UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04894
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FRANKLIN MANAGED TRUST
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 09/30
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Date of reporting period: 09/30/04
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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SEPTEMBER 30, 2004
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A series of Franklin Managed Trust
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ANNUAL REPORT AND SHAREHOLDER LETTER
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WANT TO RECEIVE
THIS DOCUMENT
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FRANKLIN Eligible shareholders can
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franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise
of three world-class investment management
groups--Franklin, Templeton and Mutual
Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups
operates autonomously, relying on its own
research and staying true to the unique
investment disciplines that underlie its
success.
FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing
and also brings expertise in growth- and
value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton
pioneered international investing and, in
1954, launched what has become the industry's
oldest global fund. Today, with research
offices in over 25 countries, they offer
investors the broadest global reach in the
industry.
MUTUAL SERIES. Founded in 1949, Mutual Series
is dedicated to a unique style of value
investing, searching aggressively for
opportunity among undervalued stocks,
arbitrage situations and distressed
companies.
TRUE DIVERSIFICATION Because our management groups work
independently and adhere to distinctly
different investment approaches, Franklin,
Templeton and Mutual Series funds typically
have a low overlap of securities. That's why
our funds can be used to build truly
diversified portfolios covering every major
asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with
exceptional risk-adjusted returns over the
long term, as well as the reliable account
services that have helped us become one of
the most trusted names in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the annual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Rising Dividends Fund ............................................ 3
Performance Summary ....................................................... 7
Your Fund's Expenses ...................................................... 12
Financial Highlights and Statement of Investments ......................... 14
Financial Statements ...................................................... 20
Notes to Financial Statements ............................................. 24
Report of Independent Registered Public Accounting Firm ................... 33
Tax Designation ........................................................... 34
Board Members and Officers ................................................ 35
Shareholder Information ................................................... 39
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ANNUAL REPORT
FRANKLIN RISING DIVIDENDS FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Rising Dividends Fund seeks
long-term capital appreciation. Preservation of capital is also an important
consideration. The Fund invests at least 80% of its net assets in equity
securities of companies that have paid consistently rising dividends.
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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
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This annual report for Franklin Rising Dividends Fund covers the fiscal year
ended September 30, 2004.
PERFORMANCE OVERVIEW
For the year under review, Franklin Rising Dividends Fund - Class A posted a
+13.86% cumulative total return. The Fund underperformed its benchmark, the
Russell Midcap(R) Value Index, which posted a 25.62% total return for the same
period.(1) You can find the Fund's long-term performance data in the Performance
Summary beginning on page 7.
ECONOMIC AND MARKET OVERVIEW
During the 12 months ended September 30, 2004, the domestic economy grew, with
one-year gross domestic product (GDP) increasing an estimated 3.9%. Major
contributors to growth included inventory investment, equipment and software
spending, and federal government spending. The economy experienced solid export
growth and a resilient housing market; however, job worries contributed to
declining consumer confidence late in the period, which could be seen in
relatively weak consumer spending and modest retail sales.
Labor market conditions improved during the reporting period. More than one-half
of the jobs lost during the recession and weak economic expansion have been
recovered. The economy created 1.8 million jobs since summer 2003. In addition,
the unemployment rate fell from 6.1% in September 2003
(1) Source: Standard & Poor's Micropal. The Russell Midcap Value Index is
market capitalization weighted and measures performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted
growth values. The stocks are also members of the Russell 1000 Value
Index. The index is unmanaged and includes reinvested dividends. One
cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 18.
Annual Report | 3
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 9/30/04
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Finance* 35.2%
Producer Manufacturing 21.3%
Health Technology 11.8%
Consumer Non-Durables 6.8%
Process Industries 6.4%
Retail Trade 4.1%
Consumer Durables 3.5%
Non-Energy Minerals 2.7%
Technology Services 2.4%
Electronic Technology 1.4%
Commercial Services 0.3%
Short-Term Investments & Other Net Assets 4.1%
to 5.4% at period-end.(2) Services created the most jobs led by leisure and
hospitality, education and health, and business and professional services.
In light of positive economic developments, consumer inflation remained modest
but picked up speed in 2004, with record-high oil prices a dominant theme.
Excluding the volatile food and energy categories, consumer prices increased
2.0% for the 12 months ended September 30, 2004.(2) Consequently, the Federal
Reserve Board (Fed) raised the federal funds target rate during the reporting
period, with quarter percentage point hikes on June 30, August 10 and September
21. As a result of the increases, the federal funds target rate rose from 1.0%
to 1.75%. With core inflation expected to remain relatively low, Fed
policymakers believe they can raise interest rates at a measured pace.
Nonetheless, the Fed said it will respond to changes in economic prospects as
needed to fulfill its obligation to maintain price stability.
Domestic equity markets sustained a rally through early 2004, then flattened and
traded in a fairly narrow range through period-end. Despite continued signs of
enhanced corporate fundamentals, investors appeared cautious due to geopolitical
uncertainty, soaring oil prices and rising short-term interest rates. The
Standard & Poor's 500 Composite Index (S&P 500) rose 13.86% for the 12 months
under review, while the technology-heavy NASDAQ Composite Index gained 6.75%.(3)
INVESTMENT STRATEGY
We base our investment strategy on our belief that companies with consistently
rising dividends should, over time, also realize stock price appreciation. We
select portfolio securities based on several criteria. To be eligible for
purchase, stocks generally will pass certain screening procedures, requiring
consistent and substantial dividend increases, strong balance sheets, and
relatively low price/earnings ratios. We seek fundamentally sound companies that
meet our standards and attempt to acquire them at what we believe are attractive
prices, often when they are out of favor with other investors.
* Significant exposure to a single sector may result in greater volatility
for the Fund than a more broadly diversified portfolio.
(2) Source: Bureau of Labor Statistics.
(3) Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks
chosen for market size, liquidity and industry group representation. Each
stock's weight in the index is proportionate to its market value. The S&P
500 is one of the most widely used benchmarks of U.S. equity performance.
The NASDAQ Composite Index measures all domestic and international common
stocks listed on The NASDAQ Stock Market. The index is market value
weighted and includes over 3,000 companies.
4 | Annual Report
MANAGER'S DISCUSSION
Significant positive contributors to the Fund's return during the fiscal year
ended September 30, 2004, were Nucor, Carlisle and National Commerce Financial.
Strong customer demand for steel enabled Nucor to raise its selling prices and
improve its profitability during the period. Nucor has 31 consecutive years of
dividend increases. Carlisle, which manufactures a variety of industrial
products including commercial roofing materials, and tires for lawn and garden
equipment, had strong sales and earnings growth in recent quarters. Carlisle has
increased its dividend for 28 years in a row. National Commerce, a southeastern
regional bank, reached an agreement to be acquired by SunTrust Banks. National
Commerce has 29 consecutive years of dividend increases.
Three stocks that declined during the period were Family Dollar Stores, Superior
Industries International and Hillenbrand Industries. Family Dollar had
disappointing sales and earnings results over the last several quarters, partly
due to its inability to meet its plan for new store openings. Nevertheless, the
company increased its dividend for the 28th year in a row. Operational problems
as well as increased selling price pressure caused Superior to lower its
earnings expectations for 2004. Superior has a strong balance sheet and has
increased its dividend for 21 successive years. A difficult product transition
in its hospital-beds unit and higher raw material prices led Hillenbrand to
reduce its 2004 earnings expectations. Still, Hillenbrand has 33 consecutive
years of dividend increases.
New positions we added to the portfolio during the 12 months under review were
United Technologies and Freddie Mac. United Technologies provides
high-technology products and support services to customers in the aerospace and
building industries worldwide. Freddie Mac is one of two stockholder-owned, but
government sponsored, entities created to support the home mortgage finance
system. Freddie Mac has increased its dividend for 14 years in a row.
The Fund eliminated several positions during the reporting period. We sold
Universal, which had a long-term dividend growth rate below our guidelines,
following strong appreciation during the period. The Fund also liquidated
Limited Brands, which did not have the history of consistent annual dividends
that we prefer. We divested our Royal Dutch Petroleum holding after the company
announced that it had previously overstated its levels of oil reserves. We also
sold Fresh Brands because the company cut its dividend as a result of operating
problems.
TOP 10 EQUITY HOLDINGS
9/30/04
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COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
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Praxair Inc. 4.2%
PROCESS INDUSTRIES
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Family Dollar Stores Inc. 4.1%
RETAIL TRADE
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Pfizer Inc. 4.1%
HEALTH TECHNOLOGY
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Carlisle Cos. Inc. 4.1%
PRODUCER MANUFACTURING
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General Electric Co. 4.0%
PRODUCER MANUFACTURING
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Hillenbrand Industries Inc. 4.0%
HEALTH TECHNOLOGY
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Old Republic International Corp. 3.9%
FINANCE
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American International Group Inc. 3.9%
FINANCE
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Roper Industries Inc. 3.7%
PRODUCER MANUFACTURING
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Fannie Mae 3.5%
FINANCE
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Annual Report | 5
Our 10 largest positions on September 30, 2004, represented 39.5% of the Fund's
total net assets. It is interesting to note how these 10 companies would, in
aggregate, respond to the Fund's screening criteria based on a simple average of
statistical measures. On average, these 10 companies have raised their dividends
24 years in a row and by 243% in the past 10 years. At period-end, their most
recent year-over-year dividend increases averaged 14% with a yield of 1.7% and a
dividend payout ratio of 26%, based on estimates of calendar year 2004 operating
earnings. The average price/earnings ratio was 16.1 times 2004 estimates versus
17.1 for that of the unmanaged S&P 500 on September 30, 2004.
Thank you for your continued participation in Franklin Rising Dividends Fund. We
look forward to serving your future investment needs.
[PHOTO OMITTED]
/s/ Donald G. Taylor
Donald G. Taylor
Senior Portfolio Manager
William J. Lippman
Bruce Baughman
Margaret McGee
Portfolio Management Team
Franklin Rising Dividends Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF SEPTEMBER 30, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
6 | Annual Report
PERFORMANCE SUMMARY AS OF 9/30/04
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects the Fund's dividend income,
capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A CHANGE 9/30/04 9/30/03
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Net Asset Value (NAV) +$3.55 $30.58 $27.03
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DISTRIBUTIONS (10/1/03-9/30/04)
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Dividend Income $0.1599
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Long-Term Capital Gain $0.0389
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TOTAL $0.1988
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CLASS B CHANGE 9/30/04 9/30/03
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Net Asset Value (NAV) +$3.44 $30.25 $26.81
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DISTRIBUTIONS (10/1/03-9/30/04)
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Dividend Income $0.0705
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Long-Term Capital Gain $0.0389
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TOTAL $0.1094
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CLASS C CHANGE 9/30/04 9/30/03
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Net Asset Value (NAV) +$3.44 $30.21 $26.77
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DISTRIBUTIONS (10/1/03-9/30/04)
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Dividend Income $0.0667
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Long-Term Capital Gain $0.0389
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TOTAL $0.1056
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CLASS R CHANGE 9/30/04 9/30/03
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Net Asset Value (NAV) +$3.54 $30.51 $26.97
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DISTRIBUTIONS (10/1/03-9/30/04)
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Dividend Income $0.1590
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Long-Term Capital Gain $0.0389
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TOTAL $0.1979
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Franklin Rising Dividends Fund paid distributions derived from long-term capital
gains of 3.89 cents ($0.0389) per share in December 2003. The Fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
Annual Report | 7
PERFORMANCE SUMMARY (CONTINUED)
PERFORMANCE
CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.
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CLASS A 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------
Cumulative Total Return(1) +13.86% +66.36% +234.71%
Average Annual Total Return(2) +7.31% +9.41% +12.18%
Value of $10,000 Investment(3) $10,731 $15,678 $31,557
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CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
- -------------------------------------------------------------------------------------
Cumulative Total Return(1) +13.26% +62.00% +46.81%
Average Annual Total Return(2) +9.26% +9.86% +6.78%
Value of $10,000 Investment(3) $10,926 $16,000 $14,581
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CLASS C 1-YEAR 5-YEAR INCEPTION (5/1/95)
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Cumulative Total Return(1) +13.26% +61.89% +199.14%
Average Annual Total Return(2) +12.26% +10.11% +12.34%
Value of $10,000 Investment(3) $11,226 $16,189 $29,914
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CLASS R 1-YEAR INCEPTION (1/1/02)
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Cumulative Total Return(1) +13.82% +25.73%
Average Annual Total Return(2) +12.82% +8.71%
Value of $10,000 Investment(3) $11,282 $12,573
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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
8 | Annual Report
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes any current, applicable, maximum sales charge, Fund expenses,
account fees and reinvested distributions. The unmanaged index includes
reinvestment of any income or distributions. It differs from the Fund in
composition and does not pay management fees or expenses. One cannot invest
directly in an index. The Consumer Price Index (CPI), calculated by the U.S.
Bureau of Labor Statistics, is a commonly used measure of the inflation rate.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP Russell MidCap Consumer Price
DATE FUND - CLASS A VALUE INDEX(4) CPI(4) Value Index NSA
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10/1/1994 9428.00 10000.00 10000.00
10/31/1994 9389.00 9991.29 10006.69 -0.087061% 0.066934%
11/30/1994 9158.00 9550.28 10020.08 -4.413958% 0.133779%
12/31/1994 9248.00 9665.48 10020.08 1.206236% 0.000000%
1/31/1995 9487.00 9938.41 10060.24 2.823733% 0.400802%
2/28/1995 9772.00 10440.01 10100.40 5.047138% 0.399202%
3/31/1995 9983.00 10636.38 10133.87 1.880922% 0.331345%
4/30/1995 10055.00 10861.34 10167.34 2.115021% 0.330251%
5/31/1995 10419.00 11297.85 10187.42 4.018883% 0.197498%
6/30/1995 10533.00 11558.32 10207.50 2.305488% 0.197109%
7/31/1995 10787.00 11961.24 10207.50 3.485997% 0.000000%
8/31/1995 10957.00 12195.84 10234.27 1.961301% 0.262295%
9/30/1995 11343.00 12475.37 10254.35 2.292039% 0.196207%
10/31/1995 11238.00 12232.14 10287.82 -1.949703% 0.326371%
11/30/1995 11815.00 12901.17 10281.12 5.469495% -0.065062%
12/31/1995 12045.00 13042.11 10274.43 1.092435% -0.065104%
1/31/1996 12289.00 13359.36 10334.67 2.432468% 0.586319%
2/29/1996 12441.00 13486.22 10368.14 0.949627% 0.323834%
3/31/1996 12414.00 13770.98 10421.69 2.111508% 0.516462%
4/30/1996 12368.00 13887.87 10461.85 0.848780% 0.385357%
5/31/1996 12719.00 14020.51 10481.93 0.955112% 0.191939%
6/30/1996 12845.00 14035.45 10488.62 0.106508% 0.063857%
7/31/1996 12433.00 13367.86 10508.70 -4.756459% 0.191449%
8/31/1996 12719.00 13928.64 10528.78 4.195038% 0.191083%
9/30/1996 13366.00 14439.71 10562.25 3.669190% 0.317864%
10/31/1996 13773.00 14819.89 10595.72 2.632860% 0.316857%
11/30/1996 14727.00 15749.91 10615.80 6.275509% 0.189514%
12/31/1996 14866.00 15684.36 10615.80 -0.416180% 0.000000%
1/31/1997 15157.00 16177.23 10649.26 3.142401% 0.315259%
2/28/1997 15570.00 16451.19 10682.73 1.693489% 0.314268%
3/31/1997 15085.00 15951.48 10709.50 -3.037550% 0.250627%
4/30/1997 15463.00 16353.78 10722.89 2.522044% 0.125000%
5/31/1997 16639.00 17317.80 10716.20 5.894779% -0.062422%
6/30/1997 17230.00 17960.62 10729.59 3.711888% 0.124922%
7/31/1997 18701.00 19294.15 10742.97 7.424745% 0.124766%
8/31/1997 18315.00 19068.77 10763.05 -1.168097% 0.186916%
9/30/1997 19260.00 20251.46 10789.83 6.202207% 0.248756%
10/31/1997 18788.00 19635.87 10816.60 -3.039697% 0.248139%
11/30/1997 19239.00 20298.47 10809.91 3.374396% -0.061881%
12/31/1997 19675.00 21075.05 10796.52 3.825849% -0.123839%
1/31/1998 19586.00 20665.61 10816.60 -1.942798% 0.185989%
2/28/1998 21143.00 22046.34 10836.68 6.681305% 0.185644%
3/31/1998 21725.00 23181.29 10856.76 5.148025% 0.185300%
4/30/1998 21636.00 23051.99 10876.84 -0.557769% 0.184957%
5/31/1998 20808.00 22513.74 10896.92 -2.334968% 0.184615%
6/30/1998 20532.00 22585.38 10910.31 0.318203% 0.122850%
7/31/1998 19834.00 21440.25 10923.70 -5.070192% 0.122699%
8/31/1998 16684.00 18425.45 10937.08 -14.061409% 0.122549%
9/30/1998 17517.00 19500.60 10950.47 5.835124% 0.122399%
10/31/1998 19372.00 20763.54 10977.24 6.476387% 0.244499%
11/30/1998 20072.00 21493.08 10977.24 3.513562% 0.000000%
12/31/1998 20861.00 22146.35 10970.55 3.039482% -0.060976%
1/31/1999 19762.00 21630.24 10997.32 -2.330484% 0.244051%
2/28/1999 19062.00 21154.53 11010.71 -2.199257% 0.121729%
3/31/1999 18940.00 21456.69 11044.18 1.428322% 0.303951%
4/30/1999 20406.00 23488.97 11124.50 9.471555% 0.727273%
5/31/1999 20620.00 23587.02 11124.50 0.417423% 0.000000%
6/30/1999 21366.00 23855.95 11124.50 1.140192% 0.000000%
7/31/1999 21019.00 23258.78 11157.97 -2.503229% 0.300842%
8/31/1999 20138.00 22454.93 11184.74 -3.456142% 0.239952%
9/30/1999 18969.00 21318.34 11238.29 -5.061628% 0.478755%
10/31/1999 19139.00 21947.35 11258.37 2.950563% 0.178678%
11/30/1999 18907.00 21544.81 11265.06 -1.834138% 0.059453%
12/31/1999 18716.00 22121.95 11265.06 2.678771% 0.000000%
1/31/2000 17823.00 20798.90 11298.53 -5.980686% 0.297089%
2/29/2000 17765.00 19929.00 11365.46 -4.182448% 0.592417%
3/31/2000 19283.00 22344.95 11459.17 12.122801% 0.824499%
4/30/2000 19196.00 22434.35 11465.86 0.400081% 0.058411%
5/31/2000 19516.00 22819.90 11479.25 1.718563% 0.116754%
6/30/2000 18451.00 21969.35 11539.49 -3.727233% 0.524781%
7/31/2000 18276.00 22482.78 11566.27 2.337053% 0.232019%
8/31/2000 19336.00 23861.24 11566.27 6.131162% 0.000000%
9/30/2000 19528.00 24089.71 11626.51 0.957485% 0.520833%
10/31/2000 20006.00 24547.59 11646.59 1.900750% 0.172712%
11/30/2000 20328.00 24227.52 11653.28 -1.303888% 0.057471%
12/31/2000 22268.00 26364.78 11646.59 8.821642% -0.057438%
1/31/2001 22650.00 26269.06 11720.21 -0.363073% 0.632184%
2/28/2001 22532.00 26158.02 11767.07 -0.422701% 0.399772%
3/31/2001 22120.00 25433.67 11793.84 -2.769125% 0.227531%
4/30/2001 23237.00 26831.71 11840.70 5.496797% 0.397276%
5/31/2001 24060.00 27593.55 11894.24 2.839341% 0.452233%
6/30/2001 24120.00 27225.68 11914.32 -1.333180% 0.168824%
7/31/2001 24621.00 27116.36 11880.86 -0.401524% -0.280899%
8/31/2001 24473.00 26621.09 11880.86 -1.826490% 0.000000%
9/30/2001 22340.00 24080.93 11934.40 -9.541879% 0.450704%
10/31/2001 22684.00 24209.49 11894.24 0.533836% -0.336512%
11/30/2001 24258.00 25903.92 11874.16 6.999057% -0.168824%
12/31/2001 25187.00 26977.82 11827.31 4.145698% -0.394589%
1/31/2002 25766.00 27250.41 11854.08 1.010404% 0.226372%
2/28/2002 26417.00 27693.07 11900.94 1.624444% 0.395257%
3/31/2002 27742.00 29108.57 11967.87 5.111363% 0.562430%
4/30/2002 28088.00 29089.40 12034.81 -0.065842% 0.559284%
5/31/2002 27915.00 29045.58 12034.81 -0.150650% 0.000000%
6/30/2002 26923.00 27748.83 12041.50 -4.464523% 0.055617%
7/31/2002 25203.00 25032.30 12054.89 -9.789719% 0.111173%
8/31/2002 25570.00 25323.58 12095.05 1.163618% 0.333148%
9/30/2002 23294.00 22766.88 12115.13 -10.096103% 0.166021%
10/31/2002 24404.00 23490.18 12135.21 3.176984% 0.165746%
11/30/2002 25188.00 24969.31 12135.21 6.296788% 0.000000%
12/31/2002 24742.00 24375.87 12108.43 -2.376692% -0.220629%
1/31/2003 23789.00 23700.73 12161.98 -2.769716% 0.442233%
2/28/2003 23338.00 23307.84 12255.69 -1.657706% 0.770501%
3/31/2003 23328.00 23387.39 12329.32 0.341322% 0.600765%
4/30/2003 25286.00 25165.87 12302.54 7.604423% -0.217155%
5/31/2003 26485.00 27380.88 12282.46 8.801657% -0.163221%
6/30/2003 26536.00 27572.12 12295.85 0.698448% 0.108992%
7/31/2003 27510.00 28429.03 12309.24 3.107862% 0.108873%
8/31/2003 27868.00 29438.49 12356.09 3.550809% 0.380642%
9/30/2003 27715.00 29209.85 12396.25 -0.776649% 0.325027%
10/31/2003 29642.00 31353.87 12382.87 7.340046% -0.107991%
11/30/2003 29785.00 32262.39 12349.40 2.897641% -0.270270%
12/31/2003 30607.00 33655.10 12336.01 4.316807% -0.108401%
1/31/2004 30958.00 34543.14 12396.25 2.638656% 0.488334%
2/29/2004 31505.00 35397.37 12463.19 2.472943% 0.539957%
3/31/2004 31247.00 35454.43 12543.51 0.161199% 0.644468%
4/30/2004 30690.00 33954.83 12583.67 -4.229670% 0.320171%
5/31/2004 31206.00 34824.98 12657.30 2.562673% 0.585106%
6/30/2004 31897.00 36067.97 12697.46 3.569242% 0.317292%
7/31/2004 31134.00 35090.76 12677.38 -2.709337% -0.158144%
8/31/2004 31546.00 35655.84 12684.07 1.610336% 0.052798%
9/30/2004 31557.00 36693.73 12710.84 2.910861% 0.211082%
215.57% 266.94% 27.11%
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP Russell MidCap Consumer Price
DATE FUND - CLASS B VALUE INDEX(4) CPI(4) Value Index NSA
- --------------------------------------------------------------------------------------------------------------
1/1/1999 10000 10000 10000
1/31/1999 9473 9767 10024 -2.330484% 0.244051%
2/28/1999 9133 9552 10037 -2.199257% 0.121729%
3/31/1999 9075 9689 10067 1.428322% 0.303951%
4/30/1999 9774 10606 10140 9.471555% 0.727273%
5/31/1999 9867 10651 10140 0.417423% 0.000000%
6/30/1999 10222 10772 10140 1.140192% 0.000000%
7/31/1999 10051 10502 10171 -2.503229% 0.300842%
8/31/1999 9625 10139 10195 -3.456142% 0.239952%
9/30/1999 9063 9626 10244 -5.061628% 0.478755%
10/31/1999 9140 9910 10262 2.950563% 0.178678%
11/30/1999 9024 9728 10268 -1.834138% 0.059453%
12/31/1999 8930 9989 10268 2.678771% 0.000000%
1/31/2000 8498 9392 10299 -5.980686% 0.297089%
2/29/2000 8471 8999 10360 -4.182448% 0.592417%
3/31/2000 9194 10090 10445 12.122801% 0.824499%
4/30/2000 9147 10130 10451 0.400081% 0.058411%
5/31/2000 9291 10304 10464 1.718563% 0.116754%
6/30/2000 8780 9920 10519 -3.727233% 0.524781%
7/31/2000 8692 10152 10543 2.337053% 0.232019%
8/31/2000 9194 10774 10543 6.131162% 0.000000%
9/30/2000 9278 10878 10598 0.957485% 0.520833%
10/31/2000 9506 11084 10616 1.900750% 0.172712%
11/30/2000 9650 10940 10622 -1.303888% 0.057471%
12/31/2000 10570 11905 10616 8.821642% -0.057438%
1/31/2001 10747 11862 10683 -0.363073% 0.632184%
2/28/2001 10682 11811 10726 -0.422701% 0.399772%
3/31/2001 10481 11484 10750 -2.769125% 0.227531%
4/30/2001 11008 12116 10793 5.496797% 0.397276%
5/31/2001 11390 12460 10842 2.839341% 0.452233%
6/30/2001 11416 12294 10860 -1.333180% 0.168824%
7/31/2001 11644 12244 10830 -0.401524% -0.280899%
8/31/2001 11574 12021 10830 -1.826490% 0.000000%
9/30/2001 10556 10874 10879 -9.541879% 0.450704%
10/31/2001 10720 10932 10842 0.533836% -0.336512%
11/30/2001 11452 11697 10824 6.999057% -0.168824%
12/31/2001 11894 12182 10781 4.145698% -0.394589%
1/31/2002 12159 12305 10805 1.010404% 0.226372%
2/28/2002 12457 12505 10848 1.624444% 0.395257%
3/31/2002 13083 13144 10909 5.111363% 0.562430%
4/30/2002 13237 13135 10970 -0.065842% 0.559284%
5/31/2002 13146 13115 10970 -0.150650% 0.000000%
6/30/2002 12679 12530 10976 -4.464523% 0.055617%
7/31/2002 11860 11303 10988 -9.789719% 0.111173%
8/31/2002 12029 11435 11025 1.163618% 0.333148%
9/30/2002 10955 10280 11043 -10.096103% 0.166021%
10/31/2002 11470 10607 11062 3.176984% 0.165746%
11/30/2002 11836 11275 11062 6.296788% 0.000000%
12/31/2002 11619 11007 11037 -2.376692% -0.220629%
1/31/2003 11174 10702 11086 -2.769716% 0.442233%
2/28/2003 10952 10524 11171 -1.657706% 0.770501%
3/31/2003 10947 10560 11239 0.341322% 0.600765%
4/30/2003 11861 11363 11214 7.604423% -0.217155%
5/31/2003 12412 12364 11196 8.801657% -0.163221%
6/30/2003 12431 12450 11208 0.698448% 0.108992%
7/31/2003 12881 12837 11220 3.107862% 0.108873%
8/31/2003 13045 13293 11263 3.550809% 0.380642%
9/30/2003 12963 13189 11300 -0.776649% 0.325027%
10/31/2003 13858 14158 11287 7.340046% -0.107991%
11/30/2003 13920 14568 11257 2.897641% -0.270270%
12/31/2003 14298 15197 11245 4.316807% -0.108401%
1/31/2004 14458 15598 11300 2.638656% 0.488334%
2/29/2004 14706 15983 11361 2.472943% 0.539957%
3/31/2004 14580 16009 11434 0.161199% 0.644468%
4/30/2004 14313 15332 11470 -4.229670% 0.320171%
5/31/2004 14546 15725 11538 2.562673% 0.585106%
6/30/2004 14861 16286 11574 3.569242% 0.317292%
7/31/2004 14502 15845 11556 -2.709337% -0.158144%
8/31/2004 14687 16100 11562 1.610336% 0.052798%
9/30/2004 14581 16569 11586 2.910861% 0.211082%
45.81% 65.69% 15.86%
Annual Report | 9
PERFORMANCE SUMMARY (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------
CLASS C 9/30/04
- -----------------------------------
1-Year +12.26%
- -----------------------------------
5-Year +10.11%
- -----------------------------------
Since Inception (5/1/95) +12.34%
- -----------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP Russell MidCap Consumer Price
DATE FUND - CLASS C VALUE INDEX(4) CPI(4) Value Index NSA
- ------------------------------------------------------------------------------------------------------
5/1/1995 10000.00 10000.00 10000.00
5/31/1995 10389.00 10401.89 10019.75 4.018883% 0.197498%
6/30/1995 10498.00 10641.70 10039.50 2.305488% 0.197109%
7/31/1995 10745.00 11012.67 10039.50 3.485997% 0.000000%
8/31/1995 10908.00 11228.66 10065.83 1.961301% 0.262295%
9/30/1995 11285.00 11486.03 10085.58 2.292039% 0.196207%
10/31/1995 11174.00 11262.09 10118.50 -1.949703% 0.326371%
11/30/1995 11742.00 11878.06 10111.92 5.469495% -0.065062%
12/31/1995 11965.00 12007.82 10105.33 1.092435% -0.065104%
1/31/1996 12201.00 12299.91 10164.58 2.432468% 0.586319%
2/29/1996 12346.00 12416.71 10197.50 0.949627% 0.323834%
3/31/1996 12311.00 12678.89 10250.16 2.111508% 0.516462%
4/30/1996 12251.00 12786.51 10289.66 0.848780% 0.385357%
5/31/1996 12600.00 12908.64 10309.41 0.955112% 0.191939%
6/30/1996 12722.00 12922.38 10316.00 0.106508% 0.063857%
7/31/1996 12306.00 12307.74 10335.75 -4.756459% 0.191449%
8/31/1996 12590.00 12824.05 10355.50 4.195038% 0.191083%
9/30/1996 13222.00 13294.59 10388.41 3.669190% 0.317864%
10/31/1996 13619.00 13644.62 10421.33 2.632860% 0.316857%
11/30/1996 14552.00 14500.89 10441.08 6.275509% 0.189514%
12/31/1996 14683.00 14440.54 10441.08 -0.416180% 0.000000%
1/31/1997 14972.00 14894.32 10474.00 3.142401% 0.315259%
2/28/1997 15366.00 15146.55 10506.91 1.693489% 0.314268%
3/31/1997 14887.00 14686.47 10533.25 -3.037550% 0.250627%
4/30/1997 15247.00 15056.87 10546.41 2.522044% 0.125000%
5/31/1997 16404.00 15944.43 10539.83 5.894779% -0.062422%
6/30/1997 16984.00 16536.27 10553.00 3.711888% 0.124922%
7/31/1997 18417.00 17764.05 10566.16 7.424745% 0.124766%
8/31/1997 18035.00 17556.55 10585.91 -1.168097% 0.186916%
9/30/1997 18955.00 18645.44 10612.25 6.202207% 0.248756%
10/31/1997 18482.00 18078.68 10638.58 -3.039697% 0.248139%
11/30/1997 18913.00 18688.72 10632.00 3.374396% -0.061881%
12/31/1997 19341.00 19403.73 10618.83 3.825849% -0.123839%
1/31/1998 19245.00 19026.75 10638.58 -1.942798% 0.185989%
2/28/1998 20765.00 20297.99 10658.33 6.681305% 0.185644%
3/31/1998 21333.00 21342.93 10678.08 5.148025% 0.185300%
4/30/1998 21237.00 21223.89 10697.83 -0.557769% 0.184957%
5/31/1998 20413.00 20728.32 10717.58 -2.334968% 0.184615%
6/30/1998 20133.00 20794.27 10730.74 0.318203% 0.122850%
7/31/1998 19437.00 19739.96 10743.91 -5.070192% 0.122699%
8/31/1998 16342.00 16964.25 10757.08 -14.061409% 0.122549%
9/30/1998 17159.00 17954.13 10770.24 5.835124% 0.122399%
10/31/1998 18959.00 19116.91 10796.58 6.476387% 0.244499%
11/30/1998 19638.00 19788.60 10796.58 3.513562% 0.000000%
12/31/1998 20397.00 20390.07 10789.99 3.039482% -0.060976%
1/31/1999 19318.00 19914.88 10816.33 -2.330484% 0.244051%
2/28/1999 18630.00 19476.90 10829.49 -2.199257% 0.121729%
3/31/1999 18502.00 19755.09 10862.41 1.428322% 0.303951%
4/30/1999 19923.00 21626.21 10941.41 9.471555% 0.727273%
5/31/1999 20114.00 21716.48 10941.41 0.417423% 0.000000%
6/30/1999 20836.00 21964.09 10941.41 1.140192% 0.000000%
7/31/1999 20487.00 21414.28 10974.33 -2.503229% 0.300842%
8/31/1999 19624.00 20674.17 11000.66 -3.456142% 0.239952%
9/30/1999 18478.00 19627.72 11053.32 -5.061628% 0.478755%
10/31/1999 18626.00 20206.85 11073.07 2.950563% 0.178678%
11/30/1999 18391.00 19836.23 11079.66 -1.834138% 0.059453%
12/31/1999 18201.00 20367.59 11079.66 2.678771% 0.000000%
1/31/2000 17320.00 19149.47 11112.57 -5.980686% 0.297089%
2/29/2000 17272.00 18348.56 11178.41 -4.182448% 0.592417%
3/31/2000 18742.00 20572.92 11270.57 12.122801% 0.824499%
4/30/2000 18657.00 20655.22 11277.16 0.400081% 0.058411%
5/31/2000 18951.00 21010.20 11290.32 1.718563% 0.116754%
6/30/2000 17907.00 20227.10 11349.57 -3.727233% 0.524781%
7/31/2000 17727.00 20699.82 11375.91 2.337053% 0.232019%
8/31/2000 18752.00 21968.95 11375.91 6.131162% 0.000000%
9/30/2000 18918.00 22179.30 11435.15 0.957485% 0.520833%
10/31/2000 19374.00 22600.88 11454.90 1.900750% 0.172712%
11/30/2000 19668.00 22306.19 11461.49 -1.303888% 0.057471%
12/31/2000 21545.00 24273.96 11454.90 8.821642% -0.057438%
1/31/2001 21907.00 24185.83 11527.32 -0.363073% 0.632184%
2/28/2001 21774.00 24083.59 11573.40 -0.422701% 0.399772%
3/31/2001 21374.00 23416.69 11599.74 -2.769125% 0.227531%
4/30/2001 22440.00 24703.86 11645.82 5.496797% 0.397276%
5/31/2001 23220.00 25405.28 11698.49 2.839341% 0.452233%
6/30/2001 23266.00 25066.58 11718.24 -1.333180% 0.168824%
7/31/2001 23742.00 24965.94 11685.32 -0.401524% -0.280899%
8/31/2001 23590.00 24509.94 11685.32 -1.826490% 0.000000%
9/30/2001 21525.00 22171.23 11737.99 -9.541879% 0.450704%
10/31/2001 21849.00 22289.59 11698.49 0.533836% -0.336512%
11/30/2001 23344.00 23849.65 11678.74 6.999057% -0.168824%
12/31/2001 24231.00 24838.38 11632.65 4.145698% -0.394589%
1/31/2002 24772.00 25089.35 11658.99 1.010404% 0.226372%
2/28/2002 25391.00 25496.91 11705.07 1.624444% 0.395257%
3/31/2002 26658.00 26800.15 11770.90 5.111363% 0.562430%
4/30/2002 26983.00 26782.51 11836.73 -0.065842% 0.559284%
5/31/2002 26796.00 26742.16 11836.73 -0.150650% 0.000000%
6/30/2002 25843.00 25548.25 11843.32 -4.464523% 0.055617%
7/31/2002 24182.00 23047.15 11856.48 -9.789719% 0.111173%
8/31/2002 24526.00 23315.33 11895.98 1.163618% 0.333148%
9/30/2002 22325.00 20961.39 11915.73 -10.096103% 0.166021%
10/31/2002 23376.00 21627.33 11935.48 3.176984% 0.165746%
11/30/2002 24133.00 22989.15 11935.48 6.296788% 0.000000%
12/31/2002 23688.00 22442.77 11909.15 -2.376692% -0.220629%
1/31/2003 22771.00 21821.17 11961.82 -2.769716% 0.442233%
2/28/2003 22327.00 21459.44 12053.98 -1.657706% 0.770501%
3/31/2003 22297.00 21532.69 12126.40 0.341322% 0.600765%
4/30/2003 24162.00 23170.12 12100.07 7.604423% -0.217155%
5/31/2003 25287.00 25209.48 12080.32 8.801657% -0.163221%
6/30/2003 25326.00 25385.55 12093.48 0.698448% 0.108992%
7/31/2003 26244.00 26174.50 12106.65 3.107862% 0.108873%
8/31/2003 26569.00 27103.91 12152.73 3.550809% 0.380642%
9/30/2003 26411.00 26893.41 12192.23 -0.776649% 0.325027%
10/31/2003 28237.00 28867.39 12179.07 7.340046% -0.107991%
11/30/2003 28365.00 29703.87 12146.15 2.897641% -0.270270%
12/31/2003 29132.00 30986.13 12132.98 4.316807% -0.108401%
1/31/2004 29449.00 31803.74 12192.23 2.638656% 0.488334%
2/29/2004 29954.00 32590.23 12258.06 2.472943% 0.539957%
3/31/2004 29706.00 32642.77 12337.06 0.161199% 0.644468%
4/30/2004 29162.00 31262.09 12376.56 -4.229670% 0.320171%
5/31/2004 29637.00 32063.23 12448.98 2.562673% 0.585106%
6/30/2004 30271.00 33207.64 12488.48 3.569242% 0.317292%
7/31/2004 29548.00 32307.94 12468.73 -2.709337% -0.158144%
8/31/2004 29914.00 32828.20 12475.31 1.610336% 0.052798%
9/30/2004 29914.00 33783.79 12501.65 2.910861% 0.211082%
199.14% 237.84% 25.02%
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------
CLASS R 9/30/04
- -----------------------------------
1-Year +12.82%
- -----------------------------------
Since Inception (1/1/02) +8.71%
- -----------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP FUNDSTATION Russell MidCap Consumer Price
DATE FUND - CLASS R VALUE INDEX(4) CPI(4) PERFORM / CDA Value Index NSA
- -----------------------------------------------------------------------------------------------------------------------------
1/1/2002 10000.00 10000.00 10000.00
1/31/2002 10276.00 10101.04 10022.64 2.76% 1.010404% 0.226372%
2/28/2002 10535.16 10265.13 10062.25 2.52% 1.624444% 0.395257%
3/31/2002 11064.53 10789.81 10118.85 5.02% 5.111363% 0.562430%
4/30/2002 11202.15 10782.71 10175.44 1.24% -0.065842% 0.559284%
5/31/2002 11132.84 10766.47 10175.44 -0.62% -0.150650% 0.000000%
6/30/2002 10738.07 10285.79 10181.10 -3.55% -4.464523% 0.055617%
7/31/2002 10052.00 9278.84 10192.42 -6.39% -9.789719% 0.111173%
8/31/2002 10197.65 9386.81 10226.37 1.45% 1.163618% 0.333148%
9/30/2002 9290.59 8439.11 10243.35 -8.89% -10.096103% 0.166021%
10/31/2002 9733.57 8707.22 10260.33 4.77% 3.176984% 0.165746%
11/30/2002 10046.97 9255.50 10260.33 3.22% 6.296788% 0.000000%
12/31/2002 9867.17 9035.52 10237.69 -1.79% -2.376692% -0.220629%
1/31/2003 9490.48 8785.26 10282.97 -3.82% -2.769716% 0.442233%
2/28/2003 9306.66 8639.63 10362.20 -1.94% -1.657706% 0.770501%
3/31/2003 9302.64 8669.12 10424.45 -0.04% 0.341322% 0.600765%
4/30/2003 10084.14 9328.35 10401.81 8.40% 7.604423% -0.217155%
5/31/2003 10559.27 10149.40 10384.83 4.71% 8.801657% -0.163221%
6/30/2003 10580.36 10220.29 10396.15 0.20% 0.698448% 0.108992%
7/31/2003 10965.08 10537.93 10407.47 3.64% 3.107862% 0.108873%
8/31/2003 11108.73 10912.11 10447.09 1.31% 3.550809% 0.380642%
9/30/2003 11046.45 10827.36 10481.04 -0.56% -0.776649% 0.325027%
10/31/2003 11816.90 11622.09 10469.72 6.97% 7.340046% -0.107991%
11/30/2003 11874.15 11958.86 10441.43 0.48% 2.897641% -0.270270%
12/31/2003 12197.60 12475.10 10430.11 2.72% 4.316807% -0.108401%
1/31/2004 12338.23 12804.27 10481.04 1.15% 2.638656% 0.488334%
2/29/2004 12556.21 13120.92 10537.63 1.77% 2.472943% 0.539957%
3/31/2004 12453.75 13142.07 10605.55 -0.82% 0.161199% 0.644468%
4/30/2004 12230.75 12586.20 10639.50 -1.79% -4.229670% 0.320171%
5/31/2004 12436.67 12908.74 10701.75 1.68% 2.562673% 0.585106%
6/30/2004 12708.89 13369.49 10735.71 2.19% 3.569242% 0.317292%
7/31/2004 12408.55 13007.26 10718.73 -2.36% -2.709337% -0.158144%
8/31/2004 12573.28 13216.72 10724.39 1.33% 1.610336% 0.052798%
9/30/2004 12573.28 13601.45 10747.03 0.00% 2.910861% 0.211082%
25.73% 36.01% 7.47%
10 | Annual Report
PERFORMANCE SUMMARY (CONTINUED)
ENDNOTES
THE FUND MAY INVEST IN STOCKS OF SMALLER-CAPITALIZATION COMPANIES, WHICH CARRY
SPECIAL RISKS SUCH AS GREATER PRICE VOLATILITY THAN LARGER-COMPANY STOCKS,
PARTICULARLY OVER THE SHORT TERM. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS A: Prior to 8/3/98, these shares were offered at a lower initial sales
charge; thus actual total returns may differ.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares
have higher annual fees and expenses than Class A shares.
CLASS R: Shares are available to certain eligible investors as described in
the prospectus. These shares have higher annual fees and expenses
than Class A shares.
(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any current,
applicable, maximum sales charge.
(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include any current, applicable,
maximum sales charge.
(4) Source: Standard & Poor's Micropal. The Russell Midcap Value Index is
market capitalization weighted and measures performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted
growth values. The stocks are also members of the Russell 1000 Value
Index.
Annual Report | 11
YOUR FUND'S EXPENSES
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
12 | Annual Report
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ----------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 3/31/04 VALUE 9/30/04 PERIOD* 3/31/04-9/30/04
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,009.90 $6.08
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.95 $6.11
- ----------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.00 $8.78
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.25 $8.82
- ----------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.00 $8.78
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.25 $8.82
- ----------------------------------------------------------------------------------------------------
CLASS R
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,009.60 $6.28
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.75 $6.31
- ----------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
1.21%; B: 1.75%; C: 1.75%; and R: 1.25%), multiplied by the average
account value over the period, multiplied by 183/366 to reflect the
one-half year period.
Annual Report | 13
FRANKLIN MANAGED TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN RISING DIVIDENDS FUND
--------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
CLASS A 2004 2003 2002 2001 2000
--------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $ 27.03 $ 22.87 $ 22.71 $ 20.02 $ 21.28
--------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ........................ .35 .16 .13 .18 .16
Net realized and unrealized gains (losses) ...... 3.40 4.16 .87 2.70 .40
--------------------------------------------------------------------
Total from investment operations ................. 3.75 4.32 1.00 2.88 .56
--------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (.16) (.07) (.11) (.19) (.15)
Net realized gains .............................. (.04) (.09) (.73) -- (1.67)
--------------------------------------------------------------------
Total distributions .............................. (.20) (.16) (.84) (.19) (1.82)
--------------------------------------------------------------------
Redemption fees .................................. --(c) -- -- -- --
--------------------------------------------------------------------
Net asset value, end of year ..................... $ 30.58 $ 27.03 $ 22.87 $ 22.71 $ 20.02
====================================================================
Total return(b) .................................. 13.86% 18.98% 4.27% 14.40% 2.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $1,285,585 $ 832,195 $ 502,150 $ 297,316 $ 261,571
Ratios to average net assets:
Expenses ........................................ 1.25% 1.37% 1.36% 1.45% 1.58%
Net investment income ........................... 1.17% .62% .51% .78% .81%
Portfolio turnover rate .......................... 3.42% 4.23% 5.67% 18.72% 11.91%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(c) Amount is less than $0.001 per share.
14 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
-------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
CLASS B 2004 2003 2002 2001 2000
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 26.81 $ 22.75 $ 22.62 $ 19.96 $ 21.23
-------------------------------------------------------------------
Income from investment operations:
Net investment income(a) .......................... .19 .02 -- .06 .06
Net realized and unrealized gains (losses) ........ 3.36 4.14 .88 2.69 .39
-------------------------------------------------------------------
Total from investment operations ................... 3.55 4.16 .88 2.75 .45
-------------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.07) (.01) (.02) (.09) (.05)
Net realized gains ................................ (.04) (.09) (.73) -- (1.67)
-------------------------------------------------------------------
Total distributions ................................ (.11) (.10) (.75) (.09) (1.72)
-------------------------------------------------------------------
Redemption fees .................................... --(c) -- -- -- --
-------------------------------------------------------------------
Net asset value, end of year ....................... $ 30.25 $ 26.81 $ 22.75 $ 22.62 $ 19.96
===================================================================
Total return(b) .................................... 13.26% 18.33% 3.78% 13.77% 2.38%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $ 292,322 $ 176,837 $ 45,522 $ 4,934 $ 1,684
Ratios to average net assets:
Expenses .......................................... 1.79% 1.92% 1.93% 2.00% 2.13%
Net investment income (loss) ...................... .63% .07% (.06)% .24% .27%
Portfolio turnover rate ............................ 3.42% 4.23% 5.67% 18.72% 11.91%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.001 per share.
Annual Report | See notes to financial statements. | 15
FRANKLIN MANAGED TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
CLASS C 2004 2003 2002 2001 2000
----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 26.77 $ 22.72 $ 22.60 $ 19.92 $ 21.19
----------------------------------------------------------------
Income from investment operations:
Net investment income(a) ............................. .19 .02 .01 .05 .06
Net realized and unrealized gains (losses) ........... 3.36 4.13 .86 2.70 .39
----------------------------------------------------------------
Total from investment operations ...................... 3.55 4.15 .87 2.75 .45
----------------------------------------------------------------
Less distributions from:
Net investment income ................................ (.07) (.01) (.02) (.07) (.05)
Net realized gains ................................... (.04) (.09) (.73) -- (1.67)
----------------------------------------------------------------
Total distributions ................................... (.11) (.10) (.75) (.07) (1.72)
----------------------------------------------------------------
Redemption fees ....................................... --(c) -- -- -- --
----------------------------------------------------------------
Net asset value, end of year .......................... $ 30.21 $ 26.77 $ 22.72 $ 22.60 $ 19.92
================================================================
Total return(b) ....................................... 13.26% 18.30% 3.72% 13.78% 2.38%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $ 475,176 $ 289,700 $ 94,734 $ 32,074 $ 23,870
Ratios to average net assets:
Expenses ............................................. 1.79% 1.93% 1.85% 1.99% 2.07%
Net investment income ................................ .63% .06% .02% .23% .30%
Portfolio turnover rate ............................... 3.42% 4.23% 5.67% 18.72% 11.91%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.001 per share.
16 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
---------------------------------------------
YEAR ENDED SEPTEMBER 30,
CLASS R 2004 2003 2002(d)
---------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................... $ 26.97 $ 22.84 $ 24.67
---------------------------------------------
Income from investment operations:
Net investment income(a) ................................... .35 .14 .11
Net realized and unrealized gains (losses) ................. 3.39 4.15 (1.85)
---------------------------------------------
Total from investment operations ............................ 3.74 4.29 (1.74)
---------------------------------------------
Less distributions from:
Net investment income ...................................... (.16) (.07) (.09)
Net realized gains ......................................... (.04) (.09) --
---------------------------------------------
Total distributions ......................................... (.20) (.16) (.09)
---------------------------------------------
Redemption fees ............................................. --(c) -- --
---------------------------------------------
Net asset value, end of year ................................ $ 30.51 $ 26.97 $ 22.84
============================================
Total return(b) ............................................. 13.82% 18.91% (7.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................. $ 36,510 $ 19,464 $ 1,774
Ratios to average net assets:
Expenses ................................................... 1.29% 1.43% 1.41%e
Net investment income ...................................... 1.13% .56% .46%e
Portfolio turnover rate ..................................... 3.42% 4.23% 5.67%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.001 per share.
(d) For the period January 2, 2002 (effective date) to September 30, 2002.
(e) Annualized.
Annual Report | See notes to financial statements. | 17
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004
- -----------------------------------------------------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND OTHER EQUITY INTERESTS 95.9%
COMMERCIAL SERVICES .3%
ABM Industries Inc. ....................................................... 325,800 $ 6,564,870
------------
CONSUMER DURABLES 3.5%
Leggett & Platt Inc. ...................................................... 2,040,000 57,324,000
Russ Berrie & Co. Inc. .................................................... 814,500 16,412,175
------------
73,736,175
------------
CONSUMER NON-DURABLES 6.8%
Alberto-Culver Co. ........................................................ 1,254,450 54,543,486
Altria Group Inc. ......................................................... 59,500 2,798,880
Lancaster Colony Corp. .................................................... 464,900 19,602,509
Procter & Gamble Co. ...................................................... 1,139,400 61,664,328
Superior Uniform Group Inc. ............................................... 224,200 3,071,540
------------
141,680,743
------------
ELECTRONIC TECHNOLOGY 1.4%
Cohu Inc. ................................................................. 284,400 4,203,432
Diebold Inc. .............................................................. 523,800 24,461,460
------------
28,664,892
------------
FINANCE 35.2%
AFLAC Inc. ................................................................ 1,337,200 52,431,612
American International Group Inc. ......................................... 1,210,477 82,300,331
Arthur J. Gallagher & Co. ................................................. 1,157,000 38,331,410
Erie Indemnity Co., A ..................................................... 637,000 32,499,740
Fannie Mae ................................................................ 1,161,000 73,607,400
Freddie Mac ............................................................... 451,900 29,481,956
Mercantile Bankshares Corp. ............................................... 576,950 27,670,522
Mercury General Corp. ..................................................... 425,100 22,483,539
National Commerce Financial Corp. ......................................... 1,924,300 65,830,303
Old Republic International Corp. .......................................... 3,292,800 82,418,784
Peoples Bancorp Inc. ...................................................... 262,768 6,916,054
RLI Corp. ................................................................. 551,524 20,709,726
State Street Corp. ........................................................ 1,421,500 60,712,265
TrustCo Bank Corp. NY ..................................................... 678,121 8,693,511
U.S. Bancorp .............................................................. 2,334,903 67,478,697
Washington Mutual Inc. .................................................... 1,520,050 59,403,554
Wilmington Trust Corp. .................................................... 139,400 5,047,674
------------
736,017,078
------------
HEALTH TECHNOLOGY 11.8%
Becton, Dickinson & Co. ................................................... 754,800 39,023,160
Hillenbrand Industries Inc. ............................................... 1,644,900 83,116,797
Pfizer Inc. ............................................................... 2,787,100 85,285,260
(a) West Pharmaceutical Services Inc. ......................................... 1,809,600 37,730,160
------------
245,155,377
------------
NON-ENERGY MINERALS 2.7%
Nucor Corp. ............................................................... 624,100 57,024,017
------------
18 | Annual Report
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2004 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONT.)
PROCESS INDUSTRIES 6.4%
Bemis Co. Inc. ................................................................... 801,800 $ 21,311,844
Donaldson Co. Inc. ............................................................... 611,200 17,351,968
Myers Industries Inc. ............................................................ 720,973 7,894,654
Praxair Inc. ..................................................................... 2,045,400 87,420,396
--------------
133,978,862
--------------
PRODUCER MANUFACTURING 21.3%
Baldor Electric Co. .............................................................. 144,666 3,422,798
Brady Corp., A ................................................................... 247,600 12,075,452
Carlisle Cos. Inc. ............................................................... 1,327,400 84,860,682
CIRCOR International Inc. ........................................................ 88,200 1,719,900
Dover Corp. ...................................................................... 577,400 22,443,538
General Electric Co. ............................................................. 2,475,500 83,127,290
Graco Inc. ....................................................................... 941,137 31,528,089
Kaydon Corp. ..................................................................... 293,800 8,452,626
Roper Industries Inc. ............................................................ 1,342,800 77,157,288
Superior Industries International Inc. ........................................... 1,174,500 35,176,275
Teleflex Inc. .................................................................... 808,800 34,374,000
United Technologies Corp. ........................................................ 549,200 51,284,296
--------------
445,622,234
--------------
RETAIL TRADE 4.1%
Family Dollar Stores Inc. ........................................................ 3,154,900 85,497,790
--------------
TECHNOLOGY SERVICES 2.4%
Reynolds & Reynolds Co., A ....................................................... 2,059,000 50,795,530
--------------
TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS (COST $1,658,942,601) ............. 2,004,737,568
--------------
SHORT TERM INVESTMENTS (COST $80,914,832) 3.9%
MONEY FUND
(b) Franklin Institutional Fiduciary Trust Money Market Portfolio .................... 80,914,832 80,914,832
--------------
TOTAL INVESTMENTS (COST $1,739,857,433) 99.8% .................................... 2,085,652,400
OTHER ASSETS, LESS LIABILITIES .2% ............................................... 3,940,134
--------------
NET ASSETS 100.0% ................................................................ $2,089,592,534
==============
(a) See Note 7 regarding Holdings of 5% Voting Securities of Portfolio
Companies.
(b) See Note 8 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 19
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2004
---------------
FRANKLIN RISING
DIVIDENDS FUND
---------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers .................................................. $1,634,217,302
Cost - Non-controlled affiliated issuers (Note 7) ............................ 24,725,299
Cost - Sweep Money Fund (Note 8) ............................................. 80,914,832
--------------
Value - Unaffiliated issuers ................................................. 1,967,007,408
Value - Non-controlled affiliated issuers (Note 7) ........................... 37,730,160
Value - Sweep Money Fund (Note 8) ............................................ 80,914,832
Receivables:
Capital shares sold .......................................................... 10,809,554
Dividends and interest ....................................................... 2,828,763
--------------
Total assets ............................................................ 2,099,290,717
--------------
Liabilities:
Payables:
Investment securities purchased .............................................. 2,981,535
Capital shares redeemed ...................................................... 3,201,180
Affiliates ................................................................... 3,385,302
Other liabilities ............................................................. 130,166
Total liabilities ........................................................ 9,698,183
--------------
Net assets, at value ................................................... $2,089,592,534
==============
Net assets consist of:
Undistributed net investment income ........................................... $ 13,709,833
Net unrealized appreciation (depreciation) .................................... 345,794,967
Accumulated net realized gain (loss) .......................................... 15,778,210
Capital shares ................................................................ 1,714,309,524
--------------
Net assets, at value ................................................... $2,089,592,534
==============
20 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
September 30, 2004
---------------
FRANKLIN RISING
DIVIDENDS FUND
---------------
CLASS A:
Net assets, at value .............................................................. $1,285,584,771
==============
Shares outstanding ................................................................ 42,045,600
==============
Net asset value per share(a) ...................................................... $ 30.58
==============
Maximum offering price per share (net asset value per share / 94.25%) ............. $ 32.45
==============
CLASS B:
Net assets, at value .............................................................. $ 292,322,286
==============
Shares outstanding ................................................................ 9,663,211
==============
Net asset value and maximum offering price per share(a) ........................... $ 30.25
==============
CLASS C:
Net assets, at value .............................................................. $ 475,175,620
==============
Shares outstanding ................................................................ 15,731,015
==============
Net asset value and maximum offering price per share(a) ........................... $ 30.21
==============
CLASS R:
Net assets, at value .............................................................. $ 36,509,857
==============
Shares outstanding ................................................................ 1,196,823
==============
Net asset value and maximum offering price per share(a) ........................... $ 30.51
==============
(a) Redemption price is equal to net asset value less any applicable
contingent deferred sales charge and redemption fees retained by the Fund.
Annual Report | See notes to financial statements. | 21
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended September 30, 2004
---------------
FRANKLIN RISING
DIVIDENDS FUND
---------------
Investment income:
Dividends:
Unaffiliated issuers ............................................................. $ 41,276,493
Non-controlled affiliated issuers (Note 7) ....................................... 760,032
Sweep Money Fund (Note 8) ........................................................ 597,361
-------------
Total investment income .......................................................... 42,633,886
-------------
Expenses:
Management fees (Note 3) .......................................................... 10,431,175
Distribution fees (Note 3)
Class A .......................................................................... 4,927,171
Class B .......................................................................... 2,465,994
Class C .......................................................................... 4,068,661
Class R .......................................................................... 149,019
Transfer agent fees (Note 3) ...................................................... 2,926,254
Accounting fees (Note 3) .......................................................... 40,000
Custodian fees (Note 4) ........................................................... 33,039
Reports to shareholders ........................................................... 117,575
Registration and filing fees ...................................................... 192,310
Professional fees ................................................................. 58,954
Trustees' fees and expenses ....................................................... 46,768
Other ............................................................................. 52,310
-------------
Total expenses ................................................................... 25,509,230
Expense reductions (Note 4) ...................................................... (231)
-------------
Net expenses .................................................................... 25,508,999
-------------
Net investment income .......................................................... 17,124,887
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ........................................ 16,873,434
Net change in unrealized appreciation (depreciation) on investments .............. 159,219,313
-------------
Net realized and unrealized gain (loss) ............................................ 176,092,747
-------------
Net increase (decrease) in net assets resulting from operations .................... $ 193,217,634
=============
22 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended September 30, 2004 and 2003
------------------------------------------
FRANKLIN RISING DIVIDENDS FUND
------------------------------------------
2004 2003
------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................................................ $ 17,124,887 $ 4,248,985
Net realized gain (loss) from investments .................................... 16,873,434 2,506,089
Net change in unrealized appreciation (depreciation) on investments .......... 159,219,313 150,411,443
------------------------------------------
Net increase (decrease) in net assets resulting from operations .......... 193,217,634 157,166,517
Distributions to shareholders from:
Net investment income:
Class A ...................................................................... (5,124,283) (1,586,483)
Class B ...................................................................... (529,986) (35,548)
Class C ...................................................................... (829,380) (58,587)
Class R ...................................................................... (121,804) (19,592)
Net realized gains:
Class A ...................................................................... (1,235,098) (2,092,455)
Class B ...................................................................... (285,847) (245,781)
Class C ...................................................................... (472,640) (462,944)
Class R ...................................................................... (30,577) (23,150)
------------------------------------------
Total distributions to shareholders ........................................... (8,629,615) (4,524,540)
Capital share transactions: (Note 2)
Class A ...................................................................... 338,191,543 226,119,921
Class B ...................................................................... 90,333,139 113,822,110
Class C ...................................................................... 144,107,903 165,642,842
Class R ...................................................................... 14,169,576 15,787,912
------------------------------------------
Total capital share transactions ............................................... 586,802,161 521,372,785
Redemption fees ................................................................ 6,900 --
------------------------------------------
Net increase (decrease) in net assets .................................... 771,397,080 674,014,762
Net assets:
Beginning of year ............................................................. 1,318,195,454 644,180,692
------------------------------------------
End of year ................................................................... $ 2,089,592,534 $ 1,318,195,454
==========================================
Undistributed net investment income included in net assets:
End of year ................................................................... $ 13,709,833 $ 3,190,399
==========================================
Annual Report | See notes to financial statements. | 23
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS
FRANKLIN RISING DIVIDENDS FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Managed Trust (the Trust) is registered under the Investment Company
Act of 1940 as a diversified, open-end investment company, consisting of one
fund, the Franklin Rising Dividends Fund (the Fund). The Fund seeks long-term
capital appreciation. Preservation of capital is also an important
consideration. The Fund invests at least 80% of its net assets in equity
securities of companies that have paid consistently rising dividends.
The following summarizes the Fund's significant accounting policies.
a. Security Valuation
Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing 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 by independent pricing services or recognized dealers in
such securities. If events occur that materially affect the values of securities
after the prices are determined, but prior to 4:00 p.m. Eastern time or the
close of trading on the NYSE, whichever is earlier, or if market quotations are
deemed not readily available or reliable, the securities will be valued at fair
value. Investments in open-end mutual funds are valued at the closing net asset
value. All security valuation procedures are approved by the Board of Trustees.
b. Income Taxes
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under Sub Chapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
c. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
24 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. Accounting Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.
e. Redemption Fees
Effective June 1, 2004, redemptions and exchanges of Fund shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital as noted in the Statement of Changes in Net Assets.
f. Guarantees and Indemnifications
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
The Fund offers four classes of shares: Class A, Class B, Class C and Class R.
Each class of shares differs by its initial sales load, contingent deferred
sales charges, distribution fees, voting rights on matters affecting a single
class and its exchange privilege.
At September 30, 2004, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
---------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2004 2003
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------
CLASS A SHARES:
Shares sold ............................... 18,971,456 $ 567,102,553 16,950,150 $ 423,590,362
Shares issued in reinvestment of
distributions .......................... 187,096 5,461,274 130,077 3,208,995
Shares redeemed ........................... (7,896,008) (234,372,284) (8,258,155) (200,679,436)
---------------------------------------------------------------------------
Net increase (decrease) .................... 11,262,544 $ 338,191,543 8,822,072 $ 226,119,921
===========================================================================
Annual Report | 25
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
--------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2004 2003
--------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
CLASS B SHARES:
Shares sold ............................. 3,913,076 $ 115,516,852 5,212,913 $ 128,837,999
Shares issued in reinvestment of
distributions ........................ 24,214 701,721 10,097 248,202
Shares redeemed ......................... (869,904) (25,885,434) (628,597) (15,264,091)
--------------------------------------------------------------------------------
Net increase (decrease) ................. 3,067,386 $ 90,333,139 4,594,413 $ 113,822,110
================================================================================
CLASS C SHARES:
Shares sold ............................. 7,103,069 $ 209,292,387 7,976,909 $ 197,839,477
Shares issued in reinvestment of
distributions ........................ 38,312 1,108,453 18,855 462,902
Shares redeemed ......................... (2,233,858) (66,292,937) (1,341,870) (32,659,537)
--------------------------------------------------------------------------------
Net increase (decrease) ................. 4,907,523 $ 144,107,903 6,653,894 $ 165,642,842
================================================================================
CLASS R SHARES:
Shares sold ............................. 703,620 $ 20,994,785 757,073 $ 18,572,440
Shares issued in reinvestment of
distributions ........................ 5,369 156,344 1,564 38,502
Shares redeemed ......................... (233,729) (6,981,553) (114,756) (2,823,030)
--------------------------------------------------------------------------------
Net increase (decrease) ................. 475,260 $ 14,169,576 643,881 $ 15,787,912
================================================================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also officers or directors of the following
entities:
- --------------------------------------------------------------------------------------
ENTITY AFFILIATION
- --------------------------------------------------------------------------------------
Franklin Advisory Services, LLC (Advisory Services) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton/Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
a. Management Fees
The Fund pays an investment management fee to Advisory Services based on the
average daily net assets of the Fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
.750% First $500 million
.625% Over $500 million, up to and including $1 billion
.500% In excess of $1 billion
26 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
b. Administrative Fees
Under an agreement with Advisory Services, FT Services provides administrative
services to the Fund. The fee is paid by Advisory Services based on average
daily net assets, and is not an additional expense of the Fund.
The Fund also pays accounting fees to Advisory Services as noted in the
Statement of Operations.
c. Distribution Fees
The Fund reimburses Distributors up to .50%, 1.00%, 1.00% and .50% per year of
its average daily net assets of Class A, Class B, Class C, and Class R,
respectively, for costs incurred in marketing the Fund's shares under a Rule
12b-1 plan. Under the Class A distribution plan, costs exceeding the maximum for
the current plan year cannot be reimbursed in subsequent periods.
d. Sales Charges/Underwriting Agreements
Distributors has advised the Fund of the following commission transactions
related to the sale of the Fund's shares for the year:
Sales charges received ......................................... $1,381,285
Contingent deferred sales charges retained ..................... $ 499,451
e. Transfer Agent
The Fund paid transfer agent fees of $2,926,254, of which $1,920,695 was paid to
Investor Services.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended September 30, 2004, the
custodian fees were reduced as noted in the Statement of Operations.
Annual Report | 27
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
5. INCOME TAXES
At September 30, 2004, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income, and undistributed long-term
capital gains for income tax purposes were as follows:
Cost of investments ...................................... $ 1,740,807,988
----------------
Unrealized appreciation .................................. $ 382,296,193
Unrealized depreciation .................................. (37,451,781)
----------------
Net unrealized appreciation (depreciation) ............... $ 344,844,412
================
Undistributed ordinary income ............................ $ 13,709,833
Undistributed long term capital gains .................... 16,728,765
----------------
Distributable earnings ................................... $ 30,438,598
================
Net realized gains differ for financial statement and tax purposes primarily due
to differing treatment of wash sales.
The tax character of distributions paid during the years ended September 30,
2004 and 2003, was as follows:
-------------------------
2004 2003
-------------------------
Distributions paid from:
Ordinary income ..................... $6,605,453 $1,700,210
Long term capital gain .............. 2,024,162 2,824,330
-------------------------
$8,629,615 $4,524,540
=========================
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
year ended September 30, 2004, aggregated $610,039,041 and $57,725,902,
respectively.
7. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" to include
investments in portfolio companies in which a fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" for the
Fund at September 30, 2004 were as shown below.
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF REALIZED
HELD AT BEGINNING GROSS GROSS SHARES HELD AT VALUE AT INVESTMENT CAPITAL
NAME OF ISSUER OF YEAR ADDITIONS REDUCTIONS END OF YEAR END OF YEAR INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
West Pharmaceutical
Services Inc. ......... 904,800 904,800 -- 1,809,600 $37,730,160 $ 760,032 --
------------------------------------
TOTAL AFFILIATED SECURITIES (1.81% of Net Assets) $37,730,160 $ 760,032 --
------------------------------------
28 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
8. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc., (an affiliate of the investment manager). Management
fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in
an amount not to exceed the management fees paid by the Sweep Money Fund.
9. REGULATORY MATTERS
MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On September 20, 2004, Franklin Resources, Inc. (Franklin Resources, Inc. and
its subsidiaries are referred to collectively as the "Company") announced that
an agreement has been reached by two of its subsidiaries, Franklin Advisers,
Inc. ("Franklin Advisers") and Franklin Templeton Alternative Strategies, Inc.
("FTAS"), with the Securities Division of the Office of the Secretary of the
Commonwealth of Massachusetts (the "State of Massachusetts") related to an
administrative complaint filed on February 4, 2004. The administrative complaint
addressed one instance of market timing that was also a subject of the August 2,
2004 settlement that Franklin Advisers reached with the SEC, as described below.
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers and FTAS have consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts. The consent order has multiple sections, including
"Statements of Fact" and "Violations of Massachusetts Securities Laws." The
Company admitted the "Statements of Fact." The Company did not admit or deny the
"Violations of the Massachusetts Securities Laws." While Franklin Advisers and
FTAS did not admit or deny engaging in any wrongdoing, the Company believes that
it is in its best interest and the interests of its funds' shareholders to
settle this issue now and move forward.
On October 25, 2004, the State of Massachusetts filed an administrative
complaint against Franklin Resources, Inc. ("FRI") alleging a violation of the
Massachusetts Uniform Securities law (the "Act") in connection with having filed
on September 20, 2004, an allegedly false and misleading report on Form 8-K with
the SEC. The Massachusetts administrative complaint seeks an order calling for
FRI to cease and desist from further violations of the Act and to pay an
administrative fine in an amount to be determined.
Annual Report | 29
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
9. REGULATORY MATTERS (CONTINUED)
MASSACHUSETTS ADMINISTRATIVE PROCEEDING (CONTINUED)
FRI's SEC filing of September 20, 2004 described the settlement consent order
with the State of Massachusetts and reported while "Franklin Advisers and FTAS
did not admit or deny engaging in any wrongdoing, the Company believes that it
is in the best interest of the Company and its funds' shareholders to settle
this issue now and move forward." The October 25, 2004 State of Massachusetts
administrative complaint alleges that this description of the settlement consent
order was materially false and misleading under Massachusetts law. FRI's
management disagrees with the allegation made in this administrative complaint
and continues to believe that the description of the terms of the settlement
consent order issued by the State of Massachusetts is neither false nor
misleading.
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement has been reached by
Franklin Advisers with the SEC that resolves the issues resulting from the SEC's
investigation of market timing activity and the SEC issued an "Order instituting
administrative and cease-and-desist proceedings pursuant to sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and sections 9(b) and 9(f) of the
Investment Company Act of 1940, making findings and imposing remedial sanctions
and a cease-and-desist order" (the "Order"). The SEC's Order concerns the
activities of a limited number of third parties that ended in 2000 and those
that are the subject of the Massachusetts administrative complaint described
above.
Under the terms of the SEC's Order, pursuant to which Franklin Advisers neither
admits nor denies any wrongdoing, Franklin Advisers has agreed to pay $50
million, of which $20 million is a civil penalty, to be distributed to
shareholders of certain funds in accordance with a plan to be developed by an
Independent Distribution Consultant. At this time, it is unclear which funds
will receive distributions or which shareholders of any particular fund will
receive distributions. The SEC Order also requires Franklin Advisers to, among
other things, enhance and periodically review compliance policies and
procedures.
30 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
9. REGULATORY MATTERS (CONTINUED)
OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees have been providing documents and information in response
to these requests and subpoenas. In addition, the Company has responded to
requests for similar kinds of information from regulatory authorities in some of
the foreign countries where the Company conducts its global asset management
business.
The staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against Franklin Advisers and Franklin
Templeton Distributors, Inc. ("FTDI") concerning payments to securities dealers
who sell fund shares (commonly referred to as "revenue sharing"). The staff of
the California Attorney General's Office ("CAGO") also has advised the Company
that the California Attorney General is authorized to bring a civil action
against the Company and FTDI arising from the same events. Even though the
Company currently believes that the charges the SEC staff and CAGO staff are
contemplating are unwarranted, it also believes that it is in the best interest
of the Company's and funds' shareholders to resolve these issues voluntarily, to
the extent the Company can reasonably do so. The Company continues to have
discussions towards resolving these governmental investigations.
Annual Report | 31
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
9. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS
The Trust, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York
and Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Massachusetts
administrative complaint described above. The lawsuits are styled as class
actions or derivative actions on behalf of either the named funds or the
Company.
Various subsidiaries of the Company have also been named in multiple lawsuits
filed in state courts in Illinois alleging breach of duty with respect to
valuation of the portfolio securities of certain funds managed by such
subsidiaries.
In addition, the Company and certain of its subsidiaries, as well as certain
current and former officers, employees, and directors have been named in
multiple lawsuits alleging violations of various securities laws and pendent
state law claims relating to the disclosure of directed brokerage payments
and/or payment of allegedly excessive advisory, commission, and distribution
fees. These lawsuits are styled as class actions and derivative actions brought
on behalf of certain funds.
The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.
The Company cannot predict with certainty the eventual outcome of the foregoing
governmental investigations or class actions or other lawsuits. If the Company
finds that it bears responsibility for any unlawful or inappropriate conduct
that caused losses to the Trust, it is committed to making the Trust or its
shareholders whole, as appropriate.
32 | Annual Report
FRANKLIN MANAGED TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FRANKLIN RISING DIVIDENDS FUND
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF FRANKLIN MANAGED TRUST SAN MATEO,
CALIFORNIA
We have audited the accompanying statement of assets and liabilities of the
Franklin Rising Dividends Fund, a series of shares of Franklin Managed Trust,
including the statement of investments, as of September 30, 2004, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 September 30, 2004, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Rising Dividends Fund at September 30, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 3, 2004,
except for Note 9, as to which the date is November 12, 2004
Annual Report | 33
FRANKLIN MANAGED TRUST
TAX DESIGNATION (UNAUDITED)
FRANKLIN RISING DIVIDENDS FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund hereby
designates $16,873,434 as a capital gain dividend for the fiscal year ended
September 30, 2004.
Under Section 854(b)(2) of the Code, the Fund hereby designates up to a maximum
of $40,963,051 as qualified dividends for purposes of the maximum rate under
Section 1(h)(11) of the Code for the fiscal year ended September 30, 2004. In
January 2005, shareholders will receive Form 1099-DIV which will include their
share of qualified dividends distributed during the calendar year 2004.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
Under Section 854(b)(2) of the Code, the Fund hereby designates 100.00% of the
ordinary income dividends as income qualifying for the dividends received
deduction for the fiscal year ended September 30, 2004.
34 | Annual Report
BOARD MEMBERS AND OFFICERS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK T. CROHN (80) Trustee Since 1986 5 Director, Unity Mutual Life Insurance
One Franklin Parkway Company.
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Eastport Lobster & Fish Company; and FORMERLY, Chief Executive Officer and Chairman, Financial Benefit Life Insurance
Company (insurance and annuities) (until 1996); Chief Executive Officer National Benefit Life Insurance Co. (insurance) (1963-1982);
and Director, AmVestors Financial Corporation (until 1997).
- ------------------------------------------------------------------------------------------------------------------------------------
BURTON J. GREENWALD (74) Trustee Since 2001 12 Director, Fiduciary Emerging Markets
One Franklin Parkway Bond Fund PLC and Fiduciary International
San Mateo, CA 94403-1906 Ireland Limited.
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Managing Director, B.J. Greenwald Associates, management consultants to the financial services industry.
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES RUBENS II (74) Trustee Since 1986 12 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor.
- ------------------------------------------------------------------------------------------------------------------------------------
LEONARD RUBIN (78) Trustee Since 1986 12 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Partner in LDR Equities, LLC (manages personal investments); and FORMERLY, President, F.N.C. Textiles, Inc.; and Chairman of the
Board, Carolace Embroidery Co., Inc. (until 1996).
- ------------------------------------------------------------------------------------------------------------------------------------
**WILLIAM J. LIPPMAN (79) Trustee, Trustee and 18 None
One Parker Plaza, 9th Floor President and President
Fort Lee, NJ 07024-2920 Chief since 1986
Executive and Chief
Officer - Executive
Investment Officer-
Management Investment
Management
since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Private Client Group, Inc.; President, Franklin Advisory Services, LLC.; and officer and/or director
or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of two of the investment companies
in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 35
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice President Since 1991 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July Not Applicable None
One Franklin Parkway Compliance 2004
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources, Inc.,
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42) Treasurer Since July Not Applicable None
One Franklin Parkway 2004
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive
Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer,
Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
36 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (57) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL Officer -
33394-3091 Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (64) Vice President Since 1991 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 37
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch Chemicals, Inc.
600 Fifth Avenue - AML and Lingnan Foundation
Rockefeller Center Compliance
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52) Chief Financial Since May Not Applicable None
500 East Broward Blvd. Officer and 2004
Suite 2100 Chief
Fort Lauderdale, FL Accounting
33394-3091 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and formerly, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** William J. Lippman is considered to be an interested person of the Trust
under the federal securities laws due to his position as an officer of
some of the subsidiaries of Franklin Resources, Inc., which is the parent
company of the Trust's adviser and distributor.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK T. CROHN AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. CROHN, WHO CURRENTLY IS A DIRECTOR OF VARIOUS COMPANIES AND
CHAIRS THE FUNDS AUDIT COMMITTEE, QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS
BUSINESS BACKGROUND AND EXPERIENCE, WHICH INCLUDES SERVICE AS CHIEF EXECUTIVE
OFFICER OF NATIONAL BENEFIT LIFE INSURANCE COMPANY (1963-1982), CHIEF EXECUTIVE
OFFICER OF FINANCIAL BENEFIT LIFE INSURANCE COMPANY (1982-1996), AND SERVICE AS
A DIRECTOR OF AMVESTORS FINANCIAL CORPORATION UNTIL 1997. AS A RESULT OF SUCH
BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. CROHN HAS
ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. CROHN IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
38 | Annual Report
FRANKLIN MANAGED TRUST
FRANKLIN RISING DIVIDENDS FUND
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Annual Report | 39
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LITERATURE REQUEST
TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT 1-800/DIAL BEN(R)
(1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
Franklin Small-Mid Cap Growth Fund
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Federal Money Fund(5), (6)
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(5), (7)
Franklin Money Fund(5), (6)
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
TAX-FREE INCOME(8)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(9)
Tax-Exempt Money Fund(5), (6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(10)
Colorado
Connecticut
Florida(10)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York(10)
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(11)
(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2) The fund is only open to existing shareholders and select retirement
plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.
(5) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6) Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
(7) Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.
(8) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(9) Portfolio of insured municipal securities.
(10) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(11) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable
contracts.
09/04 Not part of the annual report
[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN RISING DIVIDENDS FUND
INVESTMENT MANAGER
Franklin Advisory Services, LLC
One Parker Plaza
Ninth Floor
Fort Lee, NJ 07024
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
158 A2004 11/04
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank T. Crohn and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $20,500 for the fiscal year ended September 30, 2004 and $0 for the fiscal
year ended September 30, 2003.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of the their financial
statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
There were no fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant, other than the services
reported in paragraphs (a)-(c) of Item 4.
There were no fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant, other than
the services reported in paragraphs (a)-(c) of Item 4.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were pre-approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) There were no non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant.
(h) No disclosures are required by this Item 4(h).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS.
(A) Code of Ethics
(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN MANAGED TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 29, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 29, 2004
By /s/Galen G. Vetter
Chief Financial Officer
Date November 29, 2004