CONTENTS
Shareholder Letter......................... 1
Fund Reports
Franklin Balance Sheet
Investment Fund............................ 3
Franklin MicroCap
Value Fund................................. 8
Franklin Value Fund....................... 13
Financial Highlights &
Statement of Investments................... 24
Financial Statements....................... 45
Notes to
Financial Statements....................... 49
Report of
Independent Accountants.................... 57
Tax Information............................ 58
SHAREHOLDER LETTER
Dear Shareholder:
It is a pleasure to bring you the Franklin Value Investors Trust's annual report
for the period ended October 31, 1997.
During this one-year period, benign inflation and declining interest rates led
to accelerated economic activity. This was highly apparent in the U.S. markets,
where large amounts of capital were poured into equity securities. On October
31, 1996, the Dow Jones(R) Industrial Average (the Dow) closed at 6029.38; by
July, it pushed through the 8000-point mark for the first time. Knowing that no
securities market can advance forever without a correction, many investors were
asking, "When will this market correct?" The answer came on October 27th, when,
fueled by concerns about currency crises in Southeast Asia, the Dow dropped
7.18%. The decline probably was enough to keep the Federal Reserve Board from
acting to raise interest rates in the near term, but not enough to deter
investors from participating in the market. The morning after saw the market
gain back almost half of its losses, surging ahead 4.7%. Although the Dow
continued to seesaw throughout the remainder of that week, it closed at 7442.08
on October 31, 1997 -- an impressive 1400 points above its level a year earlier.
With the volatility present in the markets at the end of the period, it is
important to remember, then, that markets correct -- in our opinion, it is
desirable for them to do so. Consequently, investor concern about market
volatility and questions about its direction prompt us to comment on the
importance of investing for the long term.
Successful investors historically have achieved good results through setting
goals, diversifying their assets, and having patience. They know mutual fund
investments are long term, so daily market fluctuations and short-term
volatility have minimal impact on their overall investment goals. They
understand that patience and discipline are keys to successful investing.
Remember, it's time -- not timing -- that makes the difference.
We encourage you to speak with your investment representative about your
financial goals. He or she can address concerns about volatility, and help you
stay focused on the long term and diversify your investments. Mutual funds offer
a level of diversification that is almost impossible for individual investors to
achieve on their own.
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
"Successful investors historically have achieved good results through setting
goals, diversifying their assets, and having patience."
FRANKLIN BALANCE SHEET
INVESTMENT FUND
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.
The Franklin Balance Sheet Investment Fund searches for securities of companies
(any size) selling at a discount to book value -- an investment strategy that we
feel is unique among fund investors, especially as we apply it.
During the year ended October 31, 1997, cash flow into the fund was steady,
totaling $188.4 million. Size of the fund is an important issue for us. In order
that we don't outgrow our opportunities, the fund is currently open only to
retirement accounts and existing shareholders.
Financial stocks are a heavy, but diminishing, concentration in the portfolio.
At the end of the reporting period, life insurance comprised 9.4% of the fund's
total net assets, down from 12.5% on October 31, 1996. Property/casualty
insurance also decreased over the year, to 9.5% from 10.8%. Banks & thrifts,
once our largest group and 7.7% of total net assets on October 31, 1996, are
down to 3.2% in the portfolio. The reductions in these sectors reflect several
mergers and gradual selling, offset by a third consecutive year of excellent
price performance. Now, at year end, our number one priority is to get the cash
working, but we are finding few new bargains among financial stocks to replace
those we sold.
Franklin Balance Sheet
Investment Fund
Top Ten Holdings
10/31/97
% of Total
COMPANY/INDUSTRY Net Assets
- ---------------------------------------------
LTV Corp. 3.39%
STEEL & BASE METALS
Entergy Corp. 2.60%
UTILITIES
American National Insurance 2.59%
INSURANCE - LIFE/SPECIALTY
British Steel Plc. 2.16%
STEEL & BASE METALS
U.S. Home Corp 2.04%
BUILDERS & BUILDING PRODUCTS
Aztar Corp. 1.87%
MISCELLANEOUS
Castle & Cooke, Inc. 1.85%
BUILDING & BUILDING PRODUCTS
Overseas Shipholding Group 1.82%
TRANSPORTATION
Niagara Mohawk Power 1.77%
UTILITIES
American General Corp. 1.66%
INSURANCE - LIFE/SPECIALTY
For a complete list of portfolio holdings, please see page 25 of this report.
Net cash flow for the year was strong, enabling the fund to establish new
positions and add to existing ones. Purchases during the year were directed into
more out-of-favor sectors such as steel, homebuilding, retailing,
transportation, natural resources, and utilities. We initiated positions in
British Steel, Cyrk, Entergy, Homebase, Intergraph, M.D.C. Holdings, and New
York State Electric &Gas. We also added to existing holdings in Niagara Mohawk,
Central Maine Power, Insteel, International Shipholding, Lawyers Title, LTV,
Mesa Air, Price Enterprises, Syms, and Washington National.
Please remember, this discussion reflects our views and opinions as of October
31, 1997, the end of the reporting period. However, market and economic
conditions are changing constantly, which may affect our strategies and
portfolio holdings. Although historic performance is no guarantee of future
results, these insights may help you understand our investment and management
philosophy.
We thank you for your participation in the Franklin Balance Sheet Investment
Fund and look forward to serving you in the future. Please feel free to contact
us with any questions or comments.
PERRFORMANCE SUMMARY
Franklin Balance Sheet Investment Fund reported a +32.86% cumulative total
return for the one-year period ended October 31, 1997. Cumulative total return
measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any, and does not include the initial sales
charge. We always maintain a long-term perspective when managing the fund, and
we encourage shareholders to view their investments in a similar manner. As you
can see from the table on page 7, the fund delivered a cumulative total return
of more than 238% since inception on April 2, 1990.
The fund's share price, as measured by net asset value, increased $6.07, from
$29.15 on October 31, 1996, to $35.22 on October 31, 1997. During the reporting
period, shareholders received per-share distributions of 45.8 cents ($0.458) in
dividend income and $2.355 in capital gains, of which 92.16 cents represented
short-term gains and $1.4334 represented long-term gains. Distributions will
vary depending on income earned by the fund and any profits realized from the
sale of securities in the portfolio as well as the fund's operating expenses.
The graph on page 7 compares Franklin Balance Sheet Investment Fund's
performance to that of the Russell 1000(R) Value Index which is composed of
the 1,000 largest U.S. companies, ranked by market capitalization. We will be
replacing this index with the Wilshire Small Companies Value Index. The Wilshire
Small Companies Value Index is a broad-based, capitalization-weighted index
comprised of 250 stocks representing nine different sectors. While our
investment focus is directed toward both large and small capitalization stocks,
the new index is more reflective of actual portfolio holdings. The Russell
1000(R) Value Index will be omitted beginning with the 1998 annual report.
Keep in mind that an unmanaged market index has inherent performance
differentials in comparison with any fund. An index doesn't pay management fees
to cover salaries of security analysts or portfolio managers, or pay commissions
or market spreads to buy and sell securities. Unlike an index, mutual funds are
never 100% invested because they need to have cash on hand to redeem shares. In
addition, the performance shown for the fund includes the maximum initial sales
charge, all fund expenses and account fees. If operating expenses such as
Franklin Balance Sheet Investment Fund's had been applied to the index, its
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest in it directly.
*Includes all sales charges and represents the change in value of an investment
over the periods shown. Total return assumes reinvestment of dividends and
capital gains at net asset value.
**Index is unmanaged and includes reinvested dividends. Source: U.S. Bureau of
Labor Statistics (10/31/97).
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Balance Sheet Investment Fund
Periods ended 10/31/97
Since
Inception
1-Year 5-Year (4/2/90)
- ------------------------------------------------------------------------
Cumulative Total Return1 32.86% 168.07% 238.89%
Average Annual Total Return2 30.88% 21.44% 17.23%
Value of a $10,000 Investment3 $13,088 $26,412 $33,377
1993 1994 1995 1996 1997
- ------------------------------------------------------------------------
Fiscal Year Total Return4 39.84% 3.42% 19.32% 16.93% 32.86%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 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. Fiscal year total return represents the change in value of an investment over
the periods indicated on the specific dates and do not includes the sales
charge.
All total return calculations assume reinvestment of dividends and any 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.
EFFECTIVE FEBRUARY 1, 1998, THE FUND'S 12B-1 FEE WILL BE 0.25%.
Past expense reductions by the fund's manager increased the fund's total
returns.
Past performance is not predictive of future results.
FRANKLIN MICROCAP VALUE FUND
"We practice very conservative assumptions when purchasing securities for the
portfolio."
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.
The Franklin MicroCap Value Fund is managed in the same manner as the Franklin
Balance Sheet Investment Fund 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. We practice very conservative valuation assumptions when
purchasing securities for the portfolio. It is our conviction that a functioning
corporation is probably worth more than the break-up value of all 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.
Net cash flow into the fund totaled $29.4 million over the fiscal year, with
$17.2 million coming into the fund in the second half of the year. We directed
the fund to new and existing investments in sectors such as environmental
control (6.0% of total net assets), builders/building supplies (7.4%), insurance
(property/casualty) (7.2%), retail (13.3%), technology (9.7%), and
textiles/apparel (6.1%). We were net sellers of financial stocks as prices of
these securities rose throughout the reporting period. During the year, we found
sufficient buying opportunities among microcap companies so that our overall
cash position on October 31 was a comfortable 3.5% of total net assets.
Please remember, this discussion reflects our views and opinions as of October
31, 1997, the end of the reporting period. However, market and economic
conditions are changing constantly, which may affect our strategies and
portfolio holdings. Although historic performance is no guarantee of future
results, these insights may help you understand our investment and management
philosophy.
We thank you for your participation in the Franklin MicroCap Value Fund and look
forward to serving you in the future. Please feel free to contact us with any
questions or comments.
Franklin MicroCap Value Fund
Top Ten Holdings
10/31/97
% of Total
COMPANY/INDUSTRY Net Assets
Video Lottery Technologies Inc. 2.92%
TECHNOLOGY
Moore Products Co. 2.04%
MANUFACTURING
Emcon 1.99%
ENVIRONMENTAL CONTROL
Lechters, Inc. 1.82%
RETAIL
Zemex Corp. 1.68%
NATURAL RESOURCES
Universal Electronics, Inc. 1.66%
TECHNOLOGY
Allou Health & Beauty, Inc. 1.66%
MISCELLANEOUS
Kentucky Electric Steel, Inc. 1.64%
STEEL/BASE METALS
Professionals Insurance Co. 1.62%
Management Group
INSURANCE - PROPERTY/CASUALTY
TransFinancial Holdings Inc.
TRANSPORTATION 1.57%
For a complete list of portfolio holdings, please see page 32 of this report.
PERFORMANCE SUMMARY
Franklin MicroCap Value Fund produced a +35.05% cumulative total return for the
one-year period ended October 31, 1997. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include the sales charge.
The fund's share price, as measured by net asset value, increased $5.85, from
$18.44 on October 31, 1996, to $24.29 on October 31, 1997. During the reporting
period, the fund paid distributions of 6.7 cents ($0.067) per share in dividend
income and 40.2 cents ($0.402) per share in short-term capital gains.
Distributions will vary depending on income earned by the fund and any profits
realized from the sale of securities in the portfolio, as well as the fund's
operating expenses.
The graph on page 12 compares Franklin MicroCap Value Fund's performance to that
of the Russell 2000(R) Value Index. We will be replacing this index with the
Wilshire Small Companies Value Index. The Wilshire Small Companies Value Index
is a broad-based, capitalization-weighted index comprised of 250 stocks
representing nine different sectors. We feel this new index is more reflective
of the fund's portfolio composition. The Russell 2000(R) Value Index will be
omitted beginning with the 1998 annual report.
Keep in mind that an unmanaged market index has inherent performance
differentials in comparison with any fund. An index doesn't pay management fees
to cover salaries of security analysts or portfolio managers, or pay commissions
or market spreads to buy and sell securities. Unlike an index, mutual funds are
never 100% invested because they need to have cash on hand to redeem shares. In
addition, the performance shown for the fund includes the maximum initial sales
charge, all fund expenses and account fees. If operating expenses such as
Franklin MicroCap Value Fund's had been applied to the index, its performance
would have been lower. Please remember that an index is simply a measure of
performance, and one cannot invest in it directly.
*Includes all sales charges and represents the change in value of an investment
over the periods shown.Total return assumes reinvestment of dividends and
capital gains at net asset value.
**Index is unmanaged and includes reinvested dividends.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin MicroCap Value Fund
Periods ended 10/31/97
Since
Inception
1-Year (12/12/95)
- ------------------------------------------------------------------
Cumulative Total Return1 35.05% 67.08%
Average Annual Total Return2 28.97% 28.09%
Value of a $10,000 Investment3 $12,897 $15,953
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.5% 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 sales charge.
Past expense reductions by the fund's manager increased the fund's total
returns.
All total return calculations assume reinvestment of dividends and any 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.
FRANKLIN VALUE FUND
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.
We started the Franklin Value Fund to take advantage of clear value
opportunities that didn't fit the 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 book value; other 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.
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.
Net cash flow for the year was strong, at $87 million, enabling us to establish
significant new positions and add to existing portfolio holdings. At year end,
our major industry holdings were manufacturing (15.0% of total net assets),
builders/building products (14.8%), technology (12.1%), and insurance -
property/casualty (9.1%), with cash at 8.4%. Despite the consistent cash flow
and the powerful market advance, we were pleased to be able to put the money to
work at what we consider bargain prices. Our portfolio turnover for the past
year has been relatively low but we enjoyed some profitable trades. For example,
during the last six months of the year, we sold our positions in Cognex and
Lehman Brothers at 109% and 130% gains on cost, respectively. We had a loss,
however, of 42% when we sold our position in Silicon Graphics in the second half
of the reporting period.
Despite the market turbulence of recent weeks, stock market valuations are still
high by most historical standards, and continued volatility is likely. We
believe this is not necessarily negative because it often provides patient value
investors with attractive buying opportunities. We are confident that our value
investing approach has the potential to serve our shareholders well -- even in
down markets -- since many of the stocks we consider for purchase have already
been taken to the woodshed. We are hopeful this focus on value will offer
reasonable protection against market setbacks, though there can be no assurance
it will.
Please remember, this discussion reflects our views and opinions as of October
31, 1997, the end of the reporting period. However, market and economic
conditions are changing constantly, which may affect our strategies and
portfolio holdings. Although historic performance is no guarantee of future
results, these insights may help you understand our investment and management
philosophy.
We thank you for your participation in the Franklin Value Fund and look forward
to serving you in the future. Please feel free to contact us with any questions
or comments.
Franklin Value Fund
Top Ten Holdings
10/31/97
% of Total
COMPANY/INDUSTRY Net Assets
DIMON, Inc. 3.06%
TOBACCO
Ocwen Asset Investment Corp. 2.77%
FINANCIAL SERVICES
Butler Manufacturing Co. 2.74%
BUILDERS/BUILDING PRODUCTS
LTV Corp. 2.70%
STEEL/BASE METALS
Standard Commercial Corp. 2.53%
TOBACCO
JLG Industries, Inc. 2.52%
MANUFACTURING
Coachmen Industries, Inc. 2.08%
BUILDERS/BUILDING PRODUCTS
Engel General Developers, Ltd. 1.97%
BUILDERS/BUILDING PRODUCTS
Haskel International Inc. 1.89%
MANUFACTURING
Komag, Inc. 1.87%
TECHNOLOGY
For a complete list of portfolio holdings, please see page 40 of this report.
PERFORMANCE SUMMARY
CLASS I
Franklin Value Fund - Class I produced a +47.43% cumulative total return for the
one-year period ended October 31, 1997. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include the sales charge.
The fund's share price, as measured by net asset value, increased $7.53, from
$17.15 on October 31, 1996, to $24.68 on October 31, 1997. During the reporting
period, shareholders received per-share distributions of 7.85 cents ($0.0785) in
dividend income and 36.92 cents ($0.3692) in short-term capital gains.
Distributions will vary depending on income earned by the fund and any profits
realized from the sale of securities in the portfolio, as well as the level of
the fund's operating expenses.
The graph on page 17 compares the Franklin Value Fund's performance to that of
the Russell 1000(R) Value Index, which is composed of the 1,000 largest U.S.
companies, ranked by market capitalization. We will be replacing this index with
the Wilshire Small Companies Value Index. The Wilshire Small
Companies Value Index is a broad-based, capitalization-weighted index comprised
of 250 stocks representing nine different sectors. While our investment focus is
directed toward both large and small capitalization stocks, the new index is
more reflective of actual portfolio holdings. The Russell 1000(R) Value Index
will be omitted beginning with the 1998 annual report.
Keep in mind that an unmanaged market index has inherent performance
differentials in comparison with any fund. An index doesn't pay management fees
to cover salaries of security analysts or portfolio managers, or pay commissions
or market spreads to buy and sell securities. Unlike an index, mutual funds are
never 100% invested because they need to have cash on hand to redeem shares. In
addition, the performance shown for the fund includes the maximum initial sales
charge, all fund expenses and account fees. If operating expenses such as
Franklin Value Fund's had been applied to the index, its performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest in it directly.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Value Fund - Class I
Periods ended 10/31/97
Since
Inception
1-Year (3/11/96)
- ---------------------------------------------------------------
Cumulative Total Return1 47.43% 69.08%
Average Annual Total Return2 40.78% 33.92%
Value of a $10,000 Investment3 $14,078 $16,144
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the initial sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.5% 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 sales charge.
The fund's manager has agreed in advance to waive a portion of its management
fees and to make certain payments to reduce expenses, which increased total
return to shareholders. Without these reductions, the fund's total return would
have been lower.
All total return calculations assume reinvestment of dividends and any 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.
CLASS II
Franklin Value Fund - Class II produced a +46.40% cumulative total return for
the one-year period ended October 31, 1997. Cumulative total return measures the
change in value of an investment, assuming reinvestment of all distributions,
and does not include the sales charge.
The fund's share price, as measured by net asset value, increased $7.45, from
$17.14 on October 31, 1996, to $24.59 on October 31, 1997. During the reporting
period, shareholders did not receive dividend income. The fund paid out 36.92
cents ($0.3692) in short-term capital gains. Distributions will vary depending
on income earned by the fund and any profits realized from the sale of
securities in the portfolio as well as the fund's operating expenses.
The graph on page 20 compares the performance of the fund's Class II shares
since inception with the performance of the unmanaged Russell 1000(R), Value
Index. We will be replacing this index with the Wilshire Small Companies Value
Index. The Wilshire
Small Companies Value Index is a broad-based, capitalization-weighted index
comprised of 250 stocks representing nine different sectors. While our
investment focus is directed toward both large and small capitalization stocks,
the new index is more reflective of actual portfolio holdings. The Russell
1000(R), Value Index will be omitted beginning with the 1998 annual report.
Keep in mind that an unmanaged index has inherent performance differentials in
comparison with any fund. An index doesn't pay management fees to cover salaries
of security analysts or portfolio managers, or pay commissions or market spreads
to buy and sell stocks. Unlike an index, mutual funds are never 100% invested
because they need to have cash on hand to redeem shares. In addition, the
performance shown for the fund includes the maximum initial sales charge, all
fund expenses and account fees. If operating expenses such as Franklin Value
Fund's had been applied to the index, its performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly.
*Includes all sales charges and represents the change in value of an investment
over the periods shown.Total return assumes reinvestment of dividends and
capital gains at net asset value. **Index is unmanaged and includes reinvested
dividends.
**Index is unmanaged and includes reinvested dividends.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Value Fund - Class II
Periods ended October 31,1997
Since
Inception
1-Year (9/3/97)
- ---------------------------------------------------------------
Cumulative Total Return1 46.40% 53.88%
Average Annual Total Return2 44.03% 43.06%
Value of a $10,000 Investment3 $14.397 $15,140
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 since inception and includes the
maximum 1.0% initial sales charge and the 1.0% contingent deferred sales charge,
applicable to shares redeemed within 18 months of investment.
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 sales charge.
The fund's manager has agreed in advance to waive a portion of its management
fees and to make certain payments to reduce expenses, which increased total
return to shareholders. Without these reductions, the fund's total return would
have been lower.
All total return calculations assume reinvestment of dividends and any 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.
ADVISOR CLASS
Franklin Value Fund - Advisor Class reported a +32.35% cumulative total return
for the period from January 2, 1997 (commencement of sales), through October 31,
1997. Cumulative total return measures the change in value of an investment,
assuming reinvestment of all distributions.
The fund's share price, as measured by net asset value, increased $5.97 cents,
from $18.75 at inception on January 2, 1997, to $24.72 on October 31, 1997.
During the reporting period, shareholders received per-share distributions of
7.92 cents ($0.0792) in dividend income. Distributions will vary depending on
income earned by the fund and any profits realized from the sale of securities
in the portfolio as well as the fund's operating expenses.
The graph on page 23 compares the performance of the fund's Advisor Class shares
with the performance of the unmanaged Russell 1000(R) Value Index. For the
periods prior to January 2, 1997, the fund performance is that of the fund's
Class I shares, excluding the initial sales charge, but including Class I
expenses. We will be replacing this index with the Wilshire Small Companies
Value Index. The Wilshire Small Companies Value Index is a broad-based,
capitalization-weighted index comprised of 250 stocks representing nine
different sectors.
While our investment focus is directed toward both large and small
capitalization stocks, the new index is more reflective of actual portfolio
holdings. The Russell 1000(R) Value Index will be omitted beginning with the
1998 annual report.
Keep in mind that an unmanaged index has inherent performance differentials in
comparison with any fund. An index doesn't pay management fees to cover salaries
of security analysts or portfolio managers, or pay commissions or market spreads
to buy and sell stocks. Unlike an index, mutual funds are never 100% invested
because they need to have cash on hand to redeem shares. In addition, the
performance shown for the fund includes the maximum initial sales charge, all
fund expenses and account fees. If operating expenses such as Franklin Value
Fund's had been applied to the index, its performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Value Fund - Advisor Class
Periods ended 10/31/97
Since
Inception
1-Year* (3/11/96)*
- -------------------------------------------------------------------------
Cumulative Total Return1 47.89% 69.61%
Average Annual Total Return2 47.89% 38.01%
Value of a $10,000 Investment3 $14,789 $16,961
*Effective January 2, 1997, the fund began offering Advisor Class shares to
certain eligible investors as described in its prospectus. This share class does
not have sales charges nor Rule 12b-1 plans. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the fund's Class I performance, excluding the effect of the Class I maximum
initial sales charge, but including the effect of Class I expenses, including
Rule 12b-1 fees; and (b) for periods after January 1, 1997, figures reflect
actual Advisor Class performance, including the deduction of all charges and
fees applicable only to that class. Since January 2, 1997 (commencement of
sales), the cumulative total return of Advisor Class shares was 32.35%.
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods.
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 sales charge.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your 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.
FRANKLIN VALUE INVESTORS TRUST
Financial Highlights
Franklin Balance Sheet Investment Fund
<TABLE>
<CAPTION>
Class I
- -------------------------------------------------------------------------------------------------------
Year Ended October 31,
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $29.15 $26.34 $22.68 $22.97 $17.37
----------------------------------------------------------
Income from investment operations:
Net investment income .48 .47 .30 .23 .39
Net realized and unrealized gains 8.40 3.85 3.98 .51 6.26
----------------------------------------------------------
Total from investment operations 8.88 4.32 4.28 .74 6.65
----------------------------------------------------------
Less distributions from:
Net investment income (.46) (.44) (.27) (.26) (.43)
Net realized gains (2.35) (1.07) (.35) (.77) (.62)
----------------------------------------------------------
Total distributions (2.81) (1.51) (.62) (1.03) (1.05)
----------------------------------------------------------
Net asset value, end of year $35.22 $29.15 $26.34 $22.68 $22.97
==========================================================
Total return* 32.86% 16.93% 19.32% 3.42% 37.78%
Ratios/supplemental data
Net assets, end of year (000's) $1,222,953 $657,002 $387,540 $134,255 $22,317
Ratio to average net assets:
Expenses 1.08% 1.08% 1.17% 1.19% --
Expenses excluding waiver and
payments by affiliate 1.08% 1.08% 1.17% 1.34% 1.85%
Net investment income 1.59% 1.69% 1.30% .99% 1.89%
Portfolio turnover rate 24.63% 35.46% 28.63% 24.96% 31.36%
Average commission rate paid*** $.0384 $.0453 -- -- --
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994 dividends from net
investment income were reinvested at the offering price.
*** Relates to purchases and sales of equity securities. Prior to fiscal year
end 1996 disclosure of average commission rate was not required.
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments, October 31, 1997
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments, October 31, 1997
<TABLE>
<CAPTION>
Franklin Balance Sheet Investment Fund SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
Common Stocks 86.4%
Banks/Thrifts 3.2%
<S> <C> <C>
meriana Bancorp, Inc. 6,000 $ 121,500
aBank Plus Corp. 863,500 10,362,000
aCalumet Bancorp, Inc. 70,000 3,535,000
Farmers & Merchants Bank of Long Beach 2,400 5,520,000
cFidelity Bancorp, Inc. 144,500 3,477,031
Fidelity Financial of Ohio, Inc. 93,000 1,395,000
First Defiance Financial Corp. 300,000 4,762,500
a,cFirst Financial Bancorp, Inc. 24,000 468,000
First National Bank of Anchorage 87 202,275
First Shenango Bancorp, Inc. 30,275 1,029,350
GA Financial, Inc. 198,700 3,874,650
aProvident Financial Holdings, Inc. 10,000 196,875
aQuaker City Bancorp, Inc. 110,000 2,255,000
TCF Financial Corp. 13,502 767,926
Westco Bancorp, Inc. 69,000 1,828,500
------------
39,795,607
------------
Builders/Building Products 7.7%
aBeazer Homes USA, Inc. 275,800 5,274,675
a,cCastle & Cooke, Inc. 1,270,000 22,621,875
aDevcon International Corp. 216,200 1,013,438
cM.D.C. Holdings, Inc. 1,069,300 11,895,963
aM/I Schottenstein Homes, Inc. 5,500 76,313
cPitt-Des Moines, Inc. 177,500 6,123,750
cRyland Group, Inc. 834,800 14,922,050
aSchuler Homes, Inc. 529,100 4,232,800
Standard-Pacific Corp. 150,000 1,631,250
a,cU.S. Home Corp. 700,800 24,878,400
aWashington Homes, Inc. 214,000 989,750
------------
93,660,264
------------
Business Products & Services 2.3%
a,cCyrk, Inc. 1,171,000 14,930,250
aGovernment Technology Services, Inc. 173,100 843,863
aHandleman Co. 1,115,000 7,595,938
aMatrix Service Co. 257,500 1,995,625
aNashua Corp. 206,000 2,806,750
------------
28,172,426
------------
Closed End Funds 5.3%
Central European Equity Fund 225,000 5,203,125
Emerging Markets Infrastructure Fund, Inc. 300,000 3,525,000
Growth Fund of Spain, Inc. 275,000 4,262,500
H & Q Healthcare Investors 150,000 2,568,750
INVESCO Global Health Sciences Fund 325,000 5,626,563
Irish Investment Fund, Inc. 135,000 2,126,250
John Hancock Bank and Thrift Opportunity Fund 325,000 13,832,813
Latin America Investment Fund, Inc. 175,000 2,646,875
Closed End Funds (cont.)
Latin American Equity Fund, Inc. 25,000 $ 342,188
Liberty All Star Growth Fund 200,000 2,437,500
Mexico Fund 375,000 7,007,813
Morgan Grenfell Smallcap Fund, Inc. 123,800 1,609,400
Petroleum & Resources Corp. 60,000 2,415,000
Royce Global Trust, Inc. 160,000 910,000
Royce OTC Micro-Cap Trust 1,000 10,875
Royce Value Trust 52,500 813,750
Scudder New Europe Fund, Inc. 325,000 5,037,500
Southeastern Thrift & Bank Fund, Inc. 44,800 1,064,000
The Swiss Helvetia Fund 125,000 2,984,375
------------
64,424,277
------------
Environmental Control .4%
cEcology and Environment, Inc., Class A 260,000 2,876,250
aEmcon 200,000 1,175,000
aHarding Lawson Associates Group, Inc. 135,800 1,290,100
------------
5,341,350
------------
Food 2.1%
a,cButtrey Food and Drug Stores Co. 467,700 5,261,625
Genesee Corp., Class B 117,900 5,393,925
cNash-Finch Co. 699,100 14,069,388
Orange-co, Inc. 184,000 1,472,000
------------
26,196,938
------------
Furniture .8%
cAllen Organ Co., Class B 83,000 3,548,250
aAmeriwood Industries International Corp. 200,000 1,237,500
aBaldwin Piano & Organ Co. 124,300 2,144,175
cPulaski Furniture Corp. 192,000 3,744,000
aRiver Oaks Furniture, Inc. 23,000 46,000
------------
10,719,925
------------
Insurance - Life/Specialty 9.4%
American General Corp. 397,283 20,261,433
American National Insurance Co. 329,900 31,670,400
AmerUs Life Holdings, Inc., Class A 89,400 2,776,988
FBL Financial Group, Inc., Class A 442,000 17,514,250
Guarantee Life Companies, Inc. 100,000 2,762,500
Kansas City Life Insurance Co. 800 70,400
aNational Western Life Insurance Co., Class A 93,800 9,426,900
Presidential Life Corp. 728,000 14,469,000
aTrigon Healthcare, Inc. 273,300 6,678,769
Washington National Corp. 285,600 9,299,850
------------
114,930,490
------------
Insurance - Property/Casualty 9.5%
a,cACMAT Corp., Class A 295,000 $ 5,402,188
American Indemnity Financial Corp. 90,000 1,125,000
Amwest Insurance Group, Inc. 74,700 1,064,475
Argonaut Group, Inc. 161,000 5,192,250
Baldwin & Lyons, Class B 91,477 1,909,582
Chartwell Re Corp. 225,000 7,284,375
aFarm Family Holdings, Inc. 137,000 4,247,000
Lawyers Title Corp. 152,500 4,841,875
cMerchants Group, Inc. 257,800 4,994,875
Meridian Insurance Group, Inc. 272,000 4,964,000
aProfessionals Insurance Co. Management Group 90,650 3,036,775
PXRE Corp. 425,700 12,983,850
aRisk Capital Holdings, Inc. 400,000 9,100,000
Scor (France) 350,000 16,255,363
SCPIE Holdings, Inc. 472,800 13,415,700
Sphere Drake Holdings, Ltd. 900,000 7,368,750
cStewart Information Services Corp. 465,000 11,944,688
Terra Nova (Bermuda) Holdings, Ltd., Class A 20,000 517,500
------------
115,648,246
------------
Manufacturing 2.7%
cA.P. Green Industries, Inc. 521,300 6,711,738
a,cAmerican Pacific Corp. 421,100 3,237,206
Binks Sames Corp. 149,300 6,345,250
Espey Manufacturing & Electronics Corp. 15,000 260,625
cInsteel Industries, Inc. 565,300 4,310,413
Mine Safety Appliances Co. 18,400 1,297,200
cMonarch Machine Tool Co. 250,000 2,093,750
aOroAmerica, Inc. 92,000 517,500
cOshkosh Truck Corp., Class B 483,000 7,969,500
TransPro, Inc. 25,300 203,981
Treadco, Inc. 5,000 52,500
------------
32,999,663
------------
Miscellaneous 2.2%
a,cAztar Corp. 3,210,000 22,871,263
Lehman Brothers Holdings, Inc. 85,000 4,000,313
------------
26,871,576
------------
Natural Resources 3.8%
a,cCrown Central Petroleum, Class B 500,000 9,468,750
cEnex Resources Corp. 104,500 1,280,125
a,cKaneb Services, Inc. 2,463,000 13,546,500
Kentucky River Coal Corp. 153 481,950
cRochester & Pittsburgh Coal Co. 172,000 6,385,500
Ultramar Diamond Shamrock Corp. 483,000 14,912,625
------------
46,075,450
------------
Real Estate 2.7%
aCraig Corp. 59,700 $ 1,126,838
a,cEchelon International Corporation, Inc. 490,000 11,545,625
Price Enterprises, Inc. 533,400 9,734,550
Rouse Co. 367,800 10,206,450
------------
32,613,463
------------
Restaurants .8%
aBertucci's, Inc. 151,100 944,375
a,cUnique Casual Restaurants, Inc. 764,500 4,969,250
aVICORP Restaurants, Inc. 280,000 4,340,000
------------
10,253,625
------------
Retail 7.6%
Cato Corp., Class A 860,000 7,363,750
aCrown Books Corp. 5,200 42,900
DEB Shops, Inc. 51,000 306,000
a,cDesigns, Inc. 848,000 3,710,000
aEvans, Inc. 201,100 527,888
cFred's, Inc. 712,000 15,842,000
a,cGood Guys!, Inc. 737,500 5,162,500
Haverty Furniture Co., Inc. 397,700 5,170,100
aHi-Lo Automotive, Inc. 257,900 725,344
aHomebase, Inc. 1,483,900 13,633,331
a,cJacobson Stores, Inc. 298,100 3,241,838
aJan Bell Marketing, Inc. 111,400 327,238
aKmart Corp. 590,000 7,780,625
aLechters, Inc. 733,500 3,988,406
aLittle Switzerland, Inc. 192,000 1,248,000
Noland Co. 44,700 1,058,831
aPriceSmart, Inc. 133,350 2,200,275
Shopko Stores, Inc. 150,000 3,759,375
aSyms Corp. 720,000 9,720,000
cWolohan Lumber Co. 520,000 7,215,000
------------
93,023,401
------------
Steel/Base Metals 7.2%
British Steel, Plc., ADR 10,000,000 26,466,345
cCommonwealth Industries, Inc. 1,127,300 19,868,663
LTV Corp. 3,400,000 41,437,500
------------
87,772,508
------------
Technology 4.4%
a,cAudiovox Corp., Class A 1,053,900 9,550,969
a,cAydin Corp. 270,000 3,526,875
aCasino Data Systems 212,100 1,033,988
aCentigram Communications Corp. 243,400 4,046,525
a,cCherry Corp., Class A 408,900 6,286,838
a,cCherry Corp., Class B 271,000 4,098,875
a,cESCO Electronics Corp. 840,000 14,437,500
Technology (cont.)
aIntergraph Corp. 95,000 $ 1,021,250
aStandard Microsystems Corp. 700,000 8,093,750
aVideo Lottery Technologies, Inc. 122,500 1,301,563
------------
53,398,133
------------
Textile/Apparel 4.3%
a,cChic By H.I.S., Inc. 756,000 5,811,750
cDelta Woodside Industries, Inc. 2,267,500 14,313,594
a,cDixie Group, Inc. 600,000 7,125,000
a,cFarah, Inc. 649,300 3,774,056
cGaran, Inc. 285,100 6,307,838
cHaggar Corp. 850,000 13,068,750
aHampton Industries, Inc. 30,400 273,600
Thomaston Mills, Inc., Class A 176,700 1,590,300
------------
52,264,888
------------
Transportation 3.9%
cInternational Shipholding Corp. 652,300 11,945,244
aMesa Air Group, Inc. 780,000 4,192,500
Overseas Shipholding Group, Inc. 900,000 22,275,000
Petroleum Helicopters, Inc., Non Voting 220,000 5,335,000
Petroleum Helicopters, Inc., Voting 77,500 1,821,250
aTransFinancial Holdings, Inc. 270,000 2,413,125
------------
47,982,119
------------
Utilities 6.1%
Central Maine Power Co. 1,136,300 15,055,975
Entergy Corp. 1,300,000 31,768,750
New York State Electic & Gas Corp. 226,700 6,050,056
aNiagara Mohawk Power Corp. 2,236,200 21,663,188
------------
74,537,969
------------
Company in Liquidation
Strawbridge & Clothier, Class A 330,500 --
------------
Total Common Stocks (Cost $849,363,974) 1,056,682,318
------------
PRINCIPAL
AMOUNT
---------------
Bonds .4%
Hechinger Co., senior notes, 6.95%, 10/15/03 (Cost $4,412,349) $ 7,000,000 5,285,000
------------
Total Long Term Investments (Cost $853,776,323) 1,061,967,318
------------
bRepurchase Agreement 14.1%
Joint Repurchase Agreement, 5.671%, 11/03/97, (Maturity Value $171,939,284) (Cost $171,858,066)
Aubrey G. Lanston & Co., Inc., (Maturity Value $2,354,948)
B.A. Securities, Inc., (Maturity Value $17,665,035)
Barclays de Zoete Wedd Securities, Inc., (Maturity Value $17,665,035)
Bear, Stearns & Co., Inc, (Maturity Value $10,599,021)
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $17,665,035)
Dresdner Kleinwort Benson North America, L.L.C., (Maturity Value $17,665,035)
Fuji Securities, Inc., (Maturity Value $17,665,035)
Lehman Brothers, Inc., (Maturity Value $17,665,035)
Sanwa Securities (USA) Co., L.P., (Maturity Value $17,665,035)
Swiss Bank Corp. Investment Bank, (Maturity Value $17,665,035)
UBS Securities, L.L.C., (Maturity Value $17,665,035)
Collateralized by U.S. Treasury Bills and Notes $171,858,066 $ 171,858,066
------------
Total Investments (Cost $1,025,634,389) 100.9% 1,233,825,384
Other Assets, less Liabilities (.9%) (10,872,624)
------------
Net Assets 100.0% $1,222,952,760
============
aNon-income producing.
bSee Note 1(d) regarding joint repurchase agreement.
cSee Note 7 regarding holdings of 5% voting securities.
</TABLE>
FRANKLIN VALUE INVESTORS TRUST
Financial Highlights (continued)
Franklin MicroCap Value Fund
Class I
-------------------------
Year Ended October 31,
-------------------------
1997 19961
-------------------------
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $18.44 $15.00
-------------------------
Income from investment operations:
Net investment income (loss) (.01) .14
Net realized and unrealized gains 6.33 3.41
-------------------------
Total from investment operations 6.32 3.55
-------------------------
Less distributions from:
Net investment income (.07) (.11)
Net realized gains (.40) --
-------------------------
Total distributions (.47) (.11)
-------------------------
Net asset value, end of year $24.29 $18.44
=========================
Total return* 35.05% 23.72%
Ratios/supplemental data
Net assets, end of year (000's) $191,638 $119,664
Ratios to average net assets:
Expenses 1.22% 1.24%**
Net investment income (loss) (.05%) 1.28%**
Portfolio turnover rate 21.33% 14.15%
Average commission rate paid*** $.0437 $.0476
1For the period December 12, 1995 (effective date) to October 31, 1996.
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
***Relates to purchases and sales of equity securities.
See notes to financial statements.
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments, October 31, 1997 (cont.)
<TABLE>
<CAPTION>
Franklin MicroCap Value Fund SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks (cont.)
Banks/Thrifts 10.1%
American National Bancorp, Inc. 49,000 $ 983,063
Bayonne Bancshares, Inc. 188,005 2,397,064
aCalumet Bancorp, Inc. 20,300 1,025,150
FFD Financial Corp. 35,000 638,750
Fidelity Financial of Ohio, Inc. 116,000 1,740,000
aFirst Financial Bancorp, Inc. 2,500 48,750
GA Financial, Inc. 150,300 2,930,850
aHallmark Capital Corp. 10,100 295,425
aHF Bancorp, Inc. 100,000 1,587,500
HF Financial Corp. 2,900 74,675
Landmark Bancshares, Inc. 51,700 1,189,100
Little Falls Bancorp, Inc. 70,000 1,277,500
MidCity Financial Corp. 600 2,088,000
aPeoples Home Savings Bank 13,400 232,825
aQuaker City Bancorp, Inc. 87,500 1,793,750
Somerset Group, Inc. 56,250 977,344
------------
19,279,746
------------
Builders/Building Supplies 7.4%
aeazer Homes USA, Inc. 82,400 1,575,900
aContinental Materials Corp. 50,000 1,353,125
a,cDevcon International Corp. 230,000 1,078,125
Engle Homes, Inc. 100,000 1,500,000
aGuy F. Atkinson Co. 31,000 137,563
Insteel Industries, Inc. 260,000 1,982,500
aM/I Schottenstein Homes, Inc. 161,500 2,240,813
a,cOriole Homes Corp., Class B 360,000 2,205,000
a,cTemtex Industries, Inc. 265,500 929,250
aWashington Homes, Inc. 238,500 1,103,063
------------
14,105,339
------------
Business Products & Services 3.0%
a,cAmerican Physicians Service Group, Inc. 247,000 1,729,000
a,cGovernment Technology Services, Inc. 400,200 1,950,975
Nashua Corp. 80,000 1,090,000
TAB Products Co. 77,500 939,688
------------
5,709,663
------------
Environmental Control 6.0%
cEcology and Environment, Inc., Class A 110,000 1,216,875
a,cEmcon 650,000 3,818,750
aFluor Daniel/GTI, Inc. 12,000 107,250
a,cGZA GeoEnvironmental Technologies, Inc. 235,000 1,057,500
a,cHarding Lawson Associates Group, Inc. 304,900 2,896,550
a,cRoy F. Weston, Inc., Class A 570,300 2,388,131
------------
11,485,056
------------
Financial Services .6%
a,cAllstate Financial Corp. 209,000 $ 1,208,292
------------
Food 2.7%
aButtrey Food and Drug Stores Co. 188,300 2,118,375
Genesee Corp., Class A 600 27,450
Genesee Corp., Class B 36,000 1,647,000
aHomeland Holding Corp. 44,400 369,075
Orange-co, Inc. 90,000 720,000
aVillage Super Market Inc., Class A 23,000 224,250
------------
5,106,150
------------
Furniture 3.2%
Allen Organ Co., Class B 42,000 1,795,500
aAmeriwood Industries International Corp. 167,000 1,033,313
aBaldwin Piano & Organ Co. 52,700 909,075
Pulaski Furniture Corp. 80,000 1,560,000
a,cRiver Oaks Furniture, Inc. 394,600 789,200
------------
6,087,088
------------
Insurance - Life/Specialty .1%
National Security Group, Inc. 9,500 206,625
------------
Insurance - Property/Casualty 7.2%
a,cACMAT Corp., Class A 150,000 2,746,875
American Indemnity Financial Corp. 70,000 875,000
Amwest Insurance Group, Inc. 159,000 2,265,750
aFarm Family Holdings, Inc. 50,000 1,550,000
Merchants Group, Inc. 500 9,688
Meridian Insurance Group, Inc. 128,000 2,336,000
Old Guard Group, Inc. 50,000 881,250
aProfessionals Insurance Co. Management Group 92,450 3,097,075
------------
13,761,638
------------
Manufacturing 10.4%
A. P. Green Industries, Inc. 163,600 2,106,350
aAmerican Pacific Corp. 356,300 2,739,056
a,cArt's-Way Manufacturing Co., Inc. 82,500 825,000
aAthey Products Corp. 154,000 654,500
Binks Sames Corp. 59,400 2,524,500
Courier Corp. 16,400 432,550
cEspey Manufacturing & Electronics Corp. 93,000 1,615,875
Monarch Machine Tool Co. 101,000 845,875
a,cMoore Products Co. 134,700 3,906,300
aOroAmerica, Inc. 51,300 288,563
Pitt-Des Moines, Inc. 45,000 1,552,500
TransPro, Inc. 15,700 126,581
Treadco, Inc. 222,200 2,333,100
------------
19,950,750
------------
Miscellaneous 1.7%
a,cAllou Health and Beauty, Inc., Class A 407,000 $ 3,179,688
------------
Natural Resources 2.8%
aCrystal Oil Co. 44,000 1,710,500
Enex Resources Corp. 23,600 289,100
Rochester & Pittsburgh Coal Co. 4,900 181,913
aZemex Corp. 323,400 3,213,778
------------
5,395,291
------------
Real Estate 1.2%
aCraig Corp. 50,500 953,188
Griffin Land & Nurseries, Inc. 94,600 1,359,875
------------
2,313,063
------------
Restaurants 3.6%
aBertucci's, Inc. 359,000 2,243,750
a,cSpaghetti Warehouse, Inc. 310,000 2,131,250
aUnique Casual Restaurants, Inc. 350,000 2,275,000
aVICORP Restaurants, Inc. 14,100 218,550
------------
6,868,550
------------
Retail 13.3%
aCatherines Stores Corp. 62,400 358,800
Cato Corp., Class A 25,000 214,063
aCosmetic Center, Inc., Class C 46,415 168,254
aCrown Books Corp. 240,800 1,986,600
DEB Shops, Inc. 150,000 900,000
aDesigns, Inc. 366,200 1,602,125
Fred's, Inc. 8,000 178,000
a,cGantos, Inc. 500,000 1,343,750
aGood Guys!, Inc. 294,300 2,060,100
a,cHi-Lo Automotive, Inc. 809,800 2,277,563
aJacobson Stores, Inc. 87,200 948,300
aJan Bell Marketing, Inc. 111,400 327,238
Jos. A. Bank Clothiers, Inc. 42,000 241,500
aLechters, Inc. 640,000 3,480,000
aLittle Switzerland, Inc. 320,000 2,080,000
Noland Co. 45,400 1,075,413
aS & K Famous Brands, Inc. 91,000 1,251,250
aSeaman Furniture Co. 52,500 1,273,125
aSyms Corp. 100,600 1,358,100
aTrak Auto Corp. 15,700 206,063
aUnited Retail Group, Inc. 37,900 111,331
Wolohan Lumber Co. 138,000 1,914,750
Zions Co-Op Mercantile Institution 7,200 108,000
------------
25,464,325
------------
Steels/Base Metals 1.6%
a,cKentucky Electric Steel, Inc. 450,000 3,150,000
------------
Technology 9.7%
a,cAerovox, Inc. 291,600 $ 1,622,025
Analysis & Technology, Inc. 20,000 435,000
aAydin Corp. 210,000 2,743,125
aCasino Data Systems 247,900 1,208,513
aCentigram Communications Corp. 23,000 382,375
aDatron Systems, Inc. 36,600 388,875
aDBA Systems, Inc. 192,000 1,464,000
aInterlink Computer Sciences, Inc. 17,000 78,625
aSPACEHAB, Inc. 137,700 1,402,819
aUniversal Electronics, Inc. 300,000 3,187,500
a,cVideo Lottery Technologies, Inc. 527,000 5,599,375
------------
18,512,232
------------
Textiles/Apparel 6.1%
a,dBibb Co. 72,000 562,500
aChic By H.I.S., Inc. 194,100 1,492,144
a,cConcord Fabrics, Inc., Class A 148,800 1,153,200
aDixie Group, Inc. 100,000 1,187,500
aFarah, Inc. 160,700 934,069
Garan, Inc. 120,500 2,666,063
aHampton Industries, Inc. 188,800 1,699,200
aNorton McNaughton, Inc. 155,800 954,275
Thomaston Mills, Inc., Class A 119,100 1,071,900
------------
11,720,851
------------
Transportation 5.5%
aCrowley Maritime Corp. 1,640 1,824,500
aKLLM Transport Services, Inc. 216,000 2,673,000
Petroleum Helicopters, Inc., Non Voting 113,000 2,740,250
Petroleum Helicopters, Inc., Voting 17,600 413,600
cTransFinancial Holdings, Inc. 336,000 3,003,000
------------
10,654,350
------------
Utilities .3%
Citizens Electric Co. 4,600 142,025
Maine Public Service Co. 42,200 527,500
669,525
------------
Total Long Term Investments (Cost $146,854,713) 184,828,222
------------
Joint Repurchase Agreements, 5.671%, 11/03/97 (Maturity Value $5,209,307) (Cost
$5,206,847) Aubrey G. Lanston & Co., Inc., (Maturity Value $71,349) B.A.
Securities, Inc., (Maturity Value $535,204) Barclays de Zoete Wedd Securites,
Inc., (Maturity Value $535,204) Bear, Stearns & Co., Inc., (Maturity Value
$321,122) Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value
$535,204) Dresdner Kleinwort Benson North America, L.L.C., (Maturity Value
$535,204) Fuji Securities, Inc., (Maturity Value $535,204) Lehman Brothers,
Inc., (Maturity Value $535,204) Sanwa Securities (USA) Co., L.P., (Maturity
Value $535,204) Swiss Bank Corp. Investment Bank, (Maturity Value $535,204)
UBS Securities, L.L.C., (Maturity Value $535,204)
Collateralized by U.S. Treasury Bills and Notes $5,206,847 $ 5,206,847
------------
Total Investments (Cost $152,061,560) 99.2% 190,035,069
Other Assets, less Liabilities .8% 1,602,885
------------
Net Assets 100.0% $191,637,954
============
aNon-income producing.
bSee Note 1(d) regarding joint repurchase agreement.
cSee Note 7 regarding holdings of 5% voting securities.
dSee Note 6 regarding restricted securities.
</TABLE>
FRANKLIN VALUE INVESTORS TRUST
Financial Highlights (continued)
Franklin Value Fund
Class I
------------------------------
Year Ended October 31,
------------------------------
1997 19962
------------------------------
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $17.15 $15.00
----------------------
Income from investment operations:
Net investment income .08 .05
Net realized and unrealized gains 7.90 2.15
----------------------
Total from investment operations 7.98 2.20
----------------------
Less distributions from:
Net investment income (.08) (.05)
Net realized gains (.37) --
----------------------
Total distributions (.45) (.05)
----------------------
Net asset value, end of year $24.68 $17.15
======================
Total return * 47.43% 14.69%
Ratios/supplemental data
Net assets, end of year (000's) $78,897 $7,828
Ratios to average net assets:
Expenses 1.32% 1.35%**
Expenses excluding waiver and payments by affiliate 1.41% 2.87%**
Net investment income .27% .57%**
Portfolio turnover rate 13.92% 32.52%
Average commission rate paid*** $.0474 $.0464
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
***Relates to purchases and sales of equity securities.
2For the period March 11, 1996 (effective date) to October 31, 1996.
Class II
------------------------------
Year Ended October 31,
------------------------------
1997 19963
------------------------------
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year $17.14 $16.38
-----------------------
Income from investment operations:
Net investment income (loss) (.02) .01
Net realized and unrealized gains 7.84 .76
-----------------------
Total from investment operations 7.82 .77
-----------------------
Less distributions from:
Net investment income -- (.01)
Net realized gains (.37) --
-----------------------
Total distributions (.37) (.01)
-----------------------
Net asset value, end of year $24.59 $17.14
=======================
Total return* 46.40% 4.68%
Ratios/supplemental data
Net assets, end of year (000's) $21,554 $434
Ratios to average net assets:
Expenses 1.87% 2.00%**
Expenses excluding waiver and payments by affiliate 1.96% 3.52%**
Net investment income (.30%) (.08%)**
Portfolio turnover rate 13.92% 32.52%
Average commission rate paid*** $.0474 $.0464
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
***Relates to purchases and sales of equity securities.
3For the period September 1, 1996 (effective date) to October 31, 1996.
Advisor Class
----------------
19974
----------------
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $18.75
-------------
Income from investment operations:
Net investment income .10
Net realized and unrealized gains 5.95
-------------
Total from investment operations 6.05
-------------
Less distributions from:
Net investment income (.08)
-------------
Net asset value, end of period $24.72
=============
Total return * 32.35%
Ratios/supplemental data
Net assets, end of period (000's) $4,495
Ratios to average net assets:
Expenses .98%**
Expenses excluding waiver and payments by affiliate 1.07%**
Net investment income .59%**
Portfolio turnover rate 13.92%
Average commission rate paid*** $.0474
*Total return is not annualized.
**Annualized
***Relates to purchases and sales of equity securities.
4For the period January 2, 1997 (effective date) to October 31, 1997.
FRANKLIN VALUE INVESTORS TRUST
Statement of Investments, October 31, 1997 (cont.)
<TABLE>
<CAPTION>
Franklin Value Fund (cont.) SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------
Common Stocks (cont.)
Banks/Thrifts 1.7%
<S> <C> <C>
BankAtlantic Bancorp, Inc. , Class A 22,687 $ 311,945
BankAtlantic Bancorp, Inc. , Class B 7,000 97,125
aBank Plus Corp. 41,200 494,400
Fidelity Financial of Ohio, Inc. 2,000 30,000
aFirst International Bancorp, Inc. 9,500 154,375
aFlagstar Bancorp, Inc. 30,000 566,250
GA Financial, Inc. 5,000 97,500
------------
1,751,595
------------
Builders/Building Products 14.8%
aAmerican Buildings Co. 5,300 148,400
aBeazer Homes USA, Inc. 39,900 763,089
aBelmont Homes, Inc. 79,500 587,553
Butler Manufacturing Co. 85,000 2,879,375
Coachmen Industries, Inc. 110,000 2,186,250
D.R. Horton, Inc. 78,000 1,170,000
a,cEngel General Developers, Ltd. 248,000 2,061,500
aGiant Cement Holding, Inc. 2,100 50,925
aKevco, Inc. 43,300 703,625
aMorgan Products, Ltd. 220,000 1,457,500
Patrick Industries, Inc. 32,500 471,250
aPerini Corp. 115,000 1,049,375
Ryland Group, Inc. 43,200 772,200
aSouthern Energy Homes, Inc. 104,200 957,338
aU.S. Home Corp. 7,000 248,500
------------
15,506,880
------------
Business Products/Services 2.0%
aAmerican Pacific Corp. 20,400 156,825
aAmerican Physicians Service Group, Inc. 18,800 131,600
Ennis Business Forms 116,400 1,222,200
aValley National Gases, Inc. 50,000 550,000
------------
2,060,625
------------
Financial Services 6.5%
aFirst Sierra Financial, Inc. 20,000 395,000
aHomeSide, Inc. 31,500 844,594
aMatrix Capital Corp. 113,000 1,723,250
Ocwen Asset Investment Corp. 145,900 2,899,762
aWilshire Financial Services Group, Inc. 31,800 961,950
------------
6,824,556
------------
Food 1.3%
Nash-Finch Co. 21,800 438,725
Schultz Sav-O Stores, Inc. 56,550 890,663
------------
1,329,388
------------
Furniture .5%
Flexsteel Industries, Inc. 46,200 $ 519,750
------------
Health Care 2.5%
aMatrix Pharmaceutical, Inc. 77,000 308,000
aOrthoLogic Corp. 375,300 1,923,413
West Company, Inc. 13,400 450,575
------------
2,681,988
------------
Insurance - Life/Specialty 1.9%
ALLIED Life Financial Corp. 67,600 1,487,200
American National Insurance Co. 1,600 153,600
FBL Financial Group, Inc., Class A 3,500 138,688
Presidential Life Corp. 10,200 202,725
------------
1,982,213
------------
Insurance - Property/Casualty 9.1%
aFarm Family Holdings, Inc. 7,800 241,800
Financial Security Assurance Holdings, Ltd. 3,900 169,650
Guaranty National Corp. 38,900 1,388,244
Harleysville Group, Inc. 1,600 40,800
Leucadia National Corp. 6,000 207,750
MMI Companies, Inc. 33,500 835,406
aPAULA Financial 20,000 505,000
Penn-America Group, Inc. 23,600 435,125
The PMI Group, Inc. 22,000 1,329,625
aProfessional Insurance Co. Management Group 22,820 764,470
RLI Corp. 5,200 215,800
Scor (France) 3,700 171,842
aThe Seibels Bruce Group, Inc. 219,000 1,669,875
aSymons International Group, Inc. 34,000 688,500
Terra Nova (Bermuda) Holdings, Ltd., Class A 33,000 853,875
------------
9,517,762
------------
Manufacturing 15.0%
Ameron International Corp. 3,100 211,575
aAstec Industries, Inc. 12,000 204,000
aAtchison Casting Corp. 40,000 822,500
Binks Sames Corp. 10,000 425,000
aCannondale Corp. 75,900 1,679,289
Carpenter Technology Corp. 11,000 532,125
Commercial Intertech Corp. 42,000 682,500
aDenison International, Plc. (United Kingdom) 65,000 1,226,875
aEkco Group, Inc. 81,100 562,631
Flowserve Corp. 22,000 654,500
aGehl Co. 15,000 315,234
aGlobal Industrial Technologies, Inc. 77,000 1,313,813
Haskel International, Inc., Class A 159,500 1,973,813
JLG Industries, Inc. 208,000 2,639,000
aKeystone Consolidated Industries, Inc. 61,800 803,400
Manufacturing (cont.)
Oshkosh Truck Corp., Class B 18,300 $ 301,950
Schweitzer-Manduit International, Inc. 15,500 652,938
United Industrial Corp. 75,500 788,030
------------
15,789,173
------------
Miscellaneous .7%
aAllou Health and Beauty, Inc., Class A 18,900 147,657
aAztar Corp. 60,000 427,500
aDevon Group, Inc. 4,500 176,625
------------
751,782
------------
Natural Resources 1.6%
aAtwood Oceanics, Inc. 3,300 365,475
aOil-Dri Corporation of America 73,600 1,260,400
Rochester & Pittsburgh Coal Co. 2,500 92,813
------------
1,718,688
------------
Real Estate .3%
Rouse Co. 12,500 346,875
------------
Retail 6.0%
aAPS Holding Corp., Class A 127,000 952,500
aBrookstone, Inc. 81,200 982,017
Cato Corp., Class A 100,000 856,250
Haverty Furniture Co., Inc. 80,000 1,040,000
aLittle Switzerland, Inc. 31,000 201,500
aRepublic Automotive Parts, Inc. 60,000 945,000
aS & K Famous Brands, Inc. 12,000 165,000
Stanhome, Inc. 1,400 39,113
aSyms Corp. 81,000 1,093,500
------------
6,274,880
------------
Steels/Base Metals 4.3%
Commonwealth Industries, Inc. 94,200 1,660,275
LTV Corp. 233,000 2,839,688
------------
4,499,963
------------
Technology 12.1%
Analysis & Technology, Inc. 8,200 178,350
Astro-Med, Inc. 31,600 272,550
aAydin Corp. 19,400 253,413
Elbit Systems, Ltd. (Israel) 150,000 1,762,500
aESCO Electronics Corp. 43,000 739,062
aInterlink Computer Sciences, Inc. 104,000 481,000
aKomag, Inc. 113,000 1,956,312
aManchester Equipment Co., Inc. 63,000 259,875
aPremenos Technology Corp. 70,900 903,975
aRead-Rite Corp. 80,600 1,601,925
aSPACEHAB, Inc. 151,000 1,538,313
aSpectralink Corp. 27,300 98,965
Technology (cont.)
aSynopsys, Inc. 19,000 $ 738,625
aThermoTrex Corp. 22,700 522,100
aUltrak, Inc. 122,900 1,413,350
------------
12,720,315
------------
Textile/Apparel .7%
aChic By H.I.S., Inc. 20,000 153,750
aRidgeview, Inc. 80,000 540,000
------------
693,750
------------
Tobacco 5.6%
DIMON, Inc. 123,800 3,211,064
aStandard Commercial Corp. 159,000 2,653,313
------------
5,864,377
------------
Transportation 3.1%
aFritz Companies, Inc. 71,000 980,688
Kenan Transport Co. 18,650 445,268
aRush Enterprises, Inc. 23,000 198,375
Teekay Shipping Corp. 50,000 1,600,000
------------
3,224,331
------------
Utilities .6%
aNRG Generating (U.S.), Inc. 3,900 76,050
Unicom Corp. 21,100 590,800
------------
666,850
------------
Total Common Stocks (Cost $86,105,212) 94,725,741
------------
PRINCIPAL
AMOUNT
--------------
Corporate Bonds .3%
Hechinger Co., senior notes, 6.95%, 10/15/03 (Cost $303,333) $ 500,000 377,500
Convertible Corporate Bonds 1.0%
SPACEHAB, Inc., cvt. sub. notes, 144A, 8.00%, 10/15/07 (Cost $1,000,000) 1,000,000 1,005,000
------------
Total Bonds (Cost $1,303,333) 1,382,500
------------
Total Long Term Investments (Cost $87,408,545) 96,108,241
------------
Joint Repurchase Agreements, 5.671%, 11/01/97, (Maturity Value $9,697,645)
(Cost $9,693,064) Aubrey G. Lanston & Co., Inc., (Maturity Value $132,823) B.
A. Securities, Inc., (Maturity Value $996,336) Barclays de Zoete Wedd
Securities, Inc., (Maturity Value $996,336) Bear, Stearns & Co., Inc.,
(Maturity Value $597,801) Donaldson, Lufkin & Jenrette Securities Corp.,
(Maturity Value $996,336) Dresdner Kleinwort Benson North America, L.L.C.,
(Maturity Value $996,336) Fuji Securities, Inc., (Maturity Value $996,336)
Lehman Brothers, Inc., (Maturity Value $996,336) Sanwa Securities (USA) Co.,
L.P., (Maturity Value $996,335) Swiss Bank Corp. Investment Bank, (Maturity
Value $996,335) UBS Securities L.L.C., (Maturity Value $996,335)
Collateralized by U.S. Treasury Bills & Notes $9,693,064 $ 9,693,064
------------
Total Investments (Cost $97,101,609) 100.8% 105,801,305
Other Assets, less Liabilities (.8%) (854,949)
------------
Net Assets 100.0% $104,946,356
============
aNon-income producing
bSee Note 1 (d) regarding joint repo purchase agreement.
cSee Note 7 regarding holdings of 5% voting securities.
dSee Note 6 regarding restricted securities.
</TABLE>
FRANKLIN VALUE INVESTORS TRUST
Financial Statements
Statements of Assets and Liabilities
October 31, 1997
<TABLE>
<CAPTION>
Franklin Franklin
Balance Sheet MicroCap Franklin
Investment Fund Value Fund Value Fund
--------------------------------------------------
Assets:
Investments in securities:
<S> <C> <C> <C>
Cost $ 853,776,323 $146,854,713 $ 87,408,545
=================================================
Value 1,061,967,318 184,828,222 96,108,241
Repurchase agreements, at value and cost 171,858,066 5,206,847 9,693,064
Cash 5,963,912 889,594 1,108,068
Receivables:
Investment securities sold -- 721,462 225,344
Capital shares sold 2,064,411 717,513 1,748,412
Dividends and interest 795,251 92,230 46,643
Other assets 562,283 -- 14,580
--------------------------------------------------
Total assets 1,243,211,241 192,455,868 108,944,352
--------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 16,394,994 513,404 1,345,969
Capital shares redeemed 345,466 41,637 2,447,150
Affiliates 1,932,068 250,283 151,900
Shareholders 1,533,402 4,030 35,244
Other liabilities 52,551 8,560 17,733
--------------------------------------------------
Total liabilities 20,258,481 817,914 3,997,996
--------------------------------------------------
Net assets, at value $1,222,952,760 $191,637,954 $104,946,356
==================================================
Net assets consist of:
Undistributed net investment income $ 2,723,942 $-- $ 4,129
Net unrealized appreciation 208,189,577 37,973,509 8,699,696
Accumulated net realized gain 65,037,581 11,861,695 1,075,252
Capital shares 947,001,660 141,802,750 95,167,279
--------------------------------------------------
Net assets, at value $1,222,952,760 $191,637,954 $104,946,356
==================================================
</TABLE>
<TABLE>
<CAPTION>
Franklin Franklin
Balance Sheet MicroCap Franklin
Investment Fund Value Fund Value Fund
--------------------------------------------------
Class I:
<S> <C> <C> <C>
Net assets, at value $1,222,952,760 $191,637,954 $78,897,408
===================================================
Shares outstanding 34,722,428 7,889,001 3,197,257
===================================================
Net asset value per share* $35.22 $24.29 $24.68
===================================================
Maximum offering price (net asset value per share / 98.5%, 95.5%, and
95.5%, respectively) $35.76 $25.43 $25.84
===================================================
Class II:
Net assets, at value -- -- $21,553,703
===================================================
Shares outstanding -- -- 876,420
===================================================
Net asset value per share* -- -- $24.59
===================================================
Maximum offering price (net asset value per share / 99%) -- -- $24.84
===================================================
Advisor Class:
Net assets, at value -- -- $4,495,245
===================================================
Shares outstanding -- -- 181,839
===================================================
Net asset value per share and maximum offering price per share -- -- $24.72
===================================================
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
FRANKLIN VALUE INVESTORS TRUST
Financial Statements (continued)
Statements of Operations
for the year ended October 31, 1997
<TABLE>
<CAPTION>
Franklin Franklin
Balance Sheet MicroCap Franklin
Investment Fund Value Fund Value Fund
- -----------------------------------------------------------------------------------------------------------
Investment income:
Dividends:
<S> <C> <C> <C>
Unaffiliated issuers* $ 11,053,980 $ 1,031,430 $ 346,899
Non-controlled affiliated issuers (Note 7) 2,845,040 100,300 --
Interest 9,850,501 581,647 221,911
------------------------------------
Total investment income 23,749,521 1,713,377 568,810
------------------------------------
Expenses:
Management fees (Note 3) 4,247,685 1,104,784 267,392
Distribution fees (Note 3)
Class I 4,067,885 333,050 96,920
Class II -- -- 44,590
Transfer agent fees (Note 3) 772,373 199,917 42,750
Custodian fees 21,752 1,784 371
Reports to shareholders 228,128 57,540 13,590
Registration and filing fees 142,477 79,141 42,581
Professional fees 52,134 5,845 4,024
Trustees' fees and expenses 27,704 4,982 1,168
Other 21,584 4,679 13,502
------------------------------------
Total expenses 9,581,722 1,791,722 526,888
Expenses waived/paid by affiliate (Note 3) -- -- (31,077)
------------------------------------
Net expenses 9,581,722 1,791,722 495,811
------------------------------------
Net investment income (loss) 14,167,799 (78,345) 72,999
------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments in unaffiliated issues 54,148,433 12,151,934 1,067,182
Investments in non-controlled affiliated issues (Note 7) 5,818,865 -- --
Closed-end funds distributions 5,383,631 -- --
Foreign currency transactions (540) -- 26
------------------------------------
Net realized gain 65,350,389 12,151,934 1,067,208
------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 165,463,665 33,546,997 8,386,549
Translation of assets and liabilities
denominated in foreign currencies (1,418) -- --
------------------------------------
Net unrealized appreciation 165,462,247 33,546,997 8,386,549
------------------------------------
Net realized and unrealized gain 230,812,636 45,698,931 9,453,757
------------------------------------
Net increase in net assets resulting from operations $244,980,435 $45,620,586 $9,526,756
====================================
</TABLE>
*Net of foreign taxes of $207,191 and $2,188 for the Franklin Balance Sheet
Investment Fund and Franklin Value Fund, respectively.
See notes to financial statements.
FRANKLIN VALUE INVESTORS TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the years ended October 31, 1997 and 1996
<TABLE>
<CAPTION>
Franklin Balance Franklin MicroCap Franklin
Sheet Investment Fund Value Fund Value Fund
------------------------------------------------------------------------------------------
1997 1996 1997 1996* 1997 1996**
------------------------------------------------------------------------------------------
Increase in net assets:
Operations:
Net investment
<S> <C> <C> <C> <C> <C> <C>
income (loss) $ 14,167,799 $ 9,544,326 $ (78,345) $ 723,299 $ 72,999 $ 14,719
Net realized gain from
investments and foreign
currency transactions 65,350,389 53,678,790 12,151,934 2,640,347 1,067,208 209,875
Net unrealized appreciation
on investments and
translation of assets and
liabilities denominated
in foreign currencies 165,462,247 19,022,910 33,546,997 4,426,512 8,386,549 313,147
-------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 244,980,435 82,246,026 45,620,586 7,790,158 9,526,756 537,741
Distributions to shareholders from:
Net investment income:
Class I (12,631,986) (8,792,315) (152,942) (496,647) (66,816) (13,553)
Advisor Class -- -- -- -- (3,903) --
Net realized gains:
Class I (53,996,143) (17,015,078) (2,930,586) -- (192,201) --
Class II -- -- -- -- (10,143) --
-------------------------------------------------------------------------------------------
Total distributions to
shareholders (66,628,129) (25,807,393) (3,083,528) (496,647) (273,063) (13,553)
Capital share transactions
(Note 2):
Class I 387,598,329 213,023,960 29,437,190 112,370,195 63,130,877 7,305,688
Class II -- -- -- -- 20,208,077 431,897
Advisor Class -- -- -- -- 4,091,936 --
------------------------------------------------------------------------------------------
Total capital share transactions 387,598,329 213,023,960 29,437,190 112,370,195 87,430,890 7,737,585
Net increase in
net assets 565,950,635 269,462,593 71,974,248 119,663,706 96,684,583 8,261,773
Net assets:
Beginning of year 657,002,125 387,539,532 119,663,706 -- 8,261,773 --
------------------------------------------------------------------------------------------
End of year $1,222,952,760 $657,002,125 $191,637,954 $119,663,706 $104,946,356 $8,261,773
==========================================================================================
Undistributed net investment
income included in net assets:
End of year $ 2,723,942 $ 1,188,669 $-- $ 231,287 $ 4,129 $ 627
==========================================================================================
</TABLE>
*For the period December 12, 1995 (effective date) to October 31, 1996.
**For the period March 11, 1996 (effective date) to October 31, 1996.
See notes to financial statements.
FRANKLIN VALUE INVESTORS TRUST
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
a. Organization:
Franklin Value Investors Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end, non-diversified investment company,
consisting of three series (the Funds). The Funds' investment policy is to
obtain capital growth and income.
The following summarizes the Funds' significant accounting policies.
b. Security Valuation:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures approved by the Board of
Trustees.
c. Foreign Currency Translation:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Funds do not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the recorded amounts of
dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
d. Joint Repurchase Agreement:
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. 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 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 October 31, 1997, all outstanding
repurchase agreements held by the Funds had been entered into on that date.
e. Income Taxes:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute all of its taxable income.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
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. Other expenses are
charged to each Fund on a specific identification basis.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
g. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
Effective September 1, 1996, the Franklin Value Fund offered two classes of
shares: Class I and Class II. Outstanding shares before that date were
designated Class I shares. Effective January 2, 1997, the Franklin Value Fund
offered Advisor Class shares to qualified investors. The shares have the same
rights except for their initial sales load, distribution fees, voting rights on
matters affecting a single class and the exchange privilege of each class.
2. CAPITAL STOCK (cont.)
At October 31, 1997, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
Franklin Balance Franklin MicroCap Franklin
Sheet Investment Fund Value Fund* Value Fund**
------------------------------------------------------------------------------------
Class I Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------------
Year ended October 31, 1997
<S> <C> <C> <C> <C> <C> <C>
Shares sold 14,624,224 $470,566,560 2,302,643 $ 48,279,959 3,359,946 $77,528,012
Shares issued on reinvestment
of distributions 2,029,002 58,119,661 148,129 2,750,756 12,980 240,426
Shares redeemed (4,466,272) (141,087,892) (1,050,071) (21,593,525) (632,076) (14,637,561)
------------------------------------------------------------------------------------
Net increase 12,186,954 $387,598,329 1,400,701 $ 29,437,190 2,740,850 $63,130,877
====================================================================================
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 on 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
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class II Shares Amount
---------------------
Year ended October 31, 1997
<S> <C> <C>
Shares sold 886,618 $21,017,778
Shares issued on reinvestment of distributions 446 8,061
Shares redeemed (35,962) (817,762)
---------------------
Net increase 851,102 $20,208,077
=====================
Year ended October 31, 1996***
Shares sold 25,854 $ 440,955
Shares redeemed (536) (9,058)
---------------------
Net increase 25,318 431,897
=====================
Advisor Class Shares Amount
----------------------
Year ended October 31, 1997****
Shares sold 217,368 $ 4,869,043
Shares issued on reinvestment of distributions 187 3,903
Shares redeemed (35,716) (781,010)
---------------------
Net increase 181,839 $ 4,091,936
=====================
</TABLE>
*Effective date of registration was December 12, 1995.
**Effective date of registration was March 11, 1996.
***Effective date of Class II shares was September 1, 1996.
****Effective date of Advisor Class shares was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or trustees of
Franklin Advisory Services, Inc. (Advisory Services), Franklin/Templeton
Distributors, Inc. (Distributors), Franklin Templeton Services, Inc. (FT
Services), and Franklin/Templeton Investor Services, Inc. (Investor Services)
the Fund's investment manager, principal underwriter, administrative manager,
and transfer agent, respectively.
The Funds pay an investment management fee to Advisory Services based on the
average net assets of the Funds as follows:
Franklin Balance Sheet
Investment Fund
Annualized Fee RateDaily Net Assets
----------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
Franklin MicroCap
Value Fund
Annualized Fee Rate Daily Net Assets
---------------------------------------------------------------------
.750% Daily net assets
Franklin Value Fund
Annualized Fee Rate Daily Net Assets
---------------------------------------------------------------------
.750% First $500 million
.625% Over $500 million, up to and including $1 billion
.500% In excess of $1 billion
Under an agreement with Advisory Services, FT Services provides administrative
services to the Funds. The fee is paid by Advisory Services based on average
daily net assets, and is not an additional expense of the Funds.
Advisory Services agreed in advance to waive management fees for the Franklin
Value Fund, as noted in the Statement of Operations.
The Franklin Value Fund reimburses Distributors up to .35% and 1.00% per year of
the average daily net assets of Class I and Class II, respectively, and the
Franklin Balance Sheet Investment Fund and the Franklin MicroCap Fund reimburses
Distributors up to .50% and .25% per year of the average daily net assets,
respectively, for costs incurred in marketing the Funds' shares.
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the year ended October 31, 1997 as
follows:
Franklin Franklin Franklin
Balance Sheet Microcap Value
Investment Fund Value Fund Fund
---------------------------------------------------------------------
Net commisions paid $740,857 $72,749 $127,041
Contingent deferred sales charges $-- $-- $ 4,616
The funds paid transfer agent fees of $1,015,040, of which $864,887 was paid to
Investor Services.
4. INCOME TAXES
At October 31, 1997, the net unrealized appreciation based on the cost of
investments for income tax purposes was as follows:
Franklin Franklin Franklin
Balance Sheet MicroCap Value
Investment Fund Value Fund Fund
------------------------------------------------------------------------
Investments at cost $1,025,635,952 $152,088,925 $97,101,609
============================================
Unrealized appreciation $ 221,672,826 $ 43,139,379 $11,082,847
Unrealized depreciation (13,483,394) (5,193,235) (2,383,151)
============================================
Net unrealized appreciation $ 208,189,432 $ 37,946,144 $ 8,699,696
============================================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions. Net realized
capital gains differ for financial statement and tax purposes primarily due to
differing treatment of wash sales and foreign currency transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended October 31, 1997 were as follows:
Franklin Franklin Franklin
Balance Sheet MicroCap Value
Investment Fund Value Fund Fund
------------------------------------------------------------------------
Purchases $477,380,912 $80,014,635 $83,284,021
Sales $180,043,541 $29,105,926 $ 4,739,184
6. RESTRICTED SECURITIES
The Funds may purchase securities through a private offering that generally
cannot be sold to the public without prior registration under the Securities Act
of 1933. The costs of registering such services are paid by the issuer.
Restricted securities held at October 31, 1997 are as follows:
<TABLE>
<CAPTION>
Shares Issuer Acquisition Date Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Microcap Value Fund
<S> <C> <C> <C>
72,000 Bibb Co. (.3% of Net Assets) 10/16/96 - 10/24/96 $596,874 $562,500
========
Face
Amount
Franklin Value Fund
$1,000,000 SPACEHAB, Inc., cvt. sub. notes, 144A, 8.00%, 10/15/07 (1.0% of Net Assets) 2/06/97 - 10/31/97 $1,000,000 $1,005,000
========
</TABLE>
7. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which a Fund owns 5% or more of the outstanding voting
securities. Investments in affiliated companies at October 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Balance of Shares Number of Realized
Shares Held at Gross Gross Shares Held at Value at Dividend Capital Gains
Name of Issuer: October 31, 1996 Additions Reductions October 31, 1997O ctober 31, 1997 Income (Losses)
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Balance Sheet
Investment Fund
<S> <C> <C> <C> <C> <C> <C> <C>
ACMAT Corp., Class A 295,000 -- -- 295,000 $ 5,402,188 $ -- $ --
A.P. Green Industries, Inc. 400,900 120,400 -- 521,300 6,711,738 71,016 --
Allen Organ Co., Class B 18,300 64,700 -- 83,000 3,548,250 19,672 --
American Pacific Corp. 370,400 50,700 -- 421,100 3,237,206 -- --
Audiovox Corp., Class A -- 1,053,900 -- 1,053,900 9,550,969 -- --
Aydin Corp. 209,500 60,500 -- 270,000 3,526,875 -- --
Aztar Corp. 1,100,400 2,109,600 -- 3,210,000 22,871,263 -- --
Buttrey Food and Drug Stores Co. 467,700 -- -- 467,700 5,261,625 -- --
Castle & Cooke, Inc. -- 1,270,000 -- 1,270,000 22,621,875 -- --
Cherry Corp., Class A 295,100 113,800 -- 408,900 6,286,838 -- --
Cherry Corp., Class B 219,900 51,100 -- 271,000 4,098,875 -- --
Chic By H.I.S., Inc. 756,000 -- -- 756,000 5,811,750 -- --
Commonwealth Industries, Inc. 675,500 451,800 -- 1,127,300 19,868,663 157,690 --
Crown Central Petroleum, Class B 500,000 -- -- 500,000 9,468,750 -- --
Cyrk, Inc. -- 1,171,000 -- 1,171,000 14,930,250 -- --
Delta Woodside Industries, Inc. 1,385,200 882,300 -- 2,267,500 14,313,594 45,700 --
Designs, Inc. -- 848,000 -- 848,000 3,710,000 -- --
Dixie Group, Inc. 600,000 -- -- 600,000 7,125,000 -- --
Echelon International
Corporation, Inc. -- 490,000 -- 490,000 11,545,625 -- --
Ecology and Environmental,
Inc., Class A 260,000 -- -- 260,000 2,876,250 83,200 --
Enex Resources Corp. 104,500 -- -- 104,500 1,280,125 31,350 --
ESCO Electronics Corp. 498,000 342,000 -- 840,000 14,437,500 -- --
Farah, Inc. -- 649,300 -- 649,300 3,774,056 -- --
Fidelity Bancorp, Inc. 144,500 -- -- 144,500 3,477,031 46,240 --
First Financial Bancorp, Inc. 24,000 -- -- 24,000 468,000 -- --
Fred's, Inc. 670,600 41,400 -- 712,000 15,842,000 139,700 --
Garan, Inc. 267,300 17,800 -- 285,100 6,307,838 277,980 --
Good Guys!, Inc. 500,000 240,000 2,500 737,500 5,162,500 -- (1,563)
Haggar Corp. 800,000 50,000 -- 850,000 13,068,750 125,000 --
Insteel Industries, Inc. 424,800 140,500 -- 565,300 4,310,413 110,466 --
International Shipholding Corp. 309,800 342,500 -- 652,300 11,945,244 109,569 --
Jacobson Stores, Inc. 297,200 900 -- 298,100 3,241,838 -- --
Kaneb Services, Inc. -- 2,463,000 -- 2,463,000 13,546,500 -- --
Matrix Services Co. 498,000 -- 240,500 257,500 * -- 1,269,081
M.D.C. Holdings, Inc. -- 1,069,300 -- 1,069,300 11,895,963 975 --
Merchants Group, Inc. 254,500 3,300 -- 257,800 4,994,875 51,230 --
Monarch Machine Tool Co. 250,000 -- -- 250,000 $ 2,093,750 $ 50,000 $--
Nash-Finch Co. 600,000 99,100 -- 699,100 14,069,388 455,175 --
Oshkosh Truck Corp. 483,000 -- -- 483,000 7,969,500 241,500 --
Pitt-Des Moines, Inc. 18,900 158,600 -- 177,500 6,123,750 144,375 --
Pulaski Furniture Corp. 192,000 -- -- 192,000 3,744,000 130,560 --
Rochester & Pittsburgh Coal Co. 101,200 70,800 -- 172,000 6,385,500 74,070 --
Ryland Group, Inc. 439,700 395,100 -- 834,800 14,922,050 283,570 --
Stewart Information Services Corp. 300,000 165,000 -- 465,000 11,944,688 82,000 --
Super Food Services, Inc. 886,500 -- 886,500 -- * -- 4,551,347
U.S. Home Corp. 547,900 152,900 -- 700,800 24,878,400 -- --
Unique Casual Restaurants, Inc. -- 764,500 -- 764,500 4,969,250 -- --
Wolohan Lumber Co. 385,500 134,500 -- 520,000 7,215,000 114,002 --
-------------------------------------
Total Affiliated Issuers $400,835,493 $2,845,040 $5,818,865
=====================================
Franklin MicroCap Value Fund
ACMAT Corp., Class A -- 150,000 -- 150,000 $ 2,746,875 $-- $--
Aerovox, Inc. -- 291,600 -- 291,600 1,622,025 -- --
Allou Health and Beauty, Inc., Class A 234,600 172,400 -- 407,000 3,179,688 -- --
Allstate Financial Corp. 127,000 82,000 -- 209,000 1,208,292 -- --
American Physicians
Service Group, Inc. 230,000 17,000 -- 247,000 1,729,000 -- --
Art's-Way Manufacturing Co., Inc. 82,500 -- -- 82,500 825,000 -- --
Concord Fabrics, Inc., Class A 23,900 124,900 -- 148,800 1,153,200 -- --
Devcon International Corp. 153,000 77,000 -- 230,000 1,078,125 -- --
Ecology and Environment,
Inc., Class A 109,600 400 -- 110,000 1,216,875 35,200 --
Emcon 305,000 345,000 -- 650,000 3,818,750 -- --
Espey Manufacturing
& Electronics Corp. 54,800 38,200 -- 93,000 1,615,875 65,100 --
Gantos, Inc. 8,500 491,500 -- 500,000 1,343,750 -- --
Government Technology
Services, Inc. 138,300 261,900 -- 400,200 1,950,975 -- --
GZA GeoEnvironmental
Technologies, Inc. 500 234,500 -- 235,000 1,057,500 -- --
Harding Lawson Associates
Group, Inc. 145,000 159,900 -- 304,900 2,896,550 -- --
Hi-Lo Automotive, Inc. 752,000 57,800 -- 809,800 2,277,563 -- --
Kentucky Electric Steel, Inc. 100,000 350,000 -- 450,000 3,150,000 -- --
Moore Products Co. 134,700 -- -- 134,700 3,906,300 -- --
Oriole Homes Corp., Class B 360,000 -- -- 360,000 2,205,000 -- --
River Oaks Furniture, Inc. 334,400 60,200 -- 394,600 789,200 -- --
Roy F. Weston, Inc., Class A 245,000 325,300 -- 570,300 2,388,131 -- --
Spaghetti Warehouse, Inc. -- 310,000 -- 310,000 $ 2,131,250 $-- $--
Temtex Industries, Inc. 265,500 -- -- 265,500 929,250 -- --
TransFinancial Holdings, Inc. -- 336,000 -- 336,000 3,003,000 -- --
Video Lottery Technologies, Inc. 526,900 100 -- 527,000 5,599,375 -- --
-------------------------------------
Total Affiliated Issuers $ 53,821,549 $ 100,300 $--
=====================================
Franklin Value Fund --
Engel General Developers, Inc. -- 248,000 -- 248,000 $ 2,061,500 $-- $--
=====================================
</TABLE>
*As of October 31, 1997 no longer an affiliate.
To the Shareholders and Board of Trustees
of Franklin Value Investors Trust:
We have audited the accompanying statements of assets and liabilities of the
three funds comprising the Franklin Value Investors Trust including each Fund's
statement of investments, as of October 31, 1997, and the related statement of
operations, the statements of changes in net assets, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
three funds comprising Franklin Value Investors Trust as of October 31, 1997,
the results of their operations, the changes in their net assets, and their
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
December 3, 1997
FRANKLIN VALUE INVESTORS TRUST
Tax Information
Under Section 854(b)(2) of the Internal Revenue Cose, the Funds hereby designate
the ordinary income dividends as income qualifying for the dividends received
deduction for the year ended October 31, 1997 as follows:
Franklin Balance Sheet Investment Fund 37.60%
Franklin MicroCap Value Fund 36.70%
Franklin Value Fund 100.00%
Franklin Vale Investors Trust Annual Report October 31, 1997
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM
304(a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph hypothetically compares the performance of the Franklin
Balance Sheet Investment Fund to that of the Wilshire Small Companies Index, the
Russell 1000 Value Index, and the CPI based on a $10,000 investment from 4/2/90
to 10/31/97.
Period Ending Fund Index Index Index
4/2/1990 $9,849 $10,000 $10,000 $10,000
4/30/1990 $9,547 $9,525 $9,610 $10,016
5/31/1990 $9,947 $9,858 $10,408 $10,039
6/30/1990 $9,856 $9,693 $10,171 $10,093
7/31/1990 $9,685 $9,210 $10,083 $10,132
8/31/1990 $8,792 $8,566 $9,197 $10,225
9/30/1990 $7,940 $7,978 $8,751 $10,311
10/31/1990 $7,647 $7,703 $8,632 $10,373
11/30/1990 $8,099 $8,162 $9,230 $10,395
12/31/1990 $8,325 $8,453 $9,464 $10,395
1/31/1991 $8,902 $8,855 $9,890 $10,458
2/28/1991 $9,764 $9,629 $10,548 $10,473
3/31/1991 $10,050 $9,944 $10,704 $10,489
4/30/1991 $10,325 $10,283 $10,783 $10,505
5/31/1991 $10,626 $10,683 $11,185 $10,536
6/30/1991 $10,468 $10,617 $10,714 $10,567
7/31/1991 $10,571 $11,147 $11,162 $10,583
8/31/1991 $10,633 $11,584 $11,365 $10,613
9/30/1991 $10,647 $11,660 $11,281 $10,660
10/31/1991 $10,779 $11,892 $11,469 $10,676
11/30/1991 $10,709 $11,652 $10,880 $10,707
12/31/1991 $11,246 $12,595 $11,792 $10,715
1/31/1992 $11,564 $13,032 $11,811 $10,731
2/29/1992 $11,966 $13,346 $12,100 $10,769
3/31/1992 $12,022 $13,511 $11,925 $10,824
4/30/1992 $11,930 $13,876 $12,439 $10,839
5/31/1992 $12,065 $14,133 $12,501 $10,855
6/30/1992 $12,015 $14,139 $12,423 $10,894
7/31/1992 $12,764 $14,679 $12,903 $10,917
8/31/1992 $12,379 $14,592 $12,508 $10,947
9/30/1992 $12,221 $14,703 $12,681 $10,978
10/31/1992 $12,451 $14,832 $12,692 $11,016
11/30/1992 $13,003 $15,519 $13,108 $11,032
12/31/1992 $13,724 $16,276 $13,420 $11,024
1/31/1993 $14,031 $16,825 $13,810 $11,078
2/28/1993 $14,121 $17,209 $14,296 $11,117
3/31/1993 $14,593 $17,795 $14,717 $11,156
4/30/1993 $14,555 $17,315 $14,529 $11,187
5/31/1993 $14,969 $17,436 $14,821 $11,202
6/30/1993 $15,150 $17,663 $15,147 $11,218
7/31/1993 $15,626 $18,020 $15,317 $11,218
8/31/1993 $16,865 $18,481 $15,870 $11,250
9/30/1993 $16,888 $18,876 $15,895 $11,273
10/31/1993 $17,411 $18,833 $15,884 $11,319
11/30/1993 $17,100 $18,189 $15,557 $11,327
12/31/1993 $17,233 $18,574 $15,852 $11,327
1/31/1994 $17,722 $18,742 $16,452 $11,358
2/28/1994 $17,517 $18,430 $15,889 $11,397
3/31/1994 $16,940 $17,846 $15,298 $11,435
4/30/1994 $17,153 $18,078 $15,592 $11,451
5/31/1994 $17,343 $17,972 $15,771 $11,459
6/30/1994 $17,390 $17,977 $15,394 $11,498
7/31/1994 $17,802 $18,493 $15,873 $11,529
8/31/1994 $18,301 $18,931 $16,328 $11,575
9/30/1994 $18,285 $18,553 $15,786 $11,607
10/31/1994 $18,007 $18,243 $16,006 $11,615
11/30/1994 $17,411 $17,752 $15,359 $11,630
12/31/1994 $17,490 $18,210 $15,536 $11,630
1/31/1995 $18,016 $18,583 $16,014 $11,676
2/28/1995 $18,817 $19,234 $16,647 $11,723
3/31/1995 $19,214 $19,132 $17,011 $11,762
4/30/1995 $19,847 $19,667 $17,549 $11,801
5/31/1995 $20,260 $20,118 $18,288 $11,824
6/30/1995 $20,731 $20,657 $18,536 $11,848
7/31/1995 $21,227 $21,366 $19,181 $11,848
8/31/1995 $21,789 $21,878 $19,452 $11,879
9/30/1995 $22,032 $22,570 $20,156 $11,902
10/31/1995 $21,485 $22,441 $19,956 $11,942
11/30/1995 $22,228 $23,262 $20,968 $11,933
12/31/1995 $22,745 $23,628 $21,495 $11,925
1/31/1996 $22,856 $23,814 $22,165 $11,995
2/29/1996 $23,018 $24,010 $22,334 $12,034
3/31/1996 $23,589 $24,387 $22,713 $12,096
4/30/1996 $24,196 $24,311 $22,800 $12,144
5/31/1996 $24,666 $24,666 $23,085 $12,167
6/30/1996 $24,443 $24,732 $23,103 $12,174
7/31/1996 $23,860 $23,587 $22,230 $12,197
8/31/1996 $24,649 $24,477 $22,866 $12,220
9/30/1996 $24,864 $25,186 $23,773 $12,259
10/31/1996 $25,122 $25,499 $24,693 $12,299
11/30/1996 $26,122 $27,095 $26,484 $12,322
12/31/1996 $26,727 $27,274 $26,145 $12,322
1/31/1997 $27,712 $27,677 $27,413 $12,361
2/28/1997 $28,171 $28,314 $27,816 $12,400
3/31/1997 $27,635 $27,552 $26,814 $12,431
4/30/1997 $27,503 $28,057 $27,940 $12,446
5/31/1997 $29,187 $30,021 $29,502 $12,438
6/30/1997 $30,818 $31,116 $30,768 $12,453
7/31/1997 $32,055 $32,797 $33,082 $12,468
8/31/1997 $32,225 $33,161 $31,904 $12,492
9/30/1997 $34,354 $34,988 $33,831 $12,523
10/31/1997 $33,377 $34,029 $32,887 $12,554
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the Franklin
MicroCap Value Fund to that of the Wilshire Small Companies Index and the
Russell 2000 Value Index, based on a $10,000 investment from 12/12/95 to
10/31/97.
Period Ending Fund Index Index
12/12/1995 $9,548 $10,000 $10,000
12/31/1995 $9,688 $10,190 $10,096
1/31/1996 $9,714 $10,257 $10,176
2/29/1996 $9,987 $10,418 $10,259
3/31/1996 $10,772 $10,637 $10,420
4/30/1996 $11,288 $10,927 $10,388
5/31/1996 $11,581 $11,204 $10,540
6/30/1996 $11,569 $11,072 $10,568
7/31/1996 $11,230 $10,483 $10,079
8/31/1996 $11,396 $10,938 $10,459
9/30/1996 $11,652 $11,236 $10,762
10/31/1996 $11,812 $11,367 $10,896
11/30/1996 $12,203 $11,978 $11,578
12/31/1996 $12,314 $12,367 $11,654
1/31/1997 $12,682 $12,558 $11,826
2/28/1997 $12,905 $12,677 $12,098
3/31/1997 $12,656 $12,337 $11,773
4/30/1997 $12,367 $12,519 $11,988
5/31/1997 $13,089 $13,515 $12,828
6/30/1997 $13,753 $14,199 $13,296
7/31/1997 $14,258 $14,796 $14,014
8/31/1997 $14,659 $15,031 $14,169
9/30/1997 $16,097 $16,030 $14,950
10/31/1997 $15,953 $15,594 $14,540
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the Franklin
Value Fund - Class I Shares to that of the Wilshire Small Companies Index and
the Russell 1000 Value Index, based on a $10,000 investment from 3/11/96 to
10/31/97.
Period Ending Fund Index Index
3/11/1996 $9,548 $10,000 $10,000
3/31/1996 $9,669 $10,110 $10,101
4/30/1996 $10,159 $10,148 $10,070
5/31/1996 $10,433 $10,275 $10,217
6/30/1996 $10,223 $10,283 $10,244
7/31/1996 $9,846 $9,895 $9,770
8/31/1996 $10,446 $10,178 $10,138
9/30/1996 $10,771 $10,582 $10,432
10/31/1996 $10,950 $10,991 $10,562
11/30/1996 $11,736 $11,788 $11,223
12/31/1996 $12,334 $11,637 $11,297
1/31/1997 $12,849 $12,202 $11,464
2/28/1997 $12,928 $12,381 $11,728
3/31/1997 $12,462 $11,935 $11,412
4/30/1997 $12,345 $12,437 $11,621
5/31/1997 $13,495 $13,132 $12,435
6/30/1997 $14,352 $13,695 $12,888
7/31/1997 $15,418 $14,725 $13,584
8/31/1997 $15,883 $14,201 $13,735
9/30/1997 $16,864 $15,059 $14,492
10/31/1997 $16,144 $14,639 $14,095
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the Franklin
Value Fund - Class II Shares to that of the Wilshire Small Companies Index and
the Russell 1000 Value Index, based on a $10,000 investment from 9/3/96 to
10/31/97.
Period Ending Fund Index Index
9/3/1996 $9,903 $10,000 $10,000
9/30/1996 $10,241 $10,397 $10,290
10/31/1996 $10,405 $10,799 $10,418
11/30/1996 $11,146 $11,582 $11,070
12/31/1996 $11,695 $11,434 $11,143
1/31/1997 $12,185 $11,989 $11,308
2/28/1997 $12,247 $12,165 $11,568
3/31/1997 $11,801 $11,727 $11,257
4/30/1997 $11,683 $12,219 $11,463
5/31/1997 $12,767 $12,903 $12,265
6/30/1997 $13,572 $13,456 $12,713
7/31/1997 $14,570 $14,468 $13,399
8/31/1997 $15,003 $13,953 $13,548
9/30/1997 $15,920 $14,796 $14,294
10/31/1997 $15,140 $14,383 $13,903
GRAPHIC MATERIAL (5)
The following line graph hypothetically compares the performance of the Franklin
Value Fund - Advisor Class Shares to that of the Wilshire Small Companies Index
and the Russell 1000 Value Index, based on a $10,000 investment from 3/11/96 to
10/31/97.
Period Ending Fund Index Index
3/11/1996 $10,000 $10,000 $10,000
3/31/1996 $10,127 $10,110 $10,101
4/30/1996 $10,640 $10,148 $10,070
5/31/1996 $10,927 $10,275 $10,217
6/30/1996 $10,707 $10,283 $10,244
7/31/1996 $10,312 $9,895 $9,770
8/31/1996 $10,940 $10,178 $10,138
9/30/1996 $11,281 $10,582 $10,432
10/31/1996 $11,469 $10,991 $10,562
11/30/1996 $12,291 $11,788 $11,223
12/31/1996 $12,918 $11,637 $11,297
1/31/1997 $13,464 $12,202 $11,464
2/28/1997 $13,546 $12,381 $11,728
3/31/1997 $13,063 $11,935 $11,412
4/30/1997 $12,940 $12,437 $11,621
5/31/1997 $14,152 $13,132 $12,435
6/30/1997 $15,053 $13,695 $12,888
7/31/1997 $16,185 $14,725 $13,584
8/31/1997 $16,679 $14,201 $13,735
9/30/1997 $17,716 $15,059 $14,492
10/31/1997 $16,961 $14,639 $14,095
