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
---------
FRANKLIN MANAGED TRUST
----------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
------------
Date of fiscal year end: 9/30
----
Date of reporting period: 9/30/05
-------
ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------
A series of Franklin Managed Trust
- --------------------------------------------------------------------------------
ANNUAL REPORT AND SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN Eligible shareholders can
RISING DIVIDENDS FUND sign up for eDelivery at
franklintempleton.com.
See inside for details.
- --------------------------------------------------------------------------------
[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE(R)
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 offices in
over 25 countries, Templeton offers investors
a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series
is dedicated to a unique style of value
investing, searching aggressively for
opportunity among what it believes are
undervalued stocks, as well as arbitrage
situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work
independently and adhere to different
investment approaches, Franklin, Templeton
and Mutual Series funds typically have
distinct portfolios. That's why our funds can
be used to build truly diversified allocation
plans 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, accurate
and personal service that has helped us
become one of the most trusted names in
financial services.
- --------------------------------------------------------------------------------
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Not part of the annual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Rising Dividends Fund ............................................ 3
Performance Summary ....................................................... 8
Your Fund's Expenses ...................................................... 13
Financial Highlights and Statement of Investments ......................... 15
Financial Statements ...................................................... 21
Notes to Financial Statements ............................................. 25
Report of Independent Registered Public Accounting Firm ................... 32
Tax Designation ........................................................... 33
Board Members and Officers ................................................ 34
Shareholder Information ................................................... 38
- --------------------------------------------------------------------------------
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, while not a goal, 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.
- --------------------------------------------------------------------------------
PERFORMANCE DATA 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.
- --------------------------------------------------------------------------------
This annual report for Franklin Rising Dividends Fund covers the fiscal year
ended September 30, 2005.
PERFORMANCE OVERVIEW
For the 12 months under review, Franklin Rising Dividends Fund - Class A posted
a +3.60% cumulative total return. The Fund underperformed its benchmarks, the
Standard & Poor's 500 Composite Index (S&P 500), which returned +12.25%, and the
Russell Midcap(R) Value Index, which posted a +26.13% total return for the same
period.(1) The S&P 500 is replacing the Russell Midcap Value Index as the Fund's
benchmark. Since no index reflects the Fund's strategy, comparison with a
generally accepted market index such as the S&P 500 seems an appropriate
benchmark. You can find the Fund's long-term performance data in the Performance
Summary beginning on page 8.
ECONOMIC AND MARKET OVERVIEW
During the 12 months ended September 30, 2005, a maturing domestic economic
expansion was driven by perceived staying power across most industries, sectors
and regions. Gross domestic product (GDP) rose during the period, benefiting
primarily from personal consumption and greater business investment. Demand for
imported goods and materials fueled a widening trade
(1) Source: Standard & Poor's Micropal. The Russell Midcap Value Index is
market capitalization weighted and measures performance of those Russell
Midcap Index companies with lower price-to-book ratios and lower
forecasted growth values. The stocks are also members of the Russell 1000
Value Index. 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 indices are
unmanaged and include 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 19.
Annual Report | 3
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 9/30/05
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
- -----------------------------------------------------
% OF TOTAL
NET ASSETS
- -----------------------------------------------------
Finance* 35.2%
- -----------------------------------------------------
Producer Manufacturing* 25.9%
- -----------------------------------------------------
Health Technology 11.0%
- -----------------------------------------------------
Consumer Non-Durables 7.6%
- -----------------------------------------------------
Process Industries 6.1%
- -----------------------------------------------------
Non-Energy Minerals 3.4%
- -----------------------------------------------------
Retail Trade 3.2%
- -----------------------------------------------------
Consumer Durables 2.3%
- -----------------------------------------------------
Technology Services 2.2%
- -----------------------------------------------------
Other 1.6%
- -----------------------------------------------------
Short-Term Investments & Other Net Assets 1.5%
- -----------------------------------------------------
gap. The U.S. dollar rallied in 2005 driven largely by rising short-term
domestic interest rates and strong economic growth in the U.S. relative to many
of its major trading partners.
Oil prices increased substantially during the period amid concerns about
potential long-term supply limitations in the face of expected strong global
demand growth, especially from China and India. Despite rising commodity prices,
inflation remained relatively contained for the 12 months ended September 30,
2005, as measured by the 2.0% rise for the core Consumer Price Index (CPI).(2)
With controlling inflation at the forefront of its agenda, the Federal Reserve
Board raised the federal funds target rate from 1.75% to 3.75%, and said it
would respond to changes in economic prospects as needed to fulfill its
obligation to maintain price stability. Compared with the rise in short-term
interest rates, long-term interest rates remained relatively stable, supporting
overall robust housing and commercial real estate activity, which contributed to
economic growth.
Many businesses enjoyed their widest profit margins on record, propelled largely
by productivity gains. The labor market firmed as employment increased and the
unemployment rate dropped from 5.4% to 5.1% during the reporting period.(2)
Personal income rose, and hiring rebounded in many industries, bolstered by
healthy business spending and solid business confidence. However, late in the
period consumer sentiment fell amid concerns about rising energy costs.
In this environment, the blue chip stocks of the Dow Jones Industrial Average
posted a one-year total return of +7.23%, while the broader S&P 500
and.technology-heavy NASDAQ Composite Index returned +12.25% and +14.9%.(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 criteria, requiring
consistent and substantial dividend increases, strong balance
* Significant exposure to a single sector may result in the Fund's
experiencing greater volatility than a fund with a more broadly
diversified portfolio. There are specific risks to investing in the
finance industry, which is sensitive to changes in interest rates, subject
to extensive government regulation, and recently has undergone rapid
change related to consolidations and changes to its regulatory framework.
(2) Source: Bureau of Labor Statistics. Core CPI excludes food and energy
costs.
(3) Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is
price weighted based on the average market price of 30 blue chip stocks of
companies that are generally industry leaders. See footnote 1 for a
description of the S&P 500. The NASDAQ Composite Index measures all NASDAQ
domestic and international based common type stocks listed on The NASDAQ
Stock Market. The index is market value weighted and includes more than
3,000 companies.
4 | Annual Report
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.
MANAGER'S DISCUSSION
Significant positive contributors to the Fund's return during the year under
review included Roper Industries, Teleflex and Nucor. Roper reported strong
growth in sales and earnings as its recently acquired radio frequency technology
segment performed well. Roper has increased its dividend 12 consecutive years.
Teleflex continued to make progress in implementing its restructuring and
divestiture program, which is intended to reduce the company's exposure to
underperforming cyclical businesses and consolidate its numerous small
manufacturing facilities. Teleflex has 28 years of annual dividend increases.
Nucor's stock price reacted positively to industry reports that steel
distributors increased orders after inventories hit a 15-month low in August. As
a result, sheet steel prices rose in September. Nucor has increased its dividend
for the last 32 years.
Fund holdings that negatively impacted our results this year included Family
Dollar Stores, Fannie Mae and Pfizer. Family Dollar's relatively weak comparable
store sales during its fiscal year (ended in August) caused company earnings to
fall below expectations. Many of Family Dollar's customers were hurt by high
gasoline prices that likely reduced discretionary spending. Despite its recent
slowdown, Family Dollar has increased its dividend for 29 years. The stock of
Fannie Mae, a public home mortgage funding company operating under federal
charter, steadily declined over the year as concerns grew that the government
might enact legislation related to its regulation that would reduce its overall
value. Later in the reporting period, Fannie Mae reported that it would not
complete the restatement of its financials until the second half of 2006,
disappointing many investors. Pfizer has been under pressure for a variety of
reasons, including approaching patent expirations, legal challenges to its
patents by generic competitors, and product safety concerns. Pfizer has 38
consecutive years of annual dividend increases.
The Fund initiated a significant new position in McCormick & Co. McCormick makes
and distributes spices, seasonings and flavors to the food industry, including
retail outlets, restaurants and food processors. McCormick has increased its
dividend for 18 years. Existing Fund positions that were significantly increased
include Freddie Mac, American International Group, United Technologies and
Dover.
TOP 10 EQUITY HOLDINGS
9/30/05
- ---------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- ---------------------------------------------------------
Roper Industries Inc. 4.9%
PRODUCER MANUFACTURING
- ---------------------------------------------------------
American International Group Inc. 4.8%
FINANCE
- ---------------------------------------------------------
Praxair Inc. 4.4%
PROCESS INDUSTRIES
- ---------------------------------------------------------
General Electric Co. 4.2%
PRODUCER MANUFACTURING
- ---------------------------------------------------------
Carlisle Cos. Inc. 4.1%
PRODUCER MANUFACTURING
- ---------------------------------------------------------
United Technologies Corp. 3.9%
PRODUCER MANUFACTURING
- ---------------------------------------------------------
Old Republic International Corp. 3.8%
FINANCE
- ---------------------------------------------------------
Pfizer Inc. 3.6%
HEALTH TECHNOLOGY
- ---------------------------------------------------------
State Street Corp. 3.6%
FINANCE
- ---------------------------------------------------------
Procter & Gamble Co. 3.6%
CONSUMER NON-DURABLES
- ---------------------------------------------------------
Annual Report | 5
During the period, the Fund sold its position in Myers Industries. Myers, whose
business segments provide a variety of industrial and consumer products ranging
from tire supplies to storage containers, has faced particularly intense raw
material cost pressures in the past couple of years. We also sold Wilmington
Trust during the period, largely because its earnings growth and, as a result,
its dividend growth have been inconsistent in recent years. The Fund's remaining
position in Altria Group was also sold on strength as investors' diminished
perception of its litigation risk caused its stock price to rise. The Fund also
completed its sale of Circor International, a designer, manufacturer and
supplier of industrial fluid control devices, which had not increased its
dividend since it was spun off from another company in 2000.
Our 10 largest positions on September 30, 2005, represented 40.9% 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
25 years in a row and by 296% in the past 10 years. Their most recent
year-over-year dividend increases averaged 24% with a yield of 1.8% and a
dividend payout ratio of 29%, based on estimates of calendar year 2005 operating
earnings. The average price/earnings ratio was 16.9 times 2005 estimates versus
16.7 for that of the unmanaged S&P 500 on September 30, 2005.
6 | Annual Report
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, 2005, 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.
Annual Report | 7
PERFORMANCE SUMMARY AS OF 9/30/05
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 reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------
CLASS A (SYMBOL: FRDPX) CHANGE 9/30/05 9/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.56 $ 31.14 $ 30.58
- --------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/04-9/30/05)
- --------------------------------------------------------------------------------
Dividend Income $0.3035
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.2368
- --------------------------------------------------------------------------------
TOTAL $0.5403
- --------------------------------------------------------------------------------
CLASS B (SYMBOL: FRDBX) CHANGE 9/30/05 9/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.49 $ 30.74 $ 30.25
- --------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/04-9/30/05)
- --------------------------------------------------------------------------------
Dividend Income $0.1549
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.2368
- --------------------------------------------------------------------------------
TOTAL $0.3917
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: FRDTX) CHANGE 9/30/05 9/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.48 $ 30.69 $ 30.21
- --------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/04-9/30/05)
- --------------------------------------------------------------------------------
Dividend Income $0.1536
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.2368
- --------------------------------------------------------------------------------
TOTAL $0.3904
- --------------------------------------------------------------------------------
CLASS R (SYMBOL: FRDRX) CHANGE 9/30/05 9/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.51 $ 31.02 $ 30.51
- --------------------------------------------------------------------------------
DISTRIBUTIONS (10/1/04-9/30/05)
- --------------------------------------------------------------------------------
Dividend Income $0.2939
- --------------------------------------------------------------------------------
Long-Term Capital Gain $0.2368
- --------------------------------------------------------------------------------
TOTAL $0.5307
- --------------------------------------------------------------------------------
Franklin Rising Dividends Fund paid distributions derived from long-term capital
gains of 23.68 cents ($0.2368) per share in December 2004. The Fund designates
such distributions as capital gain dividends per Internal Revenue Code Section
852(b)(3).
8 | Annual Report
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.
- ----------------------------------------------------------------------------------------
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------
Cumulative Total Return(1) +3.60% +67.42% +188.22%
- ----------------------------------------------------------------------------------------
Average Annual Total Return(2) -2.37% +9.55% +10.51%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $ 9,763 $15,780 $27,158
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ----------------------------------------------------------------------------------------
Cumulative Total Return(1) +2.89% +62.81% +51.04%
- ----------------------------------------------------------------------------------------
Average Annual Total Return(2) -1.11% +9.97% +6.30%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $ 9,889 $16,081 $15,104
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------
Cumulative Total Return(1) +2.89% +62.69% +172.73%
- ----------------------------------------------------------------------------------------
Average Annual Total Return(2) +1.89% +10.22% +10.55%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $10,189 $16,269 $27,273
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
CLASS R 1-YEAR 3-YEAR INCEPTION (1/1/02)
- ----------------------------------------------------------------------------------------
Cumulative Total Return(1) +3.45% +40.00% +30.06%
- ----------------------------------------------------------------------------------------
Average Annual Total Return(2) +2.45% +11.87% +7.28%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $10,245 $14,000 $13,006
- ----------------------------------------------------------------------------------------
PERFORMANCE DATA 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.
Annual Report | 9
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.
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------
CLASS A 9/30/05
- -----------------------------------
1-Year -2.37%
- -----------------------------------
5-Year +9.55%
- -----------------------------------
10-Year +10.51%
- -----------------------------------
CLASS A (10/1/95-9/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP S&P 500
DATE FUND - CLASS A VALUE INDEX(4) CPI(4) INDEX(4)
- ---------------------------------------------------------------------------------
10/1/1995 9423 10000 10000 10000
10/31/1995 9336 9805 10033 9964
11/30/1995 9815 10341 10026 10401
12/31/1995 10006 10454 10020 10602
1/31/1996 10209 10709 10078 10962
2/29/1996 10335 10810 10111 11064
3/31/1996 10313 11039 10163 11170
4/30/1996 10274 11132 10202 11335
5/31/1996 10566 11239 10222 11627
6/30/1996 10671 11251 10228 11671
7/31/1996 10328 10715 10248 11156
8/31/1996 10566 11165 10268 11391
9/30/1996 11103 11575 10300 12032
10/31/1996 11441 11879 10333 12364
11/30/1996 12234 12625 10352 13297
12/31/1996 12349 12572 10352 13034
1/31/1997 12591 12967 10385 13848
2/28/1997 12934 13187 10418 13957
3/31/1997 12531 12786 10444 13384
4/30/1997 12845 13109 10457 14183
5/31/1997 13822 13882 10450 15045
6/30/1997 14313 14397 10463 15719
7/31/1997 15535 15466 10477 16969
8/31/1997 15215 15285 10496 16019
9/30/1997 16000 16233 10522 16896
10/31/1997 15608 15740 10548 16332
11/30/1997 15982 16271 10542 17088
12/31/1997 16344 16893 10529 17381
1/31/1998 16270 16565 10548 17573
2/28/1998 17564 17672 10568 18840
3/31/1998 18047 18582 10587 19804
4/30/1998 17973 18478 10607 20003
5/31/1998 17285 18047 10627 19660
6/30/1998 17056 18104 10640 20458
7/31/1998 16476 17186 10653 20240
8/31/1998 13859 14769 10666 17317
9/30/1998 14552 15631 10679 18426
10/31/1998 16093 16644 10705 19924
11/30/1998 16674 17228 10705 21131
12/31/1998 17329 17752 10698 22348
1/31/1999 16416 17338 10725 23282
2/28/1999 15835 16957 10738 22558
3/31/1999 15734 17199 10770 23461
4/30/1999 16952 18828 10849 24369
5/31/1999 17129 18907 10849 23795
6/30/1999 17749 19122 10849 25114
7/31/1999 17461 18644 10881 24331
8/31/1999 16729 17999 10907 24211
9/30/1999 15758 17088 10960 23548
10/31/1999 15898 17593 10979 25037
11/30/1999 15706 17270 10986 25546
12/31/1999 15547 17732 10986 27050
1/31/2000 14806 16672 11018 25691
2/29/2000 14758 15975 11084 25205
3/31/2000 16019 17911 11175 27669
4/30/2000 15946 17983 11181 26837
5/31/2000 16212 18292 11195 26288
6/30/2000 15327 17610 11253 26936
7/31/2000 15182 18022 11279 26515
8/31/2000 16063 19127 11279 28161
9/30/2000 16222 19310 11338 26675
10/31/2000 16619 19677 11358 26562
11/30/2000 16886 19420 11364 24469
12/31/2000 18498 21133 11358 24589
1/31/2001 18815 21057 11430 25461
2/28/2001 18718 20968 11475 23141
3/31/2001 18375 20387 11501 21676
4/30/2001 19303 21508 11547 23359
5/31/2001 19987 22118 11599 23516
6/30/2001 20036 21824 11619 22944
7/31/2001 20452 21736 11586 22718
8/31/2001 20330 21339 11586 21297
9/30/2001 18558 19303 11638 19577
10/31/2001 18844 19406 11599 19951
11/30/2001 20151 20764 11580 21481
12/31/2001 20923 21625 11534 21669
1/31/2002 21404 21843 11560 21353
2/28/2002 21944 22198 11606 20941
3/31/2002 23046 23333 11671 21729
4/30/2002 23333 23317 11736 20412
5/31/2002 23189 23282 11736 20262
6/30/2002 22365 22243 11743 18819
7/31/2002 20937 20065 11756 17353
8/31/2002 21241 20299 11795 17466
9/30/2002 19350 18249 11815 15570
10/31/2002 20272 18829 11834 16939
11/30/2002 20924 20015 11834 17935
12/31/2002 20554 19539 11808 16882
1/31/2003 19762 18998 11860 16441
2/28/2003 19387 18683 11952 16193
3/31/2003 19379 18747 12023 16349
4/30/2003 21005 20172 11997 17696
5/31/2003 22001 21948 11978 18628
6/30/2003 22044 22101 11991 18866
7/31/2003 22852 22788 12004 19199
8/31/2003 23150 23597 12050 19572
9/30/2003 23023 23414 12089 19365
10/31/2003 24623 25133 12076 20460
11/30/2003 24743 25861 12043 20640
12/31/2003 25426 26977 12030 21721
1/31/2004 25717 27689 12089 22120
2/29/2004 26171 28374 12154 22427
3/31/2004 25957 28420 12232 22089
4/30/2004 25494 27217 12272 21743
5/31/2004 25923 27915 12343 22041
6/30/2004 26497 28911 12383 22469
7/31/2004 25863 28128 12363 21726
8/31/2004 26206 28581 12369 21813
9/30/2004 26214 29413 12396 22049
10/31/2004 26077 30094 12461 22386
11/30/2004 27192 32127 12467 23291
12/31/2004 28039 33372 12422 24083
1/31/2005 27403 32595 12448 23496
2/28/2005 27812 33733 12520 23991
3/31/2005 27333 33631 12617 23566
4/30/2005 26836 32744 12702 23120
5/31/2005 27429 34098 12689 23855
6/30/2005 27246 35213 12696 23889
7/31/2005 28100 36890 12755 24777
8/31/2005 27263 36602 12820 24551
9/30/2005 27158 37098 12977 24750
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------
CLASS B 9/30/05
- -----------------------------------
1-Year -1.11%
- -----------------------------------
5-Year +9.97%
- -----------------------------------
Since Inception (1/1/99) +6.30%
- -----------------------------------
CLASS B (1/1/99-9/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP S&P 500
DATE FUND - CLASS B VALUE INDEX(4) CPI(4) INDEX(4)
- -----------------------------------------------------------------------------
1/1/1999 10000 10000 10000 10000
1/31/1999 9473 9767 10024 10418
2/28/1999 9133 9552 10037 10094
3/31/1999 9075 9689 10067 10498
4/30/1999 9774 10606 10140 10905
5/31/1999 9867 10651 10140 10647
6/30/1999 10222 10772 10140 11238
7/31/1999 10051 10502 10171 10887
8/31/1999 9625 10139 10195 10834
9/30/1999 9063 9626 10244 10537
10/31/1999 9140 9910 10262 11203
11/30/1999 9024 9728 10268 11431
12/31/1999 8930 9989 10268 12104
1/31/2000 8498 9392 10299 11496
2/29/2000 8471 8999 10360 11279
3/31/2000 9194 10090 10445 12381
4/30/2000 9147 10130 10451 12009
5/31/2000 9291 10304 10464 11763
6/30/2000 8780 9920 10519 12053
7/31/2000 8692 10152 10543 11865
8/31/2000 9194 10774 10543 12601
9/30/2000 9278 10878 10598 11936
10/31/2000 9506 11084 10616 11886
11/30/2000 9650 10940 10622 10949
12/31/2000 10570 11905 10616 11003
1/31/2001 10747 11862 10683 11393
2/28/2001 10682 11811 10726 10355
3/31/2001 10481 11484 10750 9699
4/30/2001 11008 12116 10793 10453
5/31/2001 11390 12460 10842 10523
6/30/2001 11416 12294 10860 10267
7/31/2001 11644 12244 10830 10166
8/31/2001 11574 12021 10830 9530
9/30/2001 10556 10874 10879 8760
10/31/2001 10720 10932 10842 8927
11/30/2001 11452 11697 10824 9612
12/31/2001 11894 12182 10781 9696
1/31/2002 12159 12305 10805 9555
2/28/2002 12457 12505 10848 9371
3/31/2002 13083 13144 10909 9723
4/30/2002 13237 13135 10970 9134
5/31/2002 13146 13115 10970 9067
6/30/2002 12679 12530 10976 8421
7/31/2002 11860 11303 10988 7765
8/31/2002 12029 11435 11025 7816
9/30/2002 10955 10280 11043 6967
10/31/2002 11470 10607 11062 7580
11/30/2002 11836 11275 11062 8025
12/31/2002 11619 11007 11037 7554
1/31/2003 11174 10702 11086 7357
2/28/2003 10952 10524 11171 7246
3/31/2003 10947 10560 11239 7316
4/30/2003 11861 11363 11214 7919
5/31/2003 12412 12364 11196 8335
6/30/2003 12431 12450 11208 8442
7/31/2003 12881 12837 11220 8591
8/31/2003 13045 13293 11263 8758
9/30/2003 12963 13189 11300 8665
10/31/2003 13858 14158 11287 9155
11/30/2003 13920 14568 11257 9236
12/31/2003 14298 15197 11245 9720
1/31/2004 14458 15598 11300 9898
2/29/2004 14706 15983 11361 10036
3/31/2004 14580 16009 11434 9884
4/30/2004 14313 15332 11470 9729
5/31/2004 14546 15725 11538 9863
6/30/2004 14861 16286 11574 10054
7/31/2004 14502 15845 11556 9722
8/31/2004 14687 16100 11562 9761
9/30/2004 14682 16569 11586 9866
10/31/2004 14604 16952 11647 10017
11/30/2004 15220 18098 11653 10422
12/31/2004 15685 18799 11611 10777
1/31/2005 15322 18361 11635 10514
2/28/2005 15543 19002 11702 10735
3/31/2005 15268 18945 11794 10545
4/30/2005 14978 18445 11873 10345
5/31/2005 15302 19208 11861 10674
6/30/2005 15184 19836 11867 10690
7/31/2005 15656 20781 11922 11087
8/31/2005 15179 20618 11983 10986
9/30/2005 15104 20898 12129 11075
10 | Annual Report
PERFORMANCE SUMMARY (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------
Class C 9/30/05
- -----------------------------------
1-Year +1.89%
- -----------------------------------
5-Year +10.22%
- -----------------------------------
10-Year +10.55%
- -----------------------------------
CLASS C (10/1/95-9/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING DIVIDENDS RUSSELL MIDCAP S&P 500
DATE FUND - CLASS C VALUE INDEX(4) CPI(4) INDEX(4)
- -----------------------------------------------------------------------------
10/1/1995 10000 10000 10000 10000
10/31/1995 9902 9805 10033 9964
11/30/1995 10405 10341 10026 10401
12/31/1995 10602 10454 10020 10602
1/31/1996 10812 10709 10078 10962
2/29/1996 10940 10810 10111 11064
3/31/1996 10909 11039 10163 11170
4/30/1996 10856 11132 10202 11335
5/31/1996 11165 11239 10222 11627
6/30/1996 11273 11251 10228 11671
7/31/1996 10905 10715 10248 11156
8/31/1996 11156 11165 10268 11391
9/30/1996 11716 11575 10300 12032
10/31/1996 12068 11879 10333 12364
11/30/1996 12894 12625 10352 13297
12/31/1996 13011 12572 10352 13034
1/31/1997 13267 12967 10385 13848
2/28/1997 13616 13187 10418 13957
3/31/1997 13192 12786 10444 13384
4/30/1997 13511 13109 10457 14183
5/31/1997 14536 13882 10450 15045
6/30/1997 15050 14397 10463 15719
7/31/1997 16319 15466 10477 16969
8/31/1997 15982 15285 10496 16019
9/30/1997 16797 16233 10522 16896
10/31/1997 16378 15740 10548 16332
11/30/1997 16759 16271 10542 17088
12/31/1997 17139 16893 10529 17381
1/31/1998 17054 16565 10548 17573
2/28/1998 18400 17672 10568 18840
3/31/1998 18904 18582 10587 19804
4/30/1998 18819 18478 10607 20003
5/31/1998 18088 18047 10627 19660
6/30/1998 17840 18104 10640 20458
7/31/1998 17224 17186 10653 20240
8/31/1998 14481 14769 10666 17317
9/30/1998 15205 15631 10679 18426
10/31/1998 16800 16644 10705 19924
11/30/1998 17402 17228 10705 21131
12/31/1998 18075 17752 10698 22348
1/31/1999 17118 17338 10725 23282
2/28/1999 16509 16957 10738 22558
3/31/1999 16395 17199 10770 23461
4/30/1999 17654 18828 10849 24369
5/31/1999 17824 18907 10849 23795
6/30/1999 18463 19122 10849 25114
7/31/1999 18154 18644 10881 24331
8/31/1999 17389 17999 10907 24211
9/30/1999 16374 17088 10960 23548
10/31/1999 16505 17593 10979 25037
11/30/1999 16297 17270 10986 25546
12/31/1999 16128 17732 10986 27050
1/31/2000 15347 16672 11018 25691
2/29/2000 15305 15975 11084 25205
3/31/2000 16608 17911 11175 27669
4/30/2000 16532 17983 11181 26837
5/31/2000 16793 18292 11195 26288
6/30/2000 15868 17610 11253 26936
7/31/2000 15708 18022 11279 26515
8/31/2000 16616 19127 11279 28161
9/30/2000 16764 19310 11338 26675
10/31/2000 17168 19677 11358 26562
11/30/2000 17429 19420 11364 24469
12/31/2000 19092 21133 11358 24589
1/31/2001 19412 21057 11430 25461
2/28/2001 19294 20968 11475 23141
3/31/2001 18940 20387 11501 21676
4/30/2001 19884 21508 11547 23359
5/31/2001 20575 22118 11599 23516
6/30/2001 20617 21824 11619 22944
7/31/2001 21038 21736 11586 22718
8/31/2001 20903 21339 11586 21297
9/30/2001 19074 19303 11638 19577
10/31/2001 19361 19406 11599 19951
11/30/2001 20686 20764 11580 21481
12/31/2001 21472 21625 11534 21669
1/31/2002 21951 21843 11560 21353
2/28/2002 22499 22198 11606 20941
3/31/2002 23623 23333 11671 21729
4/30/2002 23910 23317 11736 20412
5/31/2002 23744 23282 11736 20262
6/30/2002 22900 22243 11743 18819
7/31/2002 21428 20065 11756 17353
8/31/2002 21733 20299 11795 17466
9/30/2002 19783 18249 11815 15570
10/31/2002 20714 18829 11834 16939
11/30/2002 21385 20015 11834 17935
12/31/2002 20991 19539 11808 16882
1/31/2003 20178 18998 11860 16441
2/28/2003 19784 18683 11952 16193
3/31/2003 19758 18747 12023 16349
4/30/2003 21410 20172 11997 17696
5/31/2003 22407 21948 11978 18628
6/30/2003 22442 22101 11991 18866
7/31/2003 23255 22788 12004 19199
8/31/2003 23544 23597 12050 19572
9/30/2003 23404 23414 12089 19365
10/31/2003 25021 25133 12076 20460
11/30/2003 25135 25861 12043 20640
12/31/2003 25814 26977 12030 21721
1/31/2004 26095 27689 12089 22120
2/29/2004 26543 28374 12154 22427
3/31/2004 26323 28420 12232 22089
4/30/2004 25841 27217 12272 21743
5/31/2004 26262 27915 12343 22041
6/30/2004 26824 28911 12383 22469
7/31/2004 26183 28128 12363 21726
8/31/2004 26508 28581 12369 21813
9/30/2004 26508 29413 12396 22049
10/31/2004 26359 30094 12461 22386
11/30/2004 27473 32127 12467 23291
12/31/2004 28312 33372 12422 24083
1/31/2005 27655 32595 12448 23496
2/28/2005 28054 33733 12520 23991
3/31/2005 27557 33631 12617 23566
4/30/2005 27033 32744 12702 23120
5/31/2005 27619 34098 12689 23855
6/30/2005 27415 35213 12696 23889
7/31/2005 28259 36890 12755 24777
8/31/2005 27397 36602 12820 24551
9/30/2005 27273 37098 12977 24750
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------
CLASS R 9/30/05
- -----------------------------------
1-Year +2.45%
- -----------------------------------
3-Year +11.87%
- -----------------------------------
Since Inception (1/1/02) +7.28%
- -----------------------------------
CLASS R (1/1/02-9/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
FRANKLIN RISING
DIVIDENDS RUSSELL MIDCAP S&P 500
DATE FUND - CLASS R VALUE INDEX(4) CPI(4) INDEX(4)
- -------------------------------------------------------------------
1/1/2002 10000 10000 10000 10000
1/31/2002 10276 10101 10023 9854
2/28/2002 10535 10265 10062 9664
3/31/2002 11065 10790 10119 10028
4/30/2002 11202 10783 10175 9420
5/31/2002 11133 10766 10175 9351
6/30/2002 10738 10286 10181 8685
7/31/2002 10052 9279 10192 8008
8/31/2002 10198 9387 10226 8061
9/30/2002 9291 8439 10243 7185
10/31/2002 9734 8707 10260 7817
11/30/2002 10047 9255 10260 8277
12/31/2002 9867 9036 10238 7791
1/31/2003 9490 8785 10283 7587
2/28/2003 9307 8640 10362 7473
3/31/2003 9303 8669 10424 7545
4/30/2003 10084 9328 10402 8167
5/31/2003 10559 10149 10385 8596
6/30/2003 10580 10220 10396 8706
7/31/2003 10965 10538 10407 8860
8/31/2003 11109 10912 10447 9032
9/30/2003 11046 10827 10481 8937
10/31/2003 11817 11622 10470 9442
11/30/2003 11874 11959 10441 9525
12/31/2003 12198 12475 10430 10024
1/31/2004 12338 12804 10481 10208
2/29/2004 12556 13121 10538 10350
3/31/2004 12454 13142 10606 10194
4/30/2004 12231 12586 10640 10034
5/31/2004 12437 12909 10702 10171
6/30/2004 12709 13369 10736 10369
7/31/2004 12409 13007 10719 10026
8/31/2004 12573 13217 10724 10066
9/30/2004 12573 13601 10747 10175
10/31/2004 12511 13916 10804 10331
11/30/2004 13047 14856 10809 10749
12/31/2004 13450 15432 10770 11114
1/31/2005 13145 15073 10792 10843
2/28/2005 13338 15599 10855 11071
3/31/2005 13107 15552 10939 10876
4/30/2005 12864 15142 11013 10669
5/31/2005 13149 15768 11002 11009
6/30/2005 13052 16283 11007 11024
7/31/2005 13463 17059 11058 11434
8/31/2005 13060 16926 11115 11330
9/30/2005 13006 17155 11251 11422
Annual Report | 11
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 forecaster
growth values. The stocks are also members of the Russell 1000 Value
Index. 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 includes
reinvested dividends and is one of the most widely used benchmarks of U.S.
equity performance.
12 | Annual Report
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.
Annual Report | 13
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 3/31/05 VALUE 9/30/05 PERIOD* 3/31/05-9/30/05
- ----------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 993.60 $ 5.05
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,020.00 $ 5.11
- ----------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 989.40 $ 8.88
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,016.14 $ 9.00
- ----------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 989.70 $ 8.83
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,016.19 $ 8.95
- ----------------------------------------------------------------------------------------------------------
CLASS R
- ----------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 992.30 $ 6.39
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,018.65 $ 6.48
- ----------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
1.01%; B: 1.78%; C: 1.77%; and R: 1.28%), multiplied by the average
account value over the period, multiplied by 183/365 to reflect the
one-half year period.
14 | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN RISING DIVIDENDS FUND
-------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
CLASS A 2005 2004 2003 2002 2001
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 30.58 $ 27.03 $ 22.87 $ 22.71 $ 20.02
-------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... 0.29 0.35 0.16 0.13 0.18
Net realized and unrealized gains (losses) ..... 0.81 3.40 4.16 0.87 2.70
-------------------------------------------------------------------
Total from investment operations .................. 1.10 3.75 4.32 1.00 2.88
-------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.30) (0.16) (0.07) (0.11) (0.19)
Net realized gains ............................. (0.24) (0.04) (0.09) (0.73) --
-------------------------------------------------------------------
Total distributions ............................... (0.54) (0.20) (0.16) (0.84) (0.19)
-------------------------------------------------------------------
Redemption fees ................................... --(c) --(c) -- -- --
-------------------------------------------------------------------
Net asset value, end of year ...................... $ 31.14 $ 30.58 $ 27.03 $ 22.87 $ 22.71
===================================================================
Total return(b) ................................... 3.60% 13.86% 18.98% 4.27% 14.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................... $ 1,480,742 $ 1,285,585 $ 832,195 $ 502,150 $ 297,316
Ratios to average net assets:
Expenses ....................................... 1.09% 1.25% 1.37% 1.36% 1.45%
Net investment income .......................... 0.92% 1.17% 0.62% 0.51% 0.78%
Portfolio turnover rate ........................... 3.58% 3.42% 4.23% 5.67% 18.72%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge.
(c) Amount is less than $0.01 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 B 2005 2004 2003 2002 2001
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 30.25 $ 26.81 $ 22.75 $ 22.62 $ 19.96
-------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... 0.07 0.19 0.02 -- 0.06
Net realized and unrealized gains (losses) ..... 0.81 3.36 4.14 0.88 2.69
-------------------------------------------------------------------
Total from investment operations .................. 0.88 3.55 4.16 0.88 2.75
-------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.15) (0.07) (0.01) (0.02) (0.09)
Net realized gains ............................. (0.24) (0.04) (0.09) (0.73) --
-------------------------------------------------------------------
Total distributions ............................... (0.39) (0.11) (0.10) (0.75) (0.09)
-------------------------------------------------------------------
Redemption fees ................................... --(c) --(c) -- -- --
-------------------------------------------------------------------
Net asset value, end of year ...................... $ 30.74 $ 30.25 $ 26.81 $ 22.75 $ 22.62
===================================================================
Total return(b) ................................... 2.89% 13.26% 18.33% 3.78% 13.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................... $ 291,714 $ 292,322 $ 176,837 $ 45,522 $ 4,934
Ratios to average net assets:
Expenses ....................................... 1.78% 1.79% 1.92% 1.93% 2.00%
Net investment income (loss) ................... 0.23% 0.63% 0.07% (0.06)% 0.24%
Portfolio turnover rate ........................... 3.58% 3.42% 4.23% 5.67% 18.72%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge.
(c) Amount is less than $0.01 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 C 2005 2004 2003 2002 2001
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 30.21 $ 26.77 $ 22.72 $ 22.60 $ 19.92
-------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... 0.07 0.19 0.02 0.01 0.05
Net realized and unrealized gains (losses) ..... 0.80 3.36 4.13 0.86 2.70
-------------------------------------------------------------------
Total from investment operations .................. 0.87 3.55 4.15 0.87 2.75
-------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.15) (0.07) (0.01) (0.02) (0.07)
Net realized gains ............................. (0.24) (0.04) (0.09) (0.73) --
-------------------------------------------------------------------
Total distributions ............................... (0.39) (0.11) (0.10) (0.75) (0.07)
-------------------------------------------------------------------
Redemption fees ................................... --(c) --(c) -- -- --
-------------------------------------------------------------------
Net asset value, end of year ...................... $ 30.69 $ 30.21 $ 26.77 $ 22.72 $ 22.60
===================================================================
Total return(b) ................................... 2.89% 13.26% 18.30% 3.72% 13.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................... $ 523,687 $ 475,176 $ 289,700 $ 94,734 $ 32,074
Ratios to average net assets:
Expenses ....................................... 1.77% 1.79% 1.93% 1.85% 1.99%
Net investment income .......................... 0.24% 0.63% 0.06% 0.02% 0.23%
Portfolio turnover rate ........................... 3.58% 3.42% 4.23% 5.67% 18.72%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge.
(c) Amount is less than $0.01 per share.
Annual Report | See notes to financial statements. | 17
FRANKLIN MANAGED TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
---------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
CLASS R 2005 2004 2003 2002(d)
---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................ $ 30.51 $ 26.97 $ 22.84 $ 24.67
---------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... 0.23 0.35 0.14 0.11
Net realized and unrealized gains (losses) ..... 0.81 3.39 4.15 (1.85)
---------------------------------------------------------
Total from investment operations .................. 1.04 3.74 4.29 (1.74)
---------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.29) (0.16) (0.07) (0.09)
Net realized gains ............................. (0.24) (0.04) (0.09) --
---------------------------------------------------------
Total distributions ............................... (0.53) (0.20) (0.16) (0.09)
---------------------------------------------------------
Redemption fees ................................... --(c) --(c) -- --
---------------------------------------------------------
Net asset value, end of year ...................... $ 31.02 $ 30.51 $ 26.97 $ 22.84
=========================================================
Total return(b) ................................... 3.45% 13.82% 18.91% (7.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................... $ 44,448 $ 36,510 $ 19,464 $ 1,774
Ratios to average net assets:
Expenses ....................................... 1.28% 1.29% 1.43% 1.41%(e)
Net investment income .......................... 0.73% 1.13% 0.56% 0.46%(e)
Portfolio turnover rate ........................... 3.58% 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 $0.01 per share.
(d) For the period January 2, 2002 (commencement of operations) to September
30, 2002.
(e) Annualized.
18 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005
- -------------------------------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- -------------------------------------------------------------------------------------------------------
COMMON STOCKS 98.5%
COMMERCIAL SERVICES 0.7%
ABM Industries Inc. ............................................... 825,800 $ 17,184,898
---------------
CONSUMER DURABLES 2.3%
Leggett & Platt Inc. .............................................. 2,080,000 42,016,000
Russ Berrie & Co. Inc. ............................................ 814,500 11,500,740
---------------
53,516,740
---------------
CONSUMER NON-DURABLES 7.6%
Alberto-Culver Co. ................................................ 1,404,050 62,831,238
Lancaster Colony Corp. ............................................ 184,156 7,918,708
McCormick & Co. Inc. .............................................. 650,400 21,222,552
Procter & Gamble Co. .............................................. 1,398,400 83,148,864
Superior Uniform Group Inc. ....................................... 224,200 2,892,180
---------------
178,013,542
---------------
ELECTRONIC TECHNOLOGY 0.9%
Cohu Inc. ......................................................... 134,200 3,173,830
Diebold Inc. ...................................................... 548,800 18,911,648
---------------
22,085,478
---------------
FINANCE 35.2%
AFLAC Inc. ........................................................ 1,541,600 69,834,480
American International Group Inc. ................................. 1,813,777 112,381,623
Arthur J. Gallagher & Co. ......................................... 987,000 28,435,470
Erie Indemnity Co., A ............................................. 637,000 33,601,750
Fannie Mae ........................................................ 1,161,000 52,036,020
Freddie Mac ....................................................... 1,286,900 72,658,374
Mercantile Bankshares Corp. ....................................... 576,950 31,086,066
Mercury General Corp. ............................................. 395,100 23,702,049
Old Republic International Corp. .................................. 3,297,800 87,952,326
Peoples Bancorp Inc. .............................................. 262,768 7,260,280
RLI Corp. ......................................................... 551,524 25,513,500
State Street Corp. ................................................ 1,706,200 83,467,304
SunTrust Banks Inc. ............................................... 878,105 60,984,393
TrustCo Bank Corp. NY ............................................. 678,121 8,496,856
U.S. Bancorp ...................................................... 2,334,903 65,564,076
Washington Mutual Inc. ............................................ 1,520,050 59,616,361
---------------
822,590,928
---------------
HEALTH TECHNOLOGY 11.0%
Becton Dickinson & Co. ............................................ 754,800 39,574,164
Hillenbrand Industries Inc. ....................................... 1,703,500 80,149,675
Pfizer Inc. ....................................................... 3,352,600 83,714,422
(a) West Pharmaceutical Services Inc. ................................. 1,809,600 53,690,832
---------------
257,129,093
---------------
Annual Report | 19
FRANKLIN MANAGED TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (CONTINUED)
- -------------------------------------------------------------------------------------------------------
FRANKLIN RISING DIVIDENDS FUND SHARES VALUE
- -------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
NON-ENERGY MINERALS 3.4%
Nucor Corp. ....................................................... 1,338,200 $ 78,940,418
---------------
PROCESS INDUSTRIES 6.1%
Bemis Co. Inc. .................................................... 863,600 21,330,920
Donaldson Co. Inc. ................................................ 611,200 18,659,936
Praxair Inc. ...................................................... 2,153,400 103,212,462
---------------
143,203,318
---------------
PRODUCER MANUFACTURING 25.9%
Baldor Electric Co. ............................................... 144,666 3,667,283
Brady Corp., A .................................................... 600,200 18,570,188
Carlisle Cos. Inc. ................................................ 1,523,600 96,855,252
Dover Corp. ....................................................... 1,362,400 55,572,296
General Electric Co. .............................................. 2,896,900 97,538,623
Graco Inc. ........................................................ 941,137 32,262,176
Kaydon Corp. ...................................................... 293,800 8,346,858
Nordson Corp. ..................................................... 141,800 5,392,654
Roper Industries Inc. ............................................. 2,942,600 115,614,754
Superior Industries International Inc. ............................ 874,500 18,819,240
Teleflex Inc. ..................................................... 898,800 63,365,400
United Technologies Corp. ......................................... 1,755,400 90,999,936
---------------
607,004,660
---------------
RETAIL TRADE 3.2%
Family Dollar Stores Inc. ......................................... 3,734,000 74,194,580
---------------
TECHNOLOGY SERVICES 2.2%
Reynolds & Reynolds Co., A ........................................ 1,859,000 50,955,190
---------------
TOTAL COMMON STOCKS (COST $1,918,603,417) ......................... 2,304,818,845
---------------
SHORT TERM INVESTMENTS (COST $39,973,542) 1.7%
MONEY FUND 1.7%
(b) Franklin Institutional Fiduciary Trust Money Market Portfolio ..... 39,973,542 39,973,542
---------------
TOTAL INVESTMENTS (COST $1,958,576,959) 100.2% .................... 2,344,792,387
OTHER ASSETS, LESS LIABILITIES (0.2)% ............................. (4,201,290)
---------------
NET ASSETS 100.0% ................................................. $ 2,340,591,097
===============
(a) See Note 7 regarding holdings of 5% voting securities.
(b) See Note 8 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio.
20 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2005
---------------
FRANKLIN RISING
DIVIDENDS FUND
---------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................................. $ 1,893,878,118
Cost - Non-controlled affiliated issuers (Note 7) ............................ 24,725,299
Cost - Sweep Money Fund (Note 8) ............................................. 39,973,542
---------------
Total cost of investments .................................................... $ 1,958,576,959
===============
Value - Unaffiliated issuers ................................................. $ 2,251,128,013
Value - Non-controlled affiliated issuers (Note 7) ........................... 53,690,832
Value - Sweep Money Fund (Note 8) ............................................ 39,973,542
---------------
Total value of investments ................................................... 2,344,792,387
Receivables:
Investment securities sold ................................................... 224,372
Capital shares sold .......................................................... 4,643,994
Dividends .................................................................... 3,426,231
---------------
Total assets .............................................................. 2,353,086,984
---------------
Liabilities:
Payables:
Capital shares redeemed ...................................................... 8,746,814
Affiliates ................................................................... 3,574,887
Accrued expenses and other liabilities .......................................... 174,186
---------------
Total liabilities ......................................................... 12,495,887
---------------
Net assets, at value ................................................... $ 2,340,591,097
===============
Net assets consist of:
Paid-in capital ................................................................. $ 1,931,059,514
Undistributed net investment income ............................................. 11,745,554
Net unrealized appreciation (depreciation) ...................................... 386,215,428
Accumulated net realized gain (loss) ............................................ 11,570,601
---------------
Net assets, at value ................................................... $ 2,340,591,097
===============
Annual Report | See notes to financial statements. | 21
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
September 30, 2005
---------------
FRANKLIN RISING
DIVIDENDS FUND
---------------
CLASS A:
Net assets, at value ............................................................ $ 1,480,741,729
===============
Shares outstanding .............................................................. 47,550,497
===============
Net asset value per share(a) .................................................... $ 31.14
===============
Maximum offering price per share (net asset value per share / 94.25%) ........... $ 33.04
===============
CLASS B:
Net assets, at value ............................................................ $ 291,714,292
===============
Shares outstanding .............................................................. 9,490,335
===============
Net asset value and maximum offering price per share(a) ......................... $ 30.74
===============
CLASS C:
Net assets, at value ............................................................ $ 523,686,935
===============
Shares outstanding .............................................................. 17,061,309
===============
Net asset value and maximum offering price per share(a) ......................... $ 30.69
===============
CLASS R:
Net assets, at value ............................................................ $ 44,448,141
===============
Shares outstanding .............................................................. 1,432,884
===============
Net asset value and maximum offering price per share(a) ......................... $ 31.02
===============
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
22 | See notes to financial statements. | Annual Report
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended September 30, 2005
---------------
FRANKLIN RISING
DIVIDENDS FUND
---------------
Investment income:
Dividends:
Unaffiliated issuers ......................................................... $ 42,822,180
Non-controlled affiliated issuers (Note 7) ................................... 2,159,293
Sweep Money Fund (Note 8) .................................................... 1,741,001
Other income (Note 9) ........................................................... 24,170
---------------
Total investment income 46,746,644
---------------
Expenses:
Management fees (Note 3a) ....................................................... 13,254,096
Distribution fees (Note 3c)
Class A ...................................................................... 4,444,061
Class B ...................................................................... 3,100,115
Class C ...................................................................... 5,274,914
Class R ...................................................................... 213,066
Transfer agent fees (Note 3e) ................................................... 4,072,522
Accounting fees (Note 3b) ....................................................... 40,000
Custodian fees (Note 4) ......................................................... 46,861
Reports to shareholders ......................................................... 255,564
Registration and filing fees .................................................... 248,940
Professional fees ............................................................... 51,012
Trustees' fees and expenses ..................................................... 98,093
Other ........................................................................... 73,601
---------------
Total expenses ............................................................ 31,172,845
Expense reductions (Note 4) ............................................... (670)
---------------
Net expenses ........................................................... 31,172,175
---------------
Net investment income ............................................... 15,574,469
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ....................................... 12,537,774
Net change in unrealized appreciation (depreciation) on investments ............. 40,420,461
---------------
Net realized and unrealized gain (loss) ............................................ 52,958,235
---------------
Net increase (decrease) in net assets resulting from operations .................... $ 68,532,704
===============
Annual Report | See notes to financial statements. | 23
FRANKLIN MANAGED TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
FRANKLIN RISING DIVIDENDS FUND
-----------------------------------
YEAR ENDED SEPTEMBER 30,
2005 2004
-----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................................... $ 15,574,469 $ 17,124,887
Net realized gain (loss) from investments ................................ 12,537,774 16,873,434
Net change in unrealized appreciation (depreciation) on investments ...... 40,420,461 159,219,313
-----------------------------------
Net increase (decrease) in net assets resulting from operations .... 68,532,704 193,217,634
-----------------------------------
Distributions to shareholders from:
Net investment income:
Class A ............................................................... (13,133,748) (5,124,283)
Class B ............................................................... (1,538,997) (529,986)
Class C ............................................................... (2,494,919) (829,380)
Class R ............................................................... (371,084) (121,804)
Net realized gains:
Class A ............................................................... (10,247,353) (1,235,098)
Class B ............................................................... (2,352,709) (285,847)
Class C ............................................................... (3,846,333) (472,640)
Class R ............................................................... (298,988) (30,577)
-----------------------------------
Total distributions to shareholders ......................................... (34,284,131) (8,629,615)
-----------------------------------
Capital share transactions: (Note 2)
Class A ............................................................... 173,297,564 338,191,543
Class B ............................................................... (5,406,462) 90,333,139
Class C ............................................................... 41,454,787 144,107,903
Class R ............................................................... 7,395,599 14,169,576
-----------------------------------
Total capital share transactions ............................................ 216,741,488 586,802,161
-----------------------------------
Redemption fees ............................................................. 8,502 6,900
-----------------------------------
Net increase (decrease) in net assets .............................. 250,998,563 771,397,080
Net assets:
Beginning of year ........................................................... 2,089,592,534 1,318,195,454
-----------------------------------
End of year ................................................................. $ 2,340,591,097 $ 2,089,592,534
===================================
Undistributed net investment income included in net assets:
End of year ................................................................. $ 11,745,554 $ 13,709,833
===================================
24 | See notes to financial statements. | Annual Report
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 following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Fund's Board of
Trustees.
B. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
continue to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
Annual Report | 25
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 is
recorded on the ex-dividend date. Distributions to shareholders are recorded on
the ex-dividend date and are determined according to income tax regulations (tax
basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with generally accepted accounting principles.
These differences may be permanent or temporary. Permanent differences are
reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they will reverse in subsequent
periods.
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.
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 expenses during the reporting period. Actual results could differ from those
estimates.
E. REDEMPTION FEES
A short-term redemption fee will be imposed, with some exceptions, on any Fund
shares that are redeemed or exchanged within seven calendar days following their
purchase date (30 days or less prior to June 1, 2004 and 90 days or less prior
to January 1, 2004). The redemption fee is 2% of the amount redeemed. Such fees
are retained by the Fund and accounted for as an addition to paid-in capital.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and Trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
26 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
2. SHARES OF BENEFICIAL INTEREST
The Fund offers four classes of shares: Class A, Class B, Class C, and Class R.
Effective March 1, 2005, Class B shares are only offered to existing Class B
shareholders in the form of reinvested distributions and certain exchanges from
other Franklin Templeton Class B shares. 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, 2005, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2005 2004
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
CLASS A SHARES:
Shares sold .................... 16,306,678 $ 512,348,163 18,971,456 $ 567,102,553
Shares issued in reinvestment of
distributions ............... 647,392 20,502,909 187,096 5,461,274
Shares redeemed ................ (11,449,173) (359,553,508) (7,896,008) (234,372,284)
-----------------------------------------------------------
Net increase (decrease) ........ 5,504,897 $ 173,297,564 11,262,544 $ 338,191,543
===========================================================
CLASS B SHARES:
Shares sold .................... 1,085,604 $ 33,673,346 3,913,076 $ 115,516,852
Shares issued in reinvestment of
distributions ............... 106,936 3,362,042 24,214 701,721
Shares redeemed ................ (1,365,416) (42,441,850) (869,904) (25,885,434)
-----------------------------------------------------------
Net increase (decrease) ........ (172,876) $ (5,406,462) 3,067,386 $ 90,333,139
===========================================================
CLASS C SHARES:
Shares sold .................... 4,932,412 $ 153,188,348 7,103,069 $ 209,292,387
Shares issued in reinvestment of
distributions ............... 171,526 5,385,934 38,312 1,108,453
Shares redeemed ................ (3,773,644) (117,119,495) (2,233,858) (66,292,937)
-----------------------------------------------------------
Net increase (decrease) ........ 1,330,294 $ 41,454,787 4,907,523 $ 144,107,903
===========================================================
CLASS R SHARES:
Shares sold .................... 567,437 $ 17,767,709 703,620 $ 20,994,785
Shares issued in reinvestment of
distributions ............... 20,729 655,026 5,369 156,344
Shares redeemed ................ (352,105) (11,027,136) (233,729) (6,981,553)
-----------------------------------------------------------
Net increase (decrease) ........ 236,061 $ 7,395,599 475,260 $ 14,169,576
===========================================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the following
subsidiaries:
Annual Report | 27
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
- ---------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ---------------------------------------------------------------------------------------
Franklin Advisory Services Inc. (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
- --------------------------------------------------------------------------------
0.750% Up to and including $500 million
0.625% Over $500 million, up to and including $1 billion
0.500% In excess of $1 billion
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's Board of Trustees has adopted distribution plans for each share class
pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's Class A
reimbursement distribution plan, the Fund reimburses Distributors up to 0.25%
per year of Class A's average daily net assets for costs incurred in connection
with the sale and distribution of the Fund's shares. Prior to February 1, 2005,
the Fund reimbursed Distributors up to 0.50% per year of its average daily net
assets of Class A. Under the Class A reimbursement distribution plan, costs
exceeding the maximum for the current plan year cannot be reimbursed in
subsequent periods.
Under the Fund's compensation distribution plans, the Fund pays Distributors for
costs incurred in connection with the sale and distribution of the Fund's shares
up to a certain percentage per year of its average daily net assets of each
class as follows:
Class B .............. 1.00%
Class C .............. 1.00%
Class R .............. 0.50%
28 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the year:
Net sales charge received(a) ................... $ 1,405,706
Contingent deferred sales charges retained ..... $ 691,430
(a) Net of commissions paid to unaffiliated broker/dealers.
E. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $4,072,522, of which $2,456,805 was
retained by 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, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
The tax character of distributions paid during the years ended September 30,
2005 and 2004, was as follows:
--------------------------
2005 2004
--------------------------
Distributions paid from:
Ordinary income .............. $ 17,538,748 $ 6,605,453
Long term capital gain ....... 16,745,383 2,024,162
--------------------------
$ 34,284,131 $ 8,629,615
==========================
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales.
Annual Report | 29
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
5. INCOME TAXES (CONTINUED)
At September 30, 2005, 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 ............................ $ 1,959,527,514
---------------
Unrealized appreciation ........................ $ 504,562,700
Unrealized depreciation ........................ (119,297,827)
---------------
Net unrealized appreciation (depreciation) ..... $ 385,264,873
===============
Undistributed ordinary income .................. $ 14,326,946
Undistributed long term capital gains .......... 9,939,764
---------------
Distributable earnings ......................... $ 24,266,710
===============
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
year ended September 30, 2005, aggregated $327,465,942 and $80,342,900,
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
year ended September 30, 2005 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. ... 1,809,600 -- -- 1,809,600 $53,690,832 $796,224 $--
TOTAL AFFILIATED SECURITIES (2.29% OF NET ASSETS)
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.
30 | Annual Report
FRANKLIN MANAGED TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN RISING DIVIDENDS FUND
9. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.
Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds and are recorded as
other income in the current period. The SEC has not yet approved the
distribution plan pertaining to the December 13, 2004 SEC Order. When approved,
disbursements of settlement monies will be made promptly to the relevant funds,
in accordance with the terms and conditions of that order. The IDC continues to
develop the plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices described above.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.
The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intends to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate
Annual Report | 31
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, 2005, 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. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. 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, 2005, 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, 2005, 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 LLP
Philadelphia, Pennsylvania
November 15, 2005
32 | Annual Report
FRANKLIN MANAGED TRUST
TAX DESIGNATION (UNAUDITED)
FRANKLIN RISING DIVIDENDS FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $9,956,381 as a capital
gain dividend for the fiscal year ended September 30, 2005.
Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $44,981,473 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
September 30, 2005. In January 2006, shareholders will receive Form 1099-DIV
which will include their share of qualified dividends distributed during the
calendar year 2005. 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 designates 100% of the ordinary
income dividends as income qualifying for the dividends received deduction for
the fiscal year ended September 30, 2005.
Annual Report | 33
FRANKLIN MANAGED TRUST
BOARD MEMBERS AND OFFICERS
The name, year of birth 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
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK T. CROHN (1924) Trustee Since 1986 6 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 (1929) Trustee Since 2001 13 Director, Fiduciary Emerging Markets
One Franklin Parkway Bond Fund PLC and Fiduciary
San Mateo, CA 94403-1906 International Ireland Limited.
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry).
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES RUBENS II (1930) Trustee Since 1986 13 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor.
- ------------------------------------------------------------------------------------------------------------------------------------
LEONARD RUBIN (1925) Trustee Since 1986 13 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).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT E. WADE (1946) Trustee Since 2004 13 Director, El Oro and Exploration Co.,
One Franklin Parkway p.l.c.; and FORMERLY, Director, El Oro
San Mateo, CA 94403-1906 Mining and Exploration Company,
p.l.c and The Exploration Company,
p.l.c. (until 2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Practicing attorney.
- ------------------------------------------------------------------------------------------------------------------------------------
34 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**WILLIAM J. LIPPMAN (1925) Trustee, Trustee and 15 None
One Parker Plaza, 9th Floor President and President
Fort Lee, NJ 07024-2920 Chief Executive since 1986
Officer - and Chief
Investment Executive
Management Officer -
Investment
Management
since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Advisory Services, LLC; Director, Templeton Worldwide, Inc.; and officer and/or director or trustee, as the case
may be, of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (1945) Vice President Since 1991 Not Applicable Not Applicable
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.; and officer and/or director or trustee, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 48 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 32 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).
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 48 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 35
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 48 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 (1947) Vice President Since 2000 Not Applicable Not Applicable
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, LLC,
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 48 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. (1940) Vice President Since 1991 Not Applicable Not Applicable
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.; 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 46 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (1937) Vice President Since 2002 Not Applicable Not Applicable
600 Fifth Avenue - AML
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; Director, Franklin Templeton Institutional
Suisse SA, Arch Chemicals, Inc. and Lingnan Foundation; and officer and/or director, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (1937) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the subsidiaries of
Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton Investments; and FORMERLY, General Counsel,
Franklin Resources, Inc.; Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited
(until 2000); and Director, Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
36 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice Since Not Applicable Not Applicable
One Franklin Parkway President October 2005
San Mateo, Ca 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Senior Vice President, Franklin Resources, Inc.; officer of 48 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Partner, Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI)
(1997- 2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 48 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
* 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
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 FUND'S 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 U.S. 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.
Annual Report | 37
FRANKLIN MANAGED TRUST
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Trust has established Proxy Voting Policies and Procedures ("Policies") that
the Trust uses to determine how to vote proxies relating to portfolio
securities. Shareholders may view the Trust'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 Trust's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. 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.
38 | Annual Report
This page intentionally left blank.
This page intentionally left blank.
LITERATURE REQUEST
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 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-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin MidCap Value Fund
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
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(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(4)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME(5)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(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(7)
Colorado
Connecticut
Florida(7)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(6)
Michigan(6)
Minnesota(6)
Missouri
New Jersey
New York(7)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(8)
(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) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(5) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(6) Portfolio of insured municipal securities.
(7) 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).
(8) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
09/05 Not part of the annual report
[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
|_| 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 A2005 11/05
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 12(a)(1), 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, 2005 and $20,500 for the
fiscal year ended September 30, 2004.
(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 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 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) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. 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 11. 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 12. EXHIBITS.
(a) (1) Code of Ethics
(a) (2) 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) 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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 21, 2005
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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 21, 2005
By /s/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date November 21, 2005