FRANKLIN MANAGED TRUST, 485B24E, 1997-01-31

FRANKLIN MANAGED TRUST
485B24E, 1997-01-31

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As filed with the Securities and Exchange Commission on January 31, 1997

File Nos.
33-9994
811-4894

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N- 1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre- Effective Amendment No.

Post-Effective Amendment No. 16 (X)

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 17 (X)

FRANKLIN MANAGED TRUST
(Exact Name of Registrant as Specified in Charter)

777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (415) 312- 2000

HARMON E. BURNS, 777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Name and Address of Agent for Service of Process)

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[x] on February 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on [date] pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on [date] pursuant to paragraph (a)(ii) of rule 485

Calculation of Registration Fee Under the Securities Act of 1933

Title of Proposed Amount
Securities Amount Maximum Proposed of
Being Being Offering Price Aggregate Offering
Registered Registered* Per Share Price* Fee*
________________________________________________________________
Beneficial 1,100,186 $23.99 $0 $0
Interest
________________________________________________________________

*Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 5,245,942 shares were redeemed during the fiscal year ended
September 30, 1996. 4,145,756 shares were used for reductions pursuant to
Paragraph (d) of Rule 24f-2 during the current year. 1,100,186 shares is the
amount of redeemed shares used for reduction in this amendment. Pursuant to
457(d) under the Securities Act of 1933, the maximum public offering price of
$23.99 per share on January 20, 1996, is the price used as the basis for these
calculations. The maximum public offering price per share varies and, thus, may
be higher or lower than $23.99 in the future. No fee is required for the
1,100,186 shares.

As part of its initial registration statement, the registrant has elected to
register an indefinite number of shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and hereby continues such election.
The registrant filed the notice required by Rule 24f-2 for its most recent
fiscal year on November 27, 1996.

FRANKLIN MANAGED TRUST
CROSS REFERENCE SHEET

FORM N-1A

PART A: INFORMATION REQUIRED IN PROSPECTUS
(Franklin Corporate Qualified Dividend Fund)

N-1A Location in
ITEM NO. ITEM REGISTRATION STATEMENT

1. Cover Page Cover Page

2. Synopsis "Expense Summary"

3. Condensed Financial "Financial Highlights"; "How
Information does the Fund Measure
Performance?"

4. General Description of "How is the Fund Organized?";
Registrant "How does the Fund Invest its
Assets?"; "What are the Fund's
Potential Risks?"

5. Management of the Fund "Who Manages the Fund?"

5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders

6. Capital Stock and Other "How is the Fund Organized?";
Securities "Services to Help You Manage
Your Account"; "What
Distributions Might I Receive
from the Fund?"; "How Taxation
Affects You and the Fund"

7. Purchase of Securities Being "How Do I Buy Shares?"; "May I
Offered Exchange Shares for Shares of
Another Fund?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account";
"Useful Terms and Definitions"

8. Redemption or Repurchase "May I Exchange Shares for
Shares of Another Fund?"; "How
Do I Sell Shares?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account"

9. Pending Legal Proceedings Not Applicable

FRANKLIN MANAGED TRUST
CROSS REFERENCE SHEET

FORM N-1A

PART A: INFORMATION REQUIRED IN PROSPECTUS
(Franklin Rising Dividends Fund)

N-1A Location in
ITEM NO. ITEM REGISTRATION STATEMENT

1. Cover Page Cover Page

2. Synopsis "Expense Summary"

3. Condensed Financial "Financial Highlights"; "How
Information does the Fund Measure
Performance?"

4. General Description of "How is the Fund Organized?";
Registrant "How does the Fund Invest its
Assets?"; "What are the Fund's
Potential Risks?"

5. Management of the Fund "Who Manages the Fund?"

5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders

8. Redemption or Repurchase "May I Exchange Shares for
Shares of Another Fund?"; "How
Do I Sell Shares?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account"

9. Pending Legal Proceedings Not Applicable

FRANKLIN MANAGED TRUST
CROSS REFERENCE SHEET

FORM N-1A

PART A: INFORMATION REQUIRED IN PROSPECTUS
(Franklin Investment Grade Income Fund)

N-1A Location in
ITEM NO. ITEM REGISTRATION STATEMENT

1. Cover Page Cover Page

2. Synopsis "Expense Summary"

3. Condensed Financial "Financial Highlights"; "How
Information does the Fund Measure
Performance?"

4. General Description of "How is the Fund Organized?";
Registrant "How does the Fund Invest its
Assets?"; "What are the Fund's
Potential Risks?"

5. Management of the Fund "Who Manages the Fund?"

5A. Management's Discussion of Contained in Registrant's Annual
Fund Performance Report to Shareholders

8. Redemption or Repurchase "May I Exchange Shares for
Shares of Another Fund?"; "How
Do I Sell Shares?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account"

9. Pending Legal Proceedings Not Applicable

FRANKLIN MANAGED TRUST
CROSS REFERENCE SHEET

FORM N-1A

Part B: Information Required in
STATEMENT OF ADDITIONAL INFORMATION

10. Cover Page Cover Page

11. Table of Contents Contents

12. General Information and Not Applicable
History

13. Investment Objectives and "How does the Fund Invest its
Policies Assets?"; "Investment Restrictions"

14. Management of the Registrant "Officers and Trustees"

15. Control Persons and "Officers and Trustees"; "Investment
Principal Holders of Management and Other Services";
Securities "Miscellaneous Information"

16. Investment Advisory and "Investment Management and Other
Other Services Services"; "The Fund's Underwriter"

17. Brokerage Allocation and "How does the Fund Buy Securities
Other Practices For its Portfolio?"

18. Capital Stock and Other See Prospectus "How is the Fund
Securities Organized?"

19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Being Shares?"; "How are Fund Shares
Offered Valued?"; "Financial Statements"

20. Tax Status "Additional Information on
Distributions and Taxes"

21. Underwriters "The Fund's Underwriter"

22. Calculation of Performance "How does the Fund Measure
Data Performance?"

23. Financial Statements "Financial Statements"

Prospectus & Application

Franklin Corporate Qualified Dividend Fund

Investment Strategy

INCOME

February 1, 1997

This prospectus describes the Franklin Corporate Qualified Dividend Fund (the
"Fund"). It contains information you should know before investing in the Fund.
Please keep it for future reference.

The Fund has a Statement of Additional Information ("SAI"), dated February 1,
1997, which may be amended from time to time. It includes more information about
the Fund's procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a larger
print version of this prospectus, call 1-800/DIAL BEN or write the Fund at the
address shown.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE, DEALER,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.

FRANKLIN

CORPORATE

QUALIFIED

DIVIDEND FUND

FEBRUARY 1, 1997

WHEN READING THIS PROSPECTUS, YOU WILL SEE CERTAIN TERMS BEGINNING WITH CAPITAL
LETTERS. THIS MEANS THE TERM IS EXPLAINED IN OUR GLOSSARY SECTION.

TABLE OF CONTENTS

ABOUT THE FUND
Expense Summary..................................... 2
Financial Highlights................................ 3
How does the Fund Invest its Assets?................ 6
What are the Fund's Special Considerations?......... 9
What are the Fund's Potential Risks?................ 10
Who Manages the Fund?............................... 11
How does the Fund Measure Performance?.............. 12
How Taxation Affects the Fund and its Shareholders.. 13
How is the Trust Organized?......................... 14

ABOUT YOUR ACCOUNT
How Do I Buy Shares?................................ 15
May I Exchange Shares for Shares of Another Fund?... 18
How Do I Sell Shares?............................... 20
What Distributions Might I Receive from the Fund?... 23
Transaction Procedures and Special Requirements..... 24
Services to Help You Manage Your Account............ 27

GLOSSARY
Useful Terms and Definitions........................ 30

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

ABOUT THE FUND

EXPENSE SUMMARY

This table is designed to help you understand the costs of investing in the
Fund. It is based on the Fund's historical expenses for the fiscal year ended
September 30, 1996. The Fund's actual expenses may vary.

A. SHAREHOLDER TRANSACTION EXPENSES+

Maximum Sales Charge Imposed on

Purchases (as a percentage of Offering Price) 1.50%++
Deferred Sales Charge None+++
Exchange Fee (per transaction) $5.00*

B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)

Management Fees 0.50%
Rule 12b-1 Fees 0.21%**
Other Expenses 0.36%
Total Fund Operating Expenses 1.07%

C. EXAMPLE

Assume the Fund's annual return is 5%, operating expenses are as described
above,and you sell your shares after the number of years shown. These are the
projected expenses for each $1,000 that you invest in the Fund.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

$26*** $49 $73 $144

THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in its Net Asset Value or dividends and are not directly charged
to your account.

+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.

++There is no front-end sales charge if you invest $1 million or more.

+++A Contingent Deferred Sales Charge of 1% may apply to purchases of $1 million
or more if you sell the shares within one year. See "How Do I Sell Shares? -
Contingent Deferred Sales Charge" for details.

*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.

**These fees may not exceed 0.25%. The combination of front-end sales charges
and Rule 12b-1 fees could cause long-term shareholders to pay more than the
economic equivalent of the maximum front-end sales charge permitted under the
NASD's rules. It is estimated, however, that this would take a substantial
number of years.

***Assumes a Contingent Deferred Sales Charge will not apply.

Financial Highlights

This table summarizes the Fund's financial history. The information has been
audited by Tait, Weller & Baker, the Fund's independent auditors. Their audit
report covering each of the most recent five years appears in the financial
statements in the Trust's Annual Report to Shareholders for the fiscal year
ended September 30, 1996. The Annual Report to Shareholders also includes more
information about the Fund's performance. For a free copy, please call Fund
Information.
<TABLE>
<CAPTION>

For the Year Ended September 30, For the Year Ended January 31,

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993* 1992 1991 1990 1989 1988** 1987***
Per Share Operating Performance

Net Asset Value
at Beginning of Period $23.76 $23.69 $24.47 $23.75 $21.63 $19.03 $20.65 $21.11 $21.77 $25.00
Net Investment Income 1.10 1.21 1.02 0.73 1.37 1.73 1.77 1.76 1.84 1.68
Net Realized & Unrealized
Gain (Loss) on Securities (0.190) -- (0.844) 0.777 2.144 2.540 (1.566) (0.434) (0.650) (3.460)
Total From
Investment Operations 0.910 1.210 0.176 1.507 3.514 4.270 0.204 1.326 1.190 (1.780)
Distributions from
Net Investment Income (1.150) (1.140) (0.956) (0.787) (1.394) (1.670) (1.824) (1.786) (1.850) (1.450)
Net Asset Value
at End of Year $23.52 $23.76 $23.69 $24.47 $23.75 $21.63 $19.03 $20.65 $21.11 $21.77
Total Return+ 3.94% 5.26% 0.72% 6.44% 16.75% 23.25% 1.05% 6.42% 5.68% (7.41)%

Ratios/Supplemental Data

Net Assets at End
of Period (in 000's) $27,791 $27,793 $31,790 $33,849 $29,444 $22,242 $17,498 $23,260 $30,632 $14,134
Ratio of Expenses
to Average Net Assets 1.07% 1.02% 1.00% 1.06%++ 1.10% 1.24% 1.33% 1.43% 1.46% 1.34%++
Ratio of Net Investment
Income to Average Net Assets 4.64% 5.02% 4.19% 4.09%++ 5.97% 8.09% 8.84% 8.31% 8.51% 7.94%++
Portfolio Turnover Rate 24.88% 29.18% 32.17% 27.46% 29.01% --% 1.55% 14.42% 8.00% 149.17%
Average Commission Rate+++ 0.0600 -- -- -- -- -- -- -- -- --
</TABLE>

*For the period ended September 30, 1993.

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

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

+Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum front-end sales charge or the
Contingent Deferred Sales Charge. It also assumes reinvestment of dividends and
capital gains, if any, at Net Asset Value.

++Annualized.

+++Represents the average commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities.

HOW DOES THE FUND INVEST ITS ASSETS?

THE FUND'S INVESTMENT OBJECTIVE

The Fund is designed to serve as an income producing vehicle for the cash
reserves of taxable corporations. The Fund's investment objective is to generate
high after-tax income for corporations, consistent with investment in investment
quality securities. The objective is a fundamental policy of the Fund and may
not be changed without shareholder approval. Of course, there is no assurance
that the Fund's objective will be achieved.

TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST

The Fund seeks to achieve its investment objective by maximizing the amount of
dividend income it receives that qualifies for the 70% corporate
dividends-received deduction under current federal income tax laws.

Under normal market conditions, at least 75% of the Fund's total assets will be
invested in equity securities of domestic corporations paying dividends that
qualify for the dividends-received deduction. The types of securities in which
the Fund typically invests include adjustable rate preferred stocks, auction
rate preferred stocks, conventional preferred stocks, and common stocks.

Because the Fund seeks income consistent with investment in investment quality
securities, under normal market conditions at least 95% of the Fund's portfolio
is invested in equity securities of issuers whose long-term debt securities are
either rated in one of the four highest rating categories (AAA, AA, A or BBB by
S&P, or Aaa, Aa, A, or Baa by Moody's) or, if unrated, are of comparable quality
as determined by Advisory Services. Debt securities rated within the top three
categories comprise what are known as high-grade bonds and are regarded as
having a strong capacity to pay principal and interest. Medium-grade bonds (BBB
by S&P or Baa by Moody's) are regarded as having an adequate capacity to pay
principal and interest but with greater vulnerability to adverse economic
conditions and some speculative characteristics. See "Appendix" in the SAI for a
further description of these ratings.

Although market risks are inherent in any investment program, Advisory Services
believes that such risks may be reduced through careful analysis of prospective
issuers. While the opinion of rating services may be considered in selecting
securities for the Fund's portfolio, Advisory Services relies primarily on its
own credit analysis, which includes a study of the existing debt, capital
structure, ability to service debt and to pay dividends, and the credit rating
and current trend of earnings for any company under consideration.

The common stocks that the Fund purchases are generally not rated and ratings on
the issuers' preferred or debt securities should not be construed as a rating on
the issuers' common stocks.

ADJUSTABLE RATE AND AUCTION RATE PREFERRED STOCKS. The Fund may invest a portion
of its portfolio in adjustable rate and auction rate preferred stocks, the
dividends on which qualify for the dividends-received deduction.

Adjustable rate stocks are preferred stocks with cumulative and adjustable
dividends. Regardless of the issuer, these stocks generally have the same terms
and provisions, except for the specific adjustment formula used to determine
their quarterly dividend rate. These formulas vary in regard to (i) the fixed
amount of premium or discount in relation to a particular U.S. Treasury
instrument rate and (ii) the minimum and maximum range within which the dividend
rate may fluctuate. The applicable rate is generally determined by the issuer at
the beginning of each quarterly dividend period by adding or subtracting
(depending upon the terms of the issue) either a fixed number of basis points or
a percentage calculation to the highest of three specified rates: a "Treasury
Bill Rate," a "Ten-Year Constant Maturity Rate" and a "Twenty-Year Constant
Maturity Rate."

Auction rate preferred stocks are similar to short-term, corporate money market
instruments in that the auction rate preferred stockholder normally has the
opportunity to liquidate at par every 49 days, at which time the dividend rate
is reset. Generally, the maximum dividend rate ranges from 110% to 250%,
depending on quality, of the sixty-day "AA" Composite Commercial Paper Rate and
the minimum dividend rate is 56% of that same rate. The maximum and minimum
dividend rates may be higher or lower depending upon the particular issuer.

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

OTHER INVESTMENT POLICIES OF THE FUND

SHORT-TERM INVESTMENTS. In any period of stock market weakness or uncertain
market or economic conditions as determined by Advisory Services, the Fund may
establish a defensive position to preserve capital by temporarily investing all
or a part of its assets in short-term, fixed-income securities or retaining such
assets in cash or cash equivalents. Such investments, which may also be made on
a temporary basis pending investment in equity securities, would include U.S.
government securities, bank certificates of deposit, bankers' acceptances,
high-quality commercial paper issued by domestic corporations and repurchase
transactions.

REPURCHASE AGREEMENTS. The Fund may engage in repurchase transactions in which
the Fund buys a U.S. government security subject to resale to a bank or dealer
at an agreed-upon price and date. The transaction requires the collateralization
of the seller's obligation by the transfer of securities with an initial market
value, including accrued interest, equal to at least 102% of the dollar amount
invested by the Fund in each agreement, with the value of the underlying
security marked-to-market daily to maintain coverage of at least 100%. A default
by the seller might cause the Fund to experience a loss or delay in the
liquidation of the collateral securing the repurchase agreement. The Fund might
also incur disposition costs in liquidating the collateral. The Fund, however,
intends to enter into repurchase agreements only with financial institutions
such as broker-dealers and banks that are deemed creditworthy by Advisory
Services. A repurchase agreement is deemed to be a loan by the Fund under the
1940 Act. The U.S. government security subject to resale (the collateral) will
be held on behalf of the Fund by a custodian bank approved by the Board and will
be held pursuant to a written agreement.

LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
and subject to the following conditions, the Fund may lend its portfolio
securities to qualified securities dealers or other institutional investors,
provided that such loans do not exceed 30% of the value of the Fund's total
assets at the time of the most recent loan. The Fund currently intends to limit
its lending of securities to no more than 5% of its total assets. The borrower
must deposit with the Fund's custodian bank collateral with an initial market
value of at least 102% of the initial market value of the securities loaned,
including any accrued interest, with the value of the collateral and loaned
securities marked-to-market daily to maintain collateral coverage of at least
100%. This collateral shall consist of cash, securities issued by the U.S.
government, its agencies or instrumentalities, or irrevocable letters of credit.
The lending of securities is a common practice in the securities industry. The
Fund may engage in security loan arrangements with the primary objective of
increasing the Fund's income either through investing the cash collateral in
short-term interest bearing obligations or by receiving a loan premium from the
borrower. Under the securities loan agreement, the Fund continues to be entitled
to all dividends or interest on any loaned securities. As with any extension of
credit, there are risks of delay in recovery and loss of rights in the
collateral should the borrower of the security fail financially.

BORROWING. The Fund may borrow money only from banks for temporary or emergency
purposes in amounts not to exceed 15% of the Fund's total assets. Additional
investments may not be made while any such borrowings are in excess of 5% of the
Fund's total assets.

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

ILLIQUID INVESTMENTS. The Fund's policy is not to invest more than 10% of its
net assets in illiquid or restricted securities. Illiquid securities are
generally securities that cannot be sold within seven days in the normal course
of business at approximately the amount at which the Fund has valued them.

PERCENTAGE RESTRICTIONS. If a percentage restriction noted above is adhered to
at the time of investment, a later increase or decrease in the percentage
resulting from a change in the value of portfolio securities or the amount of
net assets will not be considered a violation of any of the foregoing policies.

OTHER POLICIES AND RESTRICTIONS. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
restrictions and more information about the Fund's investment policies, please
see "How does the Fund Invest its Assets?" and "Investment Restrictions" in the
SAI.

WHAT ARE THE FUND'S SPECIAL CONSIDERATIONS?

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

To be eligible for the 70% dividends-received deduction on any dividend paid by
the Fund, you must also satisfy certain federal tax requirements discussed under
"How Taxation Affects the Fund and its Shareholders."

If you are in the 35% regular tax bracket, the effect of the tax deduction is
that 89.5% of the Fund's qualifying dividends will be retained as after-tax
income. On an after-tax basis, the Fund's qualifying dividends would likely give
you a significantly higher return than investments in taxable money market
instruments, as illustrated in the chart below. There is no assurance, of
course, that any of these results will be attained, that federal income tax laws
applicable to the dividends-received deduction will remain the same or that such
deduction may not be modified in the future.

The following chart compares the net after-tax yields for a fully taxable
investment and the Fund, assuming the maximum 1997 federal corporate income tax
rate of 35% and that 100% of the Fund's dividends qualify for the current 70%
dividends-received deduction.

Chart Omitted - Description follows

AFTER-TAX COMPARISON OF THE CORPORATE QUALIFIED
DIVIDEND FUND AND A FULLY TAXABLE INVESTMENT

CORPORATE QUALIFIED FULLY TAXABLE
PRE-TAX YIELDS DIVIDEND FUND INVESTMENT

12% 10.74% 7.8%

10% 8.95% 6.5%

8% 7.16% 5.2%

6% 5.37% 3.9%

4% 3.58% 2.6%

If we assume a pre-tax yield of 12%, an investment in the Franklin Corporate
Qualified Dividend Fund will result in an after-tax return of approximately
10.74%. If we compare this with a fully-taxable investment, the after-tax return
is only 7.8% since no portion of the dividends qualify for the 70%
dividends-received deduction.

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

WHAT ARE THE FUND'S POTENTIAL RISKS?

The value of your shares will increase as the value of the securities owned by
the Fund increases and will decrease as the value of the Fund's investments
decrease. In this way, you participate in any change in the value of the
securities owned by the Fund. In addition to the factors that affect the value
of any particular security that the Fund owns, the value of Fund shares may also
change with movements in the stock market as a whole.

MARKET RISK. If there is a general market decline, shown for example by a drop
in the Dow Jones Industrials or other equity based index, the value of what the
Fund owns, and thus the Fund's share price, may also decline. The value of the
stock market has increased and decreased in the past. These changes are
unpredictable and may happen again in the future.

WHO MANAGES THE FUND?

THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations.

INVESTMENT MANAGER. As of July 1, 1996, Advisory Services manages the Fund's
assets and makes its investment decisions. Advisory Services also performs
similar services for other funds. It is wholly owned by Resources, a publicly
owned company engaged in the financial services industry through its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are the principal
shareholders of Resources. Together, Advisory Services and its affiliates manage
over $171 billion in assets. Advisory Services employs the same individuals to
manage the Fund's portfolio as the previous manager. The terms and conditions of
the management services provided to the Fund remain the same. Please see
"Investment Management and Other Services" and "Miscellaneous Information" in
the SAI for information on securities transactions and a summary of the Fund's
Code of Ethics.

MANAGEMENT TEAM. The team responsible for the day-to-day management of the
Fund's portfolio is: William Lippman and Philip Smith since the Fund's
inception, and Margaret McGee since 1988.

William Lippman
President of Advisory Services

Mr. Lippman holds a Master of Business Administration degree from New York
University and a Bachelor of business administration degree from City College of
New York. Mr. Lippman has been in the securities industry for over 30 years and
with the Franklin Templeton Group since 1988.

Philip Smith
Vice President of Advisory Services

Mr. Smith holds a Doctor of Jurisprudence degree from Yale Law School and a
Bachelor of Arts degree from Princeton University. He has been in the securities
industry since 1964 and with the Franklin Templeton Group since 1988.

Margaret McGee
Vice President of Advisory Services

Ms. McGee holds a Bachelor of Arts degree in business administration from
William Paterson College. She has been in the securities industry since 1985 and
with the Franklin Templeton Group since 1988.

MANAGEMENT FEES. During the fiscal year ended September 30, 1996, management
fees totaling 0.50% of the average daily net assets of the Fund were paid to the
investment manager. Total expenses of the Fund, including fees paid to the
investment manager, were 1.07%.

PORTFOLIO TRANSACTIONS. Advisory Services tries to obtain the best execution on
all transactions. If Advisory Services believes more than one broker or dealer
can provide the best execution, consistent with internal policies it may
consider research and related services and the sale of Fund shares, as well as
shares of other funds in the Franklin Templeton Group of Funds, when selecting a
broker or dealer. Please see "How does the Fund Buy Securities for its
Portfolio?" in the SAI for more information.

ADMINISTRATIVE SERVICES. Under an agreement with Advisory Services, FT Services
provides certain administrative services and facilities for the Fund. Please see
"Investment Management and Other Services" in the SAI for more information.

THE FUND'S RULE 12B-1 PLAN

The Fund has a distribution plan or "Rule 12b-1 Plan" under which it may
reimburse Distributors or others for activities primarily intended to sell
shares of the Fund. These expenses may include, among others, distribution or
service fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates, printing prospectuses
and reports used for sales purposes, preparing and distributing sales literature
and advertisements, and a prorated portion of Distributors' overhead expenses.

Payments by the Fund under the plan may not exceed 0.25% per year of the Fund's
average daily net assets, payable on a monthly basis. All distribution expenses
over this amount will be borne by those who have incurred them. During the first
year after certain purchases made without a sales charge, Distributors may keep
the Rule 12b-1 fees associated with the purchase. For more information, please
see "The Fund's Underwriter" in the SAI.

HOW DOES THE FUND MEASURE PERFORMANCE?

From time to time, the Fund advertises its performance. The more commonly used
measures of performance are total return, current yield and current distribution
rate. The Fund may also advertise its taxable-equivalent yield and distribution
rate. Performance figures are usually calculated using the maximum sales charge,
but certain figures may not include the sales charge.

Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield shows the
income per share earned by the Fund. The current distribution rate shows the
dividends or distributions paid to shareholders by the Fund. This rate is
usually computed by annualizing the dividends paid per share during a certain
period and dividing that amount by the current Offering Price. Unlike current
yield, the current distribution rate may include income distributions from
sources other than dividends and interest received by the Fund. The
taxable-equivalent yield and distribution rate show the before-tax yield or
distribution rate that would have to be earned from a taxable investment to
equal the Fund's yield or distribution rate, assuming one or more tax rates.

The Fund's investment results will vary. Performance figures are always based on
past performance and do not guarantee future results. For a more detailed
description of how the Fund calculates its performance figures, please see "How
does the Fund Measure Performance?" in the SAI.

HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS

The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.

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

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

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

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

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

For the fiscal year ended September 30, 1996, 100% of the income dividends paid
by the Fund qualified for the corporate dividends-received deduction, subject to
certain holding period and debt financing restrictions imposed under the Code on
the corporation claiming the deduction.

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

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

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

If you are not considered a U.S. person for federal income tax purposes, you
should consult with your financial or tax advisor regarding the applicability of
U.S. withholding or other taxes on distributions received from the Fund and the
application of foreign tax laws to these distributions.

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

How is the Trust Organized?

The Fund is a diversified series of Franklin Managed Trust (the "Trust"), an
open-end management investment company, commonly called a mutual fund. It was
organized as a Massachusetts business trust in July 1986, and is registered with
the SEC under the 1940 Act. Shares of each series of the Trust have equal and
exclusive rights to dividends and distributions declared by that series and the
net assets of the series in the event of liquidation or dissolution. Shares of
the Fund are considered Class I shares for redemption, exchange and other
purposes. Additional series and classes of shares may be offered in the future.

The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.

The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. A meeting may also be called by the Board in its discretion
or by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection with
removing members of the Board.

ABOUT YOUR ACCOUNT

HOW DO I BUY SHARES?

OPENING YOUR ACCOUNT

To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check.

MINIMUM
INVESTMENTS*

To Open Your Account $25,000
To Add to Your Account $ 5,000

*We may refuse any order to buy shares.

Sales Charge Reductions and Waivers

If you qualify to buy shares under one of the sales charge reduction or waiver
categories described below, please include a written statement with each
purchase order explaining which privilege applies. If you don't include this
statement, we cannot guarantee that you will receive the sales charge reduction
or waiver.

QUANTITY DISCOUNTS. The sales charge you pay depends on the dollar amount you
invest, as shown in the table below.

TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE

Less than $500,000 1.50% 1.52% 1.50%
$500,000 but less than $1,000,000 1.00% 1.01% 1.00%
$1,000,000 or more* None None None

*If you invest $1 million or more, a Contingent Deferred Sales Charge may be
imposed on an early redemption. Please see "How Do I Sell Shares? - Contingent
Deferred Sales Charge." Please also see "Other Payments to Securities Dealers"
below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases.

LETTER OF INTENT. You may buy shares at a reduced sales charge by completing the
Letter of Intent section of the shareholder application. A Letter of Intent is a
commitment by you to invest a specified dollar amount during a 13 month period.
The amount you agree to invest determines the sales charge you pay.

BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:

o You authorize Distributors to reserve 5% of your total intended purchase in
Fund shares registered in your name until you fulfill your Letter.

o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.

o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.

o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.

Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct.

If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.

SALES CHARGE WAIVERS. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver category 2 below: (i)
the distributions must be reinvested within 365 days of their payment date, and
(ii) Class II distributions may be reinvested in either Class I or Class II
shares. Class I distributions may only be reinvested in Class I shares.

The Fund's sales charges will not apply if you are buying shares with money from
the following sources:

1. Accounts that were opened in Franklin Corporate Cash Management Fund prior
to January 1, 1989

2. Dividend and capital gain distributions from any Franklin Templeton Fund or
a REIT sponsored or advised by Franklin Properties, Inc.

3. Redemptions from any Franklin Templeton Fund if you:

o Originally paid a sales charge on the shares,

o Reinvest the money within 365 days of the redemption date, and

o Reinvest the money in the same class of shares.

An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares were subject to a
Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.

If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.

4. Companies exchanging shares or selling assets pursuant to a merger,
acquisition or exchange offer

5. Redemptions from other mutual funds

If you sold shares of a fund that is not a Franklin Templeton Fund within the
past 60 days, you may invest the proceeds without any sales charge if (a) the
investment objectives were similar to the Fund's, and (b) your shares in that
fund were subject to any front-end or contingent deferred sales charges at the
time of purchase. You must provide a copy of the statement showing your
redemption.

The Fund's sales charges will also not apply to purchases by:

6. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs

7. Registered Securities Dealers and their affiliates, for their investment
accounts only

8. Accounts managed by the Franklin Templeton Group

9. Certain unit investment trusts and their holders reinvesting distributions
from the trusts

10. Investors exchanging Advisor Class shares from any of the Franklin
Templeton Funds, or, beginning on or about May 1, 1997, Class Z shares of
Franklin Mutual Series Fund Inc.

OTHER PAYMENTS TO SECURITIES DEALERS

The payments described below may be made to Securities Dealers who initiate and
are responsible for certain purchases made without a sales charge. A Securities
Dealer may only receive one of these payments for each qualifying purchase.
Securities Dealers who receive payments under item 1 below will earn the Rule
12b-1 fee associated with the purchase starting in the thirteenth calendar month
after the purchase. The payments are paid by Distributors or one of its
affiliates, at its own expense, and not by the Fund or its shareholders.

1. Securities Dealers will receive up to 0.75% of the purchase price for
purchases of $1 million or more.

2. Securities Dealers may receive up to 0.25% of the purchase price for
purchases made under waiver category 6 above.

Securities Dealers may receive additional compensation from Distributors or an
affiliated company in connection with selling shares of the Franklin Templeton
Funds. Compensation may include financial assistance for conferences,
shareholder services, automation, sales or training programs, or promotional
activities. Registered representatives and their families may be paid for travel
expenses, including lodging, in connection with business meetings or seminars.
In some cases, this compensation may only be available to Securities Dealers
whose representatives have sold or are expected to sell significant amounts of
shares. Securities Dealers may not use sales of the Fund's shares to qualify for
this compensation if prohibited by the laws of any state or self-regulatory
agency, such as the NASD.

MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?

We offer a wide variety of funds. If you would like, you can move your
investment from your Fund, its investment objective and polices, account to an
existing or new account in another Franklin Templeton Fund (an "exchange").
Because it is technically a sale and a purchase of shares, an exchange is a
taxable transaction.

Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums.

METHOD STEPS TO FOLLOW

BY MAIL 1. Send us written instructions signed by all account owners

2. Include any outstanding share certificates for the shares
you're exchanging

BY PHONE Call Shareholder Services or TeleFACTS(R)

If you do not want the ability to exchange by phone to
apply to your account, please let us know.

THROUGH YOUR DEALER Call your investment representative

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.

WILL SALES CHARGES APPLY TO MY EXCHANGE?

You generally will not pay a front-end sales charge on exchanges.

If you have held your shares less than six months, however, you will pay the
percentage difference between the sales charge you previously paid and the
applicable sales charge of the new fund. If you have never paid a sales charge
on your shares because, for example, they have always been held in a money fund,
you will pay the Fund's applicable sales charge no matter how long you have held
your shares. These charges may not apply if you qualify to buy shares without a
sales charge.

CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred Sales
Charge when you exchange shares. Any shares subject to a Contingent Deferred
Sales Charge at the time of exchange, however, will remain so in the new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, shares
are exchanged into the new fund in the order they were purchased. If you
exchange shares into one of our money funds, the time your shares are held in
that fund will not count towards the completion of any Contingency Period. For
more information about the Contingent Deferred Sales Charge, please see that
section under "How Do I Sell Shares?"

EXCHANGE RESTRICTIONS

Please be aware that the following restrictions apply to exchanges:

o You may only exchange shares within the same class.*

*Because the Fund does not offer Advisor Class shares, Advisor Class shares of
any Franklin Templeton Fund may be exchanged for shares of the Fund at Net Asset
Value. Beginning on or about May 1, 1997, Class Z shares of Franklin Mutual
Series Fund Inc. may also be exchanged into shares of the Fund.

o The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. PLEASE
NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON YOUR
ACCOUNT(S). Additional procedures may apply. Please see "Transaction Procedures
and Special Requirements."

o The fund you are exchanging into must be eligible for sale in your state.

o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.

o Your exchange may be restricted or refused if you: (i) request an exchange out
of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii) exchange
shares equal to at least $5 million, or more than 1% of the Fund's net assets.
Shares under common ownership or control are combined for these limits. If you
exchange shares as described in this paragraph, you will be considered a Market
Timer. Each exchange by a Market Timer, if accepted, will be charged $5.00. Some
of our funds do not allow investments by Market Timers.

Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.

HOW DO I SELL SHARES?

You may sell (redeem) your shares at any time.

METHOD STEPS TO FOLLOW

By Check 1. You may request redemption drafts (checks) free of charge on
the shareholder application or by calling TeleFACTS(R).

2. You may make checks payable to any person and in any amount
of $100 or more. You will continue to earn income dividends
until the check has cleared. Please see "More Information
About Selling Your Shares By Check" below.

METHOD STEPS TO FOLLOW

By Mail 1. Send us written instructions signed by all account owners

2. Include any outstanding share certificates for the shares
you are selling

3. Provide a signature guarantee if required

4. Corporate accounts may need to send additional documents.
Accounts under court jurisdiction may have additional
requirements.

By Wire 1. Complete the "Wire Redemption Privilege" section of the
shareholder application and send it to us.

2. Call Shareholder Services

3. If we receive your request in proper form before 3:00 p.m.
Pacific time, your wire payment will be sent the next
business day. You may have redemption proceeds wired to an
escrow account the same day, if we receive your request in
proper form before 9:00 a.m. Pacific time.

By Phone Call Shareholder Services

Telephone requests will be accepted:

o If the request is $50,000 or less. Institutional accounts may
exceed $50,000 by completing a separate agreement. Call
Institutional Services to receive a copy.

o If there are no share certificates issued for the shares you
want to sell or you have already returned them to the Fund

o Unless the address on your account was changed by phone
within the last 30 days

Through Your Dealer Call your investment representative

Beginning on or about May 1, 1997, you will automatically be able to redeem
shares by telephone without completing a telephone redemption agreement. PLEASE
NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON YOUR
ACCOUNT. If you later decide you would like this option, send us written
instructions signed by all account owners.

We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.

If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.

Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.

MORE INFORMATION ABOUT SELLING YOUR SHARES BY CHECK

The checks are drawn through Bank of America NT & SA (the "Bank"), the Fund's
custodian. The Bank may terminate this service at any time upon notice to you.

When a check is presented for payment, we will redeem an equivalent number of
shares in your account to cover the amount of the check. Your shares will be
redeemed at the Net Asset Value next determined after we receive a check that
does not exceed the collected balance in your account. If a check is presented
for payment that exceeds the collected balance in your account, the Bank may
return the check unpaid. Since you will not know the exact amount in your
account on the day a check clears, you should not use a check to close your
account.

You will generally not be able to convert a check drawn on your Fund account
into a certified or cashier's check by presenting it at the Bank. Because the
Fund is not a bank, we cannot assure that a stop payment order written by you
will be effective. We will use our best efforts, however, to see that these
orders are carried out.

CONTINGENT DEFERRED SALES CHARGE

If you did not pay a front-end sales charge because you invested $1 million or
more or agreed to invest $1 million or more under a Letter of Intent, a
Contingent Deferred Sales Charge may apply if you sell all or a part of your
investment within the Contingency Period. Once you have invested $1 million or
more, any additional investments you make without a sales charge may also be
subject to a Contingent Deferred Sales Charge if they are sold within the
Contingency Period. The charge is 1% of the value of the shares sold or the Net
Asset Value at the time of purchase, whichever is less.

We will first redeem shares not subject to the charge in the following order:

1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period,

2) Shares purchased with reinvested dividends and capital gain distributions,
and

3) Shares held longer than the Contingency Period.

We then redeem shares subject to the charge in the order they were purchased.

Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.

WAIVERS. We waive the Contingent Deferred Sales Charge for:

o Exchanges

o Account fees

o Sales of shares purchased pursuant to a sales charge waiver

o Redemptions by the Fund when an account falls below the minimum required
account size

o Redemptions through a systematic withdrawal plan set up before February 1,
1995

o Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, up to 1% a month of an account's Net Asset Value (3% quarterly, 6%
semiannually or 12% annually). For example, if you maintain an annual balance of
$1 million, you can withdraw up to $120,000 annually through a systematic
withdrawal plan free of charge.

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?

The Fund declares dividends from its net investment income monthly to
shareholders of record on the last business day of that month and pays them on
or about the 15th day of the next month.

Capital gains, if any, may be distributed annually, usually in December.

Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. The Fund does not pay "interest" or guarantee any
fixed rate of return on an investment in its shares.

If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.

Distribution Options

You may receive your distributions from the Fund in any of these ways:

1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge) by
reinvesting capital gain distributions, or both dividend and capital gain
distributions. This is a convenient way to accumulate additional shares and
maintain or increase your earnings base.

2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge).
Many shareholders find this a convenient way to diversify their investments.

3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
party or to a checking account, you may need a signature guarantee. If you send
the money to a checking account, please see "Electronic Fund Transfers" under
"Services to Help You Manage Your Account."

TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 4 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE FUND. You
may change your distribution option at any time by notifying us by mail or
phone. Please allow at least seven days before the record date for us to process
the new option.

TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS

HOW AND WHEN SHARES ARE PRICED

The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 1:00 p.m.
Pacific time. You can find the prior day's closing Net Asset Value and Offering
Price of the Fund in many newspapers.

To calculate Net Asset Value per share, the Fund's assets are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Fund's assets are valued as
described under "How are Fund Shares Valued?" in the SAI.

THE PRICE WE USE WHEN YOU BUY OR SELL SHARES

You buy shares at the Offering Price, unless you qualify to buy shares at a
reduced sales charge or with no sales charge. The Offering Price is based on the
Net Asset Value per share and includes the maximum sales charge. We calculate it
to two decimal places using standard rounding criteria. You sell shares at Net
Asset Value.

The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.

PROPER FORM

An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.

WRITTEN INSTRUCTIONS

Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:

o Your name,

o The Fund's name,

o A description of the request,

o For exchanges, the name of the fund you're exchanging into,

o Your account number,

o The dollar amount or number of shares, and

o A telephone number where we may reach you during the day, or in the evening if
preferred.

SIGNATURE GUARANTEES

For our mutual protection, we require a signature guarantee in the following
situations:

1) You wish to sell over $50,000 worth of shares,

2) You want the proceeds to be paid to someone other than the registered owners,

3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,

4) We receive instructions from an agent, not the registered owners,

5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.

A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. You should
verify that the institution is an eligible guarantor before signing. A notarized
signature is not sufficient.

SHARE CERTIFICATES

We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.

Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.

TELEPHONE TRANSACTIONS

You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.

When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We will also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.

If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send written
instructions to us, as described elsewhere in this prospectus. If you are unable
to execute a transaction by telephone, we will not be liable for any loss.

ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS

When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.

REQUIRED DOCUMENTS. For corporate accounts, please send us a corporate
resolution when you open your account. This will help avoid delays in processing
your transactions while we verify who may sign on the account.

STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.

ELECTRONIC INSTRUCTIONS. If there is a Securities Dealer or other representative
of record on your account, we are authorized to use and execute electronic
instructions. We will accept electronic instructions directly from your dealer
or representative without further inquiry. Electronic instructions may be
processed through the services of the NSCC, which currently include the NSCC's
"Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's
PCTrades II(TM) System.

KEEPING YOUR ACCOUNT OPEN

Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $12,500. We will only do
this if the value of your account fell below this amount because you voluntarily
sold your shares and your account has been inactive (except for the reinvestment
of distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to
$25,000.

SERVICES TO HELP YOU MANAGE YOUR ACCOUNT

AUTOMATIC INVESTMENT PLAN

Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the automatic investment plan application
included with this prospectus or contact your investment representative. The
market value of the Fund's shares may fluctuate and a systematic investment plan
such as this will not assure a profit or protect against a loss. You may
discontinue the program at any time by notifying Investor Services by mail or
phone.

SYSTEMATIC WITHDRAWAL PLAN

Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50.

If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. If you choose to have the money sent to a
checking account, please see "Electronic Fund Transfers" below.

You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.

To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"

You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? - Systematic
Withdrawal Plan" in the SAI for more information.

ELECTRONIC FUND TRANSFERS

You may choose to have dividend and capital gain distributions from the Fund or
payments under a systematic withdrawal plan sent directly to a checking account.
If the checking account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.

TELEFACTS(R)

From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:

o obtain information about your account;

o obtain price and performance information about any Franklin Templeton Fund;

o exchange shares between identically registered Franklin accounts; and

o request duplicate statements and deposit slips for Franklin accounts.

You will need the Fund's code number to use TeleFACTS. The Fund's code number is
117.

STATEMENTS AND REPORTS TO SHAREHOLDERS

We will send you the following statements and reports on a regular basis:

o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.

o Financial reports of the Fund will be sent every six months. Call Fund
Information if you would like an additional free copy of the Fund's financial
reports or an interim quarterly report.

AVAILABILITY OF THESE SERVICES

The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.

WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?

If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund and Distributors are also located at this address. Advisory Services is
located at One Parker Plaza, 16th Floor, Fort Lee, New Jersey 07024. You may
also contact us by phone at one of the numbers listed below.

HOURS OF OPERATION (PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)

Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.

Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.

GLOSSARY

Useful Terms and Definitions

1940 Act - Investment Company Act of 1940, as amended

Advisers - Franklin Advisers, Inc., the Fund's former investment manager

Advisory Services - Franklin Advisory Services, Inc., the Fund's investment
manager

Board - The Board of Trustees of the Trust

CD - Certificate of deposit

Class I and Class II - Certain funds in the Franklin Templeton Funds offer two
classes of shares, designated "Class I" and "Class II." The two classes have
proportionate interests in the same portfolio of investment securities. They
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Because the Fund's sales charge structure and Rule 12b-1 plan are similar
to those of Class I shares, shares of the Fund are considered Class I shares for
redemption, exchange and other purposes.

Code - Internal Revenue Code of 1986, as amended

Contingency Period - The 12 month period during which a Contingent Deferred
Sales Charge may apply. Regardless of when during the month you purchased
shares, they will age one month on the last day of that month and each following
month.

Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.

Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."

Franklin Funds - The mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust

Franklin Templeton Funds - The Franklin Funds and the Templeton Funds

Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries

Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds

FT Services - Franklin Templeton Services, Inc., the Fund's administrator

Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent

IRS - Internal Revenue Service

Letter - Letter of Intent

Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.

Moody's - Moody's Investors Service, Inc.

NASD - National Association of Securities Dealers, Inc.

Net Asset Value (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.

NSCC - National Securities Clearing Corporation

NYSE - New York Stock Exchange

Offering Price - The public offering price is based on the Net Asset Value per
share and includes the 1.50% sales charge.

REIT - Real Estate Investment Trust

Resources - Franklin Resources, Inc.

SAI - Statement of Additional Information

S&P - Standard & Poor's Corporation

SEC - U.S. Securities and Exchange Commission

Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.

TeleFACTS(R) - Franklin Templeton's automated customer servicing system

Templeton Funds - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund

U.S. - United States

We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.

PROSPECTUS & APPLICATION

FRANKLIN RISING DIVIDENDS FUND

INVESTMENT STRATEGY

GROWTH & INCOME

FEBRUARY 1, 1997

FRANKLIN MANAGED TRUST

This prospectus describes the Franklin Rising Dividends Fund (the "Fund"). It
contains information you should know before investing in the Fund. Please keep
it for future reference.

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

Franklin Rising Dividends Fund

FRANKLIN
RISING DIVIDENDS
FUND

FEBRUARY 1, 1997

When reading this prospectus, you will see certain terms beginning with capital
letters. This means the term is explained in our glossary section.

Table of Contents

About the Fund

Expense Summary.......................................................... 2

Financial Highlights .................................................... 3

How does the Fund Invest its Assets?..................................... 6

What are the Fund's Potential Risks?..................................... 8

Who Manages the Fund?.................................................... 10

How does the Fund Measure Performance?................................... 12

How Taxation Affects the Fund and its Shareholders....................... 12

How is the Trust Organized?.............................................. 14

About Your Account

How Do I Buy Shares?..................................................... 15

May I Exchange Shares for Shares of Another Fund?........................ 21

How Do I Sell Shares?.................................................... 24

What Distributions Might I Receive from the Fund?........................ 26

Transaction Procedures and Special Requirements.......................... 28

Services to Help You Manage Your Account................................. 32

Glossary

Useful Terms and Definitions ............................................ 35

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

Franklin Rising Dividends Fund

ABOUT THE FUND

EXPENSE SUMMARY

This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended September 30, 1996. The Fund's actual expenses may vary.

CLASS I CLASS II

A.Shareholder Transaction Expenses+
Maximum Sales Charge
(as a percentage of Offering Price) 4.50% 1.99%
Paid at time of purchase 4.50%++ 1.00%+++
Paid at redemption++++ None 0.99%
Exchange Fee (per transaction) $5.00* $5.00*
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.75% 0.75%
Rule 12b-1 Fees 0.45%** 1.00%**
Other Expenses 0.20% 0.20%
Total Fund Operating Expenses 1.40% 1.95%

C. Example

Assume the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in the Fund.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class I $59*** $87 $118 $205
Class II $39 $71 $114 $235

For the same Class II investment, you would pay projected expenses of $30 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.

This is just an example. It does not represent past or future expenses or
returns. Actual expenses and returns may be more or less than those shown.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.

+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.

++There is no front-end sales charge if you invest $1 million or more in Class I
shares.

+++Although Class II has a lower front-end sales charge than Class I, its Rule
12b-1 fees are higher. Over time you may pay more for Class II shares. Please
see "How Do I Buy Shares? - Deciding Which Class to Buy."

++++A Contingent Deferred Sales Charge may apply to any Class II purchase if you
sell the shares within 18 months and to Class I purchases of $1 million or more
if you sell the shares within one year. The charge is 1% of the value of the
shares sold or the Net Asset Value at the time of purchase, whichever is less.
The number in the table shows the charge as a percentage of Offering Price.
While the percentage is different depending on whether the charge is shown based
on the Net Asset Value or the Offering Price, the dollar amount paid by you
would be the same. See "How Do I Sell Shares? Contingent Deferred Sales Charge"
for details.

*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.

** These fees may not exceed 0.50% for Class I and 1.00% for Class II. The
combination of front-end sales charges and Rule 12b-1 fees could cause long-term
shareholders to pay more than the economic equivalent of the maximum front-end
sales charge permitted under the NASD's rules.

*** Assumes a Contingent Deferred Sales Charge will not apply.

FINANCIAL HIGHLIGHTS

This table summarizes the Fund's financial history. The information has been
audited by Tait, Weller and Baker, the Fund's independent auditors. Their audit
report covering each of the most recent five years appears in the financial
statements in the Trust's Annual Report to Shareholders for the fiscal year
ended September 30, 1996. The Annual Report to Shareholders also includes more
information about the Fund's performance. For a free copy, please call Fund
Information.

Year Ended September 30,

Class I Shares 1996 1995 1994 1993*** 1992 1991 1990 1989 19881 1987**
Per Share Operating Performance
Net Asset Value At
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period $17.31 $14.67 $15.43 $16.18 $14.91 $11.21 $11.58 $10.01 $8.72 $10.00
Net Investment Income 0.28 0.33 0.28 0.19 0.24 0.28 0.33 0.37 0.33 0.28
Net Realized & Unrealized Gain
(Loss) on Securities 2.779 2.608 (0.800) (0.745) 1.290 3.720 (0.310) 1.560 1.280 (1.370)
Total From Investment Operations 3.059 2.938 (0.520) (0.555) 1.530 4.000 0.020 1.930 1.610 (1.090)
Distributions From
Net Investment Income (0.339) (0.298) (0.240) (0.195) (0.260) (0.300) (0.390) (0.360) (0.320) (0.190)
Net Asset Values at End of Period $20.03 $17.31 $14.67 $15.43 $16.18 $14.91 $11.21 $11.58 $10.01 $8.72
Total Return++ 17.83% 20.32% (3.38)% (3.43)% 10.38% 35.95% .26% 19.60% 18.80% (11.25)%
Ratios/Supplemental Data
Net Assets at
End of Period in (000's) $277,746 $260,917 $261,461 $356,708 $197,804 $71,380 $39,907 $40,550 $31,792 $33,418
Ratio of Expenses to
Average Net Assets 1.40%* 1.43% 1.43% 1.40%* 1.46% 1.53% 1.60% 1.70% 1.62% 1.79%*
Ratio of Net Income to
Average Net Assets 1.49%* 2.10% 1.81% 1.73%* 1.67% 2.16% 2.99% 3.28% 3.44% 3.06%*
Portfolio Turnover Rate 31.55% 14.60% 25.75% 11.48% 12.73% 16.83% 28.87% 26.87% 18.19% 44.57%
Average Commission Rate+ 0.0508
</TABLE>

Year Ended September 30,

Class II Shares 1996 1995****
Net Asset Value at Beginning of Period $17.28 $15.47
Net Investment Income 0.21 .011
Net Realized & Unrealized Gain on Securities 2.735 1.826
Total From Investment Operations 2.945 1.936
Distributions From Net Investment Income (0.245) (0.126)
Net Asset Values at End of Period $19.98 $17.28
Total Return++ 17.16% 12.56%
Ratios/Supplemental Data
Net Assets at End of Period in (000's) $3,882 $1,060
Ratio of Expenses to Average Net Assets 1.95% 1.90%*
Ratio of Net Income to Average Net Assets 0.94% 1.92%*
Portfolio Turnover Rate 31.55% 14.60%
Average Commission Rate+ 0.0508

*Annualized.

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

***For the nine-month period ended September 30, 1993, resulting from a change
in fiscal year.

****For the period May 1, 1995 to September 30, 1995.

+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 the Contingent Deferred Sales Charge and assumes reinvestment of
dividends and capital gains, if any, at Net Asset Value.

1On June 28, 1988, the investment manager changed from L.F. Rothschild Fund
Management, Inc. to Advisers.

How does the Fund Invest its Assets?

THE FUND'S INVESTMENT OBJECTIVE

The Fund's investment objective is long-term capital appreciation. The objective
is a fundamental policy of the Fund and may not be changed without shareholder
approval. Preservation of capital, while not an objective, is also an important
consideration. Incidental to seeking its investment objective of long-term
capital appreciation, the Fund seeks current income. Of course, there is no
assurance that the Fund's objective will be achieved.

TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST

The Fund seeks to achieve its investment objective by investing at least 65% of
its total assets in financially sound companies that have paid consistently
rising dividends (as described below) based on Advisory Services, investment
philosophy that the securities of such companies, because of their dividend
record, have a strong potential to increase in value. Normally, the Fund's
investments are in common stocks, securities convertible into common stocks, or
rights or warrants to subscribe for or purchase common stocks. The remaining 35%
of the Fund's assets typically are invested in dividend-paying equity securities
with similar characteristics that may not meet all of the criteria listed below.
The Fund diversifies its investments among different companies in different
industry segments with no more than 25% of the Fund's portfolio concentrated in
any one industry.

As a fundamental policy, under normal market conditions at least 65% of the
Fund's portfolio is invested in the securities of companies that meet the
following criteria:

o Consistent dividend increases - A company should have increased its dividend
in at least eight out of the last ten years with no year showing a decrease.

o Substantial dividend increases - A company must have increased its dividend at
least 100% over the past ten years.

o Reinvested earnings - Dividend payout should be less than 65% of current
earnings (except for utility companies).

o Strong balance sheet - Long-term debt should be no more than 30% of total
capitalization (except for utility companies).

o Attractive price - The current price should either be in the lower half of the
stock's price/earnings ratio range for the past ten years or less than the
current market price/earnings ratio of the stocks comprising the Standard &
Poor's 500 Stock Index. This criterion applies only at the time of purchase.

Advisory Services believes that a focus on companies with a pattern of rising
dividends will help the Fund attain its objective of long-term capital
appreciation. In addition, because capital preservation is an important
consideration, Advisory Services also reviews a company's stability and the
strength of its balance sheet in selecting among eligible growth companies
generally. Advisory Services also considers other factors, such as return on
shareholder's equity, rate of earnings growth and anticipated price/earnings
ratios, in selecting investments for the Fund.

Following these policies, the Fund will invest predominantly in equity
securities issued by large-cap and mid-cap U.S. companies. Large-cap U.S.
companies are those which have market capitalization of $5 billion or more;
mid-cap U.S. companies generally have market capitalizations of $1 to $5
billion. It may also invest to a lesser degree in smaller capitalization
companies, which may be subject to different and greater risks. See "What are
the Fund's Potential Risks? - Small Companies."

Foreign Securities. The Fund may invest in foreign securities, generally by
purchasing sponsored or unsponsored American Depositary Receipts ("ADRs"),
Global Depositary Receipts ("GDRs") and European Depositary Receipts (EDRs").
ADRs evidence ownership of, and represent the right to receive, securities of a
foreign issuer deposited in a U.S. bank or a correspondent bank, while GDRs and
EDRs are typically issued by foreign banks or trust companies and evidence
ownership of underlying securities issued by either a foreign or a U.S.
corporation. The Fund may also purchase the securities of foreign issuers
directly in foreign markets. The Fund currently intends to limit its foreign
investments to no more than 10% of its net assets. Foreign securities have risks
that U.S. securities do not have. For more information about foreign securities
and their risks, please see "What are the Fund's Potential Risks?" in this
prospectus and "How does the Fund Invest its Assets? - Rising Dividends Fund -
Foreign Securities" in the SAI.

OTHER INVESTMENT POLICIES OF THE FUND

In any period of stock market weakness or of uncertain market or economic
conditions as determined by Advisory Services, the Fund may establish a
defensive position to preserve capital by temporarily having all or a part of
its assets invested in short-term, fixed-income securities or retained in cash
or cash equivalents. These investments would include U.S. government securities,
bank certificates of deposit, bankers' acceptances and high-quality commercial
paper issued by domestic corporations.

Repurchase Agreements. For temporary defensive purposes, or as an interim
investment pending longer-term investment in securities meeting the Fund's
special criteria, the Fund may engage in repurchase transactions in which the
Fund buys a U.S. government security subject to resale to a bank or dealer at an
agreed-upon price and date. The transaction requires the collateralization of
the seller's obligation by the transfer of securities with an initial market
value, including accrued interest, equal to at least 102% of the dollar amount
invested by the Fund in each agreement, with the value of the underlying
security marked-to-market daily to maintain coverage of at least 100%. A default
by the seller might cause the Fund to experience a loss or delay in the
liquidation of the collateral securing the repurchase agreement. The Fund might
also incur disposition costs in liquidating the collateral. The Fund, however,
intends to enter into repurchase agreements only with financial institutions
such as broker-dealers and banks that are deemed creditworthy by Advisory
Services. A repurchase agreement is deemed to be a loan by the Fund under the
1940 Act. The U.S. government security subject to resale (the collateral) will
be held on behalf of the Fund by a custodian bank approved by the Board and will
be held pursuant to a written agreement.

Illiquid Investments. The Fund's policy is not to invest more than 10% of its
net assets in illiquid securities. Illiquid securities are generally securities
that cannot be sold within seven days in the normal course of business at
approximately the amount at which the Fund has valued them.

Loans of Portfolio Securities. Consistent with procedures approved by the Board,
the Fund may lend its portfolio securities to qualified securities dealers or
other institutional investors. Although permitted to lend up to 30% of its total
assets, the Fund currently intends to limit its lending of securities to no more
than 5% of its total assets. For a description of the Fund's securities lending
procedures, please see the SAI.

Percentage Restrictions. If a percentage restriction noted above is adhered to
at the time of investment, a later increase or decrease in the percentage
resulting from a change in the value of portfolio securities or the amount of
net assets will not be considered a violation of any of the foregoing policies.

Other Policies and Restrictions. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
restrictions and more information about the Fund's investment policies, please
see "How does the Fund Invest its Assets?" and "Investment Restrictions" in the
SAI.

WHAT ARE THE FUND'S POTENTIAL RISKS?

Market Risk. If there is a general market decline in any country where the Fund
is invested, the value of what the Fund owns, and thus the Fund's share price,
may also decline. The value of worldwide stock markets has increased and
decreased in the past. These changes are unpredictable and may happen again in
the future.

Depository Receipts. Investments in Depository Receipts reduce but do not
eliminate all the risk associated with foreign investments. To the extent that
the Fund acquires Depository Receipts through banks which do not have a
contractual relationship with the foreign issuer of the security underlying the
Depository Receipt to issue and service such Depository Receipts, there may be
an increased possibility that the Fund would not become aware of and be able to
respond to corporate actions such as stock splits or rights offerings involving
the foreign issuer in a timely manner. Please see "Foreign Securities" in the
SAI for more information.

Foreign Securities. Foreign investing involves special risks, including currency
fluctuations and economic and political uncertainties. The Fund's current
foreign investment strategy is to focus on purchasing ADRs, GDRs and EDRs.
Investments in Depositary Receipts reduce but do not eliminate all the risk
associated with foreign investments. To the extent that the Fund acquires
Depositary Receipts through banks which do not have a contractual relationship
with the foreign issuer of the security underlying the Depositary Receipt to
issue and service such Depositary Receipts, there may be an increased
possibility that the Fund would not become aware of and be able to respond to
corporate actions such as stock splits or rights offerings involving the foreign
issuer in a timely manner. Please see "How does the Fund Invest its Assets? -
Rising Dividends Fund - Foreign Securities" in the SAI for more information.

Small Companies. The Fund may invest in companies that have relatively small
revenues and limited product lines. Small companies may lack depth of
management, they may be unable to internally generate funds necessary for growth
or potential development or to generate such funds through external financing on
favorable terms. Due to these and other factors, small companies may suffer
significant losses, as well as realize substantial growth.

Historically, small capitalization stocks have been more volatile than larger
capitalization stocks and are therefore more speculative than investments in
larger companies. Among the reasons for the greater price volatility are the
less certain growth prospects of smaller firms, the lower degree of liquidity in
the markets for such stocks, and the greater sensitivity of small companies to
changing economic conditions. Besides exhibiting greater volatility, small
company stocks may, to a degree, fluctuate independently of larger company
stocks. Small company stocks may decline in price as large company stocks rise,
or rise in price as large company stocks decline.

WHO MANAGES THE FUND?

The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
two classes of shares. While none is expected, the Board will act appropriately
to resolve any material conflict that may arise.

Investment Manager. As of July 1, 1996, Advisory Services manages the Fund's
assets and makes its investment decisions. Advisory Services also performs
similar services for other funds. It is wholly owned by Resources, a publicly
owned company engaged in the financial services industry through its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are the principal
shareholders of Resources. Together, Advisory Services and its affiliates manage
over $171 billion in assets. Advisory Services employs the same individuals to
manage the Fund's portfolio as the previous manager. The terms and conditions of
the management services provided to the Fund remain the same. Please see
"Investment Management and Other Services" and "Miscellaneous Information" in
the SAI for information on securities transactions and a summary of the Fund's
Code of Ethics.

Management Team. The team responsible for the day-to-day management of the
Fund's portfolio is: Bruce C. Baughman and William Lippman since the Fund's
inception, Margaret McGee since 1988 and Donald G. Taylor since June 1996.

William Lippman
President of Advisory Services

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

Bruce C. Baughman
Vice President of Advisory Services

Mr. Baughman holds a bachelor of arts degree from Stanford University and a
master's degree in science - accounting from New York University. He has been
with the Franklin Templeton Group since 1988. Mr. Baughman is a member of
several securities industry-related committees and associations.

Margaret McGee
Vice President of Advisory Services

Ms. McGee holds a bachelor of arts degree from William Patterson College. She
has been with the Franklin Templeton Group since 1988.

Donald G. Taylor
Portfolio Manager of Advisory Services

Mr. Taylor holds a bachelor of science degree in economics from the Wharton
School of Finance at the University of Pennsylvania. Mr. Taylor has been in the
securities industry for over ten years. He joined the Franklin Templeton Group
in June 1996.

Management Fees. During the fiscal year ended September 30, 1996, management
fees totaling 0.75% of the average daily net assets of the Fund were paid to the
investment manager. Total expenses of Class I and Class II shares, including
fees paid to the investment manager, were 1.40% and 1.95%, respectively.

Portfolio Transactions. Advisory Services tries to obtain the best execution on
all transactions. If Advisory Services believes more than one broker or dealer
can provide the best execution, consistent with internal policies, it may
consider research and related services and the sale of Fund shares, as well as
shares of other funds in the Franklin Templeton Group of Funds, when selecting a
broker or dealer. Please see "How does the Fund Buy Securities for its
Portfolio?" in the SAI for more information.

Administrative Services. Under an agreement with Advisory Services, FT Services
provides certain administrative services and facilities for the Fund. Please see
"Investment Management and Other Services" in the SAI for more information.

THE RULE 12B-1 PLANS

Each class has a distribution plan or "Rule 12b-1 Plan" under which it may pay
or reimburse Distributors or others for activities primarily intended to sell
shares of the class. These expenses may include, among others, distribution or
service fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates, printing prospectuses
and reports used for sales purposes, preparing and distributing sales literature
and advertisements, and a prorated portion of Distributors' overhead expenses.

Payments by the Fund under the Class I plan may not exceed 0.25% per year of
Class I's average daily net assets. All distribution expenses over this amount
will be borne by those who have incurred them. During the first year after
certain Class I purchases made without a sales charge, Distributors may keep the
Rule 12b-1 fees associated with the purchase.

Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.

Each class may also pay a servicing fee of up to 0.25% of the average daily net
assets under its plan. This fee may be used to pay Securities Dealers or others
for, among other things, helping to establish and maintain customer accounts and
records, helping with requests to buy and sell shares, receiving and answering
correspondence, monitoring dividend payments from the Fund on behalf of
customers, and similar servicing and account maintenance activities.

The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Fund's Underwriter" in the SAI.

HOW DOES THE FUND MEASURE PERFORMANCE?

From time to time, each class of the Fund advertises its performance. The more
commonly used measures of performance are total return, current yield and
current distribution rate. Performance figures are usually calculated using the
maximum sales charges, but certain figures may not include sales charges.

Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield for each
class shows the income per share earned by that class. The current distribution
rate shows the dividends or distributions paid to shareholders of a class. This
rate is usually computed by annualizing the dividends paid per share during a
certain period and dividing that amount by the current Offering Price of the
class. Unlike current yield, the current distribution rate may include income
distributions from sources other than dividends and interest received by the
Fund.

The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How does the Fund Measure Performance?" in the SAI.

HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS

The Fund has elected and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. By distributing all of its
income and meeting certain other requirements relating to the sources of its
income and diversification of its assets, the Fund will not be liable for
federal income or excise taxes.

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

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

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

Sixty-four percent of the income dividends paid by the Fund for the fiscal year
ended September 30, 1996 qualified for the corporate dividends-received
deduction, subject to certain holding period and debt financing restrictions
imposed under the Code on the corporation claiming the deduction.

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

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

If you are not a U.S. person for purposes of federal income taxation, you should
consult with your financial or tax advisors regarding the applicability of U.S.
withholding or other taxes on distributions received by you from the Fund and
the application of foreign tax laws to these distributions.

You should consult your tax advisor regarding the applicability of state and
local intangible property or income taxes to your shares in the Fund and to
distributions and redemption proceeds you receive from the Fund.

HOW IS THE TRUST ORGANIZED?

The Fund is a diversified series of Franklin Managed Trust (the "Trust"), an
open-end management investment company, commonly called a mutual fund. It was
organized as a Massachusetts business trust on July 1, 1986, and is registered
with the SEC under the 1940 Act. The Fund offers two classes of shares: Franklin
Rising Dividends Fund - Class I and Franklin Rising Dividends Fund - Class II.
Additional series and classes of shares may be offered in the future.

Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by state law, or (3) required to be voted on
separately by the 1940 Act. Shares of each class of a series have the same
voting and other rights and preferences as the other classes and series of the
Trust for matters that affect the Trust as a whole.

ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT

To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. Please indicate which class of shares you want to buy. If you do not
specify a class, your purchase will be automatically invested in Class I shares.

MINIMUM
INVESTMENTS*

To Open Your Account $100
To Add to Your Account $ 25

*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.

DECIDING WHICH CLASS TO BUY

You should consider a number of factors when deciding which class of shares to
buy. If you plan to buy $1 million or more in a single payment or you qualify to
buy Class I shares without a sales charge, you may not buy Class II shares.

Generally, you should consider buying Class I shares if:

o you expect to invest in the Fund over the long term;

o you qualify to buy Class I shares at a reduced sales charge; or

o you plan to buy $1 million or more over time.

You should consider Class II shares if:

o you expect to invest less than $100,000 in the Franklin Templeton Funds; and

o you plan to sell a substantial number of your shares within approximately six
years or less of your investment.

Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.

For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.

Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.

PURCHASE PRICE OF FUND SHARES

For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.

TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE*

CLASS I
Under $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000 2.25% 2.30% 2.00%
$1,000,000 or more** None None None
CLASS II
Under $1,000,000** 1.00% 1.01% 1.00%

*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? -
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Deciding Which
Class to Buy."

SALES CHARGE REDUCTIONS AND WAIVERS

- - If you qualify to buy shares under one of the sales charge reduction or
waiver categories described below, please include a written statement with each
purchase order explaining which privilege applies. If you don't include this
statement, we cannot guarantee that you will receive the sales charge reduction
or waiver.

Cumulative Quantity Discounts - Class I Only. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your shares in other Franklin
Templeton Funds, as well as those of your spouse, children under the age of 21
and grandchildren under the age of 21. If you are the sole owner of a company,
you may also add any company accounts, including retirement plan accounts.
Companies with one or more retirement plans may add together the total plan
assets invested in the Franklin Templeton Funds to determine the sales charge
that applies.

Letter of Intent - Class I Only. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.

By completing the Letter of Intent section of the shareholder application, you
acknowledge and agree to the following:

o You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.

o You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.

o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.

o Although you may exchange your shares, you may not sell reserved shares until
you complete the Letter or pay the higher sales charge.

Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.

If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.

Group Purchases - Class I Only. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.

A qualified group is one that:

o Was formed at least six months ago,

o Has a purpose other than buying Fund shares at a discount,

o Has more than 10 members,

o Can arrange for meetings between our representatives and group members,

o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to Distributors,

o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and

o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.

Sales Charge Waivers. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.

The Fund's sales charges will not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 4:

1. Dividend and capital gain distributions from any Franklin Templeton Fund or
a REIT sponsored or advised by Franklin Properties, Inc.

2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds

3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.

4. Redemptions from any Franklin Templeton Fund if you:

o Originally paid a sales charge on the shares,

o Reinvest the money within 365 days of the redemption date, and

o Reinvest the money in the same class of shares.

5. Redemptions from other mutual funds

The Fund's sales charges will also not apply to Class I purchases by:

6. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which the
trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts by mail
accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal funds
received by the close of business on the next business day following the order.

7. Group annuity separate accounts offered to retirement plans

8. Retirement plans that (i) are sponsored by an employer with at least 100
employees, (ii) have plan assets of $1 million or more, or (iii) agree to invest
at least $500,000 in the Franklin Templeton Funds over a 13 month period.
Retirement plans that are not Qualified Retirement Plans or SEPS, such as 403(b)
or 457 plans, must also meet the requirements described under "Group Purchases -
Class I Only" above.

9. An Eligible Governmental Authority. Please consult your legal and investment
advisors to determine if an investment in the Fund is permissible and suitable
for you and the effect, if any, of payments by the Fund on arbitrage rebate
calculations.

10. Broker-dealers, registered investment advisors or certified financial
planners, who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs.

11. Registered Securities Dealers and their affiliates, for their investment
accounts only

12. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer

13. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies

14. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer

15. Accounts managed by the Franklin Templeton Group

16. Certain unit investment trusts and their holders reinvesting distributions
from the trusts

17. Investors exchanging Advisor Class shares from any of the Franklin Templeton
Funds, or, beginning on or about May 1, 1997, Class Z shares of Franklin Mutual
Series Fund Inc.

HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?

Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.

Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, please call our Retirement Plans Department.

Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.

OTHER PAYMENTS TO SECURITIES DEALERS

The payments described below may be made to Securities Dealers who initiate and
are responsible for Class II purchases and certain Class I purchases made
without a sales charge. A Securities Dealer may only receive one of these
payments for each qualifying purchase. Securities Dealers who receive payments
under items 1, 2 and 3 below will earn the Rule 12b-1 fee associated with the
purchase starting in the thirteenth calendar month after the purchase. The
payments are paid by Distributors or one of its affiliates, at its own expense,
and not by the Fund or its shareholders.

1. Securities Dealers may receive up to 1% of the purchase price for Class II
purchases.

2. Securities Dealers will receive up to 1% of the purchase price for Class I
purchases of $1 million or more.

3. Securities Dealers may, in the sole discretion of Distributors, receive up to
1% of the purchase price for Class I purchases made under waiver category 8
above.

4. Securities Dealers may receive up to 0.25% of the purchase price for Class I
purchases made under waiver categories 6, 9 and 10 above.

Please see "How Do I Buy, Sell and Exchange Shares - Other Payments to
Securities Dealers" in the SAI for any breakpoints that may apply.

MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?

We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.

If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts.

METHOD STEPS TO FOLLOW
<TABLE>
<CAPTION>

<S> <C>
By Mail 1. Send us written instructions signed by all account owners

2. Include any outstanding share certificates for the shares you're exchanging

By Phone Call Shareholder Services or TeleFACTS(R)

- If you do not want the ability to exchange by phone, please let us know.

Through Your Dealer Call your investment representative

</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.

WILL SALES CHARGES APPLY TO MY EXCHANGE?

You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.

We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"

Contingent Deferred Sales Charge - Class I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund in the order they were purchased. If you exchange Class I shares into one
of our money funds, the time your shares are held in that fund will not count
towards the completion of any Contingency Period.

Contingent Deferred Sales Charge - Class II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
Contingent Deferred Sales Charge, such as shares from the reinvestment of
dividends and capital gains ("free shares"), $2,000 in shares that are no longer
subject to a Contingent Deferred Sales Charge because you have held them for
longer than 18 months ("matured shares"), and $3,000 in shares that are still
subject to a Contingent Deferred Sales Charge ("CDSC liable shares"). If you
exchange $3,000 into a new fund, $500 will be exchanged from free shares, $1,000
from matured shares, and $1,500 from CDSC liable shares.

Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares 3
months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.

While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. We believe the proportional method of exchanging Class II shares
more closely reflects the expectations of Class II shareholders if shares are
sold during the Contingency Period. The tax consequences of a sale or exchange
are determined by the Code and not by the method used by the Fund to transfer
shares.

If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.

EXCHANGE RESTRICTIONS

Please be aware that the following restrictions apply to exchanges:

o You may only exchange shares within the same class.*

*Because the Fund does not offer Advisor Class shares, Advisor Class shares of
any Franklin Templeton Fund may be exchanged for shares of the Fund. Beginning
on or about May 1, 1997, Class Z shares of Franklin Mutual Series Fund Inc.
may also be exchanged into shares of the Fund.

o The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply.
Please see "Transaction Procedures and Special Requirements."

o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.

o The fund you are exchanging into must be eligible for sale in your state.

o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.

HOW DO I SELL SHARES?

You may sell (redeem) your shares at any time.

METHOD STEPS TO FOLLOW

<S> <C>
By Mail 1. Send us written instructions signed by all account owners

2. Include any outstanding share certificates for the shares you are selling

3. Provide a signature guarantee if required

4. Corporate, partnership and trust accounts may need to send additional documents. Accounts
under court jurisdiction may have additional requirements.

By Phone
(Only available if you
have completed and sent
to us the telephone redemption
agreement included with
this prospectus)

Call Shareholder Services

Telephone requests will be accepted:

o If the request is $50,000 or less. Institutional accounts may exceed $50,000
by completing a separate agreement. Call Institutional Services to receive a copy.

o If there are no share certificates issued for the shares you want to sell or
you have already returned them to the Fund

o Unless you are selling shares in a Trust Company retirement plan account

o Unless the address on your account was changed by phone within the last 30 days

Through Your Dealer Call your investment representative

</TABLE>

Beginning on or about May 1, 1997, you will automatically be able to redeem
shares by telephone without completing a telephone redemption agreement. Please
notify us in writing if you do not want this option to be available on your
account. If you later decide you would like this option, send us written
instructions signed by all account owners.

Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.

TRUST COMPANY RETIREMENT PLAN ACCOUNTS

To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.

CONTINGENT DEFERRED SALES CHARGE

For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make without
a sales charge may also be subject to a Contingent Deferred Sales Charge if they
are sold within the Contingency Period. For any Class II purchase, a Contingent
Deferred Sales Charge may apply if you sell the shares within the Contingency
Period. The charge is 1% of the value of the shares sold or the Net Asset Value
at the time of purchase, whichever is less.

We will first redeem shares not subject to the charge in the following order:

1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period,

2) Shares purchased with reinvested dividends and capital gain distributions,
and

3) Shares held longer than the Contingency Period.

We then redeem shares subject to the charge in the order they were purchased.

Unless otherwise specified, when you request to sell a stated dollar amount, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated number of shares, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.

Waivers. We waive the Contingent Deferred Sales Charge for:

o Exchanges

o Account fees

o Sales of shares purchased pursuant to a sales charge waiver

o Redemptions by the Fund when an account falls below the minimum required
account size

o Redemptions following the death of the shareholder or beneficial owner

o Redemptions through a systematic withdrawal plan set up before February 1,
1995

o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, up to 1% a month of an account's Net Asset Value (3%
quarterly, 6% semiannually or 12% annually). For example, if you maintain
an annual balance of $1 million in Class I shares, you can withdraw up to
$120,000 annually through a systematic withdrawal plan free of charge.
Likewise, if you maintain an annual balance of $10,000 in Class II shares,
$1,200 may be withdrawn annually free of charge.

o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy

o Tax-free returns of excess contributions from employee benefit plans

o Distributions from employee benefit plans, including those due to
termination or plan transfer

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?

The Fund declares dividends from its net investment income quarterly in March,
June, September and December to shareholders of record on the last business day
of that month and pays them on or about the 15th day of the next month.
Capital gains, if any, may be distributed annually, usually in December.

Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of each class.

If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.

DISTRIBUTION OPTIONS

You may receive your distributions from the Fund in any of these ways:

1. Buy additional shares of the Fund - You may buy additional shares of the same
class of the Fund (without a sales charge or imposition of a Contingent Deferred
Sales Charge) by reinvesting capital gain distributions, or both dividend and
capital gain distributions. If you own Class II shares, you may also reinvest
your distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.

2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge). If
you own Class II shares, you may also direct your distributions to buy Class I
shares of another Franklin Templeton Fund. Many shareholders find this a
convenient way to diversify their investments.

3. Receive distributions in cash - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee. If you send
the money to a checking account, please see "Electronic Fund Transfers" under
"Services to Help You Manage Your Account."

To select one of these options, please complete sections 6 and 7 of the
shareholder application included with this prospectus or tell your investment
representative which option you prefer. If you do not select an option, we will
automatically reinvest dividend and capital gain distributions in the same class
of the Fund. For Trust Company retirement plans, special forms are required to
receive distributions in cash. You may change your distribution option at any
time by notifying us by mail or phone. Please allow at least seven days before
the record date for us to process the new option.

TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS

HOW AND WHEN SHARES ARE PRICED

The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the scheduled close of the NYSE,
generally 1:00 p.m. Pacific time. You can find the prior day's closing Net Asset
Value and Offering Price for each class in many newspapers.

The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How are Fund Shares Valued?" in the SAI.

THE PRICE WE USE WHEN YOU BUY OR SELL SHARES

You buy shares at the Offering Price of the class you wish to purchase, unless
you qualify to buy shares at a reduced sales charge or with no sales charge. The
Offering Price of each class is based on the Net Asset Value per share of the
class and includes the maximum sales charge. We calculate it to two decimal
places using standard rounding criteria. You sell shares at Net Asset Value.

PROPER FORM

WRITTEN INSTRUCTIONS

Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:

o Your name,

o The Fund's name,

o The class of shares,

o A description of the request,

o For exchanges, the name of the fund you're exchanging into,

o Your account number,

o The dollar amount or number of shares, and

o A telephone number where we may reach you during the day, or in the evening if
preferred.

SIGNATURE GUARANTEES

For our mutual protection, we require a signature guarantee in the following
situations:

1) You wish to sell over $50,000 worth of shares,

2) You want the proceeds to be paid to someone other than the registered owners,

3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,

4) We receive instructions from an agent, not the registered owners,

5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.

SHARE CERTIFICATES

TELEPHONE TRANSACTIONS

You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.

Trust Company Retirement Plan Accounts. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.

To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.

ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS

Joint Ownership. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, all owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.

Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.

Trusts. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.

Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.

TYPE OF ACCOUNT DOCUMENTS REQUIRED
<TABLE>
<CAPTION>

Corporation Corporate Resolution
<S> <C>
Partnership 1. The pages from the partnership agreement that identify the general partners, or

2. A certification for a partnership agreement

Trust 1. The pages from the trust document that identify the trustees, or

2. A certification for trust

</TABLE>

Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.

Electronic Instructions. If there is a Securities Dealer or other representative
of record on your account, we are authorized to use and execute electronic
instructions. We will accept electronic instructions directly from your dealer
or representative without further inquiry. Electronic instructions may be
processed through the services of the NSCC, which currently include the NSCC's
"Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's
PCTrades II(TM) System.

TAX IDENTIFICATION NUMBER

The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.

We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.

KEEPING YOUR ACCOUNT OPEN

Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.

SERVICES TO HELP YOU MANAGE YOUR ACCOUNT

AUTOMATIC INVESTMENT PLAN

AUTOMATIC PAYROLL DEDUCTION - CLASS I ONLY

You may have money transferred from your paycheck to the Fund to buy additional
Class I shares. Your investments will continue automatically until you instruct
the Fund and your employer to discontinue the plan. To process your investment,
we must receive both the check and payroll deduction information in required
form. Due to different procedures used by employers to handle payroll
deductions, there may be a delay between the time of the payroll deduction and
the time we receive the money.

SYSTEMATIC WITHDRAWAL PLAN

You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.

ELECTRONIC FUND TRANSFERS - CLASS I ONLY

You may choose to have dividend and capital gain distributions from Class I
shares of the Fund or payments under a systematic withdrawal plan sent directly
to a checking account. If the checking account is with a bank that is a member
of the Automated Clearing House, the payments may be made automatically by
electronic funds transfer. If you choose this option, please allow at least
fifteen days for initial processing. We will send any payments made during that
time to the address of record on your account.

TELEFACTS(R)

From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:

o obtain information about your account;

o obtain price and performance information about any Franklin Templeton Fund;

o exchange shares between identically registered Franklin accounts; and

o request duplicate statements and deposit slips for Franklin accounts.

You will need the code number for each class to use TeleFACTS. The code numbers
for Class I and Class II are 158 and 258, respectively.

STATEMENTS AND REPORTS TO SHAREHOLDERS

We will send you the following statements and reports on a regular basis:

o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. Please verify the
accuracy of your statements when you receive them.

o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.

INSTITUTIONAL ACCOUNTS

Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For further
information, call Institutional Services.

AVAILABILITY OF THESE SERVICES

WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?

If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund and Distributors are also located at this address. Advisory Services is
located at One Parker Plaza, Sixteenth Floor, Fort Lee, New Jersey 07024. You
may also contact us by phone at one of the numbers listed below.

HOURS OF OPERATION (PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.

Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.

GLOSSARY

USEFUL TERMS AND DEFINITIONS

1940 Act - Investment Company Act of 1940, as amended

Advisers - Franklin Advisers, Inc., the Fund's former investment manager

Advisory Services - Franklin Advisory Services, Inc., the Fund's investment
manager

Board - The Board of Trustees of the Trust

CD - Certificate of deposit

Class I, Class II, Advisor Class and Class Z - Certain Funds in the Franklin
Templeton Funds offer more than one class of shares, designated "Class I",
"Class II", "Advisor Class" and "Class Z". The classes have proportionate
interests in the same portfolio of investment securities. They differ, however,
primarily in their sales charge structures and Rule 12b-1 plans. Advisor Class
and Class Z shares are purchased without a sales charge and do not have a Rule
12b-1 plan.

Code - Internal Revenue Code of 1986, as amended

Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the contingency
period is 18 months. Regardless of when during the month you purchased shares,
they will age one month on the last day of that month and each following month.

Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.

Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."

Eligible Governmental Authority - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.

Franklin Funds - The mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin
Government Securities Trust

Franklin Templeton Funds - The Franklin Funds and the Templeton Funds

Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries

Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds

FT Services - Franklin Templeton Services, Inc., the Fund's administrator

Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent

IRS - Internal Revenue Service

Letter - Letter of Intent

NASD - National Association of Securities Dealers, Inc.

NSCC - National Securities Clearing Corporation

NYSE - New York Stock Exchange

Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 4.50% for Class I and 1% for Class II.

Qualified Retirement Plan(s) - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.

REIT - Real Estate Investment Trust

Resources - Franklin Resources, Inc.

SAI - Statement of Additional Information

SEC - U.S. Securities and Exchange Commission

SEP - An employer sponsored simplified employee pension plan established under
section 408(k) of the Code

TeleFACTS(R) - Franklin Templeton's automated customer servicing system

Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.

U.S. - United States

We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.

PROSPECTUS & APPLICATION

Franklin
Investment Grade
Income Fund

INVESTMENT STRATEGY
INCOME

FEBRUARY 1, 1997

Franklin Managed Trust
- --------------------------------------------------------------------------------

This prospectus describes Class I shares of the Franklin Investment Grade Income
Fund (the "Fund"). It contains information you should know before investing in
the Fund. Please keep it for future reference.

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

Franklin Investment Grade Income Fund

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

February 1, 1997

When reading this prospectus, you will see terms that are capitalized. This
means the term is explained in our glossary section.

Table of Contents

About the Fund
Expense Summary............................. 2
Financial Highlights........................ 3
How does the Fund Invest its Assets?........ 6
What are the Fund's Potential Risks?........ 12
Who Manages the Fund?....................... 14
How does the Fund Measure Performance?...... 16
How Taxation Affects the Fund and
its Shareholders........................... 16
How is the Trust Organized?................. 17

About Your Account
How Do I Buy Shares?........................ 18
May I Exchange Shares for Shares
of Another Fund?........................... 24
How Do I Sell Shares?....................... 26
What Distributions Might I Receive
from the Fund?............................. 28
Transaction Procedures and
Special Requirements....................... 29
Services to Help You Manage Your Account.... 33

Glossary
Useful Terms and Definitions................ 36

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

Franklin Investment Grade Income Fund

About the Fund

Expense Summary

A. Shareholder Transaction Expenses+
Maximum Sales Charge Imposed on Purchases
(as a percentage of Offering Price) 4.25%++
Deferred Sales Charge None+++
Exchange Fee (per transaction) $5.00*

B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.50%
Rule 12b-1 Fees 0.19%**
Other Expenses 0.37%
--------
Total Fund Operating Expenses 1.06%
========

C. Example

Assume the Fund's annual return is 5%, operating expenses are as described
above, and you sell your shares after the number of years shown. These are
the projected expenses for each $1,000 that you invest in the Fund.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------

$53*** $75 $98 $166

THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. Actual expenses and returns may be more or less than those shown.
The Fund pays its operating expenses. The effects of these expenses are
reflected in its Net Asset Value or dividends and are not directly charged
to your account.

+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.

++There is no front-end sales charge if you invest $1 million or more.

*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.

***Assumes a Contingent Deferred Sales Charge will not apply.

Financial Highlights

For the Year Ended September 30, For the Year Ended January 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993*** 1992 1991 1990 1989 1988++ 1987**
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $9.04 $8.82 $9.31 $8.93 $9.03 $8.40 $8.58 $8.66 $8.85 $10.00
---------------------------------------------------------------------------------------------
Net Investment Income 0.44 0.44 0.45 0.38 0.62 0.69 0.74 0.78 0.83 0.69

Net Realized & Unrealized
Gain (Loss) on Securities (0.064) 0.259 (0.544) 0.402 (0.086) 0.635 (0.174) (0.077) (0.210) (1.220)
---------------------------------------------------------------------------------------------
Total From Investment Operations 0.376 0.699 (0.094) 0.782 0.534 1.325 0.566 0.703 0.620 (0.530)
---------------------------------------------------------------------------------------------
Distributions from Net
Investment Income (0.406) (0.479) (0.396) (0.402) (0.634) (0.695) (0.746) (0.783) (0.810) (0.620)
---------------------------------------------------------------------------------------------
Net Asset Value at End of Year $9.01 $9.04 $8.82 $9.31 $8.93 $9.03 $8.40 $8.58 $8.66 $8.85
---------------------------------------------------------------------------------------------
Total Return+ 4.25% 8.21% (1.02)% 8.94% 6.16% 16.57% 7.01% 8.5% 7.24% (5.34)%

RATIOS/SUPPLEMENTAL DATA

Net Assets at End of
Period (in 000's) $29,372 $29,824 $29,553 $35,970 $29,367 $21,773 $12,289 $17,143 $12,650 $15,608

Ratio of Expenses to
Average Net Assets 1.06% 1.09% 1.05% 1.09%* 1.08% 1.26% 1.43% 1.62% 1.35% 1.48%*

Ratio of Net Investment
Income to Average Net Assets 4.81% 4.96% 4.91% 5.61%* 7.02% 8.36% 8.84% 9.74% 9.36% 8.47%*

Portfolio Turnover Rate 20.06% 64.70% 10.57% 53.19% 27.28% 28.31% 11.37% 56.72% 34.87% 101.12%
</TABLE>

*Annualized

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

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

+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 the Contingent Deferred Sales Charge. The total return for the Fund
also assumes reinvestment of dividends and capital gains, if any, at Net Asset
Value.

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

How does the Fund Invest its Assets?

The Fund's Investment Objective The Fund's investment objective is to seek a
maximum level of income consistent with prudent exposure to risk. The objective
is a fundamental policy of the Fund and may not be changed without shareholder
approval. Of course, there is no assurance that the Fund's objective will be
achieved.

At times, particularly during periods when the yield curve is positive, the Fund
will endeavor to provide a higher yield than that available from a money market
mutual fund, while attempting to avoid the potential risks to principal often
associated with both non-investment grade securities and longer-term
instruments.

Types of Securities in which the Fund May Invest The Fund seeks to achieve its
objective by investing in a diversified portfolio of debt securities, most of
which will be intermediate-term investment grade issues and dividend-paying
common and preferred stocks.

The Fund may invest in corporate debt obligations such as bonds, notes, and
debentures; obligations convertible into common stocks; obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities;
obligations denominated in either U.S. dollars or foreign currencies issued by
foreign corporations and governments (including Canadian provinces and their
instrumentalities) and supranational entities; commercial paper; and currency
deposits or equivalents.

Because the Fund seeks a maximum level of income consistent with prudent
exposure to risk, under normal market conditions at least 75% of the Fund's
portfolio will be invested in debt securities that are rated in one of the four
highest rating categories or in unrated securities that are of comparable
quality as determined by the Fund's investment manager. The four highest rating
categories are AAA, AA, A or BBB by S&P, or Aaa, Aa, A or Baa by Moody's.

Debt securities within the top three categories comprise what are known as
high-grade bonds and are regarded as having a strong capacity to pay principal
and interest. Medium-grade bonds (BBB by S&P or Baa by Moody's) are regarded as
having an adequate capacity to pay principal and interest but with greater
vulnerability to adverse economic conditions and some speculative
characteristics.

Although the Fund may invest up to 25% of its portfolio in securities that are
not rated in the four highest rating categories or of comparable quality, the
Fund will not invest in any debt securities rated lower than B by Moody's or S&P
or in any equity securities of an issuer if a majority of the issuer's debt
securities are rated lower than B by Moody's or S&P. Similarly, the Fund will
not invest in any unrated debt securities that the Fund considers to be of lower
comparable quality than securities rated B by Moody's or S&P. Debt securities
rated B by Moody's are regarded as generally lacking the characteristics of
desirable investments and, in Moody's judgment, assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small. Debt securities rated BB or B by S&P are
regarded, on balance, as predominantly speculative with respect to the capacity
to pay interest and repay principal in accordance with the terms of the
obligation. The Fund does not intend to invest more than 5% of its net assets in
debt securities rated below Baa by Moody's or BBB by S&P. An appendix discussing
these ratings is included in the SAI.

Although market risks are inherent in any investment program, the Fund believes
that such risks may be reduced through careful analysis of prospective issuers.
Moreover, while the opinion of rating services is considered in selecting rated
securities for the Fund's portfolio, the Fund's investment manager relies
primarily on its own credit analysis, which includes a study of the existing
debt issuer's capital structure, ability to service debt and to pay dividends,
and the current trend of earnings for any company under consideration for
investment by the Fund. The net asset value per share of the Fund will
fluctuate, however, as the market value of its investment portfolio fluctuates.

Under normal economic conditions, the Fund will invest at least 65% of its
assets in intermediate-term obligations. Intermediate-term obligations in which
the Fund invests typically will have effective remaining maturities of between
two and ten years at the time of purchase. The remaining 35% may be invested, to
the extent available and permissible, in obligations with maturities that are
shorter than two years or longer than ten years at the time of purchase.

The Fund will consider the effective maturity of a "putable" bond to be its
optional redemption date or dates. An obligation that requires the obligor to
periodically prepay portions of the obligation before its stated maturity will
be considered by the Fund to have a maturity equal to its expected average life
or average term. These are not fundamental policies of the Fund and may be
changed by the Board.

U.S. Government Securities. The Fund may invest in all types of U.S. government
securities including: (1) U.S. Treasury obligations with varying interest rates,
maturities and dates of issuance, such as U.S. Treasury bills (maturities of one
year or less), U.S. Treasury notes (original maturities of one to ten years) and
U.S. Treasury bonds (generally original maturities of greater than ten years);
and (2) obligations issued or guaranteed by U.S. government agencies and
instrumentalities such as the Government National Mortgage Association ("GNMA"),
the Export-Import Bank and the Farmers Home Administration. Some of the Fund's
investments will include obligations which are supported by the full faith and
credit of the U.S. government. In the case of U.S. government obligations that
are not backed by the full faith and credit of the U.S. government (e.g.,
obligations of the Federal National Mortgage Association ("FNMA") and a Federal
Home Loan Bank), the Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitments.

Collateralized Obligations. The Fund may invest in collateralized obligations,
which generally are bonds issued by single purpose, stand-alone finance
subsidiaries or trusts of financial institutions, government agencies or
instrumentalities, investment bankers or other similar institutions, such as
Collateralized Automobile Receivables ("CARs") and Collateralized Mortgage
Obligations ("CMOs"). All such collateralized obligations will either be issued
or guaranteed by a U.S. government agency or instrumentality rated AAA by a
nationally recognized statistical rating agency.

CARs are generally automobile loan pass-through certificates issued by single
purpose, stand alone financial subsidiaries or trusts (such as Grantor Trusts)
of financial institutions, government agencies or instrumentalities, investment
bankers or other similar institutions.

CMOs purchased by the Fund may be:

(1) collateralized by pools of mortgages in which each mortgage is guaranteed as
to payment of principal and interest by an agency or instrumentality of the U.S.
government;

(2) collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer and the guarantee is collateralized by
U.S. government securities; or

(3) securities in which the proceeds of the issuance are invested in mortgage
securities and payment of the principal and interest is supported by the credit
of an agency or instrumentality of the U.S. government.

For a discussion of the risks involved in buying these types of collateralized
obligations, please see "What are the Fund's Potential Risks?" below.

Options and Financial Futures. The Fund may engage in various option and hedging
activities. Specifically, the Fund may write covered call and put options and
under limited circumstances, for bona fide hedging purposes only, purchase
certain options on securities and interest rate futures contracts. The option
and hedging activities that the Fund is authorized to engage in are summarized
below and described in greater detail in the SAI.

The Fund may write covered call and put options on any securities it may
purchase for its portfolio. The principal reason for writing call or put options
is to obtain, through the receipt of premiums, a greater current return than
would be realized on the underlying securities alone. The Fund's current return
can be expected to fluctuate because opportunities to realize net gains from a
covered call and put option writing program and income yields vary as economic
and market conditions change. The Fund may receive a higher or lower total
return from its positions in options than it would have received from its
underlying securities if they had not been subject to options. The Fund does not
engage in option writing strategies for speculative purposes, and writes call
options and put options on a covered basis only, which means that, with respect
to any call options it has written, it will own the underlying securities or
comparable securities satisfying the cover requirements of the securities
exchanges, and, with respect to any put options it has written, it will maintain
in a separate account cash or U.S. government securities with a value at least
equal to the exercise price of the put option.

The Fund may also purchase call and put options on securities, but only for
limited purposes. The Fund may purchase call and put options for the purpose of
offsetting its obligations pursuant to previously written options. The Fund may
purchase put options only on U.S. government securities in its portfolio in
anticipation of a decline in the market value of such securities and then only
in amounts not exceeding 10% of its total assets. The Fund's ability to purchase
put options allows it to protect unrealized gains in appreciated U.S. government
securities in its portfolio without actually selling the securities and while
continuing to receive interest income on the securities.

In addition, solely for hedging purposes, the Fund may purchase and sell call
and put options on interest rate futures contracts. The Fund may not purchase or
sell options on interest rate futures contracts if immediately thereafter the
value of those contracts would constitute more than 30% of the Fund's total
assets or if the sum of the premiums paid for the options would exceed 5% of the
Fund's total assets.

The Fund's option and hedging activities involve certain risks as summarized in
"What are the Fund's Potential Risks?" and as more fully discussed in the SAI.

Foreign Securities. The Fund may, using the criteria set forth above, invest any
portion of its assets in debt securities issued by foreign corporations and
governments, their instrumentalities, and supranational entities. The Fund
presently has no intention of investing more than 25% of its assets in the debt
securities of foreign governments.

A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank, the European Development Bank and the Asian Development Bank.

The Fund may invest in securities issued in any currency and may hold foreign
currency to the extent consistent with its objective and policies described
above. Securities of issuers within a given country may be denominated in the
currency of that or another country, or in multinational currency units.

For more information about foreign securities and their risks, please see "What
are the Fund's Potential Risks?" in this prospectus and in the SAI.

Other Investment Policies of the Fund

In any period of market weakness or of uncertain market or economic conditions,
the Fund may establish a temporary defensive position to preserve capital by
investing all or a part of its assets in short-term, fixed-income securities,
cash or cash equivalents. Such investments may include U.S. government
securities, bank certificates of deposit, bankers' acceptances and high-grade
commercial paper issued by domestic corporations.

U.S. Treasury Rolls. The Fund may enter into "U.S. Treasury rolls" in which the
Fund sells outstanding U.S. Treasury securities and buys back "when-issued" U.S.
Treasury securities of slightly longer maturity for simultaneous settlement on
the settlement date of the "when-issued" U.S. Treasury security. Two potential
advantages of such a strategy are 1) the Fund can regularly and incrementally
adjust its weighted average maturity (which otherwise would constantly diminish
with the passage of time); and 2) in a normal yield curve environment (in which
shorter maturities yield less than longer maturities), a gain in yield to
maturity can be obtained along with the desired extension.

During the period prior to the settlement date, the Fund continues to earn
interest on the securities it is selling. It does not earn interest on the
securities that it is purchasing until after the settlement date. The Fund could
suffer an opportunity loss if the counterparty to the roll failed to perform its
obligations on the settlement date, and if market conditions changed adversely.
The Fund intends, however, to enter into U.S. Treasury rolls only with
government securities dealers recognized by the Federal Reserve Board or with
member banks of the Federal Reserve System.

Loans of Portfolio Securities. Consistent with procedures approved by the Board,
the Fund may lend its portfolio securities to qualified Securities Dealers or
other institutional investors. Although permitted to lend up to 30% of its total
assets, the Fund currently intends to limit its lending of securities to no more
than 5% of its total assets. For a description of the Fund's securities lending
procedures, please see the SAI.

Repurchase Agreements. The Fund may engage in repurchase transactions in which
the Fund buys a U.S. government security subject to resale to a bank or dealer
at an agreed-upon price and date. The transaction requires the collateralization
of the seller's obligation by the transfer of securities with an initial market
value, including accrued interest, equal to at least 102% of the dollar amount
invested by the Fund in each agreement, with the value of the underlying
security marked-to-market daily to maintain coverage of at least 100%. A default
by the seller might cause the Fund to experience a loss or delay in the
liquidation of the collateral securing the repurchase agreement. The Fund might
also incur disposition costs in liquidating the collateral. The Fund, however,
intends to enter into repurchase agreements only with financial institutions
such as broker-dealers and banks that are deemed creditworthy by Advisory
Services. A repurchase agreement is deemed to be a loan by the Fund under the
1940 Act. The U.S. government security subject to resale (the collateral) will
be held on behalf of the Fund by a custodian bank approved by the Board and will
be held pursuant to a written agreement.

Portfolio Turnover. The Fund's portfolio turnover rate for the fiscal years
ended 1995 and 1996 was 64.70% and 20.06%, respectively. The higher portfolio
turnover rate for the fiscal year ended 1995 was due to higher interest rates
early in the year, which encouraged the sale of intermediate-term U.S.
Treasuries by the Fund, and the significant capital appre-ciation of certain
bonds that the investment manager determined were ripe for sale. High portfolio
turnover may increase the Fund's transaction costs and taxable capital gains.
The investment manager will consider the potential benefits of investing in
Treasury rolls against these considerations.

Borrowing. The Fund may borrow money only from banks for temporary or emergency
purposes in amounts not to exceed 15% of the Fund's total assets, and additional
investments may not be made while any amounts borrowed are in excess of 5% of
the Fund's total assets.

What are the Fund's Potential Risks?

Interest Rate and Market Risk. To the extent the Fund invests in debt
securities, changes in interest rates in any country where the Fund is invested
will affect the value of the Fund's portfolio and its share price. Rising
interest rates, which often occur during times of inflation or a growing
economy, are likely to have a negative effect on the value of the Fund's shares.
To the extent the Fund invests in common stocks, a general market decline, shown
for example by a drop in the Dow Jones Industrials or other equity based index,
in any country where the Fund is invested, may also cause the value of what the
Fund owns, and thus the Fund's share price, to decline. The value of stock
markets and interest rates throughout the world has increased and decreased in
the past. These changes are unpredictable and may happen again in the future.

Collateralized Automobile Receivables. Because CARs are asset-backed securities,
they have certain risks not presented by mortgage-backed securities.
Asset-backed securities do not have the benefit of the same type of security
interests in the related collateral. In the case of automobile receivables,
there is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing the receivables due to the large
number of vehicles involved in a typical issuance and technical requirements
under state laws. Therefore, recoveries on repossessed collateral may not always
be available to support payments on the securities.

Collateralized Mortgage Obligations. CMOs and other mortgage-backed securities
differ from conventional bonds in that the principal is paid back over the life
of the certificate rather than at maturity. As a result, the Fund will receive
monthly scheduled payments of principal and interest on its investment in these
securities, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. When the Fund reinvests the payments
and any unscheduled prepayments of principal it receives, it may receive a rate
of interest which is lower than the rate on the existing security. For this
reason, mortgage-backed securities may be less effective than other types of
U.S. government securities as a means of "locking in" long-term interest rates.

The market value of mortgage-backed securities, like other U.S. government
securities in the Fund's portfolio, will generally vary inversely with changes
in market interest rates, declining when interest rates rise and rising when
interest rates decline. However, mortgage-backed securities, while having
comparable risk of decline in value during periods of rising rates, may have
less potential for capital appreciation than other investments of comparable
maturities due to the likelihood of increased prepayments of mortgages as
interest rates decline. In addition, to the extent such securities are purchased
at a premium, mortgage foreclosures and unscheduled principal prepayments may
result in some loss of the Fund's principal investment to the extent of the
premium paid.

Options and Financial Futures. The purchase of call and put options involves the
risk that the price of the underlying securities or interest rate futures
contracts will not move in the anticipated direction during the option periods,
and the Fund may lose all or some portion of the amount of the premiums it has
paid (plus transaction costs). Options on interest rate futures contracts
involve a somewhat greater risk in that a liquid market for such options may not
exist to permit the Fund to establish or close out its positions. Although the
Fund generally will purchase only options for which there appears to be an
active market, there is no assurance that a liquid market on any exchange will
exist for any particular option or at any particular time.

The principal risk with respect to writing covered call and put options is the
Fund's possible inability to effect closing transactions at favorable prices. By
writing the option, the Fund agrees to buy or sell the security at a specified
price during a specified period, and, until the option lapses (i.e., the
specified period expires or the option is exercised) or is canceled by a closing
transaction, the Fund cannot sell the covering security to recognize a profit
(or limit a loss). In addition, if the price of the underlying security does not
move in the anticipated direction, the Fund will have to sell or buy the
covering security at a price that is below market (in the case of a security
sold upon the exercise of a written call option) or buy the covering security at
a price that is above market (in the case of a security purchased upon the
exercise of a written put option) unless the Fund can close out its optioned
position prior to the option exercise date. Moreover, until an option lapses or
is canceled by a closing transaction, the maximum sales price the Fund may
realize on a security subject to an option is limited to the option price. The
Fund continues, however, to bear the risk of a decline in the price of a
security subject to an option during the option period, although any potential
loss during that period would be reduced by the amount of the option premium
received. Although certain risks are involved in these option and hedging
transactions, Advisory Services believes that, because the Fund writes only
covered options on portfolio securities and purchases options only for hedging
purposes, the options and hedging strategies of the Fund do not subject it to
the risks frequently associated with these transactions.

The Fund's investment in options may be limited by the requirements of the Code
for qualification as a regulated investment company. These instruments require
the application of complex and special tax rules and elections, more information
about which is included in the SAI.

Transactions in options, options on futures, CARS, and CMOs are generally
considered "derivative securities."

Foreign Securities. There are inherent risks associated with investments in
foreign securities. An investment may be affected by changes in currency rates
and exchange control regulations, and the Fund may incur transaction charges in
exchanging currencies. Foreign government securities are frequently not subject
to the accounting and financial reporting standards applicable to U.S.
government securities and less information may be available regarding these
securities. Most foreign government securities are traded in foreign
over-the-counter markets or on foreign stock exchanges, and are generally less
liquid and more volatile than comparable U.S. government securities. There is
also the possibility of expropriation or confiscatory taxation, political or
social instability or diplomatic developments that could adversely affect the
value of those investments. See the SAI for further information.

Foreign exchange gains and losses realized by the Fund in connection with
transactions involving foreign currencies, foreign currency payables or
receivables, and foreign currency-denominated debt securities are subject to
special tax rules which may cause these gains and losses to be treated as
ordinary income and losses rather than capital gains and losses and may affect
the amount and timing of the Fund's income or loss from these transactions and
in turn its distributions to shareholders.

Who Manages the Fund?

The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations.

Management Team. The team responsible for the day-to-day management of the
Fund's portfolio is: William Lippman and Philip Smith since the Fund's inception
and Margaret McGee since 1988.

William Lippman
President of Advisory Services

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

Philip Smith
Vice President of Advisory Services

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

Margaret McGee
Vice President of Advisory Services

Ms. McGee holds a bachelor of arts degree from William Patterson College. She
has been with the Franklin Templeton Group since 1988.

Management Fees. During the fiscal year ended September 30, 1996, management
fees totaling 0.50% of the average daily net assets of the Fund were paid to the
investment manager. Total expenses of the Fund, including fees paid to the
investment manager, were 1.06%.

The Fund's Rule 12b-1 Plan

Payments by the Fund under the plan may not exceed 0.25% per year of the Fund's
average daily net assets. All distribution expenses over this amount will be
borne by those who have incurred them. During the first year after certain
purchases made without a sales charge, Distributors may keep the Rule 12b-1 fees
associated with the purchase. For more information, please see "The Fund's
Underwriter" in the SAI.

How does the Fund Measure Performance?

From time to time, the Fund advertises its performance. The more commonly used
measures of performance are total return, current yield and current distribution
rate. Performance figures are usually calculated using the maximum sales charge,
but certain figures may not include the sales charge.

How Taxation Affects the Fund and its Shareholders

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

For corporate shareholders, none of the distributions paid by the Fund for the
fiscal year ended September 30, 1996, qualified for the corporate
dividends-received deduction and it is not anticipated that any of the current
year's dividends will qualify.

If you are not considered a U.S. person for federal income for tax purposes, you
should consult with your financial or tax advisors regarding the applicability
of U.S. withholding or other taxes on distributions received by you from the
Fund and the application of foreign tax laws to these distributions.

How is the Trust Organized?

As of January 1, 1997, the Fund began offering a new class of shares designated
"Franklin Investment Grade Income Fund - Advisor Class." All Fund shares
outstanding before the offering of Advisor Class shares have been designated as
Franklin Investment Grade Income Fund - Class I shares and will retain their
previous rights and privileges. Class I and Advisor Class shares differ as to
sales charges, expenses and services. Different fees and expenses will affect
performance. Advisor Class shares are described in a separate prospectus
relating only to that class. For more information concerning Advisor Class
shares of the Fund, contact your investment representative or Distributors.
Additional series and classes of shares may be offered in the future.

Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as the other class of
the Fund on matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by law, or (3) required to be voted on
separately by the 1940 Act.

Shares of each series of the Trust have equal and exclusive rights to dividends
and distributions declared by that series and the net assets of the series in
the event of liquidation or dissolution.

About Your Account

How Do I Buy Shares?

Opening Your Account

To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check.

MINIMUM
INVESTMENTS*
- -------------------------------------------
To Open Your Account $100
To Add to Your Account $ 25

*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.

Sales Charge Reductions and Waivers

- - If you qualify to buy shares under one of the sales charge reduction or waiver
categories described below, please include a written statement with each
purchase order explaining which privilege applies. If you don't include this
statement, we cannot guarantee that you will receive the sales charge reduction
or waiver.

Quantity Discounts. The sales charge you pay depends on the dollar amount you
invest, as shown in the table below.

TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
-------------------
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------------------------

Under $100,000 4.25% 4.44% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000 2.15% 2.20% 2.00%
$1,000,000 or more* None None None

Cumulative Quantity Discounts. To determine if you may pay a reduced sales
charge, the amount of your current purchase is added to the cost or current
value, whichever is higher, of your shares in the Franklin Templeton Funds, as
well as those of your spouse, children under the age of 21 and grandchildren
under the age of 21. If you are the sole owner of a company, you may also add
any company accounts, including retirement plan accounts. Companies with one or
more retirement plans may add together the total plan assets invested in the
Franklin Templeton Funds to determine the sales charge that applies.

Letter of Intent. You may buy shares at a reduced sales charge by completing the
Letter of Intent section of the shareholder application. A Letter of Intent is a
commitment by you to invest a specified dollar amount during a 13 month period.
The amount you agree to invest determines the sales charge you pay.

By completing the Letter of Intent section of the shareholder application, you
acknowledge and agree to the following:

o You authorize Distributors to reserve 5% of your total intended purchase in
Fund shares registered in your name until you fulfill your Letter.

o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.

o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.

o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.

If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.

Group Purchases. If you are a member of a qualified group, you may buy Fund
shares at a reduced sales charge that applies to the group as a whole. The sales
charge is based on the combined dollar value of the group members' existing
investments, plus the amount of the current purchase.

A qualified group is one that:

o Was formed at least six months ago,

o Has a purpose other than buying Fund shares at a discount,

o Has more than 10 members,

o Can arrange for meetings between our representatives and group members,

o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,

o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and

o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.

The Fund's sales charges will not apply if you are buying shares with money from
the following sources:

1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
REIT sponsored or advised by Franklin Properties, Inc.

2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds

4. Redemptions from any Franklin Templeton Fund if you:

o Originally paid a sales charge on the shares,

o Reinvest the money within 365 days of the redemption date, and

o Reinvest the money in the same class of shares.

5. Redemptions from other mutual funds

The Fund's sales charges will also not apply to purchases by:

7. Group annuity separate accounts offered to retirement plans

10. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs

11. Registered Securities Dealers and their affiliates, for their investment
accounts only

12. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer

13. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies

14. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer

15. Accounts managed by the Franklin Templeton Group

16. Certain unit investment trusts and their holders reinvesting distributions
from the trusts

How Do I Buy Shares in Connection with Retirement Plans?

Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.

Other Payments to Securities Dealers

The payments described below may be made to Securities Dealers who initiate and
are responsible for certain purchases made without a sales charge. A Securities
Dealer may only receive one of these payments for each qualifying purchase.
Securities Dealers who receive payments under items 1 or 2 below will earn the
Rule 12b-1 fee associated with the purchase starting in the thirteenth calendar
month after the purchase. The payments are paid by Distributors or one of its
affiliates, at its own expense, and not by the Fund or its shareholders.

1. Securities Dealers will receive up to 0.75% of the purchase price for
purchases of $1 million or more.

2. Securities Dealers may, in the sole discretion of Distributors, receive up to
1% of the purchase price for purchases made under waiver category 8 above.

3. Securities Dealers may receive up to 0.25% of the purchase price for
purchases made under waiver categories 6, 9 and 10 above.

Please see "How Do I Buy, Sell and Exchange Shares? - Other Payments to
Securities Dealers" in the SAI for any breakpoints that may apply.

May I Exchange Shares for Shares of Another Fund?

Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums.

<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
By Mail 1. Send us written instructions signed by all account owners

2. Include any outstanding share certificates for the shares you're exchanging
- ---------------------------------------------------------------------------------------------------------------------------
By Phone Call Shareholder Services or TeleFACTS(R)

- If you do not want the ability to exchange by phone to apply to your account, please let us
know.
- ---------------------------------------------------------------------------------------------------------------------------
Through Your Dealer Call your investment representative
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.

Will Sales Charges Apply to My Exchange?

Contingent Deferred Sales Charge. We will not impose a Contingent Deferred Sales
Charge when you exchange shares. Any shares subject to a Contingent Deferred
Sales Charge at the time of exchange, however, will remain so in the new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, shares
are exchanged into the new fund in the order they were purchased. If you
exchange shares into one of our money funds, the time your shares are held in
that fund will not count towards the completion of any Contingency Period. For
more information about the Contingent Deferred Sales Charge, please see that
section under "How Do I Sell Shares?"

Exchange Restrictions

Please be aware that the following restrictions apply to exchanges:

o You may only exchange shares within the same class.

o The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all
transactions. Please notify us in writing if you do not want this option to
be available on your account(s). Additional procedures may apply. Please
see "Transaction Procedures and Special Requirements."

o The fund you are exchanging into must be eligible for sale in your state.

o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.

o Your exchange may be restricted or refused if you: (i) request an exchange
out of the Fund within two weeks of an earlier exchange request, (ii)
exchange shares out of the Fund more than twice in a calendar quarter, or
(iii) exchange shares equal to at least $5 million, or more than 1% of the
Fund's net assets. Shares under common ownership or control are combined
for these limits. If you exchange shares as described in this paragraph,
you will be considered a Market Timer. Each exchange by a Market Timer, if
accepted, will be charged $5.00. Some of our funds do not allow investments
by Market Timers.

How Do I Sell Shares?

<TABLE>
<CAPTION>
You may sell (redeem) your shares at any time.

METHOD STEPS TO FOLLOW
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
By Mail 1. Send us written instructions signed by all account owners

2. Include any outstanding share certificates for the shares you are selling

3. Provide a signature guarantee if required

4. Corporate, partnership and trust accounts may need to send additional documents. Accounts
under court jurisdiction may have additional requirements.
- ---------------------------------------------------------------------------------------------------------------------------
(Only available By Phone Call Shareholder Services
if you have
completed and Telephone requests will be accepted:
sent to us the
telephone o If the request is $50,000 or less. Institutional accounts may exceed $50,000 by completing a
redemption separate agreement. Call Institutional Services to receive a copy.
agreement
included with o If there are no share certificates issued for the shares you want to sell or you have already
this prospectus) returned them to the Fund

o Unless you are selling shares in a Trust Company retirement plan account

o Unless the address on your account was changed by phone within the last 30 days
- ---------------------------------------------------------------------------------------------------------------------------
Through Your Dealer Call your investment representative
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.

Trust Company Retirement Plan Accounts

To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
591/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.

Contingent Deferred Sales Charge

We will first redeem shares not subject to the charge in the following order:

1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period,

2) Shares purchased with reinvested dividends and capital gain distributions,
and

3) Shares held longer than the Contingency Period.

We then redeem shares subject to the charge in the order they were purchased.

Waivers. We waive the Contingent Deferred Sales Charge for:

o Exchanges

o Account fees

o Sales of shares purchased pursuant to a sales charge waiver

o Redemptions by the Fund when an account falls below the minimum required
account size

o Redemptions following the death of the shareholder or beneficial owner

o Redemptions through a systematic withdrawal plan set up before February 1,
1995

o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, up to 1% a month of an account's Net Asset Value (3%
quarterly, 6% semiannually or 12% annually). For example, if you maintain
an annual balance of $1 million, you can withdraw up to $120,000 annually
through a systematic withdrawal plan free of charge.

o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy

o Tax-free returns of excess contributions from employee benefit plans

o Distributions from employee benefit plans, including those due to
termination or plan transfer

What Distributions Might I Receive from the Fund?

The Fund declares dividends from its net investment income monthly to
shareholders of record on the last business day of that month and pays them on
or about the 15th day of the next month.

If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.

Distribution Options

You may receive your distributions from the Fund in any of these ways:

1. Buy additional shares of the Fund - You may buy additional shares of the Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge) by
reinvesting capital gain distributions, or both dividend and capital gain
distributions. This is a convenient way to accumulate additional shares and
maintain or increase your earnings base.

2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge).
Many shareholders find this a convenient way to diversify their investments.

Transaction Procedures and Special Requirements

How and When Shares are Priced

The Price We Use When You Buy or Sell Shares

Proper Form

Written Instructions

Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:

o Your name,

o The Fund's name,

o A description of the request,

o For exchanges, the name of the fund you're exchanging into,

o Your account number,

o The dollar amount or number of shares, and

o A telephone number where we may reach you during the day, or in the evening
if preferred.

Signature Guarantees

For our mutual protection, we require a signature guarantee in the following
situations:

1) You wish to sell over $50,000 worth of shares,

2) You want the proceeds to be paid to someone other than the registered owners,

3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,

4) We receive instructions from an agent, not the registered owners,

5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.

Share Certificates

Telephone Transactions

You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.

To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.

Account Registrations and Required Documents

Trusts. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.

<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Corporation Corporate Resolution
- ---------------------------------------------------------------------------------------------------------------
Partnership 1. The pages from the partnership agreement that identify the general partners, or

2. A certification for a partnership agreement
- ---------------------------------------------------------------------------------------------------------------
Trust 1. The pages from the trust document that identify the
trustees, or

2. A certification for trust
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

Tax Identification Number

Keeping Your Account Open

Services to Help You Manage Your Account

Automatic Investment Plan

Automatic Payroll Deduction

You may have money transferred from your paycheck to the Fund to buy additional
shares. Your investments will continue automatically until you instruct the Fund
and your employer to discontinue the plan. To process your investment, we must
receive both the check and payroll deduction information in required form. Due
to different procedures used by employers to handle payroll deductions, there
may be a delay between the time of the payroll deduction and the time we receive
the money.

Systematic Withdrawal Plan

You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.

Electronic Fund Transfers

TeleFACTS(R)

From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:

o obtain information about your account;

o obtain price and performance information about any Franklin Templeton Fund;

o exchange shares between identically registered Franklin accounts; and

o request duplicate statements and deposit slips for Franklin accounts.

You will need the Fund's code number to use TeleFACTS. The Fund's code number is
159.

Statements and Reports to Shareholders

We will send you the following statements and reports on a regular basis:

o Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. Please
verify the accuracy of your statements when you receive them.

o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household
and send only one copy of a report. Call Fund Information if you would like
an additional free copy of the Fund's financial reports or an interim
quarterly report.

Institutional Accounts

Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. For further information, call Institutional
Services.

Availability of These Services

What If I Have Questions About My Account?

If you have any questions about your account, you may write to Investor Services
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
The Fund and Distributors are also located at this address. Advisory Services is
located at One Parker Plaza, Sixteenth Floor, Fort Lee, New Jersey, 07013. You
may also contact us by phone at one of the numbers listed below.

HOURS OF OPERATION (PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- --------------------------------------------------------------------------------

Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.

Glossary

Useful Terms and Definitions

1940 Act - Investment Company Act of 1940, as amended

Advisers - Franklin Advisers, Inc., the Fund's former investment manager

Advisory Services - Franklin Advisory Services, Inc., the Fund's investment
manager

Board - The Board of Trustees of the Trust

CD - Certificate of deposit

Class I, Class II, Advisor Class and Class Z - Certain funds in the Franklin
Templeton Funds offer more than one class of shares, designated "Class I,"
"Class II," "Advisor Class" and "Class Z." The classes have proportionate
interests in the same portfolio of investment securities. They differ, however,
primarily in their sales charge structures and Rule 12b-1 plans. Advisor Class
and Class Z shares are purchased without a sales charge and do not have a Rule
12b-1 plan.