fiat, SpA........................................................................ 5,888,163
------------
7,840,134
------------
Japan 1.6%
JP 230,000 Daito Trust Construction Co., Ltd. .............................................. 3,446,795
JP 48,000 Hitachi, Ltd. ................................................................... 447,389
JP 200,000 Matsushita Electric Industrial Co., Ltd. ........................................ 3,728,241
------------
7,622,425
------------
Mexico 1.3%
MX 1,900,000 aCifra, SA, Class B ............................................................. 2,750,428
MX 400,000 aConsorcio G Grupo Dina, SA de CV................................................ 255,768
Mexico (cont.)
US 86,400 Telefonos de Mexico, ADR......................................................... $ 2,894,400
US 24,000 Vitro, SA, ADR .................................................................. 165,000
------------
6,065,596
------------
Netherlands 1.6%
NL 56,500 European Vinyls Corp., International, NV......................................... 1,755,790
NL 50,000 Frans Maas Groep ................................................................ 1,990,619
NL 103,595 Ing Groep, NV.................................................................... 3,091,753
NL 40,000 Koninklijke Nedlloyd, NV......................................................... 921,724
------------
7,759,886
------------
New Zealand .4%
NZ 560,000 Fisher & Paykel, Ltd. ........................................................... 1,803,108
US 15,607 Fletcher Challenge, Ltd., Forestry Division, ADR................................. 193,137
------------
1,996,245
------------
Norway .6%
NO 45,000 Hafslund, AS, Class B............................................................ 287,748
NO 180,600 Helikopter Services Group, ASA................................................... 2,087,041
NO 45,000 aNycomed, AS, Class B............................................................ 624,032
------------
2,998,821
------------
Philippines 1.0%
PH 5,375,000 Metro Pacific Corp., MDI......................................................... 1,600,191
PH 199,890 aPhilippine National Bank ....................................................... 3,337,858
------------
4,938,049
------------
South Korea 1.3%
KR 17,000 Byucksan Development Co., Ltd. .................................................. 215,853
KR 11,227 Keumkang Co., Ltd. .............................................................. 742,709
KR 100,000 Pacific Chemical Co., Ltd. ...................................................... 1,886,095
KR 123,920 Shinhan Bank Co., Ltd. .......................................................... 2,837,389
KR 1,000 Tae Kwang Industrial Co., Ltd. .................................................. 567,061
------------
6,249,107
------------
Spain 2.7%
ES 4,400 Banco Popular Espanol ........................................................... 785,094
ES 75,000 Banco Santander, SA.............................................................. 3,503,769
ES 63,900 Cristaleria Espanola, SA ........................................................ 4,013,562
ES 450,000 Iberdrola, SA.................................................................... 4,622,866
------------
12,925,291
------------
Sweden 2.8%
SE 35,000 Asea, AB, Class A ............................................................... 3,716,206
SE 50,000 Assidomaen, AB................................................................... 1,166,742
SE 163,000 Munksjo, AB...................................................................... 1,280,169
SE 12,400 bNordbanken, AB.................................................................. 239,722
SE 190,000 Skandia Foersaekrings, AB........................................................ 5,036,248
SE 68,000 aSwedish Match, AB............................................................... 211,569
SE 68,000 Volvo, AB, Class B............................................................... 1,550,823
------------
13,201,479
------------
Switzerland 3.6%
CH 3,900 Ciba-Geigy, AG................................................................... $ 4,757,049
CH 2,200 Kuoni Reisen Holding, AG, Class B................................................ 5,050,190
CH 3,000 Societe Generale de Surveillance Holdings, Ltd., bearer certificate.............. 7,186,563
------------
16,993,802
------------
Thailand .7%
TH 724,466 Industrial Finance Corp. of Thailand ............................................ 3,253,077
TH 89,700 aMDX Public Co., Ltd. ........................................................... 146,185
------------
3,399,262
------------
Turkey .2%
US 75,000 aTurkish Growth Fund ............................................................ 984,375
------------
United Kingdom 3.6%
GB 220,000 Argyll Group, Plc. .............................................................. 1,185,551
GB 1,000,000 British Gas, Plc. ............................................................... 2,795,378
GB 135,000 BTR, Plc., Class A............................................................... 518,843
GB 1,455,000 aCordiant, Plc. ................................................................. 2,462,961
GB 1,396,100 Dawson International, Plc. ...................................................... 1,777,864
GB 466,666 Lex Service, Plc. ............................................................... 2,717,725
GB 256,000 London Pacific Group, Ltd. ...................................................... 1,023,730
GB 320,554 National Power, Plc. ............................................................ 2,583,668
GB 275,300 W.H. Smith Group ................................................................ 2,026,523
------------
17,092,243
------------
United States 31.5%
US 89,000 A.G. Edwards, Inc. .............................................................. 2,414,125
US 15,000 Aflac, Inc. ..................................................................... 448,125
US 280,000 Archer Daniels Midland Co. ...................................................... 5,355,000
US 339,000 aBanner Aerospace, Inc. ......................................................... 2,839,125
US 230,000 aBay Networks, Inc. ............................................................. 5,922,500
US 27,000 Citicorp ........................................................................ 2,230,875
US 56,500 Dayton-Hudson Corp. ............................................................. 5,826,563
US 109,300 Dean Witter Discover & Co. ...................................................... 6,257,425
US 84,800 aDSC Communications Corp. ....................................................... 2,554,600
US 58,500 Entergy Corp. ................................................................... 1,659,938
US 156,000 Federal National Mortgage Association ........................................... 5,226,000
US 90,000 Ford Motor Co. .................................................................. 2,913,750
US 124,500 aFruit of the Loom, Inc., Class A................................................ 3,174,750
US 89,000 General Growth Properties ....................................................... 2,147,125
US 60,000 General Motors Corp. ............................................................ 3,142,500
US 66,000 General Motors Corp., Class H.................................................... 3,968,250
US 34,000 Georgia-Pacific Corp. ........................................................... 2,414,000
US 70,000 Goodyear Tire & Rubber Co. ...................................................... 3,377,500
US 251,100 Highwood Properties, Inc., REIT.................................................. 6,936,638
US 34,700 Horizon Group, Inc. ............................................................. 711,350
US 52,800 Houghton Mifflin Co. ............................................................ 2,626,800
US 56,500 International Business Machines Corp. ........................................... 5,593,500
US 48,900 aLandstar System, Inc. .......................................................... 1,418,100
US 97,902 Limited, Inc. ................................................................... 2,104,893
US 42,000 Merrill Lynch & Co., Inc. ....................................................... 2,735,250
US 20,000 Mobil Corp. ..................................................................... 2,242,500
US 75,000 Motorola, Inc. .................................................................. 4,715,625
US 32,000 National Health Investors, Inc. ................................................. 1,048,000
United States (cont.)
US 30,400 Nike, Inc., Class B ............................................................. $ 3,123,600
US 157,000 aOMI Corp. ...................................................................... 1,354,125
US 50,000 aOwens Corning .................................................................. 2,150,000
US 70,000 PECO Energy Co. ................................................................. 1,820,000
US 151,700 Pharmacia & Upjohn, Inc. ........................................................ 6,731,688
US 150,000 aPinnacle Systems, Inc. ......................................................... 3,112,500
US 150,000 Post Properties, Inc. ........................................................... 5,306,250
US 24,000 Reliastar Financial Corp. ....................................................... 1,035,000
US 80,000 Rouse Co. ....................................................................... 2,070,000
US 130,000 aSyms Corp. ..................................................................... 958,750
US 30,000 Texaco, Inc. .................................................................... 2,516,250
US 120,000 Torchmark Corp. ................................................................. 5,250,000
US 350 aTransport Holdings, Inc., Class A............................................... 16,100
US 157,500 Travelers, Inc. ................................................................. 7,185,938
US 114,200 UNUM Corp. ...................................................................... 7,108,950
US 81,000 Valero Energy Corp. ............................................................. 2,025,000
US 115,000 Weeks Corp. ..................................................................... 2,990,000
US 240,000 Wheelabrator Technologies, Inc. ................................................. 3,660,000
------------
150,418,958
------------
Total Common Stocks (Cost $344,051,708).................................... 391,840,489
------------
Preferred Stocks 3.7%
Brazil 2.5%
BR 258,441,822 Banco Bradesco, SA, pfd. ........................................................ 2,110,465
BR 151,938,238 Cemig-Cia Energetica de Minas Gerais, pfd. ...................................... 4,039,985
BR 1,952,000 Coteminas Cia Tecidos Norte de Minas, pfd. ...................................... 770,769
US 75,000 Telebras-Telecomunicacoes Brasileiras, SA, pfd., ADR............................. 5,221,875
------------
12,143,094
------------
Greece .4%
GR 219,110 aMichaniki, SA, pfd. ............................................................ 1,821,742
------------
Italy .8%
IT 2,203,300 Concessioni e Costruzioni Autostrade, SpA, Class B, pfd. ........................ 3,819,005
------------
Mexico
US 6,500 Nacional Financiera, SA, 11.25%, 05/15/98, cvt. pfd. ............................ 222,625
------------
Total Preferred Stocks (Cost $13,799,210).................................. 18,006,466
------------
Total Common Stocks and Preferred Stocks (Cost $357,850,918)............... 409,846,955
------------
Face
Amount
Bonds 1.6%
India .4%
US 2,000,000 Essar Gujarat, Ltd., cvt., 5.50%, 08/05/98 ...................................... 1,970,000
------------
Italy .6%
IT 2,950,000,000 b,eSofte, SA, cvt., 4.25%, 07/30/98 ............................................. 2,932,185
------------
Mexico .2%
US 1,210,000 Empresas ICA Sociedad Controladora, SA, cvt., 5.00%, 03/15/04 ................... 768,350
------------
Switzerland .1%
US 365,000 C.S. Holding Finance BV, cvt., 4.875%, 11/19/02 ................................. 525,600
------------
Thailand .3%
US 3,602,000 MDX Public Co., Ltd., cvt., 4.75%, 09/17/03 ..................................... $ 1,692,940
------------
Total Bonds (Cost $6,793,375).............................................. 7,889,075
------------
Total Long Term Investments (Cost $364,644,293)............................ 417,736,030
------------
gReceivables from Repurchase Agreements 14.3%
US 25,122,000 BZW Securities, Inc., 5.35%, 07/01/96, (Maturity Value $25,011,146)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............................... 25,000,000
US 16,060,000 Morgan Stanley & Co., Inc., 5.25%, 07/01/96, (Maturity Value $15,854,934)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97 ............................... 15,848,000
US 27,299,000 UBS Securities, Inc., 5.37%, 07/01/96, (Maturity Value $27,484,294)
Collateral: U.S. Treasury Notes, 5.875%, 07/31/97 .............................. 27,472,000
------------
Total Receivables from Repurchase Agreements (Cost $68,320,000)............ 68,320,000
------------
Total Investments (Cost $432,964,293) 101.7% ......................... 486,056,030
Liabilities in Excess of Other Assets (1.7)% ......................... (8,073,070)
------------
Net Assets 100.0% .................................................... $477,982,960
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $433,820,184 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 68,289,204
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. (16,053,358)
------------
Net unrealized appreciation ................................................... $ 52,235,846
============
</TABLE>
COUNTRY LEGEND:
AR - Argentina
AT - Austria
AU - Australia
BR - Brazil
CA - Canada
CH - Switzerland
DD - Germany
DK - Denmark
ES - Spain
FI - Finland
FR - France
GB - United Kingdom
GR - Greece
PORTFOLIO ABBREVIATIONS:
REIT - Real Estate Investment Trust
HK - Hong Kong
IT - Italy
JP - Japan
KR - South Korea
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
PH - Philippines
SE - Sweden
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Country* Shares Templeton Global Asset Allocation Fund (Note 1)
Common Stocks 44.1%
Argentina .5%
<S> <C> <C> <C>
US 2,000 Telecom Argentina Stet France, SA, ADR............................................. $ 93,750
US 6,900 Transportadora de Gas del Sur, SA, Class B, ADR.................................... 84,525
------------
178,275
------------
Australia 1.2%
AU 26,433 Coles Myer, Ltd., Class A.......................................................... 95,980
AU 93,062 HIH Winterthur International Holdings, Ltd. ....................................... 175,540
AU 41,881 Pacific BBA, Ltd. ................................................................. 103,686
AU 2,550 Pacific Dunlop, Ltd. ............................................................. 5,732
AU 10,000 RGC, Ltd. ......................................................................... 48,336
------------
429,274
------------
Austria .2%
AT 1,060 Boehler Uddeholm, AG............................................................... 82,197
------------
Bermuda 1.2%
US 10,000 Partnerre, Ltd. ................................................................... 298,750
US 7,000 Sea Containers, Ltd., Class A...................................................... 133,000
------------
431,750
------------
Brazil 1.8%
US 7,500 Cia Energetica de Minas Gerais, ADR................................................ 199,422
US 7,700 Companhia Siderurgica Nacional, ADR................................................ 196,305
US 12,600 Lojas Americanas, SA, ADR.......................................................... 248,449
------------
644,176
------------
Canada .5%
CA 12,000 Hudsons Bay Co. ................................................................... 181,945
------------
Chile .4%
US 4,800 Madeco Manufacturera de Cobre, SA, ADR............................................. 135,000
------------
Colombia .2%
US 5,000 a,bCementos Paz del Rio, SA, ADR................................................... 66,250
------------
Denmark .3%
DK 2,000 Tele Danmark, AS, Class B.......................................................... 100,717
------------
Finland 1.2%
FI 10,000 aEnso Oy, Class R.................................................................. 77,944
FI 3,750 Metsa Serla Oy, Class B............................................................ 26,719
FI 5,000 Nokia, AB, Class A................................................................. 184,603
FI 2,400 Outokumpu Oy, Class A.............................................................. 40,418
FI 4,200 aUPM-Kymmene Corp. ................................................................ 87,509
------------
417,193
------------
France 5.1%
FR 11,731 AXA, SA............................................................................ 642,164
FR 9,000 Banque Nationale de Paris ......................................................... 316,139
FR 9,700 Rhone-Poulenc, SA, Class A ........................................................ 255,122
FR 1,805 Societe Elf Aquitane, SA........................................................... 132,842
FR 2,556 Total, SA, Class B ................................................................ 189,703
FR 2,500 Union du Credit Bail Immobilier Unibail ........................................... 249,793
------------
1,785,763
------------
Germany .4%
DD 360 Volkswagen, AG .................................................................... 134,140
------------
Greece .5%
GR 3,066 Alpha Credit Bank ................................................................. $ 161,872
------------
Hong Kong 2.4%
HK 32,000 Cheung Kong Holdings, Ltd. ........................................................ 230,469
HK 111,000 Grand Hotel Holdings, Ltd. ........................................................ 43,736
HK 1,013,600 Hon Kwok Land Investment Co., Ltd. ................................................ 353,547
HK 12,200 Melco International Development, Ltd. ............................................. 3,389
HK 244,000 Shun Tak Holdings ................................................................. 149,727
HK 164,000 Yue Yuen Industrial (Holdings), Ltd. .............................................. 46,610
------------
827,478
------------
Hungary .4%
US 12,107 bMOL Magyar Olay - Es Gazipari RT, GDS............................................. 133,782
------------
Indonesia .4%
US 19,300 aAsia Pacific Resources International, Class A..................................... 144,750
------------
Italy .6%
IT 74,700 aBanca Fideuram, SpA............................................................... 162,592
IT 10,000 STET (Sta Finanziaria Telefonica Torino), SpA...................................... 33,915
------------
196,507
------------
Japan .8%
JP 12,000 Daito Trust Construction Co., Ltd. ................................................ 179,833
JP 5,000 Matsushita Electric Industrial Co., Ltd. .......................................... 93,206
------------
273,039
------------
Mexico .5%
MX 96,200 aCifra, SA, Class B ............................................................... 139,259
US 3,000 aEmpresas ICA Sociedad Controladora, SA, ADR....................................... 41,625
------------
180,884
------------
Netherlands .4%
NL 5,020 Ing Groep, NV...................................................................... 149,820
------------
New Zealand .5%
NZ 51,300 Ceramico Corp., Ltd. .............................................................. 64,942
US 9,000 aTranz Rail Holdings, Ltd., ADR.................................................... 124,875
------------
189,817
------------
Norway .7%
NO 14,800 Elkem, AS.......................................................................... 204,097
NO 1,700 Hafslund, AS, Class B.............................................................. 10,870
NO 1,700 aNycomed, AS, Class B.............................................................. 23,575
------------
238,542
------------
Spain 1.1%
ES 9,500 Dragados y Construcciones, SA...................................................... 125,796
ES 20,500 Iberdrola, SA...................................................................... 210,597
ES 1,750 Telefonica de Espana, SA .......................................................... 32,264
------------
368,657
------------
Sweden 2.8%
SE 2,300 Electrolux, AB, Class B ........................................................... 115,851
SE 165 aFastighets Naeckebro, AB Tornet, Class A.......................................... 2,043
SE 5,000 Marieberg Tidnings, AB, Class A ................................................... 125,359
SE 18,000 bNordbanken, AB.................................................................... 347,984
Sweden (cont.)
SE 13,800 Skandia Foersaekrings, AB.......................................................... $ 365,791
SE 1,650 Svenska Handelsbanken, Class A..................................................... 34,515
------------
991,543
------------
Switzerland 1.3%
CH 70 Kuoni Reisen Holding, AG, Class B.................................................. 160,688
CH 115 Societe Generale de Surveillance Holdings, Ltd., br. .............................. 275,485
------------
436,173
------------
Thailand .5%
TH 30,000 Chareon Pokphand Feedmill Public Co., Ltd., fgn. .................................. 159,524
------------
Turkey .3%
US 7,500 aTurkish Growth Fund .............................................................. 98,438
------------
United Kingdom 2.1%
GB 40,000 British Gas, Plc. ................................................................. 111,815
GB 45,000 aCordiant, Plc. ................................................................... 76,174
GB 13,500 Dawson International, Plc. ........................................................ 17,192
GB 21,666 Lex Service, Plc. ................................................................ 126,176
GB 118,414 aRailtrack Group, Plc. ............................................................ 402,731
GB 2,200 W.H. Smith Group .................................................................. 16,195
------------
750,283
------------
United States 15.8%
US 2,860 AK Steel Holding Corp. ............................................................ 111,898
US 16,000 Archer Daniels Midland Co. ........................................................ 306,000
US 10,100 aBay Networks, Inc. ............................................................... 260,075
US 5,900 Beacon Properties Corp. ........................................................... 151,188
US 6,800 Carramerica Realty Corp. .......................................................... 163,200
US 2,400 Citicorp .......................................................................... 198,300
US 2,700 Dayton-Hudson Corp. ............................................................... 278,438
US 5,000 Dean Witter Discover & Co. ........................................................ 286,250
US 6,950 aFruit of the Loom, Inc., Class A.................................................. 177,225
US 2,700 General Motors Corp. .............................................................. 141,413
US 3,100 General Motors Corp., Class H ..................................................... 186,388
US 2,500 Georgia-Pacific Corp. ............................................................. 177,500
US 3,600 Goodyear Tire & Rubber Co. ........................................................ 173,700
US 15,300 Highwood Properties, Inc., REIT.................................................... 422,663
US 12,000 Horizon Group, Inc. ............................................................... 246,000
US 3,200 Houghton Mifflin Co. .............................................................. 159,200
US 3,500 International Business Machines Corp. ............................................. 346,500
US 3,000 aLandstar System, Inc. ............................................................ 87,000
US 3,300 Motorola, Inc. .................................................................... 207,488
US 1,800 Peco Energy Co. ................................................................... 46,800
US 5,200 aPinnacle Systems, Inc. ........................................................... 107,900
US 4,400 Post Properties, Inc. ............................................................. 155,650
US 3,200 Summit Properties, Inc., REIT...................................................... 62,800
US 1,400 Texas Utilties Electric Co. ....................................................... 59,850
US 2,121 The Limited, Inc. ................................................................. 45,602
US 7,000 Torchmark Corp. ................................................................... 306,250
US 4,000 UNUM Corp. ........................................................................ 249,000
US 2,400 Valero Energy Corp. ............................................................... 60,000
United States (cont.)
US 7,500 Weeks Corp. ....................................................................... $ 195,000
US 10,000 Wheelabrator Technologies, Inc. ................................................... 152,500
------------
5,521,778
------------
Total Common Stocks (Cost $14,101,438)....................................... 15,409,567
------------
Preferred Stocks 1.2%
Argentina .8%
US 4,700 Cia de Inversiones en Telecomunicaciones, SA, 7.00%, cvt. pfd. .................... 272,600
------------
Greece .4%
GR 18,740 aMichaniki, SA, pfd. .............................................................. 155,810
------------
Total Preferred Stocks (Cost $423,186)....................................... 428,410
------------
Total Common Stocks and Preferred Stocks (Cost $14,524,624).................. 15,837,977
------------
Face
Amount
Bonds 24.4%
Argentina 1.6%
US 65,000 Bocon Previsionales II, FRN, 5.063%, 04/01/01 ..................................... 74,230
US 100,000 Bridas Corp., Yankee, 12.50%, 11/18/99 ............................................ 104,500
US 100,000 bIndustrias Metalurgicas Pescarmona, 11.75%, 03/27/98 ............................. 100,875
US 500,000 Republic of Argentina, Series L, VRN, 5.25%, 03/31/23 ............................. 274,375
------------
553,980
------------
Australia 1.7%
AU 570,000 eGovernment of Australia, 7.00%, 04/15/00 ......................................... 427,450
AU 205,000 eRepublic of Australia, 12.00%, 11/15/01 .......................................... 184,053
------------
611,503
------------
Brazil 1.1%
US 150,000 bCentrais Electricas Brasileiras, SA, 10.00%, 10/30/98 ............................ 153,000
US 395,000 Government of Brazil, 4.25%, 04/15/24 ............................................. 218,731
------------
371,731
------------
Canada .7%
CA 80,000 eGovernment of Canada, 5.75%, 03/01/99 ............................................ 57,683
CA 60,000 eGovernment of Canada, 10.50%, 03/01/01 ........................................... 50,044
CA 90,000 eGovernment of Canada, 9.00%, 12/01/04 ............................................ 71,822
CA 100,000 eGovernment of Canada, 8.75%, 12/01/05 ............................................ 78,843
------------
258,392
------------
Denmark .8%
DK 235,000 eGovernment of Denmark, 8.00%, 05/15/03 ........................................... 42,463
DK 790,000 eKingdom of Denmark, 9.00%, 11/15/00 .............................................. 149,018
DK 500,000 eKingdom of Denmark, 8.00%, 11/15/01 .............................................. 91,200
------------
282,681
------------
Ecuador .3%
US 290,000 Republic of Ecuador, FRN, 3.25%, 02/28/25 ......................................... 104,219
------------
Germany 1.6%
DD 100,000 eDeutsche Bundespost, 7.75%, 10/01/04 ............................................. 70,589
DD 150,000 eFederal Republic of Germany, 8.00%, 07/22/02 ..................................... 108,597
DD 85,000 eFederal Republic of Germany, 7.125%, 12/20/02 .................................... 58,905
DD 90,000 eFederal Republic of Germany, 6.50%, 07/15/03 ..................................... 60,032
Germany (cont.)
DD 80,000 eFederal Republic of Germany, Bundes, 8.25%, 09/20/01 ............................. $ 58,523
DD 85,000 eFederal Republic of Germany, Bundesobl, 6.625%, 01/20/98 ......................... 58,061
DD 200,000 eTreuhandanstalt, 7.125%, 01/29/03 ................................................ 138,534
------------
553,241
------------
India .4%
US 150,000 Essar Gujarat, Ltd., cvt., 5.50%, 08/05/98 ........................................ 147,750
------------
Indonesia .3%
ID 87,000 PT Polysindo Intl. Finance Co., Series B, 11.375%, 06/15/06 ....................... 88,523
------------
Ireland .1%
IR 35,000 eRepublic of Ireland, 6.25%, 10/18/04 ............................................. 51,725
------------
Italy 1.7%
IT 85,000,000 eBuoni Poliennali del Tes, 8.50%, 08/01/99 ........................................ 55,620
IT 195,000,000 eBuoni Poliennali del Tes, 10.50%, 09/01/05 ....................................... 137,248
IT 570,000,000 eGovernment of Italy, 10.50%, 07/15/00 ............................................ 395,195
------------
588,063
------------
Mexico 1.8%
US 130,000 Bancomer, SA, 8.00%, 07/07/98 ..................................................... 128,375
US 335,000 United Mexican States, 9.75%, 02/06/01 ............................................ 333,325
US 250,000 United Mexican States, Series B, 6.25%, 12/31/19 .................................. 162,344
------------
624,044
------------
Philippines .9%
US 170,000 Phillipine Long Distance Telephone Co., 9.25%, 06/30/06 ........................... 170,638
US 180,000 Phillippine Pars, Series B, FRN, 5.75%, 12/01/17 .................................. 143,550
------------
314,188
------------
Poland .4%
US 180,000 Government of Poland, PDI, FRN, 3.75%, 10/27/14 ................................... 137,025
------------
Spain 1.2%
ES 29,010,000 eGovernment of Spain, 12.25%, 03/25/00 ............................................ 257,567
ES 8,100,000 eGovernment of Spain, 11.30%, 01/15/02 ............................................ 71,252
ES 11,020,000 eGovernment of Spain, 10.00%, 02/28/05 ............................................ 91,945
------------
420,764
------------
Sweden 1.0%
SE 1,200,000 eKingdom of Sweden, 13.00%, 06/15/01 .............................................. 220,739
SE 700,000 eKingdom of Sweden, 10.25%, 05/05/03 .............................................. 119,280
------------
340,019
------------
Trinidad and Tobago .5%
US 170,000 bSei Holdings IX Inc., 11.00%, 11/30/00 ........................................... 178,500
------------
United Kingdom 1.7%
GB 230,000 eUnited Kingdom, 12.00%, 11/20/98 ................................................. 398,376
GB 80,000 eUnited Kingdom, cvt., 9.50%, 10/25/04 ............................................ 136,896
GB 40,000 eUnited Kingdom, ln., 9.50%, 01/15/99 ............................................. 66,041
------------
601,313
------------
United States 5.7%
US 405,000 U.S. Treasury Bonds, 6.375%, 08/15/02 ............................................. 401,772
US 810,000 U.S. Treasury Notes, 6.125%, 07/31/00 ............................................. 801,017
US 810,000 U S Treasury Notes, 6.25%, 08/31/00 ............................................... 804,306
------------
2,007,095
------------
Venezuela .9%
US 250,000 Republic of Venezuela, Par Bond, Series B, 6.75%, 03/31/20 ........................ $ 153,750
US 250,000 Republic of Venezuela, Series A, 6.75%, 03/31/20 .................................. 153,750
------------
307,500
------------
Total Bonds (Cost $8,415,927)................................................ 8,542,256
------------
Total Long Term Investments (Cost $22,940,551)............................... 24,380,233
------------
fShort Term Securities 13.5%
United States
US 1,150,000 Federal Farm Credit Bank, 5.25% - 5.30%, 07/09/96 - 08/09/96 ...................... 1,145,974
US 1,200,000 Federal Home Loan Bank, 5.25% - 5.29%, 07/08/96 - 08/07/96 ........................ 1,196,025
US 1,200,000 Federal Home Loan Mortgage Corp., 5.25% - 5.29%, 07/05/96 - 07/31/96 .............. 1,197,082
US 1,200,000 Federal National Mortgage Association, 5.25% - 5.30%, 07/11/96 - 08/08/96 ......... 1,196,111
------------
Total Short Term Securities (Cost $4,734,746)................................ 4,735,192
------------
Total Investments before Repurchase Agreements (Cost $27,675,297) ........... 29,115,425
------------
gReceivables from Repurchase Agreements 16.9%
US 5,920,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $5,900,630) (Cost $5,898,000)
Collateral: U.S. Treasury Notes, 7.00%, 09/30/96 ................................. 5,898,000
------------
Total Investments (Cost $33,573,297) 100.1%............................. 35,013,425
Liabilities in Excess of Other Assets (.1)% ............................ (26,385)
------------
Net Assets 100.0% ...................................................... $34,987,040
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $33,573,297 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over cost ..................................................... $ 1,893,526
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ................................................. (453,398)
------------
Net unrealized appreciation ..................................................... $ 1,440,128
============
</TABLE>
COUNTRY LEGEND:
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
ID - Indonesia
IR - Ireland
IT - Italy
JP - Japan
MX - Mexico
NL - Netherlands
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States
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.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
eFace amount is stated in foreign currency.
fCertain 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 upon maturity.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Statement of Investments in Securities and Net Assets, June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Value
Shares Small Cap Fund (Note 1)
Common Stocks 92.2%
Commercial Services 4.9%
<S> <C> <C>
16,900 aAffiliated Computer Services, Inc. .......................................................... $ 794,300
17,300 aLabor Ready, Inc. ........................................................................... 484,400
35,000 Norrell Corp. ................................................................................ 1,719,375
100,000 aRent-Way, Inc. .............................................................................. 1,362,500
20,000 aRobert Half International, Inc. ............................................................. 557,500
------------
4,918,075
------------
Consumer Products Durables 4.0%
36,500 aBelmont Homes, Inc. ......................................................................... 789,313
40,000 aCannondale Corp. ............................................................................ 810,000
35,000 aK-2, Inc. ................................................................................... 949,375
50,000 aMorrow Snowboards, Inc. ..................................................................... 525,000
43,200 aSouthern Energy Homes, Inc. ................................................................. 928,800
------------
4,002,488
------------
Consumer Products Non-Durables .7%
6,900 aDonna Karan International, Inc. ............................................................. 193,200
9,000 aTommy Hilfiger Corp. ........................................................................ 482,625
------------
675,825
------------
Consumer Services 2.7%
45,000 aPrime Hospitality Corp. ..................................................................... 742,500
39,400 aRed Lion Hotels, Inc. ....................................................................... 827,400
40,000 aStarbucks Corp. ............................................................................. 1,130,000
------------
2,699,900
------------
Electronic Technology 12.4%
60,000 aCognex Corp. ................................................................................ 967,500
19,600 aDuPont Photomasks, Inc. ..................................................................... 401,800
50,100 aEtec Systems, Inc. .......................................................................... 1,114,725
20,300 aKomag, Inc. ................................................................................. 535,413
35,000 aLexmark International Group, Inc., Class A................................................... 704,375
46,400 Logicon, Inc. ................................................................................ 1,386,200
24,800 aNatural Microsystems Corp. .................................................................. 868,000
1,600 aShiva Corp. ................................................................................. 128,000
24,000 aSilicon Graphics, Inc. ...................................................................... 576,000
95,100 aTekelec ..................................................................................... 1,248,188
75,000 aTracor, Inc. ................................................................................ 1,293,750
25,000 aUCAR International, Inc. .................................................................... 1,040,625
25,000 aVerilink Corp. .............................................................................. 637,500
150,000 aVisioneer, Inc. ............................................................................. 1,518,750
------------
12,420,826
------------
Energy/Minerals 5.2%
103,000 aBarrett Resources Corp. ..................................................................... 3,064,250
146,400 aCairn Energy USA, Inc. ...................................................................... 2,104,500
------------
5,168,750
------------
Financial Services 5.4%
61,200 aAmeriCredit Corp. ........................................................................... 956,250
26,300 Chartwell Re Corp. ........................................................................... 581,888
6,200 aContiFinancial Corp. ........................................................................ 182,900
9,400 Executive Risk, Inc. ......................................................................... 359,550
46,300 IPC Holdings, Ltd. .......................................................................... 931,788
Financial Services (cont.)
60,000 aRisk Capital Holdings, Inc. ................................................................. $ 1,177,500
44,900 aSilicon Valley Bancshares ................................................................... 1,156,175
------------
5,346,051
------------
Health Care Services 4.0%
12,900 aAccess Health, Inc. ......................................................................... 609,525
51,800 aMecon, Inc. ................................................................................. 1,171,975
1,000 aMedic Computer Systems, Inc. ................................................................ 81,125
32,600 aSierra Health Services, Inc. ................................................................ 1,026,900
90,000 aU.S. Diagnostic Labs, Inc. .................................................................. 1,102,500
------------
3,992,025
------------
Health Technology 7.0%
12,400 aHeartport, Inc. ............................................................................. 375,100
68,200 Mentor Corp. ................................................................................. 1,739,100
205,000 aNeurobiological Technologies, Inc. .......................................................... 1,358,125
70,600 aNoven Pharmaceuticals, Inc. ................................................................. 1,129,600
57,600 aOptical Sensors, Inc. ....................................................................... 597,600
37,500 aPenederm, Inc. .............................................................................. 637,500
17,800 aPharmacopeia, Inc. .......................................................................... 364,900
2,700 aSerologicals Corp. .......................................................................... 71,550
27,000 aTransition Systems, Inc. .................................................................... 769,500
------------
7,042,975
------------
Industrial Services .2%
6,600 aWaters Corp. ................................................................................ 217,800
------------
Oil/Gas - Equipment & Services 1.2%
10,000 aCarbo Ceramics, Inc. ........................................................................ 220,000
56,600 aVarco International, Inc. ................................................................... 1,025,875
------------
1,245,875
------------
Printing & Publishing 1.2%
20,000 aScholastic Corp. ............................................................................ 1,240,000
------------
Producer Manufacturing 4.6%
15,100 aAmerican Buildings Co. ...................................................................... 441,675
10,000 Butler Manufacturing Co. ..................................................................... 337,500
17,900 aCastech Aluminum Group, Inc. ................................................................ 264,025
27,400 aCentury Aluminum Co. ........................................................................ 431,550
68,400 Easco, Inc. .................................................................................. 564,300
40,000 aGentex Corp. ................................................................................ 780,000
13,000 Pittston Brink's Group ....................................................................... 378,625
28,700 Roper Industries, Inc. ....................................................................... 1,399,125
------------
4,596,800
------------
Real Estate Investment Trust 5.6%
40,000 Bay Apartment Communities, Inc. .............................................................. 1,035,000
90,300 Equity Inns, Inc. ............................................................................ 1,038,450
35,000 FelCor Suite Hotels, Inc. .................................................................... 1,067,500
27,400 OMEGA Healthcare Investors, Inc. ............................................................. 756,925
26,000 Storage Trust Realty ......................................................................... 533,000
98,000 Winston Hotels, Inc. ......................................................................... 1,139,250
------------
5,570,125
------------
Retail .5%
7,500 aBorders Group, Inc. ......................................................................... $ 241,875
9,000 aDesigner Holdings, Ltd. ..................................................................... 239,625
------------
481,500
------------
Semiconductors 8.0%
12,000 aAdaptec, Inc. ............................................................................... 568,500
24,800 aAltera Corp. ................................................................................ 942,400
15,900 aExar Corp. .................................................................................. 206,700
50,000 aLattice Semiconductor Corp. ................................................................. 1,206,250
45,000 Linear Technology Corp. ...................................................................... 1,350,000
87,600 aMicro Linear Corp. .......................................................................... 657,000
110,000 aSierra Semiconductor Corp. .................................................................. 1,278,750
26,200 aUniphase Corp. .............................................................................. 930,100
26,000 aXilinx, Inc. ................................................................................ 825,500
------------
7,965,200
------------
Technology Services 12.7%
79,600 aAcclaim Entertainment, Inc. ................................................................. 766,150
62,000 aAmisys Managed Care Systems ................................................................. 1,596,500
3,000 aBusiness Objects, SA, ADR.................................................................... 120,750
8,100 aCitrix Systems, Inc. ........................................................................ 307,800
25,700 aFractal Design Corp. ........................................................................ 375,863
34,400 aFulcrum Technology, Inc. .................................................................... 442,900
7,500 ai2 Technologies, Inc. ....................................................................... 320,625
22,500 aIDT Corp. ................................................................................... 216,560
5,600 aIntegrated Systems, Inc. .................................................................... 224,350
68,900 aMapinfo Corp. ............................................................................... 723,450
5,000 aMcAfee Associates, Inc. ..................................................................... 245,000
15,000 aMercury Interactive Corp. ................................................................... 206,250
6,000 aMetaTools, Inc. ............................................................................. 141,000
85,000 aPhoenix Technologies, Ltd. .................................................................. 1,423,750
100,000 aQuantum Corp. ............................................................................... 1,462,500
20,000 aRainbow Technologies, Inc. .................................................................. 400,000
12,500 aSapient Corp. ............................................................................... 528,125
35,500 aScopus Technology, Inc. ..................................................................... 550,250
11,300 aSecure Computing Corp. ..................................................................... 259,900
18,500 aSterling Software, Inc. ..................................................................... 1,424,500
17,000 aSymantec Corp. .............................................................................. 212,500
19,000 aSynopsys, Inc. .............................................................................. 755,250
------------
12,703,973
------------
Telecommunications 6.5%
36,000 aCommNet Cellular ............................................................................ 1,080,000
26,300 aGlenayre Technologies, Inc. ................................................................. 1,315,000
26,000 IntelCom Group, Inc. ......................................................................... 650,000
16,000 aNewbridge Networks Corp. .................................................................... 1,048,000
25,000 aRural Cellular Corp., Class A................................................................ 318,750
23,000 aSilver King Communications .................................................................. 690,000
150,000 aSpectralink Corp. ........................................................................... 1,443,750
------------
6,545,500
------------
Transportation 4.5%
50,000 Air Express International Corp. .............................................................. 1,412,500
30,000 Expeditors International of Washington, Inc. ................................................. 930,000
Transportation (cont.)
41,000 Harper Group, Inc. ........................................................................... $ 799,500
46,000 aLandstar System, Inc. ....................................................................... 1,334,000
------------
4,476,000
------------
Utilities .9%
31,400 aAES Corp. ................................................................................... 887,050
------------
Total Common Stocks (Cost $89,706,386).................................................. 92,196,738
------------
Face
Amount
Convertible Corporate Bonds 1.0%
$ 400,000 bQuantum Corp., cvt. sub. notes, 5.00%, 03/01/03 ............................................. 366,500
425,000 bU.S. Diagnostic Labs, Inc., cvt. sub. deb., 9.00%, 03/31/03 ................................. 639,625
------------
Total Convertible Corporate Bonds (Cost $855,254)....................................... 1,006,125
------------
Total Long Term Investments (Cost $90,561,640).......................................... 93,202,863
------------
g,hReceivables from Repurchase Agreement 1.8%
1,836,845 Joint Repurchase Agreement, 5.439%, 07/01/96, (Maturity Value $1,846,400) (Cost $1,845,563)
Chase Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $254,270)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc., (Maturity Value $265,355)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/96 - 11/30/99 ........................ 1,845,563
------------
Total Investments (Cost $92,407,203) 95.0%......................................... 95,048,426
Other Assets and Liabilities, Net 5.0%............................................. 5,012,048
------------
Net Assets 100.0%.................................................................. $100,060,474
============
At June 30, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $92,416,162 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 7,764,366
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (5,132,102)
------------
Net unrealized appreciation ................................................................ $ 2,632,264
============
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Value
Shares Capital Growth Fund (Note 1)
Common Stocks 82.1%
Commercial Services 2.6%
2,500 Equifax, Inc. ..................................................................................... $ 65,625
2,200 aRobert Half International, Inc. .................................................................. 61,325
------------
126,950
------------
Consumer Products Durables 2.3%
1,500 Duracell International, Inc. ...................................................................... 64,688
1,800 Mattel, Inc. ...................................................................................... 51,524
------------
116,212
------------
Consumer Products Non-Durables 4.3%
700 Campbell Soup Co. ................................................................................. 49,350
1,000 Coca-Cola Co. ..................................................................................... 48,875
300 aDonna Karan International, Inc. .................................................................. 8,400
600 Hershey Foods Corp. ............................................................................... 44,025
700 Proctor & Gamble Co. .............................................................................. 63,438
------------
214,088
------------
Consumer Services 3.4%
1,200 aCUC International, Inc. .......................................................................... 42,600
1,000 Disney (Walt) Co. ................................................................................. 62,875
1,200 aMirage Resorts, Inc. ............................................................................. 64,800
------------
170,275
------------
Electronic Technology 12.2%
900 aBay Networks...................................................................................... 23,175
1,000 aCabletron Systems, Inc. .......................................................................... 68,625
1,700 aCisco Systems, Inc. .............................................................................. 96,263
600 aCompaq Computer Corp. ............................................................................ 29,550
600 Hewlett-Packard Co. ............................................................................... 59,775
1,200 Intel Corp. ....................................................................................... 88,124
1,900 Linear Technology Corp. ........................................................................... 57,000
1,300 Molex, Inc. ....................................................................................... 41,275
2,000 aSilicon Graphics, Inc. ........................................................................... 48,000
400 United Technologies Corp. ......................................................................... 46,000
1,600 aXilinx, Inc. ..................................................................................... 50,800
------------
608,587
------------
Energy/Minerals 4.0%
3,000 aBarrett Resources Corp. .......................................................................... 89,250
700 Royal Dutch Petroleum Co., New York Shares......................................................... 107,625
------------
196,875
------------
Financial Services 7.4%
900 American International Group, Inc. ................................................................ 88,763
800 Citicorp .......................................................................................... 66,100
2,200 Federal National Mortgage Association.............................................................. 73,700
2,800 Schwab (Charles) Corp. ............................................................................ 68,600
300 Wells Fargo & Co. ................................................................................. 71,963
------------
369,126
------------
Health Care Services 1.6%
1,200 aPacificare Health Systems, Inc., Class B.......................................................... 81,300
------------
Health Technology 13.2%
1,300 Abbott Laboratories................................................................................ 56,550
1,300 Allergan, Inc. .................................................................................... 51,025
Health Technology (cont.)
1,000 American Home Products Corp. ...................................................................... $ 60,125
1,300 aAmgen, Inc. ...................................................................................... 70,200
2,000 Baxter International, Inc. ........................................................................ 94,500
1,900 aBoston Scientific Corp. .......................................................................... 85,500
1,000 aGenzyme Corp. .................................................................................... 50,250
1,500 Johnson & Johnson.................................................................................. 74,250
900 Lilly (Eli) & Co. ................................................................................. 58,500
900 Merck & Co., Inc. ................................................................................. 58,163
------------
659,063
------------
Industrial Services 2.9%
2,300 Browning-Ferris Industries, Inc. .................................................................. 66,700
900 Schlumberger, Ltd. ................................................................................ 75,825
------------
142,525
------------
Process Industries 3.8%
1,500 Air Products and Chemicals, Inc. .................................................................. 86,625
1,200 Millipore Corp. ................................................................................... 50,250
1,000 Sigma-Aldrich Corp. ............................................................................... 53,500
------------
190,375
------------
Producer Manufacturing 3.4%
700 Emerson Electric Co. .............................................................................. 63,263
800 Minnesota Mining & Manufacturing Co. .............................................................. 55,200
1,500 aU.S. Filter Corp. ................................................................................ 52,125
------------
170,588
------------
Retail 2.1%
1,200 McDonald's Corp. .................................................................................. 56,100
2,400 aOffice Depot, Inc. ............................................................................... 48,900
100 aSaks Holdings, Inc. .............................................................................. 3,412
------------
108,412
------------
Technology Services 11.5%
1,500 Adobe Systems, Inc. ............................................................................... 53,813
100 aAspect Development, Inc. ......................................................................... 2,550
1,300 Automatic Data Processing, Inc. ................................................................... 50,213
500 aBroderbund Software, Inc. ........................................................................ 16,125
1,400 Electronic Data Systems Corp. ..................................................................... 75,250
1,200 First Data Corp. .................................................................................. 95,550
3,200 aInformix Corp. ................................................................................... 72,000
900 aIntuit, Inc. ..................................................................................... 42,525
300 aMicrosoft Corp. .................................................................................. 36,038
1,300 aOracle Corp. ..................................................................................... 51,269
1,000 aSterling Software, Inc. .......................................................................... 77,000
------------
572,333
------------
Transportation 3.7%
2,500 Air Express International Corp. ................................................................... 70,624
1,600 aFritz Cos., Inc. ................................................................................. 51,600
2,100 Southwest Airlines Co. ............................................................................ 61,162
------------
183,386
------------
Utilities 3.7%
1,800 aAES Corp. ........................................................................................ $ 50,850
2,300 aAirTouch Communications, Inc. .................................................................... 64,974
1,400 GTE Corp. ......................................................................................... 62,650
------------
178,474
------------
Total Long Term Investments (Cost $4,101,739)............................................... 4,088,569
------------
Face
Amount
g,hReceivables from Repurchase Agreements 5.4%
$ 270,124 Joint Repurchase Agreement, 5.439%, 07/01/96 (Maturity Value $271,483) (Cost $271,360)
Chase Securities, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.375%, 11/30/97
Daiwa Securities America, Inc., (Maturity Value $39,016)
Collateral: U..S. Treasury Notes, 5.25% - 8.875%, 12/31/97 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $37,387)
Collateral: U.S. Treasury Bills, 05/29/97
U.S. Treasury Notes, 5.125% - 6.75%, 07/31/97 - 07/31/00
Fuji Securities, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 07/31/97 - 02/15/99
Lehman Brothers, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.625% - 11.75%, 09/30/99 - 02/15/01
SBC Capital Markets, Inc., (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97
UBS Securities, Inc. (Maturity Value $39,016)
Collateral: U.S. Treasury Notes, 6.50% - 8.875%, 11/15/98 - 11/30/99 ............................. 271,360
------------
Total Investments (Cost $4,373,099) 87.5%............................................... 4,359,929
Other Assets and Liabilities, Net 12.5%................................................. 622,861
------------
Net Assets 100.0% ...................................................................... $4,982,790
============
At June 30, 1996, the net unrealized depreciation based on the
cost of investments for income tax purposes of $4,373,099 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................... $ 91,917
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................... (105,087)
------------
Net unrealized depreciation ..................................................................... $ (13,170)
============
aNon icome producing.
gFace amount for repurchase agreements is for the underlying collateral.
hSee 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, June 30, 1996 (unaudited)
Shares/ Value
Country* Warrants Templeton International Smaller Companies Fund (Note 1)
Common Stocks & Warrants 41.4%
Argentina .6%
<S> <C> <C> <C>
US 100 bComercial Industrial Financiera Inmobiliari Agropecuaria, ADR ....................... $ 280
AR 12,300 Mirgor, SA, Comercial Industrial Financiera Inmobi, Class C, ADR ..................... 34,440
------------
34,720
------------
Austria 1.6%
AT 1,153 Boehler Uddeholm, AG.................................................................. 89,409
------------
Bermuda
US 100 Sea Containers, Ltd., Class A......................................................... 1,900
------------
Canada .4%
CA 1,480 Hudsons Bay Co. ...................................................................... 22,440
------------
China 1.7%
CN 131,000 Dongfang Electrical Machinery Co., Ltd., Class H...................................... 32,832
US 92,000 bGuangdong Electric Power Development Co., Ltd., Class B.............................. 58,832
------------
91,664
------------
Denmark 1.7%
DK 1,247 Det Danske Traelastkompagni, AS....................................................... 91,748
------------
France 2.2%
FR 706 aMarine Wendel ....................................................................... 58,464
FR 179 Sa des Galeries Lafayette ............................................................ 61,102
------------
119,566
------------
Germany 1.0%
DD 1,316 Moebel Walther, AG.................................................................... 56,263
------------
Hong Kong 6.4%
HK 361,000 Baltrans Holdings, Ltd. .............................................................. 48,968
HK 70,000 C.P. Pokphand Co., Ltd. .............................................................. 27,807
HK 120,000 Hung Hing Printing Group, Ltd. ....................................................... 31,780
HK 60,000 Kumagai Gumi Hong Kong, Ltd. ......................................................... 53,871
HK 7,800 aKumagai Gumi Hong Kong, Ltd., warrants............................................... 1,189
HK 210,000 Sinocan Holdings, Ltd. ............................................................... 92,239
HK 23,000 Swank International Manufacturing Co., Ltd. ......................................... 4,011
HK 656,000 Techtronic Industries Co., Ltd. ...................................................... 90,679
------------
350,544
------------
Indonesia 1.3%
ID 39,500 PT Steady Safe, fgn. ................................................................. 54,307
ID 9,500 PT Tambang Timah (Persero), fgn. ..................................................... 17,551
------------
71,858
------------
Italy 3.0%
IT 6,250 Cartiere Burgo, SPA .................................................................. 34,173
US 3,600 a,bEsaote Biomedica, SPA, ADR......................................................... 129,381
------------
163,554
------------
Netherlands 4.8%
NL 1,103 Crown-Van Gelder Papier, SA........................................................... 95,716
NL 1,046 De Boer Winkelbedrijven, NV........................................................... 53,358
NL 315 Hollandsche Beton Groep, NV .......................................................... 60,396
NL 2,416 Internatio-Mueller, NV................................................................ 53,264
------------
262,734
------------
New Zealand 1.9%
NZ 800 Helicopter Line (The) ................................................................ $ 1,541
US 7,200 aTranz Rail Holdings, Ltd., ADR....................................................... 99,900
------------
101,441
------------
Norway 1.8%
NO 4,015 bUnion Bank of Norway, Primary Capital Certificate.................................... 98,364
------------
Spain 4.0%
ES 831 Cristaleria Espanola, SA ............................................................. 52,195
ES 3,755 Dragados y Construcciones, SA......................................................... 49,722
ES 11,095 aEnergia e Industrias Aragonesas Eia S ............................................... 54,693
ES 1,080 Gesa-Gas y Electricidad, SA........................................................... 59,904
------------
216,514
------------
Sweden 4.7%
US 6,300 a,bDahl International, AB............................................................. 88,015
SE 3,000 Foereningsbanken, AB, Class A......................................................... 9,878
SE 1,260 Marieberg Tidnings, AB, Class A ...................................................... 31,590
SE 7,995 Munksjo, AB........................................................................... 62,791
SE 5,675 Scribona, AB, Class B................................................................. 59,570
SE 1,200 Stena Line, AB, Class B, free......................................................... 5,709
------------
257,553
------------
Switzerland 2.5%
CH 52 Sarna Kunststoff Holding, AG.......................................................... 54,901
CH 100 aSwisslog Holding, AG................................................................. 29,594
CH 120 Zehnder Holding, AG................................................................... 49,430
------------
133,925
------------
Turkey .6%
TH 98,875 bTofas Turk Otomobil Fabrikasi, AS, GDR............................................... 33,618
------------
United Kingdom 1.2%
GB 9,400 Lex Service, Plc. .................................................................... 54,743
GB 5,270 aMcBride, Plc. ...................................................................... 10,721
------------
65,464
------------
Total Long Term Investments (Cost $2,164,464)................................... 2,263,279
------------
Face
Amount
fShort Term Investments 18.1%
US $1,000,000 U.S. Treasury Bills, 5.12%, 09/19/96 (Cost $988,480).................................. 988,760
------------
Total Investments before Repurchase Agreements (Cost $3,152,944)................ 3,252,039
------------
gReceivables from Repurchase Agreements 43.4%
US $ 828,660 BA Securities, Inc., 5.40%, 07/01/96, (Maturity Value $800,360)
Collateral: U.S. Treasury Bills, 09/26/96 ........................................... $ 800,000
US 786,907 Morgan Stanley & Co., Inc., 5.35%, 07/01/96, (Maturity Value $768,342)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01 .................................... 768,000
US 817,590 Smith Barney, Inc., 5.27%, 07/01/96, (Maturity Value $800,351)
Collateral: U.S. Treasury Notes, 6.875%, 10/31/96 ................................... 800,000
------------
Total Receivables from Repurchase Agreements (Cost $2,368,000).................. 2,368,000
------------
Total Investments (Cost $5,520,944) 102.9%................................. 5,620,039
Liabilities in Excess of Other Assets (2.9)% .............................. (157,938)
------------
Net Assets 100.0% ........................................................ $5,462,101
============
At June 30, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $5,520,944 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ....................................................... $ 126,934
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ....................................................... (27,839)
------------
Net unrealized appreciation ........................................................ $ 99,095
============
</TABLE>
CURRENCY LEGEND:
AR - Argentina
AT - Austria
CA - Canada
CH - Switzerland
CN - China
DD - Germany
DK - Denmark
ES - Spain
FR - France
GB - United Kingdom
HK - Hong Kong
ID - Indonesia
IT - Italy
NL - Netherlands
NO - Norway
NZ - New Zealand
SE - Sweden
TH - Thailand
US - United States
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
fCertain short-term securities are traded on a discount basis; the rates shown
are the discount rate at the time of purchase by the Fund. Other securities bear
interest at the rates shown, payable at fixed dates or upon maturity.
gFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements
Statements of Assets and Liabilities
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Templeton Investment Grade
Adjustable U.S. Global Income High Intermediate Precious
Government Fund Securities Fund Income Fund Bond Fund Metals Fund
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost.............................. $186,098,338 $211,454,138 $336,198,296 $125,576,693 $105,596,112
=========== ========== ========== ========== ==========
At value........................................ 185,421,610 210,433,794 337,293,936 125,600,576 114,924,117
Receivables from repurchase agreements,
at value and cost.............................. 6,852,696 7,455,000 27,371,663 33,528,713 7,416,580
Cash........................................... -- 462 271,855 648,448 --
Foreign currencies (Cost $247)................. -- 247 -- -- --
Receivables:
Dividends and interest.......................... 1,755,955 5,562,872 7,022,109 1,594,207 187,831
Investment securities sold...................... 438,418 -- -- -- 1,360,019
Capital shares sold............................. 1,442 20,624 -- -- 24,228
----------- ---------- ---------- ---------- ----------
Total assets.................................... 194,470,121 223,472,999 371,959,563 161,371,944 123,912,775
----------- ---------- ---------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................... -- -- 4,807,365 -- --
When-issued basis (Note 1)..................... 20,059,653 -- -- -- --
Capital shares repurchased...................... 339,406 35,306 -- -- 1,724,546
Management fees................................. 81,874 99,857 154,404 76,086 63,846
Accrued expenses and other liabilities......... 8,985 18,636 11,345 9,775 16,607
Unrealized loss on forward foreign currency
contracts (Note 2)............................. -- 81,229 -- -- --
----------- ---------- ---------- ---------- ----------
Total liabilities............................... 20,489,918 235,028 4,973,114 85,861 1,804,999
----------- ---------- ---------- ---------- ----------
Net assets, at value............................ $173,980,203 $223,237,971 $366,986,449 $161,286,083 $122,107,776
=========== ========== ========== ========== ==========
Net assets consist of:
Undistributed net investment income............ $ 5,728,864 $ 5,710,199 $ 16,995,921 $ 4,370,290 $ 788,752
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies.. (676,728) (1,123,123) 1,096,650 23,883 9,328,212
Undistributed net realized gain (loss) from
investments and foreign currency transactions.. (13,843,348) (7,017,017) 456,693 (629,048) 1,730,651
Capital shares................................. 182,771,415 225,667,912 348,437,185 157,520,958 110,260,161
----------- ---------- ---------- ---------- ----------
Net assets, at value............................ $173,980,203 $223,237,971 $366,986,449 $161,286,083 $122,107,776
=========== ========== ========== ========== ==========
Shares outstanding.............................. 17,015,354 17,747,988 28,448,771 12,038,869 8,182,324
=========== ========== ========== ========== ==========
Net asset value per share....................... $10.22 $12.58 $12.90 $13.40 $14.92
=========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Real Estate U.S. Government Zero Coupon Zero Coupon Zero Coupon
Securities Fund Securities Fund Fund - 2000 Fund - 2005 Fund - 2010
---------- ---------- ---------- --------- ----------
Assets:
Investments in securities:
At identified cost................................ $183,642,920 $576,245,965 $125,920,919 $74,761,492 $69,766,814
========== ========== ========== ========= ==========
At value.......................................... 215,361,867 572,640,581 131,311,210 78,890,497 74,714,151
Receivables from repurchase agreements,
at value and cost................................ 17,504,215 10,331,334 -- 342,052 1,964,705
Cash............................................. -- 380 95,271 92,441 726,533
Receivables:
Dividends and interest............................ 1,640,017 4,066,511 14 -- --
Investment securities sold........................ -- 66,189 -- -- --
Capital shares sold............................... 48,738 139,581 43,430 -- --
---------- ---------- ---------- --------- ----------
Total assets...................................... 234,554,837 587,244,576 131,449,925 79,324,990 77,405,389
---------- ---------- ---------- --------- ----------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1)....................... 405,600 -- -- -- --
Capital shares repurchased........................ 113,996 1,246,664 332,082 -- --
Management fees................................... 105,066 235,187 39,778 23,836 15,186
Accrued expenses and other liabilities........... 16,153 42,078 5,305 4,663 40,246
---------- ---------- ---------- --------- ----------
Total liabilities................................. 640,815 1,523,929 377,165 28,499 55,432
---------- ---------- ---------- --------- ----------
Net assets, at value.............................. $233,914,022 $585,720,647 $131,072,760 $79,296,491 $77,349,957
========== ========== ========== ========= ==========
Net assets consist of:
Undistributed net investment income.............. $ 4,931,182 $ 20,284,371 $ 4,012,250 $ 2,397,428 $ 2,365,319
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies.... 31,718,947 (3,605,384) 5,390,291 4,129,005 4,947,337
Undistributed net realized gain (loss) from
investments and foreign currency transactions... 401,968 (15,874,865) 19,385 (6,924) (112,389)
Capital shares................................... 196,861,925 584,916,525 121,650,834 72,776,982 70,149,690
---------- ---------- ---------- --------- ----------
Net assets, at value.............................. $233,914,022 $585,720,647 $131,072,760 $79,296,491 $77,349,957
========== ========== ========== ========= ==========
Shares outstanding................................ 13,067,390 45,724,527 9,025,164 5,169,145 5,170,715
========== ========== ========== ========= ==========
Net asset value per share......................... $17.90 $12.81 $14.52 $15.34 $14.96
========== ========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton Templeton
Money Growth and Income International Pacific
Market Fund Income Fund Securities Fund Equity Fund Growth Fund
--------- --------- ------------ ----------- ----------
Assets:
Investments in securities:
At identified cost............................ $375,039,414 $815,964,222 $1,203,674,923 $ 769,452,857 $334,161,143
========= ========= ============ =========== ==========
At value...................................... 375,039,414 929,390,532 1,255,379,463 853,816,627 379,691,664
Receivables from repurchase agreements,
at value and cost............................ 57,200,000 55,900,396 43,688,098 146,904,000 9,711,000
Cash......................................... 4,240 527,988 -- 4,422 226
Receivables:
Dividends and interest........................ 878,046 3,448,648 19,491,780 5,968,113 1,381,333
Investment securities sold.................... -- 5,196,414 953,028 142,319 --
Capital shares sold........................... 662,642 -- -- 898,871 443,731
From affiliates............................... 17,736 -- -- -- --
Prepaid expenses............................. 6,373 -- -- -- --
--------- --------- ------------ ----------- ----------
Total assets.................................. 433,808,451 994,463,978 1,319,512,369 1,007,734,352 391,227,954
--------- --------- ------------ ----------- ----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................. -- 908,700 6,194,941 2,450,798 1,315
When-issued basis (Note 1)................... -- -- 739,115 -- --
Capital shares repurchased.................... 4,440,525 -- 969,136 -- --
Management fees............................... 137,337 378,322 493,964 -- 278,991
Accrued expenses and other liabilities....... -- 42,245 65,511 996,275 102,520
--------- --------- ------------ ----------- ----------
Total liabilities............................. 4,577,862 1,329,267 8,462,667 3,447,073 382,826
--------- --------- ------------ ----------- ----------
Net assets, at value.......................... $429,230,589 $993,134,711 $1,311,049,702 $1,004,287,279 $390,845,128
========= ========= ============ =========== ==========
Net assets consist of:
Undistributed net investment income.......... $-- $ 19,325,567 $ 47,258,926 $ 19,559,661 $--
Accumulated distributions in excess of
net investment income........................ -- -- -- -- (431,923)
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies............ -- 113,426,310 51,705,376 84,363,770 45,530,521
Undistributed net realized gain (loss)
from investments and foreign
currency transactions........................ -- 17,159,627 10,613,204 11,714,108 (4,238,361)
Capital shares............................... 429,230,589 843,223,207 1,201,472,196 888,649,740 349,984,891
--------- --------- ------------ ----------- ----------
Net assets, at value.......................... $429,230,589 $993,134,711 $1,311,049,702 $1,004,287,279 $390,845,128
========= ========= ============ =========== ==========
Shares outstanding............................ $429,230,589 61,226,096 81,475,748 71,173,798 26,236,248
========= ========= ============ =========== ==========
Net asset value per share..................... $1.00 $16.22 $16.09 $14.11 $14.90
========= ========= ============ =========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton
Developing Templeton
Rising Utility Markets Global
Dividends Fund Equity Fund Equity Fund Growth Fund
---------- ----------- ---------- ----------
Assets:
Investments in securities:
At identified cost............................................ $343,283,118 $1,213,133,094 $238,224,929 $364,644,293
========== =========== ========== ==========
At value...................................................... 449,681,048 1,315,480,122 250,961,248 417,736,030
Receivables from repurchase agreements, at value and cost.... 54,657,235 4,645,079 -- 68,320,000
Cash......................................................... -- 676,256 25,817 116,962
Foreign currencies (Cost $159,280)........................... -- -- 159,280 --
Receivables:
Dividends and interest........................................ 1,079,315 4,241,583 965,677 1,597,260
Investment securities sold.................................... 504,000 2,316,705 30,857 --
Capital shares sold........................................... 119,836 -- 383,627 569,551
---------- ----------- ---------- ----------
Total assets.................................................. 506,041,434 1,327,359,745 252,526,506 488,339,803
---------- ----------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased............................... 26,220 -- 239,777 9,936,080
Capital shares repurchased.................................... 324,706 -- -- --
Management fees............................................... 314,076 494,242 252,916 333,329
Accrued expenses and other liabilities....................... 16,737 37,748 100,273 87,434
---------- ----------- ---------- ----------
Total liabilities............................................. 681,739 531,990 592,966 10,356,843
---------- ----------- ---------- ----------
Net assets, at value.......................................... $505,359,695 $1,326,827,755 $251,933,540 $477,982,960
========== =========== ========== ==========
Net assets consist of:
Undistributed net investment income.......................... $ 5,025,117 $ 29,934,329 $ 2,931,786 $ 4,132,517
Net unrealized appreciation on investments
and translation of assets and liabilities denominated
in foreign currencies........................................ 106,397,930 102,346,510 12,736,319 53,091,737
Undistributed net realized gain (loss) from investments
and foreign currency transactions............................ (14,609,194) 21,881,440 1,402,424 (3,642,714)
Capital shares............................................... 408,545,842 1,172,665,476 234,863,011 424,401,420
---------- ----------- ---------- ----------
Net assets, at value.......................................... $505,359,695 $1,326,827,755 $251,933,540 $477,982,960
========== =========== ========== ==========
Shares outstanding............................................ 38,005,837 74,845,398 22,802,874 37,912,576
========== =========== ========== ==========
Net asset value per share..................................... $13.30 $17.73 $11.05 $12.61
========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
June 30, 1996 (unaudited)
Templeton
Templeton International
Global Asset Small Capital Smaller
Allocation Fund Cap Fund Growth Fund Companies Fund
--------- ---------- -------- -----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost................................................. $27,675,297 $ 90,561,640 $4,101,739 $3,152,944
========= ========== ======== ===========
At value........................................................... 29,115,425 93,202,863 4,088,569 3,252,039
Receivables from repurchase agreements, at value and cost......... 5,898,000 1,845,563 271,360 2,368,000
Cash.............................................................. 189,354 1,433,722 751,374 --
Receivables:
Dividends and interest............................................. 266,800 92,857 2,913 9,464
Investment securities sold......................................... -- 4,172,475 -- --
Capital shares sold................................................ 149,862 -- -- 37,161
--------- ---------- -------- -----------
Total assets....................................................... 35,619,441 100,747,480 5,114,216 5,666,664
--------- ---------- -------- -----------
Liabilities:
Payables:
Investment securities purchased.................................... 592,177 619,708 127,134 114,339
Management fees.................................................... 17,964 66,992 2,449 --
Accrued expenses and other liabilities............................ 21,846 306 1,843 5,032
Unrealized loss on forward foreign currency contracts (Note 2).... 414 -- -- --
Bank overdraft.................................................... -- -- -- 1,152
Foreign currency overdraft, at value and cost..................... -- -- -- 84,040
--------- ---------- -------- -----------
Total liabilities.................................................. 632,401 687,006 131,426 204,563
--------- ---------- -------- -----------
Net assets, at value............................................... $34,987,040 $100,060,474 $4,982,790 $5,462,101
========= ========== ======== ===========
Net assets consist of:
Undistributed net investment income............................... $532,431 $225,075 $5,579 $24,325
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies............................................. 1,439,346 2,641,223 (13,170) 99,095
Undistributed net realized gain (loss) from investments
and foreign currency transactions................................. 64,865 3,150,229 -- (2,662)
Capital shares.................................................... 32,950,398 94,043,947 4,990,381 5,341,343
--------- ---------- -------- -----------
Net assets, at value............................................... $34,987,040 $100,060,474 $4,982,790 $5,462,101
========= ========== ======== ===========
Shares outstanding................................................. 3,078,439 8,237,812 489,535 528,897
========= ========== ======== ===========
Net asset value per share.......................................... $11.37 $12.15 $10.18 $10.33
========= ========== ======== ===========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations
for the six months ended June 30, 1996 (unaudited)
Adjustable U.S. Templeton Investment Grade
Government Global Income High Intermediate Precious Real Estate
Fund Securities Fund Income Fund Bond Fund Metals Fund Securities Fund
------------- ------------ ------------- --------------- ------------ -------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest1 (Note 1).................... $6,269,587 $9,157,921 $17,381,075 $4,865,176 $ 424,852 $ 499,132
Dividends............................. -- -- 594,966 -- 790,572 5,087,196
------------- ------------ ------------- --------------- ------------ -------------
Total income........................... 6,269,587 9,157,921 17,976,041 4,865,176 1,215,424 5,586,328
------------- ------------ ------------- --------------- ------------ -------------
Expenses:
Management fees (Note 6).............. 515,424 637,086 936,441 470,692 395,223 617,918
Reports to shareholders............... 14,283 17,000 19,290 10,901 8,085 12,734
Custodian fees........................ 1,923 31,750 13,628 4,122 16,062 5,849
Professional fees..................... 4,067 3,600 5,364 3,582 2,512 4,076
Trustees' fees and expenses........... 722 1,050 1,372 694 638 895
Other................................. 3,848 633 4,957 4,686 4,110 12,207
------------- ------------ ------------- --------------- ------------ -------------
Total expenses......................... 540,267 691,119 981,052 494,677 426,630 653,679
------------- ------------ ------------- --------------- ------------ -------------
Net investment income................. 5,729,320 8,466,802 16,994,989 4,370,499 788,794 4,932,649
------------- ------------ ------------- --------------- ------------ -------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments........................... (966,844) (1,282,676) 460,869 (202,994) 1,760,003 836,912
Foreign currency transactions......... -- (56,009) (1,127) -- (29,352) --
Net unrealized appreciation (depreciation) on:
Investments............................ 323,295 (4,365,517) (3,846,126) (2,984,999) 4,990,330 9,633,065
Translation of assets and liabilities
denominated in foreign currencies..... -- (108,014) 2,858 -- 417 --
------------- ------------ ------------- --------------- ------------ -------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................... (643,549) (5,812,216) (3,383,526) (3,187,993) 6,721,398 10,469,977
------------- ------------ ------------- --------------- ------------ -------------
Net increase in net assets resulting
from operations....................... $5,085,771 $2,654,586 $13,611,463 $1,182,506 $7,510,192 $15,402,626
============= ============ ============= =============== ============ =============
1Net of foreign taxes withheld of $82,507 in the Templeton Global Income
Securities Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
U.S. Government Zero Coupon Zero Coupon Zero Coupon Money Growth and
Securities Fund Fund - 2000 Fund - 2005 Fund - 2010 Market Fund Income Fund
--------------- ------------- ------------ -------------- ------------- ------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest (Note 1)................... $21,942,180 $4,277,963 $2,555,448 $ 2,518,841 $11,712,537 $ 1,942,218
Dividends2.......................... -- -- -- -- -- 19,703,938
--------------- ------------- ------------ -------------- ------------- ------------
Total income......................... 21,942,180 4,277,963 2,555,448 2,518,841 11,712,537 21,646,156
--------------- ------------- ------------ -------------- ------------- ------------
Expenses:
Management fees (Note 6)............ 1,494,980 369,885 247,257 240,468 1,100,542 2,210,098
Reports to shareholders............. 38,605 7,425 4,967 4,502 45,604 47,546
Custodian fees...................... 15,407 3,224 3,061 1,779 16,870 18,229
Professional fees................... 8,053 2,450 1,820 1,520 10,981 12,749
Trustees' fees and expenses......... 2,414 533 303 285 2,727 3,055
Other............................... 31,675 1,694 1,646 1,464 -- 42,637
Management fees waived by
manager (Note 6).................... -- (119,225) (101,435) (96,544) (268,707) --
--------------- ------------- ------------ -------------- ------------- ------------
Total expenses....................... 1,591,134 265,986 157,619 153,474 908,017 2,334,314
--------------- ------------- ------------ -------------- ------------- ------------
Net investment income............... 20,351,046 4,011,977 2,397,829 2,365,367 10,804,520 19,311,842
--------------- ------------- ------------ -------------- ------------- ------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments......................... (165,616) 19,680 -- 76,009 -- 17,308,153
Foreign currency transactions....... -- -- -- -- -- 7,947
Net unrealized appreciation (depreciation) on:
Investments.......................... (29,588,904) (6,905,014) (7,912,643) (11,390,023) -- 13,395,811
--------------- ------------- ------------ -------------- ------------- ------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................. (29,754,520) (6,885,334) (7,912,643) (11,314,014) -- 30,711,911
--------------- ------------- ------------ -------------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations........... $ (9,403,474) $(2,873,357) $(5,514,814) $ (8,948,647) $10,804,520 $50,023,753
=============== ============= ============ ============== ============= ============
2Net of foreign taxes and fees withheld of $426,563 for the Growth and Income Fund.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
Templeton
Income Templeton Templeton Rising Developing
Securities International Pacific Dividends Utility Markets
Fund Equity Fund Growth Fund Fund Equity Fund Equity Fund
------------- -------------- ------------- ------------ ------------- -------------
Investment income:
<S> <C> <C> <C> <C> <C> <C>
Interest (Note 1)................... $37,842,015 $ 5,760,211 $ 429,908 $ 1,463,710 $ 1,104,841 $ 711,306
Dividends3.......................... 15,134,941 20,045,205 4,574,674 5,431,833 32,015,299 3,815,049
------------- -------------- ------------- ------------ ------------- -------------
Total income......................... 52,976,956 25,805,416 5,004,582 6,895,543 33,120,140 4,526,355
------------- -------------- ------------- ------------ ------------- -------------
Expenses:
Management fees (Note 6)............ 3,008,518 3,766,436 1,668,116 1,810,335 3,161,268 1,317,027
Reports to shareholders............. 72,784 87,650 30,500 25,998 83,560 4,000
Custodian fees...................... 87,940 335,000 126,500 11,868 45,837 172,000
Professional fees................... 17,281 10,200 6,100 6,015 18,467 2,000
Trustees' fees and expenses......... 4,913 4,750 1,800 1,736 5,553 --
Other............................... 15,521 45,180 13,814 12,920 19,069 1,739
------------- -------------- ------------- ------------ ------------- -------------
Total expenses....................... 3,206,957 4,249,216 1,846,830 1,868,872 3,333,754 1,496,766
------------- -------------- ------------- ------------ ------------- -------------
Net investment income............... 49,769,999 21,556,200 3,157,752 5,026,671 29,786,386 3,029,589
------------- -------------- ------------- ------------ ------------- -------------
Realized and unrealized gain
(loss) from investments and
foreign currency:
Net realized gain (loss) from:
Investments......................... 10,957,132 12,098,187 (3,558,769) 203,185 29,593,403 1,829,137
Foreign currency transactions....... (340,048) (255,705) (10,078) -- (43,501) (171,960)
Net unrealized appreciation (depreciation) on:
Investments.......................... (9,127,495) 72,678,896 42,072,054 27,984,801 (4,177,801) 22,481,561
Translation of assets and
liabilities denominated in
foreign currencies.................. 50,443 -- -- -- (1,069) 48,919
------------- -------------- ------------- ------------ ------------- -------------
Net realized and unrealized gain
(loss) from investments and
foreign currencies.................. 1,540,032 84,521,378 38,503,207 28,187,986 25,371,032 24,187,657
------------- -------------- ------------- ------------ ------------- -------------
Net increase in net assets
resulting from operations........... $51,310,031 $106,077,578 $41,660,959 $33,214,657 $55,157,418 $27,217,246
============= ============== ============= ============ ============= =============
3Net of foreign taxes and fees withheld of $77,609, $338,257, and $237,059 in
the Income Securities Fund, Templeton Pacific Growth Fund, and Templeton
Developing Markets Equity Fund, respectively.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended June 30, 1996 (unaudited)
Templeton
Templeton Templeton International
Global Global Asset Small Capital Smaller
Growth Fund Allocation Fund Cap Fund Growth Fund* Companies Fund*
------------- -------------- ----------- ------------ ----------------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)................................... $ 1,590,049 $ 425,369 $ 330,028 $ 6,003 $ 17,615
Dividends4.......................................... 5,970,832 245,088 105,086 3,876 12,036
------------- -------------- ----------- ------------ ----------------
Total income......................................... 7,560,881 670,457 435,114 9,879 29,651
------------- -------------- ----------- ------------ ----------------
Expenses:
Management fees (Note 6)............................ 1,787,343 95,790 201,695 2,449 4,763
Reports to shareholders............................. 5,000 4,300 1,128 573 65
Custodian fees...................................... 85,440 10,727 540 328 200
Professional fees................................... 6,000 3,000 4,804 556 150
Trustees' fees and expenses......................... 500 125 62 65 50
Other............................................... 3,991 3,199 1,383 329 98
------------- -------------- ----------- ------------ ----------------
Total expenses....................................... 1,888,274 117,141 209,612 4,300 5,326
------------- -------------- ----------- ------------ ----------------
Net investment income............................... 5,672,607 553,316 225,502 5,579 24,325
------------- -------------- ----------- ------------ ----------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments......................................... (3,981,410) 83,561 3,150,203 -- (2,662)
Foreign currency transactions....................... (8,527) (13,048) -- -- --
Net unrealized appreciation (depreciation) from:
Investments......................................... 38,274,436 1,057,542 2,479,402 (13,170) 99,095
Translation of assets and liabilities denominated
in foreign currencies............................... -- (357) -- -- --
------------- -------------- ----------- ------------ ----------------
Net realized and unrealized gain (loss) from
investments and foreign currencies.................. 34,284,499 1,127,698 5,629,605 (13,170) 96,433
------------- -------------- ----------- ------------ ----------------
Net increase (decrease) in net assets resulting
from operations..................................... $39,957,106 $1,681,014 $5,855,107 $ (7,591) $120,758
============= ============== =========== ============ ================
4Net of foreign taxes withheld of $484,303 and $24,652 in the Templeton Global
Growth Fund and Global Asset Allocation Fund, respectively.
*May 1, 1996 (effective date) to June 30, 1996
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended June 30, 1996
(unaudited) and the year ended December 31, 1995
Adjustable U.S. Templeton Global
Government Fund Income Securities Fund High Income Fund
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 5,729,320 $ 13,331,187 $ 8,466,802 $ 18,687,112 $ 16,994,989 $ 31,021,484
Net realized gain (loss) from
investments and foreign
currency transactions ............ (966,844) (1,954,776) (1,338,685) (7,995,904) 459,742 1,770,719
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................ 323,295 7,421,084 (4,473,531) 22,864,210 (3,843,268) 22,884,579
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 5,085,771 18,797,495 2,654,586 33,555,418 13,611,463 55,676,782
Distributions to shareholders from:
Undistributed net
investment income................. (13,329,910) (13,455,726) (17,028,466) (9,275,583) (31,018,152) (21,305,944)
Net realized capital gains........ -- -- -- -- (1,646,547) --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... (7,875,255) (54,937,609) (5,582,233) (35,396,559) 25,136,139 71,496,259
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets..................... (16,119,394) (49,595,840) (19,956,113) (11,116,724) 6,082,903 105,867,097
Net assets:
Beginning of period............... 190,099,597 239,695,437 243,194,084 254,310,808 360,903,546 255,036,449
---------- ---------- ---------- ---------- ---------- ----------
End of period..................... $173,980,203 $190,099,597 $223,237,971 $243,194,084 $366,986,449 $360,903,546
========== ========== ========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 13,329,454 $ 13,453,993 $ 14,271,863 $ 20,717,930 $ 31,020,827 $ 21,367,505
========== ========== ========== ========== ========== ==========
End of period...................... $ 5,728,864 $ 13,329,454 $ 5,710,199 $ 14,271,863 $ 16,995,921 $ 31,020,827
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Investment Grade Real Estate
Intermediate Bond Fund Precious Metals Fund Securities Fund
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 4,370,499 $ 8,616,354 $ 788,794 $ 1,615,339 $ 4,932,649 $ 9,336,142
Net realized gain (loss) from
investments and foreign
currency transactions............. (202,994) 656,832 1,730,651 1,438,861 836,912 1,068,152
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................ (2,984,999) 6,077,509 4,990,747 (1,361,730) 9,633,065 21,851,218
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 1,182,506 15,350,695 7,510,192 1,692,470 15,402,626 32,255,512
Distributions to shareholders from:
Undistributed net
investment income................. (8,616,357) (6,603,637) (1,593,438) (1,664,388) (9,336,429) (6,411,953)
Net realized capital gains........ -- -- (1,460,667) (1,232,041) -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3).......................... 2,816,940 2,257,200 12,542,875 (18,765,586) 14,374,474 (8,066,883)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets........................ (4,616,911) 11,004,258 16,998,962 (19,969,545) 20,440,671 17,776,676
Net assets:
Beginning of period............... 165,902,994 154,898,736 105,108,814 125,078,359 213,473,351 195,696,675
---------- ---------- ---------- ---------- ---------- ----------
End of period..................... $161,286,083 $165,902,994 $122,107,776 $105,108,814 $233,914,022 $213,473,351
========== ========== ========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 8,616,148 $ 6,603,431 $ 1,615,202 $ 1,682,044 $ 9,334,962 $ 6,410,773
========== ========== ========== ========== ========== ==========
End of period...................... $ 4,370,290 $ 8,616,148 $ 788,752 $ 1,615,202 $ 4,931,182 $ 9,334,962
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
U.S. Government
Securities Fund Zero Coupon Fund - 2000 Zero Coupon Fund - 2005
---------------------- ---------------------- --------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............... $ 20,351,046 $ 41,653,906 $ 4,011,977 $ 7,341,344 $ 2,397,829 $ 4,217,941
Net realized gain (loss) from
investments and foreign
currency transactions............... (165,616) (891,143) 19,680 72,202 -- 27,440
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies.................. (29,588,904) 68,885,320 (6,905,014) 14,631,144 (7,912,643) 14,450,466
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets resulting
from operations..................... (9,403,474) 109,648,083 (2,873,357) 22,044,690 (5,514,814) 18,695,847
Distributions to shareholders from:
Undistributed net
investment income................... (41,654,771) (43,440,615) (7,341,063) (5,282,540) (4,218,190) (2,941,626)
Net realized capital gains.......... -- -- (72,481) -- -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3)............................ (6,386,579) (2,081,082) 4,002,940 26,364,407 5,807,792 15,968,605
---------- ---------- ---------- ---------- --------- ---------
Net increase (decrease)
in net assets....................... (57,444,824) 64,126,386 (6,283,961) 43,126,557 (3,925,212) 31,722,826
Net assets:
Beginning of period................. 643,165,471 579,039,085 137,356,721 94,230,164 83,221,703 51,498,877
---------- ---------- ---------- ---------- --------- ---------
End of period....................... $585,720,647 $643,165,471 $131,072,760 $137,356,721 $79,296,491 $83,221,703
========== ========== ========== ========== ========= =========
Undistributed net investment
income included in net assets:
Beginning of period.................. $ 41,588,096 $ 43,374,805 $ 7,341,344 $ 5,282,540 $ 4,217,789 $ 2,941,474
========== ========== ========== ========== ========= =========
End of period........................ $ 20,284,371 $ 41,588,096 $ 4,012,250 $ 7,341,344 $ 2,397,428 $ 4,217,789
========== ========== ========== ========== ========= =========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Zero Coupon Fund - 2010 Money Market Fund Growth and Income Fund
-------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
--------- --------- ---------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.............. $ 2,365,367 $ 4,092,137 $ 10,804,520 $ 25,363,309 $ 19,311,842 $ 22,234,234
Net realized gain from
investments and foreign
currency transactions.............. 76,009 1,268,380 -- 289 17,316,100 79,239,315
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated in
foreign currencies................. (11,390,023) 17,390,706 -- -- 13,395,811 91,264,881
--------- --------- ---------- ----------- ---------- ----------
Net increase (decrease)
in net assets resulting
from operations.................... (8,948,647) 22,751,223 10,804,520 25,363,598 50,023,753 192,738,430
Distributions to shareholders from:
Undistributed net
investment income.................. (4,092,016) (2,074,389) (10,804,520) (25,363,598)+ (22,225,405) (8,012,262)
Net realized capital gains......... (1,109,315) -- -- -- (78,719,995) (17,435,234)
Increase (decrease) in net assets
from capital share transactions
(Note 3)........................... 5,867,143 19,594,876 (316,264) (89,071,533) 154,568,890 204,319,488
--------- --------- ---------- ----------- ---------- ----------
Net increase (decrease)
in net assets...................... (8,282,835) 40,271,710 (316,264) (89,071,533) 103,647,243 371,610,422
Net assets:
Beginning of period................ 85,632,792 45,361,082 429,546,853 518,618,386 889,487,468 517,877,046
--------- --------- ---------- ----------- ---------- ----------
End of period...................... $77,349,957 $85,632,792 $429,230,589 $429,546,853 $993,134,711 $889,487,468
========= ========= ========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period................. $ 4,091,968 $ 2,074,248 $-- $-- $ 22,239,184 $ 8,017,077
========= ========= ========== =========== ========== ==========
End of period....................... $ 2,365,319 $ 4,091,968 $-- $-- $ 19,325,567 $ 22,239,184
========= ========= ========== =========== ========== ==========
+Distributions were increased by a net realized gain from security transactions of $289.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Templeton
Income Securities Fund International Equity Fund Pacific Growth Fund
------------------------ ----------------------- ----------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income........ $ 49,769,999 $ 91,009,891 $ 21,556,200 $ 23,458,911 $ 3,157,752 $ 7,241,924
Net realized gain (loss) from
investments and foreign
currency transactions........ 10,617,084 (15,464,708) 11,842,482 30,984,955 (3,568,847) 6,009,137
Net unrealized appreciation
(depreciation) on
investments and translation
of assets and liabilities
denominated in foreign
currencies................... (9,077,052) 152,006,805 72,678,896 26,564,752 42,072,054 12,826,175
----------- ----------- ----------- ---------- ---------- ----------
Net increase in
net assets resulting
from operations.............. 51,310,031 227,551,988 106,077,578 81,008,618 41,660,959 26,077,236
Distributions to shareholders
from:
Undistributed net
investment income............ (66,923,858) (63,454,170) (25,386,301) (13,634,404) (10,559,889) (6,625,094)
In excess of net investment
income....................... (431,923)
Net realized capital gains.. (11,129,687) (5,103,693) (31,064,816) (16,891,097) (6,370,263) (2,753,036)
Increase (decrease) in net
assets from capital share
transactions (Note 3)........ 71,255,714 107,540,999 104,544,196 14,509,031 34,610,363 (60,595,295)
----------- ----------- ----------- ---------- ---------- ----------
Net increase (decrease)
in net assets................ 44,512,200 266,535,124 154,170,657 64,992,148 58,909,247 (43,896,189)
Net assets:
Beginning of period.......... 1,266,537,502 1,000,002,378 850,116,622 785,124,474 331,935,881 375,832,070
----------- ----------- ----------- ---------- ---------- ----------
End of period................ $1,311,049,702 $1,266,537,502 $1,004,287,279 $850,116,622 $390,845,128 $331,935,881
=========== =========== =========== ========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period........... $ 91,003,300 $ 67,603,145 $ 23,389,762 $ 13,466,616 $ 7,402,137 $ 6,796,802
=========== =========== =========== ========== ========== ==========
End of period................. $ 47,258,926 $ 91,003,300 $ 19,559,661 $ 23,389,762 $ (431,923) $ 7,402,137
=========== =========== =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Developing
Rising Dividends Fund Utility Equity Fund Markets Equity Fund
--------------------- ------------------------ ----------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......... $ 5,026,671 $ 10,367,695 $ 29,786,386 $ 65,692,968 $ 3,029,589 $ 2,632,898
Net realized gain from
investments and foreign
currency transactions.......... 203,185 251,515 29,549,902 2,816,631 1,657,177 3,236,155
Net unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities denominated
in foreign currencies.......... 27,984,801 88,320,864 (4,178,870) 282,539,662 22,530,480 (2,382,349)
---------- ---------- ----------- ----------- ---------- ----------
Net increase in
net assets resulting
from operations................ 33,214,657 98,940,074 55,157,418 351,049,261 27,217,246 3,486,704
Distributions to shareholders from:
Undistributed net
investment income.............. (10,368,611) (8,063,908) (65,540,030) (70,961,297) (2,182,460) (489,978)
Net realized capital gains..... -- -- -- -- (4,037,551) (115,132)
Increase (decrease) in net
assets from capital share
transactions (Note 3).......... 19,260,372 62,448,084 (86,235,833) (11,752,253) 72,852,463 57,013,367
---------- ---------- ----------- ----------- ---------- ----------
Net increase (decrease)
in net assets.................. 42,106,418 153,324,250 (96,618,445) 268,335,711 93,849,698 59,894,961
Net assets:
Beginning of period............ 463,253,277 309,929,027 1,423,446,200 1,155,110,489 158,083,842 98,188,881
---------- ---------- ----------- ----------- ---------- ----------
End of period.................. $505,359,695 $463,253,277 $1,326,827,755 $1,423,446,200 $251,933,540 $158,083,842
========== ========== =========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of period............. $ 10,367,057 $ 8,063,270 $ 65,687,973 $ 70,953,514 $ 2,084,657 $ 758,368
========== ========== =========== =========== ========== ==========
End of period................... $ 5,025,117 $ 10,367,057 $ 29,934,329 $ 65,687,973 $ 2,931,786 $ 2,084,657
========== ========== =========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton Global Templeton Global
Growth Fund Asset Allocation Fund
---------------------- ---------------------
1996 1995 1996 1995**
---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income........................................... $ 5,672,607 $ 6,108,912 $ 553,316 $ 251,964
Net realized gain (loss) from investments and foreign
currency transactions .......................................... (3,989,937) 7,733,119 70,513 11,985
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies........ 38,274,436 15,482,583 1,057,185 382,161
---------- ---------- --------- ---------
Net increase in net assets resulting from operations............. 39,957,106 29,324,614 1,681,014 646,110
Distributions to shareholders from:
Undistributed net investment income............................. (7,356,653) (1,324,712) (14,807) (246,062)
Net realized capital gains...................................... (7,356,653) -- (29,613) --
Increase in net assets from capital share transactions (Note 3).. 113,984,043 151,899,127 18,621,743 13,828,655
---------- ---------- --------- ---------
Net increase in net assets....................................... 139,227,843 179,899,029 20,258,337 14,228,703
Net assets:
Beginning of period............................................. 338,755,117 158,856,088 14,728,703 500,000
---------- ---------- --------- ---------
End of period................................................... $477,982,960 $338,755,117 $34,987,040 $14,728,703
========== ========== ========= =========
Undistributed net investment income included in net assets:
Beginning of period............................................. $ 5,816,563 $ 1,454,896 $ (6,078) $--
========== ========== ========= =========
End of period................................................... $ 4,132,517 $ 5,816,563 $ 532,431 $ (6,078)
========== ========== ========= =========
**April 19, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
Templeton
International
Capital Smaller
Small Cap Fund Growth Fund Companies Fund
--------------------- -------- -----------
1996 1995*** 1996* 1996*
---------- --------- -------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income............................................ $ 225,502 $ 33,213 $ 5,579 $ 24,325
Net realized gain (loss) from investments and foreign
currency transactions ........................................... 3,150,203 2,754 -- (2,662)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies............................................ 2,479,402 161,821 (13,170) 99,095
---------- --------- -------- -----------
Net increase (decrease) in net assets resulting
from operations ................................................. 5,855,107 197,788 (7,591) 120,758
Distributions to shareholders from:
Undistributed net investment income.............................. (33,640) -- -- --
Net realized capital gains....................................... (2,728) -- -- --
Increase in net assets from capital share transactions (Note 3)... 80,940,257 12,853,690 4,990,381 5,341,343
---------- --------- -------- -----------
Net increase in net assets........................................ 86,758,996 13,051,478 4,982,790 5,462,101
Net assets:
Beginning of period.............................................. 13,301,478 250,000 -- --
---------- --------- -------- -----------
End of period.................................................... $100,060,474 $13,301,478 $4,982,790 $5,462,101
========== ========= ======== ===========
Undistributed net investment income included in net assets:
Beginning of period.............................................. $ 33,213 $-- $-- $--
========== ========= ======== ===========
End of period.................................................... $ 225,075 $ 33,213 $ 5,579 $ 24,325
========== ========= ======== ===========
</TABLE>
*May 1, 1996 (effective date) to June 30, 1996.
***November 1, 1995 (effective date) to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN VALUEMARK FUNDS
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Valuemark Funds (the Trust) is an open-end management investment
company (mutual fund) registered under the Investment Company Act of 1940, as
amended. The Trust currently consists of twenty-three separate funds (the
Funds), all of which are diversified except for the Templeton Global Income
Securities Fund. 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.
The investment objectives of each Fund are as follows:
Capital Growth
Precious Metals Fund
Templeton Developing Markets
Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton Pacific Growth Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Growth and Income
Growth and Income Fund
Income Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
Current Income
Adjustable U.S. Government Fund
Templeton Global Income Securities Fund
High Income Fund
Investment Grade Intermediate Bond Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Capital Preservation and Income
Money Market Fund
The Capital Growth Fund and the Templeton International Smaller Companies Fund
became effective on May 1, 1996.
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 price, 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 of Trustees
(the Board). Securities for which market quotations are not available, and
securities restricted as to resale, 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. 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 and will, therefore, not be reflected in the computation
of the Fund's net asset value, unless material. 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.
Portfolio securities in the Money Market Fund are valued at amortized cost,
which approximates value. The 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 trustees have 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
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.
Original issue discount is 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
distribution is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and any changes in unrealized
portfolio appreciation or depreciation.
For the Money Market Fund, distributions are normally declared 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 preceding day. Such distributions are declared and
reinvested daily in additional shares of the Fund at net asset value.
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 tax basis mark to market of unrealized gains with respect to passive
foreign investment company (PFIC) shares, differing treatments of foreign
currency transactions and defaulted securities - see Note 7.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to tax basis mark to market of unrealized gains with
respect to passive foreign investment company (PFIC) shares, differing treatment
of wash sale and foreign currency transactions.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
f. 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.
g. 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 fluctuations 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
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 Funds' 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 arise
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.
h. Repurchase Agreements:
The Funds may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System. A repurchase agreement is accounted for as a loan by the
Fund to the seller, collateralized by underlying U.S. government securities,
which are delivered to the Fund's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1996, all outstanding repurchase agreements held by the Funds had been
entered into on June 28, 1996.
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 Fund to the seller, collateralized by underlying U.S.
government securities, which are delivered to the Fund's custodian. The market
value, including accrued interest, of the
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
h. Repurchase Agreements: (cont.)
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At June 30, 1996, all
outstanding repurchase agreements held by the Funds, had been entered into on
June 28, 1996.
i. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may trade 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.
j. Mortgage Dollar Rolls:
The U.S. Government Securities Fund may enter into mortgage dollar rolls in
which the Fund 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 Templeton Global Income Securities Fund and Templeton 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 fund value. The 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 June 30, 1996, the Templeton Global Income Securities Fund had the
following forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
In Unrealized
Contracts to Sell (Foreign exchange currency) Exchange for Settlement Date Gain (Loss)
---------------------------- --------- ---------- -------
<S> <C> <C> <C>
394,000,000 Japanese Yen............ U.S. $ 3,612,260 07/15/96 U.S. $ 3,100
323,695,000 Japanese Yen............ 2,966,957 07/15/96 1,812
21,231,000 Deutsche Mark........... 13,948,355 07/23/96 (36,813)
10,573,000 Deutsche Mark........... 6,928,571 07/19/96 (34,372)
24,088,000 Deutsche Mark........... 15,860,934 08/01/96 (14,956)
--------- ---------- -------
U.S. $43,317,077 U.S. $(81,229)
========= =======
The Templeton Global Asset Allocation Fund had the following forward foreign
currency contracts outstanding:
In Unrealized
Contracts to Sell (Foreign exchange currency) Exchange for Settlement Date Gain (Loss)
- ---------------------------- --------- ---------- -------
<S> <C> <C> <C>
52,000 Deutsche Mark............... U.S. $ 34,076 07/19/96 U.S. $(169)
104,000 Deutsche Mark............... 68,326 07/23/96 (180)
104,000 Deutsche Mark............... 68,480 08/01/96 (65)
--------- -------
U.S. $170,882 U.S. $(414)
========= =======
3. TRUST SHARES
At June 30, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the six months ended June 30, 1996 and the year ended December 31, 1995 were as
follows:
Adjustable U.S. Templeton Global
Government Fund Income Securities Fund High Income Fund
------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Six months ended June 30, 1996
Shares sold................................. 2,425,163 $26,297,757 853,401 $11,343,371 5,714,936 $79,649,599
Shares issued in reinvestment of distributions 1,311,999 13,329,910 1,374,372 17,028,466 2,553,925
32,664,699
Shares redeemed............................. (4,387,128) (47,502,922) (2,550,831) (33,954,070) (6,241,198) (87,178,159)
-------- ---------- -------- ---------- -------- ----------
Net increase (decrease)................ (649,966) $ (7,875,255) (323,058) $ (5,582,233) 2,027,663 $25,136,139
======== ========== ======== ========== ======== ==========
Year ended December 31, 1995
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
======== ========== ======== ========== ======== ==========
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
-------- ---------- -------- --------- -------- --------- -------- ----------
Six months ended
June 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 856,663 $12,019,630 3,654,798 $60,460,047 1,530,457 $27,463,704 2,178,004 $29,950,797
Shares issued in
reinvestment of
distributions....... 647,360 8,616,357 200,532 3,054,106 521,297 9,336,429 3,298,081 41,654,771
Shares redeemed..... (1,271,344) (17,819,047) (3,140,697) (50,971,278) (1,250,944) (22,425,659) (5,696,202) (77,992,147)
-------- ---------- -------- --------- -------- --------- -------- ----------
Net increase
(decrease).......... 232,679 $ 2,816,940 714,633 $12,542,875 800,810 $14,374,474 (220,117) $ (6,386,579)
======== ========== ======== ========= ======== ========= ======== ==========
Year ended
December 31, 1995
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)
======== ========== ======== ========= ======== ========= ======== ==========
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 799,679 $12,335,361 614,698 $10,056,763 1,661,927 $27,105,481
Shares issued in reinvestment of distributions 517,344 7,413,544 282,342 4,218,190 361,958 5,201,331
Shares redeemed.............................. (1,022,008) (15,745,965) (516,320) (8,467,161) (1,600,406) (26,439,669)
-------- ---------- -------- --------- -------- ----------
Net increase ........................... 295,015 $ 4,002,940 380,720 $ 5,807,792 423,479 $ 5,867,143
======== ========== ======== ========= ======== ==========
3. TRUST SHARES (cont.)
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Year ended December 31, 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
======== ========== ======== ========= ======== ==========
Money Market Fund Growth and Income Fund Income Securities Fund
---------------------- --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
---------- ----------- -------- ---------- --------- -----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.......................... 299,789,423 $299,789,423 9,709,215 $169,556,522 7,460,586 $124,166,549
Shares issued in reinvestment
of distributions..................... 10,804,350 10,804,350 6,313,033 100,945,399 4,981,081 78,053,545
Shares redeemed...................... (310,910,037) (310,910,037) (6,694,390) (115,933,031) (7,878,933) (130,964,380)
---------- ----------- -------- ---------- --------- -----------
Net increase (decrease)......... (316,264) $ (316,264) 9,327,858 $154,568,890 4,562,734 $ 71,255,714
========== =========== ======== ========== ========= ===========
Year ended December 31, 1995
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
========== =========== ======== ========== ========= ===========
Templeton Templeton Rising
International Equity Fund Pacific Growth Fund Dividends Fund
------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 5,089,140 $ 72,641,913 6,141,423 $92,160,402 4,649,806 $61,143,078
Shares issued in reinvestment of distributions 4,023,601 56,451,117 1,175,496 17,362,075 776,094 10,368,611
Shares redeemed............................. (1,739,985) (24,548,834) (4,950,771) (74,912,114) (4,008,624) (52,251,317)
-------- ---------- -------- --------- -------- ----------
Net increase........................... 7,372,756 $104,544,196 2,366,148 $34,610,363 1,417,276 $19,260,372
======== ========== ======== ========= ======== ==========
Year ended December 31, 1995
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
======== ========== ======== ========= ======== ==========
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund Global Growth Fund
--------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- -------- --------- -------- ----------
Six months ended June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............................. 3,308,929 $ 59,205,881 8,261,997 $90,119,617 9,952,737 $124,748,935
Shares issued in reinvestment
of distributions......................... 3,882,703 65,540,030 568,038 6,220,011 1,172,375 14,713,306
Shares redeemed.......................... (11,879,902) (210,981,744) (2,185,380) (23,487,165) (2,052,821) (25,478,198)
--------- ---------- -------- --------- -------- ----------
Net increase (decrease)............. (4,688,270) $ (86,235,833) 6,644,655 $72,852,463 9,072,291 $113,984,043
========= ========== ======== ========= ======== ==========
3. TRUST SHARES (cont.)
Templeton Developing Templeton
Utility Equity Fund Markets Equity Fund Global Growth Fund
--------------------- ------------------- --------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- -------- --------- -------- ----------
Year ended December 31, 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
========= ========== ======== ========= ======== ==========
Templeton
Templeton Global Asset International Smaller
Allocation Fund Small Cap Fund Capital Growth Fund** Companies Fund**
------------------ ------------------- --------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------- --------- -------- ---------- ------ -------- ------ --------
Six months ended
June 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.................. 1,878,207 $20,827,524 8,766,894 $102,663,292 579,958 $5,894,657 536,166 $5,415,731
Shares issued in
reinvestment of distributions 3,931 44,420 2,914 36,368 -- -- -- --
Shares redeemed............. (203,649) (2,250,201) (1,830,784) (21,759,403) (90,423) (904,276) (7,269) (74,388)
------- --------- -------- ---------- ------ -------- ------ --------
Net increase ........... 1,678,489 $18,621,743 6,939,024 $ 80,940,257 489,535 $4,990,381 528,897 $5,341,343
======= ========= ======== ========== ====== ======== ====== ========
Year ended
December 31, 1995*
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 April 19, 1995 (effective date) to December 31, 1995 and for the
period November 1, 1995 (effective date) to December 31, 1995 for the Templeton
Global Asset Allocation Fund and Small Cap Fund, respectively.
**For the period May 1, 1996 (effective date) to June 30, 1996.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At December 31, 1995, for tax purposes, the Trust 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 Developing Templeton Templeton
International Pacific Markets Global Global Asset Small
Equity Fund Growth Fund Equity Fund Growth Fund Allocation Fund Cap Fund
--------- -------- -------- -------- ---------- ------
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
Templeton Investment Grade
Adjustable U.S. Global Income Intermediate Real Estate U.S. Government Zero Coupon
Government Fund Securities Fund Bond Fund Securities Fund Securities Fund Fund - 2005
----------- ---------- ----------- ---------- ---------- --------
Capital loss carryovers
Expiring in:
<S> <C> <C> <C> <C> <C> <C>
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
Expiring in:
2001............................. $ 2,985,091 $--
2002............................. 11,480,517 7,515,804
---------- --------
$14,465,608 $7,515,804
========== ========
</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 June 30, 1996 by $4,168 in Zero Coupon Fund - 2005,
$250,789 in Zero Coupon Fund - 2010, $9,777 in Growth and Income Fund,
$3,555,233 in Templeton Pacific Growth Fund, $346,771 in Rising Dividends Fund,
$855,891 in Templeton Global Growth Fund and $8,959 in Small Cap Fund.
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Templeton Investment Grade
Adjustable U.S. Global Income High Intermediate Precious Real Estate U.S. Government
Government Fund Securities Fund Income Fund Bond Fund Metals Fund Securities FundSecurities Fund**
----------- ---------- --------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases........... $98,747,502 $182,372,186 $39,204,226 $13,013,438 $19,647,671 $16,601,532 $25,553,980
Sales............... $83,632,612 $196,347,200 $44,031,345 $22,500,000 $ 6,620,755 $ 9,527,461 $51,071,570
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....................... $ 764,880 $2,227,312 $8,639,430 $194,693,340 $248,370,798 $82,815,367 $33,007,843
Sales........................... $3,060,034 -- $7,804,103 $ 99,433,417 $107,396,964 $41,773,155 $10,393,311
Templeton Templeton
Rising Developing Templeton Templeton International
Dividends Utility Markets Global Global Asset Small Capital Smaller
Fund Equity Fund Equity Fund Growth Fund Allocation Fund Cap Fund Growth Fund* Companies Fund*
--------- ---------- -------- --------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases....... $35,751,410 $231,608,449 $71,021,155 $88,806,660 $13,297,493 $97,354,289 $4,101,739 $2,164,464
Sales........... $19,180,812 $236,952,708 $ 8,552,443 $16,452,342 $ 4,100,444 $18,138,705 -- --
*For the period May 1, 1996 (effective date) to June 30, 1996.
**Excludes purchase and sales of mortgage dollar roll transactions, which aggregated $16,432,748 and $16,433,354,
respectively.
</TABLE>
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
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 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 as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.625 of 1% First $100 million
0.500 of 1% over $100 million, up to and including $250 million
0.450 of 1% over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
Under the terms of a separate management agreement with 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
Fees are further reduced on net assets 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
------------- ----------------------------------
0.750 of 1% First $500 million
0.625 of 1% over $500 million, up to and including $1 billion
0.500 of 1% over $1 billion
Templeton Global Advisers Ltd. (TGAL) 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
Fees are further reduced on net assets over $500 million.
TGAL 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
------------- ----------------------------------
0.650 of 1% First $200 million
0.585 of 1% over $200 million, up to and including $1.3 billion
0.520 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
Fees are further reduced on net assets over $500 million.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
a. Management Agreement: (cont.)
Under a subadvisory agreement, TICI provides services to the Templeton Global
Asset Allocation Fund and receives from TGAL fees computed monthly based on the
average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.250 of 1% First $200 million
0.225 of 1% over $200 million, up to and including $1.3 billion
0.200 of 1% over $1.3 billion
Under a subadvisory agreement, TICI provides services to the Templeton Global
Income Securities Fund and receives from Advisers fees computed monthly based on
the average daily net assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.350 of 1% First $100 million
0.250 of 1% over $100 million, up to and including $250 million
0.200 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
Fees are further reduced on net assets over $10 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
------------- ----------------------------------
0.150 of 1% First $200 million
0.135 of 1% over $200 million, up to and including $700 million
0.100 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets 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
------------- ----------------------------------
0.150 of 1% First $200 million
0.135 of 1% over $200 million, up to and including $700 million
0.100 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets over $1.2 billion.
Global Investors serves as the business manager for the Templeton Global Growth
Fund and receives from TGAL fees computed monthly based on the average daily net
assets as follows:
Annualized Fee Rate Average Daily Net Assets
------------- ----------------------------------
0.050 of 1% First $200 million
0.045 of 1% over $200 million, up to and including $700 million
0.033 of 1% over $700 million, up to and including $1.2 billion
Fees are further reduced on net assets 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. For the six months ended June 30,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees for the Zero Coupon Fund - 2000, Zero
Coupon Fund - 2005, Zero Coupon Fund - 2010, and Money Market Fund, aggregating
$585,911.
b. Distribution Plans:
The management agreements between the Funds, Advisers, TGAL 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.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Shareholder Services Agreement:
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.
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Advisers, Investor Services, TGAL, TAML, TICI, Global Investors, TQA (all
wholly-owned subsidiaries of Franklin Resources, Inc.), and/or Allianz Life.
7. CREDIT RISK AND DEFAULTED SECURITIES
The High Income Fund and the Income Securities Fund have 91.7% and 45.7%,
respectively, of their portfolios invested in lower rated and comparable quality
unrated securities. At June 30, 1996, the High Income Fund held one defaulted
security issued by one company with a value aggregating $41,097 representing
.01% of the Fund's net assets. The Income Securities Fund held three defaulted
securities issued by three companies with a value aggregating $8,420,656
representing .64% of the Fund's net assets.
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 the
Funds more significantly to economic changes occurring in certain industries or
sectors, as follows:
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 Equity Fund has investments in excess of
10% of its net assets in Argentina, Hong Kong and Mexico.
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.
8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investment of 5% or more of an issuer's outstanding voting securities held by
any of the Funds are defined in the Investment Company Act of 1940 as affiliated
companies. The investments in such companies at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Purchase Market Dividend
Fund Affiliate Cost Value Income
- ------------------------------ -------------------------- -------- -------- -------
<S> <C> <C> <C>
Income Securities Fund Tanger Factory Outlet Centers, Inc. $9,812,592 $8,379,300 $562,224
</TABLE>
9. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933. The
Fund may purchase restricted securities through a private offering and they
cannot be sold without prior registration under the Securities Act of 1933
unless such sale is pursuant to an exemption therefrom. Subsequent costs of
registration of such securities are borne by the issuer. A secondary market
exists for certain privately placed securities. For the Real Estate Securities
Fund and the Income Securities Fund restricted securities are currently valued
as disclosed in Note 1. At June 30, 1996, the Funds held restricted securities
with a value aggregating $1,530,466 and $41,001, respectively, representing .65%
and less than .01% of the respective Fund's net assets. Such securities are:
Real Estate Securities Fund
Shares Security Acquisition Date Cost Value
- ------ ------------- ------------ -------- --------
137,570 NVR, Inc. 4/8/94 $1,107,439 $1,530,466
Income Securities Fund
Shares/
Warrants
- ------
3,088 NVR, Inc. 10/17/89, 9/29/93 $63,831 $34,354
3,128 NVR, Inc. warrants 9/29/93 13,294 6,647
10. 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 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.
11. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate 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%6 7.19% 43.31% --
1992 10.86 .36 .12 .48 (.24) -- (.24) 11.10 4.45 256,980 .6046 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 --
1996** 10.76 .42 (.12) .30 (.84) -- (.84) 10.22 2.82 173,980 .59* 6.31* 49.69 --
Templeton Global Income Securities 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 --
1996** 13.46 .57 (.41) .16 (1.04) -- (1.04) 12.58 1.27 223,238 .60* 7.40* 83.65 --
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 --
1996** 13.66 .62 (.12) .50 (1.20) (.06) (1.26) 12.90 3.77 366,986 .54* 9.40* 10.86 --
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 --
1996** 14.05 .39 (.29) .10 (.75) -- (.75) 13.40 .77 161,286 .60* 5.34* 9.55 --
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 --
1996** 14.08 .08 1.14 1.22 (.20) (.18) (.38) 14.92 10.07 122,108 .64* 1.18* 5.68 .0305
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 --
1996** 17.40 .37 .88 1.25 (.75) -- (.75) 17.90 7.18 233,914 .59* 4.43* 4.52 .0531
11. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate 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*** --
1996** 14.00 .51 (.73) (.22) (.97) -- (.97) 12.81 (1.46) 585,721 .52* 6.66* 4.26*** --
Zero Coupon Fund - 2000
1991 11.40 .57 1.67 2.24 (.38) -- (.38) 13.26 20.19 27,699 .256 7.88 19.15 --
1992 13.26 .57 .58 1.15 (.53) -- (.53) 13.88 9.04 48,217 .256 6.97 9.10 --
1993 13.88 .66 1.55 2.21 (.62) (.03) (.65) 15.44 16.15 76,916 .376 5.88 7.02 --
1994 15.44 .68 (1.71) (1.03) (.69) (.10) (.79) 13.62 (6.76) 94,230 .406 6.37 -- --
1995 13.62 .75 2.03 2.78 (.67) -- (.67) 15.73 20.67 137,357 .406 6.14 1.63 --
1996** 15.73 .46 (.80) (.34) (.86) (.01) (.87) 14.52 (2.09) 131,073 .406* 6.01* .57 --
Zero Coupon Fund - 2005
1991 11.15 .54 1.65 2.19 (.43) -- (.43) 12.91 20.37 11,299 .256 8.00 4.54 --
1992 12.91 .65 .67 1.32 (.61) -- (.61) 13.62 10.81 18,295 .256 7.46 19.48 --
1993 13.62 .44 2.55 2.99 (.52) (.01) (.53) 16.08 22.21 42,998 .376 5.67 16.59 --
1994 16.08 .71 (2.24) (1.53) (.60) (.19) (.79) 13.76 (9.60) 51,499 .406 6.53 2.00 --
1995 13.76 .78 3.53 4.31 (.69) -- (.69) 17.38 31.76 83,222 .406 6.19 1.72 --
1996** 17.38 .44 (1.62) (1.18) (.86) -- (.86) 15.34 (6.65) 79,296 .406* 6.04* -- --
Zero Coupon Fund - 2010
1991 11.25 .56 1.58 2.14 (.55) -- (.55) 12.84 20.09 15,610 .256 8.05 22.44 --
1992 12.84 1.21 .03 1.24 (.73) -- (.73) 13.35 10.31 13,431 .256 7.64 54.50 --
1993 13.35 .50 2.81 3.31 (.94) (.04) (.98) 15.68 25.47 29,189 .256 5.89 36.63 --
1994 15.68 .55 (2.27) (1.72) (.63) (.31) (.94) 13.02 (10.97) 45,361 .406 6.57 4.34 --
1995 13.02 .76 4.75 5.51 (.49) -- (.49) 18.04 42.79 85,633 .406 6.41 31.45 --
1996** 18.04 .47 (2.43) (1.96) (.88) (.24) (1.12) 14.96 (10.63) 77,350 .406* 6.13* 10.11 --
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 .466 4.05 -- --
1995 1.00 .06 -- .06 (.06) -- (.06) 1.00 5.74 429,547 .406 5.58 -- --
1996** 1.00 .02 -- .02 (.02) -- (.02) 1.00 2.51 429,231 .426* 4.97* -- --
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 --
1996** 17.14 .29 .63 .92 (.40) (1.44) (1.84) 16.22 5.54 993,135 .50* 4.16* 11.57 .0462
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 --
1996** 16.47 .62 .02 .64 (.87) (.15) (1.02) 16.09 4.04 1,311,050 .50* 7.73* 9.01 .0521
11. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ----------------------------------
Ratio of
Net Asset Net Total Distri- Distribu- Net Net Net Investment
Value at Net Realized & From butions tions From Asset Assets at Ratio of Income to Average
Beginning Invest-Unrealized Invest- From Net Realized Total Value at End of Expenses Average Portfolio Com-
Year of ment Gain(Loss) ment InvestmentCapital Distri- End of Total Period to Average Net Turnover mission
Ended Period Income on SecuritiesOperationsIncome Gains butions Period Return+(in000's)Net Assets Assets Rate Rate****
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 --
1996** 13.32 .29 1.35 1.64 (.38) (.47) (.85) 14.11 12.31 1,004,287 .91* 4.62* 5.31 .0158
Templeton Pacific Growth Fund
19921 10.00 -- (.12) (.12) -- -- -- 9.88 (1.20) 5,788 1.316* -- 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 --
1996** 13.91 .11 1.58 1.69 (.44) (.26) (.70) 14.90 12.16 390,845 .98* 1.68* 2.88 .0134
Rising Dividends Fund
19921 10.00 .06 .92 .98 -- -- -- 10.98 9.80 97,687 .676* 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 --
1996** 12.66 .13 .79 .92 (.28) -- (.28) 13.30 7.25 505,360 .77* 2.08* 4.48 .0497
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 --
1996** 17.90 .49 .26 .75 (.92) -- (.92) 17.73 4.42 1,326,828 .49* 4.40* 17.57 .0197
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 --
1996** 9.78 .10 1.46 1.56 (.10) (.19) (.29) 11.05 15.93 251,934 1.42* 2.87* 4.68 .0020
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 --
1996** 11.75 .11 1.16 1.27 (.20) (.21) (.41) 12.61 10.83 477,983 .94* 2.81* 4.58 .0097
Templeton Global Asset Allocation Fund
19953 10.00 .18 .52 .70 (.18) -- (.18) 10.52 7.01 14,729 .90* 3.84* 30.00 --
1996** 10.52 .18 .69 .87 (.01) (.01) (.02) 11.37 8.13 34,987 .97* 4.60* 25.16 .0135
Small Cap Fund
19954 10.00 .03 .21 .24 -- -- -- 10.24 2.30 13,301 .90* 2.70* 16.04 --
1996** 10.24 .01 1.90 1.91 -- -- -- 12.15 18.69 100,060 .78* .84* 34.47 .0519
Capital Growth Fund
19965 10.00 .01 .17 .18 -- -- -- 10.18 1.80 4,983 .32* .42* -- .0574
Templeton International Smaller Companies Fund
19965 10.00 .05 .28 .33 -- -- -- 10.33 3.30 5,462 .74* 3.37* -- .0075
</TABLE>
*Annualized.
**For the six months ended June 30, 1996.
***The portfolio turnover rate excludes mortgage dollar roll transactions.
****Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities. +Total return measures the change in value of an investment over the
periods indicated. It is not annualized. It assumes reinvestment of dividends
and capital gains at net asset value. ++Per share amounts have been calculated
using the average shares outstanding during the period.
11. FINANCIAL HIGHLIGHTS (cont.)
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. 5For the period May 1, 1996
(effective date) to June 30, 1996.
6During the periods indicated below, Advisers agreed to waive in advance a
portion of its management fees and made payments of other expenses incurred by
the Funds in the Trust. Had such action not been taken, the ratio of expenses to
average net assets would have been as follows:
Ratio of
expenses
to average
net assets
------
Adjustable U.S. Government Fund
1991........................... .66%
1992........................... .62
Zero Coupon Fund - 2000
1991........................... .68
1992........................... .68
1993........................... .67
1994........................... .66
1995........................... .63
1996**......................... .58*
Ratio of
expenses
to average
net assets
------
Zero Coupon Fund - 2005
1991........................... .71%
1992........................... .69
1993........................... .67
1994........................... .68
1995........................... .66
1996**......................... .65*
Zero Coupon Fund - 2010
1991........................... .70
1992........................... .69
1993........................... .68
1994........................... .68
1995........................... .66
1996**......................... .65*
Ratio of
expenses
to average
net assets
------
Money Market Fund
1994........................... .54%
1995........................... .53
1996**......................... .54*
Templeton Pacific Growth Fund
19921.......................... 2.57*
Rising Dividends Fund
19921.......................... .76*
