Franklin Managed Income Fund

Important Legal Information

• CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
• Most Franklin Templeton funds offer multiple share classes. Share classes are subject to different fees and expenses, which will affect their performance. In general, Class A/A1 have a maximum initial sales charge; Class C/C1 shares have a 1% contingent deferred sales charge; Class Z, Advisor Class and Class R6 shares have no sales charges nor Rule 12b-1 fees; Class R shares have no sales charges, but do have a Rule 12b-1 fee.
• Total Returns include change in share price, assume reinvestment of all distributions, and reflect the deduction of fund expenses and applicable fees. Total Returns With Sales Charge: returns reflect the deduction of the stated sales charge. Total returns, distribution rate, and yields reflect any applicable expense reductions, without which the results for those impacted funds would have been lower.

• Managed Distribution Policy Risks—The Franklin Managed Income Fund is not guaranteed to achieve its investment goal of seeking to maximize income to support monthly distributions, while maintaining the prospects for capital appreciation. In addition, some of its distributions may be treated in part as a return of capital which will decrease shareholders' cost basis in the fund and affect the amount of any capital gain or loss that they realize when selling or exchanging fund shares. The annual payout rate may be adjusted higher or lower from year to year, and could vary substantially over time. It is possible for the fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under the managed distribution policy. Investors who hold the fund within a tax-advantaged retirement account should consult their tax advisors to discuss tax consequences of receiving cash distributions. In addition, use of the fund or election of the option to receive distribution payments in cash may be restricted in certain retirement plans by the terms of the governing plan documents and/or the discretion of the plan administrator. Investors are strongly advised to consult with their financial advisor for assistance before selecting the fund, based on their goals and personal situations, including time horizon, income needs, risk tolerance, and tax bracket. These and other risks are described more fully in the fund's prospectus.

• All investments involve risks, including possible loss of principal. The fund's share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. As the prices of bonds in the fund adjust to a rise in interest rates, the fund's share price may decline. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. These and other risk considerations are described more fully in the prospectus.

• Effective 3/1/19, Franklin Balanced Fund repositioned to become an income strategy. The fund changed its name to Franklin Managed Income Fund, as well as its dividend policy, investment management fees and primary benchmark.

• For more information on any of our funds, contact your financial advisor or download a prospectus. Investors should carefully consider a fund's investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.
• Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. Investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.

Footnotes

1. Portfolio holdings are subject to change.
2. Characteristics pertain to the fixed income portion of the portfolio only.
3. A statistical measurement of the range of a fund's total returns. In general, a higher standard deviation means greater volatility. Based on the fund's monthly returns over the 3-year period ended as of the date of the calculation.
4. A statistical measurement of the range of a fund's total returns. In general, a higher standard deviation means greater volatility. Based on the fund's monthly returns over the 3-year period ended as of the date of the calculation.
5. A statistical measurement of the range of a fund's total returns. In general, a higher standard deviation means greater volatility. Based on the fund's monthly returns over the 3-year period ended as of the date of the calculation.
6. A statistical measurement of a fund's historical risk-adjusted performance. It is calculated by taking a fund's excess return over that of the three-month Treasury bill divided by its standard deviation. Higher values generally indicate better historical risk-adjusted performance. Based on the 3 years ended as of the date of the calculation.
7. A statistical measurement of a fund's historical risk-adjusted performance. It is calculated by taking a fund's excess return over that of the three-month Treasury bill divided by its standard deviation. Higher values generally indicate better historical risk-adjusted performance. Based on the 3 years ended as of the date of the calculation.
8. A statistical measurement of a fund's historical risk-adjusted performance. It is calculated by taking a fund's excess return over that of the three-month Treasury bill divided by its standard deviation. Higher values generally indicate better historical risk-adjusted performance. Based on the 3 years ended as of the date of the calculation.
9. The annualized percentage difference between a fund's actual returns and its expected performance given its level of market risk, as measured by beta. Based on the 3-year period ended as of the date of the calculation.
10. The annualized percentage difference between a fund's actual returns and its expected performance given its level of market risk, as measured by beta. Based on the 3-year period ended as of the date of the calculation.
11. The annualized percentage difference between a fund's actual returns and its expected performance given its level of market risk, as measured by beta. Based on the 3-year period ended as of the date of the calculation.
12. A measure of the fund's volatility relative to the market, as represented by the Blended 50% MSCI USD High Dividend Yield Index + 25% ICE BofAML US Corporate & High Yield Index + 25% Bloomberg Barclays US Aggregate Index. A beta greater than 1.00 indicates volatility greater than the market. Based on the 3-year period ended as of the date of the calculation.
13. A measure of the fund's volatility relative to the market, as represented by the Blended 50% MSCI USD High Dividend Yield Index + 25% ICE BofAML US Corporate & High Yield Index + 25% Bloomberg Barclays US Aggregate Index. A beta greater than 1.00 indicates volatility greater than the market. Based on the 3-year period ended as of the date of the calculation.
14. A measure of the fund's volatility relative to the market, as represented by the Blended 50% MSCI USD High Dividend Yield Index + 25% ICE BofAML US Corporate & High Yield Index + 25% Bloomberg Barclays US Aggregate Index. A beta greater than 1.00 indicates volatility greater than the market. Based on the 3-year period ended as of the date of the calculation.
15. Percentage of the fund's returns explained by movements in the S&P 500 Index. 100 equals perfect correlation to the index. Based on the 3-year period ended as of the date of the calculation.
16. Percentage of the fund's returns explained by movements in the S&P 500 Index. 100 equals perfect correlation to the index. Based on the 3-year period ended as of the date of the calculation.
17. Percentage of the fund's returns explained by movements in the S&P 500 Index. 100 equals perfect correlation to the index. Based on the 3-year period ended as of the date of the calculation.
18. The fund's 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the fund's actual income distribution rate, which reflects the fund's past dividends paid to shareholders.
19. The fund's 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the fund's actual income distribution rate, which reflects the fund's past dividends paid to shareholders.
20. Public Offering Price — Purchase price for each share of the fund on a given day. It includes the maximum initial sales charge, if any.
21. Public Offering Price — Purchase price for each share of the fund on a given day. It includes the maximum initial sales charge, if any.
22. Net Asset Value — The amount per share you would receive if you sold shares that day.
23. Net Asset Value — The amount per share you would receive if you sold shares that day.
24. Source: Morningstar®. The style box reveals a fund's investment style. The vertical axis shows the market capitalization of the stocks owned and the horizontal axis shows investment style (value, blend, or growth). Placement is determined by fund portfolio holding figures most recently entered into Morningstar's database and corresponding market conditions. Shaded areas show the past 3 years of quarterly data. Past performance does not guarantee future results.
25. Source: Morningstar®. For each mutual fund and exchange traded fund with at least a 3-year history, Morningstar calculates a Morningstar Rating based on how a fund ranks on a Morningstar Risk-Adjusted Return measure against other funds in the same category. This measure takes into account variations in a fund's monthly performance, and does not take into account the effects of sales charges and loads, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The weights are: 100% 3-year rating for 36-59 months of total returns, 60% 5-year rating/40% 3-year rating for 60-119 months of total returns, and 50% 10-year rating/30% 5-year rating/20% 3-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent 3-year period actually has the greatest impact because it is included in all three rating periods. Morningstar Rating is for the named share class only; other classes may have different performance characteristics. Past performance is not an indicator or a guarantee of future performance.
26. Characteristics pertain to the equity portion of the portfolio only.
27. ©2019 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
28. The hypothetical scenario does not take into account federal, state or municipal taxes. If taxes were taken into account, the hypothetical values shown would have been lower.
29. The Gross Expense Ratio does not include a fee waiver related to the Fund's investment in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through its 2/28/20. Fund investment results reflect the fee reduction; without this reduction, the results would have been lower. Please see the prospectus for additional information.
30. The Gross Expense Ratio does not include a fee waiver related to the Fund's investment in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through its 2/28/20. Fund investment results reflect the fee reduction; without this reduction, the results would have been lower. Please see the prospectus for additional information.
31. The Gross Expense Ratio does not include a fee waiver related to the Fund's investment in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through its 2/28/20. Fund investment results reflect the fee reduction; without this reduction, the results would have been lower. Please see the prospectus for additional information.
32. Information only pertains to the equity component of the portfolio. Weightings as a percent of equity holdings. Percentage may not equal 100 due to rounding. Information is historical and may not reflect current or future characteristics.
33. Ratings shown are assigned by one or more Nationally Recognized Statistical Rating Organizations ('NRSRO'), such as Standard & Poor's, Moody's and Fitch. The ratings are an indication of an issuer's creditworthiness and typically range from AAA or Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available, the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific rating are assigned the country rating provided by an NRSRO, if available. The NR category consists of ratable securities that have not been rated by an NRSRO. The N/A category consists of nonratable securities (e.g., equities). Cash and equivalents are excluded from this breakdown.
34. Indices are unmanaged and one cannot invest directly in them. Index returns do not reflect any fees, expenses or sales charges.
35. Indices are unmanaged and one cannot invest directly in them. Index returns do not reflect any fees, expenses or sales charges.
36. Indices are unmanaged and one cannot invest directly in them. Index returns do not reflect any fees, expenses or sales charges.
37. For performance reporting purposes, the inception date for Classes A/A1, R, R6, Z, and Advisor Class shares of all Franklin Templeton Funds is the date of effectiveness of the fund's registration statement or the first day the fund commenced operations. For Class C shares, generally the inception date is the first day the fund commenced offering such shares. Exceptions: Templeton Global Balanced Fund Classes A and C use the inception date of the old Class A and C shares, renamed Class A1 and Class C1. For Franklin Mutual Series Funds, Franklin International Small Cap Growth Fund and Franklin Pelagos Commodities Strategy Fund, the inception date for Classes A, C, R and R6 shares is the funds' oldest class', Z or Advisor, inception date. Franklin U.S. Government Money Fund Class R6 inception date is the first day it commenced offering such shares. For Franklin California Ultra-Short Tax-Free Income Fund Classes A1 and Advisor Class use the inception date of its predecessor, Franklin California Tax-Exempt Money Fund.
38. For performance reporting purposes, the inception date for Classes A/A1, R, R6, Z, and Advisor Class shares of all Franklin Templeton Funds is the date of effectiveness of the fund's registration statement or the first day the fund commenced operations. For Class C shares, generally the inception date is the first day the fund commenced offering such shares. Exceptions: Templeton Global Balanced Fund Classes A and C use the inception date of the old Class A and C shares, renamed Class A1 and Class C1. For Franklin Mutual Series Funds, Franklin International Small Cap Growth Fund and Franklin Pelagos Commodities Strategy Fund, the inception date for Classes A, C, R and R6 shares is the funds' oldest class', Z or Advisor, inception date. Franklin U.S. Government Money Fund Class R6 inception date is the first day it commenced offering such shares. For Franklin California Ultra-Short Tax-Free Income Fund Classes A1 and Advisor Class use the inception date of its predecessor, Franklin California Tax-Exempt Money Fund.
39. For performance reporting purposes, the inception date for Classes A/A1, R, R6, Z, and Advisor Class shares of all Franklin Templeton Funds is the date of effectiveness of the fund's registration statement or the first day the fund commenced operations. For Class C shares, generally the inception date is the first day the fund commenced offering such shares. Exceptions: Templeton Global Balanced Fund Classes A and C use the inception date of the old Class A and C shares, renamed Class A1 and Class C1. For Franklin Mutual Series Funds, Franklin International Small Cap Growth Fund and Franklin Pelagos Commodities Strategy Fund, the inception date for Classes A, C, R and R6 shares is the funds' oldest class', Z or Advisor, inception date. Franklin U.S. Government Money Fund Class R6 inception date is the first day it commenced offering such shares. For Franklin California Ultra-Short Tax-Free Income Fund Classes A1 and Advisor Class use the inception date of its predecessor, Franklin California Tax-Exempt Money Fund.
40. After-tax average annual total returns represent the average change in value of an investment on an annualized basis. Returns are calculated using the highest individual federal income tax rates; state and local taxes are not considered. Your actual after-tax returns depend on your particular tax situation and may differ from those shown. The before shares sold calculation assumes taxes are paid on fund distributions (dividends and capital gains) but does not reflect taxes that may be incurred upon sale or exchange of shares. The after shares sold calculation also adjusts for taxes due if the fund investment is sold at the end of the measurement period.