FRANKLIN MANAGED TRUST, 497, 1995-09-08

FRANKLIN MANAGED TRUST
497, 1995-09-08

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Franklin
Corporate Qualified

Dividend Fund

Franklin Managed Trust

PROSPECTUS February 1, 1995
as amended August 10, 1995

777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN

Franklin Managed Trust (the "Trust") is a diversified, open-end management
investment company consisting of three separate series. This Prospectus pertains
only to the Franklin Corporate Qualified Dividend Fund (the "Fund"), formerly
the Franklin Corporate Cash Portfolio.

The Fund is designed exclusively to serve as an income producing vehicle for the
cash reserves of taxable corporations. The objective of the Fund is to generate
high after-tax income for corporations, consistent with investment in investment
quality securities. To achieve its objective, the Fund invests primarily in the
equity securities of domestic corporations that generate dividend income
qualifying for the 70% corporate dividends-received deduction under current
federal income tax laws.

This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that a prospective investor should know before
investing. After reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and sale of shares and
other items which a prospective investor will find useful to have.

Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank; further, such shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
Shares of the Fund involve investment risks, including the possible loss of
principal.

A Statement of Additional Information (the "SAI") concerning the Trust, dated
February 1, 1995, as may be amended from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated herein by reference. A copy is available
without charge from the Fund or the Fund's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), at the address or
telephone number shown above.

This Prospectus is not an offering of the securities herein described in any
state in which the offering is not authorized. No sales representative, dealer,
or other person is authorized to give any information or make any
representations other than those contained in this Prospectus. Further
information may be obtained from the underwriter.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Contents Page

Expense Table.................... 2
Financial Highlights............. 3
About the Trust.................. 4
Investment Objective and
Policies of the Fund............ 4
Management of the Fund........... 8
Distributions to Shareholders.... 10
Taxation of the Fund
and Its Shareholders............ 11
How to Buy Shares of the Fund.... 12
Other Programs and Privileges
Available to Fund Shareholders.. 16
Exchange Privilege............... 18
How to Sell Shares of the Fund... 20
Telephone Transactions........... 24
Valuation of Fund Shares......... 25
How to Get Information Regarding
an Investment in the Fund....... 26
Performance...................... 26
General Information.............. 27
Account Registrations............ 28
Portfolio Operations............. 29

Expense Table

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly in
connection with an investment in the Fund. These figures are based on aggregate
operating expenses of the Fund for the fiscal year ended September 30, 1994.

Shareholder Transaction Expenses

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)
1.50%

Deferred Sales Charge............................................... NONE*
Exchange Fee (per transaction)...................................... $5.00**
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees..................................................... 0.50%
12b-1 Fees.......................................................... 0.23%+
Other Expenses:
Accounting Fees.............................................. 0.12%
Registration Fees............................................ 0.05%
Other........................................................ 0.10%
Total Other Expenses................................................ 0.27%
Total Fund Operating Expenses....................................... 1.00%

*Investments of $1 million or more are not subject to a front-end sales charge;
however, a contingent deferred sales charge of 1% is generally imposed on
certain redemptions within a "contingency period" of 12 months of the calendar
month following such investments. See "How to Sell Shares of the Fund -
Contingent Deferred Sales Charge."

**$5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.

+Consistent with National Association of Securities Dealers, Inc.'s rules, it is
possible that the combination of front-end sales charges and Rule 12b-1 fees
could cause long-term shareholders to pay more than the economic equivalent of
the maximum front-end sales charges permitted under those same rules. Given the
Fund's maximum initial sales charge and the rate of the Fund's Rule 12b-1 fee,
however, it is estimated that this would take a substantial number of years.

Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.

Example

As required by SEC regulations, the following example illustrates the expenses,
including the maximum front-end sales charge, that apply to a $1,000 investment
in the Fund over various time periods assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period.

One Year* Three Years Five Years Ten Years
$25 $46 $69 $136

*Assumes that a contingent deferred sales charge will not apply.

This example is based on the aggregate annual operating expenses shown above and
should not be considered a representation of future expenses, which may be more
or less than those shown. The operating expenses are borne by the Fund and only
indirectly by shareholders as a result of their investment in the Fund. In
addition, federal regulations require the example to assume an annual return of
5%, but the Fund's actual return may be more or less than 5%.

Financial Highlights

Set forth below is a table containing the financial highlights for a share of
the Fund from the effective date of the registration statement through each of
the fiscal years ended December 31, 1992, for the nine-month period ended
September 30, 1993 (annualized as a result of a change in fiscal year end from
December to September) and for the fiscal year ended September 30, 1994. The
information has been audited by Tait, Weller and Baker, independent auditors,
whose audit report covering the years ended 1990 through 1994 appears in the
financial statements in the Trust's SAI. The remaining figures, which are also
audited, are not covered by the auditors' current report. See the discussion
"Reports to Shareholders" under "General Information."

Per Share Operating Performance Ratios/Supplemental Data

Net Asset Net Realized Distributions Net Asset Net Assets Ratio of Ratio of
Value at Net & Unrealized Total From From Net Values at End Expenses Net Income Portfolio
Year Beginning Investment Gain (Loss) Investment Investment at End Total of Year to Average to Average Turnover
Ended of Year Income on SecuritiesOperations Income of Year Return+ (In 000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987** $25.00 $1.68 $(3.460) $(1.780) $(1.450) $21.77 (7.41)% $14,134 1.34%* 7.94%* 149.17%
1988++ 21.77 1.84 (0.650) 1.190 (1.850) 21.11 5.68 30,632 1.46 8.51 8.00
1989 21.11 1.76 (0.434) 1.326 (1.786) 20.65 6.42 23,260 1.43 8.31 14.42
1990 20.65 1.77 (1.566) 0.204 (1.824) 19.03 1.05 17,498 1.33 8.84 1.55
1991 19.03 1.73 2.540 4.270 (1.670) 21.63 23.25 22,242 1.24 8.09 -
1992 21.63 1.37 2.144 3.514 (1.394) 23.75 16.57 29,444 1.10 5.97 29.01
1993*** 23.75 0.73 0.777 1.507 (0.787) 24.47 6.44 33,849 1.06* 4.09* 27.46
1994**** 24.47 1.02 (0.844) 0.176 (0.956) 23.69 .72 31,790 1.00 4.19 32.17

</TABLE>

*Annualized

**For the period January 14, 1987 (effective date of registration) to December
31, 1987.

***For the period ended September 30, 1993.

****For the year ended September 30, 1994.

+Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum 1.5% initial sales charge and assumes
reinvestment of dividends and capital gains, if any, at net asset value.

++On June 28, 1988, the investment manager changed from L.F. Rothschild Fund
Management, Inc. to Franklin Advisers, Inc.

About the Trust

The Trust is a diversified, open-end management investment company, or mutual
fund, organized as a Massachusetts business trust in July 1986 and registered
with the SEC under the Investment Company Act of 1940 (the "1940 Act"). The
Trust currently consists of three series, each of which issues a separate series
of the Trust's shares and maintains a totally separate investment portfolio.
This Prospectus pertains only to the Franklin Corporate Qualified Dividend Fund
(the "Fund") which changed its name from the Franklin Corporate Cash Portfolio,
effective May 1, 1991.

The Board of Trustees may determine, at a future date, to offer shares of the
Fund in one or more "classes" to permit the Fund to take advantage of
alternative methods of selling Fund shares. "Classes" of shares represent
proportionate interests in the same portfolio of investment securities but with
different rights, privileges and attributes, as determined by the trustees.
Certain funds in the Franklin Templeton Funds, as that term is defined under
"How to Buy Shares of the Fund," currently offer their shares in two classes,
designated "Class I" and "Class II." Because the Fund's sales charge structure
and plan of distribution are similar to those of Class I shares, shares of the
Fund may be considered Class I shares for redemption, exchange and other
purposes.

Shares of the Fund may be purchased (minimum investment of $25,000 initially and
$5,000 thereafter) at the current public offering price, which is equal to the
Fund's net asset value (see "Valuation of Fund Shares") plus a sales charge not
exceeding 1.5% of the offering price. Shares of the Fund are available for
purchase only by corporations.

Investment Objective
and Policies of the Fund

The Fund is designed to serve as an income producing vehicle for the cash
reserves of taxable corporations. The objective of the Fund is to generate high
after-tax income for corporations, consistent with investment in investment
quality securities. The objective is a fundamental policy of the Fund and may
not be changed without shareholder approval.

The Fund seeks to achieve its investment objective by maximizing the amount of
dividend income it receives which qualifies for the 70% corporate
dividends-received deduction under current federal income tax laws. Under normal
market conditions, at least 75% of the Fund's total assets will be invested in
equity securities of domestic corporations paying dividends that qualify for the
dividends-received deduction. The types of securities in which the Fund
typically invests include adjustable rate preferred stocks, auction rate
preferred stocks, conventional preferred stocks, and common stocks. Many of the
securities in which the Fund may invest are not short-term, and the net asset
value per share of the Fund will fluctuate as the market value of its investment
portfolio fluctuates.

Because the Fund seeks income consistent with prudent management, under normal
market conditions at least 95% of the Fund's portfolio is invested in equity
securities of issuers whose long-term debt securities are either rated in one of
the four highest rating categories (described below) or, if unrated, are of
equivalent quality as determined by the Fund's investment manager. The common
stocks that the Fund purchases are generally not rated and ratings on the
issuers' preferred or debt securities should not be construed as a rating on the
issuers' common stocks. The four highest rating categories are AAA, AA, A or BBB
by Standard & Poor's Corporation ("S&P"), or Aaa, Aa, A, or Baa by Moody's
Investors Service ("Moody's"). Debt securities within the top three categories
(AAA, AA and A by S&P or Aaa, Aa or A by Moody's) comprise what are known as
high-grade bonds and are regarded as having a strong capacity to pay principal
and interest. Medium-grade bonds (BBB by S&P or Baa by Moody's) are regarded as
having an adequate capacity to pay principal and interest but with greater
vulnerability to adverse economic conditions and some speculative
characteristics. See "Appendix" in the SAI for a further description of these
ratings.

Although there is no assurance that the Fund will achieve its objective due to
the market risks inherent in any investment program, the investment manager
believes that such risks may be minimized through careful analysis of
prospective issuers. Thus, while the opinion of rating services may be
considered in selecting securities for the Fund's portfolio, in choosing
investments the investment manager relies primarily on its own credit analysis,
which includes a study of the existing debt, capital structure, ability to
service debt and to pay dividends, and the credit rating and current trend of
earnings for any company under consideration.

Consistent with procedures approved by the Board of Trustees and subject to the
following conditions, the Fund may lend its portfolio securities to qualified
securities dealers or other institutional investors, provided that such loans do
not exceed 30% of the value of the Fund's total assets at the time of the most
recent loan. The borrower must deposit with the Fund's custodian collateral with
an initial market value of at least 102% of the initial market value of the
securities loaned, including any accrued interest, with the value of the
collateral and loaned securities marked-to-market daily to maintain collateral
coverage of at least 100%. Such collateral shall consist of cash, securities
issued by the U.S. government, its agencies or instrumentalities, or irrevocable
letters of credit. The lending of securities is a common practice in the
securities industry. The Fund may engage in security loan arrangements with the
primary objective of increasing the Fund's income either through investing the
cash collateral in short-term, interest bearing obligations or by receiving a
loan premium from the borrower. Under the securities loan agreement, the Fund
continues to be entitled to all dividends or interest on any loaned securities.
As with any extension of credit, there are risks of delay in recovery and loss
of rights in the collateral should the borrower of the security fail
financially.

In any period of stock market weakness or of uncertain market or economic
conditions as determined by the investment manager, the Fund may establish a
defensive position to preserve capital by temporarily investing all or a part of
its assets in short-term, fixed-income securities or retaining such assets in
cash or cash equivalents. Such investments, which may also be made on a
temporary basis pending investment in equity securities, would include U.S.
government securities, bank certificates of deposit, bankers' acceptances and
high-quality commercial paper issued by domestic corporations. For temporary
defensive purposes, or as an interim investment pending longer term investment
in dividend-paying equity securities, the Fund may engage in repurchase
transactions, in which the Fund purchases a U.S. government security subject to
resale to a bank or dealer at an agreed-upon price and date. The transaction
requires the collateralization of the seller's obligation by the transfer of
securities with an initial market value, including accrued interest, equal to at
least 102% of the dollar amount invested by the Fund in each agreement, with the
value of the underlying security marked to market daily to maintain coverage of
at least 100%. A default by the seller might cause the Fund to experience a loss
or delay in the liquidation of the collateral securing the repurchase agreement.
The Fund might also incur disposition costs in liquidating the collateral. The
Fund, however, intends to enter into repurchase agreements only with financial
institutions such as broker-dealers and banks which are deemed creditworthy by
the Fund's investment manager. A repurchase agreement is deemed to be a loan by
the Fund under the 1940 Act. The U.S. government security subject to resale (the
collateral) will be held on behalf of the Fund by a custodian approved by the
Fund's Board of Trustees and will be held pursuant to a written agreement.

To the extent interest income is derived from the above activities, it will not
qualify for the corporate dividends-received deduction.

It is the policy of the Fund that illiquid securities (securities that cannot be
disposed of within seven days in the normal course of business at approximately
the amount at which the Fund has valued the securities) or restricted securities
may not constitute, at the time of purchase, more than 10% of the value of the
total net assets of the Fund.

Adjustable Rate and Auction Rate Preferred Stocks. As noted, the Fund may invest
a portion of its portfolio in adjustable rate and auction rate preferred stocks,
the dividends on which qualify for the dividends-received deduction.

Adjustable rate stocks are preferred stocks with cumulative and adjustable
dividends. Regardless of the issuer, these stocks generally have the same terms
and provisions, except for the specific adjustment formula used to determine
their quarterly dividend rate. Such formulas vary in regard to (i) the fixed
amount of premium or discount in relation to a particular U.S. Treasury
instrument rate and (ii) the minimum and maximum range within which the dividend
rate may fluctuate. The applicable rate is generally determined by the issuer at
the beginning of each quarterly dividend period by adding or subtracting
(depending upon the terms of the issue) either a fixed number of basis points or
a percentage calculation to the highest of three specified rates: a "Treasury
Bill Rate," a "Ten-Year Constant Maturity Rate" and a "Twenty-Year Constant
Maturity Rate." Auction rate stocks are similar to short-term, corporate money
market instruments in that the auction rate preferred stockholder normally has
the opportunity to liquidate at par every 49 days, at which time the dividend
rate is reset. Generally, the maximum dividend rate ranges from 110% to 250%,
depending on quality, of the sixty-day "AA" Composite Commercial Paper Rate and
the minimum rate is 56% of the same rate. The maximum and minimum dividend rates
may be higher or lower depending upon the particular issuer.

While the Fund intends to invest only in adjustable rate and auction rate
preferred stocks that are represented by the issuer or its counsel to be, or are
considered in the best judgment of the Fund's management to be, equity
securities for purposes of the dividends-received deduction, there is the
possibility that some such stocks may be classified as debt securities with the
result that the dividends paid on such securities would not be qualifying
dividends.

Special Considerations

Prospective investors in the Fund should consider the following special factors:

1. As discussed under "Taxation of the Fund and Its Shareholders," in order to
have 100% of the dividend income paid by the Fund qualify for the corporate 70%
dividends-received deduction, 100% of the Fund's net distributable income must
be derived from qualifying dividends received from the Fund's stock in domestic
corporations with respect to which certain requirements of federal tax laws are
satisfied by the Fund. If the aggregate qualifying dividends received by the
Fund are less than 100% of its net distributable income, then the amount of the
Fund's dividends paid to its shareholders which will be eligible for the
deduction will also be proportionately less. While the Fund intends to maximize
the amount of qualifying dividend income it receives, consistent with its
investment objective, it is possible that less than 100% of the Fund's net
distributable income in any year will consist of qualifying dividend income to
its corporate shareholders.

2. To be eligible for the 70% dividends-received deduction on any dividend paid
by the Fund, a corporate investor must also satisfy certain federal tax
requirements discussed under "Taxation of the Fund and Its Shareholders."

The Fund intends to maximize the amount of its dividend income which qualifies
for the dividends-received deduction by corporate shareholders under federal tax
laws. The effect of the tax deduction for corporate investors in the 35% regular
tax bracket is that 89.5% of the Fund's qualifying dividends will be retained as
after-tax income. On an after-tax basis, the Fund's qualifying dividends would
likely give a corporate shareholder a significantly higher return than
investments in taxable money market instruments, as illustrated in the following
chart. There is no assurance, of course, that any of these results will be
attained, that federal income tax laws applicable to the dividends-received
deduction will remain the same or that such deduction may not in the future be
modified.

The following chart compares the net after-tax yields for a fully taxable
investment and the Fund, assuming the maximum 1994 federal corporate income tax
rate of 35% and that 100% of the Fund's dividends qualify for the current 70%
dividends-received deduction.

The foregoing chart is for illustrative purposes only, based on current
applicable federal corporate income tax rates, and no representation is being
made of the Fund's actual or intended yield or the percentage of its dividends
which will in fact qualify for the dividends-received deduction. In addition,
the net asset value of the Fund will fluctuate and an investor may realize a
gain or loss on redemption. For more information see "Taxation of the Fund and
Its Shareholders."

Investment Restrictions. The Fund is subject to a number of additional
investment restrictions, some of which may be changed only with the approval of
shareholders, which limit its activities to some extent. One of these
restrictions states that the Fund may borrow money only from banks for temporary
or emergency purposes in amounts not to exceed 15% of the Fund's total assets,
and that additional investments may not be made while any such borrowings are in
excess of 5% of the Fund's total assets. For a list of these restrictions and
more information concerning the policies discussed herein, please see the SAI.

How Shareholders Participate in the
Results of the Fund's Activities

The assets of the Fund are invested in portfolio securities. If the securities
owned by the Fund increase in value, the value of the shares of the Fund which
the shareholder owns will increase. If the securities owned by the Fund decrease
in value, the value of the shareholder's shares will also decline. In this way,
shareholders participate in any change in the value of the securities owned by
the Fund.

In addition to the factors which affect the value of individual securities, as
described in the preceding sections, a shareholder may anticipate that the value
of Fund shares will fluctuate with movements in the broader equity and bond
markets.

A decline in the market, expressed for example by a drop in the Dow Jones
Industrials or the S&P 500 average or any other equity based index, may also be
reflected in declines in the Fund's share price. History reflects both decreases
and increases in the valuation of the market, and these may reoccur
unpredictably in the future.

Management of the Fund

The Board of Trustees has the primary responsibility for the overall management
of the Trust and for electing the officers of the Trust who are responsible for
administering its day-to-day operations.

Franklin Advisers, Inc. ("Advisers" or "Manager") serves as the Fund's
investment manager. Advisers is a wholly-owned subsidiary of Franklin Resources,
Inc. ("Resources"), a publicly owned holding company, the principal shareholders
of which are Charles B. Johnson and Rupert H. Johnson, Jr., who own
approximately 20% and 16%, respectively, of Resources' outstanding shares.
Resources is engaged in various aspects of the financial services industry
through its various subsidiaries (the "Franklin Templeton Group"). Advisers acts
as investment manager or administrator to 34 U.S. registered investment
companies (113 separate series) with aggregate assets of over $76 billion.

Pursuant to the management agreement, the Manager supervises and implements the
Fund's investment activities and provides certain administrative services and
facilities which are necessary to conduct the Fund's business.

During the fiscal year ended September 30, 1994, fees totaling 0.50% of the
average daily net assets of the Fund were paid to Advisers.

Among the responsibilities of the Manager under the management agreement is the
selection of brokers and dealers through whom transactions in the Fund's
portfolio securities will be effected. The Manager tries to obtain the best
execution on all such transactions. If it is felt that more than one broker is
able to provide the best execution, the Manager will consider the furnishing of
quotations and of other market services, research, statistical and other data
for the Manager and its affiliates, as well as the sale of shares of the Fund,
as factors in selecting a broker. Further information is included under "The
Trust's Policies Regarding Brokers Used on Portfolio Transactions" in the SAI.

Shareholder accounting and many of the clerical functions for the Fund are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent") in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.

During the fiscal year ended September 30, 1994, expenses borne by the Fund,
including fees paid to Advisers and to Investor Services, totaled 1.00% of the
average daily net assets of the Fund.

Plan of Distribution

The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. Under the Plan, the Fund may reimburse Distributors or
others for all expenses incurred by Distributors or others in the promotion and
distribution of the Fund's shares. Such expenses may include, but are not
limited to, the printing of prospectuses and reports used for sales purposes,
expenses of preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a prorated
portion of Distributors' overhead expenses attributable to the distribution of
Fund shares, as well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing agreement with
the Fund, Distributors or its affiliates. The maximum amount which the Fund may
pay to Distributors or others for such distribution expenses is 0.25% per annum
of the average daily net assets of the Fund, payable on a monthly basis. All
expenses of distribution and marketing in excess of 0.25% per annum will be
borne by Distributors, or others who have incurred them, without reimbursement
from the Fund. The Plan also covers any payments to or by the Fund, Advisers,
Distributors, or other parties on behalf of the Fund, Advisers or Distributors,
to the extent such payments are deemed to be for the financing of any activity
primarily intended to result in the sale of shares issued by the Fund within the
context of Rule 12b-1. The payments under the Plan are included in the maximum
operating expenses which may be borne by the Fund. The Plan does not provide for
any unreimbursed expenses to be carried forward to successive annual periods.
For more information, please see the SAI.

Distributions to Shareholders

There are two types of distributions which the Fund may make to its
shareholders:

1. Income dividends. The Fund receives income in the form of dividends, interest
and other income derived from its investments. This income, less the expenses
incurred in the Fund's operations, is its net investment income from which
income dividends may be distributed. Thus, the amount of dividends paid per
share may vary with each distribution.

2. Capital gain distributions. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Fund as of October 31 of the current fiscal year
and any undistributed net capital gains from the prior fiscal year. These
distributions, when made, will generally be fully taxable to the Fund's
shareholders. The Fund may make more than one distribution derived from net
short-term and net long-term capital gains in any year or adjust the timing of
these distributions for operational or other reasons.

Distribution Date

Although subject to change by the Board of Trustees, without prior notice to or
approval by shareholders, the Fund's current policy is to declare income
dividends payable monthly for shareholders of record on the last business day of
the month, payable on or about the 15th day of the following month. The amount
of income dividend payments by the Fund is dependent upon the amount of net
income received by the Fund from its portfolio holdings, is not guaranteed and
is subject to the discretion of the Board of Trustees. Fund shares are quoted
ex-dividend on the first business day following the record date. The Fund does
not pay "interest" or guarantee any fixed rate of return on an investment in its
shares.

In order to be entitled to a dividend, an investor must have acquired Fund
shares prior to the close of business on the record date. An investor
considering purchasing Fund shares shortly before the record date of a
distribution should be aware that because the value of the Fund's shares is
based directly on the amount of its net assets, rather than on the principle of
supply and demand, any distribution of income or capital gain will result in a
decrease in the value of the Fund's shares equal to the amount of the
distribution. While a dividend or capital gain distribution received shortly
after purchasing shares represents, in effect, a return of a portion of the
shareholder's investment, it may be taxable as dividend income or capital gain.

Dividend Reinvestment

Unless otherwise requested, income dividends and capital gain distributions, if
any, will be automatically reinvested in the shareholder's account in the form
of additional shares, valued at the closing net asset value (without a sales
charge) on the dividend reinvestment date. Dividend and capital gain
distributors are only eligible for reinvestment at net asset value in the Fund
or Class I shares of other Franklin Templeton Funds. Shareholders have the right
to change their election with respect to the receipt of distributions by
notifying the Fund, but any such change will be effective only as to
distributions for which the record date is seven or more business days after the
Fund has been notified. See the SAI for more information.

Many of the Fund's shareholders receive their distributions in the form of
additional shares. This is a convenient way to accumulate additional shares and
maintain or increase the shareholder's earnings base. Of course, any shares so
acquired remain at market risk.

Distributions in Cash

A shareholder may elect to receive income dividends, or both income dividends
and capital gain distributions, in cash. By completing the "Special Payment
Instructions for Distributions" section of the Shareholder Application included
with this Prospectus, a shareholder may direct the selected distributions to
another fund in the Franklin Group of Funds(R) or the Templeton Funds, to
another person, or directly to a checking account. If the bank at which the
account is maintained is a member of the Automated Clearing House, the payments
may be made automatically by electronic funds transfer. If this last option is
requested, the shareholder should allow at least 15 days for initial processing.
Dividends which may be paid in the interim will be sent to the address of
record. Additional information regarding automated fund transfers may be
obtained from Franklin's Shareholder Services Department. See "Purchases at Net
Asset Value" under "How to Buy Shares of the Fund."

Taxation of the Fund and Its Shareholders

The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. Additional information on tax matters
relating to the Fund and its shareholders is included in the section entitled
"Additional Information Regarding Taxation" in the SAI.

Each series of the Trust is treated as a separate entity for federal income tax
purposes. The Fund intends to continue to qualify for treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). By distributing all of its income and meeting certain
other requirements relating to the sources of its income and diversification of
its assets, the Fund will not be liable for federal income or excise taxes.

For federal income tax purposes, any income dividends which the shareholder
receives from the Fund, as well as any distributions derived from the excess of
net short-term capital gain over net long-term capital loss, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares.

Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time the shareholder has owned Fund shares and regardless of whether
such distributions are received in cash or in additional shares.

Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
paid by the Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.

Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a gain or a loss. Any loss incurred on the sale or
exchange of Fund shares, held for six months or less, will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares.

For the fiscal year ended September 30, 1994, 100% of the income dividends paid
by the Fund qualified for the corporate dividends-received deduction, subject to
certain holding period and debt financing restrictions imposed under the Code on
the corporation claiming the deduction.

Corporate shareholders should note that dividends paid by the Fund from sources
other than the qualifying dividends it receives will not qualify for the
dividends-received deduction. For example, any interest income and net
short-term capital gain (in excess of any net long-term capital loss or capital
loss carryover) included in investment company taxable income and distributed by
the Fund as a dividend will not qualify for the dividends-received deduction.

Corporate shareholders should also note that availability of the corporate
dividends-received deduction is subject to certain restrictions. For example,
the deduction is eliminated unless the Fund shares have been held (or deemed
held) for at least 46 days in a substantially unhedged manner. The
dividends-received deduction may also be reduced to the extent interest paid or
accrued by a corporate shareholder is directly attributable to its investment in
Fund shares. The entire dividend, including the portion which is treated as a
deduction, is includable in the tax base on which the federal alternative
minimum tax is computed and may also result in a reduction in the shareholder's
tax basis in its Fund shares, under certain circumstances, if the shares have
been held for less than two years. Corporate shareholders whose investment in
the Fund is "debt financed" for these tax purposes should consult with their tax
advisors concerning the availability of the dividends-received deduction.

The Fund will inform shareholders of the source of their dividends and
distributions at the time they are paid and will, promptly after the close of
each calendar year, advise them of the tax status for federal income tax
purposes of such dividends and distributions.

Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes on distributions received by them from the
Fund and the application of foreign tax laws to these distributions.

Shareholders should consult their tax advisors with respect to the applicability
of state and local intangible property or income taxes to their shares in the
Fund and to distributions and redemption proceeds received from the Fund.

How to Buy Shares of the Fund

Shares of the Fund are continuously offered through securities dealers which
execute an agreement with Distributors, the principal underwriter of the Fund's
shares. The use of the term "securities dealer" shall include other financial
institutions which, pursuant to an agreement with Distributors (directly or
through affiliates), handle customer orders and accounts with the Fund. Such
reference, however, is for convenience only and does not indicate a legal
conclusion of capacity. The minimum initial investment is $25,000 and subsequent
investments must be $5,000 or more. The Fund and Distributors reserve the right
to waive these minimums or refuse any order for the purchase of shares.

The Fund may impose a $10 charge for each returned item, against any shareholder
account which, in connection with the purchase of Fund shares submits a check or
a draft which is returned unpaid to the Fund.

Purchase Price of Fund Shares

Shares of the Fund are offered at the public offering price, which is determined
by adding the net asset value per share plus a sales charge, next computed (1)
after the shareholder's securities dealer receives the order which is promptly
transmitted to the Fund or (2) after receipt of an order by mail from the
shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check). The sales charge is
a variable percentage of the offering price depending upon the amount of the
sale. The offering price will be calculated to two decimal places using standard
rounding criteria. A description of the method of calculating net asset value
per share is included under the caption "Valuation of Fund Shares."

Set forth below is a table of total front-end sales charges or underwriting
commissions and dealer concessions.

Total Sales Charge

As a Percentage Dealer Concession
Size of Transaction As a Percentageof Net Amount As a Percentage
at Offering Price of Offering Price Invested of Offering Price*,***

<S> <C> <C> <C>
Less than $500,000 1.50% 1.52% 1.50%
$500,000 but less than $1,000,000 1.00% 1.01% 1.00%
$1,000,000 or more None None (see below)**
</TABLE>

*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.

**The following commissions will be paid by Distributors, out of its own
resources, to dealers who initiate and are responsible for purchases of $1
million or more: 0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50 million but less
than $100 million, plus 0.15% on sales of $100 million or more. Dealer
concession breakpoints are reset every 12 months for purposes of additional
purchases.

***At the discretion of Distributors, all sales charges may at times be allowed
to the securities dealer. If 90% or more of the sales commission is allowed,
such dealer may be deemed to be an underwriter as that term is defined in the
Securities Act of 1933, as amended.

No front-end sales charge applies on investments of $1 million or more, but a
contingent deferred sales charge of 1% is imposed on certain redemptions of all
or a portion of investments of $1 million within contingency period. See "How to
Sell Shares of the Fund - Contingent Deferred Sales Charge."

The size of a transaction which determines the applicable sales charge on the
purchase of Fund shares is determined by adding the amount of the shareholder's
current purchase plus the cost or current value (whichever is higher) of a
shareholder's existing investment in one or more of the funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds. Included for these
aggregation purposes are (a) the mutual funds in the Franklin Group of Funds
except Franklin Valuemark Funds and Franklin Government Securities Trust (the
"Franklin Funds"), (b) other investment products underwritten by Distributors or
its affiliates (although certain investments may not have the same schedule of
sales charges and/or may not be subject to reduction) and (c) the U.S.
registered mutual funds in the Templeton Group of Funds except Templeton Capital
Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton Variable
Products Series Fund (the "Templeton Funds"). (Franklin Funds and Templeton
Funds are collectively referred to as the "Franklin Templeton Funds.") Sales
charge reductions based upon aggregate holdings of (a), (b) and (c) above
("Franklin Templeton Investments") may be effective only after notification to
Distributors that the investment qualifies for a discount.

Distributors or one of its affiliates, out of its own resources, may also
provide additional compensation to securities dealers in connection with sales
of shares in the Franklin Templeton Funds. Compensation may include financial
assistance to securities dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and/or shareholder services and programs regarding one or more
of the Franklin Templeton Funds and other dealer-sponsored programs or events.
In some instances, this compensation may be made available only to certain
securities dealers whose representatives have sold or are expected to sell
significant amounts of shares of the Franklin Templeton Funds. Compensation may
include payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Securities dealers may not use sales of the
Fund's shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
additional compensation is paid for by the Fund or its shareholders.

Certain officers and trustees of the Trust are also affiliated with
Distributors. A detailed description is included in the SAI.

Quantity Discounts in Sales Charges

An investment in the Fund may qualify for a reduction in the sales charge under
the following programs:

1. Rights of Accumulation. The cost or current value (whichever is higher) of
existing investments in Franklin Templeton Investments may be combined with the
amount of the current purchase in determining the sales charge to be paid.

2. Letter of Intent. An investor may immediately qualify for a reduced sales
charge on a purchase of shares of the Fund by completing the Letter of Intent
section of the Shareholder Application (the "Letter of Intent" or "Letter"). By
completing the Letter, the investor expresses an intention to invest during the
next 13 months a specified amount which if made at one time would qualify for a
reduced sales charge and grants to Distributors a security interest in the
reserved shares and irrevocably appoints Distributors as attorney-in-fact with
full power of substitution to surrender for redemption any or all shares for the
purpose of paying any additional sales charge due. Purchases under the Letter
will conform with the requirements of Rule 22d-1 under the 1940 Act. The
investor or the investor's securities dealer must inform Investor Services or
Distributors that this Letter is in effect each time a purchase is made.

An investor acknowledges and agrees to the following provisions by completing
the Letter of Intent section of the Shareholder Application: Five percent (5%)
of the amount of the total intended purchase will be reserved in shares of the
Fund, registered in the investor's name, to assure that the full applicable
sales charge will be paid if the intended purchase is not completed. The
reserved shares will be included in the total shares owned as reflected on
periodic statements; income and capital gain distributions on the reserved
shares will be paid as directed by the investor. The reserved shares will not be
available for disposal by the investor until the Letter of Intent has been
completed, or the higher sales charge paid. For more information, see
"Additional Information Regarding Purchases" in the SAI.

Although the sales charges on Class II shares cannot be reduced through these
programs, the value of Class II shares owned by the investor may be included in
determining a reduced sales charge to be paid on Class I shares pursuant to the
Letter of Intent and Rights of Accumulation programs.

Purchases at Net Asset Value

Former shareholders of Franklin Corporate Cash Management Fund who are now
shareholders of the Fund are eligible to continue to purchase additional shares
of the Fund at net asset value and without the imposition of a contingent
deferred sales charge, next computed after an order is received in proper form
from the shareholder or a securities dealer.

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by companies exchanging shares
with or selling assets pursuant to a merger, acquisition or exchange offer and
accounts managed by the Franklin Templeton Group.

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by persons who have redeemed,
within the previous 365 days, their shares of the Fund or another of the Class I
Franklin Templeton Funds which were purchased with a sales charge or assessed a
contingent deferred sales charge on redemption. If a different class of shares
is purchased, the full front-end sales charge must be paid at the time of
purchase of the new shares. An investor may reinvest an amount not exceeding the
redemption proceeds. Credit will be given for any contingent deferred sales
charge paid on the shares redeemed and subsequently repurchased, a new
contingency period will begin. Shares of the Fund redeemed in connection with an
exchange into another of the Franklin Templeton Funds (see "Exchange Privilege")
are not considered "redeemed" for this privilege. In order to exercise this
privilege, a written order for the purchase of shares of the Fund must be
received by the Fund or the Fund's Shareholder Services Agent within 365 days
after the redemption. The 365 days, however, do not begin to run on redemption
proceeds placed immediately after redemption in a Franklin Bank Certificate of
Deposit ("CD") until the CD (including any rollover) matures. Reinvestment at
net asset value may also be handled by a securities dealer or other financial
institution, who may charge the shareholder a fee for this service. The
redemption is a taxable transaction but reinvestment without a sales charge may
affect the amount of gain or loss recognized and the tax basis of the shares
reinvested. If there has been a loss on the redemption, the loss may be
disallowed if a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a reinvestment is
included in the tax section of this Prospectus and the SAI.

Dividends and capital gains received in cash by the shareholder may also be used
to purchase shares of the Fund or another of the Franklin Templeton Funds Class
I shares at net asset value and without the imposition of a contingent deferred
sales charge within 365 days of the payment date of such distribution. To
exercise this privilege, a written request to reinvest the distribution must
accompany the purchase order. Additional information may be obtained from
Shareholder Services at 1-800/632-2301. See "Distributions in Cash" under
"Distributions to Shareholders."

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in an unaffiliated mutual fund which
was subject to a front-end sales charge or a contingent deferred sales charge
and which has investment objectives similar to those of the Fund.

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers, who have
entered into a supplemental agreement with Distributors or by registered
investment advisors affiliated with such broker dealers, on behalf of their
clients who are participting in a comprehensive fee program (sometimes known as
a wrap fee program).

Refer to the SAI for further information.

General

Securities laws of states in which the Fund's shares are offered for sale may
differ from the interpretations of federal law, and banks and financial
institutions selling Fund shares may be required to register as dealers pursuant
to state law.

If the purchase or sale of Fund shares with the assistance of certain banks, as
described herein, were deemed to be an impermissible activity for such bank(s)
under the Glass-Steagall Act, or other federal laws, such activities would be
discontinued by such bank(s). Investors utilizing such bank assistance would
then be able to seek other avenues to invest in Fund shares, such as securities
dealers registered with the SEC.

Other Programs and Privileges
Available to Fund Shareholders

Certain of the programs and privileges described in this section may not be
available directly from the Fund to shareholders whose shares are held, of
record, by a financial institution or in a "street name" account or networked
account through the National Securities Clearing Corporation ("NSCC") (see the
section captioned "Account Registrations" in this Prospectus).

Share Certificates

Shares for an initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss or
theft of a share certificate. A lost, stolen or destroyed certificate cannot be
replaced without obtaining a sufficient indemnity bond. The cost of such a bond,
which is generally borne by the shareholder, can be 2% or more of the value of
the lost, stolen or destroyed certificate. A certificate will be issued if
requested in writing by the shareholder or by the securities dealer.

Confirmations

A confirmation statement will be sent to each shareholder quarterly to reflect
the dividends reinvested during that period and after each other transaction
which affects the shareholder's account. This statement will also show the total
number of shares owned by the shareholder, including the number of shares in
"plan balance" for the account of the shareholder.

Automatic Investment Plan

Under the Automatic Investment Plan, a shareholder may be able to arrange to
make additional purchases of shares automatically on a monthly basis by
electronic funds transfer from a checking account, if the bank which maintains
the account is a member of the Automated Clearing House, or by preauthorized
checks drawn on the shareholder's bank account. A shareholder may, of course,
terminate the program at any time. The Shareholder Application included with
this Prospectus contains the requirements applicable to this program. In
addition, shareholders may obtain more information concerning this program from
their securities dealers or from Distributors.

The market value of the Fund's shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investor should keep in mind
that such a program does not assure a profit or protect against a loss.

Systematic Withdrawal Plan

A shareholder may establish a Systematic Withdrawal Plan and receive regular
periodic payments from the account, provided that the net asset value of the
shares held by the shareholder is at least $5,000. There are no service charges
for establishing or maintaining a Systematic Withdrawal Plan. The minimum amount
which the shareholder may withdraw is $50 per withdrawal transaction, although
this is merely the minimum amount allowed under the plan and should not be
mistaken for a recommended amount. The plan may be established on a monthly,
quarterly, semiannual or annual basis. If the shareholder establishes a plan,
any capital gain distributions and income dividends paid by the Fund will be
reinvested for the shareholder's account in additional shares at net asset
value. Payments will then be made from the liquidation of shares at net asset
value on the day of the transaction (which is generally the first business day
of the month in which the payment is scheduled) with payment generally received
by the shareholder three to five days after the date of liquidation. By
completing the "Special Payment Instructions for Distributions" section of the
Shareholder Application included with this Prospectus, a shareholder may direct
the selected withdrawals to another of the Franklin Templeton Funds, to another
person, or directly to a checking account. If the bank at which the account is
maintained is a member of the Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If this last option is requested,
the shareholder should allow at least 15 days for initial processing. Payments
which may be paid in the interim will be sent to the address of record.
Liquidation of shares may reduce or possibly exhaust the shares in the
shareholder's account, to the extent withdrawals exceed shares earned through
dividends and distributions, particularly in the event of a market decline. If
the withdrawal amount exceeds the total plan balance, the account will be closed
and the remaining balance will be sent to the shareholder. As with other
redemptions, a liquidation to make a withdrawal payment is a sale for federal
income tax purposes. Because the amount withdrawn under the plan may be more
than the shareholder's actual yield or income, part of the payment may be a
return of the shareholder's investment.

The maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional shares of the Fund would be disadvantageous because of the sales
charge on the additional purchases. Also, redemptions of shares may be subject
to a contingent deferred sales charge if the shares are redeemed within 12
months of the calendar month of the original purchase date. The shareholder
should ordinarily not make additional investments of less than $5,000 or three
times the annual withdrawals under the plan during the time such a plan is in
effect. The applicable contingent deferred sales charge is waived for share
redemptions of up to 1% monthly of an account's net asset value (12% annually,
6% semiannually, 3% quarterly). For example, if an account maintained an annual
balance of $1,000,000, only $120,000 could be withdrawn through a once-yearly
Systematic Withdrawal Plan free of charge; any amount over that $120,000 would
be assessed a 1% (or applicable) contingent deferred sales charge. A Systematic
Withdrawal Plan may be terminated on written notice by the shareholder or the
Fund, and it will terminate automatically if all shares are liquidated or
withdrawn from the account, or upon the Fund's receipt of notification of the
death or incapacity of the shareholder. Shareholders may change the amount (but
not below the specified minimum) and schedule of withdrawal payments, or suspend
one such payment by giving written notice to Investor Services at least seven
business days prior to the end of the month preceding a scheduled payment. Share
certificates may not be issued while a Systematic Withdrawal Plan is in effect.

Exchange Privilege

The Franklin Templeton Funds consist of a number of mutual funds with various
investment objectives and policies. The shares of most of these mutual funds are
offered to the public with a sales charge. If a shareholder's investment
objective or outlook for the securities markets changes, the Fund shares may be
exchanged for shares of other Franklin Templeton Funds Class I shares which are
eligible for sale in the shareholder's state of residence and in conformity with
such fund's stated eligibility requirements and investment minimums. Before
making an exchange investors should review the prospectus of the fund they wish
to exchange from and the fund they wish to exchange into for all specific
requirements or limitations on exercising the exchange privilege, for example,
minimum holding periods or applicable sales charges. No exchanges between
different classes of shares are allowed and, therefore, shares of the Fund may
not be exchanged for Class II shares of other Franklin Templeton Funds.
Shareholders may choose to redeem shares of the Fund and purchase Class II
shares of other Franklin Templeton Funds but such purchase will be subject to
that Fund's Class II front-end and contingent deferred sales charges for the
contingency period of 18 months.

Exchanges may be made in any of the following ways:

Exchanges By Mail

Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any outstanding
share certificates.

Exchanges By Telephone

Shareholders, or their investment representative
of record, if any, may exchange shares of the
Fund by telephone by calling Investor Services at 1-800/632-2301 or the
automated Franklin TeleFACTS(R) system (day or night) at 1-800/247-1753. If the
shareholder does not wish this privilege extended to a particular account, the
Fund or Investor Services should be notified.

The Telephone Exchange Privilege allows a shareholder to effect exchanges from
the Fund into an identically registered account in one of the other available
Franklin Templeton Funds. The Telephone Exchange Privilege is available only for
uncertificated shares or those which have previously been deposited in the
shareholder's account. The Fund and Investor Services will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Please refer to "Telephone Transactions - Verification Procedures."

During periods of drastic economic or market changes, it is possible that the
Telephone Exchange Privilege may be difficult to implement and the TeleFACTS
option may not be available. In this event, shareholders should follow the other
exchange procedures discussed in this section, including the procedures for
processing exchanges through securities dealers.

Exchanges Through Securities Dealers

As is the case with all purchases and redemptions of the Fund's shares, Investor
Services will accept exchange orders from securities dealers who execute a
dealer or similar agreement with Distributors. See also "Exchanges By Telephone"
above. Such a dealer-ordered exchange will be effective only for uncertificated
shares on deposit in the shareholder's account or for which certificates have
previously been deposited. A securities dealer may charge a fee for handling an
exchange.

Additional Information Regarding Exchanges

The contingency period during which a contingent deferred sales charge may be
assessed will be tolled (or stopped) for the period such shares are exchanged
into and held in a Franklin or Templeton money market fund. If the account has
shares subject to a contingent deferred sales charge, the shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund - Contingent Deferred Sales Charge."

Exchanges are made on the basis of the net asset values of the funds involved,
except as set forth below. Exchanges of shares of the Fund which were purchased
without a sales charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless the investment on
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares of the Fund which were
purchased with a lower sales charge to a fund which has a higher sales charge
will be charged the difference, unless the shares were held in the Fund for at
least six months prior to executing the exchange.

When an investor requests the exchange of the total value of the Fund account,
declared but unpaid income dividends and capital gain distributions will be
transferred to the fund being exchanged into and will be invested at net asset
value. Because the exchange is considered a redemption and purchase of shares,
the shareholder may realize a gain or loss for federal income tax purposes.
Backup withholding and information reporting may also apply. Information
regarding the possible tax consequences of such an exchange is included in the
tax section in this Prospectus and in the SAI.

If a substantial portion of the Fund's shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money market
instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objective exist immediately. Subsequently,
this money will be withdrawn from such short-term money market instruments and
invested in portfolio securities in as orderly a manner as is possible when
attractive investment opportunities arise.

The Exchange Privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.

Timing Accounts

Accounts which are administered by allocation or market timing services to
purchase or redeem shares based on predetermined market indicators ("Timing
Accounts") will be charged a $5.00 administrative service fee per each such
exchange. All other exchanges are without charge.

Restrictions on Exchanges

In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.

The Fund reserves the right to temporarily or permanently terminate the exchange
privilege or reject any specific purchase order for any Timing Account or any
person whose transactions seem to follow a timing pattern who: (i) makes an
exchange request out of the Fund within two weeks of an earlier exchange request
out of the Fund, or (ii) makes more than two exchanges out of the Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1% of the Fund's net assets. Accounts under common
ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.

The Fund reserves the right to refuse the purchase side of exchange requests by
any Timing Account, person, or group if, in the Manager's judgment, the Fund
would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected. A
shareholder's purchase exchanges may be restricted or refused if the Fund
receives or anticipates simultaneous orders affecting significant portions of
the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.

The Fund and Distributors also, as indicated in "How to Buy Shares of the Fund,"
reserve the right to refuse any order for the purchase of shares.

How to Sell Shares of the Fund

A shareholder may at any time liquidate shares owned and receive from the Fund
the value of the shares. Shares may be redeemed in any of the following ways:

Redemptions by Check

The Fund will supply redemption drafts (which are similar to checks and are
referred to as checks throughout this Prospectus) to shareholders who have
requested them on the Shareholder Application. The election of the check
redemption procedure does not create a checking account or other bank account
relationship between a shareholder and the Fund or any bank. These checks are
drawn through the Fund's custodian, Bank of America NT & SA (the "Custodian" or
"Bank"). Shareholders will generally not be able to convert a check drawn on the
Fund account into a certified or cashier's check by presentation at the Fund's
Custodian. The shareholder may make checks payable to the order of any person in
any amount not less than $100, provided the amount of the check is for not more
than 98% of the value of the shareholder's account. There is no charge to the
shareholder for this check redemption procedure.

When a redemption check is presented for payment, the Fund will redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Shares will be redeemed at their net asset value
next determined after receipt of a check which does not exceed 98% of the net
asset value of the account. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by check.

Because the Fund is not a bank, no assurance can be given that stop payment
orders on checks written by shareholders will be effective. The Fund, however,
will use its best efforts to see that such orders are carried out.

Shareholders will be subject to the right of the Custodian to return a
redemption check unpaid (marked "insufficient funds") if the amount exceeds 98%
of the net asset value of their account at the time the check is presented for
payment. This is required since the aggregate value of the shareholder's account
may change and cannot accurately be determined in advance. Therefore, redemption
checks should not be used to close a Fund account. The Bank or the Fund reserves
the right to terminate this service at any time upon notice to shareholders.

Redemptions by Mail

Send a written request, signed by all registered owners, to Investor Services,
at the address shown on the back cover of this Prospectus, and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. The shareholder will then receive from the
Fund the value of the shares based upon the net asset value per share next
computed after the written request in proper form is received by Investor
Services. Redemption requests received after the time at which the net asset
value is calculated (at 1:00 p.m. Pacific time) each day that the New York Stock
Exchange (the "Exchange") is open for business will receive the price calculated
on the following business day. Shareholders are requested to provide a telephone
number(s) where they may be reached during business hours, or in the evening if
preferred. Investor Services' ability to contact a shareholder promptly when
necessary will speed the processing of the redemption.

To be considered in proper form, signature(s) must be guaranteed if the
redemption request involves any of the following:

(1) the proceeds of the redemption are over $50,000;

(2) the proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account;

(3) the proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, preauthorized bank account or brokerage firm
account;

(4) share certificates, if the redemption proceeds are in excess of $50,000; or

(5) the Fund or Investor Services believes that a signature guarantee would
protect against potential claims based on the transfer instructions, including,
for example, when (a) the current address of an account cannot be confirmed, (b)
the Fund has been notified of an adverse claim, (c) the instructions received by
the Fund are given by an agent, not the actual registered owner, or (d) the
authority of a representative of a corporation, partnership, association, or
other entity has not been established to the satisfaction of the Fund.

Signature(s) must be guaranteed by an "eligible guarantor institution" as
defined under Rule 17Ad-15 under the Securities Exchange Act of 1934. Generally,
eligible guarantor institutions include (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities dealers
which are members of a national securities exchange or a clearing agency or
which have minimum net capital of $100,000; or (4) institutions that participate
in the Securities Transfer Agent Medallion Program ("STAMP") or other recognized
signature guarantee medallion program. A notarized signature will not be
sufficient for the request to be in proper form.

Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered shareholders exactly as the account is
registered, with the signature(s) guaranteed as referenced above. Shareholders
are advised, for their own protection, to send the share certificate and
assignment form in separate envelopes if they are being mailed in for
redemption.

Liquidation requests of corporations also require a signature guaranteed letter
of instruction from the authorized officer(s) of the corporation and a corporate
resolution.

Payment for redeemed shares will be sent to the shareholder within seven days
after receipt of the request in proper form.

Redemptions by Telephone

A shareholder may redeem shares by telephoning the Fund at 1-800/632-2301.
Payment of redemption requests of up to $1,000 (once per business day) will be
sent by mail to the shareholder's address as reflected on the Fund's records.
For payments over $1,000, the shareholder must complete the "Wire Redemptions
Privilege" section of the Shareholder Application. Proceeds will then be wired
directly to the commercial bank or brokerage firm designated by the shareholder.
Wires will not be sent for redemption requests of $1,000 or less. Shareholders
may have redemption proceeds of over $1,000, up to $50,000 per day per Fund
account, sent directly to their address of record by filing a completed Franklin
Templeton Telephone Redemption Authorization Agreement (the "Agreement"),
included with this Prospectus. Information may also be obtained by writing to
the Fund or Investor Services at the address shown on the cover or by calling
1-800/632-2301. The Fund and Investor Services will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions - Verification Procedures."

Telephone redemption requests received before 1:00 p.m. Pacific time on any
business day will be processed that same day. The redemption check will be sent
within seven days, made payable to all the registered owners on the account, and
will be sent only to the address of record. Wire payments will be transmitted
the next business day following receipt prior to 1:00 p.m. Pacific time of a
request for redemption in proper form. Shareholders may wish to allow for longer
processing time if they want to assure that redemption proceeds will be
available at a specific time for a specific transaction.

Redemption requests by telephone will not be accepted within 30 days following
an address change by telephone. In that case, a shareholder should follow the
other redemption procedures set forth in this Prospectus.

The telephone redemption privilege may be modified or discontinued by the Fund
at any time upon 60 days' notice to shareholders.

Redeeming Shares Through Securities Dealers

The Fund will accept redemption orders from securities dealers who have entered
into a dealer or similar agreement with Distributors. This is known as a
repurchase. The only difference between a normal redemption and a repurchase is
that if the shareholder redeems shares through a dealer, the redemption price
will be the net asset value next calculated after the shareholder's dealer
receives the order which is promptly transmitted to the Fund, rather than on the
day the Fund receives the shareholder's written request in proper form. These
documents, as described in the preceding section, are required even if the
shareholder's securities dealer has placed the repurchase order. After receipt
of a repurchase order from the dealer, the Fund will still require a signed
letter of instruction and all other documents set forth above. A shareholder's
letter should reference the Fund, the account number, the fact that the
repurchase was ordered by a dealer and the dealer's name. Details of the
dealer-ordered trade, such as trade date, confirmation number, and the amount of
shares or dollars, will help speed processing of the redemption. The seven-day
period within which the proceeds of the shareholder's redemption will be sent
will begin when the Fund receives all documents required to complete ("settle")
the repurchase in proper form. The redemption proceeds will not earn dividends
or interest during the time between receipt of the dealer's repurchase order and
the date the redemption is processed upon receipt of all documents necessary to
settle the repurchase. Thus, it is in a shareholder's best interest to have the
required documentation completed and forwarded to the Fund as soon as possible.
The shareholder's dealer may charge a fee for handling the order. The SAI
contains more information on the redemption of shares.

Contingent Deferred Sales Charge

In order to recover commissions paid to securities dealers on investments of $1
million or more redeemed within the contingency period of 12 months of the
calendar month following their purchase will be assessed a contingent deferred
sales charge, unless one of the exceptions described below applies. The charge
is 1% of the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the net asset value at the time of
purchase of such shares, and is retained by Distributors. The contingent
deferred sales charge is waived in certain instances. In determining if a charge
applies, shares not subject to a contingent deferred sales charge are deemed to
be redeemed first, in the following order: (i) shares representing amounts
attributable to capital appreciation of those shares held less than the
contingency period; (ii) shares purchased with reinvested dividends and capital
gain distributions; and (iii) other shares held longer than 12 months; and
followed by any shares held less than 12 months, on a "first in, first out"
basis. For tax purposes, a contingent deferred sales charge is treated as either
a reduction in redemption proceeds or an adjustment to the cost basis of the
shares redeemed.

The contingent deferred sales charge is waived for: exchanges; redemptions
through a Systematic Withdrawal Plan set up prior to February 1, 1995 and for
Systematic Withdrawal Plans set up thereafter, redemptions of up to 1% monthly
of an account's net asset value (3% quarterly, 6% semiannually or 12% annually);
and redemptions initiated by the Fund due to a shareholder's account falling
below the minimum specified account size.

All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that month
and each subsequent month.

Requests for redemptions for a specified dollar amount, unless otherwise
specified will result in additional shares being redeemed to cover any
applicable contingent deferred sales charge while requests for redemption of a
specific number of shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.

Additional Information Regarding Redemptions

The Fund may delay the mailing of the redemption check, or a portion thereof,
until the clearance of the check used to purchase Fund shares, which may take up
to 15 days or more. Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these checks will also be
held pending clearance. Shares purchased by federal funds wire are available for
immediate redemption. In addition, the right of redemption may be suspended or
the date of payment postponed if the Exchange is closed (other than customary
closing) or upon the determination of the SEC that trading on the Exchange is
restricted or an emergency exists, or if the SEC permits it, by order, for the
protection of shareholders. Of course, the amount received may be more or less
than the amount invested by the shareholder, depending on fluctuations in the
market value of securities owned by the Fund.

Other Information

Distribution or redemption checks sent to shareholders do not earn interest or
any other income during the time such checks remain uncashed and neither the
Fund nor its affiliates will be liable for any loss to the shareholder caused by
the shareholder's failure to cash such check(s).

"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.

Other

For any information required about a proposed liquidation, a shareholder may
call Franklin's Shareholder Services Department or the securities dealer may
call Franklin's Dealer Services Department.

Telephone Transactions

Shareholders of the Fund and their investment representative of record, if any,
may be able to execute various transactions by calling Investor Services at
1-800/632-2301.

All shareholders will be able to: (i) effect a change in address, (ii) change a
dividend option, (iii) transfer Fund shares in one account to another
identically registered account in the Fund, (iv) request the issuance of share
certificates, to be sent to the address of record only, and (v) exchange Fund
shares as described in this Prospectus by telephone. In addition, shareholders
who complete and file an Agreement as described under "How to Sell Shares of the
Fund - Redemptions by Telephone" will be able to redeem shares of the Fund.

Verification Procedures

The Fund and Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the purpose
of establishing the caller's identification, and sending a confirmation
statement on redemptions to the address of record each time account activity is
initiated by telephone. So long as the Fund and Investor Services follow
instructions communicated by telephone which were reasonably believed to be
genuine at the time of their receipt, neither they nor their affiliates will be
liable for any loss to the shareholder caused by an unauthorized transaction.
The Fund and Investor Services may be liable for any losses due to unauthorized
or fraudulent instructions in the event such reasonable procedures are not
followed. Shareholders are, of course, under no obligation to apply for or
accept telephone transaction privileges. In any instance where the Fund or
Investor Services is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund nor Investor Services will be liable for any losses which may
occur because of a delay in implementing a transaction.

General

During periods of drastic economic or market changes, it is possible that the
telephone transaction privileges will be difficult to execute because of heavy
telephone volume. In such situations, shareholders may wish to contact their
investment representative for assistance, or to send written instructions to the
Fund as detailed elsewhere in this Prospectus.

Neither the Fund nor Investor Services will be liable for any losses resulting
from the inability of a shareholder to execute a telephone transaction.

The telephone transaction privilege may be modified or discontinued by the Fund
at any time upon 60 days' written notice to shareholders.

Valuation of Fund Shares

The net asset value per share of the Fund is determined as of the scheduled
closing of the Exchange (generally 1:00 p.m. Pacific time) each day that the
Exchange is open for trading. In addition, the Fund may make or cause to be made
a more frequent determination of its net asset value and offering price, which
determination shall reasonably reflect any material changes in the fair value of
securities and other assets held by the Fund since the immediate preceding
determination of net asset value. The Fund's present intention, however, is to
price only once a day. Many newspapers carry daily quotations of the prior
trading day's closing "bid" (net asset value) and "ask" (offering price, which
includes the maximum sales charge of the Fund).

The net asset value per share of the Fund is determined in the following manner:
The aggregate of all liabilities, accrued expenses and taxes and any necessary
reserves is deducted from the aggregate gross value of all assets, and the
difference is divided by the number of shares of the Fund outstanding at the
time. For the purpose of determining the aggregate net assets of the Fund, cash
and receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities for
which market quotations are readily available are valued within the range of the
most recent bid and ask prices as obtained from one or more dealers that make
markets in the securities. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market as determined by the Manager. With the
approval of trustees, the Fund may utilize a pricing service, bank or securities
dealer to perform any of the above described functions.

Auction rate preferred stocks are valued as stated above based upon quotations
readily available in the marketplace, but if there are no such readily available
quotations with respect to a given security, such security is valued based upon
the market value of comparable securities, if any, traded in the market place.
As a practical matter, the value of auction rate preferred stock in the
secondary market has a consistent history, to date, of trading at its par value
plus an accrual of the dividend income to be received on the issuer's next
dividend payment date plus or minus some adjustment for possible changes in
interest rates or as a commission. Accordingly, when market values based upon
readily available market quotations are not determinable for such securities
held by the Fund, or for comparable securities, then such securities may be
valued at their par value plus an accrual of the dividends to be received on the
next dividend payment date. The Fund's management, on behalf of the Board of
Trustees, may also assign a fair value different from par value (plus an accrual
of dividend income due) to any auction rate preferred stock for which a market
quotation is not readily available if management believes the value of such
security has been materially affected by changes in the issuer's
creditworthiness or in the market place for trades in such security. The Board
of Trustees continually reviews this procedure and makes such changes as it
feels are needed to enable the Fund to best reflect the daily fair value of its
portfolio securities. Other securities for which reliable quotations or
comparisons are not readily available and all other assets are valued at their
respective fair value as determined following procedures established by the
Board of Trustees.

How to Get Information Regarding an Investment in the Fund

Any questions or communications regarding a shareholder's account should be
directed to Investor Services at the address shown on the back cover of this
Prospectus.

From a touch-tone phone, Franklin and Templeton shareholders may access an
automated system (day or night) which offers the following features:

By calling the Franklin TeleFACTS(R) system at 1-800/247-1753, shareholders may
obtain Class I and Class II account information, current price and, if
available, yield or other performance information specific to the Fund or any
Franklin Templeton Fund. In addition, Franklin Class I shareholders may process
an exchange, within the same class, into an identically registered Franklin
account; and request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips.

Fund information may be accessed by entering Fund Code 17 followed by the #
sign. The system's automated operator will prompt the caller with easy to follow
step-by-step instructions from the main menu. Other features may be added in the
future.

To assist shareholders and securities dealers wishing to speak directly with a
representative, the following is a list of the various Franklin departments,
telephone numbers and hours of operation to call. The same numbers may be used
when calling from a rotary phone:

Hours of Operation (Pacific time)
Department Name Telephone No. (Monday through Friday)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
8:30 a.m. to 5:00 p.m. (Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.

In order to ensure that the highest quality of service is being provided,
telephone calls placed to or by representatives in Franklin's or Templeton's
service departments may be accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.

Performance

Advertisements, sales literature and communications to shareholders may contain
various measures of the Fund's performance including current yield, tax
equivalent yield, various expressions of total return, current distribution
rate, and taxable equivalent distribution rate. They may occasionally cite
statistics to reflect the Fund's volatility or risk.

Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent applicable, through the end
of the most recent calendar quarter, assuming reinvestment of all distributions.
The Fund may also furnish total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value. For such
purposes, total return equals the total of all income and capital gain paid to
shareholders, assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a percentage of the
purchase price.

Current yield reflects the income per share earned by the Fund's portfolio
investments. It is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and annualizing the result. A tax equivalent yield
demonstrates the taxable yield necessary to produce an after-tax yield
equivalent to the Fund's current yield (calculated as indicated above).

Current yield and tax equivalent yield, which are calculated according to a
formula prescribed by the SEC (see the SAI), are not indicative of the dividends
or distributions which were or will be paid to the Fund's shareholders.
Dividends or distributions paid to shareholders are reflected in the current
distribution rate (or taxable equivalent distribution rate), which may be quoted
to shareholders. The current distribution rate is computed by dividing the total
amount of dividends per share paid by the Fund during the past 12 months by the
current maximum offering price. A taxable equivalent distribution rate
demonstrates the taxable distribution rate necessary to produce an after-tax
distribution rate equivalent to the Fund's distribution rate (calculated as
indicated above). Under certain circumstances, such as when there has been a
change in the amount of dividend payout or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid during the
period such policies were in effect, rather than using the dividends during the
past 12 months. The current distribution rate differs from the current yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as short-term capital gain, and is
calculated over a different period of time.

In each case, performance figures are based upon past performance, reflect all
recurring charges against Fund income and will assume the payment of the maximum
sales charge on the purchase of shares. When there has been a change in the
sales charge structure, the historical performance figures will be restated to
reflect the new rate. The investment results of the Fund, like all other
investment companies, will fluctuate over time; thus, performance figures should
not be considered to represent what an investment may earn in the future or what
the Fund's yield, distribution rate or total return may be in any future period.

General Information

Reports to Shareholders

The Fund's fiscal year ends September 30. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. Additional copies may be obtained, without charge, upon
request to the Trust at the telephone number or address set forth on the cover
page of this Prospectus.

Additional information on Fund performance is included in the Fund's Annual
Report to Shareholders and the SAI.

Organization and Voting Rights

The Trust was organized as a Massachusetts business trust on July 1, 1986 and
registered with the SEC under the 1940 Act. Its name was changed from L.F.
Rothschild Managed Trust to Franklin Managed Trust on June 28, 1988. The Trust
is authorized to issue an unlimited number of shares of beneficial interest,
$.01 par value, in various series. The Trust currently issues shares in three
series or portfolios, all of which are diversified: the Franklin Corporate
Qualified Dividend Fund (formerly the Franklin Corporate Cash Portfolio), the
Franklin Rising Dividends Fund and the Franklin Investment Grade Income Fund.
Additional series may be added in the future by the Board of Trustees. All
shares have one vote and, when issued, are fully paid, non-assessable and
redeemable. All shares have equal voting, participation and liquidation rights,
but have no subscription, preemptive or conversion rights.

Shares of the Fund have noncumulative voting rights which means that in all
elections of trustees the holders of more than 50% of the shares voting can
elect 100% of the trustees if they choose to do so and, in such event, the
holders of the remaining shares voting will not be able to elect any person or
persons to the Board of Trustees.

The Fund does not intend to hold annual shareholders' meetings. The Fund may,
however, hold a special meeting for such purposes as changing fundamental
investment restrictions, approving a new management agreement or any other
matters which are required to be acted on by shareholders under the 1940 Act. A
meeting may also be called by a majority of the Board of Trustees or by
shareholders holding at least 10% of the shares entitled to vote at the meeting.
Shareholders will receive assistance in communicating with other shareholders in
connection with the election or removal of trustees such as that provided in
Section 16(c) of the 1940 Act.

On December 31, 1988, the Fund acquired all of the net assets of Franklin
Corporate Cash Management Fund ("Management Fund") pursuant to an Agreement and
Plan of Reorganization which was approved by the shareholders of Management Fund
on December 7, 1988.

Redemptions by the Fund

The Fund reserves the right to redeem, at net asset value, shares of any
shareholder whose account has a value of less than $12,500, but only where the
value of such account has been reduced by the shareholder's prior voluntary
redemption of shares and has been inactive (except for the reinvestment of
distributions) for a period of at least six months, provided advance notice is
given to the shareholder. More information is included in the SAI.

Shares of the Fund may or may not constitute a legal investment for investors
whose investment authority is restricted by applicable law or regulation. SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.

Account Registrations

Except as indicated, a shareholder may transfer an account in the Fund carried
in "street" or "nominee" name by the shareholder's securities dealer to a
comparably registered Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have executed dealer
agreements on file with Distributors. Unless a dealer agreement has been
executed and is on file with Distributors, the Fund will not process the
transfer and will so inform the shareholder's delivering securities dealer. To
effect the transfer, a shareholder should instruct the securities dealer to
transfer the account to a receiving securities dealer and sign any documents
required by the securities dealer(s) to evidence consent to the transfer. Under
current procedures, the account transfer may be processed by the delivering
securities dealer and the Fund after the Fund receives authorization in proper
form from the shareholder's delivering securities dealer. In the future it may
be possible to effect such transfers electronically through the services of the
NSCC.

The Fund may conclusively accept instructions from an owner or the owner's
nominee listed in publicly available nominee lists, regardless of whether the
account was initially registered in the name of or by the owner, the nominee, or
both. If a securities dealer or other representative is of record on an
investor's account, the investor will be deemed to have authorized the use of
electronic instructions on the account, including, without limitation, those
initiated through the services of the NSCC, to have adopted as instruction and
signature any such electronic instructions received by the Fund and the
Shareholder Services Agent, and to have authorized them to execute the
instructions without further inquiry. At the present time, such services which
are available, or which are anticipated to be made available in the near future,
include the NSCC's "Networking," "Fund/SERV," and "ACATS" systems.

Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.

Portfolio Operations

The following persons are primarily responsible for the day-to-day management of
the Fund's portfolio: William Lippman and Philip Smith since inception and
Margaret McGee since 1988.

William Lippman
Senior Vice President of Advisers

Mr. Lippman holds a bachelor's degree in business administration from City
College of New York and a master's degree in business administration from the
Graduate School of Business Administration of New York University. He has been
with Advisers since 1988.

Philip Smith
Portfolio Manager of Advisers

Mr. Smith holds a bachelor of arts degree from Princeton University and a juris
doctorate degree from Yale University. He has been with Advisers since 1988.

Margaret McGee
Portfolio Manager of Advisers

Ms. McGee holds a bachelor of arts degree from William Patterson College. She
has been with Advisers since 1988.