FRANKLIN MANAGED TRUST
N-30D, 1997-06-10
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                                                     MESSAGE FROM THE PRESIDENT
- --------------------------------------------------------------------------------

Table of Contents                            Page

Message from the President                      1

Fund Reports

Franklin Corporate Qualified
Dividend Fund                                   3

Franklin Rising Dividends Fund                  8

Franklin Investment Grade
Income Fund                                    14

Statement of Investments                       19

Financial Statements                           29

Notes to Financial Statements                  32



                                                                   May 15, 1997

Dear Shareholder,

We are pleased to bring you the Franklin  Managed Trust  semi-annual  report for
the period ended March 31, 1997.

For the  six-month  reporting  period,  interest  rates  fluctuated as investors
reacted to various U.S.  economic reports.  The 30-year  Treasury,  for example,
fluctuated  between a low of 6.35% on December  3, 1996,  and a high of 7.10% on
March 31,  1997.*  Interest  rates  ended the period  higher  due to  continued,
above-trend U.S. economic strength.  In fact, the Federal Reserve Board moved to
pre-empt  potentially  higher  inflation by raising the federal  funds rate (the
rate banks charge each other for overnight loans) from 5.25% to 5.50% in March.

So far, this rate increase has caused some volatility in the U.S. stock and bond
markets.  Many  analysts  anticipate  further rate hikes,  which could result in
additional  volatility of financial markets.  However,  any slowdown in economic
activity could reduce the risk of higher inflation,  and fixed-income securities
may respond well in this type of environment.


*Source: Micropal.


During the period  under  review,  fixed-income  mutual  funds  performed in the
shadow of an exciting and alluring stock market.  Investors poured large amounts
of capital into equity mutual funds  throughout  1996 and early 1997,  while the
Dow Jones  Industrial  Average(R)  set new highs --  closing  above 7000 for the
first time on February 13, 1997.

It is important to remember  that  financial  markets  always have -- and always
will -- fluctuate.  No one can predict the future  performance of the securities
markets,  but history  has shown that over the long term,  stocks and bonds have
delivered  impressive results.  For this reason, we encourage you to review your
investment program periodically with your investment representative and focus on
your long-term goals.

The following pages contain more detailed information  regarding the performance
of the funds in the Franklin Managed Trust. If you have any questions concerning
your  investment,  we welcome the opportunity to answer them. We appreciate your
continued  support,  welcome new shareholders,  and look forward to serving your
investment needs in the years ahead.


Sincerely,



William J. Lippman
President
Franklin Managed Trust



- --------------------------------------------------------------------------------
                           -- Celebrating 50 Years --

This year marks 50 years of business for Franklin  Templeton.  Over these years,
the mutual  fund  industry  has  experienced  profound  changes  in  technology,
regulations  and  customer  expectations.  As  one of the  largest  mutual  fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity  to invest around the globe.  We thank you for your past
support and look forward to serving your investment needs in the years ahead.
- --------------------------------------------------------------------------------



FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND

Your Fund's Objective:

The  Franklin  Corporate  Qualified  Dividend  Fund is  designed  to serve as an
income-producing  vehicle  for the cash  reserves of taxable  corporations.  The
fund's  objective  is  to  generate  high,  after-tax  income  for  corporations
consistent with investment in  investment-quality  securities.  The fund invests
primarily in the equity  securities  of domestic  corporations  whose  dividends
qualify for the 70%  corporate-dividends-received  deduction. 

We are pleased to report that the Franklin  Corporate  Qualified  Dividend  Fund
continued to meet its  investment  objective  during the reporting  period.  Its
share price,  as measured by net asset value,  fluctuated  narrowly and ended at
$23.90 on March 31,  1997,  up from $23.52 on  September  30,  1996.  During the
period, the fund also paid monthly tax-advantaged income to corporations,  which
totaled 52.5 cents per share over the six-month period.




GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT




The chart above,  showing asset  classes with  historically  the greatest  price
stability furthest to the right, profiles the fund's investments at the close of
the period. As the illustration shows,  auction-rate  preferred stocks, and cash
and  equivalents,  comprised more than 60% of the fund's total net assets.  With
the exception of cash and equivalents, auction-rate preferred stocks exhibit the
lowest price  sensitivity to interest  rates,  because they normally reset their
rates  every 49 days  based on the  results  of a Dutch  auction.  This  process
generally allows investors to receive par value for their securities at periodic
intervals, as other investors bid to set a new dividend rate.

Next are  adjustable-rate  preferred  stocks,  which have offered  somewhat less
price stability than auction-rate  preferreds.  Adjustables reset their dividend
rates approximately every 90 days (according to a yield spread fixed at the time
of original sale) relative to the highest of three U.S. Treasury benchmarks: the
three-month  Treasury  Bill Rate,  the 10-year  Constant  Maturity  Rate and the
20-year Constant Maturity Rate. Thus,  adjustables tend to maintain their prices
even when interest rates swing radically, but they are not protected from losses
caused by a decline in credit quality.

Finally,  fixed-rate preferred stocks have the least price stability.  As of the
end of the reporting period, all our fixed-rate  preferreds had limited terms to
redemption,  ranging  from  a few  months  to a few  years.  This  lowers  their
sensitivity  to interest  rates  similar to that of short to  intermediate-term
bonds.

We seek to control various sources of potential  risk,  including  interest rate
and credit risk,  through careful  selection of securities and active management
of the fund.  National  ratings  services,  such as Standard and  Poor's(R)  and
Moody's,  as well as our own  in-house  evaluations,  provide us with a guide to
each issuer's credit quality. The chart on the next page illustrates the quality
breakdown of the fund's investments at the close of the period.

Last year the Clinton Administration proposed eliminating the dividends-received
deduction,  but didn't  take any  action.  This  year,  the  Administration  has
proposed  reducing the deduction,  from 70% to 50%. Although it is impossible to
predict the future, we intend to maintain the portfolio's  conservative position
by  holding  more  than 50% of total  net  assets  in cash and  equivalents  and
auction-rate preferreds.

This  discussion  reflects our strategies for the fund and includes our opinions
at the close of the reporting  period.  Since economic and market conditions are
constantly  changing,  our  strategies,  evaluations,  conclusions and decisions
regarding  the  portfolio  holdings  discussed  in this report may change as new
circumstances  arise.  Although  past  performance  of a specific  investment or
sector cannot guarantee future performance, such information can help illustrate
how we analyze the securities we purchase or sell for the fund.




GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT




Performance Summary

The Franklin Corporate Qualified Dividend Fund's share price, as measured by net
asset value,  increased 38.0 cents, from $23.52 on September 30, 1996, to $23.90
on March 31, 1997. The fund also paid income  distributions  totaling 52.5 cents
($0.525)  per  share  during  the same  period.  Dividends  will  vary  based on
portfolio earnings, and past distributions are not indicative of future trends.

The fund's  distribution  rate was 4.20%,  based on an  annualization of the 8.5
cent per share March dividend and the maximum  offering price of $24.26 on March
31,  1997.  Based on the 1997  maximum  federal  corporate  tax rate of 35%, the
taxable  equivalent  distribution  rate was  5.78%,  assuming  that 100% of your
fund's dividends qualify for the 70% corporate-dividends-received deduction.

For the periods  ended March 31,  1997,  your fund  provided  six- and  12-month
cumulative  total returns of +3.89% and +6.00%,  respectively.  Cumulative total
returns reflect the change in value of an investment,  assuming  reinvestment of
dividends  and capital  gains,  if any.  They do not  include the initial  sales
charge, and past performance is not predictive of future results.



   FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
   Dividend Distributions 10/1/96 - 3/31/97

                                          Dividend
   Month                                  per Share
- --------------------------------------------------------------------------------

   October                                9.0 cents

   November                               9.0 cents

   December                               9.0 cents

   January                                8.5 cents

   February                               8.5 cents

   March                                  8.5 cents

   Total                                 52.5 cents



We have always maintained a long-term perspective and encourage our shareholders
to do the same.  While the fund may experience  volatility from time to time, we
believe its performance  should be satisfactory over the long term. As the table
on the  following  page  illustrates,  if you had  invested  in the  fund at its
inception,  your  cumulative  total return would have been +84.25% by the end of
the reporting period.



<TABLE>
<CAPTION>
Franklin Corporate Qualified Dividend Fund
Periods Ended March 31, 1997

                                                                                                 Since
                                                                                               Inception
                                                                1-Year    5-Year     10-Year   (1/14/87)
- --------------------------------------------------------------------------------------------------------

     <S>                                                         <C>      <C>        <C>        <C>
     NAV Cumulative Total Return1                                6.00%    31.05%     83.44%     84.25%
     POP Cumulative Total Return1                                4.40%    29.09%     80.69%     81.49%
     NAV Average Annual Total Return2                            6.00%     5.56%      6.26%      6.17%
     POP Average Annual Total Return2                            4.40%     5.24%      6.09%      6.01%

     Distribution Rate3                                 4.20%
     Equivalent Taxable
     Distribution Rate4                                 5.78%
     30-Day Standardized Yield5                         4.12%
     Equivalent Taxable Yield4                          5.67%
- --------------------------------------------------------------------------------------------------------
</TABLE>

1. Net asset value (NAV) cumulative total returns show the change in value of an
investment  over the periods  indicated  and do not  include  the initial  sales
charge.  Public  offering  price (POP) returns  include the maximum 1.5% initial
sales charge. See Note below.

2. NAV average annual total returns represent the average annual change in value
of an investment over the specified periods and do not include the sales charge.
POP returns reflect the maximum 1.5% initial sales charge. See Note below.

3. Distribution rate is based on an annualization of the fund's current 8.5 cent
per share monthly dividend and the maximum offering price of $24.26 on March 31,
1997.

4.  Equivalent  taxable  distribution  rate and yield  assume  the 1997  maximum
federal corporate tax rate of 35%.

5. Yield,  calculated  as  required by the SEC, is based on the  earnings of the
fund's portfolio during the 30 days ended March 31, 1997.

Note: All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value.  Your  investment  return and principal value
will fluctuate with market conditions,  and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.


FRANKLIN RISING DIVIDENDS FUND

Your Fund's Objective:

The  Franklin  Rising  Dividends  Fund  seeks  long-term  capital  appreciation.
Preservation of capital is also an important consideration.  The fund invests in
the equity securities of companies that have paid consistently  rising dividends
over the past 10 years.

We are pleased to report that the Franklin Rising  Dividends Fund performed well
during the six months  ended March 31, 1997.  As  discussed  in the  Performance
Summary on page 11, the Class I share's  six-month  cumulative  total return was
+12.86%.

We added several  significant  positions to the portfolio,  including Gap, Inc.,
Hanna M.A. Co., First Union Corp., Watts Industries, Inc., and Duriron Co., Inc.
Gap is a premier  apparel  retailer with several  strong  franchises,  including
Banana  Republic and Old Navy.  First Union is a large,  eastern,  regional bank
that has increased its dividend for 19 consecutive  years,  at a compound annual
rate of 13%.  Hanna,  Watts,  and  Duriron -- smaller  industrial  companies  in
consolidating  industries  all have a history  of solid  earnings  and  dividend
growth.

Some of the  positions  we  eliminated  included  Banc One Corp.,  Circuit  City
Stores,  Inc., and Loctite Corp. Banc One's heavy  dependence on its credit card
portfolio  during a period of increasing  charge-offs  led us to sell this stock
and  invest,  instead,  in First  Union.  Likewise,  we decided to sell  leading
electronics  retailer  Circuit City when the company's  sales remained weak in a
very  competitive  environment.  Loctite,  a  specialty  chemical  company,  was
acquired by another company in January, and we sold our shares at a gain of 37%.

During the six-month  period,  several holdings made notable dividend  increases
over the prior year, including Kaydon Corp. (+16.7%), Merck & Co. Inc. (+23.5%),
Mercury  General  Corp.   (+20.8%),   Nucor  Corp.  (+25%),   Superior  Surgical
Manufacturing Co. Inc. (+22.2%),  Wal-Mart Stores, Inc. (+28.6%), and Washington
Mutual Inc. (+19%).


   Franklin Rising Dividends Fund vs.
   Standard & Poor's 500(R) Stock Index*
   Common Stock Analysis
   Quarter Ended March 31, 1997

                       Franklin Rising
                       Dividends Fund      S&P 500(R)*
- --------------------------------------------------------------------------------

   Gross Income Yield       2.1%            1.99%
- --------------------------------------------------------------------------------

   Price/Book Value         3.4x            3.7x

   Average Market
   Capitalization         $10.8 billion   $11.6 billion
- --------------------------------------------------------------------------------

   Price/Earnings Ratio    15.0            19.6
- --------------------------------------------------------------------------------

   BETA                      .82            1.00


Glossary of Terms:

Gross Income Yield: Rate of dividend return for a stock,  calculated by dividing
the annual dividend by the stock price.

Price/Book  Value:  Ratio of a stock's  price to its book value per share.  Book
value is the total net asset value of a company's securities (total assets minus
total  liabilities).  Dividing  book  value  by  the  number  of  common  shares
outstanding  gives the book  value per  share.  A stock  that has a low ratio of
price to book value may be underpriced and thus, a good value.

Market  Capitalization:  The value of a company,  determined by multiplying  the
market price of one share by the number of its issued and outstanding shares.

Price/Earnings  Ratio  (P/E):  The  price of a stock  divided  by the  company's
earnings  per share.  For  instance,  a stock  selling for $40 a share,  and the
company earned $2 per share last year, has a trailing P/E of 20.  Companies with
P/Es greater than 20 tend to be young and  faster-growing,  while low P/E stocks
tend to be in mature industries or of established  blue-chip  companies.  P/E is
often used to demonstrate how expensive a stock is (i.e., how much investors are
willing to pay for a company's earnings).

BETA: A measure of a stock's relative  volatility,  in this case relative to the
S&P 500,  which has a beta of 1.0.  Thus,  a beta below this number  indicates a
stock or fund should be less volatile than the S&P 500, while a beta higher than
1.0 indicates greater  volatility than the S&P 500. A fund beta of .82 indicates
the fund should be about 20% less volatile than the S&P 500.



*Source:  Standard and Poor's.  The S&P 500 Index is  unmanaged,  and one cannot
invest directly in an index.


We base our investment  strategy on the belief that companies with  consistently
rising  dividends  should,  over time, also realize  appreciation in their stock
prices. Highlighted in the table on page 9 are several criteria we use to select
portfolio  securities.  To be eligible  for  purchase,  stocks must pass certain
investment  "screens,"  or  screening   procedures,   requiring  consistent  and
substantial  dividend  increases,  strong  balance  sheets  and  relatively  low
price/earnings  ratios.  We seek  fundamentally  sound  companies  that meet our
standards, and attempt to acquire them at attractive prices, often when they are
out of favor with other investors.

As shown in the table to the right, our 10 largest  positions on March 31, 1997,
approximated  27% of the fund's total net assets.  It is interesting to note how
these 10 companies would, in the aggregate, answer the fund's screening criteria
based  on a  simple  average  of  statistical  measures.  On  average,  these 10
companies have raised their  dividends 16 years in a row and by 372% in the last
10 years.  Their most recent dividend  increases  averaged 17.2%, and the stocks
provided a quarter-end  yield of 1.8% on March 31, 1997.  Their average dividend
payout ratio was 26%, and the average price/earnings ratio was 14.7, versus 17.3
for that of the unmanaged Standard and Poor's 500 Stock Index on the same date.


   Franklin Rising Dividends Fund
   Top 10 Stock Holdings on March 31, 1997
   Based on Total Net Assets

   Company                                % of total
   Industry                               net assets
- --------------------------------------------------------------------------------

   Family Dollar Stores, Inc.               3.37%
   Retail
- --------------------------------------------------------------------------------

   Wallace Computer Services, Inc.          3.00%
   Office/Business Supplies
- --------------------------------------------------------------------------------

   Allied Group, Inc.                       2.90%
   Insurance -- Property Casualty
- --------------------------------------------------------------------------------

   Millipore Corp.                          2.89%
   Industrial
- --------------------------------------------------------------------------------

   Dimon, Inc.                              2.77%
   Consumer Goods & Services
- --------------------------------------------------------------------------------

   MMI Companies, Inc.                      2.42%
   Insurance -- Property Casualty
- --------------------------------------------------------------------------------

   Wal-Mart Stores, Inc.                    2.42%
   Retail
- --------------------------------------------------------------------------------

   Harper Group, Inc.                       2.36%
   Transportation
- --------------------------------------------------------------------------------

   Mercury General Corp.                    2.34%
   Insurance - Property Casualty
- --------------------------------------------------------------------------------

   Royal Dutch Petroleum Co.                2.29%
   Energy


For a complete list of the fund's holdings, please see page 22 of this report.


This  discussion  reflects our strategies for the fund and includes our opinions
at the close of the reporting  period.  Since economic and market conditions are
constantly  changing,  our  strategies,  evaluations,  conclusions and decisions
regarding  the  portfolio  holdings  discussed  in this report may change as new
circumstances  arise.  Although  past  performance  of a specific  investment or
sector cannot guarantee future performance, such information can help illustrate
how we analyze the securities we purchase for the fund.


Performance Summary

Class I

The Franklin  Rising  Dividends  Fund's  share  price,  as measured by net asset
value,  increased  $1.13,  from $20.03 on September 30, 1996, to $21.16 on March
31, 1997. In addition to paying income distributions totaling 10.0 cents ($0.10)
per share  during the  period,  the fund paid out a  long-term  capital  gain of
$1.311 per share in December  1996.  Distributions  will vary  depending  on the
fund's income and any profits realized from the sale of securities in the fund's
portfolio. Past distributions are not predictive of future trends.

The fund posted  cumulative  total returns of +12.86% and +21.51%,  for the six-
and 12-month periods, respectively,  ended March 31, 1997. Total returns measure
the  change  in value of an  investment  over the  periods  indicated,  assuming
reinvestment of all distributions,  and do not include the initial sales charge.
Past performance is not predictive of future results.


<TABLE>
<CAPTION>
Franklin Rising Dividends Fund -- Class I
Periods Ended March 31, 1997

                                                                                                 Since
                                                                                               Inception
                                                               1-Year     5-Year    10-Year    (1/14/87)
- ------------------------------------------------------------------------------------------------------------

     <S>                                                       <C>       <C>        <C>        <C> 
     Cumulative Total Return1                                  21.51%    66.50%     182.36%    183.21%
     Average Annual Total Return2                              16.06%     9.72%      10.43%     10.24%

     Distribution Rate3                                1.08%
     30-Day Standardized Yield4                        0.70%

     Value of $10,000 Investment5                              $11,606   $15,903     $26,972     $27,049
- ------------------------------------------------------------------------------------------------------------
</TABLE>

1.  Cumulative  total returns  measure the change in value of an investment over
the periods  indicated  and do not include the initial  sales  charge.  See Note
below.

2. Average annual total returns  represent the average annual change in value of
an investment over the specified periods and reflect the current,  maximum 4.50%
initial sales charge. See Note below.

3. Distribution rate for Class I is based on an annualization of the current six
cents per share quarterly  dividend and the maximum  offering price of $22.16 on
March 31, 1997.

4. Yield,  calculated  as  required by the SEC, is based on the  earnings of the
fund's portfolio for the 30 days ended March 31, 1997.

5. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods  indicated and include the initial sales charge.  See Note
below.

All total return calculations assume reinvestment of dividends and capital gains
at net asset value.  Your  investment  return and principal value will fluctuate
with  market  conditions,  and you may have a gain or loss  when  you sell  your
shares. Past performance is not predictive of future results.

Note:  Prior to July 1, 1994,  fund shares were offered at a lower initial sales
charge with  dividends  reinvested  at the offering  price.  Thus,  actual total
returns for  purchasers of shares  during that period would have been  different
than noted above. Effective May 1, 1994, the fund eliminated the sales charge on
reinvested  dividends and implemented a plan of  distribution  under Rule 12b-1,
which affects subsequent performance.


Performance Summary

Class II

The Franklin  Rising  Dividends  Fund's  share  price,  as measured by net asset
value,  increased  $1.13,  from $19.98 on September 30, 1996, to $21.11 on March
31,  1997.  In  addition  to paying  income  distributions  totaling  4.34 cents
($0.0434)  per share  during the period,  the fund paid out a long-term  capital
gain of $1.311 per share in December 1996.  Distributions will vary depending on
the fund's  income and any profits  realized  from the sale of securities in the
fund's portfolio. Past distributions are not predictive of future trends.

The fund posted  cumulative  total returns of +12.60% and +20.93%,  for the six-
and 12-month periods, respectively,  ended March 31, 1997. Total returns measure
the  change  in value of an  investment  over the  periods  indicated,  assuming
reinvestment of all distributions,  and do not include the initial sales charge.
Past performance is not predictive of future results.

Franklin Rising Dividends Fund -- Class II
Periods Ended March 31, 1997

                                              Since
                                            Inception
                                 1-Year     (5/1/95)
- --------------------------------------------------------------------------------

Cumulative Total Return1         20.93%      48.87%
Average Annual Total Return2     18.73%      22.42%

Distribution Rate3                     0.58%
30-Day Standardized Yield4             0.17%

Value of $10,000 Investment5     $11,873    $14,735
- --------------------------------------------------------------------------------

1.  Cumulative  total returns  measure the change in value of an investment over
the periods indicated and do not include sales charges.

2. Average annual total returns  represent the average annual change in value of
an investment  over the  specified  periods and reflect the maximum 1.0% initial
sales charge and 1.0%  contingent  deferred  sales charge,  applicable to shares
redeemed within the first 18 months of investment.

3.  Distribution  rate for Class II is based on an  annualization of the current
3.09 cents per share quarterly dividend and the maximum offering price of $21.32
on March 31, 1997.

4. Yield,  calculated  as  required by the SEC, is based on the  earnings of the
fund's portfolio for the 30 days ended March 31, 1997.

5. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include sales charges. See Note below.

Note: All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value.  Your  investment  return and principal value
will fluctuate with market conditions,  and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.


FRANKLIN INVESTMENT GRADE INCOME FUND

Your Fund's Objective:

The Franklin Investment Grade Income Fund's objective is to seek a maximum level
of income  consistent  with  prudent  exposure to risk.  The fund  pursues  this
objective by investing in  investment-grade  debt  securities  having  primarily
intermediate maturities. The fund also seeks to offer a higher total return than
a money market fund,  generally with less risk to principal than a fund composed
of either  long-term  securities or securities  that are below  investment-grade
quality.*

During the reporting period,  the fund emphasized a shorter maturity  structure,
attempting to minimize  fluctuations in share value. This proved  effective,  as
the fund's  Class I share price,  as measured by net asset  value,  was $8.97 on
March 31, 1997, down only slightly from $9.01 at the beginning of the period.

As always, we sought to control risk,  including  interest rate and credit risk,
through  careful  selection  of  securities,  especially  in  relation  to their
maturities.  On March 31,  1997,  the  weighted  average  credit  quality of the
portfolio's  securities was in the AA range, as measured by Standard & Poor's(R)
Corporation, a national credit-rating agency.




GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT




All of the  portfolio's  investments  as of the end of the reporting  period are
call-protected for at least 20 years.


*Generally,  long-term  securities and lower-quality  securities  provide higher
yields. A money-market fund seeks a stable $1.00 per share net asset value.


On March 31,  1997,  the  portfolio  had 30% of total net  assets in  government
bonds, 16% in straight,  short- and intermediate-term bonds, 24% in "put" bonds,
and 30% in cash and equivalents (includes net other assets and liabilities).

Put bonds are an integral part of our conservative  investment strategy.  Such a
bond  allows  the  holder to  redeem  the issue at  specified  intervals  before
maturity and still receive full face value. Thus, if interest rates rise, we can
redeem the bond early and  reinvest  the  proceeds  at a higher  interest  rate.
Conversely,  if interest rates decline,  we can either keep the  higher-yielding
bond until  maturity or sell it at a favorable  price.  On March 31,  1997,  the
fund's  weighted  average  maturity was about 1.5 years,  using the optional put
dates as effective maturities, and 6.6 years using stated maturity dates.

As well-publicized, the Federal Reserve Board raised short-term interest rates a
quarter percent in March,  initiating what it described as a "pre-emptive"  move
against potentially higher inflation.

Against this background, we expect to maintain our emphasis on put bonds to keep
a shorter effective maturity.  We believe this strategy should help us produce a
higher total return than a money fund,  without subjecting the portfolio's share
price  to  the  kind  of  volatility   associated  with  longer-term   bonds  or
lower-quality investments.*

This  discussion  reflects our strategies for the fund and includes our opinions
at the close of the reporting  period.  Since economic and market conditions are
constantly  changing,  our  strategies,  evaluations,  conclusions and decisions
regarding  the  portfolio  holdings  discussed  in this report may change as new
circumstances  arise.  Although  past  performance  of a specific  investment or
sector cannot guarantee future performance, such information can help illustrate
how we analyze the securities we purchase or sell for the fund.


*Generally,  long-term  securities and lower-quality  securities  provide higher
yields. A money-market fund seeks a stable $1.00 per share net asset value.


Performance Summary

Class I

The  Franklin  Investment  Grade Income  Fund's share price,  as measured by net
asset value,  decreased 4.0 cents, from $9.01 on September 30, 1996, to $8.97 on
March 31, 1997.

The fund paid income  distributions  totaling  23.10 cents  ($0.2310) per share,
including a special year-end income distribution of 3.3 cents ($0.033) per share
to meet excise tax requirements.  Distributions  will vary based on the earnings
of the fund's  portfolio,  and past  distributions  are not predictive of future
trends.  Based on an  annualization  of March's  monthly  dividend  of 3.3 cents
($0.033)  per share and the maximum  offering  price of $9.37 on March 31, 1997,
your fund's distribution rate was 4.23%.

For the six- and  12-month  periods  ended  March 31,  1997,  your  fund  posted
cumulative total returns of +2.13% and +4.18%, respectively.

   Franklin Investment Grade Income Fund --
   Class I
   Dividend Distributions 10/1/96 - 3/31/97

                                         Dividend
   Month                                 per Share
- --------------------------------------------------------------------------------

   October                               3.3 cents

   November                              3.3 cents

   December                              6.6 cents+

   January                               3.3 cents

   February                              3.3 cents

   March                                 3.3 cents

   Total                                23.1 cents

- --------------------------------------------------------------------------------


Cumulative  total returns  measure the change in value of an investment over the
specified periods,  and assume reinvestment of dividends and capital gains. They
do not include the initial sales charge, and past performance does not guarantee
future results.


+Includes the regular,  monthly  dividend of 3.3 cents  ($0.033) per share and a
distribution of 3.3 cents ($0.033) per share to meet excise requirements.


<TABLE>
<CAPTION>
Franklin Investment Grade Income Fund -- Class I
Periods Ended March 31, 1997

                                                                                                 Since
                                                                                               Inception
                                                               1-Year     5-Year    10-Year    (1/14/87)
- ---------------------------------------------------------------------------------------------------------
     <S>                                                        <C>      <C>         <C>        <C>   
     Cumulative Total Return1                                   4.18%    33.83%      82.89%     81.33%
     Average Annual Total Return2                              -0.24%     5.08%       5.76%      5.56%

     Distribution Rate3                                4.23%

     30-Day Standardized Yield4                        4.57%
- ---------------------------------------------------------------------------------------------------------
</TABLE>

1.  Cumulative  total returns  measure the change in value of an investment over
the periods  indicated  and do not include the initial  sales  charge.  See Note
below.

2. Average annual total returns  represent the average annual change in value of
an investment over the specified periods and reflect the current,  maximum 4.25%
initial sales charge. See Note below.

3.  Distribution  rate is based on an  annualization of the current 3.3 cent per
share monthly  dividend and the maximum  offering  price for Class I of $9.37 on
March 31, 1997.

4. Yield,  calculated  as  required by the SEC, is based on the  earnings of the
fund's portfolio for the 30 days ended March 31, 1997.

All total return calculations assume reinvestment of dividends and capital gains
at net asset value.  Your  investment  return and principal value will fluctuate
with  market  conditions,  and you may have a gain or loss  when  you sell  your
shares. Past performance is not predictive of future results.

Note:  Prior to July 1, 1994,  fund shares were offered at a lower initial sales
charge with  dividends  reinvested  at the offering  price.  Thus,  actual total
returns for  purchasers of shares  during that period would have been  different
than noted above. Effective May 1, 1994, the fund eliminated the sales charge on
reinvested  dividends and implemented a plan of  distribution  under Rule 12b-1,
which affects subsequent performance.


Performance Summary

Advisor Class

The  Franklin  Investment  Grade Income  Fund's share price,  as measured by net
asset value,  decreased  7.0 cents,  to $8.96 on March 31,  1997,  from $9.03 on
January 2, 1997,  the day Advisor  Class  shares  became  available.  During the
three-month  period,  your fund paid income  distributions  totaling 10.59 cents
($0.1059) per share. Distributions will vary based on the earnings of the fund's
portfolio, and past distributions are not predictive of future trends.

Based  on an  annualization  of the  current  monthly  dividend  of  3.46  cents
($0.0346) per share and the fund's share price of $8.96 on March 31, 1997,  your
fund's distribution rate was 4.63%.

For the  three-month  period ended March 31, 1997, your fund posted a cumulative
total return of +0.40%.  Cumulative total return measures the change in value of
an investment over the specified periods,  and assumes reinvestment of dividends
and capital gains.


   Franklin Investment Grade Income Fund --
   Advisor Class
   Dividend Distributions 1/2/97 - 3/31/97

                                         Dividend
   Month                                 per Share
- --------------------------------------------------------------------------------

   January                               3.30 cents

   February                              3.83 cents

   March                                 3.46 cents

   Total                                10.59 cents

- --------------------------------------------------------------------------------



Franklin Investment Grade Income Fund --
Advisor Class
Period Ended March 31, 1997

                                            Since
                                          Inception
                                          (1/02/97)
- --------------------------------------------------------------------------------

Cumulative Total Return1                    0.40%

Distribution Rate2                4.63%

30-Day Standardized Yield3        4.99%
- --------------------------------------------------------------------------------

1.  Cumulative  total return  measures the change in value of an investment over
the period indicated.

2.  Distribution  rate for  Advisor  Class is based on an  annualization  of the
current 3.46 cent per share  monthly  dividend and share price of $8.96 on March
31, 1997.

3. Yield,  calculated  as  required by the SEC, is based on the  earnings of the
fund's portfolio for the 30 days ended March 31, 1997.



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Statement  of  Investments  in  Securities  and  Net  Assets,   March  31,  1997
(unaudited)

                                                                                                        Value
   Shares       Franklin Corporate Qualified Dividend Fund                                            (Note 1)
- ----------------------------------------------------------------------------------------------------------------
     <S>        <C>                                                                                 <C>
               aAdjustable Rate Preferred Stocks  11.7%
                Commercial Banks & Bank Holding Companies  4.5%
     48,200     Citicorp, 5.628% adj. rate pfd., Series 19 ......................................   $  1,198,975
                                                                                                    ------------
                Electric Utilities  7.2%
     10,000     Arizona Public Service Co., 6.00% adj. rate pfd., Series Q ......................        880,000
     46,700     Toledo Edison Co., 7.00% cum. adj. rate pfd., Series A ..........................      1,033,238
                                                                                                    ------------
                                                                                                       1,913,238
                                                                                                    ------------
                      Total Adjustable Rate Preferred Stocks (Cost $3,166,492) ..................      3,112,213
                                                                                                    ------------
               bAuction Rate Preferred Stocks  39.3%
         12    cCNA Financial Corp., 3.97%, Series F ............................................      1,203,573
         12    cGeneral Electric Capital Corp., 3.81%, Series K .................................      1,203,556
         12    cInternational Lease Finance, 3.849%, Series B ...................................      1,205,388
      1,000    dMorgan (JP), Inc., 4.035%, Series C .............................................      1,000,560
         12    cNorthern Trust Corp., 3.91%, Series C ...........................................      1,201,694
         10    cRepublic NY Corp., 3.879%, Series A  ............................................      1,004,418
         12    cRhone-Poulenc Rorer, 5.05%, Series 1 ............................................      1,209,987
         12    cSara Lee Corp., 3.858%, Series D ................................................      1,206,044
         12    cVirginia Electric & Power Co., 4.00%, Series 92-A  ..............................      1,202,933
                                                                                                    ------------
                      Total Auction Rate Preferred Stocks (Cost $10,400,000) ....................     10,438,153
                                                                                                    ------------
                Fixed Rate Preferred Stocks  26.9%
                Commercial Banks  5.3%
     28,000     Bankers Trust (New York), 7.375% flex rate pfd., Series J .......................      1,406,768
                                                                                                    ------------
                Financial Services  3.8%
     10,000     Household Finance Co., 7.25% pfd., Series 92-A ..................................      1,017,500
                                                                                                    ------------
                Industrial  3.3%
     28,913     McDermott, Inc., $2.60 cum. S.F., pfd., Series B ................................        861,969
                                                                                                    ------------
                Pharmaceuticals  5.0%
         13     cSmithkline Beecham Holding, flex. rate pfd., 5.58%, Series A-1 .................      1,316,250
                                                                                                    ------------
                Utilities  9.5%
     15,000     Entergy Louisiana, Inc., 7.00% S.F., pfd., ......................................      1,515,000
     10,000     Rochester Gas & Electric Co., 7.45% S.F., pfd., Series S ........................      1,018,750
                                                                                                    ------------
                                                                                                       2,533,750
                                                                                                    ------------
                      Total Fixed Rate Preferred Stocks (Cost $7,263,184) .......................      7,136,237
                                                                                                    ------------
                      Total Long Term Investments (Cost $20,829,676) ............................     20,686,603
                                                                                                    ------------
</TABLE>



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Statement  of  Investments  in  Securities  and  Net  Assets,   March  31,  1997
(unaudited) (cont.)

    Face                                                                                                Value
   Amount       Franklin Corporate Qualified Dividend Fund                                            (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S>             <C>                                                                                    <C>
               eReceivables from Repurchase Agreements  21.7%
$5,843,066      Joint Repurchase Agreement, 6.417%, 04/01/97, (Maturity Value $5,748,243)
                 (Cost $5,747,219)
                  Aubrey G. Lanston & Co., Inc., (Maturity Value $690,885)
                   Collateral: U.S. Treasury Bills, 09/04/97
                               U.S. Treasury Notes, 6.75% - 7.00%, 04/15/99 - 05/31/99
                  Barclays de Zoete Wedd Securities, Inc., (Maturity Value $345,443)
                   Collateral: U.S.Treasury Notes, 6.00% - 7.125%, 09/30/98 - 09/30/99
                  CIBC Wood Gundy Securities Corp., (Maturity Value $690,885)
                   Collateral: U.S.Treasury Notes, 6.25%, 06/30/98
                  Daiwa Securities America, Inc., (Maturity Value $690,885)
                   Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 06/30/98 - 12/31/01
                  Fuji Securities, Inc., (Maturity Value $690,885)
                   Collateral: U.S. Treasury Bills, 07/31/97
                               U.S. Treasury Notes, 5.875%, 04/30/98
                  Sanwa Securities (USA) Co., L.P., (Maturity Value $690,885)
                   Collateral: U.S. Treasury Bills, 05/15/97
                               U.S. Treasury Notes, 5.625% - 6.75%, 05/15/98 - 11/30/00
                  SBC Warburg, Inc., (Maturity Value $690,885)
                   Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
                  The Nikko Securities Co. International, Inc., (Maturity Value $566,605)
                   Collateral: U.S. Treasury Notes, 4.75% - 6.50%, 05/31/98 - 09/30/01
                  UBS Securities, L.L.C., (Maturity Value $690,885)
                   Collateral: U.S. Treasury Notes, 5.00% - 6.875%, 04/30/97 - 04/30/00 .........      $ 5,747,219
                                                                                                      ------------
                           Total Investments (Cost $26,576,895)  99.6% ..........................       26,433,822
                           Other Assets and Liabilities, Net  0.4% ..............................          107,752
                                                                                                      ------------
                           Net Assets  100.0% ...................................................      $26,541,574
                                                                                                      ============



                At March 31, 1997, the net unrealized depreciation based on the cost of investments
                 for income tax purposes of $26,576,895 was as follows:
                  Aggregate gross unrealized appreciation for all investments in which there was an
                   excess of value over tax cost...................................................     $  172,171
                  Aggregate gross unrealized depreciation for all investments in which there was an
                   excess of tax cost over value...................................................       (315,244)
                                                                                                      ------------
                  Net unrealized depreciation....................................................       $ (143,073)
                                                                                                      ============



PORTFOLIO ABBREVIATIONS:
L.L.C.  - Limited Liability Corp.
L.P.    - Limited Partnership
S.F.    - Sinking Fund






aDividend rates adjust quarterly in reference to various U.S. Treasury benchmarks.
bDividend rates adjust in response to periodic auctions, normally on a 49-day cycle.
c1 share = $100,000 par value
d1 share = $1,000 par value
eFace amount for repurchase agreements is for the underlying collateral. See Note 1(f) regarding joint repurchase agreement.



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Statement  of  Investments  in  Securities  and  Net  Assets,   March  31,  1997
(unaudited)

                                                                                                        Value
   Shares      Franklin Rising Dividends Fund                                                         (Note 1)
- ------------------------------------------------------------------------------------------------------------------
     <S>       <C>                                                                                   <C>
               Common Stocks  97.7%
               Banks/Thrifts  11.9%
     88,500    CoreStates Financial Corp. ......................................................     $ 4,203,750
     70,000    First Union Corp. ...............................................................       5,678,750
    115,500    Mercantile Bankshares Corp. .....................................................       3,898,125
    106,400    National Commerce Bancorp. ......................................................       4,096,400
     72,100    State Street Boston Corp. .......................................................       5,001,938
    310,010    TrustCo Bank Corp., New York ....................................................       6,432,708
     51,000    Washington Mutual, Inc...........................................................       2,463,938
    106,000    Wilmington Trust Corp. ..........................................................       4,505,000
                                                                                                    ------------
                                                                                                      36,280,609
                                                                                                    ------------
               Consumer Goods & Services  13.1%
    223,500    Alberto-Culver Co., Class A .....................................................       4,972,875
     71,586    Block Drug Co., Inc., Class A....................................................       3,149,784
    367,700    Dimon, Inc. .....................................................................       8,457,100
    162,200    Newell Co. ......................................................................       5,433,700
     58,000    Philip Morris Cos., Inc. ........................................................       6,619,250
    165,000    Stanhome, Inc....................................................................       4,104,375
    170,000    Universal Corp. .................................................................       4,908,750
     89,700    UST, Inc. .......................................................................       2,500,388
                                                                                                    ------------
                                                                                                      40,146,222
                                                                                                    ------------
               Drugs/Health Care  4.9%
    111,000    Bard, (C.R.), Inc. ..............................................................       3,163,500
     62,600    Bristol-Myers Squibb Co. ........................................................       3,693,400
     47,000    Merck & Co., Inc. ...............................................................       3,959,750
     18,500    Pfizer, Inc. ....................................................................       1,556,313
     98,600    West Co., Inc....................................................................       2,674,525
                                                                                                    ------------
                                                                                                      15,047,488
                                                                                                    ------------
               Electronics/Technology  6.4%
     49,000    Baldor Electric Co...............................................................       1,231,125
    130,100    Cohu, Inc........................................................................       3,106,138
     47,700    General Electric Co. ............................................................       4,734,225
    118,500    Hewlett-Packard Co...............................................................       6,310,125
     64,300    Rockwell International Corp. ....................................................       4,171,463
                                                                                                    ------------
                                                                                                      19,553,076
                                                                                                    ------------
               Energy  2.3%
     40,000    Royal Dutch Petroleum Co., New York Shares, ADR .................................       7,000,000
                                                                                                    ------------
               Financial Services  2.1%
    180,000    Federal National Mortgage Association ...........................................       6,502,500
                                                                                                    ------------
               Industrial  21.0%
`     3,750    Boeing Co. ......................................................................      $  369,844
     30,300    Donaldson Co., Inc. .............................................................       1,052,925
    112,400    Dover Corp.......................................................................       5,901,000
    234,600    Duriron Co., Inc. ...............................................................       5,161,200
    280,500    Hanna (M.A.) Co. ................................................................       5,960,625
    118,000    Kaydon Corp. ....................................................................       4,941,250
    127,000    Kimball International, Inc., Class B ............................................       4,826,000
     40,100    Leggett & Platt, Inc.............................................................       1,303,250
    208,300    Millipore Corp. .................................................................       8,826,713
    145,500    Monsanto Co. ....................................................................       5,565,375
    173,800    Myers Industries, Inc. ..........................................................       2,889,425
    138,800    Nucor Corp.......................................................................       6,350,100
    181,600    Superior Industries International, Inc. .........................................       4,108,700
    106,800    Superior Surgical Manufacturing Co., Inc. .......................................       1,388,400
    229,800    Watts Industries, Inc., Class A .................................................       5,342,850
                                                                                                    ------------
                                                                                                      63,987,657
                                                                                                    ------------
               Insurance - Property Casualty  13.8%
    257,250    Allied Group, Inc................................................................       8,875,125
     23,500    American International Group, Inc. ..............................................       2,758,312
    100,000    Chubb Corp. .....................................................................       5,387,500
    117,000    Mercury General Corp. ...........................................................       7,137,000
    289,700    MMI Cos., Inc. ..................................................................       7,387,350
    157,450    RLI Corp. .......................................................................       5,018,718
      7,100    SAFECO Corp. ....................................................................         284,000
     84,000    St. Paul Cos., Inc. .............................................................       5,449,500
                                                                                                    ------------
                                                                                                      42,297,505
                                                                                                    ------------
               Office/Business Supplies  8.6%
    109,400    Avery Dennison Corp.  ...........................................................       4,211,900
    208,000    Brady, (W.H.) Co. ...............................................................       5,226,000
    256,900    Ennis Business Forms ............................................................       2,825,900
    145,500    Standard Register Co.............................................................       4,765,124
    277,000    Wallace Computer Services, Inc. .................................................       9,175,624
                                                                                                    ------------
                                                                                                      26,204,548
                                                                                                    ------------
               Retail  10.1%
    440,000    Family Dollar Stores, Inc. ......................................................      10,285,000
    187,300    Gap, Inc. .......................................................................       6,274,550
    146,000    Rite Aid Corp. ..................................................................       6,132,000
               Retail (cont.)
     44,700    The Limited, Inc. ...............................................................      $  821,362
    264,800    Wal-Mart Stores, Inc. ...........................................................       7,381,300
                                                                                                    ------------
                                                                                                      30,894,212
                                                                                                    ------------
               Transportation  3.5%
    247,500    Arnold Industries, Inc. .........................................................       3,495,937
    330,000    Harper Group, Inc. ..............................................................       7,218,750
                                                                                                    ------------
                                                                                                      10,714,687
                                                                                                    ------------
                     Total Long Term Investments (Cost $223,259,195) ...........................     298,628,504
                                                                                                    ------------
    Face
   Amount
 ----------
              eReceivables from Repurchase Agreements  2.2%
 $6,947,734    Joint Repurchase Agreement, 6.417%, 04/01/97, (Maturity Value $6,834,956)
                (Cost $6,833,738)
                 Aubrey G. Lanston & Co., Inc., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Bills, 09/04/97
                              U.S. Treasury Notes, 6.75% - 7.00%, 04/15/99 - 05/31/99
                 Barclays de Zoete Wedd Securities, Inc., (Maturity Value $410,749)
                  Collateral: U.S. Treasury Notes, 6.00% - 7.125%, 09/30/98 - 09/30/99
                 CIBC Wood Gundy Securities Corp., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Notes, 6.25%, 06/30/98
                 Daiwa Securities America, Inc., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 06/30/98 - 12/31/01
                 Fuji Securities, Inc., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Bills, 07/31/97
                              U.S. Treasury Notes, 5.875%, 04/30/98
                 Sanwa Securities (USA) Co., L.P., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Bills, 05/15/97
                              U.S. Treasury Notes, 5.625% - 6.75%, 05/15/98 - 11/30/00
                 SBC Warburg, Inc., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
                 The Nikko Securities Co. International, Inc., (Maturity Value $673,721)
                  Collateral: U.S. Treasury Notes, 4.75% - 6.50%, 05/31/98 - 09/30/01
                 UBS Securities, L.L.C., (Maturity Value $821,498)
                  Collateral: U.S. Treasury Notes, 5.00% - 6.875%, 04/30/97 - 04/30/00 .........       6,833,738
                                                                                                    ------------
                          Total Investments (Cost $230,092,933)  99.9% .........................     305,462,242
                          Other Assets and Liabilities, Net  0.1%...............................         140,735
                                                                                                    ------------
                          Net Assets  100.0% ...................................................    $305,602,977
                                                                                                    ============



               At March 31, 1997 the net unrealized appreciation based on the cost of investments
                for income tax purposes of $230,092,933 was as follows:
                 Aggregate gross unrealized appreciation for all investments in which there was an
                  excess of value over tax cost ................................................   $  78,070,529
                 Aggregate gross unrealized depreciation for all investments in which there was an
                  excess of tax cost over value ................................................      (2,701,220)
                                                                                                    ------------
                 Net unrealized appreciation ...................................................   $  75,369,309
                                                                                                    ============



PORTFOLIO ABBREVIATIONS:
L.L.C.  - Limited Liability Corp.
L.P.    - Limited Partnership






eFace amount for repurchase agreements is for the underlying collateral. See Note 1(f) regarding joint repurchase agreement.



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Statement of Investments in Securities and Net Assets, March 31, 1997 (unaudited)

    Face                                                                                                Value
   Amount       Franklin Investment Grade Income Fund                                                 (Note 1)
- ------------------------------------------------------------------------------------------------------------------
 <S>            <C>                                                                                 <C>
                U.S. Government Securities and Agencies  35.0%
 $ 2,000,000    Tennessee Valley Authority, bonds, (putable* 07/15/01, callable 07/15/20), 6.235%,
                 07/15/45 .......................................................................   $  1,962,706
   2,000,000    U.S. Treasury Notes, 5.625%, 06/30/97 ...........................................      2,001,252
   2,000,000    U.S. Treasury Notes, 5.875%, 07/31/97 ...........................................      2,001,876
   1,000,000    U.S. Treasury Notes, 5.625%, 10/31/97 ...........................................        998,751
   1,000,000    U.S. Treasury Notes, 5.125%, 04/30/98 ...........................................        989,376
   2,000,000    U.S. Treasury Notes, 5.875%, 08/15/98 ...........................................      1,988,752
   2,000,000    U.S. Treasury Notes, 5.875%, 01/31/99 ...........................................      1,981,876
   1,000,000    U.S. Treasury Notes, 5.875%, 03/31/99 ...........................................        990,313
                                                                                                    ------------
                      Total U.S. Government Securities and Agencies (Cost $10,990,857) ..........     12,914,902
                                                                                                    ------------
                Corporate Bonds  35.1%
                Consumer Goods    8.0%
   1,500,000    Coca-Cola Enterprises, bonds, (putable* 10/15/03), 6.70%,10/15/36 ...............      1,475,134
   1,500,000    Heinz (H.J.) Co., notes, 5.50%, 09/15/97 ........................................      1,497,388
                                                                                                    ------------
                                                                                                       2,972,522
                                                                                                    ------------
                Electric Utilities  2.7%
   1,000,000    Southern California Edison Co., notes, 5.875%, 02/01/98 .........................        996,488
                                                                                                    ------------
                Financial Services  11.0%
   1,500,000    Ford Motor Credit Corp., global bond, 6.25%, 02/26/98 ...........................      1,503,330
   1,500,000    General Electric Capital Corp., medium term notes (step up to 8.125% or putable *
                 04/01/98), 5.80%, 04/01/08 .....................................................      1,562,386
   1,000,000    Norwest Financial, Inc., senior notes, 6.23%, 09/01/98 ..........................        996,852
                                                                                                    ------------
                                                                                                       4,062,568
                                                                                                    ------------
                Industrial  4.1%
   1,500,000    WMX Technologies, Inc., notes, (putable* 05/15/00), 6.65%, 05/15/05 .............      1,494,868
                                                                                                    ------------
                Retail  4.0%
   1,500,000    Penney J.C. & Co., Inc., deb., (putable* 08/15/03), 6.90%, 08/15/26 .............      1,477,908
                                                                                                    ------------
                Telephone Utilities  5.3%
   1,000,000    Bellsouth Telecommunications Corp., deb., (putable* 11/15/00), 5.85%, 11/15/45 ..        970,811
   1,000,000    New England Telephone and Telegraph, notes, 6.25%, 12/15/97 .....................      1,001,148
                                                                                                    ------------
                                                                                                       1,971,959
                                                                                                    ------------
                      Total Corporate Bonds (Cost $14,984,005) ..................................     12,976,313
                                                                                                    ------------
                      Total Long Term Investments (Cost $25,974,862).............................     25,891,215
                                                                                                    ------------



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Statement of Investments in Securities and Net Assets, March 31, 1997 (unaudited) (cont.)

    Face                                                                                                Value
   Amount       Franklin Investment Grade Income Fund                                                 (Note 1)
- ------------------------------------------------------------------------------------------------------------------
<S>             <C>                                                                                  <C>
               eReceivables from Repurchase Agreements  28.6%
$10,750,633     Joint Repurchase Agreement, 6.417%, 04/01/97, (Maturity Value $10,576,861)
                 (Cost $10,574,976)
                  Aubrey G. Lanston & Co., Inc., (Maturity Value $1,271,240)
                   Collateral: U.S. Treasury Bills, 09/04/97
                               U.S. Treasury Notes, 6.75% - 7.00%, 04/15/99 - 05/31/99
                  Barclays de Zoete Wedd Securities, Inc., (Maturity Value $635,620)
                   Collateral: U.S.Treasury Notes, 6.00% - 7.125%, 09/30/98 - 09/30/99
                  CIBC Wood Gundy Securities Corp., (Maturity Value $1,271,240)
                   Collateral: U.S.Treasury Notes, 6.25%, 06/30/98
                  Daiwa Securities America, Inc., (Maturity Value $1,271,240)
                   Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 06/30/98 - 12/31/01
                  Fuji Securities, Inc., (Maturity Value $1,271,240)
                   Collateral: U.S. Treasury Bills, 07/31/97
                               U.S. Treasury Notes, 5.875%, 04/30/98
                  Sanwa Securities (USA) Co., L.P., (Maturity Value $1,271,240)
                     Collateral: U.S. Treasury Bills, 05/15/97
                                 U.S. Treasury Notes, 5.625% - 6.75%, 05/15/98 - 11/30/00
                  SBC Warburg, Inc., (Maturity Value $1,271,240)
                   Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
                  The Nikko Securities Co. International, Inc., (Maturity Value $1,042,561)
                   Collateral: U.S. Treasury Notes, 4.75% - 6.50%, 05/31/98 - 09/30/01
                  UBS Securities, L.L.C., (Maturity Value $1,271,240)
                   Collateral: U.S. Treasury Notes, 5.00% - 6.875%, 04/30/97 - 04/30/00 .........    $10,574,976
                                                                                                    ------------
                          Total Investments (Cost $36,549,838)  98.7% ...........................     36,466,191
                          Other Assets and Liabilities, Net  1.3% ...............................        491,416
                                                                                                    ------------
                          Net Assets  100.0%.....................................................    $36,957,607
                                                                                                    ============


                At March 31, 1997, the net unrealized depreciation based on the cost of investments
                 for income tax purposes of $36,549,838 was as follows:
                  Aggregate gross unrealized appreciation for all investments in which there was an
                   excess of value over tax cost ................................................     $  137,288
                  Aggregate gross unrealized depreciation for all investments in which there was an
                   excess of tax cost over value ................................................       (220,935)
                                                                                                    ------------
                  Net unrealized depreciation ...................................................    $   (83,647)
                                                                                                    ============



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Statement  of  Investments  in  Securities  and  Net  Assets,   March  31,  1997
(unaudited) (cont.)

                Franklin Investment Grade Income Fund                           
- --------------------------------------------------------------------------------



PORTFOLIO ABBREVIATIONS:
L.L.C.  - Limited Liability Corp.
L.P.    - Limited Partnership






*Holder may choose either to redeem at par on put date or, if more advantageous,
to hold to final stated maturity.

eFace amount for  repurchase  agreements is for the underlying  collateral.  See
Note 1(f) regarding joint repurchase agreement.



   The accompanying notes are an integral part of these financial statements.



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Financial Statements

Statements of Assets and Liabilities
March 31, 1997 (unaudited)

                                                                   Franklin                             Franklin
                                                              Corporate Qualified   Franklin Rising  Investment Grade
                                                                 Dividend Fund      Dividends Fund     Income Fund
                                                                ---------------    ----------------   -------------
Assets:
 Investments in securities:
  <S>                                                               <C>               <C>               <C>        
  At identified cost .......................................        $20,829,676       $223,259,195      $25,974,862
                                                                 ==============     ==============    =============
  At value .................................................         20,686,603        298,628,504       25,891,215
 Receivables from repurchase agreements, at value and cost .          5,747,219          6,833,738       10,574,976
 Cash ......................................................            108,345                 --           78,728
 Receivables:
  Dividends and interest ...................................             35,593            630,355          364,433
  Investment securities sold ...............................                 --            615,614               --
  Capital shares sold ......................................                 --            506,758           77,224
                                                                 --------------     --------------    -------------
      Total assets .........................................         26,577,760        307,214,969       36,986,576
                                                                 --------------     --------------    -------------
Liabilities:
 Payables:
  Investment securities purchased ..........................                 --            760,619               --
  Capital shares repurchased ...............................                 --            375,023              518
  Management fees ..........................................             10,984            198,753           10,183
  Distribution fees ........................................              9,123            236,028           17,863
  Shareholder servicing costs ..............................                249                 --              405
 Accrued expenses and other liabilities ....................             15,830             41,569               --
                                                                 --------------     --------------    -------------
      Total liabilities ....................................             36,186          1,611,992           28,969
                                                                 --------------     --------------    -------------
Net assets, at value .......................................        $26,541,574       $305,602,977      $36,957,607
                                                                 ==============     ==============    =============
Net assets consist of:
 Undistributed net investment income .......................         $  226,500          $  49,997       $  181,672
 Net unrealized appreciation (depreciation) on investments .           (143,073)        75,369,309          (83,647)
 Accumulated net realized gain (loss) from investments .....         (3,199,186)        19,837,734       (1,012,824)
 Class I capital shares ....................................         29,657,333        204,731,292       37,834,312
 Class II capital shares ...................................                 --          5,614,645               --
 Advisor Class capital shares ..............................                 --                 --           38,094
                                                                 --------------     --------------    -------------
Net assets, at value .......................................        $26,541,574       $305,602,977      $36,957,607
                                                                 ==============     ==============    =============
Class I shares:
 Net assets, at value ......................................        $26,541,574       $299,374,952      $36,919,667
                                                                 ==============     ==============    =============
 Shares outstanding ........................................          1,110,659         14,150,247        4,116,882
                                                                 ==============     ==============    =============
 Net asset value per share* ................................             $23.90             $21.16            $8.97
                                                                 ==============     ==============    =============
Class II shares:
 Net assets, at value ......................................                        $ 6,228,025
                                                                                     ==========
 Shares outstanding ........................................                            295,079
                                                                                     ==========
 Net asset value per share* ................................                             $21.11
                                                                                     ==========
Advisor Class shares:
 Net assets, at value ......................................                          $  37,940
                                                                                    ===========
 Shares outstanding ........................................                              4,233
                                                                                    ===========
 Net asset value per share .................................                              $8.96
                                                                                    ===========


*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Financial Statements (cont.)

Statements of Operations
for the six months ended March 31, 1997 (unaudited)

                                                                   Franklin                            Franklin
                                                              Corporate Qualified  Franklin Rising  Investment Grade
                                                                 Dividend Fund     Dividends Fund     Income Fund
                                                                 -------------     --------------    -------------
Investment income:
 <S>                                                                <C>              <C>                     <C> 
 Dividends .................................................        $  648,204       $ 3,150,931             $ --
 Interest ..................................................            78,276           245,719          939,266
                                                                 -------------     -------------     ------------
Total Income ...............................................           726,480         3,396,650          939,266
                                                                 -------------     -------------     ------------
Expenses:
 Management fees (Note 5) ..................................            65,354         1,144,313           82,349
 Distribution fees- Class I (Note 5) .......................            26,974           682,427           33,015
 Distribution fees- Class II (Note 5) ......................                --            25,230               --
 Shareholder servicing costs (Note 5) ......................             2,659           126,640           11,228
 Accounting fees ...........................................            20,000            20,000           20,000
 Registration and filing fees ..............................            11,248            15,187            6,135
 Professional fees .........................................             8,568            13,223            5,292
 Reports to shareholders ...................................             3,718            68,966            8,561
 Trustees' fees and expenses ...............................             1,269            15,056            1,329
 Custodian fees ............................................               356             1,172              294
 Other .....................................................             1,014             4,280            1,576
                                                                 -------------     -------------     ------------
Total expenses .............................................           141,160         2,116,494          169,779
                                                                 -------------     -------------     ------------
Net investment income ......................................           585,320         1,280,156          769,487
                                                                 -------------     -------------     ------------
Realized and unrealized gain (loss) on investments:
 Net realized gain .........................................            25,700        23,110,691          141,920
 Net unrealized appreciation (depreciation) ................           404,305        11,418,037         (278,386)
                                                                 -------------     -------------     ------------
Net realized and unrealized gain (loss) on investments .....           430,005        34,528,728         (136,466)
                                                                 -------------     -------------     ------------
Net increase in net assets resulting from operations .......        $1,015,325       $35,808,884        $ 633,021
                                                                 =============     =============     ============



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



<TABLE>
<CAPTION>
FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Financial Statements (cont.)

Statements of Changes in Net Assets
for the six months ended March 31, 1997 (unaudited)
and the year ended September 30, 1996

                                       Franklin Corporate             Franklin Rising                Franklin Investment
                                     Qualified Dividend Fund          Dividends Fund                 Grade Income Fund
                                    -------------------------    ---------------------------     -------------------------
                                     Six months        Year        Six months         Year         Six months       Year
                                       ended          ended          ended           ended           ended          ended
                                      3/31/97        9/30/96        3/31/97         9/30/96         3/31/97        9/30/96
                                     ---------      ---------      ---------       ---------       ---------      ---------
Increase in net assets:
 Operations:
  <S>                               <C>           <C>           <C>               <C>             <C>           <C>         
  Net investment income ........    $  585,320    $ 1,269,131   $   1,280,156     $ 4,050,067     $  769,487    $  1,385,410
  Net realized gain (loss) from
   security transactions .......        25,700       (186,161)     23,110,691      18,376,109        141,920         136,241
  Net unrealized appreciation
   (depreciation) on investments       404,305        (29,860)     11,418,037      22,297,141       (278,386)       (291,022)
                                     ---------      ---------      ----------     -----------     ----------      ----------
      Net increase in net assets
       resulting from operations     1,015,325      1,053,110      35,808,884      44,723,317        633,021       1,230,629
 Distributions to shareholders from:
  Undistributed net
   investment income:
    Class I ....................      (581,815)    (1,330,351)     (1,404,304)     (4,942,788)      (820,747)     (1,292,338)
    Class II ...................            --             --         (10,750)        (29,691)            --              --
    Advisor Class ..............            --             --              --              --           (307)             --
  Net realized capital gain:
   Class I .....................            --             --     (18,052,928)             --             --              --
   Class II ....................            --             --        (276,484)             --             --              --
 Increase (decrease) in net
  assets from capital share
  transactions (Note 3).........    (1,683,351)       275,623       7,910,464     (20,100,001)     7,773,467        (389,824)
                                     ---------      ---------      ----------     -----------     ----------      ----------
      Net increase (decrease)
       in net assets ...........    (1,249,841)        (1,618)     23,974,882      19,650,837      7,585,434        (451,533)
Net assets:
 Beginning of period ...........    27,791,415     27,793,033     281,628,095     261,977,258     29,372,173      29,823,706
                                     ---------      ---------      ----------     -----------     ----------      ----------
 End of period .................   $26,541,574    $27,791,415    $305,602,977    $281,628,095    $36,957,607     $29,372,173
                                     =========      =========      ==========     ===========     ==========      ==========
Undistributed net investment
 income included net assets:
  Beginning of period ..........    $  222,995     $  284,215      $  184,895     $ 1,107,307     $  233,239      $  140,167
                                     =========      =========      ==========     ===========     ==========      ==========
  End of period ................    $  226,500     $  222,995    $     49,997    $    184,895     $  181,672      $  233,239
                                     =========      =========      ==========     ===========     ==========      ==========



                             The accompanying notes are an integral part of these financial statements.
</TABLE>



FRANKLIN MANAGED TRUST
- --------------------------------------------------------------------------------

Notes to Financial Statements (unaudited)


1. SIGNIFICANT ACCOUNTING POLICIES

Franklin Managed Trust (the Trust) is an open-end, management investment company
(mutual fund),  registered under the Investment  Company Act of 1940 as amended.
The Trust consists of three separate  diversified funds (the Funds). Each of the
Funds  issues a separate  series of the Trust's  shares and  maintains a totally
separate investment portfolio.

The investment objectives of each Fund are as follows:

                    Fund                                   Objective
                    -------------------------              --------------
                    Corporate Qualified Dividend Fund      Income
                    Rising Dividends Fund                  Growth and Income
                    Investment Grade Income Fund           Income

The Rising  Dividends Fund offers Class I and Class II shares and the Investment
Grade Income Fund offers Class I and Advisor  Class  shares.  Class I shares are
sold with a higher  front-end  sales  charge  than Class II shares.  There is no
front-end sales load nor distribution fees for Advisor Class shares. Class I and
II shares may be subject to a  contingent  deferred  sales charge and all shares
have the same rights,  except with respect to the effect of the respective sales
charges,  the  distribution  fees borne by each class,  voting rights on matters
affecting a single class and the exchange  privilege of each class. The offering
of Class II shares began May 1, 1995, at which time all  previously  outstanding
shares became Class I shares. The offering of Advisor Class shares began January
1, 1997.

The  following  is a summary of  significant  accounting  policies  consistently
followed by the Funds in the  preparation  of their  financial  statements.  The
policies are in conformity  with generally  accepted  accounting  principles for
investment companies.

a. Security Valuations:

Portfolio  securities listed on a securities exchange or on the NASDAQ for which
market quotations are readily available are valued at the last sale price or, if
there is no sale price, within the range of the most recent quoted bid and asked
prices.  Other  securities  are valued based on a variety of factors,  including
yield, risk,  maturity,  trade activity and recent  developments  related to the
securities.  Portfolio  securities which are traded both in the over the counter
market and on a  securities  exchange  are valued  according to the broadest and
most  representative  market determined by the manager.  The Funds may utilize a
pricing service,  bank or  broker/dealer  experienced in such matters to perform
any of the pricing functions, under procedures approved by the Board of Trustees
(the Board). Securities for which market quotations are not available are valued
in accordance with procedures established by the Board.

The value of auction rate preferred  stock is determined  based upon  quotations
readily  available  in  the  marketplace.  If  there  are no  readily  available
quotations,  the  value  will be based  upon the  values  of  comparable  traded
securities. When market quotations are not readily available for securities held
by the Funds, or for comparable securities,  then such securities will be valued
at par value plus an accrual of the dividend to be received on the next dividend
payment date, as approved by the Board.

b. Income Taxes:

The Funds  intend to  continue to qualify for the tax  treatment  applicable  to
regulated  investment  companies under the Internal Revenue Code and to make the
requisite  distributions to shareholders which will be sufficient to relieve the
Funds from income and excise taxes. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.

c. Security Transactions:

Security transactions are accounted for on the date the securities are purchased
or sold (trade date).  Realized  gains and losses on security  transactions  are
determined on the basis of specific identification.

1. SIGNIFICANT ACCOUNTING POLICIES (cont.)

d. Investment Income, Expenses and Distributions:

Dividend  income  and   distributions   to  shareholders  are  recorded  on  the
ex-dividend  date.  Interest  income and estimated  expenses are accrued  daily.
Original issue  discount is amortized as required by the Internal  Revenue Code.
Realized and unrealized  gains or losses and net investment  income,  other than
class specific expenses,  are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

e. Expense Allocation:

Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net  assets  of each  Fund to the  combined  net  assets.  In all other
respects,  expenses  are  charged  to  each  Fund  as  incurred  on  a  specific
identification basis.

f. Repurchase Agreements:

The Funds may enter into a joint repurchase  agreement  whereby their uninvested
cash  balances are  deposited  into a joint cash account to be used to invest in
one or more repurchase  agreements with government securities dealers recognized
by the Federal  Reserve Board and/or member banks of the Federal Reserve System.
The value and face amount of the joint repurchase agreement are allocated to the
Funds based on their pro-rata interest.  A repurchase agreement is accounted for
as a loan  by the  Funds  to  the  seller,  collateralized  by  underlying  U.S.
government securities,  which are delivered to the Funds' custodian.  The market
value, including accrued interest, of the initial  collateralization is required
to be at least 102% of the dollar amount  invested by the Funds,  with the value
of the underlying  securities  marked to market daily to maintain coverage of at
least 100%. At March 31, 1997, all outstanding repurchase agreements held by the
Funds had been entered into on that date.

g. Accounting Estimates:

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial statements and the amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

<TABLE>
<CAPTION>
2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At  September  30,  1996,  for tax  purposes,  the  Rising  Dividends  Fund  had
accumulated net realized capital gains of $15,056,455.  The Corporate  Qualified
Dividend Fund and  Investment  Grade Income Fund had capital loss  carryovers as
follows:

                                                                 Franklin Corporate       Franklin Investment
                                                               Qualified Dividend Fund    Grade Income Fund
                                                                   ---------------         ---------------
Capital loss carryovers expiring in:
<S>                                                                    <C>                   <C>      
1997.........................................................          $1,251,202            $ 274,652
1998 ........................................................             794,958              139,900
1999 ........................................................             226,936              117,414
2000 ........................................................             375,717                   --
2002 ........................................................             328,483                   --
2003 ........................................................              61,429              254,062
2004.........................................................                  --              368,716
                                                                  ---------------         ------------
                                                                       $3,038,725           $1,154,744
                                                                  ===============         ============
</TABLE>


2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)

From  November 1, 1995 through  September  30,  1996,  the  Corporate  Qualified
Dividend Fund incurred  $186,161 of realized capital losses. As permitted by tax
regulations,  the  Corporate  Qualified  Dividend Fund intends to elect to defer
these  losses and treat them as having  arisen in the year ended  September  30,
1997.

Capital loss carryovers of $5,368,105 for the Corporate  Qualified Dividend Fund
and $124,885 for the Investment Grade Income Fund expired at September 30, 1996,
and were reclassified to paid-in-capital.

For tax purposes,  the aggregate cost of securities and unrealized  appreciation
(depreciation) of the Funds are the same as for financial  statement purposes at
March 31, 1997.


<TABLE>
<CAPTION>
3. TRUST SHARES

At March 31,  1997,  there was an  unlimited  number of $.01 par value shares of
beneficial interest  authorized.  Transactions in each of the Funds' shares were
as follows:

                                         Franklin Corporate             Franklin Rising           Franklin Investment
                                      Qualified Dividend Fund           Dividends Fund             Grade Income Fund
                                     -------------------------     ------------------------     -----------------------
                                      Shares           Amount       Shares          Amount       Shares         Amount
                                     --------         --------     --------        --------     --------       --------
Class I shares:
Six months ended March 31, 1997
 <S>                                  <C>         <C>             <C>          <C>             <C>         <C>
 Shares sold ....................     182,989     $  4,339,245    1,069,989    $ 22,729,426    1,376,768   $ 12,421,587
 Shares issued in reinvestment
  of distributions ..............      21,733          513,674      765,963      15,865,146       70,590        636,725

 Shares redeemed ................    (275,832)      (6,536,270)  (1,550,795)    (32,822,467)    (589,646)    (5,322,939)
                                     --------         --------     --------        --------     --------       --------
Net increase (decrease) .........     (71,110)    $ (1,683,351)     285,157    $  5,772,105      857,712   $  7,735,373
                                     ========         ========     ========        ========     =========      ========
Year ended September 30, 1996
 Shares sold ....................     461,688     $ 10,870,468    2,088,118    $ 38,945,585    1,086,667   $  9,800,009
 Shares issued in reinvestment
  of distributions ..............      49,210        1,157,520      212,015       3,948,319      100,794        909,440
 Shares redeemed ................    (499,062)     (11,752,365)  (3,505,315)    (65,457,722)  (1,227,244)   (11,099,273)
                                     --------         --------     --------        --------     --------       --------
Net increase (decrease) .........      11,836        $ 275,623   (1,205,182)   $(22,563,818)     (39,783)   $  (389,824)
                                     ========         ========     ========        ========     ========       ========



3. TRUST SHARES (cont.)
                                                             Franklin Rising         Franklin Investment
                                                             Dividends Fund           Grade Income Fund
                                                        ------------------------   -----------------------
                                                         Shares          Amount     Shares         Amount
                                                        --------        --------   --------       --------
Class II shares:
Six months ended March 31, 1997
 <S>                                                     <C>          <C>       
 Shares sold ....................                        123,531      $2,629,440
 Shares issued in reinvestment
  of distributions ..............                         11,251         232,287
 Shares redeemed ................                        (33,971)       (723,368)
                                                        --------        --------
Net increase ....................                         100,811     $2,138,359
                                                        ========        ========
Year ended September 30, 1996
 Shares sold ....................                        146,186     $ 2,716,874
 Shares issued in reinvestment
  of distributions ..............                          1,078          20,157
 Shares redeemed ................                        (14,322)       (273,214)
                                                        --------        --------
Net increase ....................                        132,942      $2,463,817
                                                        ========        ========
Advisor Class shares:
January 1, 1997 to March 31, 1997
 Shares sold ....................                                                      4,199        $37,787
 Shares issued in reinvestment
  of distributions ..............                                                         34            307
 Shares redeemed ................                                                         --             --
                                                                                   ---------      ---------
Net increase ....................                                                      4,233        $38,094
                                                                                   =========      =========
</TABLE>



<TABLE>
<CAPTION>
4. PURCHASES AND SALES OF SECURITIES

Aggregate  purchases and sales of securities  (excluding  purchases and sales of
short-term securities) for the six months ended March 31, 1997 were as follows:

                                             Franklin Corporate            Franklin Rising         Franklin Investment
                                            Qualified Dividend Fund        Dividends Fund           Grade Income Fund
                                            -----------------------    ----------------------    -----------------------
<S>                                              <C>                         <C>                       <C>       
Purchases ...............................        $       --                  $58,915,096               $7,505,881
Sales ...................................        $3,320,000                  $66,819,329               $3,439,760
</TABLE>



5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

<TABLE>
<CAPTION>
a. Management Agreement:

Under the terms of a management  agreement,  Franklin Advisers,  Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to each Fund, and receives fees computed monthly based on the net assets of each
Fund, using the following annualized fee rates:


                                                             Franklin Corporate          Franklin Rising        Franklin Investment
Average Daily Net Assets                                   Qualified Dividend Fund       Dividends Fund          Grade Income Fund
- -------------------------------------------------------    -----------------------    --------------------     ---------------------
<S>                                                                <C>                       <C>                       <C>  
First $500 million ....................................            0.50%                     0.75%                     0.50%
Over $500 million, up to and including $1 billion .....            0.45%                     0.625%                    0.45%
In excess of $1 billion ...............................            0.40%                     0.50%                     0.40%
</TABLE>


Pursuant to the terms of the management  agreement,  each of the Funds also pays
accounting  fees of $40,000 per year to Advisers  for the  provision  of certain
accounting, bookkeeping and recordkeeping functions for the Funds.

Under  an  agreement  with  Advisers,  Franklin  Templeton  Services,  Inc.  (FT
Services) provides administrative services and facilities for the Funds. The fee
is paid by Advisers and computed  monthly based on average daily net assets.  It
is not a separate expense of the Funds.

b. Shareholder Services Agreement:

Under the terms of a  shareholder  services  agreement  with  Franklin/Templeton
Investor  Services,  Inc.  (Investor  Services),  the  Funds  pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended March 31, 1997, aggregated $140,527,  all of which was paid
to Investor Services.

c. Distribution Plans and Underwriting Agreement:


Under the terms of  distribution  plans pursuant to Rule 12b-1 of the Investment
Company  Act  of  1940  (the  Plans),   the  Rising  Dividends  Fund  reimburses
Franklin/Templeton  Distributors,  Inc.  (Distributors)  in  an  amount  up to a
maximum  of 0.50% per annum for Class I and 1.00% per annum for Class II, of the
average  daily  net  assets  of such  class of the  Fund,  while  the  Corporate
Qualified  Dividend Fund and the Investment  Grade Income Fund reimburse up to a
maximum  of 0.25% per annum of the  average  daily net  assets  for Class I, for
costs  incurred in the  promotion,  offering and marketing of the Funds' shares.
The Plans do not permit nor require payments of excess costs after  termination.
Fees  incurred  by the Funds  under the Plans  aggregated  $767,646  for the six
months ended March 31, 1997.

In its  capacity  as  underwriter  for the  shares  of the  Funds,  Distributors
receives  commissions  on sales of the  Funds'  shares of  beneficial  interest.
Commissions  are deducted from the gross proceeds  received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments,  out of its own resources,  to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors,  the amounts paid to
other dealers,  and any applicable  contingent deferred sales charges (CDSC) for
the six months ended March 31, 1997 were as follows:

<TABLE>
<CAPTION>

                                                          Franklin Corporate          Franklin Rising        Franklin Investment 
                                                        Qualified Dividend Fund       Dividends Fund          Grade Income Fund  
                                                        -----------------------    --------------------     ---------------------
<S>                                                            <C>                      <C>                       <C>      
Total commissions received, including CDSC .........           $38,555                  $265,376                  $  88,259
Paid to other dealers ..............................           $38,639                  $264,821                  $ 112,540
CDSC................................................           $    --                  $    986                  $      --
</TABLE>


d. Other Affiliates and Related Party Transaction:

Certain officers and trustees of the Trust are also officers and/or directors of
Distributors,  Advisers,  FT Services,  and Investor Services,  all wholly-owned
subsidiaries of Franklin Resources, Inc.


<TABLE>
<CAPTION>
6. FINANCIAL HIGHLIGHTS

Selected  data for a share of beneficial  interest  outstanding  throughout  the
period by Fund are as follows:


                   Per Share Operating Performance                                 Ratios/Supplemental Data
         ---------------------------------------------------                 ------------------------------------
                                                                                                          Ratio of
                           Net             Distri-                                                          Net
           Net          Realized &  Total  butions                                                         Invest-
          Asset         Unrealized  From    From   Distri-            Net                Net     Ratio of   ment
        Value at  Net      Gain    Invest-   Net   butions           Asset              Assets   Expenses Income to  Port-   Average
  Year   Begin-  Invest-  (Loss)    ment   Invest-  From     Total  Value at            at End   to Aver-  Average   folio    Com-  
 Ended   ning of  ment   on Secur-  Oper-   ment   Capital  Distri-  End of   Total   of Period  age Net    Net    Turnover  mission
Sept. 30 Period  Income    ities   ations  Income   Gains   butions  Period  Return++ (in 000's)  Assets   Assets    Rate     Rate+ 
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Corporate Qualified Dividend Fund:
<S>     <C>      <C>      <C>      <C>     <C>      <C>     <C>       <C>     <C>      <C>         <C>      <C>      <C>         <C>
19921   $21.63   $1.37    $2.144   $3.514  $(1.394) $   --  $(1.394)  $23.75  16.75%   $ 29,444    1.10%    5.97%    29.01%      --
19932    23.75    0.73     0.777    1.507   (0.787)     --   (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)     --   (0.956)   23.69   0.72      31,790    1.00     4.19     32.17       --
1995     23.69    1.21        --    1.210   (1.140)     --   (1.140)   23.76   5.26      27,793    1.02     5.02     29.18       --
1996     23.76    1.10    (0.190)   0.910   (1.150)     --   (1.150)   23.52   3.94      27,791    1.07     4.64     24.88   0.0600
19974    23.52    0.54     0.365    0.905   (0.525)     --   (0.525)   23.90   3.89      26,542    1.08*    4.48*       --       --
Franklin Rising Dividends Fund:
Class I Shares:
19921    14.91    0.24     1.290    1.530   (0.260)     --   (0.260)   16.18  10.38     197,804    1.46     1.67     12.73       --
19932    16.18    0.19    (0.745)  (0.555)  (0.195)     --   (0.195)   15.43  (3.43)    356,708    1.40*    1.73*    11.48       --
1994     15.43    0.28    (0.800)  (0.520)  (0.240)     --   (0.240)   14.67  (3.38)    261,461    1.43     1.81     25.75       --
1995     14.67    0.33     2.608    2.938   (0.298)     --   (0.298)   17.31  20.32     260,917    1.43     2.10     14.60       --
1996     17.31    0.28     2.779    3.059   (0.339)     --   (0.339)   20.03  17.83     277,746    1.40     1.49     31.55   0.0508
19974    20.03    0.09     2.451    2.541   (0.100) (1.311)  (0.411)   21.16  12.86     299,375    1.38*    0.85*    20.07   0.0501
Class II Shares:
19953    15.47    0.11     1.826    1.936   (0.126)     --   (0.126)   17.28  12.56       1,060    1.90*    1.92*    14.60       --
1996     17.28    0.21     2.735    2.945   (0.245)     --   (0.245)   19.98  17.16       3,882    1.95     0.94     31.55   0.0508
19974    19.98    0.04     2.444    2.484   (0.043) (1.311)  (1.354)   21.11  12.60       6,228    1.92*    0.30*    20.07   0.0501
Franklin Investment Grade Income Fund:
Class I Shares:
19921     9.03    0.62    (0.086)   0.534   (0.634)     --   (0.634)    8.93   6.16      29,367    1.08     7.02     27.28       --
19932     8.93    0.38     0.402    0.782   (0.402)     --   (0.402)    9.31   8.94      35,970    1.09*    5.61*    53.19       --
1994      9.31    0.45    (0.544)  (0.094)  (0.396)     --   (0.396)    8.82  (1.02)     29,553    1.05     4.91     10.57       --
1995      8.82    0.44     0.259    0.699   (0.479)     --   (0.479)    9.04   8.21      29,824    1.09     4.96     64.70       --
1996      9.04    0.44    (0.064)   0.376   (0.406)     --   (0.406)    9.01   4.25      29,372    1.06     4.81     20.06       --
19974     9.01    0.20    (0.009)   0.191   (0.231)     --   (0.231)    8.97   2.13      36,920    1.03*    4.68*    15.00       --
Advisor Class Shares:
19975     9.03    0.13    (0.094)   0.036   (0.106)     --   (0.106)    8.96   0.40          38    0.84*    4.86*    15.00       --
 
*Annualized
+Represents the average broker  commission rate per share paid by the Fund in connection with the execution of the Fund's  portfolio
transactions in equity securities.
++Total return measures the change in value of an investment over the periods indicated.  It is not annualized.  It does not include
the maximum front-end sales charge or contingent  deferred sales charge, and assumes  reinvestment of dividends and capital gains at
net asset value.  Prior to May 1, 1994,  dividends were  reinvested at the maximum  offering  price,  and capital gains at net asset
value.  Effective May 1, 1994, with the  implementation of the Rule 12b-1 distribution plans for Class I shares, the sales charge on
reinvested dividends was eliminated.
1For the year ended December 31, 1992.
2For the nine months ended September 30, 1993.
3For the period May 1, 1995 to September 30, 1995.
4For the six months ended March 31, 1997.
5For the period January 1, 1997 to March 31, 1997.
</TABLE>








Franklin Managed Trust Semi-Annual Report March 31, 1997.


APPENDIX

DESCRIPTION OF GRAPHIC  MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304
(a)OF REGULATION S-T)


GRAPHIC MATERIAL (1)

This chart shows in bar format portfolio breakdown and sector price stability of
the fund's securities on 3/31/97, as a percentage of total net assets.

<TABLE>
<CAPTION>

Portfolio Breakdown and Sector Price Stability

<S>                                       <C>
Fixed-Rate Preferred Stocks               25.9%
Adjustable-Rate Preferred Stocks          11.7%
Auction-Rate Preferred Stocks             39.3%
Cash & Equivalents                        22.1%
</TABLE>


GRAPHIC MATERIAL (2)

This chart shows in pie format the fund's credit  quality  breakdown on 3/31/97,
as a percentage of total net assets.

<TABLE>
<CAPTION>

Credit Quality Breakdown on March 31, 1997

<S>                                 <C>
AAA                                 21.8%
AA                                   3.8%
A                                   48.9%
BBB                                 21.6%
Below Investment Grade               3.9%
</TABLE>


GRAPHIC MATERIAL (3)

This chart shows in pie format the fund's credit  quality  breakdown on 3/31/97,
as a percentage of total net assets.

<TABLE>
<CAPTION>

Credit Quality Breakdown on March 31, 1997

<S>               <C>
AAA               71.7%
AA                 5.4%
A                 22.9%
</TABLE>





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