Semi
Annual
Report
April 30, 1997
Franklin Value Investors Trust
Franklin Balance Sheet Investment Fund
Franklin MicroCap Value Fund
Franklin Value Fund
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CELEBRATING 50 YEARS
This year marks 50 years of business for Franklin Templeton. Over these years,
the mutual fund industry has experienced profound changes in technology,
regulations and customer expectations. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest around the globe. We thank you for your past
support and look forward to serving your investment needs in the years ahead.
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PICTURE OMITTED
William J. Lippman
President
Franklin Value Invstors Trust
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to bring you the Franklin Value Investors Trust's semi-annual
report for the period ended April 30, 1997.
The big news over the last six months was the large flow of capital into equity
securities. In fact, the Dow Jones(R) Industrial Average (the Dow) set a number
of records, including closing above the 7000-point mark for the first time on
February 13, 1997. And while economic growth was relatively moderate (estimated
first quarter 1997 GDP was an annualized rate of 5.6%), the stock market's
meteoric rise prompted some degree of caution on the part of the Federal Reserve
Board. The chief topic on Wall Street was whether the Federal Open Market
Committee would increase the federal funds rate.
Investor concern about market volatility and questions about its long-term
direction prompts us to comment on the importance of investing in value. As the
name indicates, the Franklin Value Investors Trust seeks companies that we view
as bargains which can come in a variety of styles and sizes. Some are so obscure
and small as to be off the radar screen from most market analysts. Others are
well-known, large cap stocks experiencing dramatic drops, often due only to one
bad quarter. These are what we call "fallen angels." Some value stocks trade at
extraordinarily low prices relative to visible net assets; in many cases it is
possible to buy a healthy company at or below such value and pay almost nothing
for hard assets like land, minerals, and timber, whose potential sales value is
unknown but obviously substantial.
CONTENTS
Letter to Shareholders 1
Fund Reports
Franklin Balance Sheet
Investment Fund 4
Franklin MicroCap
Value Fund 8
Franklin Value Fund 12
Financial Statements 19
Notes to Financial
Statements 38
"Frequently, the
stocks we perceive
as bargains have
a cloud hanging
over them."
Other stocks can be purchased at surprisingly low prices relative to earnings or
cash flows. Frequently, the stocks we perceive as bargains have a cloud hanging
over them. It could be an out-of-favor company or industry, an ineffectual
management team, or a passive board of directors. Our job is to work at
determining whether the problem is correctable.
At times, companies of interest to us are in a turnaround mode and trading at
prices that say more about the emotions of the seller than about what we are
buying. Turnarounds do not proceed on schedule, and we frequently must conclude
that we are early. Our attention to the balance sheet and cash flow of a
business buys us time to wait out our disappointments.
The only identifiable catalyst we need is the mispricing of assets or cash flow.
We look for gains to come in one of three ways. First, the market's appraisal of
the firm may change. The stock will be bid up to levels we think appropriate,
and we exit. Second, the value disparity stays the same or increases, and a
competitor or other strategic buyer launches a takeover bid which, again, drives
up the price. Third, nothing changes except that the intrinsic value increases
over time. If that happens, we will stay with a strong balance sheet
indefinitely, since we can't predict when lightning will strike. We can also be
wrong, of course, and end up with a loss. Obviously, there are no guarantees.
The Franklin Value Investors Trust is organized into three portfolios, each
managed in the same spirit but with differing focus. While the funds have
distinct investment objectives, our fundamental operating principles remain the
same: careful investment selection and constant professional supervision.
As always, we appreciate your support, welcome your questions and look forward
to serving your investment needs in the years to come.
Sincerely,
William J. Lippman
President
Franklin Value Investors Trust
FRANKLIN BALANCE
SHEET INVESTMENT FUND
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Your Fund's Objective: Seeks high total return as well as capital appreciation
by investing primarily in securities that we believe are undervalued in the
marketplace. The fund will also seek income when deemed consistent with its
objective.
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The largest and oldest fund in the Trust is the Franklin Balance Sheet
Investment Fund. We search for securities of companies (any size) selling at a
discount to tangible book value -- an investment strategy that we feel is unique
among fund investors, especially as we apply it. Basically, we cull accounting
constructs like goodwill and deferred charges from the asset side, write down
other assets to "hard value" and adjust liabilities upward where appropriate,
hoping to reflect their full lien on the remaining hard assets. When we can buy
a going concern at a discount to the net equity thus derived, we feel we have
set the bar where it can't trip us.
During the six months ended April 30, 1997, cash flow into the fund was steady,
totaling $128.8 million. Size is an important issue. Our results, over time,
must derive from the market's inefficiencies. The total value of the world's
stock markets is expanding and, although there is more small investor
participation than before, aggregating vehicles like mutual funds are the way
small investors play. Big funds need big stocks to maneuver for liquidity
purposes. Small stocks carry an increasing illiquidity discount that contributes
to the value margin we seek. In order that we don't outgrow our opportunities,
the fund is currently open only to retirement accounts and existing
shareholders.
Insurance remains our largest industry weighting in the portfolio. At the end of
the reporting period, life insurance comprised 12.6% of the fund's total net
assets, up from 12.5% on October 31, 1996. Property/casualty insurance also
increased, rising from 10.8% to 11.7% on April 30, 1997. Additionally, we added
to our holdings in the retail, steel, homebuilding, and transportation sectors.
The banks and thrifts sector, however, continues to decline in importance for us
(down from 7.7% to 4.2% at the end of the period) as bargains in this area are
harder to find.
Over the reporting period, several of the portfolio's positions reached what we
consider our price targets and we sold them for impressive gains. Among the most
notable of these were Allmerica Financial Corp. (+56% gain on cost), LaSalle Re
Holdings Ltd. (+47%), Niagara Mohawk Power Corp. (+47%), and Progressive Bank,
Inc. (+111%). Additionally, takeovers during the reporting period boosted the
value of two of our holdings. Medex, Inc. and Super Food Services, Inc.
experienced +111% and +50% gains on cost, respectively.
This discussion reflects the strategies we employed for the fund and includes
our opinions as of the close of the reporting period. Since economic and market
conditions are constantly changing, our strategies, evaluations, conclusions and
decisions regarding portfolio holdings may change as new circumstances arise.
Although past performance of a specific investment or sector cannot guarantee
future performance, such information can help illustrate how we analyze the
securities we purchase for the fund.
Franklin Balance
Sheet Investment Fund
Top 10 Holdings on April 30, 1997
Based on Total Net Assets
Company % of Total
INDUSTRY Net Assets
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USLIFE Corp. 3.32%
INSURANCE -- LIFE/SPECIALTY
American National
Insurance Company 3.24%
INSURANCE -- LIFE/SPECIALTY
Total Petroleum
(North America), Ltd. 2.28%
NATURAL RESOURCES
U.S. Home Corp. 2.19%
FURNITURE & HOMEBUILDERS
Aztar Corp. 1.83%
MISCELLANEOUS
Presidential Life Corp. 1.74%
INSURANCE -- LIFE/SPECIALTY
Scor SA 1.73%
INSURANCE -- PROPERTY/CASUALTY
Overseas Shipholding
Group, Inc. 1.54%
TRANSPORTATION
LTV Corp. 1.52%
MANUFACTURING
Transitional Hospitals Corp. 1.50%
HOSPITALS
For a complete list of portfolio holdings, please see page 19 of this report.
PERFORMANCE SUMMARY
The Franklin Balance Sheet Investment Fund's share price, as measured by net
asset value, increased 8 cents, from $29.15 on October 31, 1996, to $29.23 on
April 30, 1997.
For the six-month period, your fund paid distributions totaling 21.8 cents
($0.218) per share in income dividends and $2.355 in capital gains, of which
92.16 cents ($0.9216) represented short-term gains and $1.4334 represented
long-term gains. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of securities in the portfolio.
The fund posted a cumulative total return of +9.48% for the six-month period
ended April 30, 1997. Cumulative total return measures the change in value of an
investment, assuming reinvestment of dividends and capital gains, and does not
include the sales charge. Past performance is not predictive of future results.
Franklin Balance Sheet Investment Fund
Periods ended April 30, 1997
Since
Inception
1-Year 5-Year (4/2/90)
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Cumulative Total Return1 13.67% 130.54% 179.25%
Average Annual Total Return2 11.97% 17.82% 15.37%
Value of a $10,000 Investment3 $11,197 $22,703 $27,503
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
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Total Return4 22.00% 17.85% 15.70% 21.92% 13.67%
1. Cumulative total return measures the change in value of an investment the
periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 1.50% initial
sales charge.
3. The value of a $10,000 investment is based on a hypothetical $10,000
investment in the fund over the specified periods and includes the initial sales
charge.
4. One-year total returns represent the change in value of an investment over
the periods ended on the specified dates and do not include the initial sales
charge.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
FRANKLIN MICROCAP VALUE FUND
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Your Fund's Objective: Seeks high total return as well as capital appreciation
by investing primarily in securities of companies with market capitalizations
under $100 million at the time of purchase, and which we believe are undervalued
in the marketplace. The fund will also seek income when deemed consistent with
its objective.
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The Franklin MicroCap Value Fund, which we sometimes refer to as "Son of Balance
Sheet," started in late 1995 when the Franklin Balance Sheet Investment Fund
partially closed to new investors. We manage it in the same manner as Balance
Sheet, except that -- for this fund -- we buy only companies whose market
capitalization is less than $100 million, and we do not buy closed-end funds as
we do in Balance Sheet.
Because of its microfocus, the Trustees determined at inception that the fund
would close to all but retirement accounts and existing shareholders once assets
reached $100 million, which they did in July 1996. Total net assets stood at
$134.2 million on April 30, 1997, and the Franklin MicroCap Value Fund was fully
invested at the end of the reporting period.
The closure provision was intended to keep the fund from outgrowing the market
segment we want to exploit. We anticipated that the rapid flow of cash into the
fund could hamper our ability to invest fast enough without compromising our
investment strategy. Price is the bedrock criterion for our purchase and sale
decisions, and unless we are able to be patient buyers and sellers of these
often thinly-traded, small securities, we will not capture the opportunities
offered by this poorly mapped corner of the investment universe.
We buy companies under very conservative valuation assumptions. It is our
conviction that a going concern is likely to be worth more than the liquidation
value of its parts. While we cannot be sure what liquidation will bring, we can
make reasoned estimates. If our bias is conservative, any surprises that come
about stand to be more positive than negative.
Over the reporting period, we sold a number of positions at considerable gains
on cost. Among these were Affiliated Community Bancorp (+52% gain on cost),
American Woodmark Corp. (+115%), Bel Fuse, Inc. (+51%), Dynamics Corp. (+38%),
People's Savings Financial Corp. (+53%), and Seaway Food Town, Inc. (+60%).
Cash flow into the fund over the six months totaled $12.2 million. We directed
the funds to new and existing investments in sectors such as environmental
control, furniture & homebuilders, insurance (property/casualty), retailing,
technology, and textiles & apparel.
This discussion reflects the strategies we employed for the fund and includes
our opinions as of the close of the reporting period. Since economic and market
conditions are constantly changing, our strategies, evaluations, conclusions and
decisions regarding portfolio holdings may change as new circumstances arise.
Although past performance of a specific investment or sector cannot guarantee
future performance, such information can help illustrate how we analyze the
securities we purchase for the fund.
Franklin MicroCap
Value Fund
Top 10 Holdings on April 30, 1997
Based on Total Net Assets
Company % of Total
INDUSTRY Net Assets
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Farm Family Holdings, Inc. 3.02%
INSURANCE -- PROPERTY/CASUALTY
Binks Manufacturing Co. 2.30%
MANUFACTURING
Moore Products Co. 2.08%
MANUFACTURING
Oriole Homes Corp. 2.08%
FURNITURE & HOMEBUILDERS
GA Financial, Inc. 1.96%
BANKS & THRIFTS
Hi-Lo Automotive, Inc. 1.81%
RETAIL
American Pacific Corp. 1.79%
MANUFACTURING
Anuhco, Inc. 1.75%
TRANSPORTATION
ACMAT Corp. 1.75%
INSURANCE -- PROPERTY/CASUALTY
Garan, Inc. 1.68%
TEXTILE & APPAREL
For a complete list of portfolio holdings, please see page 25 of this report.
PERFORMANCE SUMMARY
The Franklin MicroCap Value Fund's share price, as measured by net asset value,
increased 39 cents, from $18.44 on Octo- ber 31, 1996, to $18.83 on April 30,
1997.
For the six-month period, your fund paid distributions totaling 6.7 cents
($0.067) per share in income dividends and 40.2 cents ($0.402) in short-term
capital gains. Of course, past performance is not predictive of future results,
and distributions will vary depending on income earned by the fund and any
profits realized from the sale of securities in the portfolio.
The fund posted a cumulative total return of +4.69% for the six-month period
ended April 30, 1997. Cumulative total return measures the change in value of an
investment, assuming reinvestment of dividends and capital gains, and does not
include the sales charge. Past performance is not predictive of future results.
Franklin MicroCap Value Fund
Periods ended April 30, 1997
Since
Inception
1-Year (12/12/95)
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Cumulative Total Return1 9.56% 29.52%
Average Annual Total Return2 4.65% 16.61%
Value of a $10,000 Investment3 $10,956 $12,952
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.50% initial
sales charge.
3. The value of a $10,000 investment is based on a hypothetical $10,000
investment in the fund over the specified periods and includes the initial sales
charge.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
FRANKLIN VALUE FUND
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Your Fund's Objective: Seeks long-term total return by investing in the
securities of companies that we believe are undervalued. The fund will seek
income when deemed consistent with its objective.
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Although this report covers the six months ended April 30, 1997, it also marks
the end of the first full year of operation for the Franklin Value Fund. As
shown in the Performance Summary on page 14, the fund's Class I shares
registered a total return of +12.74% for the six months and +21.51% for the year
ended April 30, 1997. By comparison, the unmanaged Russell 1000 Value Index --
the fund's benchmark -- returned 13.16% and 22.56% for the same periods.*
We started the Franklin Value Fund in 1996 to take advantage of clear value
opportunities that didn't fit the tangible book value requirements of the
Trust's other two portfolios. This is not to say that we don't follow a value
investing philosophy for the fund -- we do. But definitions of what constitutes
value vary widely. Some investors argue for a low price relative to tangible
book value; others focus on earnings or cash flow ratios. Some seek understated
assets such as land, or intangibles, such as patents or distribution systems.
Another value approach concentrates on "fallen angels" -- former growth
companies that stumbled and suffered sharp price declines, but still have
significant potential.
*The Russell 1000 Value Index is an unmanaged index comprised of the 1,000
largest U.S. companies, ranked by market capitalization.
We seek investments that meet any of those definitions, plus others that seem
sensible. The result is an eclectic collection of value stocks that, in our
opinion, meet one or more of the value definitions. The common denominator in
almost all cases is an enterprise currently out of favor. Profiting from this
approach generally requires a high degree of patience. One can never tell when
or if a buyout will occur, a company's fundamentals will improve, or investors
will once again love a company previously scorned.
During the six-month reporting period, one of our holdings -- USLIFE Corp. --
announced it would be acquired by American General Corp. We sold our position
just prior to the close of the merger for a 65% gain on our cost -- a strong
gain considering we held it for a relatively short period of time. Other
successful sales during the period included Niagara Mohawk Power Corp. (+44%
gain on cost), Watkins-Johnson Co. (+42%), and Dura Automotive Systems, Inc.
(+69%).
Although stock market valuations are considered high by most historical
standards and increased volatility is likely, we are confident that our value
approach has the potential to serve our shareholders well. In fact, increased
volatility in the market is often welcomed by patient value investors for the
attractive buying opportunities it can provide.
This discussion reflects the strategies we employed for the fund and includes
our opinions as of the close of the reporting period. Since economic and market
conditions are constantly changing, our strategies, evaluations, conclusions and
decisions regarding portfolio holdings may change as new circumstances arise.
Although past performance of a specific investment or sector cannot guarantee
future performance, such information can help illustrate how we analyze the
securities we purchase for the fund.
Franklin Value Fund
Top 10 Holdings on April 30, 1997
Based on Total Net Assets
Company % of Total
INDUSTRY Net Assets
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Guaranty National Corp. 3.15%
INSURANCE -- PROPERTY/CASUALTY
Morgan Products Ltd. 2.67%
BUILDERS & BUILDING PRODUCTS
Fritz Companies, Inc. 2.37%
TRANSPORTATION
Commonwealth
Industries, Inc 2.35%
STEEL & BASE METALS
Durco International, Inc. 2.33%
MANUFACTURING
United Industrial Corp. 2.29%
MANUFACTURING
D.R. Horton, Inc. 2.20%
BUILDERS & BUILDING PRODUCTS
Ennis Business Forms 2.18%
BUSINESS PRODUCTS & SERVICES
Schweitzer-Manduit
International, Inc. 2.16%
MANUFACTURING
JLG Industries, Inc. 2.03%
MANUFACTURING
For a complete list of portfolio holdings, please see page 30 of this report.
PERFORMANCE SUMMARY -- CLASS I
The Franklin Value Fund's Class I share price, as measured by net asset value,
increased $1.74, from $17.15 on October 31, 1996, to $18.89 on April 30, 1997.
For the six-month period, your fund paid distributions totaling 5.75 cents
($0.0575) per share in income dividends and 36.92 cents ($0.3692) in short-term
capital gains. Of course, past performance is not predictive of future results,
and distributions will vary depending on income earned by the fund and any
profits realized from the sale of securities in the portfolio.
The fund posted a cumulative total return of +12.74% for the six-month period
ended April 30, 1997. Cumulative total return measures the change in value,
assuming reinvestment of dividends and capital gains, and does not include the
initial sales charge. Past performance is not predictive of future results.
Franklin Value Fund -- Class I
Periods ended April 30, 1997
Since
Inception
1-Year (3/11/96)
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Cumulative Total Return1 21.51% 29.29%
Average Annual Total Return2 16.06% 20.37%
Value of a $10,000 Investment3 $11,606 $12,345
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.50% initial
sales charge.
3. The value of a $10,000 investment is based on a hypothetical $10,000
investment in the fund over the specified periods and includes the initial sales
charge. All total return calculations assume reinvestment of dividends and
capital gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results. Past expense
reductions by the fund's manager increased the fund's total returns.
PERFORMANCE SUMMARY -- CLASS II
The Franklin Value Fund's Class II share price, as measured by net asset value,
increased $1.72, from $17.14 on October 31, 1996, to $18.86 on April 30, 1997.
For the six-month period, your fund paid 36.92 cents ($0.3692) in short-term
capital gains distributions. No dividend income distributions were made during
the reporting period. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of securities in the portfolio.
The fund posted a cumulative total return of +12.28% for the six-month period
ended April 30, 1997. Cumulative total return measures the change in value,
assuming reinvestment of dividends and capital gains, and does not include sales
charges. Past performance is not predictive of future results.
Franklin Value Fund -- Class II
Periods ended April 30, 1997
Since
Inception
(9/3/96)
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Cumulative Total Return1 17.98%
Aggregate Total Return2 15.84%
1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include sales charges.
2. Aggregate total return represents the change in value of an investment since
inception and includes the maximum 1.0% initial sales charge and the 1.0%
Contingent Deferred Sales Charge (CDSC), applicable to shares redeemed within
the first 18 months of investment. Since Class II shares have existed for less
than one year, average annual total returns are not provided.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Investment return and principal value will fluctuate with market
conditions and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
PERFORMANCE SUMMARY --
ADVISOR CLASS
The Franklin Value Fund's Advisor Class share price, as measured by net asset
value, increased 14 cents, from $18.75 at inception on January 2, 1997, to
$18.89 on April 30, 1997.
For the abbreviated four-month period, your fund paid distributions totaling
4.47 cents ($0.0447) per share in income dividends. Of course, past performance
is not predictive of future results, and distributions will vary depending on
income earned by the fund and any profits realized from the sale of securities
in the portfolio.
Franklin Value Fund -- Advisor Class
Period ended April 30, 1997
Since
Inception
(1/2/97)
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Aggregate Total Return 0.97%
Aggregate total return measures the change in value of an investment over the
period indicated.
Total return calculations assume reinvestment of dividends at net asset value.
Investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
<TABLE>
<CAPTION>
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments in Securities and Net Assets, April 30, 1997
(unaudited)
VALUE
SHARES Franklin Balance Sheet Investment Fund (NOTE1)
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<S> <C> <C>
Common Stocks 82.5%
Closed-End Funds 6.2%
200,000 Central European Equity Fund $ 4,475,000
160,000 Convertible Holdings, Inc. 2,400,000
200,000 Emerging Markets Infrastructure Fund, Inc. 2,400,000
300,000 aGlobal Health Sciences Fund 4,500,000
225,000 Growth Fund of Spain, Inc. 2,925,000
150,000 H & Q Healthcare Investors 2,156,250
135,000 Irish Investment Fund, Inc. 2,008,125
300,000 John Hancock Bank and Thrift Opportunity Fund 9,450,000
103,900 Latin America Investment Fund, Inc. 1,831,238
225,000 Liberty All Star Growth Fund 2,221,875
200,000 Mexico Fund 3,175,000
123,800 Morgan Grenfell Smallcap Fund, Inc. 1,160,625
60,000 Petroleum & Resources Corp. 2,025,000
52,500 Royce Value Trust 623,438
250,000 Scudder New Europe Fund, Inc. 3,750,000
44,800 Southeastern Thrift & Bank Fund, Inc. 719,600
90,000 The Inefficient Market Fund, Inc. 1,012,500
100,000 The Swiss Helvetia Fund 2,175,000
4,000 Worldwide Value Fund, Inc. 93,500
----------
49,102,151
----------
Banks & Thrifts 4.2%
30,000 Ameriana Bancorp, Inc. 472,500
555,150 aBank Plus Corp. 5,482,106
63,000 California State Bank 1,374,188
70,000 aCalumet Bancorp, Inc. 2,467,500
10,000 aDime Community Bancorp, Inc. 176,875
2,400 Farmers & Merchants Bank of Long Beach 5,016,000
144,500 dFidelity Bancorp, Inc. 2,709,375
93,000 Fidelity Financial of Ohio, Inc. 1,232,250
300,000 First Defiance Financial Corp. 3,825,000
24,000 a,dFirst Financial Bancorp, Inc. 384,000
87 First National Bank of Anchorage 155,730
30,275 First Shenango Bancorp, Inc. 737,953
232,000 GA Financial, Inc. 3,654,000
10,000 aProvident Financial Holdings, Inc. 152,500
88,000 aQuaker City Bancorp, Inc. 1,584,000
5,400 aScottdale Savings & Trust/PA 1,566,000
45,000 Standard Financial, Inc. 1,029,375
69,000 Westco Bancorp, Inc. 1,561,125
----------
33,580,477
----------
Environmental Control 0.3%
260,000 dEcology and Environment, Inc., Class A 2,015,000
23,000 aEmcon, Inc. 71,875
----------
2,086,875
----------
Food 2.1%
117,900 Genesee Corp., Class B $ 4,745,475
606,900 dNash Finch Co. 10,696,613
110,400 Orange-co., Inc. 841,800
----------
16,283,888
----------
Furniture & Homebuilders 6.6%
18,300 Allen Organ Co., Class B 727,425
164,000 aAmeriwood Industries International Corp. 1,260,750
110,800 aBaldwin Piano & Organ Co. 1,481,950
275,800 aBeazer Homes USA, Inc. 3,826,725
840,000 aCastle & Cooke, Inc. 11,550,000
5,500 aM/I Schottenstein Homes, Inc. 57,063
192,000 dPulaski Furniture Corp. 3,072,000
23,000 aRiver Oaks Furniture, Inc. 46,000
774,700 Ryland Group, Inc. 9,005,888
93,000 aSchuler Homes, Inc. 523,125
388,900 Standard-Pacific Corp. 3,111,200
700,800 a,dU.S. Home Corp. 17,257,200
----------
51,919,326
----------
Hospitals 1.5%
1,184,200 aTransitional Hospitals Corp. 11,842,000
----------
Insurance - Life & Specialty 12.6%
329,900 American National Insurance Co. 25,567,250
89,400 AmerUs Life Holdings, Inc., Class A 2,056,200
442,000 FBL Financial Group, Inc., Class A 11,105,250
100,000 Guarantee Life Companies, Inc. 1,887,500
800 Kansas City Life Insurance Co. 55,300
74,700 aNational Western Life Insurance Co., Class A 6,293,475
955,000 Presidential Life Corp. 13,728,125
273,300 aTrigon Healthcare, Inc. 5,192,700
539,600 USLIFE Corp. 26,170,600
255,800 Washington National Corp. 7,290,300
----------
99,346,700
----------
Insurance - Property & Casualty 11.7%
295,000 a,dACMAT Corp., Class A 4,609,375
90,000 American Indemnity Financial Corp. 1,080,000
74,700 Amwest Insurance Group, Inc. 933,750
161,000 Argonaut Group, Inc. 4,628,750
91,477 Baldwin & Lyons, Class B 1,623,717
225,000 Chartwell Re Corp. 5,737,500
137,000 aFarm Family Holdings, Inc. 3,270,875
115,010 Financial Security Assurance Holdings Ltd. 3,723,449
128,800 Lawyers Title Corp. 2,318,400
257,100 dMerchants Group, Inc. 4,820,625
272,000 Meridian Insurance Group, Inc. 3,672,000
Insurance - Property & Casualty (cont.)
90,650 aProfessionals Insurance Company Management Group $ 2,039,625
425,700 PXRE Corp. 10,802,138
400,000 aRisk Capital Holdings, Inc. 7,600,000
350,000 bScor (France) 13,669,065
412,200 SCPIE Holdings, Inc. 8,192,475
855,400 Sphere Drake Holdings, Ltd. 7,805,525
300,000 Stewart Information Services Corp. 5,737,500
----------
92,264,769
----------
Manufacturing 7.9%
131,100 aACX Technologies, Inc. 2,507,288
421,100 a,dAmerican Pacific Corp. 2,842,425
149,300 Binks Manufacturing Co. 6,065,313
675,500 Commonwealth Industries, Inc. 11,652,375
60,000 Dynamics Corporation of America 2,647,500
15,000 Espey Manufacturing & Electronics Corp. 261,563
424,100 dGreen (A.P.) Industries, Inc. 3,392,800
445,000 dInsteel Industries, Inc. 3,393,125
912,100 LTV Corp. 11,971,313
429,000 aMatrix Service Co. 3,271,125
44,800 Mine Safety Appliances Co. 2,531,200
250,000 dMonarch Machine Tool Co. 1,937,500
92,000 aOroamerica, Inc. 460,000
483,000 dOshkosh Truck Corp., Class B 5,131,875
175,500 dPitt-Des Moines, Inc. 4,650,750
5,000 Treadco, Inc. 42,500
----------
62,758,652
----------
Miscellaneous 3.2%
2,220,000 aAztar Corp. 14,430,000
59,700 aCraig Corp. 985,050
200,000 Lehman Brothers Holdings, Inc. 6,775,000
38,300 Noland Co. 794,725
199,800 aVICORP Restaurants, Inc. 2,297,700
----------
25,282,475
----------
Natural Resources 4.0%
500,000 a,dCrown Central Petroleum, Class B 5,875,000
211,200 aDevcon International Corp. 1,056,000
104,500 dEnex Resources Corp. 992,750
153 Kentucky River Coal Corp. 437,198
118,900 Rochester & Pittsburgh Coal Co. 5,409,950
1,800,000 Total Petroleum (North America), Ltd. 18,000,000
----------
31,770,898
----------
Real Estate 2.2%
45,900 aEchelon International Corporation, Inc. $ 866,363
400,000 Price Enterprises, Inc. 7,150,000
336,000 The Rouse Co. 9,114,000
----------
17,130,363
----------
Retail 8.5%
467,700 a,dButtrey Food and Drug Stores Co. 3,683,138
860,000 Cato Corp., Class A 3,977,500
51,000 DEB Shops, Inc. 226,313
199,500 aDesigns, Inc. 972,563
201,100 aEvans, Inc. 175,963
711,000 dFred's, Inc. 6,932,250
737,500 a,dGood Guys!, Inc. 4,425,000
397,700 Haverty Furniture Co., Inc. 4,374,700
1,500,000 aHechinger Co., Class A 2,437,500
257,900 aHi-Lo Automotive, Inc. 773,700
297,200 a,dJacobson Stores, Inc. 2,414,750
590,000 aKmart Corp. 8,038,750
463,500 aLechters, Inc. 1,506,375
192,000 aLittle Switzerland, Inc. 948,000
401,200 a,dLuria (L.) & Son, Inc. 601,800
450,000 Shopko Stores, Inc. 9,000,000
330,500 Strawbridge & Clothier, Class A 5,618,500
608,800 aSyms Corp. 6,088,000
396,500 dWolohan Lumber Co. 4,931,469
----------
67,126,271
----------
Technology 2.9%
270,000 a,dAydin Corp. 2,902,500
129,600 aCentigram Communications Corp. 1,279,800
355,500 aCherry Corp., Class A 3,732,750
236,900 aCherry Corp., Class B 2,605,900
832,600 a,dESCO Electronics Corp. 8,221,925
17,300 aGovernment Technology Services, Inc. 82,175
46,410 aSilicon Graphics, Inc. 690,349
100,000 aStandard Microsystems Corp. 856,250
87,500 aVideo Lottery Technologies, Inc. 360,938
77,000 Watkins-Johnson Co. 2,117,500
----------
22,850,087
----------
Textile & Apparel 4.3%
8,200 aBrazos Sportswear, Inc. 78,925
756,000 a,dChic By H.I.S., Inc. 4,914,000
1,400,000 a,dDelta Woodside Industries, Inc. 8,050,000
600,000 a,dDixie Yarns, Inc. 3,975,000
285,100 dGaran, Inc. 5,345,625
Textile & Apparel (cont.)
850,000 dHaggar Corp. $ 10,837,500
88,900 Thomaston Mills, Inc., Class A 966,788
----------
34,167,838
----------
Transportation 3.0%
158,400 aAnuhco, Inc. 1,237,500
392,100 dInternational Shipholding Corp. 6,665,700
684,900 Overseas Shipholding Group, Inc. 12,156,975
150,000 Petroleum Helicopters, Inc. - Non Voting 2,550,000
53,100 Petroleum Helicopters, Inc. - Voting 975,702
----------
23,585,877
----------
Utilities 1.3%
900,000 Central Maine Power Co. 10,012,500
----------
Total Common Stocks (Cost $588,586,375) 651,111,147
----------
FACE
AMOUNT
- --------
Corporate Bonds 0.6%
$7,000,000 Hechinger Co., senior notes, 6.95%,
10/15/03 (Cost $4,193,339) 4,410,000
----------
Total Long Term Investments (Cost $592,779,714) 655,521,147
----------
cReceivables from Repurchase Agreements 17.7%
141,215,944 Joint Repurchase Agreement, 5.335%, 05/01/97
(Maturity Value $139,623,631) (Cost $139,602,941)
Aubrey G. Lanston & Co., Inc., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 03/31/98 - 10/31/99
Barclays de Zoete Wedd Securities, Inc., (Maturity Value $13,547,215)
Collateral: U.S. Treasury Notes, 6.25% - 6.375%, 07/31/98 - 04/30/99
Bear, Stearns & Co., Inc., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 5.75% - 6.375%, 09/30/97 - 05/15/99
Chase Securities, Inc., (Maturity Value $7,879,776)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01
Citicorp Securities, Inc., (Maturity Value $7,879,776)
Collateral: U.S. Treasury Notes, 5.25% - 8.50%, 12/31/97 - 01/31/02
Daiwa Securities America, Inc., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 5.25% - 7.875%, 10/31/97 - 12/31/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 4.75% - 7.75%, 08/31/98 - 05/31/01
Fuji Securities, Inc., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 5.875%, 02/15/00
Sanwa Securities (USA) Co., L.P., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 5.375% - 9.125%, 05/31/98 - 12/31/01
UBS Securities L.L.C., (Maturity Value $15,759,552)
Collateral: U.S. Treasury Notes, 6.00% - 8.25%,
07/15/98 - 08/15/99 139,602,941
----------
Total Investments (Cost $732,382,655) 100.8% 795,124,088
Liabilities in Excess of Other Assets (0.8%) (6,187,997)
----------
Net Assets 100% $788,936,091
==========
At April 30, 1997, the net unrealized appreciation based on the cost
of investments for income tax purposes of $732,384,217 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost $ 95,416,422
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value (32,676,551)
Net unrealized appreciation $ 62,739,871
==========
PORTFOLIO ABBREVIATIONS
L.L.C. - Limited Liability Corp.
L.P. - Limited Partnership
aNon-income producing.
bSecurities traded in currency of country indicated and valued in U.S. dollars.
cFace amount for repurchase agreements is for the underlying collateral. See note
1(h) regarding joint repurchase agreement.
dSee note 6 regarding holdings of 5% voting securities.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments in Securities and Net Assets, April 30, 1997 (unaudited)
VALUE
SHARES Franklin MicroCap Value Fund (NOTE1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 96.5%
Banks & Thrifts 12.4%
49,000 American National Bancorp, Inc. $ 704,375
20,300 aCalumet Bancorp, Inc. 715,575
35,000 FFD Financial Corp. 472,500
116,000 Fidelity Financial of Ohio, Inc. 1,537,000
2,500 aFirst Financial Bancorp, Inc. 40,000
64,100 First Savings Bank of New Jersey 1,522,375
300 FirstFed Bancshares, Inc. 5,175
167,000 GA Financial, Inc. 2,630,250
100,000 aHF Bancorp, Inc. 1,412,500
9,000 HF Financial Corp. 175,500
10,100 aHallmark Capital Corp. 180,538
51,700 Landmark Bancshares, Inc. 1,014,613
70,000 Little Falls Bancorp, Inc. 918,750
600 MidCity Financial Corp. 1,839,000
70,000 aQuaker City Bancorp, Inc. 1,260,000
56,250 Somerset Group, Inc. 843,750
26,000 Troy Hill Bancorp, Inc. 549,900
65,000 aWilshire Financial Services Group, Inc. 877,500
----------
16,699,301
----------
Environmental Control 4.6%
110,000 dEcology and Environment, Inc., Class A 852,500
546,000 a,dEmcon, Inc. 1,706,250
147,000 aGZA GeoEnvironmental Technologies, Inc. 431,813
218,700 aHarding Lawson Associates Group 1,483,070
500,000 a,dRoy F. Weston, Inc., Class A 1,625,000
----------
6,098,633
----------
Food 1.3%
600 Genesee Corp., Class A 24,150
36,000 Genesee Corp., Class B 1,449,000
36,000 Orange-co, Inc. 274,500
----------
1,747,650
----------
Furniture & Homebuilders 7.5%
18,800 Allen Organ Co., Class B 747,300
36,000 aAmeriwood Industries International Corp. 276,750
46,000 aBaldwin Piano & Organ Co. 615,250
82,400 aBeazer Homes USA, Inc. 1,143,300
38,800 Engle Homes, Inc. 367,995
161,500 aM/I Schottenstein Homes, Inc. 1,675,563
360,000 a,dOriole Homes Corp., Class B 2,790,000
80,000 Pulaski Furniture Corp. 1,280,000
394,600 a,dRiver Oaks Furniture, Inc. 789,200
92,500 aWashington Homes, Inc. 370,000
----------
10,055,358
----------
Insurance - Life & Specialty 0.1%
5,800 Guarantee Life Companies, Inc. $ 109,475
----------
Insurance - Property & Casualty 10.5%
150,000 aACMAT Corp., Class A 2,343,750
39,000 American Indemnity Financial Corp. 468,000
159,000 Amwest Insurance Group, Inc. 1,987,500
170,000 aFarm Family Holdings, Inc. 4,058,750
500 Merchants Group, Inc. 9,375
128,000 Meridian Insurance Group, Inc. 1,728,000
4,500 National Security Group, Inc. 63,000
50,000 aOld Guard Group, Inc. 693,750
92,450 aProfessionals Insurance Company Management Group 2,080,125
40,000 aSymons International Group, Inc. 590,000
----------
14,022,250
----------
Manufacturing 17.0%
356,300 aAmerican Pacific Corp. 2,405,025
82,500 a,dArt's-Way Manufacturing Co., Inc. 510,469
22,000 aAstec Industries, Inc. 231,000
106,000 aAthey Products Corp. 450,500
76,000 Binks Manufacturing Co. 3,087,500
50,000 aContinental Materials Corp. 1,050,000
81,300 dEspey Manufacturing & Electronics Corp. 1,417,669
138,000 aGehl Co. 1,397,250
163,600 Green (A.P.) Industries, Inc. 1,308,800
195,000 Insteel Industries, Inc. 1,486,875
180,000 aKentucky Electric Steel, Inc. 855,000
101,000 Monarch Machine Tool Co. 782,750
134,700 a,dMoore Products Co. 2,795,025
51,300 aOroamerica, Inc. 256,500
45,000 Pitt-Des Moines, Inc. 1,192,500
23,500 aSteel of West Virginia, Inc. 211,500
77,500 TAB Products Co. 736,250
265,500 a,dTemtex Industries, Inc. 813,094
222,200 Treadco, Inc. 1,888,700
----------
22,876,407
----------
Miscellaneous 2.9%
208,000 a,dAllstate Financial Corp. 1,248,000
238,300 a,dAmerican Physicians Service Group, Inc. 1,340,438
16,000 Courier Corp. 288,000
50,500 aCraig Corp. 833,250
14,100 aVICORP Restaurants, Inc. 162,150
----------
3,871,838
----------
Natural Resources 1.2%
230,000 a,dDevcon International Corp. $ 1,150,000
23,600 Enex Resources Corp. 224,200
4,900 Rochester & Pittsburgh Coal Co. 222,950
----------
1,597,150
----------
Retail 18.3%
250,000 aBertucci's, Inc. 1,375,000
188,300 aButtrey Food and Drug Stores Co. 1,482,863
150,000 Cato Corp., Class A 693,750
48,116 aCosmetic Center, Inc., Class A 150,363
95,500 aCrown Books Corp. 1,157,938
150,000 DEB Shops, Inc. 665,625
55,500 aDesigns, Inc. 270,563
108,000 Fred's, Inc. 1,053,000
320,000 aGantos, Inc. 650,016
294,300 aGood Guys!, Inc. 1,765,800
700,000 aHechinger Co., Class A 1,137,500
809,800 a,dHi-Lo Automotive, Inc. 2,429,400
17,000 aHomeland Holding Corp. 114,750
86,900 aJacobson Stores, Inc. 706,063
640,000 aLechters, Inc. 2,080,000
320,000 aLittle Switzerland, Inc. 1,580,000
37,900 aLuria (L.) & Son, Inc. 56,850
165,200 aS & K Famous Brands, Inc. 1,672,650
50,000 aSeaman Furniture Co. 956,250
153,000 aShoe Carnival, Inc. 956,250
171,100 aSpaghetti Warehouse, Inc. 834,113
98,800 aSyms Corp. 988,000
20,500 aVillage Super Market, Inc., Class A 181,938
128,000 Wolohan Lumber Co. 1,591,997
5,000 Zions Co-Op Mercantile Inst. 63,438
----------
24,614,117
----------
Technology 7.9%
133,000 aAerovox, Inc. 581,875
30,600 Analysis & Technology, Inc. 432,225
210,000 aAydin Corp. 2,257,500
4,400 aBel Fuse, Inc. 49,500
15,400 aCentigram Communications Corp. 152,075
100,000 aDBA Systems, Inc. 500,000
32,500 aDatron Systems, Inc. 300,625
300,000 aGovernment Technology Services, Inc. 1,425,000
137,700 aSPACEHAB, Inc. 886,444
326,000 a,dUniversal Electronics, Inc. 1,793,000
537,000 a,dVideo Lottery Technologies, Inc. 2,215,125
----------
10,593,369
----------
Textiles & Apparel 6.3%
72,000 a,eBibb Co. $ 544,500
6,900 aBrazos Sportswear, Inc. 66,413
194,100 aChic By H.I.S., Inc. 1,261,650
146,500 a,dConcord Fabrics, Inc., Class A 915,625
250,000 aDixie Yarns, Inc. 1,656,250
120,500 Garan, Inc. 2,259,375
95,600 aHampton Industries, Inc. 681,150
103,800 Thomaston Mills, Inc., Class A 1,128,825
----------
8,513,788
----------
Transportation 3.9%
300,600 aAnuhco, Inc. 2,348,438
10,000 aBoyd Brothers Transportation, Inc. 55,000
1,640 aCrowley Maritime Corp. 1,430,900
64,500 Petroleum Helicopters, Inc. - Non Voting 1,096,500
16,000 Petroleum Helicopters, Inc. - Voting 294,000
----------
5,224,838
----------
Utilities 0.4%
4,600 Citizens Electric Co. 136,850
30,400 Maine Public Service Co. 357,200
----------
494,050
----------
Wholesale/Distribution 2.2%
366,500 a,dAllou Health and Beauty, Inc., Class A 2,153,188
39,000 Noland Co. 809,250
----------
2,962,438
----------
Total Long Term Investments (Cost $122,899,618) 129,480,662
----------
FACE
AMOUNT
- --------
cReceivables from Repurchase Agreements 3.8%
$5,158,519 Joint Repurchase Agreement, 5.335%, 05/01/97
(Maturity Value $5,100,153) (Cost $5,099,397)
Aubrey G. Lanston & Co., Inc., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 03/31/98 - 10/31/99
Barclays de Zoete Wedd Securities, Inc., (Maturity Value $494,850)
Collateral: U.S. Treasury Notes, 6.25% - 6.375%, 07/31/98 - 04/30/99
Bear, Stearns & Co., Inc., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 5.75% - 6.375%, 09/30/97 - 05/15/99
Chase Securities, Inc., (Maturity Value $287,831)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01
Citicorp Securities, Inc., (Maturity Value $287,831)
Collateral: U.S. Treasury Notes, 5.25% - 8.50%, 12/31/97 - 01/31/02
Daiwa Securities America, Inc., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 5.25% - 7.875%, 10/31/97 - 12/31/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 4.75% - 7.75%, 08/31/98 - 05/31/01
Fuji Securities, Inc., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 5.875%, 02/15/00
Sanwa Securities (USA) Co., L.P., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 5.375% - 9.125%, 05/31/98 - 12/31/01
UBS Securities L.L.C., (Maturity Value $575,663)
Collateral: U.S. Treasury Notes, 6.00% - 8.25%,
07/15/98 - 08/15/99 $ 5,099,397
----------
Total Investments (Cost $127,999,015) 100.3% 134,580,059
Liabilities in Excess of Other Assets (0.3%) (403,141)
----------
Net Assets 100% $134,176,918
==========
At April 30, 1997, the net unrealized appreciation based on the
cost of investments for income tax purposes of $128,026,380
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 13,717,503
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (7,163,824)
----------
Net unrealized appreciation $ 6,553,679
==========
PORTFOLIO ABBREVIATIONS
L.L.C. - Limited Liability Corp.
L.P. - Limited Partnership
aNon-income producing. cFace amount for repurchase agreements is for the
underlying collateral. See Note 1(h) regarding joint repurchase agreement.
dSee Note 6 regarding holdings of 5% voting securities.
eSee Note 7 regarding restricted securities.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments in Securities and Net Assets, April 30, 1997 (unaudited)
VALUE
SHARES Franklin Value Fund (NOTE1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 95.9%
Banks & Thrifts 4.9%
16,750 BankAtlantic Bancorp, Inc. , Class A $ 199,944
7,000 BankAtlantic Bancorp, Inc. , Class B 85,750
13,100 Bank Plus Corp. 129,363
2,000 Fidelity Financial of Ohio, Inc. 26,500
30,000 aFlagstar Bancorp, Inc. 393,750
5,000 GA Financial, Inc. 78,750
16,000 aMatrix Capital Corp. 182,000
4,500 aRedFed Bancorp, Inc. 59,063
----------
1,155,120
----------
Builders & Building Products 11.4%
5,300 aAmerican Buildings Co. 137,800
23,000 aBeazer Homes USA, Inc. 319,125
10,100 aBelmont Homes, Inc. 75,750
3,900 Butler Manufacturing Co. 129,675
21,000 Coachmen Industries, Inc. 359,625
53,000 D.R. Horton, Inc. 516,750
82,000 aMorgan Products, Ltd. 625,250
2,600 Patrick Industries, Inc. 34,450
27,000 Ryland Group, Inc. 313,875
7,000 aU.S. Home Corp. 172,375
----------
2,684,675
----------
Financial Services 4.8%
9,000 EVEREN Capital Corp. 212,625
17,900 aHomeSide, Inc. 286,400
6,500 Lehman Brothers Holdings, Inc. 220,188
30,000 aWilshire Financial Services Group, Inc. 405,000
----------
1,124,213
----------
Food 2.5%
8,700 Nash Finch Co. 153,338
27,700 Schultz Sav-O Stores, Inc. 443,200
----------
596,538
----------
Health Care 3.1%
60,000 aMatrix Pharmaceutical, Inc. 345,000
13,400 West Company, Inc. 373,525
----------
718,525
----------
Insurance - Life & Specialty 2.6%
15,300 ALLIED Life Financial Corp. 248,625
1,600 American National Insurance Co. 124,000
3,500 FBL Financial Group, Inc., Class A 87,938
10,200 Presidential Life Corp. 146,625
----------
607,188
----------
Insurance - Property & Casualty 11.1%
7,800 aFarm Family Holdings, Inc. $ 186,225
3,900 Financial Security Assurance Holdings Ltd. 126,263
3,100 GCR Holdings, Ltd. 67,038
38,900 Guaranty National Corp. 739,100
800 Harleysville Group, Inc. 25,550
6,000 Leucadia National Corp. 182,250
18,000 MMI Companies, Inc. 393,750
12,700 aProfessional Insurance Company Management Group 285,750
4,500 RLI Corp. 145,688
3,700 bScor (France) 144,502
20,000 aSymons International Group, Inc. 295,000
----------
2,591,116
----------
Manufacturing 20.4%
20,400 aAmerican Pacific Corp. 137,700
3,100 Ameron International Corp. 151,513
12,000 aAstec Industries, Inc. 126,000
14,500 Astro-Med, Inc. 126,875
10,000 Binks Manufacturing Co. 406,250
2,000 Carpenter Technology Corp. 81,250
19,000 Commercial Intertech Corp. 225,625
4,200 aDONCASTERS 94,500
22,000 Durco International, Inc. PLC, Sponsored ADR 547,250
81,100 aEkco Group, Inc. 385,225
8,800 Flexsteel Industries, Inc. 92,400
15,000 aGehl Co. 151,875
11,200 aGlobal Industrial Technologies, Inc. 204,400
37,700 Haskel International, Inc., Class A 344,013
38,000 JLG Industries, Inc. 475,000
18,300 Oshkosh Truck Corp., Class B 194,438
15,500 Schweitzer-Manduit International, Inc. 505,688
75,500 United Industrial Corp. 537,938
----------
4,787,940
----------
Miscellaneous 7.3%
18,900 aAllou Health and Beauty, Inc., Class A 111,038
10,500 aAmerican Physicians Service Group, Inc. 59,063
60,000 aAztar Corp. 390,000
4,700 aDevon Group, Inc. 132,775
51,000 Ennis Business Forms 510,000
2,000 The Rouse Co. 54,250
21,100 Unicom Corp. 458,925
----------
1,716,051
----------
Natural Resources 4.3%
1,000 aAtwood Oceanics, Inc. 61,250
18,000 Oil-Dri Corporation of America 288,000
2,500 Rochester & Pittsburgh Coal Co. 113,750
Natural Resources (cont.)
50,000 aValley National Gases, Inc. $ 406,250
8,000 Wiser Oil Co. 133,000
----------
1,002,250
----------
Retail 6.3%
2,300 aAPS Holding Corp., Class A 21,850
100,000 Cato Corp., Class A 462,500
17,500 Haverty Furniture Co., Inc. 192,500
100,000 aHechinger Co., Class A 162,500
31,000 aLittle Switzerland, Inc. 153,063
12,000 aS & K Famous Brands, Inc. 121,500
4,700 Stanhome, Inc. 142,175
22,500 aSyms Corp. 225,000
----------
1,481,088
----------
Steels & Base Metals 5.2%
32,000 Commonwealth Industries ,Inc. 552,000
36,500 aKeystone Consolidated Industries, Inc. 328,500
25,000 LTV Corp. 328,125
----------
1,208,625
----------
Technology 7.6%
8,200 Analysis & Technology, Inc. 115,825
15,600 aAydin Corp. 167,700
7,000 aCognex Corp. 172,375
43,000 aESCO Electronics Corp. 424,625
16,000 aSilicon Graphics, Inc. 238,000
51,900 aSPACEHAB, Inc. 334,106
21,000 aSpectralink Corp. 73,500
8,000 aSynopsys, Inc. 255,000
----------
1,781,131
----------
Textile & Apparel 0.6%
20,000 aChic By H.I.S., Inc. 130,000
----------
Transportation 3.8%
64,800 aFritz Companies, Inc. 554,850
17,050 Kenan Transport Co. 336,738
----------
891,588
----------
Total Common Stocks (Cost $21,891,325) 22,476,048
----------
FACE
AMOUNT
- --------
Corporate Bonds 1.3%
$500,000 Hechinger Co., senior notes, 6.95%, 10/15/03
(Cost $294,198) 315,000
----------
Total Long Term Investments (Cost $22,185,523) 22,791,048
----------
cReceivables from Repurchase Agreements 2.7%
$654,222 Joint Repurchase Agreement, 5.335%, 05/01/97
(Maturity Value $646,584) (Cost $646,488)
Aubrey G. Lanston & Co., Inc., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 03/31/98 - 10/31/99
Barclays de Zoete Wedd Securities, Inc., (Maturity Value $62,737)
Collateral: U.S. Treasury Notes, 6.25% - 6.375%, 07/31/98 - 04/30/99
Bear, Stearns & Co., Inc., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 5.75% - 6.375%, 09/30/97 - 05/15/99
Chase Securities, Inc., (Maturity Value $36,490)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01
Citicorp Securities, Inc., (Maturity Value $36,490)
Collateral: U.S. Treasury Notes, 5.25% - 8.50%, 12/31/97 - 01/31/02
Daiwa Securities America, Inc., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 5.25% - 7.875%, 10/31/97 - 12/31/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 4.75% - 7.75%, 08/31/98 - 05/31/01
Fuji Securities, Inc., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 5.875%, 02/15/00
Sanwa Securities (USA) Co., L.P., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 5.375% - 9.125%, 05/31/98 - 12/31/01
UBS Securities L.L.C., (Maturity Value $72,981)
Collateral: U.S. Treasury Notes, 6.00% - 8.25%,
07/15/98 - 08/15/99 $ 646,488
----------
Total Investments (Cost $22,832,011) 99.9% 23,437,536
Other Assets & Liabilities, Net 0.1% 6,057
----------
Net Assets 100.0% $ 23,443,593
==========
At April 30, 1997, the net unrealized appreciation based on the cost of
investments for income tax purposes of $22,832,011 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost $ 1,735,012
----------
Aggregate gross unrealized depreciation
for all investments in which
there was an excess of tax cost over value (1,129,487)
----------
Net unrealized appreciation $ 605,525
==========
PORTFOLIO ABBREVIATIONS
L.L.C. - Limited Liability Corp.
L.P. -Limited Partnership
aNon-income producing.
bSecurities traded in currency of country indicated and valued in U.S. dollars.
cFace amount for repurchase agreements is for the underlying collateral. See
Note 1(h) regarding joint repurchase agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN VALUE INVESTORS TRUST
Financial Statements
Statements of Assets and Liabilities
April 30, 1997 (unaudited)
Balance Sheet MicroCap
Investment Fund Value Fund Value Fund
-----------------------------------------
Assets:
Investments in securities:
<S> <C> <C> <C>
At cost - unaffiliated issuers $440,029,702 $ 93,162,944 $22,185,523
At cost - affiliated issuers 152,750,012 29,736,674 --
=======================================
At value - unaffiliated issuers 507,840,077 102,936,679 22,791,048
At value - affiliated issuers 147,681,070 26,543,983 --
Receivables from repurchase agreements,
at value and cost 139,602,941 5,099,397 646,488
Cash 357,338 34,463 38,688
Receivables:
Dividends and interest 347,255 15,195 23,792
Investment securities sold 956,722 261,108 386,962
From affiliates -- -- 15,649
Capital shares sold 1,296,988 304,688 76,903
Other assets -- -- 2,300
---------------------------------------
Total assets 798,082,391 135,195,513 23,981,830
---------------------------------------
Liabilities:
Payables: Investment securities purchased 7,386,699 368,203 489,280
Capital shares repurchased 143,657 476,646 4,452
Management fees 313,182 83,455 12,462
Distribution fees 863,634 80,245 20,464
Shareholder servicing costs 29,134 1,868 1,115
Accrued expenses and other liabilities 409,994 8,178 10,464
---------------------------------------
Total liabilities 9,146,300 1,018,595 538,237
---------------------------------------
Net assets, at value $788,936,091 $134,176,918 $23,443,593
=======================================
Net assets consist of:
Undistributed net investment income $ 1,004,158 $-- $--
Accumulated distributions in excess
of net investment income -- (100,198) (2,737)
Net unrealized appreciation on investments 62,741,433 6,581,044 605,525
Accumulated net realized gain from
investments 37,028,642 3,101,106 518,133
Class I capital shares 688,161,858 124,594,966 18,907,128
Class II capital shares -- -- 2,702,150
Advisor Class capital shares -- -- 713,394
---------------------------------------
Net assets, at value $788,936,091 $134,176,918 $23,443,593
=======================================
Balance Sheet MicroCap
Investment Fund Value Fund Value Fund
-----------------------------------------
Class I shares:
Net assets, at value $788,936,091 $134,176,918 $20,040,790
=======================================
Shares outstanding 26,991,233 7,131,380 1,060,901
=======================================
Net asset value per share* $29.23 $18.82 $18.89
=======================================
Class II shares:
Net assets, at value -- -- $2,708,697
=======================================
Shares outstanding -- -- 143,612
=======================================
Net asset value per share* -- -- $18.86
=======================================
Advisor Class shares:
Net assets, at value -- -- $ 694,106
=======================================
Shares outstanding -- -- 36,739
=======================================
Net asset value per share -- -- $18.89
=======================================
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN VALUE INVESTORS TRUST
Financial Statements (continued)
Statements of Operations
for the six months ended April 30, 1997 (unaudited)
Balance Sheet MicroCap
Investment Fund Value Fund Value Fund
---------------------------------------
Investment income:
<S> <C> <C> <C>
Dividends - unaffiliated issuers $ 4,411,312 $ 497,262 $112,056
Dividends - affiliated issuers 1,041,758 17,600 --
Interest 3,591,135 384,236 31,693
--------------------------------------
Total income 9,044,205 899,098 143,749
--------------------------------------
Expenses:
Management fees (Note 5) 1,788,020 488,158 58,573
Distribution fees Class I (Note 5) 1,620,845 141,885 20,489
Distribution fees Class II (Note 5) -- -- 6,744
Shareholder servicing costs (Note 5) 260,646 74,586 7,198
Reports to shareholders 108,288 16,378 9,189
Registration and filing fees 104,139 44,070 16,148
Professional fees 21,163 8,692 1,399
Trustees' fees and expenses (Note 5) 14,940 2,547 1,312
Custodian fees 2,562 495 78
Other 5,443 6,502 5,148
Management fees waived by manager (Note 5) -- -- (20,893)
--------------------------------------
Total expenses 3,926,046 783,313 105,385
--------------------------------------
Net investment income 5,118,159 115,785 38,364
--------------------------------------
Realized and unrealized gain
from investments and foreign currency:
Net realized gain from:
Investments 37,341,811 3,101,271 510,063
Foreign currency transactions 2,092 -- 26
Net unrealized appreciation from investments 20,014,103 2,154,532 292,378
--------------------------------------
Net realized and unrealized gain from
investments and foreign currencies 57,358,006 5,255,803 802,467
--------------------------------------
Net increase in net assets resulting
from operations $62,476,165 $5,371,588 $840,831
======================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN VALUE INVESTORS TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended April 30, 1997 (unaudited)
and the year ended October 31, 1996
Balance Sheet Investment Fund MicroCap Value Fund Value Fund
--------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended* Six months Year ended**
ended 4/30/97 10/31/96 ended 4/30/97 10/31/96 ended 4/30/97 10/31/96
--------------------------------------------------------------------------------------------
Increase in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 5,118,159 $ 9,544,326 $ 115,785 $ 723,299 $ 38,364 $ 14,719
Net realized gain from invest-
ments and foreign currency
transactions 37,343,903 53,678,790 3,101,271 2,640,347 510,089 209,875
Net unrealized appreciation on
investments 20,014,103 19,022,910 2,154,532 4,426,512 292,378 313,147
--------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 62,476,165 82,246,026 5,371,588 7,790,158 840,831 537,741
Distributions to shareholders from:
Undistributed net investment income:
Class I (5,304,762) (8,792,315) (342,437) (496,647) (37,653) (13,553)
Class II -- -- -- -- -- --
Advisor Class -- -- -- -- (1,364) --
In excess of net investment income:
Class I -- -- (100,198) -- (2,478) --
Advisor Class -- -- -- -- (259) --
Accumulated net realized capital
gains:
Class I (53,995,964) (17,015,078) (2,640,512) -- (192,201) --
Class II -- -- -- -- (10,143) --
Increase in net assets from capital
share transactions (Note 2) 128,758,527 213,023,960 12,224,771 112,370,195 14,585,087 7,737,585
--------------------------------------------------------------------------------------------
Net increase in net assets 131,933,966 269,462,593 14,513,212 119,663,706 15,181,820 8,261,773
Net assets:
Beginning of period 657,002,125 387,539,532 119,663,706 -- 8,261,773 --
--------------------------------------------------------------------------------------------
End of period $788,936,091 $657,002,125 $134,176,918 $119,663,706 $23,443,593 $8,261,773
============================================================================================
Undistributed net investment income
(accumulated distributions in excess
of net investment income) included
in net assets:
Beginning of period $ 1,188,669 $ 440,663 $ 226,652 $-- $ 627 $--
============================================================================================
End of period $ 1,004,158 $ 1,188,669 $ (100,198) $ 226,652 $ (2,737) $ 627
============================================================================================
*For the period December 12, 1995 (effective date) to October 31, 1996.
**For the period March 11, 1996 (effective date) to October 31, 1996.
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN VALUE INVESTORS TRUST
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Value Investors Trust (the Trust) is an open-end, non-diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended. The Trust's shares are offered in three
different Series (the Funds) with each Fund, in effect, representing a separate
fund and each of the Funds maintaining a totally separate investment portfolio.
The investment objective of the Funds is capital growth and income.
The Value Fund offers three classes of shares, Class I, Class II and Advisor
Class. Class I shares are sold with a higher front-end sales charge than Class
II shares. Each class of shares may be subject to a contingent deferred sales
charge and has the same rights, except with respect to the effect of the
respective sales charges, the distribution fees borne by each class, voting
rights on matters affecting a single class and the exchange privilege of each
class.
The offering of Advisor Class shares began January 1, 1997.
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 investment 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 ask price 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
d. Investment Income, Expenses and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to 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 expenses 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 Trust does 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, interest, and foreign withholding taxes
recorded on the Trust's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation or depreciation on
translation of assets and liabilities denominated in foreign currencies 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
h. Joint Repurchase Agreements:
The Funds may enter into a joint repurchase agreement whereby their uninvested
cash balance is 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 initial collateralization is required
to be at least 102% of the dollar amount invested by the Funds, with the value
of the underlying securities marked to market daily to maintain coverage of at
least 100%. At April 30, 1997, all outstanding repurchase agreements held by the
Funds had been entered into on that date.
<TABLE>
<CAPTION>
2. TRUST SHARES
At April 30, 1997, there were an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Funds' shares for
the six months ended April 30, 1997 and the year ended October 31, 1996, were as
follows:
Balance Sheet MicroCap
Investment Fund Value Fund* Value Fund**
------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------
Class I Shares:
Six months ended April 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Shares sold 4,933,965 $145,453,505 1,043,899 $ 19,998,993 757,214 $14,600,978
Shares issued in reinvestment
of distributions 1,836,036 51,638,304 148,108 2,750,368 11,851 216,261
Shares redeemed (2,314,242) (68,333,282) (548,927) (10,524,590) (164,571) (3,215,799)
------------------------------------------------------------------------------
Net increase 4,455,759 $128,758,527 643,080 $ 12,224,771 604,494 $11,601,440
==============================================================================
Year ended October 31, 1996
Shares sold 11,153,902 $306,981,566 6,856,466 $118,962,310 498,882 $ 7,986,201
Shares issued in reinvestment
of distributions 814,937 21,999,091 24,443 435,536 737 12,020
Shares redeemed (4,146,493) (115,956,697) (392,609) (7,027,651) (43,212) (692,533)
------------------------------------------------------------------------------
Net increase 7,822,346 $213,023,960 6,488,300 $112,370,195 456,407 $ 7,305,688
==============================================================================
*For the six months ended 4/30/97 and the period December 12, 1995 (effective date) to October 31, 1996.
**For the six months ended 4/30/97 and the period March 11, 1996 (effective date) to October 31, 1996.
</TABLE>
2. TRUST SHARES (cont.)
Value Fund
--------------------
Shares Amount
-------- ---------
Class II Shares:
Six months ended April 30, 1997
Shares sold 118,763 $2,279,848
Shares issued in reinvestment of distributions 446 8,061
Shares redeemed (915) (17,656)
----------------------
Net increase 118,294 $2,270,253
======================
Year ended October 31, 1996***
Shares sold 25,854 $ 440,955
Shares redeemed (536) (9,058)
----------------------
Net increase 25,318 $ 431,897
======================
Advisor Class:
Six months ended April 30, 1997****
Shares sold 51,123 $ 994,973
Shares issued in reinvestment of distributions 69 1,364
Shares redeemed (14,453) (282,943)
----------------------
Net increase 36,739 $ 713,394
======================
***For the period September 1,1996 (effective date of Class II) to October 31,
1996.
****For the period January 1, 1997 (effective date of Advisor Class) to April
30, 1997.
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At October 31, 1996, for tax purposes, the Funds had accumulated net realized
gains as follows:
Balance Sheet MicroCap
Investment Fund Value Fund Value Fund
- --------------------------------------------------------------------------------
Accumulated net
realized gains $53,990,900 $2,663,816 $210,414
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at April 30, 1997
in the Balance Sheet Investment Fund by $1,562 and $27,365 in the MicroCap Value
Fund.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the period ended April 30, 1997, were as follows:
Balance Sheet MicroCap
Investment Fund Value Fund Value Fund
- --------------------------------------------------------------------------------
Purchases $159,067,646 $45,664,177 $16,314,625
Sales $ 93,078,569 $ 9,597,112 $ 2,426,545
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisory Services, Inc.
(Advisory) provides investment advice, administrative services, office space and
facilities to each Fund, and receives fees computed daily on the net assets of
each Fund as follows:
Balance Sheet
Investment Fund
Annualized Fee Rate Daily Net Assets
- --------------------------------------------------------------------------------
0.625% First $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
MicroCap
Value Fund
Annualized Fee Rate
- --------------------------------------------------------------------------------
0.750% Daily net assets
Value Fund
Annualized Fee Rate Daily Net Assets
- --------------------------------------------------------------------------------
0.750% First $500 million
0.625% Over $500 million, up to and including $1 billion
0.500% Over $1 billion
Advisory agreed in advance to waive a portion of its management fees for the
Value Fund, as noted in the Statement of Operations, in an effort to minimize
the Value Fund's expenses for the six months ended April 30, 1997.
Under an agreement with Advisory, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Funds. The fee
is paid by Advisory and computed monthly based on average daily net assets. It
is not a separate expense of the Funds.
b. Shareholder Services Agreement:
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended April 30, 1997, aggregated $342,430, all of which was paid
to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Balance Sheet Investment Fund, MicroCap
Value Fund and Value Fund will reimburse Franklin/Templeton Distributors, Inc.
(Distributors), in an amount up to a maximum of 0.50%, 0.25% and 0.35% per
annum, respectively, for Class I, and 1.00% per annum for Class II of the
average daily net assets of such class for costs incurred in the promotion,
offering and marketing of each Fund's shares. The Plans do not permit nor
require payments of excess costs after termination. Fees incurred by the Funds
under the Plans aggregated $1,789,963 for the six months ended April 30, 1997.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Distribution Plans and Underwriting Agreement: (cont.)
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Fund's shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Fund, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to dealers for certain sales of
the Fund's shares. Commissions received by Distributors, the amounts paid to
other dealers and any applicable contingent deferred sales charges (CDSC), for
the six months ended April 30, 1997 were as follows:
Balance Sheet MicroCap
Investment Fund Value Fund Value Fund
- --------------------------------------------------------------------------------
Class I
Total commissions
received $604,414 $529,410 $152,386
Paid to other dealers $938,908 $638,624 $185,246
Class II
Total commissions
received, including
CDSC $ -- $ -- $ 21,499
Paid to other dealers $ -- $ -- $ 42,754
CDSC $ -- $ -- $ 19
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, FT Services, Advisory, and Investor Services, all wholly-owned
subsidiaries of Franklin Resources, Inc. (Resources).
At April 30, 1997, Resources owned 5.51% of the Value Fund.
<TABLE>
<CAPTION>
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO ISSUERS
Investments in portfolio issuers, 5% or more whose outstanding voting securities
are held by the Funds, are defined in the Investment Company Act of 1940 as
affiliated issuers. The Funds had investments in such affiliated issuers at
April 30, 1997, as follows:
Balance of Gross Gross Balance of Dividend Income
Shares Held Purchases Sales and Shares Held Value Nov. 1, 1996 -
Name of Issuer: Oct. 31, 1996 and Additions Reductions Apr. 30, 1997 Apr. 30, 1997 Apr. 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INVESTMENT FUND
ACMAT Corp., Class A 295,000 -- -- 295,000 $ 4,609,375 --
American Pacific Corp. 370,400 50,700 -- 421,100 2,842,425 --
Aydin Corp. 209,500 60,500 -- 270,000 2,902,500 --
Buttrey Food and Drug Stores Co. 467,700 -- -- 467,700 3,683,138 --
Chic By H.I.S., Inc. 756,000 -- -- 756,000 4,914,000 --
Cochrane Furniture, Inc. 45,000 45,000 -- * --
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO ISSUERS (cont.)
Balance of Gross Gross Balance of Dividend Income
Shares Held Purchases Sales and Shares Held Value Nov. 1, 1996 -
Name of Issuer: Oct. 31, 1996 and Additions Reductions Apr. 30, 1997 Apr. 30, 1997 Apr. 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Investment Fund (cont.)
Commonwealth Industries, Inc. 675,500 -- -- 675,500 * --
Crown Central Petroleum, Class B 500,000 -- -- 500,000 $ 5,875,000 --
Delta Woodside Industries, Inc. 1,385,200 14,800 -- 1,400,000 8,050,000 --
Dixie Yarns, Inc. 600,000 -- -- 600,000 3,975,000 --
Ecology and Environment, Inc., Class A 260,000 -- -- 260,000 2,015,000 $ 41,600
Enex Resources Corp. 104,500 -- -- 104,500 992,750 15,675
ESCO Electronics Corp. 498,000 334,600 -- 832,600 8,221,925 --
Fidelity Bancorp, Inc. 144,500 -- -- 144,500 2,709,375 23,120
First Financial Bancorp, Inc. 24,000 -- -- 24,000 384,000 --
Fred's, Inc. 670,600 40,400 -- 711,000 6,932,250 68,500
Garan, Inc. 267,300 17,800 -- 285,100 5,345,625 163,940
Good Guys!, Inc. 500,000 240,000 2,500 742,500 4,425,000 --
Green (A.P.) Industries, Inc. 400,900 23,200 -- 424,100 3,392,800 32,072
Haggar Corp. 800,000 50,000 -- 850,000 10,837,500 40,000
Insteel Industries, Inc. 424,800 20,200 -- 445,000 3,393,125 53,400
International Shipholding Corp. 309,800 82,300 -- 392,100 6,665,700 42,869
Jacobson Stores, Inc. 297,200 -- -- 297,200 2,414,750 --
Luria (L.) & Son, Inc. 401,200 -- -- 401,200 601,800 --
Matrix Service Co. 498,000 -- 69,000 429,000 * --
Merchants Group, Inc. 254,500 2,600 -- 257,100 4,820,625 25,450
Monarch Machine Tool Co. 250,000 -- -- 250,000 1,937,500 25,000
Nash Finch Co. 600,000 6,900 -- 606,900 10,696,613 236,691
Oshkosh Truck Corp., Class B 483,000 -- -- 483,000 5,131,875 120,750
Pitt-Des Moines, Inc. 18,900 156,600 -- 175,500 4,650,750 33,413
Pulaski Furniture Corp. 192,000 -- -- 192,000 3,072,000 65,280
Super Food Services, Inc. 886,500 -- 886,500 -- * --
PXRE Corp. 405,000 20,700 -- 425,700 * --
U.S. Home Corp. 547,900 152,900 -- 700,800 17,257,200 --
Wolohan Lumber Co. 385,500 11,000 -- 396,500 4,931,469 53,998
-------------------------
Total Affiliated Issuers $147,681,070 $1,041,758
=========================
MicroCap Value Fund
Allou Health and Beauty, Inc., Class A 234,600 131,900 -- 366,500 $ 2,153,188 --
Allstate Financial Corp. 127,000 81,000 -- 208,000 1,248,000 --
American Physicians Service Group, Inc. 230,000 8,300 -- 238,300 1,340,438 --
Art's-Way Manufacturing Co., Inc. 82,500 -- -- 82,500 510,469 --
Concord Fabrics, Inc., Class A 23,900 122,600 -- 146,500 915,625 --
Devcon International Corp. 153,000 77,000 -- 230,000 1,150,000 --
Ecology and Environment, Inc., Class A 109,600 400 -- 110,000 852,500 $ 17,600
Emcon, Inc. 305,000 241,000 -- 546,000 1,706,250 --
Espey Manufacturing & Electronics Corp. 54,800 27,100 -- 81,300 1,417,669 --
Hi-Lo Automotive, Inc. 752,000 57,800 -- 809,800 2,429,400 --
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO ISSUERS (cont.)
Balance of Gross Gross Balance of Dividend Income
Shares Held Purchases Sales and Shares Held Value Nov. 1, 1996 -
Name of Issuer: Oct. 31, 1996 and Additions Reductions Apr. 30, 1997 Apr. 30, 1997 Apr. 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
MicroCap Value Fund (cont.)
Moore Products Co. 134,700 -- -- 134,700 $ 2,795,025 --
Oriole Homes Corp., Class B 360,000 -- -- 360,000 2,790,000 --
River Oaks Furniture, Inc. 334,400 60,200 -- 394,600 789,200 --
Roy F. Weston, Inc., Class A 245,000 255,000 -- 500,000 1,625,000 --
Temtex Industries, Inc. 265,500 -- -- 265,500 813,094 --
Universal Electronics, Inc. -- 326,000 -- 326,000 1,793,000 --
Video Lottery Technologies, Inc. 526,900 20,100 10,000 537,000 2,215,125 --
-------------------------
Total Affiliated Issuers $ 26,543,983 $ 17,600
=========================
*As of April 30, 1997 no longer an affiliate.
</TABLE>
7. 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
Trust may purchase restricted securities through a private offering and they
cannot be sold without prior registration under the Securities Act of 1933
unless such a 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. The Trust values these
restricted securities as disclosed in Note 1. At April 30, 1997, the MicroCap
Value Fund held the following restricted security representing 0.4% of the
Fund's net assets:
Shares Security Acquisition Date Cost Value
- --------------------------------------------------------------------------------
72,000 Bibb Co. 10/16/96 - 10/24/96 $596,874 $544,500
<TABLE>
<CAPTION>
8. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout each
period by Fund, are as follows:
Per Share Operating Performance Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of
Expenses
to Average
Net Ratio
Net Assets of Net
Net Real- Distri- Distri- Ratio (before Invest-
Asset ized & Total butions butions Net Net of fee ment
Value at Unreal- From From From Asset Assets Expenses waiver Income Port- Aver-
Begin- Net ized Invest- Net Real- Value at End to Aver- and ex- to folio age
ning Invest- Gain on ment Invest- ized Total at End of age pense re- Average Turn- Commis-
Period of ment Securi- Opera- ment Capital Distri- of Total Period Net duction) Net over sion
Ended Period Income ties tions Income Gains butions Period Return++ (in 000's) Assets (see Note 5) Assets Rate Rate**
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Investment Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $15.54 $.53 $1.830 $2.360 $(.530) $ -- $ (.530) $17.37 15.51% $ 5,149 --%+ 2.60% 3.16% 30.86% --
1993 17.37 .39 6.260 6.650 (.430) (.620) (1.050) 22.97 37.78 22,317 --+ 1.85 1.89 31.36 --
1994 22.97 .23 .510 .740 (.260) (.770) (1.030) 22.68 3.42 134,255 1.19+ 1.34 0.99 24.96 --
1995 22.68 .30 3.980 4.280 (.270) (.350) (.620) 26.34 19.32 387,540 1.17 1.17 1.30 28.63 --
1996 26.34 .47 3.846 4.316 (.442) (1.064) (1.506) 29.15 16.93 657,002 1.08 1.08 1.69 35.46 0.0453
19971 29.15 .20 2.460 2.660 (.220) (2.360) (2.580) 29.23 9.48 788,936 1.06* 1.06* 1.39* 15.10 0.0435
8. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of
Expenses
to Average
Net Ratio
Net Assets of Net
Net Real- Distri- Distri- Ratio (before Invest-
Asset ized & Total butions butions Net Net of fee ment
Value at Unreal- From From From Asset Assets Expenses waiver Income Port- Aver-
Begin- Net ized Invest- Net Real- Value at End to Aver- and ex- to folio age
ning Invest- Gain on ment Invest- ized Total at End of age pense re- Average Turn- Commis-
Period of ment Securi- Opera- ment Capital Distri- of Total Period Net duction) Net over sion
Ended Period Income ties tions Income Gains butions Period Return++ (in 000's) Assets (see Note 5) Assets Rate Rate**
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin MicroCap Value Fund:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19962 $15.00 $.14 $3.410 $3.550 $(.110) $ -- $ (.110) $18.44 23.72% $119,664 1.24%* 1.24%* 1.28%* 14.15% 0.0476
19971 18.44 .02 .829 .849 (.067) (.402) (.469) 18.82+++ 4.64 134,177 1.20* 1.20* 0.18* 8.26 0.0427
Franklin Value Fund:
Class I Shares:
19963 15.00 .05 2.150 2.200 (.050) -- (.050) 17.15 14.69 7,828 1.35*+ 2.87* 0.57* 35.52 0.0464
19971 17.15 .05 2.117 2.167 (.058) (.369) (.427 18.89 12.74 20,041 1.29*+ 1.56* 0.55* 15.75 0.0469
Class II Shares:
19964 16.38 .01 .757 .763 (.007) -- (.007) 17.14 4.68 434 2.00*+ 3.52* (.08)* 32.52 0.0464
19971 17.14 (.01) 2.099 2.089 -- (.369) (.369) 18.86 12.28 2,709 2.00*+ 2.27* (.18)* 15.75 0.0469
Advisor Class Shares:
19975 18.75 .04 .145 .185 (.045) -- (.045) 18.89 0.97 694 1.00*+ 1.27* .81* 15.75 0.0469
1For the six months ended April 30, 1997.
2For the period December 12, 1995 (effective date) to October 31, 1996.
3For the period March 11, 1996 (effective date) to October 31, 1996.
4For the period September 1, 1996 (effective date) to October 31, 1996.
5For the period January 1, 1997 (effective date) to April 30, 1997.
+During the period indicated, Advisory agreed in advance to waive all or a portion of its management fees and pay all or a portion
of the other expenses incurred.
++Total return measures the change in value of an investment over the period indicated. It is not annualized. It does not include
the maximum front-end sales charge or the contingent deferred sales charge, and assumes reinvestment of dividends and capital gains
at net asset value. Prior to May 1, 1994, dividends were reinvested at the maximum offering price, and capital gains at net asset
value. Effective May 1, 1994, with the implementation of the 12b-1 distribution plans for Class I, the sales charge on reinvested
dividends were eliminated. The total return may differ from that reported in the Manager's Discussion due to differences between the
net asset values quoted and the net asset values calculated for financial reporting purposes.
+++The Net Asset Value differs from the Net Asset Value used to process shareholder activity as of the reporting date, which does
not include market adjustment for portfolio trades made on that date. These adjustments are generally accounted for on the day
following the trade date.
*Annualized.
**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.
</TABLE>