FRANKLIN INVESTORS SECURITIES TRUST
485BPOS, 1998-12-29
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As filed with the Securities and Exchange Commission on December 29, 1998

                                                                  File Nos.
                                                                   33-11444
                                                                   811-4986

                       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.   25                          (X)

                                     and/or

         REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

     Amendment No.   27                                         (X)

                       FRANKLIN INVESTORS SECURITIES 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 (650) 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 January 1, 1999 pursuant to paragraph (b)
   [ ]  60 days after filing pursuant to paragraph (a)(1)
   [ ]  on (Date) pursuant to paragraph (a)(1)
   [ ]  75 days after filing pursuant to paragraph (a)(2)
   [ ]  on (Date) pursuant to paragraph (a)(2)of Rule 485

If appropriate, check the following box:

   [ ]   This post-effective amendment designates a new effective date for a
         previously filed post-effective amendment




Title of Securities Being Registered:
Shares of Beneficial Interest:

FRANKLIN INVESTORS SECURITIES TRUST
   Franklin Global Government Income Fund - Class A
   Franklin Global Government Income Fund - Class C
   Franklin Short-Intermediate U.S. Government Securities Fund - Class A
   Franklin Convertible Securities Fund - Class A
   Franklin Convertible Securities Fund - Class C
   Franklin Equity Income Fund - Class A
   Franklin Equity Income Fund - Class B
   Franklin Equity Income Fund - Class C




The  Registrant's  prospectuses and statements of additional  information  dated
March 1, 1998, as filed with the Securities and Exchange  Commission  under Form
Type 485BPOS on February 27, 1998 (File Nos.  33-11444 and  811-4986) are hereby
incorporated by reference.






o FIST1 *P2

                            SHARE CLASS REDESIGNATION
                            EFFECTIVE JANUARY 1, 1999

                           Class A - Formerly Class I
                           Class B - New Share Class
                                     (Equity Fund Only)
                           Class C - Formerly Class II


                        SUPPLEMENT DATED JANUARY 1, 1999
                              TO THE PROSPECTUS OF
                       FRANKLIN INVESTORS SECURITIES TRUST
                (FIST1 - FRANKLIN GLOBAL GOVERNMENT INCOME FUND,
          FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND,
      FRANKLIN CONVERTIBLE SECURITIES FUND AND FRANKLIN EQUITY INCOME FUND)
                 DATED MARCH 1, 1998, AS AMENDED AUGUST 3, 1998


The prospectus is amended as follows:

I.   As of January 1, 1999,  the Equity  Fund  offers  three  classes of shares:
     Class A, Class B and Class C. The Global Fund also offers three  classes of
     shares:  Class A, Class C and Advisor Class.  The  Short-Intermediate  Fund
     offers two classes of shares:  Class A and Advisor Class.  The  Convertible
     Fund also offers two classes of shares: Class A and Class C.

     Before January 1, 1999,  Class A shares were designated Class I and Class C
     shares were designated  Class II. All references in the prospectus to Class
     I shares are replaced  with Class A, and all  references to Class II shares
     are replaced with Class C.

II.  The second  paragraph on the cover of the  prospectus  is replaced with the
     following:

     This  prospectus  describes  each fund's Class A shares,  the Equity Fund's
     Class B shares, and the Global Fund's, Convertible Fund's and Equity Fund's
     Class C shares. The Global Fund and Short-Intermediate Fund currently offer
     another  share class with a different  sales charge and expense  structure,
     which affects performance.

III. The section "Expense Summary" is replaced with the following:

     This table is designed to help you understand the costs of investing in the
     funds.  It is based on the funds'  historical  expenses for the fiscal year
     ended October 31, 1997. The funds' actual expenses may vary.

<TABLE>
<CAPTION>
                                                   SHORT-
                                     GLOBAL     INTERMEDIATE          CONVERTIBLE       EQUITY
                                      FUND          FUND                 FUND            FUND
     --------------------------------------------------------------------------------------------

     A. SHAREHOLDER TRANSACTION EXPENSES1

     CLASS A 2
     <S>                              <C>          <C>                   <C>             <C>  
     Maximum Sales Charge (as a
     percentage of Offering Price)    4.25%        2.25%                 5.75%           5.75%

      Paid at time of purchase3       4.25%        2.25%                 5.75%           5.75%

      Paid at redemption4             NONE         NONE                  NONE            NONE

     Exchange Fee (per transaction)5  NONE         NONE                  NONE            NONE

     CLASS B 6

     Maximum Sales Charge (as a
     percentage of Offering Price)     ---          ---                   ---            4.00%

      Paid at time of purchase3        ---          ---                   ---            NONE

      Paid at redemption4              ---          ---                   ---            4.00%

     Exchange Fee (per transaction)5   ---          ---                   ---            NONE

     CLASS C 2

     Maximum Sales Charge (as a
     percentage of Offering Price)    1.99%         ---                  1.99%           1.99%
 
      Paid at time of purchase3       1.00%         ---                  1.00%           1.00%

      Paid at redemption4             0.99%         ---                  0.99%           0.99%

     Exchange Fee (per transaction)5  NONE          ---                  NONE            NONE

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

     CLASS A2
     <S>                              <C>          <C>                   <C>             <C>  
     Management Fees                  0.60%        0.56%                 0.57%           0.53%

     Rule 12b-1 Fees7                 0.10%        0.08%                 0.25%           0.25%

     Other Expenses                   0.20%        0.14%                 0.18%           0.19%
                                     ----------------------------------------------------------

     Total Fund Operating Expenses    0.90%        0.78%                 1.00% 8         0.97%
                                     ==========================================================

     CLASS B6

     Management Fees                   ---          ---                   ---            0.53%

     Rule 12b-1 Fees7                  ---          ---                   ---            1.00%

     Other Expenses                    ---          ---                   ---            0.19%
                                     ----------------------------------------------------------

     Total Fund Operating Expenses     ---          ---                   ---            1.72%
                                     ==========================================================

     CLASS C2

     Management Fees                  0.60%         ---                  0.57%           0.53%

     Rule 12b-1 Fees7                 0.65%         ---                  0.99%           1.00%

     Other Expenses                   0.20%         ---                  0.18%           0.19%
                                     ----------------------------------------------------------

     Total Fund Operating Expenses    1.45%         ---                  1.74%           1.72%
                                     ==========================================================
</TABLE>

     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  $10,000  that you invest in a
     fund.

<TABLE>
<CAPTION>
                                                    SHORT-
                                      GLOBAL     INTERMEDIATE           CONVERTIBLE      EQUITY
                                       FUND          FUND                  FUND           FUND
     ----------------------------------------------------------------------------------------------

     CLASS A

     <S>                              <C>           <C>                   <C>             <C>   
     1 Year9 ....................     $  513        $  303                $  671          $  668
     3 Years ....................     $  700        $  469                $  875          $  866
     5 Years ....................     $  902        $  649                $1,096          $1,080
     10 Years ...................     $1,486        $1,169                $1,729          $1,696

     CLASS B

     Assuming you sold your shares
     at the end of the period

     <S>                              <C>           <C>                   <C>             <C>   
     1 Year .....................     $  ---        $  ---                $  ---          $  575
     3 Years ....................     $  ---        $  ---                $  ---          $  842
     5 Years ....................     $  ---        $  ---                $  ---          $1,133
     10 Years10 .................     $  ---        $  ---                $  ---          $1,831

     Assuming you stayed in the
     fund

     <S>                              <C>           <C>                   <C>             <C>   
     1 Year .....................     $  ---        $  ---                $  ---          $  175
     3 Years ....................     $  ---        $  ---                $  ---          $  542
     5 Years ....................     $  ---        $  ---                $  ---          $  933
     10 Years10 .................     $  ---        $  ---                $  ---          $1,831

     CLASS C

     <S>                              <C>           <C>                   <C>             <C>   
     1 Year11 ...................     $  344        $  ---                $  373          $  371
     3 Years ....................     $  554        $  ---                $  643          $  636
     5 Years ....................     $  884        $  ---                $1,034          $1,024
     10 Years ...................     $1,818        $  ---                $2,131          $2,110
</TABLE>

     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 funds pay their 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.

     1. If your transaction is processed through your Securities Dealer, you may
     be charged a fee by your Securities Dealer for this service.
     2. Before January 1, 1999, Class A shares were designated Class I and Class
     C shares were designated Class II.
     3. There is no  front-end  sales charge if you invest $1 million or more in
     Class A shares.  Although Class B and C have a lower front-end sales charge
     than Class A, their Rule 12b-1 fees are higher.  Over time you may pay more
     for Class B and C shares.  Please  see "How Do I Buy  Shares?  - Choosing a
     Share Class."
     4. A Contingent  Deferred Sales Charge of 1% may apply to Class A purchases
     of $1  million  or more if you sell the  shares  within one year and to any
     Class C purchase  if you sell the shares  within 18  months.  A  Contingent
     Deferred  Sales Charge of up to 4% may apply to any Class B purchase if you
     sell the shares within six years.  A Contingent  Deferred  Sales Charge may
     also apply to  purchases  by certain  retirement  plans that qualify to buy
     Class A shares without a front-end sales charge. The charge is based on 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 for Class C is different  depending
     on whether the charge is shown based on the Net Asset Value or the Offering
     Price,  the  dollar  amount  you would pay is the same.  See "How Do I Sell
     Shares? - Contingent Deferred Sales Charge" for details.
     5. There is a $5 fee for exchanges by Market Timers.
     6. The Equity Fund began offering Class B shares on January 1, 1999. Annual
     fund operating expenses are based on the expenses for Class A and C for the
     fiscal year ended  October 31,  1997.  The Rule 12b-1 fees are based on the
     maximum fees allowed under Class B's Rule 12b-1 plan.
     7.  These fees may not  exceed  0.15% for Global  Fund - Class A, 0.10% for
     Short-Intermediate  Fund,  0.25% for Convertible  Fund - Class A and Equity
     Fund - Class A, 0.65% for Global Fund - Class C, and 1.00% for  Convertible
     Fund - Class  C and  Class  B and C of  Equity  Fund.  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.
     8. Class A total fund  operating  expenses are different  than the ratio of
     expenses to average net assets shown under "Financial  Highlights" due to a
     timing  difference  between  the end of the 12b-1  plan year and the fund's
     fiscal year end.
     9. Assumes a Contingent Deferred Sales Charge will not apply.
     10.  Assumes  conversion  of Class B shares to Class A shares  after  eight
     years, lowering your annual expenses from that time on.
     11. For the same Class C investment,  you would pay  projected  expenses of
     $246 (Global Fund), $275 (Convertible  Fund), and $273 (Equity Fund) 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.

IV.  The following information is added to the section "Financial Highlights":


     GLOBAL FUND                                            SIX MONTHS ENDED
                                                             APRIL 30, 1998
                                                              (UNAUDITED)
                                                     ---------------------------
                                                        CLASS A       CLASS C
                                                     ---------------------------
     PER SHARE OPERATING PERFORMANCE
     (for a share outstanding throughout the period)
     Net asset value, beginning of period                 $8.41         $8.41
                                                     ---------------------------
     Income from investment operations:
         Net investment income                              .31           .29
         Net realized and unrealized gains                  .01           .02
                                                     ---------------------------
     Total from investment operations                       .32           .31
                                                     ---------------------------
     Less distributions from:
         Net investment income                             (.30)         (.28)
         In excess of net investment income                (.01)         (.01)
                                                     ---------------------------
     Total distributions                                   (.31)         (.29)
                                                     ===========================
     Net asset value, end of period                       $8.42         $8.43
                                                     ===========================

     Total return*                                         3.87%         3.71%

     RATIOS/SUPPLEMENTAL DATA
     Net assets, end of period (000's)                  $114,102        $5,605
     Ratios to average net assets:
         Expenses                                           .93%**       1.48%**
         Net investment income                             7.33%**       6.78%**
     Portfolio turnover rate                              19.16%        19.16%



     SHORT-INTERMEDIATE FUND                           SIX MONTHS ENDED
                                                        APRIL 30, 1998
                                                          (UNAUDITED)
                                                       ------------------
                                                            CLASS A
                                                       ------------------
     PER SHARE OPERATING PERFORMANCE
     (for a share outstanding throughout the period)
     Net asset value, beginning of period                    $10.29
                                                       ------------------
     Income from investment operations:
         Net investment income                                  .27
         Net realized and unrealized gains (losses)            (.01)
                                                       ------------------
     Total from investment operations                           .26
                                                       ------------------
     Less distributions from:
         Net investment income                                 (.28)
         Net realized gains                                      --
                                                       ------------------
     Total distributions                                       (.28)
                                                       ==================
     Net asset value, end of period                          $10.27
                                                       ==================

     Total return*                                             2.63%

     RATIOS/SUPPLEMENTAL DATA
     Net assets, end of period (000's)                       $187,528
     Ratios to average net assets:
         Expenses                                               .78%**
         Net investment income                                 5.30%**
     Portfolio turnover rate                                  37.06%



     CONVERTIBLE FUND                                      SIX MONTHS ENDED
                                                            APRIL 30, 1998
                                                             (UNAUDITED)
                                                     --------------------------
                                                        CLASS A       CLASS C
                                                     --------------------------
     PER SHARE OPERATING PERFORMANCE
     (for a share outstanding throughout the period)
     Net asset value, beginning of period                $14.74        $14.68
                                                     --------------------------
     Income from investment operations:
         Net investment income                              .31           .25
         Net realized and unrealized gains                  .42           .42
                                                     --------------------------
     Total from investment operations                       .73           .67
                                                     --------------------------
     Less distributions from:
         Net investment income                             (.35)         (.29)
         Net realized gains                               (1.04)        (1.04)
                                                     --------------------------
     Total distributions                                  (1.39)        (1.33)
                                                     ==========================
     Net asset value, end of period                      $14.08        $14.02
                                                     ==========================

     Total return*                                         5.38%         4.98%

     RATIOS/SUPPLEMENTAL DATA
     Net assets, end of period (000's)                  $224,824       $52,030
     Ratios to average net assets:
         Expenses                                           .96%**       1.70%**
         Net investment income                             4.46%**       3.74%**
     Portfolio turnover rate                              45.53%        45.53%
     Average commission rate paid***                       $.0501        $.0501



     EQUITY FUND                                           SIX MONTHS ENDED
                                                            APRIL 30, 1998
                                                             (UNAUDITED)
                                                     ---------------------------
                                                        CLASS A       CLASS C
                                                     ---------------------------
     PER SHARE OPERATING PERFORMANCE
     (for a share outstanding throughout the period)
     Net asset value, beginning of period               $19.31         $19.26
                                                     -------------------------
     Income from investment operations:
         Net investment income                             .31            .24
         Net realized and unrealized gains                2.51           2.49
                                                     -------------------------
     Total from investment operations                     2.82           2.73
                                                     -------------------------
     Less distributions from:
          Net investment income                           (.34)+         (.26)+
          Net realized gains                              (.80)          (.80)
                                                     -------------------------
     Total distributions                                 (1.14)         (1.06)
                                                     -------------------------
     Net asset value, end of period                     $20.99         $20.93
                                                     =========================

     Total return*                                       15.05%         14.60%

     RATIOS/SUPPLEMENTAL DATA
     Net assets, end of period (000's)                  $440,140       $77,348
     Ratios to average net assets:
         Expenses                                          .90%**        1.64%**
         Net investment income                            3.02%**        2.22%**
     Portfolio turnover rate                             14.87%         14.87%
     Average commission rate paid***                      $.0500         $.0500

     * Total  return  does  not  reflect  sales  commissions  or the  Contingent
     Deferred Sales Charge, and is not annualized.
     ** Annualized.
     *** Relates to purchases and sales of equity securities.
     + Includes  distributions in excess of net investment  income in the amount
     of $.002.

V.   The following  paragraphs  are added under "What Are the Risks of Investing
     in  the  Fund?"   (the   section   "Euro   Risk"  does  not  apply  to  the
     Short-Intermediate Fund):

     YEAR 2000. When evaluating current and potential portfolio positions,  Year
     2000 is one of the factors Advisers considers.

     Advisers will rely upon public filings and other statements made by issuers
     about their Year 2000  readiness.  Issuers in  countries  outside the U.S.,
     particularly  in  emerging  markets,  may not be  required to make the same
     level of  disclosure  about Year 2000  readiness as is required in the U.S.
     Advisers,  of course,  cannot audit each issuer and its major  suppliers to
     verify their Year 2000 readiness.

     If an issuer in which a fund is invested is adversely affected by Year 2000
     problems,  it is  likely  that  the  price  of its  security  will  also be
     adversely  affected.  A  decrease  in the  value of one or more of a fund's
     portfolio  holdings  will have a similar  impact on the price of the fund's
     shares.  Please see "Year 2000  Problem"  under "Who Manages the Fund?" for
     more information.

     EURO RISK. On January 1, 1999,  the European  Monetary Union (EMU) plans to
     introduce a new single currency,  the euro, which will replace the national
     currency for participating member countries. If a fund holds investments in
     countries with  currencies  replaced by the euro,  the investment  process,
     including trading, foreign exchange, payments,  settlements, cash accounts,
     custody and accounting will be impacted.

     The process to establish  the euro may result in market  volatility.  It is
     not possible to predict the impact of the euro on the business or financial
     condition  of  European  issuers  or on a  fund.  The  transition  and  the
     elimination  of currency  risk among EMU  countries may change the economic
     environment and behavior of investors, particularly in European markets. To
     the  extent  a fund  holds  non-U.S.  dollar  (euro or  other)  denominated
     securities,  it will still be exposed to currency risk due to  fluctuations
     in those currencies versus the U.S. dollar.

     Resources has created an interdepartmental  team to handle all euro-related
     changes  to enable the  Franklin  Templeton  Funds to process  transactions
     accurately and completely with minimal  disruption to business  activities.
     While there can be no assurance that a fund will not be adversely affected,
     Advisers and its  affiliated  service  providers are taking steps that they
     believe are reasonably designed to address the euro issue.

VI.  In the section "Who Manages the Fund?",

     (a) the  section  "Management  Team -  Equity  Fund" is  replaced  with the
     following:

     Frank  Felicelli  since the fund's  inception  and Kent P.  Shepherd  since
     August 1998.

     (b) the following is added to the end of the section:

     Kent P. Shepherd
     Vice President of Advisers

     Mr. Shepherd holds undergraduate degrees in Economics and Political Science
     from Northwestern University and an MBA in International Finance from UCLA.
     In addition,  Mr. Shepherd is a Chartered Financial Analyst and a Chartered
     Investment  Counselor.  Mr.  Shepherd has been with the Franklin  Templeton
     Group since 1991.

     (c) Howard M. McEldowney's general involvement with the investment strategy
     of the Equity Fund remains unchanged.

     (d) the following is added after the "Administrative Services" section:

     YEAR 2000 PROBLEM.  The funds'  business  operations  depend on a worldwide
     network of computer systems that contain date fields,  including securities
     trading  systems,  securities  transfer  agent  operations and stock market
     links.  Many  of the  systems  currently  use a two  digit  date  field  to
     represent the date, and unless these systems are changed or modified,  they
     may not be able to  distinguish  the Year 1900 from the Year 2000 (commonly
     referred to as the Year 2000 problem). In addition,  the fact that the Year
     2000 is a non-standard leap year may create difficulties for some systems.

     When the Year  2000  arrives,  the  funds'  operations  could be  adversely
     affected if the computer  systems used by Advisers,  its service  providers
     and other third parties it does business with are not Year 2000 ready.  For
     example,  the funds'  portfolio  and  operational  areas could be impacted,
     including  securities  trade  processing,  interest and dividend  payments,
     securities  pricing,  shareholder  account  services,   reporting,  custody
     functions and others. The funds could experience  difficulties in effecting
     transactions  if  any  of  their  foreign  subcustodians,   or  if  foreign
     broker-dealers or foreign markets are not ready for Year 2000.

     Advisers and its affiliated service providers are making a concerted effort
     to take steps they believe are  reasonably  designed to address  their Year
     2000 problems.  Of course,  the funds' ability to reduce the effects of the
     Year 2000  problem is also very much  dependent  upon the  efforts of third
     parties over which the funds and Advisers may have no control.

     (e) the first  sentence  under "The Rule 12b-1 Plans" is replaced  with the
     following:

     Each class has a separate distribution or "Rule 12b-1" plan under which the
     fund shall pay or may reimburse  Distributors or others for the expenses of
     activities that are primarily intended to sell shares of the class.

     (f) and the following  paragraphs  are added to the section "The Rule 12b-1
     Plans":

     Under the Class B plan, the Equity Fund pays  Distributors  up to 0.75% per
     year of  Class  B's  average  daily  net  assets  to pay  Distributors  for
     providing  distribution  and related  services and bearing  certain Class B
     expenses. All distribution expenses over this amount will be borne by those
     who have incurred them. Securities Dealers are not eligible to receive this
     portion of the Rule 12b-1 fees associated with the purchase.

     The  Equity  Fund may also pay a  servicing  fee of up to 0.25% per year of
     Class B's average daily net assets under the Class B 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.  Securities Dealers
     may be  eligible  to receive  this  portion of the Rule 12b-1 fees from the
     date of purchase.  After 8 years,  Class B shares convert to Class A shares
     and Securities  Dealers may then receive the Rule 12b-1 fees  applicable to
     Class A.

     The expenses relating to the Class B plan are also used to pay Distributors
     for advancing the  commission  costs to Securities  Dealers with respect to
     the initial sale of Class B shares.  Further,  the expenses relating to the
     Class B plan  may be used by  Distributors  to pay  third  party  financing
     entities that have provided  financing to  Distributors  in connection with
     advancing commission costs to Securities Dealers.

VII. Under "How Is the Trust Organized?",

     (a) the first paragraph is replaced with the following:

     The  Global  Fund is a  non-diversified  series,  and each  other fund is a
     diversified series of Franklin Investors Securities Trust (the "Trust"), an
     open-end management investment company,  commonly called a mutual fund. The
     Trust was organized as a Massachusetts business trust on December 22, 1986,
     and is registered with the SEC. The Equity Fund and Global Fund each offers
     three  classes of shares:  Franklin  Equity Income Fund - Class A, Franklin
     Equity Income Fund - Class B and Franklin Equity Income Fund - Class C; and
     Franklin  Global   Government  Income  Fund  -  Class  A,  Franklin  Global
     Government Income Fund - Class C and Franklin Global Government Income Fund
     - Advisor Class.  The  Convertible  Fund and  Short-Intermediate  Fund each
     offers two classes of shares:  Franklin Convertible Securities Fund - Class
     A and  Franklin  Convertible  Securities  Fund  -  Class  C;  and  Franklin
     Short-Intermediate  U.S. Government  Securities Fund - Class A and Franklin
     Short-Intermediate   U.S.  Government  Securities  Fund  -  Advisor  Class.
     Additional series and classes of shares may be offered in the future.

     (b) and the following is added:

     As of  December  7,  1998,  Templeton  Funds  Trust  Company  and  Franklin
     Templeton Trust Company each owned of record and beneficially more than 25%
     of the outstanding Advisor Class shares of the Short-Intermediate Fund, and
     Franklin  Templeton  Trust  Company,  as trustee for  ValuSelect,  owned of
     record and  beneficially  more than 25% of the  outstanding  Advisor  Class
     shares of the Global Fund.

VIII.The sections  "Choosing a Share Class" and "Purchase Price of Fund Shares,"
     found under "How Do I Buy Shares?", are replaced with the following:

     CHOOSING A SHARE CLASS

     Each class has its own sales charge and expense structure,  allowing you to
     choose  the  class  that  best  meets  your   situation.   Your  investment
     representative can help you decide.

<TABLE>
<CAPTION>
            CLASS A*                     CLASS B*                     CLASS C*
                                 (Only applicable to the
                                       Equity Fund)
     ----------------------------------------------------------------------------------
       <S>                        <C>                             <C>
       o  Front-end sales         o  No front-end sales           o  Front-end sales
          charge of 5.75%            charge                          charge of 1%
          or less
          (Convertible Fund
          and Equity Fund),
          4.25% or less
          (Global Fund) or
          2.25% or less
          (Short-Intermediate
          Fund)

       o  Contingent              o  Contingent Deferred          o  Contingent Deferred
          Deferred Sales             Sales Charge of 4% or           Sales Charge of 1% on
          Charge of 1% on            less on shares you              shares you sell within
          purchases of $1            sell within six years           18 months
          million or more
          sold within one
          year

       o  Lower annual            o  Higher annual                o  Higher annual
          expenses than              expenses than Class A           expenses than Class A
          Class B or C due           (same as Class C) due           (same as Class B) due
          to lower Rule              to higher Rule 12b-1            to higher Rule 12b-1
          12b-1 fees                 fees. Automatic                 fees. No conversion to
                                     conversion to Class A           Class A shares, so
                                     shares after eight              annual expenses do not
                                     years, reducing future          decrease.
                                     annual expenses.
       o  No maximum              o  Maximum purchase             o  Maximum purchase
          purchase amount            amount of $249,999. We          amount of $999,999. We
                                     invest any investment           invest any investment
                                     of $250,000 or more in          of $1 million or more
                                     Class A shares, since           in Class A shares,
                                     a reduced front-end             since there is no
                                     sales charge is                 front-end sales charge
                                     available and Class             and Class A's annual
                                     A's annual expenses             expenses are lower.
                                     are lower.
</TABLE>

     *Before January 1, 1999, Class A shares were designated Class I and Class C
     shares were  designated  Class II. The Equity Fund began  offering  Class B
     shares  on  January  1,  1999.  Class B  shares  are not  available  to all
     retirement plans.  Class B shares are only available to IRAs (of any type),
     Trust  Company  403(b)  plans,  and  Trust  Company  qualified  plans  with
     participant or earmarked accounts.

     PURCHASE PRICE OF FUND SHARES

     For Class A shares,  the sales charge you pay depends on the dollar  amount
     you  invest,  as shown in the table  below.  The sales  charge  for Class C
     shares is 1% and,  unlike  Class A, does not vary based on the size of your
     purchase. There is no front-end sales charge for Class B shares.

<TABLE>
<CAPTION>
                                         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 A - CONVERTIBLE FUND
     AND EQUITY FUND
     <S>                              <C>                <C>           <C>  
     Under $50,000                    5.75%              6.10%         5.00%
     $50,000 but less than       
     $100,000                         4.50%              4.71%         3.75%
     $100,000 but less than           3.50%              3.63%         2.80%
     $250,000                    
     $250,000 but less than           2.50%              2.56%         2.00%
     $500,000                    
     $500,000 but less than           2.00%              2.04%         1.60%
     $1,000,000                  
     $1,000,000 or more*              None               None          None
                                 
     CLASS A - GLOBAL FUND       
     Under $100,000                   4.25%              4.44%         4.00%
     $100,000 but less than           3.50%              3.63%         3.25%
     $250,000                    
     $250,000 but less than           2.50%              2.56%         2.25%
     $500,000                    
     $500,000 but less than           2.00%              2.04%         1.85%
     $1,000,000                  
     $1,000,000 or more*              None               None          None
                                 
     CLASS A -                   
     SHORT-INTERMEDIATE FUND     
     Under $100,000                   2.25%              2.31%         2.00%
     $100,000 but less than           1.75%              1.78%         1.50%
     $250,000                    
     $250,000 but less than           1.25%              1.27%         1.00%
     $500,000                    
     $500,000 but less than           1.00%              1.01%         0.85%
     $1,000,000                  
     $1,000,000 or more*              None               None          None
                                 
     CLASS B* - EQUITY FUND           None               None          None
                                 
     CLASS C - CONVERTIBLE       
     FUND, EQUITY FUND AND       
     GLOBAL FUND                 
     Under $1,000,000*                1.00%              1.01%         1.00%
</TABLE>
                                 
     *A Contingent Deferred Sales Charge of 1% may apply to Class A purchases of
     $1 million or more and any Class C purchase.  A Contingent  Deferred  Sales
     Charge of up to 4% may apply to any Class B 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.

IX.  In the section "Sales Charge  Waivers," found under "How Do I Buy Shares? -
     Sales Charge Reductions and Waivers,"

     (a) the first paragraph is replaced with the following:

     SALES CHARGE WAIVERS.  If one of the following sales charge waivers applies
     to you or your  purchase  of fund  shares,  you may buy  shares of the fund
     without a front-end sales charge or a Contingent Deferred Sales Charge. All
     of the sales  charge  waivers  listed  below apply to  purchases of Class A
     shares  only,  except  for items 1 and 2 which  also apply to Class B and C
     purchases.

     (b) the second waiver category is replaced with the following:

     2.   Redemption  proceeds from the sale of shares of any Franklin Templeton
          Fund.  The proceeds  must be  reinvested  in the same class of shares,
          except  proceeds from the sale of Class B shares will be reinvested in
          Class A shares.

          If you paid a  Contingent  Deferred  Sales  Charge  when you sold your
          Class A or C shares,  we will credit your  account  with the amount of
          the  Contingent  Deferred  Sales  Charge  paid  but a  new  Contingent
          Deferred  Sales Charge will apply.  For Class B shares  reinvested  in
          Class A, a new  Contingent  Deferred  Sales  Charge  will  not  apply,
          although  your  account  will not be  credited  with the amount of any
          Contingent  Deferred  Sales  Charge  paid when you sold  your  Class B
          shares.  If you own both  Class A and B shares and you later sell your
          shares,  we will  sell your  Class A shares  first,  unless  otherwise
          instructed.

          Proceeds  immediately  placed  in a  Franklin  Bank  CD  also  may  be
          reinvested  without a  front-end  sales  charge if you  reinvest  them
          within 365 days from the date the CD matures, including any rollover.

          This  waiver  does not  apply to  shares  you buy and sell  under  our
          exchange program. Shares purchased with proceeds from a money fund may
          be subject to a sales charge.

     (c) and the following new category 12 is added to the end of the second
     list of sales charge waiver categories:

     12.  Qualified   registered   investment   advisors   who  buy   through  a
          broker-dealer  or service agent who has entered into an agreement with
          Distributors

X.   The section "How Do I Buy Shares in  Connection  with  Retirement  Plans?",
     found under "How Do I Buy Shares?", is replaced with the following:

     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. These plans require separate  applications and
     their policies and procedures may be different than those described in this
     prospectus. For more information, including a free retirement plan brochure
     or application, please call Retirement Plan Services.

     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.

XI.  The section "How Do I Buy Shares?  - Other Payments to Securities  Dealers"
     is replaced with the following:

     OTHER PAYMENTS TO SECURITIES DEALERS

     The payments described below may be made to Securities Dealers who initiate
     and  are  responsible  for  Class B and C  purchases  and  certain  Class A
     purchases made without a sales charge. The payments are subject to the sole
     discretion  of  Distributors,  and are paid by  Distributors  or one of its
     affiliates and not by the fund or its shareholders.

     1.   Class A  purchases  of $1  million  or  more - up to 1% of the  amount
          invested  (Convertible  Fund  and  Equity  Fund) or up to 0.75% of the
          amount invested (Global Fund and Short-Intermediate Fund).

     2.   Class B purchases - up to 4% of the amount invested.

     3.   Class C purchases - up to 1% of the purchase price.

     4.   Class A purchases  made  without a front-end  sales  charge by certain
          retirement plans described under "Sales Charge  Reductions and Waivers
          - Retirement Plans" above - up to 1% of the amount invested.

     5.   Class A  purchases  by trust  companies  and bank  trust  departments,
          Eligible  Governmental  Authorities,  and  broker-dealers or others on
          behalf of clients  participating in comprehensive fee programs - up to
          0.25% of the amount invested.

     6.   Class A purchases by Chilean retirement plans - up to 1% of the amount
          invested.

     A  Securities  Dealer  may  receive  only  one of these  payments  for each
     qualifying purchase.  Securities Dealers who receive payments in connection
     with investments described in paragraphs 1, 3 or 6 above or a payment of up
     to 1% for investments  described in paragraph 4 will be eligible to receive
     the Rule 12b-1 fee associated with the purchase  starting in the thirteenth
     calendar month after the purchase.

     FOR BREAKPOINTS  THAT MAY APPLY AND INFORMATION ON ADDITIONAL  COMPENSATION
     PAYABLE TO SECURITIES  DEALERS IN CONNECTION  WITH THE SALE OF FUND SHARES,
     PLEASE SEE "HOW DO I BUY,  SELL AND EXCHANGE  SHARES?  - OTHER  PAYMENTS TO
     SECURITIES DEALERS" IN THE SAI.

XII. The second and third  paragraphs under "May I Exchange Shares for Shares of
     Another Fund?" are replaced with the following:

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

     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 goal
     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.  Some Franklin Templeton Funds do not offer
     Class B or C shares.

XIII.In the  section  "Contingent  Deferred  Sales  Charge,"  found under "May I
     Exchange  Shares for Shares of Another  Fund? - Will Sales Charges Apply to
     My Exchange?",

     (a) the following sentence is added to the end of the first paragraph:

     The purchase  price for  determining a Contingent  Deferred Sales Charge on
     exchanged shares will be the price you paid for the original shares.

     (b) and the third paragraph is replaced with the following:

     If you exchange  Class A 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.  If you exchange your Class B or C shares for the same
     class of shares of Franklin  Templeton Money Fund,  however,  the time your
     shares  are held in that fund will  count  towards  the  completion  of any
     Contingency Period.

XIV. The second and third bulleted items in the section "Exchange Restrictions,"
     found  under "May I Exchange  Shares  for  Shares of  Another  Fund?",  are
     replaced with the following:

     You may only exchange shares within the same class,  except as noted below.
     If you exchange your Class B shares for the same class of shares of another
     Franklin  Templeton  Fund,  the time your shares are held in that fund will
     count  towards the eight year period for  automatic  conversion  to Class A
     shares.

     Generally  exchanges  may  only  be  made  between  identically  registered
     accounts,  unless you send written instructions with a signature guarantee.
     You may, however, 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. Additional procedures
     may apply. Please see "Transaction Procedures and Special Requirements."

XV.  In the "By Phone" section of the chart under "How Do I Sell Shares?",

     (a) the first bulleted item is replaced with the following:

         If the request is $100,000 or less. Institutional accounts may
        exceed $100,000 by completing a separate agreement. Call
        Institutional Services to receive a copy.

     (b) and the third bulleted item is deleted.

XVI. In the section  "Contingent  Deferred  Sales Charge," found under "How Do I
     Sell Shares?",

     (a) the following is added after the second paragraph:

     For Class B shares, there is a Contingent Deferred Sales Charge if you sell
     your shares within six years,  as described in the table below.  The charge
     is based on the value of the shares sold or the Net Asset Value at the time
     of purchase, whichever is less.

                                                    THIS % IS DEDUCTED FROM YOUR
         IF YOU SELL YOUR CLASS B SHARES            PROCEEDS AS A CONTINGENT
         WITHIN THIS MANY YEARS AFTER BUYING THEM   DEFERRED SALES CHARGE
         -----------------------------------------------------------------------
         1 Year                                     4
         2 Years                                    4
         3 Years                                    3
         4 Years                                    3
         5 Years                                    2
         6 Years                                    1
         7 Years                                    0

     (b) and the section "Waivers" is replaced with the following:

     WAIVERS. We waive the Contingent Deferred Sales Charge for:

     o    Account fees

     o    Sales of Class A shares purchased  without a front-end sales charge by
          certain  retirement plan accounts if (i) the account was opened before
          May 1,  1997,  or (ii) the  Securities  Dealer  of record  received  a
          payment from Distributors of 0.25% or less, or (iii)  Distributors did
          not make any  payment in  connection  with the  purchase,  or (iv) the
          Securities Dealer of record has entered into a supplemental  agreement
          with Distributors

     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% monthly,  3% quarterly,  6% semiannually or
          12%  annually  of your  account's  Net Asset  Value  depending  on the
          frequency of your plan

     o    Redemptions  by Trust  Company  employee  benefit  plans  or  employee
          benefit plans serviced by ValuSelect(R) (not applicable to Class B)

     o    Distributions  from IRAs due to death or  disability  or upon periodic
          distributions  based on life  expectancy (for Class B, this applies to
          all retirement plan accounts, not only IRAs)

     o    Returns of excess  contributions  (and earnings,  if applicable)  from
          retirement plan accounts

     o    Participant  initiated  distributions  from employee  benefit plans or
          participant  initiated  exchanges among investment choices in employee
          benefit plans (not applicable to Class B)

XVII.The fourth  paragraph  under "What  Distributions  Might I Receive From the
     Fund?" is replaced with the following:

     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.

XVIII. Distribution option 3 and the paragraph following it in the section "What
     Distributions  Might I Receive  From the Fund? -  Distribution  Options" is
     replaced with the following:

     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  or  savings  account,  you may need a
     signature  guarantee.  If you  send  the  money to a  checking  or  savings
     account, please see "Electronic Fund Transfers" under "Services to Help You
     Manage Your Account."

     Distributions may be reinvested only in the same class of shares, except as
     follows: (i) Class C shareholders who chose to reinvest their distributions
     in Class A shares of the fund or another  Franklin  Templeton  Fund  before
     November  17,  1997,  may  continue  to  do  so;  and  (ii)  Class  B and C
     shareholders  may reinvest  their  distributions  in shares of any Franklin
     Templeton money fund.

XIX. Under "Transaction Procedures and Special Requirements,"

     (a) the section "Joint Accounts" is replaced with the following:

     JOINT ACCOUNTS.  For accounts with more than one registered owner, the fund
     accepts written  instructions signed by only one owner for transactions and
     account  changes  that  could  otherwise  be made by  phone.  For all other
     transactions and changes, all registered owners must sign the instructions.

     Please  keep in mind  that if you have  previously  told us that you do not
     want telephone exchange or redemption  privileges on your account,  then we
     can only accept written  instructions  to exchange or redeem shares if they
     are signed by all registered owners on the account.

     (b) the  reference  to $50,000 in the  section  "Signature  Guarantees"  is
     replaced with $100,000.

     (c) and the section "Trust Company  Retirement Plan Accounts,"  found under
     "Telephone Transactions," is deleted.

XX.  In the section "Services to Help You Manage Your Account":

     (a) the second sentence under "Automatic  Investment Plan" is replaced with
     the following:

     Under the plan,  you can have  money  transferred  automatically  from your
     checking  or  savings  account  to the fund  each  month to buy  additional
     shares.

     (b) the second  paragraph under  "Systematic  Withdrawal  Plan" is replaced
     with the following:

     If you  would  like to  establish  a  systematic  withdrawal  plan,  please
     complete the systematic  withdrawal plan section of the account 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 or savings account. If
     you choose to have the money sent to a checking or savings account,  please
     see "Electronic Fund Transfers" below.  Once your plan is established,  any
     distributions  paid by the fund will be  automatically  reinvested  in your
     account.

     (c) the section "Electronic Fund Transfers - Class I Only" is replaced with
     the following:

     ELECTRONIC FUND TRANSFERS

     You may choose to have dividend and capital gain  distributions or payments
     under a systematic  withdrawal  plan sent directly to a checking or savings
     account.  If the  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.

     (d) the third  bulleted  item under  "TeleFACTS(R)"  is  replaced  with the
     following:

     o    exchange shares (within the same class) between identically registered
          Franklin Templeton Class A, B or C accounts; and

     (e) and the last sentence and the chart under  "TeleFACTS(R)"  are replaced
     with the following:

     The code numbers for Class A, B and C are:

                                     CLASS A     CLASS B     CLASS C
     ------------------------------------------------------------------
     Convertible Fund                  137         ---         237
     Equity Fund                       139         339         239
     Global Fund                       135         ---         235
     Short-Intermediate Fund           136         ---         ---

XXI. In the "Useful Terms and Definitions" section:

     (a) the  definition  of "Class I, Class II and  Advisor  Class" is replaced
     with the following:

     CLASS A, CLASS B, CLASS C AND ADVISOR  CLASS - The Equity Fund offers three
     classes  of  shares,  designated  "Class  A,"  "Class B" and "Class C." The
     Global  Fund also offers  three  classes of shares,  designated  "Class A,"
     "Class C" and  "Advisor  Class."  The  Short-Intermediate  Fund  offers two
     classes  of  shares,   designated   "Class  A"  and  "Advisor  Class."  The
     Convertible  Fund also offers two classes of shares,  designated  "Class A"
     and "Class  C." The  classes  have  proportionate  interests  in the fund's
     portfolio.  They  differ,  however,  primarily  in their  sales  charge and
     expense structures.

     (b) and the following definitions are revised:

     CONTINGENCY PERIOD - For Class A shares, the 12 month period during which a
     Contingent  Deferred Sales Charge may apply. The contingency  period is six
     years for  Class B shares  and 18 months  for Class C shares.  The  holding
     period  begins  on the day you buy your  shares.  For  example,  if you buy
     shares on the 18th of the month, they will age one month on the 18th day of
     the next month and each following month.

     CONTINGENT  DEFERRED  SALES  CHARGE  (CDSC) - A sales charge of 1% that may
     apply if you sell your Class A or C shares within the  Contingency  Period.
     For Class B, the maximum CDSC is 4% and declines to 0% after six years.

     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 5.75% for Class A of the Convertible Fund and the
     Equity Fund, 4.25% for Class A of the Global Fund, 2.25% for Class A of the
     Short-Intermediate  Fund and 1% for Class C.  There is no  front-end  sales
     charge for Class B. We calculate the offering  price to two decimal  places
     using standard rounding criteria.



                Please keep this supplement for future reference.






o FIST1 *SA

                            SHARE CLASS REDESIGNATION
                            EFFECTIVE JANUARY 1, 1999

                           Class A - Formerly Class I
                           Class B - New Share Class
                                     (Equity Fund Only)
                           Class C - Formerly Class II


                        SUPPLEMENT DATED JANUARY 1, 1999
                  TO THE STATEMENT OF ADDITIONAL INFORMATION OF
                       FRANKLIN INVESTORS SECURITIES TRUST
                (FIST1 - FRANKLIN GLOBAL GOVERNMENT INCOME FUND,
          FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND,
     FRANKLIN CONVERTIBLE SECURITIES FUND, AND FRANKLIN EQUITY INCOME FUND)
                               DATED MARCH 1, 1998

The Statement of Additional Information is amended as follows:

I.   As of January 1, 1999,  the Equity  Fund  offers  three  classes of shares:
     Class A, Class B and Class C. The Global Fund also offers three  classes of
     shares:  Class A, Class C and Advisor Class.  The  Short-Intermediate  Fund
     offers two classes of shares:  Class A and Advisor Class.  The  Convertible
     Fund also offers two classes of shares: Class A and Class C.

     Before January 1, 1999,  Class A shares were designated Class I and Class C
     shares  were  designated  Class II.  All  references  in the  Statement  of
     Additional Information to Class I shares are replaced with Class A, and all
     references to Class II shares are replaced with Class C.

II.  The second paragraph on page 2 is replaced with the following:

     This SAI describes  each Fund's Class A and C shares (except in the case of
     the  Short-Intermediate  Fund, which does not offer Class C shares) and the
     Equity Fund's Class B shares. The Global Fund and  Short-Intermediate  Fund
     each currently  offer another share class with a different sales charge and
     expense structure,  which affects performance.  To receive more information
     about the other share class, contact your investment representative or call
     1-800/DIAL BEN.

III. The following is added to the "Officers and Trustees" section:

     As of December 7, 1998, the officers and Board members,  as a group,  owned
     of record and beneficially the following shares of the Fund:  approximately
     270  shares  of  the  Global  Fund  -  Class  A,   39,208   shares  of  the
     Short-Intermediate  Fund - Class A, 454  shares of the  Convertible  Fund -
     Class A, 2,295 shares of the Equity Fund - Class A and 99,309 shares of the
     Short-Intermediate  Fund -  Advisor  Class,  or less  than 1% of the total
     outstanding  shares of each  Fund's  Class A shares and 28.47% of the total
     outstanding Advisor Class shares of the Short-Intermediate Fund.

IV.  The first  sentence in the section  "Additional  Information  on Exchanging
     Shares," found under "How Do I Buy, Sell and Exchange Shares?", is replaced
     with the following:

     Except  in the case of the  Short-Intermediate  Fund,  if you  request  the
     exchange of the total value of your  account,  declared  but unpaid  income
     dividends and capital gain distributions will be reinvested in the Fund and
     exchanged into the new fund at Net Asset Value when paid.

V.   In  the  section   "The  Rule  12b-1   Plans,"   found  under  "The  Fund's
     Underwriter,"

     (a) the first sentence is replaced with the following:

     Each  class  has a  separate  distribution  or "Rule  12b-1"  plan that was
     adopted pursuant to Rule 12b-1 of the 1940 Act.

     (b) the  following  paragraphs  are added  after the  section  "The Class I
     Plan":

     THE CLASS B PLAN. Under the Class B plan, the Equity Fund pays Distributors
     up to 0.75%  per year of the  class'  average  daily net  assets,  payable
     quarterly,  to pay  Distributors or others for providing  distribution  and
     related services and bearing certain  expenses.  All distribution  expenses
     over this amount will be borne by those who have incurred  them. The Equity
     Fund may also pay a  servicing  fee of up to 0.25% per year of the  class'
     average daily net assets,  payable  quarterly.  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 expenses relating to the Class B plan are also used to pay Distributors
     for advancing the  commission  costs to Securities  Dealers with respect to
     the initial sale of Class B shares.  Further,  the expenses relating to the
     Class B plan  may be used by  Distributors  to pay  third  party  financing
     entities that have provided  financing to  Distributors  in connection with
     advancing commission costs to Securities Dealers.

     (c) and the section  "The Class I and Class II Plans" is renamed "The Class
     A, B and C Plans."

VI.  The following  information is added to the  applicable  sections under "How
     Does the Fund Measure  Performance?"  (the Class A performance  figures for
     the Convertible  Fund and the Equity Fund have been restated to reflect the
     current, maximum 5.75% initial sales charge):

     TOTAL RETURN

     The average annual total returns for the indicated  periods ended April 30,
     1998, were:

<TABLE>
<CAPTION>
                                   INCEPTION                                    FROM
                                      DATE     1 YEAR   5 YEARS   10 YEARS   INCEPTION
     ------------------------------------------------------------------------------------
     CLASS A

     <S>                            <C>          <C>       <C>        <C>          <C>
     Global Fund                    3/15/88      3.20%     5.58%      7.25%        7.22%
     Short-Intermediate Fund        4/15/87      4.44%     4.19%      6.65%        6.69%
     Convertible Fund               4/15/87     15.27%    13.53%     12.82%       11.71%
     Equity Fund                    3/15/88     24.02%    14.65%     14.35%       14.14%

     ------------------------------------------------------------------------------------
     CLASS C

     <S>                             <C>         <C>         <C>        <C>        <C>
     Global Fund                     5/1/95      5.29%       ---        ---        8.26%
     Convertible Fund               10/2/95     19.11%       ---        ---       15.04%
     Equity Fund                    10/2/95     28.25%       ---        ---       19.82%


     The  cumulative  total  returns for the  indicated  periods ended April 30,
     1998, were:

                                   INCEPTION                                    FROM
                                      DATE     1 YEAR   5 YEARS   10 YEARS   INCEPTION
     ------------------------------------------------------------------------------------
     CLASS A

     <S>                            <C>          <C>      <C>       <C>          <C>
     Global Fund                    3/15/88      3.20%    31.21%    101.45%      102.61%
     Short-Intermediate Fund        4/15/87      4.44%    22.77%     90.39%      104.49%
     Convertible Fund               4/15/87     15.27%    88.64%    234.05%      239.59%
     Equity Fund                    3/15/88     24.02%    98.12%    282.18%      281.46%

     ------------------------------------------------------------------------------------
     CLASS C

     <S>                             <C>         <C>         <C>        <C>       <C>
     Global Fund                     5/1/95      5.29%       ---        ---       27.79%
     Convertible Fund               10/2/95     19.11%       ---        ---       43.48%
     Equity Fund                    10/2/95     28.25%       ---        ---       59.33%
</TABLE>

     YIELD

     The yields for the 30-day period ended April 30, 1998, were:

     CLASS A

     Global Fund                          4.92%
     Short-Intermediate Fund              4.80%
     Convertible Fund                     3.43%
     Equity Fund                          2.93%

     CLASS C

     Global Fund                          5.08%
     Convertible Fund                     2.86%
     Equity Fund                          2.34%

     CURRENT DISTRIBUTION RATE

     The current  distribution rates for the 30-day period ended April 30, 1998,
     were:


     -------------------------------------------
     CLASS A

     Global Fund                          6.83%
     Short-Intermediate Fund              5.48%
     Convertible Fund                     4.01%
     Equity Fund                          2.80%

     CLASS C

     Global Fund                          6.51%
     Convertible Fund                     3.47%
     Equity Fund                          2.22%

VII. Under "Miscellaneous Information," the following is added:

     The Information  Services & Technology division of Resources  established a
     Year  2000  Project  Team in 1996.  This  team  has  already  begun  making
     necessary  software  changes to help the computer  systems that service the
     Fund and its shareholders to be Year 2000 compliant. After completing these
     modifications,  comprehensive tests are conducted in one of Resources' U.S.
     test  labs to  verify  their  effectiveness.  Resources  continues  to seek
     reasonable  assurances from all major hardware,  software or  data-services
     suppliers  that  they  will be  Year  2000  compliant  on a  timely  basis.
     Resources  is also  beginning  to  develop a  contingency  plan,  including
     identification  of those mission critical systems for which it is practical
     to develop a  contingency  plan.  However,  in an  operation as complex and
     geographically  distributed as Resources' business, the alternatives to use
     of normal systems,  especially  mission  critical  systems,  or supplies of
     electricity or long distance voice and data lines are limited.

     As of December 7, 1998, the principal  shareholders of the Fund, beneficial
     or of record, were as follows:

              NAME AND ADDRESS               SHARE AMOUNT          PERCENTAGE
- ------------------------------------------------------------------------------

     GLOBAL FUND - ADVISOR CLASS

     FTTC TTEE for ValuSelect                   78,867.870           77.39%
     Franklin Templeton 401K
     Attn: Trading
     P.O. Box 2438
     Rancho Cordova, CA 95741-2438

     SHORT-INTERMEDIATE FUND - CLASS A

     City of Scottsdale                        2,483,112.578         11.66%
     Attn: Mark Kochman
     3939 Civic Center Blvd.
     Scottsdale, AZ 85251-4433

     SHORT-INTERMEDIATE FUND - ADVISOR
     CLASS

     Templeton Funds Trust Co.                  216,665.696          62.11%
     Attn: Vickie Nuzzo
     100 Fountain Pky
     St. Petersburg, FL 33716-1205

     FTTC Trust Services FBO                    99,308.580           28.47%
     Harris J. Ashton IRA R/0
     P.O. Box 7519
     San Mateo, CA 94403-7519

VIII. The following is added to the section "Financial Statements":

     The unaudited  financial  statements  contained in the Semiannual Report to
     Shareholders of the Trust,  for the six-month  period ended April 30, 1998,
     are incorporated herein by reference.

IX.  In the "Useful Terms and Definitions" section, the definitions of "Class I,
     Class II and Advisor  Class" and  "Offering  Price" are  replaced  with the
     following:

     CLASS A, CLASS B, CLASS C AND ADVISOR  CLASS - The Equity Fund offers three
     classes  of  shares,  designated  "Class  A,"  "Class B" and "Class C." The
     Global  Fund also offers  three  classes of shares,  designated  "Class A,"
     "Class C" and  "Advisor  Class."  The  Short-Intermediate  Fund  offers two
     classes  of  shares,   designated   "Class  A"  and  "Advisor  Class."  The
     Convertible  Fund also offers two classes of shares,  designated  "Class A"
     and "Class  C." The  classes  have  proportionate  interests  in the Fund's
     portfolio.  They  differ,  however,  primarily  in their  sales  charge and
     expense structures.

     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 5.75% for Class A of the Convertible Fund and the
     Equity Fund, 4.25% for Class A of the Global Fund, 2.25% for Class A of the
     Short-Intermediate  Fund and 1% for Class C.  There is no  front-end  sales
     charge for Class B. We calculate the offering  price to two decimal  places
     using standard rounding criteria.


                Please keep this supplement for future reference.






                       FRANKLIN INVESTORS SECURITIES TRUST
                              FILE NOS. 33-11444 &
                                    811-4986

                                    FORM N-1A

                                     PART C
                                OTHER INFORMATION

ITEM 24     FINANCIAL STATEMENTS AND EXHIBITS

      a)    (1)     Audited Financial Statements incorporated herein by
                    reference to the Registrant's Annual Report to
                    Shareholders dated October 31, 1997, as filed with the
                    SEC electronically on Form Type N-30D on January 9, 1998

            FRANKLIN INVESTORS SECURITIES TRUST

            (i)     Financial Highlights

            (ii)    Statement of Investments, October 31, 1997

            (iii)   Statements of Assets and Liabilities - October 31, 1997

            (iv)    Statements of Operations for the year ended October 31,
                    1997

            (v)     Statements of Changes in Net Assets for the years ended
                    October 31, 1997 and 1996

            (vi)    Notes to Financial Statements

            (vii)   Report of Independent Accountants

            (2)     Unaudited Financial Statements incorporated herein by
                    reference to the Registrant's Semi-Annual Report to
                    Shareholders dated April 30, 1998, as filed with the SEC
                    electronically on Form Type N-30D on July 10, 1998

            FRANKLIN INVESTORS SECURITIES TRUST

            (i)     Financial Highlights

            (ii)    Statement of Investments, April 30, 1998

            (iii)   Statements of Assets and Liabilities - April 30, 1998

            (iv)    Statements of Operations for the six months ended April
                    30, 1998

            (v)     Statements of Changes in Net Assets for the six months
                    ended April 30, 1998 and the year ended October 31, 1997

            (vi)    Notes to Financial Statements

      b)    Exhibits:

            The following exhibits are hereby incorporated by reference,
            except exhibits 5(vii), 5(viii), 5(ix), 6(ii), 8(v), 8(vi), 9(i),
            11(i), 13(iii), 15(x), 15(xi), 18(iv) and 18(v) which are
            attached herewith

      (1)   Copies of the charter as now in effect;

            (i)     Agreement and Declaration of Trust dated December 16, 1986
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (ii)    Certificate of Amendment of Agreement and Declaration of
                    Trust dated March 21, 1995
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (iii)   Certificate of Amendment of Agreement and Declaration of
                    Trust dated March 13, 1990
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (iv)    Certificate of Amendment of Agreement and Declaration of
                    Trust dated March 21, 1989
                    Filing: Post-Effective Amendment No. 22 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: February 26, 1998

      (2)   Copies of the existing By-Laws or instruments corresponding
            thereto;

            (i)     By-Laws
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (ii)    Amendment to By-Laws dated January 18, 1994
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

      (3)   Copies of any voting trust agreement with respect to more than
            five percent of any class of equity securities of the Registrant;

            Not Applicable

      (4)   Specimens or copies of each security issued by the Registrant,
            including copies of all constituent instruments, defining the
            rights of the holders of such securities, and copies of each
            security being registered;

            Not Applicable

      (5)   Copies of all investment advisory contracts relating to the
            management of the assets of the Registrant;

            (i)     Management Agreement between Registrant and Franklin
                    Advisers, Inc. dated April 15, 1987
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (ii)    Administration Agreement between Registrant, on behalf of
                    Franklin Adjustable U.S. Government Securities Fund, and
                    Franklin Advisers, Inc. dated June 3, 1991
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (iii)   Administration Agreement between Registrant, on behalf of
                    Franklin Adjustable Rate Securities Fund, and Franklin
                    Advisers, Inc. dated December 26, 1991
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (iv)    Subadvisory Agreement between Franklin Advisers, Inc., on
                    behalf of Franklin Investors Securities Trust (on behalf
                    of its series: Franklin Global Government Income Fund),
                    and Templeton Investment Counsel, Inc. dated May 1, 1994
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (v)     Amendment dated August 1, 1995 to the Administration
                    Agreement between Registrant, on behalf of Franklin
                    Adjustable Rate Securities Fund, and Franklin Advisers,
                    Inc. dated December 26, 1991
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

            (vi)    Amendment dated August 1, 1995 to the Administration
                    Agreement between Registrant, on behalf of Franklin
                    Adjustable U.S. Government Securities Fund, and Franklin
                    Advisers, Inc. dated June 3, 1991
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

            (vii)   Investment Advisory Agreement between Registrant, on
                    behalf of Franklin Bond Fund, and Franklin Advisers, Inc.
                    dated July 16, 1998

            (viii)  Subadvisory Agreement between Franklin Advisers, Inc., on
                    behalf of Franklin Investors Securities Trust (on behalf
                    of its series: Franklin Bond Fund), and Templeton
                    Investment Counsel, Inc. dated July 16, 1998

            (ix)    Fund Administration Agreement between Registrant, on
                    behalf of Franklin Bond Fund, and Franklin Templeton
                    Services, Inc. dated July 16, 1998

      (6)   Copies of each underwriting or distribution contract between the
            Registrant and a principal underwriter, and specimens or copies
            of all agreements between principal underwriters and dealers;

            (i)     Amended and Restated Distribution Agreement between
                    Registrant and Franklin/Templeton Distributors, Inc.
                    dated March 29, 1995
                    Filing: Post-Effective Amendment No. 18 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: November 27, 1996

            (ii)    Forms of Dealer Agreements between Franklin/Templeton
                    Distributors, Inc. and Securities Dealers

      (7)   Copies of all bonus, profit sharing, pension or other similar
            contracts or arrangements wholly or partly for the benefit of
            trustees or officers of the Registrant in their capacity as such;
            any such plan that is not set forth in a formal document, furnish
            a reasonably detailed description thereof;

            Not Applicable

      (8)   Copies of all custodian agreements and depository contracts under
            Section 17(f) of the 1940 Act, with respect to securities and
            similar investments of the Registrant, including the schedule of
            remuneration;

            (i)     Global Custody Agreement between The Chase Manhattan
                    Bank, N.A. and Franklin Investors Securities Trust, on
                    behalf of Franklin Global Government Income Fund, dated
                    July 28, 1995
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

            (ii)    Master Custody Agreement between Registrant and Bank of
                    New York dated February 16, 1996
                    Filing: Post-Effective Amendment No. 18 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: November 27, 1996

            (iii)   Terminal Link Agreement between Registrant and Bank of
                    New York dated February 16, 1996
                    Filing: Post-Effective Amendment No. 18 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: November 27, 1996

            (iv)    Amendment dated May 7, 1997 to Master Custody Agreement
                    between Registrant and Bank of New York dated February
                    16, 1996
                    Filing: Post-Effective Amendment No. 22 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: February 26, 1998

            (v)     Amendment dated February 27, 1998 to Exhibit A of the
                    Master Custody Agreement between the Registrant and Bank
                    of New York dated February 16, 1996

            (vi)    Foreign Custody Manager Agreement between the Registrant
                    and Bank of New York made as of July 30, 1998, effective
                    as of February 27, 1998

      (9)   Copies of all other material contracts not made in the ordinary
            course of business which are to be performed in whole or in part
            at or after the date of filing the Registration Statement;

            (i)     Subcontract for Fund Administrative Services dated
                    October 1, 1996 and Amendment thereto dated April 30,
                    1998 between Franklin Advisers, Inc. and Franklin
                    Templeton Services, Inc.

      (10)  An opinion and consent of counsel as to the legality of the
            securities being registered, indicating whether they will when
            sold be legally issued, fully paid and nonassessable;

            (i)     Opinion and Consent of Counsel dated May 14, 1998
                    Filing: Post-Effective Amendment No. 23 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    File Date: May 20, 1998

      (11)  Copies of any other opinions, appraisals or rulings and consents
            to the use thereof relied on in the preparation of this
            Registration Statement and required by Section 7 of the 1933 Act;

            (i)   Consent of Independent Auditors

      (12)  All financial statements omitted from Item 23;

            Not Applicable

      (13)  Copies of any agreements or understandings made in consideration
            for providing the initial capital between or among the
            Registrant, the underwriter, adviser, promoter or initial
            stockholders and written assurances from promoters or initial
            stockholders that their purchases were made for investment
            purposes without any present intention of redeeming or reselling;

            (i)     Letter of Understanding relating to Franklin Global
                    Government Income Fund - Class II and Franklin Equity
                    Income Fund - Class II dated April 12, 1995
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (ii)    Letter of Understanding relating to Franklin Adjustable
                    Rate Securities Fund
                    Filing: Post-Effective Amendment No. 10 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: June 1, 1992

            (iii)   Letter of Understanding relating to Franklin Bond Fund
                    dated July 24, 1998

      (14)  Copies of the model plan used in the establishment of any
            retirement plan in conjunction with which Registrant offers its
            securities, any instructions thereto and any other documents
            making up the model plan.  Such form(s) should disclose the costs
            and fees charged in connection therewith;

            Not Applicable

      (15)  Copies of any plan entered into by Registrant pursuant to Rule
            12b-1 under the 1940 Act, which describes all material aspects of
            the financing of distribution of Registrant's shares, and any
            agreements with any person relating to implementation of such
            plan.

            (i)     Distribution Plan between Registrant, on behalf of
                    Franklin Global Government Income Fund, and
                    Franklin/Templeton Distributors, Inc. dated May 1, 1994
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (ii)    Distribution Plan between Registrant, on behalf of
                    Franklin Short-Intermediate U.S. Government Securities
                    Fund, and Franklin/Templeton Distributors, Inc. dated May
                    1, 1994
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (iii)   Distribution Plan between Registrant, on behalf of
                    Franklin Convertible Securities Fund, and
                    Franklin/Templeton Distributors, Inc. dated May 1, 1994
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (iv)    Amended and Restated Distribution Plan between
                    Registrant, on behalf of Franklin Adjustable U.S.
                    Government Securities Fund, and Franklin/Templeton
                    Distributors, Inc. dated July 1, 1993
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (v)     Distribution Plan between Registrant, on behalf of
                    Franklin Equity Income Fund, and Franklin/Templeton
                    Distributors, Inc. dated May 1, 1994
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (vi)    Amended and Restated Distribution Plan between
                    Registrant, on behalf of Franklin Adjustable Rate
                    Securities Fund, and Franklin/Templeton Distributors,
                    Inc. dated July 1, 1993
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (vii)   Class II Distribution Plan pursuant to Rule 12b-1 between
                    Registrant, on behalf of Franklin Global Government
                    Income Fund, and Franklin/Templeton Distributors, Inc.
                    dated March 30, 1995
                    Filing: Post-Effective Amendment No. 15 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: April 24, 1995

            (viii)  Class II Distribution Plan pursuant to Rule 12b-1 between
                    Registrant, on behalf of Franklin Convertible Securities
                    Fund, and Franklin/Templeton Distributors, Inc. dated
                    September 29, 1995
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

            (ix)    Class II Distribution Plan pursuant to Rule 12b-1 between
                    Registrant, on behalf of Franklin Equity Income Fund, and
                    Franklin/Templeton Distributors, Inc. dated March 30, 1995
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

            (x)     Form of Distribution Plan pursuant to Rule 12b-1 between
                    Registrant, on behalf of Franklin Equity Income Fund -
                    Class B, and Franklin/Templeton Distributors, Inc.

            (xi)    Distribution Plan between Registrant, on behalf of
                    Franklin Bond Fund, and Franklin/Templeton Distributors,
                    Inc. dated July 16, 1998

      (16)  Schedule for computation of each performance quotation provided
            in the Registration Statement in response to Item 22 (which need
            not be audited).

            Not Applicable

      (17)  Power of Attorney

            (i)     Power of Attorney for Franklin Investors Securities Trust
                    dated April 16, 1998
                    Filing: Post-Effective Amendment No. 23 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    File Date: May 20, 1998

            (ii)    Certificate of Secretary for Franklin Investors
                    Securities Trust dated April 16, 1998
                    Filing: Post-Effective Amendment No. 23 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    File Date: May 20, 1998

            (iii)   Power of Attorney for Adjustable Rate Securities
                    Portfolios dated February 16, 1995
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

            (iv)    Certificate of Secretary for Adjustable Rate Securities
                    Portfolios dated February 16, 1995
                    Filing: Post-Effective Amendment No. 17 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 29, 1995

      (18)  Copies of any plan entered into by registrant pursuant to Rule
            18f-3 under the 1940 Act

            (i)     Multiple Class Plan for Franklin Global Government Income
                    Fund dated June 18, 1996
                    Filing: Post-Effective Amendment No. 20 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 31, 1996

            (ii)    Multiple Class Plan for Franklin Short-Intermediate U.S.
                    Government Securities Fund dated June 18, 1996
                    Filing: Post-Effective Amendment No. 20 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: December 31, 1996

            (iii)   Multiple Class Plan for Franklin Convertible Securities
                    Fund dated August 15, 1995
                    Filing: Post-Effective Amendment No. 21 to
                    Registration Statement on Form N-1A
                    File No. 33-11444
                    Filing Date: February 28, 1997

            (iv)    Form of Multiple Class Plan for Franklin Equity Income
                    Fund

            (v)     Multiple Class Plan for Franklin Bond Fund dated July 16,
                    1998

      (27)  Financial Data Schedule

            Not Applicable

ITEM 25     PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
            REGISTRANT

            None

ITEM 26     NUMBER OF HOLDERS OF SECURITIES

            Not Applicable

ITEM 27     INDEMNIFICATION

Insofar as indemnification  for liabilities  arising under the Securities Act of
1933 may be  permitted  to trustees,  officers  and  controlling  persons of the
Registrant pursuant to the foregoing  provisions,  or otherwise,  the Registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore,  unenforceable. In the event that a claim for indemnification against
such liabilities  (other than the payment by the Registrant of expenses incurred
or paid by a trustee,  officer or  controlling  person of the  Registrant in the
successful  defense of any  action,  suit or  proceeding)  is  asserted  by such
trustee,  officer or  controlling  person in connection  with  securities  being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification is against public policy
as expressed in the Act and will be governed by the final  adjudication  of such
issue.

ITEM 28     BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

a)  The officers and directors of the Registrant's  manager, Administrator,  and
the Master Fund's investment adviser,  Franklin Advisers, Inc. ("Advisers") also
serve as officers and/or directors for (1) Advisers' corporate parent,  Franklin
Resources, Inc., and/or (2) other investment companies in the Franklin Templeton
Group of Funds.  In addition,  Mr. Charles B. Johnson was formerly a director of
General  Host  Corporation.  For  additional  information  please see Part B and
Schedules A and D of Form ADV of  Advisers  (SEC File  801-26292),  incorporated
herein by reference, which sets forth the officers and directors of Advisers and
information  as  to  any  business,  profession,  vocation  or  employment  of a
substantial  nature engaged in by those  officers and directors  during the past
two years.

b)  Templeton Investment Counsel, Inc.

Templeton  Investment  Counsel,  Inc., an indirect,  wholly owned  subsidiary of
Franklin Resources, Inc., serves as the Franklin Global Government Income Fund's
Sub-adviser,  furnishing to Franklin Advisers, Inc. in that capacity,  portfolio
management services and investment research.  For additional  information please
see part B and Schedules A and D of Form ADV of the Franklin  Global  Government
Income  Fund's  Sub-adviser  (SEC  File  801-15125),   incorporated   herein  by
reference,  which sets forth the officers and directors of the  Sub-adviser  and
information  as  to  any  business,  profession,  vocation  or  employment  of a
substantial  nature engages in by those  officers and directors  during the past
two years.

ITEM 29     PRINCIPAL UNDERWRITERS

a)  Franklin/Templeton  Distributors,  Inc.,  ("Distributors")  also  acts  as
principal  underwriter  of  shares of:

Franklin Asset Allocation Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Floating Rate Trust
Franklin Gold Fund
Franklin High Income Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust

Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.

b)  The information  required by this Item 29 with respect to each  director and
officer of  Distributors is incorporated by reference to Part B of this N-1A and
Schedule A of Form BD filed by  Distributors  with the  Securities  and Exchange
Commission pursuant to the Securities Act of 1934 (SEC File No. 8-5889).

c)  Not Applicable. Registrant's principal underwriter  is an affiliated  person
of an affiliated person of the Registrant.

ITEM 30     LOCATION OF ACCOUNTS AND RECORDS

The accounts,  books or other documents  required to be maintained by Section 31
(a) of  the  Investment  Company  Act of  1940  are  kept  by  the  Fund  or its
shareholder services agent, Franklin Templeton Investor Services,  Inc., both of
whose address is 777 Mariners Island Blvd., San Mateo, CA. 94404.

ITEM 31     MANAGEMENT SERVICES

There are no  management-related  service  contracts  not discussed in Part A or
Part B.

ITEM 32     UNDERTAKINGS

a) The Registrant hereby  undertakes to comply with the information  requirement
in Item 5A of Form N-1A including the required  information in the Fund's annual
report and to furnish  each person to whom a  prospectus  is delivered a copy of
the annual report upon request and without charge.




                                   SIGNATURES

Pursuant to the  requirements  of the  Securities Act of 1933 and the Investment
Company  Act  of  1940,  the  Registrant  certifies  that  it  meets  all of the
requirements for effectiveness of this Registration  Statement  pursuant to Rule
485(b) under the  Securities  Act of 1933 and has duly caused this  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized in the City of San Mateo and the State of California, on the 28th day
of December, 1998.

                                    FRANKLIN INVESTORS SECURITIES TRUST
                                    (Registrant)

                                    By:   EDWARD B. JAMIESON*
                                          -------------------
                                          Edward B. Jamieson,
                                          President

Pursuant to the  requirements of the Securities Act of 1933,  this  Registration
Statement has been signed below by the following  persons in the  capacities and
on the dates indicated.

EDWARD B. JAMIESON*                    Trustee and Principal
Edward B. Jamieson                     Executive Officer
                                       Dated: December 28, 1998

MARTIN L. FLANAGAN*                    Principal Financial Officer
Martin L. Flanagan                     Dated: December 28, 1998

DIOMEDES LOO-TAM*                      Principal Accounting Officer
Diomedes Loo-Tam                       Dated: December 28, 1998

FRANK H. ABBOTT, III*                  Trustee
Frank H. Abbott, III                   Dated: December 28, 1998

HARRIS J. ASHTON*                      Trustee
Harris J. Ashton                       Dated: December 28, 1998

S. JOSEPH FORTUNATO*                   Trustee
S. Joseph Fortunato                    Dated: December 28, 1998

EDITH E. HOLIDAY*                      Trustee
Edith E. Holiday                       Dated: December 28, 1998

CHARLES B. JOHNSON*                    Trustee
Charles B. Johnson                     Dated: December 28, 1998

RUPERT H. JOHNSON, JR.*                Trustee
Rupert H. Johnson, Jr.                 Dated: December 28, 1998

FRANK W.T. LAHAYE*                     Trustee
Frank W.T. LaHaye                      Dated: December 28, 1998

GORDON S. MACKLIN*                     Trustee
Gordon S. Macklin                      Dated: December 28, 1998


*By   /s/ Larry L. Greene
      Attorney-in-Fact
      (Pursuant to Powers of Attorney previously filed)




                       FRANKLIN INVESTORS SECURITIES TRUST
                             REGISTRATION STATEMENT

                                 EXHIBITS INDEX

  EXHIBIT NO.              DESCRIPTION                             LOCATION

  EX-99.B1(i)              Agreement and Declaration of Trust         *
                           dated December 16, 1986

  EX-99.B1(ii)             Certificate of Amendment of                *
                           Agreement and Declaration of Trust
                           dated March 21, 1995

  EX-99.B1(iii)            Certificate of Amendment of                *
                           Agreement and Declaration of Trust
                           dated March 13, 1990

  EX-99.B1(iv)             Certificate of Amendment of                *
                           Agreement and Declaration of Trust
                           dated March 21, 1989

  EX-99.B2(i)              By-Laws                                    *

  EX-99.B2(ii)             Amendment to By-Laws dated January         *
                           18, 1994

  EX-99.B5(i)              Management Agreement between               *
                           Registrant and Franklin Advisers,
                           Inc. dated April 15, 1987

  EX-99.B5(ii)             Administration Agreement between           *
                           Registrant, on behalf of Franklin
                           Adjustable U.S. Government
                           Securities Fund, and Franklin
                           Advisers, Inc. dated June 3, 1991

  EX-99.B5(iii)            Administration Agreement between           *
                           Registrant, on behalf of Franklin
                           Adjustable Rate Securities Fund, and
                           Franklin Advisers, Inc. dated
                           December 26, 1991

  EX-99.B5(iv)             Subadvisory Agreement between              *
                           Franklin Advisers, Inc., on behalf
                           of Franklin Investors Securities
                           Trust (on behalf of its series:
                           Franklin Global Government Income
                           Fund), and Templeton Investment
                           Counsel, Inc. dated May 1, 1994

  EX-99.B5(v)              Amendment dated August 1, 1995 to          *
                           the Administration Agreement between
                           Registrant, on behalf of Franklin
                           Adjustable Rate Securities Fund, and
                           Franklin Advisers, Inc. dated
                           December 26, 1991

  EX-99.B5(vi)             Amendment dated August 1, 1995 to          *
                           the Administration Agreement between
                           Registrant, on behalf of Franklin
                           Adjustable U.S. Government
                           Securities Fund, and Franklin
                           Advisers, Inc. dated June 3, 1991

  EX-99.B5(vii)            Investment Advisory Agreement              Attached
                           between Registrant, on behalf of
                           Franklin Bond Fund, and Franklin
                           Advisers, Inc. dated July 16, 1998

  EX-99.B5(viii)           Subadvisory Agreement between              Attached
                           Franklin Advisers, Inc., on behalf
                           of Franklin Investors Securities
                           Trust (on behalf of its series:
                           Franklin Bond Fund), and Templeton
                           Investment Counsel, Inc. dated July
                           16, 1998

  EX-99.B5(ix)             Fund Administration Agreement              Attached
                           between Registrant, on behalf of
                           Franklin Bond Fund, and Franklin
                           Templeton Services, Inc. dated July
                           16, 1998

  EX-99.B6(i)              Amended and Restated Distribution          *
                           Agreement between Registrant and
                           Franklin/Templeton  Distributors,
                           Inc. dated March 29, 1995

  EX-99.B6(ii)             Forms of Dealer Agreements between         Attached
                           Franklin/Templeton Distributors,
                           Inc. and Securities Dealers

  EX-99.B8(i)              Global Custody Agreement between The       *
                           Chase Manhattan Bank, N.A. and
                           Franklin Investors Securities Trust,
                           on behalf of Franklin Global
                           Government Income Fund, dated July
                           28, 1995

  EX-99.B8(ii)             Master Custody Agreement between           *
                           Registrant and Bank of New York
                           dated February 16, 1996

  EX-99.B8(iii)            Terminal Link Agreement between            *
                           Registrant and Bank of New York
                           dated February 16, 1996

  EX-99.B8(iv)             Amendment dated May 7, 1997 to             *
                           Master Custody Agreement between
                           Registrant and Bank of New York
                           dated February 16, 1996

  EX-99.B8(v)              Amendment dated February 27, 1998 to       Attached
                           Exhibit A of the Master Custody
                           Agreement between Registrant and
                           Bank of New York dated February 16,
                           1996

  EX-99.B8(vi)             Foreign Custody Manager Agreement          Attached
                           between Registrant and Bank of New
                           York made as of July 30, 1998,
                           effective as of February 27, 1998

  EX-99.B9(i)              Subcontract for Fund Administrative        Attached
                           Services dated October 1, 1996 and
                           Amendment thereto dated April 30,
                           1998 between Franklin Advisers, Inc.
                           and Franklin Templeton Services,
                           Inc.

  EX-99.B10(i)             Opinion and Consent of Counsel dated       *
                           May 14, 1998

  EX-99.B11(i)             Consent of Independent Auditors            Attached

  EX-99.B13(i)             Letter of Understanding relating to        *
                           Franklin Global Government Income
                           Fund - Class II and Franklin Equity
                           Income Fund - Class II dated April
                           12, 1995

  EX-99.B13(ii)            Letter of Understanding relating to        *
                           Franklin Adjustable Rate Securities
                           Fund

  EX-99.B13(iii)           Letter of Understanding relating to        Attached
                           Franklin Bond Fund dated July 24,
                           1998

  EX-99.B15(i)             Distribution Plan between                  *
                           Registrant, on behalf of Franklin
                           Global Government Income Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated May 1, 1994

  EX-99.B15(ii)            Distribution Plan between                  *
                           Registrant, on behalf of Franklin
                           Short-Intermediate U.S. Government
                           Securities Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated May 1, 1994

  EX-99.B15(iii)           Distribution Plan between                  *
                           Registrant, on behalf of Franklin
                           Convertible Securities Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated May 1, 1994

  EX-99.B15(iv)            Amended and Restated Distribution          *
                           Plan between Registrant, on behalf
                           of Franklin Adjustable U.S.
                           Government Securities Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated July
                           1, 1993

  EX-99.B15(v)             Distribution Plan between                  *
                           Registrant, on behalf of Franklin
                           Equity Income Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated May
                           1, 1994

  EX-99.B15(vi)            Amended and Restated Distribution          *
                           Plan between Registrant, on behalf
                           of Franklin Adjustable Rate
                           Securities Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated
                           July 1, 1993

  EX-99.B15(vii)           Class II Distribution Plan pursuant        *
                           to Rule 12b-1 between Registrant, on
                           behalf of Franklin Global Government
                           Income Fund, and Franklin/Templeton
                           Distributors, Inc. dated March 30,
                           1995

  EX-99.B15(viii)          Class II Distribution Plan pursuant        *
                           to Rule 12b-1 between Registrant, on
                           behalf of Franklin Convertible
                           Securities Fund, and
                           Franklin/Templeton Distributors,
                           Inc. dated September 29, 1995

  EX-99.B15(ix)            Class II Distribution Plan pursuant        *
                           to Rule 12b-1 between Registrant, on
                           behalf of Franklin Equity Income
                           Fund, and Franklin/Templeton
                           Distributors, Inc. dated March 30,
                           1995

  EX-99.B15(x)             Form of Distribution Plan pursuant         Attached
                           to Rule 12b-1 between Registrant, on
                           behalf of Franklin Equity Income
                           Fund - Class B, and
                           Franklin/Templeton Distributors, Inc.

  EX-99.B15(xi)            Distribution Plan between                  Attached
                           Registrant, on behalf of Franklin
                           Bond Fund, and Franklin/Templeton
                           Distributors, Inc. dated July 16,
                           1998

  EX-99.B17(i)             Power of Attorney for Franklin             *
                           Investors Securities Trust dated
                           April 16, 1998

  EX-99.B17(ii)            Certificate of Secretary for               *
                           Franklin Investors Securities Trust
                           dated April 16, 1998

  EX-99.B17(iii)           Power of Attorney for Adjustable           *
                           Rate Securities Portfolios dated
                           February 16, 1995

  EX-99.B17(iv)            Certificate of Secretary for               *
                           Adjustable Rate Securities
                           Portfolios dated February 16, 1995

  EX-99.B18(i)             Multiple Class Plan for Franklin           *
                           Global Government Income Fund dated
                           June 18, 1996

  EX-99.B18(ii)            Multiple Class Plan for Franklin           *
                           Short-Intermediate U.S. Government
                           Securities Fund dated June 18, 1996

  EX-99.B18(iii)           Multiple Class Plan for Franklin           *
                           Convertible Securities Fund dated
                           August 15, 1995

  EX-99.B18(iv)            Form of Multiple Class Plan for            Attached
                           Franklin Equity Income Fund

  EX-99.B18(v)             Multiple Class Plan for Franklin           Attached
                           Bond Fund dated July 16, 1998



*Incorporated by reference







                       FRANKLIN INVESTORS SECURITIES TRUST
                                  on behalf of
                               FRANKLIN BOND FUND

                          INVESTMENT ADVISORY AGREEMENT


      THIS  INVESTMENT  ADVISORY  AGREEMENT  made between  FRANKLIN  INVESTORS
SECURITIES TRUST, a Massachusetts  business trust (the "Trust"),  on behalf of
Franklin  Bond  Fund  (the  "Fund"),  a  series  of the  Trust,  and  FRANKLIN
ADVISERS, INC., a California corporation, (the "Adviser").

      WHEREAS,  the Trust has been  organized  and  intends  to  operate as an
investment  company  registered under the Investment  Company Act of 1940 (the
"1940  Act") for the  purpose  of  investing  and  reinvesting  its  assets in
securities,  as set forth in its  Agreement  and  Declaration  of  Trust,  its
By-Laws and its Registration  Statements under the 1940 Act and the Securities
Act of 1933, all as heretofore  and hereafter  amended and  supplemented;  and
the Trust  desires  to avail  itself  of the  services,  information,  advice,
assistance and  facilities of an investment  adviser and to have an investment
adviser perform various, statistical,  research, investment advisory and other
services for the Fund; and,

      WHEREAS,  the Adviser is registered  as an investment  adviser under the
Investment  Advisers  Act of 1940,  is engaged in the  business  of  rendering
investment  advisory,   counseling  and  supervisory  services  to  investment
companies  and other  investment  counseling  clients,  and desires to provide
these services to the Fund.

      NOW THEREFORE,  in consideration of the terms and conditions hereinafter
set forth, it is mutually agreed as follows:

      1.    EMPLOYMENT  OF THE ADVISER.  The Trust hereby  employs the Adviser
to manage the investment  and  reinvestment  of the Fund's assets,  subject to
the direction of the Board of Trustees and the officers of the Trust,  for the
period and on the terms  hereinafter  set forth.  The Adviser  hereby  accepts
such  employment  and agrees  during such period to render the services and to
assume  the  obligations   herein  set  forth  for  the  compensation   herein
provided.  The  Adviser  shall  for all  purposes  herein  be  deemed to be an
independent  contractor and shall,  except as expressly provided or authorized
(whether  herein or otherwise),  have no authority to act for or represent the
Fund or the  Trust in any way or  otherwise  be deemed an agent of the Fund or
the Trust.

      2.    OBLIGATIONS  OF AND  SERVICES TO BE PROVIDED BY THE  ADVISER.  The
Adviser  undertakes  to  provide  the  services  hereinafter  set forth and to
assume the following obligations:

            A.      INVESTMENT ADVISORY SERVICES.

                    (a)    The Adviser shall manage the Fund's assets  subject
to and in accordance  with the investment  objectives and policies of the Fund
and any directions  which the Trust's Board of Trustees may issue from time to
time.   In  pursuance   of  the   foregoing,   the  Adviser   shall  make  all
determinations  with respect to the  investment  of the Fund's  assets and the
purchase and sale of its investment  securities,  and shall take such steps as
may be necessary  to  implement  the same.  Such  determinations  and services
shall include  determining  the manner in which any voting  rights,  rights to
consent to  corporate  action and any other  rights  pertaining  to the Fund's
investment  securities  shall be exercised.  The Adviser shall render or cause
to be rendered  regular reports to the Trust, at regular meetings of its Board
of Trustees  and at such other  times as may be  reasonably  requested  by the
Trust's  Board of  Trustees,  of (i) the  decisions  made with  respect to the
investment  of the Fund's  assets and the purchase and sale of its  investment
securities,  (ii) the reasons for such decisions and (iii) the extent to which
those decisions have been implemented.

                    (b)    The Adviser,  subject to and in accordance with any
directions  which the Trust's  Board of Trustees  may issue from time to time,
shall place,  in the name of the Fund,  orders for the execution of the Fund's
securities  transactions.  When placing such orders, the Adviser shall seek to
obtain the best net price and  execution  for the Fund,  but this  requirement
shall not be deemed to obligate  the Adviser to place any order  solely on the
basis of  obtaining  the lowest  commission  rate if the other  standards  set
forth in this section have been  satisfied.  The parties  recognize that there
are likely to be many cases in which  different  brokers are  equally  able to
provide  such best  price and  execution  and that,  in  selecting  among such
brokers with  respect to  particular  trades,  it is desirable to choose those
brokers who furnish  research,  statistical,  quotations and other information
to the  Fund and the  Adviser  in  accordance  with the  standards  set  forth
below.  Moreover,  to the extent that it  continues  to be lawful to do so and
so long as the  Board of  Trustees  determines  that the  Fund  will  benefit,
directly  or  indirectly,  by doing so, the  Adviser  may place  orders with a
broker who charges a  commission  for that  transaction  which is in excess of
the amount of commission  that another broker would have charged for effecting
that  transaction,  provided  that the  excess  commission  is  reasonable  in
relation to the value of  "brokerage  and  research  services"  (as defined in
Section  28(e) (3) of the  Securities  Exchange Act of 1934)  provided by that
broker.

                    Accordingly,  the Trust  and the  Adviser  agree  that the
Adviser  shall select  brokers for the  execution  of the Fund's  transactions
from among:

                    (i)    Those  brokers and  dealers who provide  quotations
                    and other  services  to the Fund,  specifically  including
                    the  quotations  necessary  to  determine  the  Fund's net
                    assets,   in  such  amount  of  total   brokerage  as  may
                    reasonably be required in light of such services; and

                    (ii)   Those  brokers  and  dealers  who supply  research,
                    statistical   and  other  data  to  the   Adviser  or  its
                    affiliates   which  the  Adviser  or  its  affiliates  may
                    lawfully  and   appropriately   use  in  their  investment
                    advisory capacities,  which relate directly to securities,
                    actual  or  potential,  of the  Fund,  or which  place the
                    Adviser  in  a  better   position  to  make  decisions  in
                    connection  with the  management  of the Fund's assets and
                    securities,  whether  or not such  data may also be useful
                    to the  Adviser  and  its  affiliates  in  managing  other
                    portfolios or advising  other  clients,  in such amount of
                    total  brokerage as may  reasonably be required.  Provided
                    that the  Trust's  officers  are  satisfied  that the best
                    execution is obtained,  the sale of shares of the Fund may
                    also  be  considered  as a  factor  in  the  selection  of
                    broker-dealers    to   execute   the   Fund's    portfolio
                    transactions.

                    (c)    When  the  Adviser  has  determined  that  the Fund
should  tender   securities   pursuant  to  a  "tender  offer   solicitation,"
Franklin/Templeton  Distributors, Inc. ("Distributors") shall be designated as
the  "tendering  dealer"  so long as it is  legally  permitted  to act in such
capacity under the federal  securities laws and rules thereunder and the rules
of any  securities  exchange or  association  of which  Distributors  may be a
member.  Neither the Adviser nor  Distributors  shall be obligated to make any
additional  commitments of capital,  expense or personnel  beyond that already
committed  (other than normal periodic fees or payments  necessary to maintain
its  corporate  existence  and  membership  in  the  National  Association  of
Securities  Dealers,  Inc.) as of the date of this  Agreement.  This Agreement
shall not  obligate  the Adviser or  Distributors  (i) to act  pursuant to the
foregoing  requirement  under any circumstances in which they might reasonably
believe  that  liability  might be imposed upon them as a result of so acting,
or (ii) to institute  legal or other  proceedings to collect fees which may be
considered  to be due from  others to it as a result of such a tender,  unless
the  Trust on  behalf  of the Fund  shall  enter  into an  agreement  with the
Adviser and/or  Distributors to reimburse them for all such expenses connected
with  attempting to collect such fees,  including  legal fees and expenses and
that portion of the  compensation due to their employees which is attributable
to the time involved in attempting to collect such fees.

                    (d)    The Adviser  shall  render  regular  reports to the
Trust,  not  less  frequently  than  quarterly,  of how much  total  brokerage
business has been placed by the Adviser,  on behalf of the Fund,  with brokers
falling into each of the categories  referred to above and the manner in which
the allocation has been accomplished.

                    (e)    The  Adviser  agrees  that no  investment  decision
will be made or influenced by a desire to provide  brokerage for allocation in
accordance  with the foregoing,  and that the right to make such allocation of
brokerage shall not interfere with the Adviser's  paramount duty to obtain the
best net price and execution for the Fund.

            B.      PROVISION  OF  INFORMATION   NECESSARY  FOR  PREPARATION  OF
SECURITIES  REGISTRATION   STATEMENTS,   AMENDMENTS  AND  OTHER  MATERIALS.  The
Adviser, its officers and employees will make  available and provide  accounting
and  statistical   information   required  by  the  Fund in  the  preparation of
registration  statements,  reports  and other documents  required by federal and
state  securities  laws and with  such  information  as the  Fund may reasonably
request for  use in the preparation  of such  documents  or of  other  materials
necessary or helpful for the underwriting and distribution of the Fund's shares.

            C.      OTHER OBLIGATIONS AND  SERVICES.  The Adviser shall make its
officers  and  employees available  to the Board of Trustees and officers of the
Trust for consultation and discussions  regarding the management of the Fund and
its investment activities.

            D.      DELEGATION.  The Adviser  may  delegate  some or  all of its
responsibilities under this Agreement to a subadviser.

      3.    EXPENSES OF THE  FUND.  It is  understood that the Fund will pay all
of its own  expenses other than those expressly  assumed by the Adviser  herein,
which expenses payable by the Fund shall include:

            A.      Fees and expenses paid to the Adviser as provided herein;

            B.      Expenses of all audits by independent public accountants;

            C.      Expenses of transfer  agent,  registrar, custodian, dividend
disbursing agent and shareholder record-keeping services, including the expenses
of issue, repurchase or redemption of its shares;

            D.      Expenses of obtaining quotations  for calculating the  value
of the Fund's net assets;

            E.      Salaries and other  compensations of executive  officers  of
the  Trust  who are not officers,  directors,  stockholders  or employees of the
Adviser or its affiliates;

            F.      Taxes levied against the Fund;

            G.      Brokerage fees  and  commissions  in  connection   with  the
purchase and sale of securities for the Fund;

            H.   Costs, including the interest expense, of borrowing money;

            I.      Costs  incident to  meetings of the Board of Trustees  and
shareholders of the Fund,  reports to the Fund's  shareholders,  the filing of
reports  with  regulatory  bodies  and the  maintenance  of the Fund's and the
Trust's legal existence;

            J.      Legal  fees,  including  the  legal  fees  related  to the
registration and continued qualification of the Fund's shares for sale;

            K.      Trustees'  fees  and  expenses  to  trustees  who  are not
directors,  officers,  employees or  stockholders of the Adviser or any of its
affiliates;

            L.      Costs and  expense  of  registering  and  maintaining  the
registration  of the Fund and its  shares  under  federal  and any  applicable
state  laws;  including  the  printing  and  mailing  of  prospectuses  to its
shareholders;

            M.      Trade association dues;

            N.      The Fund's pro rata portion of fidelity  bond,  errors and
omissions, and trustees and officer liability insurance premiums; and

            O.      Fees and expenses paid to the Fund administrator.


      4.    COMPENSATION  OF THE  ADVISER.  The Fund shall pay an advisory fee
in cash to the Adviser  based upon a percentage of the value of the Fund's net
assets,  calculated  as set forth  below,  as  compensation  for the  services
rendered and obligations  assumed by the Adviser,  during the preceding month,
on the first business day of the month in each year.

            A.      For  purposes of  calculating  such fee,  the value of the
net assets of the Fund  shall be  determined  in the same  manner as that Fund
uses  to  compute  the  value  of  its  net  assets  in  connection  with  the
determination  of the net asset  value of its  shares,  all as set forth  more
fully  in  the  Fund's   current   prospectus   and  statement  of  additional
information.  The  rate of the  advisory  fee  payable  by the  Fund  shall be
calculated daily at the following annual rates:

            0.425% of the value of its net assets up to and including
            $500,000,000; and

            0.325% of the value of its net assets over $500,000,000 up
            to and including $1,000,000,000; and

            0.280% of the value of its net assets over $1,000,000,000
            up to and including $1,500,000,000; and

            0.235% of the value of its net assets over $1,500,000,000
            up to and including $6,500,000,000; and

            0.215% of the value of its net assets over $6,500,000,000
            up to and including $11,500,000,000; and

            0.200% of the value of its net assets over $11,500,000,000
            up to and including $16,500,000,000; and

            0.190% of the value of its net assets over $16,500,000,000
            up to and including $19,000,000,000; and

            0.180% of the value of its net assets over $19,000,000,000
            up to and including $21,500,000,000; and

            0.170% of the value of its net assets over $21,500,000,000.

            B.      The  advisory  fee payable by the Fund shall be reduced or
eliminated  to  the  extent  that  Distributors  has  actually  received  cash
payments of tender offer  solicitation  fees less  certain  costs and expenses
incurred in connection  therewith  and to the extent  necessary to comply with
the  limitations  on  expenses  which may be borne by the Fund as set forth in
the laws,  regulations and  administrative  interpretations of those states in
which  the  Fund's  shares  are  registered.  The  Adviser  may waive all or a
portion of its fees  provided for  hereunder  and such waiver shall be treated
as a  reduction  in  purchase  price of its  services.  The  Adviser  shall be
contractually  bound hereunder by the terms of any publicly  announced  waiver
of its fee, or any  limitation  of the Fund's  expenses,  as if such waiver or
limitation were fully set forth herein.

            C.      If this  Agreement is  terminated  prior to the end of any
month, the accrued advisory fee shall be paid to the date of termination.

      5.    ACTIVITIES  OF THE  ADVISER.  The  services  of the Adviser to the
Fund hereunder are not to be deemed exclusive,  and the Adviser and any of its
affiliates  shall be free to render  similar  services  to others.  Subject to
and in accordance  with the Agreement and  Declaration of Trust and By-Laws of
the Trust and Section 10(a) of the 1940 Act, it is understood  that  trustees,
officers,  agents and  shareholders  of the Trust are or may be  interested in
the Adviser or its affiliates as directors,  officers, agents or stockholders;
that  directors,  officers,  agents  or  stockholders  of the  Adviser  or its
affiliates  are or may be  interested  in the  Trust  as  trustees,  officers,
agents,  shareholders or otherwise;  that the Adviser or its affiliates may be
interested in the Fund as  shareholders  or otherwise;  and that the effect of
any such  interests  shall be governed by said  Agreement and  Declaration  of
Trust, By-Laws and the 1940 Act.

      6.    LIABILITIES OF THE ADVISER.

            A.      In the absence of willful  misfeasance,  bad faith,  gross
negligence,  or reckless  disregard of obligations or duties  hereunder on the
part of the  Adviser,  the Adviser  shall not be subject to  liability  to the
Trust or the Fund or to any  shareholder  of the Fund for any act or  omission
in the course of, or connected with,  rendering  services hereunder or for any
losses that may be sustained in the purchase,  holding or sale of any security
by the Fund.

            B.      Notwithstanding  the  foregoing,  the  Adviser  agrees  to
reimburse  the  Trust  for  any and  all  costs,  expenses,  and  counsel  and
trustees' fees reasonably  incurred by the Trust in the preparation,  printing
and  distribution  of  proxy   statements,   amendments  to  its  Registration
Statement,  holdings of meetings of its shareholders or trustees,  the conduct
of factual investigations,  any legal or administrative proceedings (including
any  applications  for  exemptions or  determinations  by the  Securities  and
Exchange  Commission)  which  the  Trust  incurs  as the  result  of action or
inaction of the  Adviser or any of its  affiliates  or any of their  officers,
directors,   employees   or   stockholders   where  the  action  or   inaction
necessitating  such expenditures (i) is directly or indirectly  related to any
transactions  or proposed  transaction  in the stock or control of the Adviser
or its affiliates (or litigation  related to any pending or proposed or future
transaction  in such  shares or  control)  which  shall  have been  undertaken
without the prior,  express  approval of the Trust's  Board of  Trustees;  or,
(ii) is within the control of the Adviser or any of its  affiliates  or any of
their officers,  directors,  employees or stockholders.  The Adviser shall not
be  obligated  pursuant  to the  provisions  of  this  Subparagraph  6(B),  to
reimburse  the Trust for any  expenditures  related to the  institution  of an
administrative  proceeding  or civil  litigation by the Trust or a shareholder
seeking  to  recover  all  or  a  portion  of  the  proceeds  derived  by  any
stockholder  of the  Adviser  or any of its  affiliates  from  the sale of his
shares of the Adviser,  or similar  matters.  So long as this  Agreement is in
effect,  the  Adviser  shall  pay to the  Trust the  amount  due for  expenses
subject to this  Subparagraph  6(B)  within 30 days after a bill or  statement
has been  received  by the  Adviser  therefor.  This  provision  shall  not be
deemed to be a waiver of any  claim the Trust may have or may  assert  against
the Adviser or others for costs,  expenses or damages  heretofore  incurred by
the Trust or for costs,  expenses  or damages  the Trust may  hereafter  incur
which are not reimbursable to it hereunder.

            C.      No  provision  of this  Agreement  shall be  construed  to
protect  any  trustee or officer of the Trust,  or  director or officer of the
Adviser,  from  liability in  violation of Sections  17(h) and (i) of the 1940
Act.

      7.    RENEWAL AND TERMINATION.

            A.      This Agreement shall become  effective on the date written
below  and shall  continue  in effect  for two (2)  years  thereafter,  unless
sooner  terminated  as  hereinafter  provided  and  shall  continue  in effect
thereafter   for  periods  not   exceeding  one  (1)  year  so  long  as  such
continuation  is approved at least annually (i) by a vote of a majority of the
outstanding  voting  securities  of the  Fund  or by a vote  of the  Board  of
Trustees  of the Trust,  and (ii) by a vote of a majority  of the  Trustees of
the Trust who are not parties to the Agreement  (other than as Trustees of the
Trust),  cast in person at a meeting  called for the  purpose of voting on the
Agreement.

            B.      This Agreement:

                    (i)    may at any time be  terminated  without the payment
of any  penalty  either  by vote of the Board of  Trustees  of the Trust or by
vote of a majority  of the  outstanding  voting  securities  of the Fund on 60
days' written notice to the Adviser;

                    (ii)   shall  immediately  terminate  with  respect to the
Fund in the event of its assignment; and

                    (iii)  may  be  terminated  by  the  Adviser  on 60  days'
written notice to the Fund.

            C.      As  used  in  this   Paragraph  the  terms   "assignment,"
"interested  person"  and  "vote  of a  majority  of  the  outstanding  voting
securities"  shall have the  meanings set forth for any such terms in the 1940
Act.

            D.      Any notice under this Agreement  shall be given in writing
addressed  and  delivered,  or mailed  post-paid,  to the  other  party at any
office of such party.

            E.      Unless otherwise  agreed by the Adviser,  upon termination
of this Agreement, the Trust shall cease to use the "Franklin" name and logo.

      8.    SEVERABILITY.  If any  provision of this  Agreement  shall be held
or  made  invalid  by a  court  decision,  statute,  rule  or  otherwise,  the
remainder of this Agreement shall not be affected thereby.

      9.    GOVERNING LAW. This  Agreement  shall be governed by and construed
in accordance with the laws of the State of California.


IN WITNESS  WHEREOF,  the parties  hereto have  caused  this  Agreement  to be
executed and effective on the 16th day of July, 1998.


FRANKLIN INVESTORS SECURITIES TRUST
on behalf of Franklin Bond Fund


By:   /s/ Deborah R. Gatzek
      --------------------------
      Deborah R. Gatzek
      Vice President & Secretary



FRANKLIN ADVISERS, INC.


By:   /s/ Harmon E. Burns
      ------------------------
      Harmon E. Burns
      Executive Vice President







                              SUBADVISORY AGREEMENT

                       FRANKLIN INVESTORS SECURITIES TRUST
                      (on behalf of the Franklin Bond Fund)


      THIS  SUBADVISORY  AGREEMENT made as of the July 16, 1998 by and between
FRANKLIN ADVISERS,  INC., a corporation  organized and existing under the laws
of  the  State  of  California   (hereinafter  called  "FAI"),  and  TEMPLETON
INVESTMENT COUNSEL, INC., a Florida corporation (hereinafter called "TICI").

                                W I T N E S S E T H

      WHEREAS,  FAI and TICI  are each  registered  as an  investment  adviser
under the Investment  Advisers Act of 1940 (the "Advisers  Act"),  and engaged
in the business of supplying  investment  advice,  and  investment  management
services, as an independent contractor; and

      WHEREAS,  FAI has been retained to render  investment  advisory services
to Franklin Bond Fund (the "Fund"), a series of Franklin Investors  Securities
Trust (the "Trust"),  an investment  management  company  registered  with the
U.S.   Securities  and  Exchange   Commission  (the  "SEC")  pursuant  to  the
Investment Company Act of 1940 (the "1940 Act"); and

      WHEREAS,  FAI  desires  to retain  TICI to render  investment  advisory,
research  and  related  services  to  the  Fund  pursuant  to  the  terms  and
provisions  of this  Agreement,  and TICI is  interested  in  furnishing  said
services.

      NOW,  THEREFORE,  in  consideration  of the  covenants  and  the  mutual
promises  hereinafter set forth,  the parties hereto,  intending to be legally
bound hereby, mutually agree as follows:

      1.    FAI hereby retains TICI and TICI hereby  accepts such  engagement,
to furnish certain investment  advisory services with respect to the assets of
the Fund, as more fully set forth herein.

            (a)   Subject to the  overall  policies,  control,  direction  and
review of the Trust's Board of Trustees (the "Board") and to the  instructions
and supervision of FAI, TICI will provide a continuous  investment program for
the  Fund,  including  allocation  of the  Fund's  assets  among  the  various
securities  markets  of the world and,  investment  research  and advice  with
respect to securities  and  investments  and cash  equivalents in the Fund. So
long as the  Board and FAI  determine,  on no less  frequently  than an annual
basis,  to grant the  necessary  delegated  authority to TICI,  and subject to
paragraph  (b)  below,   TICI  will  determine   what   securities  and  other
investments  will be purchased,  retained or sold by the Fund,  and will place
all  purchase  and sale  orders  on  behalf  of the Fund  except  that  orders
regarding U.S.  domiciled  securities and money market instruments may also be
placed on behalf of the Fund by FAI.

            (b)   In  performing  these  services,  TICI  shall  adhere to the
Fund's  investment  objectives,  policies and restrictions as contained in its
Prospectus  and  Statement  of  Additional  Information,  and in  the  Trust's
Declaration  of  Trust,  and  to  the  investment   guidelines  most  recently
established  by FAI and shall comply with the  provisions  of the 1940 Act and
the rules and  regulations of the SEC thereunder in all material  respects and
with the  provisions  of the United States  Internal  Revenue Code of 1986, as
amended, which are applicable to regulated investment companies.

            (c)   Unless  otherwise  instructed  by  FAI  or  the  Board,  and
subject  to  the  provisions  of  this  Agreement  and to  any  guidelines  or
limitations  specified  from time to time by FAI or by the  Board,  TICI shall
report  daily all  transactions  effected by TICI on behalf of the Fund to FAI
and to other entities as reasonably directed by FAI or the Board.

            (d)   TICI shall provide the Board at least quarterly,  in advance
of the regular meetings of the Board, a report of its activities  hereunder on
behalf of the Fund and its  proposed  strategy  for the next  quarter,  all in
such form and  detail as  requested  by the  Board.  TICI  shall  also make an
investment  officer  available  to attend  such  meetings  of the Board as the
Board may reasonably request.

            (e)   In  carrying  out its duties  hereunder,  TICI shall  comply
with all reasonable  instructions of the Fund or FAI in connection  therewith.
Such  instructions  may be  given  by  letter,  telex,  telefax  or  telephone
confirmed  by  telex,  by the  Board or by any other  person  authorized  by a
resolution  of the Board,  provided a certified  copy of such  resolution  has
been supplied to TICI.

      2.    In performing  the services  described  above,  TICI shall use its
best  efforts to obtain for the Fund the most  favorable  price and  execution
available.   Subject  to  prior  authorization  of  appropriate  policies  and
procedures  by the Board,  TICI may,  to the extent  authorized  by law and in
accordance  with  the  terms  of  the  Fund's   Prospectus  and  Statement  of
Additional Information,  cause the Fund to pay a broker who provides brokerage
and  research  services  an amount of  commission  for  effecting  a portfolio
investment  transaction  in excess of the amount of commission  another broker
would have charged for  effecting  that  transaction,  in  recognition  of the
brokerage  and  research  services  provided  by the  broker.  To  the  extent
authorized  by  applicable  law,  TICI  shall  not be  deemed  to  have  acted
unlawfully  or to  have  breached  any  duty  created  by  this  Agreement  or
otherwise solely by reason of such action.

      3.    (a)   TICI  shall,   unless  otherwise   expressly   provided  and
authorized,  have no authority to act for or represent  FAI or the Fund in any
way, or in any way be deemed an agent for FAI or the Fund.

            (b)   It is understood that the services  provided by TICI are not
to be  deemed  exclusive.  FAI  acknowledges  that  TICI may  have  investment
responsibilities,  or render investment advice to, or perform other investment
advisory  services,  for individuals or entities,  including other  investment
companies  registered  pursuant to the 1940 Act,  ("Clients") which may invest
in the same type of  securities  as the Fund.  FAI  agrees  that TICI may give
advice or exercise  investment  responsibility and take such other action with
respect to such  Clients  which may differ from advice  given or the timing or
nature of action taken with respect to the Fund.

      4.    TICI agrees to use its best efforts in performing  the services to
be provided by it pursuant to this Agreement.

      5.    FAI has  furnished  or will  furnish to TICI as soon as  available
copies properly certified or authenticated of each of the following documents:

            (a)   the  Trust's   Declaration  of  Trust,  as  filed  with  the
Secretary of State of the  Commonwealth of Massachusetts on December 16, 1986,
and  any  other  organizational   documents  and  all  amendments  thereto  or
restatements thereof;

            (b)   resolutions  of the Trust's  Board of  Trustees  authorizing
the appointment of TICI and approving this Agreement;

            (c)   the Trust's  original  Notification  of Registration on Form
N-8A under the 1940 Act as filed with the SEC and all amendments thereto;

            (d)   the  Trust's  current  Registration  Statement  on Form N-1A
under the  Securities  Act of 1933, as amended and under the 1940 Act as filed
with the SEC, and all amendments thereto, as it relates to the Fund;

            (e)   the  Fund's  most  recent   Prospectus   and   Statement  of
Additional Information; and

            (f)   the Investment Advisory Agreement between the Fund and FAI.

FAI will furnish TICI with copies of all  amendments of or  supplements to the
foregoing documents.

      6.    TICI will treat  confidentially and as proprietary  information of
the Fund all  records  and other  information  relative to the Fund and prior,
present  or  potential  shareholders,  and  will  not  use  such  records  and
information  for any purpose other than  performance  of its  responsibilities
and duties  hereunder,  except  after prior  notification  to and  approval in
writing by the Fund,  which  approval shall not be  unreasonably  withheld and
may not be withheld  where TICI may be exposed to civil or  criminal  contempt
proceedings  for failure to comply when requested to divulge such  information
by duly constituted authorities, or when so requested by the Fund.

      7.    (a)   FAI shall  pay a  monthly  fee in cash to TICI of 25% of the
investment  advisory  fee paid to FAI by the Fund,  which fee shall be payable
on the first business day of each month in each year as  compensation  for the
services  rendered  and  obligations  assumed  by TICI  during  the  preceding
month.  The  advisory fee under this  Agreement  shall be payable on the first
business  day  of the  first  month  following  the  effective  date  of  this
Agreement,  and shall be reduced by the amount of any advance payments made by
FAI relating to the previous month.

            (b)   FAI and TICI shall share equally in any voluntary  reduction
or waiver by FAI of the management  fee due FAI under the Investment  Advisory
Agreement between FAI and the Fund.

            (c)   If this  Agreement  is  terminated  prior  to the end of any
month,  the  monthly  fee shall be  prorated  for the  portion of any month in
which this Agreement is in effect which is not a complete  month  according to
the  proportion  which the number of calendar  days in the month  during which
the  Agreement is in effect bears to the total number of calendar  days in the
month, and shall be payable within 10 days after the date of termination.

      8.    Nothing  herein  contained  shall be deemed to  relieve or deprive
the Board of its  responsibility for and control of the conduct of the affairs
of the Fund.

      9.    (a) In the  absence  of  willful  misfeasance,  bad  faith,  gross
negligence,  or reckless  disregard of its obligations or duties  hereunder on
the part of TICI, neither TICI nor any of its directors,  officers,  employees
or  affiliates  shall be  subject  to  liability  to FAI or the Fund or to any
shareholder  of the Fund for any error of  judgment  or  mistake of law or any
other act or omission in the course of, or connected with,  rendering services
hereunder or for any losses that may be sustained in the purchase,  holding or
sale of any security by the Fund.

            (b)   Notwithstanding  paragraph  9(a),  to the extent that FAI is
found  by a  court  of  competent  jurisdiction,  or  the  SEC  or  any  other
regulatory   agency  to  be  liable  to  the  Fund  or  any   shareholder   (a
"liability"),  for any acts undertaken by TICI pursuant to authority delegated
as described in Paragraph  1(a), TICI shall indemnify and save FAI and each of
its   affiliates,   officers,   directors  and  employees  (each  a  "Franklin
Indemnified Party") harmless from, against,  for and in respect of all losses,
damages,  costs and  expenses  incurred by a Franklin  Indemnified  Party with
respect  to such  liability,  together  with  all  legal  and  other  expenses
reasonably  incurred by any such  Franklin  Indemnified  Party,  in connection
with such liability.

            (c)   No provision of this Agreement shall be construed to
protect any director or officer of FAI or TICI, from liability in violation
of Sections 17(h) or (i), respectively, of the 1940 Act.

      10.   During  the term of this  Agreement,  TICI  will pay all  expenses
incurred by it in connection  with its activities  under this Agreement  other
than  the  cost  of  securities  (including  brokerage  commissions,  if  any)
purchased  for the  Fund.  The  Fund and FAI  will be  responsible  for all of
their respective expenses and liabilities.

      11.   This Agreement shall be effective as of the date given above,  and
shall continue in effect for two years.  It is renewable  annually  thereafter
for successive  periods not to exceed one year each (i) by a vote of the Board
or by the vote of a  majority  of the  outstanding  voting  securities  of the
Fund,  and (ii) by the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested  persons  thereof,  cast in person
at a meeting called for the purpose of voting on such approval.

      12.   This Agreement may be terminated at any time,  without  payment of
any penalty,  by the Board or by vote of a majority of the outstanding  voting
securities of the Fund,  upon sixty (60) days' written notice to FAI and TICI,
and by FAI or TICI upon sixty (60) days' written notice to the other party.

      13.   This Agreement shall terminate  automatically  in the event of any
transfer or assignment  thereof,  as defined in the 1940 Act, and in the event
of any act or event that terminates the Investment  Advisory Agreement between
FAI and the Fund.

      14.   In compliance  with the  requirements of Rule 31a-3 under the 1940
Act,  TICI hereby  agrees that all records which it maintains for the Fund are
the  property  of the Fund and  further  agrees to  surrender  promptly to the
Fund, or to any third party at the Fund's direction,  any of such records upon
the  Fund's  request.   TICI  further  agrees  to  preserve  for  the  periods
prescribed  by Rule  31a-2  under  the 1940  Act the  records  required  to be
maintained by Rule 31a-1 under the 1940 Act.

      15.   This  Agreement  may  not  be  materially  amended,   transferred,
assigned,   sold  or  in  any  manner  hypothecated  or  pledged  without  the
affirmative  vote or  written  consent of the  holders  of a  majority  of the
outstanding  voting  securities of the Fund and may not be amended without the
written consent of FAI and TICI.

      16.   If any provision of this  Agreement  shall be held or made invalid
by a court  decision,  statute,  rule,  or  otherwise,  the  remainder of this
Agreement shall not be affected thereby.

      17.   The terms "majority of the outstanding  voting  securities" of the
Fund and  "interested  persons"  shall have the  meanings  as set forth in the
1940 Act.

      18.   This  Agreement  shall  be  interpreted  in  accordance  with  and
governed  by the laws of the  State of  California  of the  United  States  of
America.

      19.   TICI  acknowledges  that it has received notice of and accepts the
limitations  of the  Trust's  liability  as set  forth  in its  Agreement  and
Declaration  of Trust.  TICI  agrees that the  Trust's  obligations  hereunder
shall be  limited  to the  assets  of the Fund,  and that TICI  shall not seek
satisfaction  of any such  obligation  from any  shareholders  of the Fund nor
from any trustee, officer, employee or agent of the Trust.

      IN WITNESS WHEREOF,  the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers.


FRANKLIN ADVISERS, INC.


By:   /s/ Harmon E. Burns
      ------------------------
      Harmon E. Burns
      Executive Vice President



TEMPLETON INVESTMENT COUNSEL, INC.


By:   /s/ Deborah R. Gatzek
      ------------------------
      Deborah R. Gatzek
      Vice President



Franklin Bond Fund hereby acknowledges and agrees to the provisions of
paragraphs 9(a) and 10 of this Agreement.

FRANKLIN INVESTORS SECURITIES TRUST on behalf of
FRANKLIN BOND FUND


By:   /s/ Deborah R. Gatzek
      ------------------------
      Deborah R. Gatzek
      Vice President & Secretary







                      FUND ADMINISTRATION AGREEMENT BETWEEN
                       FRANKLIN INVESTORS SECURITIES TRUST
                                       AND
                        FRANKLIN TEMPLETON SERVICES, INC.


            AGREEMENT  dated as of July 16, 1998  between  FRANKLIN  INVESTORS
SECURITIES TRUST (the "Investment Company"),  an investment company registered
under the Investment  Company Act of 1940 ("1940 Act"),  on behalf of FRANKLIN
BOND FUND (the  "Fund"),  and  Franklin  Templeton  Services,  Inc.  ("FTS" or
"Administrator").

            In  consideration  of the mutual promises herein made, the parties
hereby agree as follows:

      (1)   The Administrator  agrees,  during the life of this Agreement,  to
provide the following services to the Fund:

            (a)   providing  office  space,  telephone,  office  equipment and
supplies for the Fund;

            (b) providing  trading desk facilities for the Fund,  unless these
facilities are provided by the Fund's investment adviser;

            (c)   authorizing  expenditures and approving bills for payment on
behalf of the Fund;

            (d)   supervising    preparation    of    periodic    reports   to
shareholders,  notices  of  dividends,  capital  gains  distributions  and tax
credits;  and  attending to routine  correspondence  and other  communications
with  individual  shareholders  when asked to do so by the Fund's  shareholder
servicing agent or other agents of the Fund;

            (e)   coordinating  the daily  pricing  of the  Fund's  investment
portfolio,  including  collecting  quotations from pricing services engaged by
the  Fund;  providing  fund  accounting  services,   including  preparing  and
supervising  publication  of  daily  net  asset  value  quotations,   periodic
earnings reports and other financial data; and coordinating trade settlements;

            (f)   monitoring  relationships  with  organizations  serving  the
Fund,  including  custodians,  transfer agents,  public  accounting firms, law
firms, printers and other third party service providers;

            (g)   supervising   compliance  by  the  Fund  with  recordkeeping
requirements  under the federal  securities  laws,  including the 1940 Act and
the rules and regulations  thereunder,  and under other  applicable  state and
federal  laws;  and  maintaining  books and  records  for the Fund (other than
those maintained by the custodian and transfer agent);

            (h)   preparing  and filing of tax  reports  including  the Fund's
income tax returns,  and monitoring the Fund's compliance with subchapter M of
the Internal  Revenue  Code,  as amended,  and other  applicable  tax laws and
regulations;

            (i)   monitoring the Fund's  compliance  with:  1940 Act and other
federal  securities  laws,  and rules and  regulations  thereunder;  state and
foreign  laws  and  regulations  applicable  to the  operation  of  investment
companies;  the Fund's investment objectives,  policies and restrictions;  and
the Code of Ethics  and other  policies  adopted by the  Investment  Company's
Board  of  Trustees   ("Board")  or  by  the  Fund's  investment  adviser  and
applicable to the Fund;

            (j)   providing  executive,  clerical  and  secretarial  personnel
needed to carry out the above responsibilities;

            (k)   preparing and filing regulatory  reports,  including without
limitation Forms N-1A and NSAR, proxy statements,  information  statements and
U.S. and foreign ownership reports; and

            (l)   providing support services  incidental to carrying out these
duties.

Nothing in this Agreement  shall  obligate the Investment  Company or the Fund
to pay any  compensation  to the officers of the Investment  Company.  Nothing
in  this  Agreement  shall  obligate  FTS to pay  for the  services  of  third
parties, including attorneys,  auditors, printers, pricing services or others,
engaged directly by the Fund to perform services on behalf of the Fund.

      (2)   The Investment Company agrees,  during the life of this Agreement,
to pay to FTS as  compensation  for the  foregoing  a monthly  fee equal on an
annual basis to 0.20% of the average daily net assets of the Fund.

From time to time,  FTS may waive all or a portion  of its fees  provided  for
hereunder  and such  waiver  shall be treated as a reduction  in the  purchase
price of its  services.  FTS shall be  contractually  bound  hereunder  by the
terms of any publicly  announced  waiver of its fee, or any  limitation of the
affected  Fund's  expenses,  as if such  waiver or  limitation  were fully set
forth herein.

      (3)   This  Agreement  shall  remain in full  force and  effect  for two
years  after its  execution  and  thereafter  from year to year to the  extent
continuance is approved annually by the Board of the Investment Company.

      (4)   This Agreement may be terminated by the Investment  Company at any
time on sixty (60) days' written notice without  payment of penalty,  provided
that such termination by the Investment  Company shall be directed or approved
by the vote of a majority of the Board of the Investment  Company in office at
the time or by the vote of a majority of the outstanding  voting securities of
the Investment  Company (as defined by the 1940 Act); and shall  automatically
and  immediately  terminate in the event of its  assignment (as defined by the
1940 Act).  This  Agreement  may also be terminated by FTS on sixty (60) days'
written notice to the Fund.

      (5)   In  the  absence  of  willful  misfeasance,  bad  faith  or  gross
negligence  on the part of FTS,  or of  reckless  disregard  of its duties and
obligations  hereunder,  FTS shall not be subject to liability  for any act or
omission in the course of, or connected with, rendering services hereunder.

            IN WITNESS WHEREOF,  the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers.



FRANKLIN INVESTORS SECURITIES TRUST on behalf of
FRANKLIN BOND FUND


By:   /s/ Deborah R. Gatzek
      --------------------------
      Deborah R. Gatzek
      Vice President & Secretary



FRANKLIN TEMPLETON SERVICES, INC.


By:   /s/ Harmon E. Burns
      --------------------------
      Harmon E. Burns
      Executive Vice President







                                DEALER AGREEMENT
                            Effective: March 1, 1998

Dear Securities Dealer:

Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the Franklin Templeton
investment companies (the "Funds") for which we now or in the future serve as
principal underwriter, subject to the terms of this Agreement. We will notify
you from time to time of the Funds which are eligible for distribution and
the terms of compensation under this Agreement. This Agreement supersedes any
prior dealer agreements between us, as stated in Section 18, below.

1. LICENSING.

     (a) You  represent  that  you  are (i) a  member  in good  standing  of the
National  Association  of Securities  Dealers,  Inc.  ("NASD") and are presently
licensed to the extent  necessary by the appropriate  regulatory  agency of each
jurisdiction  in which you will offer and sell  shares of the  Funds,  or (ii) a
broker,  dealer or other company licensed,  registered or otherwise qualified to
effect  transactions in securities in a country (a "foreign country") other than
the United States of America (the "U.S.") where you will offer or sell shares of
the Funds.  You agree that termination or suspension of such membership with the
NASD,  or of  your  license  to do  business  by any  regulatory  agency  having
jurisdiction,  at any time shall  terminate or suspend this Agreement  forthwith
and shall  require you to notify us in writing of such action.  If you are not a
member of the NASD but are a broker, dealer or other company subject to the laws
of a foreign  country,  you agree to conform to the  Conduct  Rules of the NASD.
This  Agreement  is in all  respects  subject to the Conduct  Rules of the NASD,
particularly Conduct Rule 2830 of the NASD, which shall control any provision to
the contrary in this Agreement.

     (b) You agree to notify us  immediately  in  writing if at any time you are
not a member in good standing of the Securities Investor Protection  Corporation
("SIPC").

2. SALES OF FUND SHARES. You may offer and sell shares of each Fund and class of
each Fund only at the public offering price which shall be applicable to, and in
effect at the time of, each transaction.  The procedures  relating to all orders
and the  handling of them shall be subject to the terms of the  applicable  then
current  prospectus  and statement of  additional  information  (hereafter,  the
"prospectus") and new account application,  including amendments,  for each such
Fund and each  class of such Fund,  and our  written  instructions  from time to
time.  This Agreement is not exclusive,  and either party may enter into similar
agreements with third parties.

3. DUTIES OF DEALER: You agree:

     (a) To act as principal,  or as agent on behalf of your  customers,  in all
transactions in shares of the Funds except as provided in Section 4 hereof.  You
shall not have any authority to act as agent for the issuer (the Funds), for the
Principal  Underwriter,  or for any other  dealer in any  respect,  nor will you
represent to any third party that you have such  authority or are acting in such
capacity.

     (b) To purchase shares only from us or from your customers.

     (c) To enter  orders for the  purchase  of shares of the Funds only from us
and only for the purpose of covering  purchase orders you have already  received
from your customers or for your own bona fide investment.

     (d) To maintain records of all sales, redemptions and repurchases of shares
made through you and to furnish us with copies of such records on request.

     (e) To distribute  prospectuses and reports to your customers in compliance
with  applicable  legal  requirements,  except to the extent  that we  expressly
undertake to do so on your behalf.

     (f) That you will not withhold placing  customers'  orders for shares so as
to profit yourself as a result of such withholding or place orders for shares in
amounts just below the point at which sales charges are reduced so as to benefit
from a higher sales charge applicable to an amount below the breakpoint.

     (g) That if any  shares  confirmed  to you  hereunder  are  repurchased  or
redeemed by any of the Funds within seven business days after such  confirmation
of your original order,  you shall forthwith  refund to us the full  concession,
allowed to you on such  orders,  including  any payments we made to you from our
own resources as provided in Section 6(b) hereof with respect to such orders. We
shall  forthwith  pay to the  appropriate  Fund the share,  if any, of the sales
charge we  retained  on such order and shall also pay to such Fund the refund of
the concession we receive from you as herein provided (other than the portion of
such  concession  we paid to you from our own  resources  as provided in Section
6(b) hereof).  We shall notify you of such  repurchase  or  redemption  within a
reasonable  time after  settlement.  Termination or suspension of this Agreement
shall not relieve you or us from the requirements of this subsection.

     (h) That if payment for the shares  purchased  is not  received  within the
time  customary or the time  required by law for such  payment,  the sale may be
canceled without notice or demand and without any responsibility or liability on
our part or on the part of the Funds,  or at our option,  we may sell the shares
which  you  ordered  back to the  Funds,  in which  latter  case we may hold you
responsible for any loss to the Funds or loss of profit suffered by us resulting
from your failure to make payment as  aforesaid.  We shall have no liability for
any check or other item returned  unpaid to you after you have paid us on behalf
of a purchaser.  We may refuse to liquidate the investment unless we receive the
purchaser's signed authorization for the liquidation.

     (i) That you shall assume  responsibility  for any loss to the Funds caused
by a correction made subsequent to trade date,  provided such correction was not
based on any  error,  omission  or  negligence  on our  part,  and that you will
immediately pay such loss to the Funds upon notification.

     (j) That if on a redemption which you have ordered,  instructions in proper
form,  including  outstanding  certificates,  are not  received  within the time
customary or the time required by law, the redemption may be canceled  forthwith
without any  responsibility or liability on our part or on the part of any Fund,
or at our option, we may buy the shares redeemed on behalf of the Fund, in which
latter  case we may  hold  you  responsible  for any loss to the Fund or loss of
profit suffered by us resulting from your failure to settle the redemption.

     (k) To obtain from your  customers  all  consents  required  by  applicable
privacy  laws to permit us, any of our  affiliates  or the Funds to provide  you
either  directly  or  through  a  service  established  for  that  purpose  with
confirmations,  account  statements and other  information about your customers'
investments in the Funds.

4. DUTIES OF DEALER:  RETIREMENT  ACCOUNTS.  In  connection  with orders for the
purchase of shares on behalf of an Individual Retirement Account,  Self-Employed
Retirement Plan or other retirement accounts, by mail,  telephone,  or wire, you
shall act as agent for the  custodian  or  trustee of such  plans  (solely  with
respect to the time of receipt of the application  and payments),  and you shall
not place such an order until you have received  from your customer  payment for
such purchase and, if such purchase  represents the first contribution to such a
plan, the completed  documents necessary to establish the plan and enrollment in
the plan. You agree to indemnify us and Franklin  Templeton Trust Company and/or
Templeton  Funds Trust Company as applicable  for any claim,  loss, or liability
resulting from incorrect investment instructions received from you which cause a
tax liability or other tax penalty.

5. CONDITIONAL ORDERS; CERTIFICATES. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates or confirmations
for  shares  purchased  shall be made by the  Funds  only  against  constructive
receipt of the purchase price,  subject to deduction for your concession and our
portion of the sales charge, if any, on such sale. No certificates for shares of
the Funds will be issued unless specifically requested.

6. DEALER COMPENSATION.

     (a) On each  purchase of shares by you from us, the total sales charges and
your  dealer  concessions  shall  be as  stated  in  each  Fund's  then  current
prospectus,  subject to NASD rules and applicable  laws.  Such sales charges and
dealer concessions are subject to reductions under a variety of circumstances as
described  in  the  Funds'  prospectuses.   For  an  investor  to  obtain  these
reductions,  we must be notified at the time of the sale that the sale qualifies
for the  reduced  charge.  If you fail to  notify us of the  applicability  of a
reduction  in the sales  charge at the time the trade is placed,  neither we nor
any of the Funds will be liable for amounts  necessary to reimburse any investor
for the reduction which should have been effected.

     (b) In accordance with the Funds'  prospectuses,  we or our affiliates may,
but are not  obligated  to,  make  payments  to you  from our own  resources  as
compensation  for certain  sales which are made at net asset value  ("Qualifying
Sales"). If you notify us of a Qualifying Sale, we may make a contingent advance
payment up to the maximum  amount  available  for payment on the sale. If any of
the shares  purchased in a Qualifying  Sale are  repurchased or redeemed  within
twelve  months of the month of  purchase,  we shall be  entitled  to recover any
advance  payment  attributable to the repurchased or redeemed shares by reducing
any account payable or other monetary  obligation we may owe to you or by making
demand upon you for repayment in cash. We reserve the right to withhold advances
to you, if for any reason we believe that we may not be able to recover unearned
advances from you. Termination or suspension of this Agreement shall not relieve
you or us from the requirements of this subsection.

7. REDEMPTIONS OR REPURCHASES. Redemptions or repurchases of shares of the Funds
will be made at the net asset value of such shares, less any applicable deferred
sales or redemption  charges,  in accordance  with the applicable  prospectuses.
Except as permitted by applicable law, you agree not to purchase any shares from
your  customers  at a price  lower than the net asset  value of such shares next
computed by the Funds after the purchase  (the  "Redemption/Repurchase  Price").
You shall,  however, be permitted to sell shares of the Funds for the account of
the  record  owner to the  Funds  at the  Redemption/Repurchase  Price  for such
shares.

8.   EXCHANGES.   Telephone   exchange   orders  will  be  effective   only  for
uncertificated  shares  or for which  share  certificates  have been  previously
deposited and may be subject to any fees or other  restrictions set forth in the
applicable  prospectuses.  Exchanges  from a Fund sold with no sales charge to a
Fund which carries a sales charge,  and exchanges  from a Fund sold with a sales
charge to a Fund which  carries a higher  sales charge may be subject to a sales
charge in accordance  with the terms of the applicable  Fund's  prospectus.  You
will be obligated to comply with any additional  exchange policies  described in
the  applicable  Fund's  prospectus,  including  without  limitation  any policy
restricting or prohibiting "Timing Accounts" as therein defined.

9. TRANSACTION PROCESSING. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become  effective only upon  confirmation by us.
If required by law,  each  transaction  shall be confirmed in writing on a fully
disclosed  basis and if  confirmed by us, a copy of each  confirmation  shall be
sent  simultaneously  to you if you so  request.  All sales are made  subject to
receipt of shares by us from the Funds.  We reserve the right in our discretion,
without  notice,  to  suspend  the sale of shares of the Funds or  withdraw  the
offering  of  shares of the  Funds  entirely.  Orders  will be  effected  at the
price(s)  next  computed  on the day they are  received  if, as set forth in the
applicable  Fund's current  prospectus,  the orders are received by us, an agent
appointed by us or the Funds prior to the time the price of the Fund's shares is
calculated.  Orders  received  after that time will be effected at the  price(s)
computed on the next business day. All orders must be  accompanied by payment in
U.S. Dollars. Orders payable by check must be drawn payable in U.S. Dollars on a
U.S. bank, for the full amount of the investment.

10. MULTIPLE CLASSES. We may from time to time provide to you written compliance
guidelines or standards  relating to the sale or  distribution of Funds offering
multiple  classes of shares (each, a "Class") with  different  sales charges and
distribution related operating expenses.  In addition,  you will be bound by any
applicable  rules or  regulations  of  government  agencies  or  self-regulatory
organizations  generally  affecting  the  sale  or  distribution  of  shares  of
investment companies offering multiple classes of shares.

11. RULE 12B-1 PLANS. You are invited to participate in all  distribution  plans
(each,  a  "Plan")  adopted  for a Class of a Fund or for a Fund that has only a
single Class (each, a "Plan Class")  pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").

     To the extent you provide administrative and other services, including, but
not limited to,  furnishing  personal and other  services and assistance to your
customers who own shares of a Plan Class,  answering routine inquiries regarding
a Fund or Class,  assisting  in changing  account  designations  and  addresses,
maintaining  such accounts or such other services as a Fund may require,  to the
extent permitted by applicable statutes, rules, or regulations, we shall pay you
a  Rule  12b-1  servicing  fee.  To  the  extent  that  you  participate  in the
distribution of Fund shares that are eligible for a Rule 12b-1 distribution fee,
we shall also pay you a Rule 12b-1  distribution  fee. All Rule 12b-1  servicing
and  distribution  fees  shall be based on the value of shares  attributable  to
customers of your firm and eligible for such payment, and shall be calculated on
the basis and at the rates set forth in the compensation schedule then in effect
for the applicable Plan (the  "Schedule").  Without prior approval by a majority
of the outstanding  shares of a particular Class of a Fund which has a Plan, the
aggregate  annual  fees paid to you  pursuant  to such Plan shall not exceed the
amounts stated as the "annual  maximums" in such Plan Class'  prospectus,  which
amount shall be a specified  percent of the value of such Plan Class' net assets
held in your customers' accounts which are eligible for payment pursuant to this
Agreement  (determined in the same manner as such Plan Class uses to compute its
net assets as set forth in its effective prospectus).

     You shall  furnish  us and each Fund that has a Plan Class  (each,  a "Plan
Fund") with such  information  as shall  reasonably be requested by the Board of
Directors,  Trustees or Managing  General Partners  (hereinafter  referred to as
"Directors")  of such Plan Fund with respect to the fees paid to you pursuant to
the Schedule of such Plan Fund.  We shall  furnish to the Boards of Directors of
the Plan Funds,  for their review on a quarterly  basis, a written report of the
amounts  expended  under the Plans and the purposes for which such  expenditures
were made.

     Each Plan and the provisions of any agreement relating to such Plan must be
approved  annually  by a vote of the  Directors  of the Fund that has such Plan,
including such persons who are not interested  persons of such Plan Fund and who
have no financial  interest in such Plan or any related  agreement  ("Rule 12b-1
Directors"). Each Plan or the provisions of this Agreement relating to such Plan
may be  terminated  at any time by the  vote of a  majority  of the  Rule  12b-1
Directors,  or by a vote of a majority  of the  outstanding  shares of the Class
that has such Plan, on sixty (60) days' written  notice,  without payment of any
penalty.  A Plan or the  provisions of this  Agreement may also be terminated by
any act that terminates the Underwriting  Agreement between us and the Fund that
has such  Plan,  and/or  the  management  or  administration  agreement  between
Franklin  Advisers,   Inc.  or  Templeton  Investment  Counsel,  Inc.  or  their
affiliates and such Plan Fund. In the event of the termination of a Plan for any
reason,  the  provisions  of this  Agreement  relating  to such  Plan  will also
terminate.

     Continuation  of a Plan and provisions of this  Agreement  relating to such
Plan are conditioned on Rule 12b-1 Directors  being  ultimately  responsible for
selecting  and  nominating  any new Rule  12b-1  Directors.  Under  Rule  12b-1,
Directors  of any of the Plan  Funds have a duty to request  and  evaluate,  and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed  determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1,  a Plan  Fund  is  permitted  to  implement  or  continue  a Plan  or the
provisions of this Agreement  relating to such Plan from  year-to-year  only if,
based on certain legal considerations,  the Board of Directors of such Plan Fund
is able to conclude  that such Plan will  benefit  the Plan  Class.  Absent such
yearly determination, such Plan and the provisions of this Agreement relating to
such Plan must be terminated  as set forth above.  In addition,  any  obligation
assumed by a Fund  pursuant to this  Agreement  shall be limited in all cases to
the  assets of such Fund and no person  shall  seek  satisfaction  thereof  from
shareholders of a Fund. You agree to waive payment of any amounts payable to you
by us under a Fund's  Plan until such time as we are in receipt of such fee from
the Fund.

     The  provisions  of the Plans  between the Plan Funds and us shall  control
over the provisions of this Agreement in the event of any inconsistency.

12.  REGISTRATION OF SHARES.  Upon request, we shall notify you of the states or
other   jurisdictions  in  which  each  Fund's  shares  are  currently  noticed,
registered  or  qualified  for  offer or sale to the  public.  We shall  have no
obligation to make notice filings of, register or qualify, or to maintain notice
filings of,  registration  of or  qualification  of, Fund shares in any state or
other jurisdiction.  We shall have no responsibility,  under the laws regulating
the  sale  of  securities  in  any  U.S.  or  foreign   jurisdiction,   for  the
registration,  qualification  or licensed status of persons  offering or selling
Fund  shares or for the  manner of  offering  or sale of Fund  shares.  If it is
necessary  to file  notice of,  register  or qualify  Fund shares in any foreign
jurisdictions  in which you intend to offer the shares of any Funds,  it will be
your  responsibility  to arrange for and to pay the costs of such notice filing,
registration or qualification;  prior to any such notice filing, registration or
qualification,  you will  notify us of your intent and of any  limitations  that
might be  imposed on the Funds,  and you agree not to proceed  with such  notice
filing,  registration  or  qualification  without  the  written  consent  of the
applicable  Funds and of ourselves.  Except as stated in this section,  we shall
not,  in any event,  be liable or  responsible  for the issue,  form,  validity,
enforceability  and  value  of such  shares  or for  any  matter  in  connection
therewith, and no obligation not expressly assumed by us in this Agreement shall
be  implied.  Nothing  in this  Agreement  shall be  deemed  to be a  condition,
stipulation  or  provision  binding any person  acquiring  any security to waive
compliance  with any  provision of the  Securities  Act of 1933, as amended (the
"1933 Act"),  the Securities  Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act,  the rules and  regulations  of the U.S.  Securities  and Exchange
Commission,  or  any  applicable  laws  or  regulations  of  any  government  or
authorized agency in the U.S. or any other country having  jurisdiction over the
offer or sale of shares of the Funds,  or to relieve the parties hereto from any
liability arising under such laws, rules and regulations.

13.  CONTINUOUSLY  OFFERED  CLOSED-END  FUNDS. This Section 13 relates solely to
shares of Funds that  represent a beneficial  interest in the Franklin  Floating
Rate  Trust  and  shares  issued by any other  continuously  offered  closed-end
investment company registered under the 1940 Act for which we or an affiliate of
ours serve as principal underwriter and that periodically repurchases its shares
(each,  a  "Trust").  Shares of a Trust that are  offered to the public  will be
registered under the 1933 Act, and are expected to be offered during an offering
period that may continue indefinitely  ("Continuous Offering Period").  There is
no guarantee that such a continuous  offering will be maintained by a Trust. The
Continuous Offering Period,  shares of a Trust and certain of the terms on which
such shares are offered shall be as described in the prospectus of the Trust.

     As set forth in a Trust's  then  current  prospectus,  we may,  but are not
obligated to, provide you with  appropriate  compensation  for selling shares of
the Trust. In addition,  you may be entitled to a fee for servicing your clients
who are  shareholders  in a Trust,  subject to  applicable  law and NASD Conduct
Rules.  You agree that any repurchases of shares of a Trust that were originally
purchased as Qualifying Sales shall be subject to Subsection 6(b) hereof.

     You expressly acknowledge and understand that,  notwithstanding anything to
the contrary in this Agreement:

     (a)  No Trust has a Rule 12b-1  Plan and in no event  will a Trust pay,  or
          have any obligation to pay, any compensation directly or indirectly to
          you.

     (b)  Shares of a Trust will not be  repurchased  by either the Trust (other
          than through repurchase offers by the Trust from time to time, if any)
          or by us and no secondary market for such shares exists currently,  or
          is expected to  develop.  Any  representation  as to a  repurchase  or
          tender offer by a Trust, other than that set forth in the Trust's then
          current  prospectus,  notification  letters,  reports or other related
          material provided by the Trust, is expressly prohibited.

     (c)  An early  withdrawal  charge payable by  shareholders of a Trust to us
          may be imposed on shares  accepted  for  repurchase  by the Trust that
          have  been  held for less  than a stated  period,  as set forth in the
          Trust's then current Prospectus.

     (d)  In the event your  customer  cancels  his or her order for shares of a
          Trust  after  confirmation,  such  shares  will  not  be  repurchased,
          remarketed or otherwise disposed of by or though us.

14. FUND  INFORMATION.  No person is authorized to give any  information or make
any representations  concerning shares of any Fund except those contained in the
Fund's then  current  prospectus  or in  materials  issued by us as  information
supplemental  to  such  prospectus.  We will  supply  reasonable  quantities  of
prospectuses,  supplemental  sales literature,  sales bulletins,  and additional
information as issued by the Fund or us. You agree not to use other  advertising
or sales  material  relating to the Funds  except that which (a) conforms to the
requirements  of  any  applicable  laws  or  regulations  of any  government  or
authorized agency in the U.S. or any other country having  jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by us in
advance of such use.  Such  approval  may be withdrawn by us in whole or in part
upon notice to you,  and you shall,  upon  receipt of such  notice,  immediately
discontinue the use of such sales  literature,  sales material and  advertising.
You are not  authorized  to modify or translate any such  materials  without our
prior written consent.

15.  INDEMNIFICATION.  You agree to indemnify,  defend and hold harmless us, the
Funds, and the respective officers,  directors and employees of the Funds and us
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the U.S. or any state or foreign  country) or
any alleged  tort or breach of  contract,  in or related to the offer or sale by
you of shares of the Funds pursuant to this Agreement (except to the extent that
our  negligence or failure to follow correct  instructions  received from you is
the cause of such loss,  claim,  liability or expense),  (2) any  redemption  or
exchange pursuant to telephone  instructions received from you or your agents or
employees,  or (3) the breach by you of any of the terms and  conditions of this
Agreement. This Section 15 shall survive the termination of this Agreement.

16. TERMINATION; SUCCESSION; ASSIGNMENT; AMENDMENT. Each party to this Agreement
may terminate its  participation  in this  Agreement by giving written notice to
the other  parties.  Such  notice  shall be deemed to have been  given and to be
effective on the date on which it was either  delivered  personally to the other
parties or any officer or member thereof, or was mailed postpaid or delivered by
electronic  transmission  to the other  parties'  chief  legal  officers  at the
addresses  shown herein or in the most recent NASD Manual.  This Agreement shall
terminate  immediately  upon the  appointment  of a Trustee under the Securities
Investor  Protection Act or any other act of insolvency by you. The  termination
of this  Agreement  by any of the  foregoing  means  shall  have no effect  upon
transactions  entered into prior to the effective date of  termination.  A trade
placed by you  subsequent to your  voluntary  termination of this Agreement will
not serve to reinstate  the  Agreement.  Reinstatement,  except in the case of a
temporary   suspension  of  a  dealer,  will  be  effective  only  upon  written
notification  by us to you. This Agreement will terminate  automatically  in the
event of its assignment by us. For purposes of the preceding sentence,  the word
"assignment"  shall have the meaning given to it in the 1940 Act. This Agreement
may not be assigned by you without our prior written consent. This Agreement may
be  amended by us at any time by  written  notice to you and your  placing of an
order or acceptance of payments of any kind after the effective date and receipt
of  notice  of any such  Amendment  shall  constitute  your  acceptance  of such
Amendment.

17. SETOFF;  DISPUTE RESOLUTION.  Should any of your concession accounts with us
have a debit  balance,  we may offset and  recover  the amount owed to us or the
Funds from any other account you have with us,  without notice or demand to you.
In the event of a dispute  concerning  any provision of this  Agreement,  either
party may require the dispute to be submitted to binding  arbitration  under the
commercial   arbitration   rules  of  the  NASD  or  the  American   Arbitration
Association.  Judgment  upon any  arbitration  award may be entered by any court
having  jurisdiction.  This Agreement  shall be construed in accordance with the
laws of the State of California,  not including any provision that would require
the general application of the law of another jurisdiction.

18. ACCEPTANCE;  CUMULATIVE EFFECT.  This Agreement is cumulative and supersedes
any agreement  previously in effect. It shall be binding upon the parties hereto
when signed by us and  accepted by you. If you have a current  dealer  agreement
with us, your first trade or  acceptance  of payments from us after your receipt
of this  Agreement,  as it may be amended  pursuant to Section 16, above,  shall
constitute your acceptance of its terms.  Otherwise,  your signature below shall
constitute your acceptance of its terms.


FRANKLIN/TEMPLETON DISTRIBUTORS, INC.


By  /s/ Greg Johnson
    ------------------------
    Greg Johnson, President


777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
415/312-2000

700 Central Avenue
St. Petersburg, Florida 33701-3628
813/823-8712

- --------------------------------------------------------------------------------
Dealer:  If you have NOT  previously  signed a Dealer  Agreement with us, please
complete and sign this section and return the original to us.


__________________________________
DEALER NAME:


By _______________________________
   (Signature)

Name:_____________________________

Title: ___________________________

Address: ______________________________
_______________________________________
_______________________________________


Telephone: _______________________

NASD CRD # _______________________

- --------------------------------------------------------------------------------
Franklin Templeton Dealer # ______________________
(Internal Use Only)
- --------------------------------------------------------------------------------


Version 12/31/97
232567.4






                     Franklin Templeton Distributors, Inc.
                         777 Mariners Island Boulevard
                            San Mateo, CA 94403-7777


May 15, 1998


Re:   Amendment of Dealer Agreement - Notice Pursuant to Section 16

Dear Securities Dealer:

This letter constitutes notice of amendment of the current Dealer Agreement (the
"Agreement") between  Franklin/Templeton  Distributors,  Inc. ("we" or "us") and
you pursuant to Section 16 of the Agreement.  The Agreement is hereby amended as
follows:

1.   Defined  terms  in this  amendment  have  the  meanings  as  stated  in the
     Agreement unless otherwise indicated.

2.   Section 6 is modified to add a subsection 6(c), as follows:

     (c) The following limitations apply with respect to shares of each Trust as
described in Section 13 of this Agreement.

          (1) Consistent with the NASD Conduct Rules, the total  compensation to
be paid to us and selected dealers and their affiliates,  including you and your
affiliates,  in connection  with the  distribution of shares of a Trust will not
exceed the underwriting  compensation limitation prescribed by NASD Conduct Rule
2710. The total underwriting  compensation to be paid to us and selected dealers
and their affiliates, including you and your affiliates, may include: (i) at the
time of purchase of shares a payment to you or another  securities  dealer of 1%
of the dollar  amount of the  purchased  shares by the  Distributor;  and (ii) a
quarterly payment at an annual rate of .50% to you or another  securities dealer
based  on the  value of such  remaining  shares  sold by you or such  securities
dealer,  if after twelve (12) months from the date of purchase,  the shares sold
by you or such securities dealer remain outstanding.

          (2) The maximum compensation shall be no more than as disclosed in the
section "Payments to Dealers" of the prospectus of the applicable Trust.

Pursuant  to  Section  16 of  the  Agreement,  your  placement  of an  order  or
acceptance  of  payments  of any kind after the  effective  date and  receipt of
notice of this amendment shall constitute your acceptance of this amendment.


FRANKLIN/TEMPLETON DISTRIBUTORS, INC.



By  /s/ Greg Johnson
    --------------------------
    Greg Johnson, President

777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
650/312-2000

100 Fountain Parkway
St. Petersburg, FL 33716
813/299-8712






                    MUTUAL FUND PURCHASE AND SALES AGREEMENT
                FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
                            EFFECTIVE: APRIL 1, 1998


1. INTRODUCTION

     The parties to this  Agreement  are the  undersigned  bank or trust company
("Bank") and Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets
forth the terms and  conditions  under  which FTDI will  execute  purchases  and
redemptions  of shares of the  Franklin or  Templeton  investment  companies  or
series of such  investment  companies for which FTDI now or in the future serves
as principal  underwriter (each, a "Fund"),  at the request of the Bank upon the
order and for the account of Bank's customers ("Customers").  In this Agreement,
"Customer"  shall include the  beneficial  owners of an account and any agent or
attorney-in-fact  duly authorized or appointed to act on the owners' behalf with
respect to the account; and "redemptions" shall include redemptions of shares of
Funds that are open-end  management  investment  companies  and  repurchases  of
shares of Funds that are closed-end investment companies by the Fund that is the
issuer  of such  shares.  FTDI will  notify  Bank from time to time of the Funds
which are eligible for  distribution  and the terms of  compensation  under this
Agreement.  This  Agreement  is not  exclusive,  and either party may enter into
similar agreements with third parties.

2. REPRESENTATIONS AND WARRANTIES OF BANK

     Bank warrants and represents to FTDI and the Funds that:

     a)   Bank is a "bank" as  defined  in  section  3(a)(6)  of the  Securities
          Exchange Act of 1934, as amended (the "1934 Act");

     b)   Bank is  authorized  to enter  into  this  Agreement  as agent for the
          Customers,  and Bank's  performance of its  obligations and receipt of
          consideration   under  this   Agreement  will  not  violate  any  law,
          regulation,  charter,  agreement,  or regulatory  restriction to which
          Bank is subject; and

     c)   Bank has received all regulatory  agency approvals and taken all legal
          and other steps  necessary for offering the services Bank will provide
          to Customers and receiving any applicable  compensation  in connection
          with this Agreement.

3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER

     FTDI warrants and represents to Bank that:

     a)   FTDI is a broker/dealer registered under the 1934 Act; and

     b)   FTDI is the principal underwriter of the Funds.

4. COVENANTS OF BANK

     a)   For each  purchase  or  redemption  transaction  under this  Agreement
          (each, a "Transaction"), Bank will:

          1)   be authorized to engage in the Transaction;

          2)   act as agent for the Customer, unless Bank is the Customer;

          3)   act solely at the request of and for the account of the Customer,
               unless Bank is the Customer;

          4)   not submit an order  unless Bank has already  received  the order
               from the Customer, unless Bank is the Customer;

          5)   not offer to sell  shares of Fund(s)  or submit a purchase  order
               unless Bank has already  delivered  to the Customer a copy of the
               then  current  prospectuses  for the  Fund(s)  whose  shares  are
               offered or are to be purchased;

          6)   not  withhold  placing  any  Customer's  order for the purpose of
               profiting  from the delay or place  orders  for shares in amounts
               just below the point at which sales  charges are reduced so as to
               benefit  from a higher Fee (as defined in  Paragraph  5(e) below)
               applicable to a Transaction in an amount below the breakpoint;

          7)   have no  beneficial  ownership of the  securities in any purchase
               Transaction   (the  Customer   will  have  the  full   beneficial
               ownership), unless Bank is the Customer (in which case, Bank will
               not engage in the  Transaction  unless the Transaction is legally
               permissible for Bank);

          8)   not accept or withhold any Fee (as defined in  Paragraph  5(e) of
               this Agreement)  otherwise  allowed under Paragraphs 5(d) and (e)
               of this  Agreement,  if  prohibited  by the  Employee  Retirement
               Income Security Act of 1974, as amended, or trust or similar laws
               to which Bank is  subject,  in the case of  Transactions  of Fund
               shares involving retirement plans, trusts, or similar accounts;

          9)   maintain  records of all Transactions of Fund shares made through
               Bank and furnish FTDI with copies of such records on request; and

          10)  distribute prospectuses, statements of additional information and
               reports  to  Customers  in  compliance  with   applicable   legal
               requirements, except to the extent that FTDI expressly undertakes
               to do so on behalf of Bank.

     b)   While this Agreement is in effect, Bank will:

          1)   not  purchase  any Fund  shares  from any person at a price lower
               than  the  redemption  or  repurchase  price as  applicable  next
               determined by the applicable Fund;

          2)   repay FTDI the full Fee  received by Bank under  Paragraphs  5(d)
               and  (e)  of  this  Agreement,  and  any  payments  FTDI  or  its
               affiliates  made to Bank from their own resources under Paragraph
               5(e) of this  Agreement  ("FTDI  Payments"),  for any Fund shares
               purchased  under this Agreement which are redeemed or repurchased
               by the Fund within 7 business days after the  purchase;  in turn,
               FTDI shall pay to the Fund the amount  repaid by Bank (other than
               any  portion  of  such  repayment  that  is a  repayment  of FTDI
               Payments)  and will notify Bank of any such  redemption  within a
               reasonable  time  (termination  or suspension  of this  Agreement
               shall  not  relieve  Bank or FTDI from the  requirements  of this
               subparagraph);

          3)   in  connection  with  orders for the  purchase  of Fund shares on
               behalf  of  an  Individual   Retirement  Account,   Self-Employed
               Retirement Plan or other retirement accounts, by mail, telephone,
               or wire,  act as agent for the custodian or trustee of such plans
               (solely  with  respect to the time of receipt of the  application
               and  payments)  and shall not place such an order  until Bank has
               received from its Customer payment for such purchase and, if such
               purchase  represents the first  contribution  to such a plan, the
               completed   documents   necessary  to  establish   the  plan  and
               enrollment  in the  plan  (Bank  agrees  to  indemnify  FTDI  and
               Franklin  Templeton  Trust Company and/or  Templeton  Funds Trust
               Company as applicable for any claim, loss, or liability resulting
               from incorrect investment  instructions  received from Bank which
               cause a tax liability or other tax penalty);

          4)   be  responsible  for  compliance  with all laws and  regulations,
               including  those of the  applicable  federal  and state  bank and
               securities regulatory authorities, with regard to Bank and Bank's
               Customers; and

          5)   obtain from its  Customers  any consents  required by  applicable
               federal  and/or state  privacy  laws to permit  FTDI,  any of its
               affiliates  or the  Funds to  provide  Bank  with  confirmations,
               account   statements  and  other   information  about  Customers'
               investments in the Funds.

5. TERMS AND CONDITIONS FOR TRANSACTIONS

     a)   Price

     Purchase orders for Fund shares received from Bank will be accepted only at
the public offering price and in compliance  with procedures  applicable to each
purchase  order as set forth in the then  current  prospectus  and  statement of
additional  information  (hereinafter,   collectively,   "prospectus")  for  the
applicable  Fund.  All purchase  orders must be  accompanied  by payment in U.S.
Dollars. Orders payable by check must be drawn payable in U.S. Dollars on a U.S.
bank,  for the full  amount of the  investment.  All sales are made  subject  to
receipt  of  shares  by FTDI  from the  Funds.  FTDI  reserves  the right in its
discretion,  without  notice,  to  suspend  the sale of shares or  withdraw  the
offering of shares entirely.

     b)   Orders and Confirmations

     All orders are subject to  acceptance  or rejection by FTDI and by the Fund
or its transfer agent at their sole  discretion,  and become effective only upon
confirmation by FTDI.  Transaction orders shall be made using the procedures and
forms  required by FTDI from time to time.  Orders  received by FTDI or an agent
appointed  by  FTDI  or the  Funds  on any  business  day  after  the  time  for
calculating  the  price  of Fund  shares  as set  forth in each  Fund's  current
prospectus will be effected at the price determined on the next business day. No
order will be accepted unless Bank or the Customer shall have provided FTDI with
the Customer's full name,  address and other  information  normally  required by
FTDI to open a  customer  account,  and FTDI  shall be  entitled  to rely on the
accuracy of the  information  provided by Bank. A written  confirming  statement
will be sent to Bank and to Customer upon settlement of each Transaction.

     c)   Multiple Class Guidelines

     FTDI may from time to time provide to Bank written compliance guidelines or
standards  relating  to the  sale or  distribution  of Funds  offering  multiple
classes  of  shares  (each,  a  "Class")  with   different   sales  charges  and
distribution-related  operating  expenses.  Bank will comply with FTDI's written
compliance  guidelines  and standards,  as well as with any applicable  rules or
regulations of government  agencies or self-regulatory  organizations  generally
affecting the sale or distribution  of investment  companies  offering  multiple
classes of shares,  whether or not Bank deems itself  otherwise  subject to such
rules or regulations.

     d)   Payments by Bank for Purchases

     On the settlement  date for each purchase,  Bank shall either (i) remit the
full purchase  price by wire transfer to an account  designated by FTDI, or (ii)
following  FTDI's  procedures,  wire the purchase  price less the Fee allowed by
Paragraph 5(e) of this  Agreement.  Twice  monthly,  FTDI will pay Bank Fees not
previously  paid  to  or  withheld  by  Bank.  Each  calendar  month,  FTDI,  as
applicable,  will  prepare  and  mail  an  activity  statement  summarizing  all
Transactions.

     e)   Fees and Payments

     Where permitted by the prospectus for a Fund, a charge,  concession, or fee
(each of the  foregoing  forms of  compensation,  a "Fee")  may be paid to Bank,
related to services  provided by Bank in connection with  Transactions in shares
of such Fund. The amount of the Fee, if any, is set by the relevant  prospectus.
Adjustments in the Fee are available for certain  purchases,  and Bank is solely
responsible  for  notifying  FTDI  when  any  purchase  or  redemption  order is
qualified  for  such  an  adjustment.  If  Bank  fails  to  notify  FTDI  of the
applicability  of a  reduction  in the  sales  charge  at the time the  trade is
placed,  neither FTDI nor any of the Funds will be liable for amounts  necessary
to reimburse any Customer for the reduction which should have been effected.

     In accordance with the Funds' prospectuses, FTDI or its affiliates may, but
are not  obligated  to,  make  payments  from  their  own  resources  to Bank as
compensation  for certain  sales that are made at net asset  value  ("Qualifying
Sales").  If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent
advance  payment up to the maximum amount  available for payment on the sale. If
any of the shares  purchased  in a Qualifying  Sale are redeemed or  repurchased
within twelve months of the month of purchase, FTDI shall be entitled to recover
any  advance  payment  attributable  to the  redeemed or  repurchased  shares by
reducing any account  payable or other monetary  obligation FTDI may owe to Bank
or by making demand upon Bank for repayment in cash.  FTDI reserves the right to
withhold any one or more advances, if for any reason FTDI believes that FTDI may
not be able to recover  unearned  advances.  Termination  or  suspension of this
Agreement does not relieve Bank from the requirements of this paragraph.

     f)   Rule 12b-1 Plans

     Bank is also invited to  participate  in all  distribution  plans (each,  a
"Plan") adopted for a Class of a Fund or for a Fund that has only a single Class
(each, a "Plan Class")  pursuant to Rule 12b-1 under the Investment  Company Act
of 1940, as amended (the "1940 Act").

     To the extent Bank provides  administrative and other services,  including,
but not limited to,  furnishing  personal and other  services and  assistance to
Customers who own shares of a Plan Class,  answering routine inquiries regarding
a Fund or Class,  assisting  in changing  account  designations  and  addresses,
maintaining  such accounts or such other services as a Fund may require,  to the
extent permitted by applicable statutes,  rules, or regulations,  FTDI shall pay
Bank a Rule 12b-1  servicing  fee. To the extent that Bank  participates  in the
distribution  of Fund shares  that are  eligible  for a Rule 12b-1  distribution
fee,FTDI  shall  also pay Bank a Rule  12b-1  distribution  fee.  All Rule 12b-1
servicing  and  distribution  fees  shall  be  based  on  the  value  of  shares
attributable to Customers and eligible for such payment, and shall be calculated
on the basis and at the rates  set forth in the  compensation  schedule  then in
effect for the  applicable  Plan (the  "Schedule").  Without prior approval by a
majority  of the  outstanding  shares  of a  particular  Class  of a  Fund,  the
aggregate  annual  fees paid to Bank  pursuant to such Plan shall not exceed the
amounts stated as the "annual  maximums" in such Plan Class'  prospectus,  which
amount shall be a specified  percent of the value of such Plan Class' net assets
held in  Customers'  accounts  which are eligible  for payment  pursuant to this
Agreement  (determined in the same manner as such Plan Class uses to compute its
net assets as set forth in its effective Prospectus).

     Bank shall furnish FTDI and each Fund that has a Plan Class (each,  a "Plan
Fund") with such  information  as shall  reasonably be requested by the Board of
Directors,  Trustees or Managing  General Partners  (hereinafter  referred to as
"Directors") of such Plan Fund with respect to the fees paid to Bank pursuant to
the Schedule of such Plan Fund. FTDI shall furnish to the Boards of Directors of
the Plan Funds,  for their review on a quarterly  basis, a written report of the
amounts  expended  under the Plans and the purposes for which such  expenditures
were made.

     Each Plan and the provisions of any agreement relating to such Plan must be
approved  annually  by a vote of the  Directors  of the Fund that has such Plan,
including such persons who are not interested  persons of such Plan Fund and who
have no financial  interest in such Plan or any related  agreement  ("Rule 12b-1
Directors"). Each Plan or the provisions of this Agreement relating to such Plan
may be terminated at any time by the vote of a majority of Rule 12b-1  Directors
of the Fund that has such Plan,  or by a vote of a majority  of the  outstanding
shares  of the Class  that has such Plan on sixty  (60)  days'  written  notice,
without  payment of any penalty.  A Plan or the provisions of this Agreement may
also be terminated by any act that terminates the Underwriting Agreement between
FTDI and the Fund that has such Plan,  and/or the  management or  administration
agreement between Franklin Advisers,  Inc. or Templeton Investment Counsel, Inc.
or their  affiliates  and such Plan Fund. In the event of the  termination  of a
Plan for any reason, the provisions of this Agreement relating to such Plan will
also terminate.

     Continuation  of a Plan and the  provisions of this  Agreement  relating to
such Plan are conditioned on Rule 12b-1 Directors being  ultimately  responsible
for selecting and  nominating  any new Rule 12b-1  Directors.  Under Rule 12b-1,
Directors  of any of the Plan  Funds have a duty to request  and  evaluate,  and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed  determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1,  a Plan  Fund  is  permitted  to  implement  or  continue  a Plan  or the
provisions of this Agreement  relating to such Plan from  year-to-year  only if,
based on certain legal considerations,  the Board of Directors of such Plan Fund
is able to  conclude  that the Plan will  benefit  the Plan  Class.  Absent such
yearly  determination,  a Plan and the provisions of this Agreement  relating to
such Plan must be terminated  as set forth above.  In addition,  any  obligation
assumed by a Fund  pursuant to this  Agreement  shall be limited in all cases to
the  assets of such Fund and no person  shall  seek  satisfaction  thereof  from
shareholders  of a Fund.  Bank agrees to waive payment of any amounts payable to
Bank by FTDI  under a Fund's  Plan until such time as FTDI is in receipt of such
fee from the Fund.

     The  provisions  of the Plans between the Plan Funds and FTDI shall control
over the provisions of this Agreement in the event of any inconsistency.

     g)   Other Distribution Services

     From time to time, FTDI may offer telephone and other augmented services in
connection  with  Transactions  under  this  Agreement.  If Bank  uses  any such
service,  Bank will be  subject to the  procedures  applicable  to the  service,
whether or not Bank has executed any agreement required for the service.

     h)   Conditional Orders; Certificates

     FTDI will not  accept  any  conditional  Transaction  orders.  Delivery  of
certificates or confirmations  for shares purchased shall be made by a Fund only
against  constructive receipt of the purchase price, subject to deduction of any
Fee  and  FTDI's  portion  of the  sales  charge,  if  any,  on  such  sale.  No
certificates  for  shares  of the  Funds  will  be  issued  unless  specifically
requested.

     i)   Cancellation of Orders

     If payment for shares  purchased is not received  within the time customary
or the time required by law for such payment,  the sale may be canceled  without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability  for such a  cancellation;  alternatively,  at FTDI's  option,  the
unpaid  shares  may be sold back to the Fund,  and Bank  shall be liable for any
resulting  loss to FTDI or to the Fund(s).  FTDI shall have no liability for any
check or other item  returned  unpaid to Bank after Bank has paid FTDI on behalf
of a purchaser. FTDI may refuse to liquidate the investment unless FTDI receives
the purchaser's signed authorization for the liquidation.

     j)   Order Corrections

     Bank  shall  assume  responsibility  for any loss to a Fund(s)  caused by a
correction made subsequent to trade date, provided such correction was not based
on any error,  omission or negligence on FTDI's part, and Bank will  immediately
pay such loss to the Fund(s) upon notification.

     k)   Redemptions; Cancellation

     Redemptions or repurchases of shares will be made at the net asset value of
such shares,  less any  applicable  deferred  sales or  redemption  charges,  in
accordance  with the  applicable  prospectuses.  If Bank  sells  shares  for the
account of the record  owner to the Funds,  Bank shall be deemed to represent to
FTDI that Bank is doing so as agent for the Customer and that Bank is authorized
to do so in such capacity. Such sales to the Funds shall be at the redemption or
repurchase  price then  currently in effect for such shares.  If on a redemption
which Bank has  ordered,  instructions  in proper  form,  including  outstanding
certificates, are not received within the time customary or the time required by
law, the  redemption may be canceled  forthwith  without any  responsibility  or
liability  on the part of FTDI or any Fund,  or at the option of FTDI,  FTDI may
buy the shares  redeemed  on behalf of the Fund,  in which  latter case FTDI may
hold Bank  responsible  for any loss to the Fund or loss of profit  suffered  by
FTDI resulting from Bank's failure to settle the redemption.

     l)   Exchanges

     Telephone exchange orders will be effective only for uncertificated  shares
or for which  share  certificates  have  been  previously  deposited  and may be
subject  to  any  fees  or  other  restrictions  set  forth  in  the  applicable
prospectuses.  Exchanges  from a Fund sold with no sales  charge to a Fund which
carries a sales charge,  and exchanges from a Fund sold with a sales charge to a
Fund which  carries a higher  sales  charge may be subject to a sales  charge in
accordance  with the terms of the  applicable  Fund's  prospectus.  Bank will be
obligated  to comply with any  additional  exchange  policies  described  in the
applicable  Fund's   prospectus,   including   without   limitation  any  policy
restricting or prohibiting "Timing Accounts" as therein defined.

     m)   Qualification of Shares; Indemnification

     Upon request,  FTDI shall notify Bank of the states or other  jurisdictions
in which each Fund's shares are currently  noticed,  registered or qualified for
offer or sale to the  public.  FTDI  shall  have no  obligation  to make  notice
filings of, register or qualify,  or to maintain notice filings of, registration
of or  qualification  of, Fund shares in any state or other  jurisdiction.  FTDI
shall have no  responsibility,  under the laws regulating the sale of securities
in any U.S. or foreign  jurisdiction,  for the  registration,  qualification  or
licensed  status of Bank or any of its agents or sub-agents  in connection  with
the  purchase  or sale of Fund  shares or for the  manner of  offering,  sale or
purchase of Fund shares. Except as stated in this paragraph,  FTDI shall not, in
any  event,   be  liable  or  responsible   for  the  issue,   form,   validity,
enforceability  and  value  of such  shares  or for  any  matter  in  connection
therewith,  and no obligation  not expressly  assumed by FTDI in this  Agreement
shall be implied.  If it is  necessary  to file  notice of,  register or qualify
shares of any Fund in any country,  state or other jurisdiction having authority
over the purchase or sale of Fund shares that are  purchased  by a Customer,  it
will be Bank's responsibility to arrange for and to pay the costs of such notice
filing,  registration  or  qualification;  prior  to  any  such  notice  filing,
registration  or  qualification,  Bank will notify FTDI of its intent and of any
limitations  that might be imposed on the Funds,  and Bank agrees not to proceed
with such  notice  filing,  registration  or  qualification  without the written
consent of the applicable Funds and of FTDI.  Nothing in this Agreement shall be
deemed to be a condition, stipulation, or provision binding any person acquiring
any security to waive  compliance  with any provision of the  Securities  Act of
1933,  as amended  (the "1933  Act"),  the 1934 Act, the 1940 Act, the rules and
regulations of the U.S.  Securities and Exchange  Commission,  or any applicable
laws or regulations  of any  government or authorized  agency in the U.S. or any
other country having jurisdiction over the offer or sale of shares of the Funds,
or to relieve the parties  hereto from any  liability  arising  under such laws,
rules or regulations.

     Bank further agrees to indemnify, defend and hold harmless FTDI, the Funds,
their  officers,  directors  and  employees  from  any and all  losses,  claims,
liabilities  and  expenses,  arising  out of (1) any  alleged  violation  of any
statute or regulation  (including  without  limitation the  securities  laws and
regulations of the United States of America or any state or foreign  country) or
any  alleged  tort or breach of  contract,  in or related to any offer,  sale or
purchase of shares of the Funds involving Bank or any Customer  pursuant to this
Agreement  (except to the extent  that  FTDI's  negligence  or failure to follow
correct  instructions  received  from  Bank is the  cause of such  loss,  claim,
liability  or expense),  (2) any  redemption  or exchange  pursuant to telephone
instructions received from Bank or its agents or employees, or (3) the breach by
Bank of any of the terms and conditions of this  Agreement.  This Paragraph 5(m)
shall survive the termination of this Agreement.

     n)   Prospectus and Sales Materials; Limit on Advertising

     No person is authorized to give any information or make any representations
concerning  shares of any Fund  except  those  contained  in the Fund's  current
prospectus or in materials  issued by FTDI as information  supplemental  to such
prospectus. FTDI will supply prospectuses, reasonable quantities of supplemental
sale literature,  sales bulletins,  and additional  information as issued.  Bank
agrees not to use other  advertising  or sales  material  or other  material  or
literature  relating  to  the  Funds  except  that  which  (a)  conforms  to the
requirements  of  any  applicable  laws  or  regulations  of any  government  or
authorized agency in the U.S. or any other country having  jurisdiction over the
offering or sale of shares of the Funds,  and (b) is approved in writing by FTDI
in advance of such use.  Such  approval  may be withdrawn by FTDI in whole or in
part  upon  notice  to Bank,  and  Bank  shall,  upon  receipt  of such  notice,
immediately  discontinue  the use of such sales  literature,  sales material and
advertising.  Bank is not  authorized to modify or translate any such  materials
without the prior written consent of FTDI.

     o)   Customer Information

          1)   DEFINITION.  For  purposes  of  this  Paragraph  5(o),  "Customer
               Information"   means   customer   names  and  other   identifying
               information   pertaining  to  one  or  more  Customers  which  is
               furnished  by Bank to FTDI in the  ordinary  course  of  business
               under this Agreement.  Customer Information shall not include any
               information  obtained from any sources other than the Customer or
               the Bank.

          2)   PERMITTED USES. FTDI may use Customer  Information to fulfill its
               obligations  under this Agreement,  the  Distribution  Agreements
               between  the Funds and FTDI,  the Funds'  prospectuses,  or other
               duties  imposed by law. In addition,  FTDI or its  affiliates may
               use Customer  Information in  communications  to  shareholders to
               market  the  Funds  or other  investment  products  or  services,
               including without limitation  variable  annuities,  variable life
               insurance,  and retirement plans and related  services.  FTDI may
               also use Customer  Information if it obtains Bank's prior written
               consent.

          3)   PROHIBITED USES.  Except as stated above, FTDI shall not disclose
               Customer Information to third parties, and shall not use Customer
               Information  in  connection  with any  advertising,  marketing or
               solicitation  of any  products or  services,  provided  that Bank
               offers or soon expects to offer  comparable  products or services
               to mutual fund customers and has so notified FTDI.

          4)   SURVIVAL; TERMINATION. The agreements described in this paragraph
               5(o) shall survive the termination of this  Agreement,  but shall
               terminate  as  to  any  account  upon  FTDI's  receipt  of  valid
               notification  of either the termination of that account with Bank
               or the transfer of that account to another bank or dealer.

6. CONTINUOUSLY OFFERED CLOSED-END FUNDS

     This  Paragraph  6  relates  solely to shares  of Funds  that  represent  a
beneficial  interest in the Franklin  Floating  Rate Trust or that are issued by
any other continuously  offered  closed-end  investment company registered under
the  1940  Act for  which  FTDI or an  affiliate  of FTDI  serves  as  principal
underwriter  and that  periodically  repurchases  its shares (each,  a "Trust").
Shares of a Trust being offered to the public will be registered  under the 1933
Act and are expected to be offered  during an offering  period that may continue
indefinitely  ("Continuous Offering Period").  There is no guarantee that such a
continuous  offering will be maintained by the Trust.  The  Continuous  Offering
Period,  shares of a Trust and  certain  of the terms on which  such  shares are
being offered are more fully described in the prospectus of the Trust.

     As set forth in a Trust's then current prospectus,  FTDI shall provide Bank
with  appropriate  compensation for purchases of shares of the Trust made by the
Bank for the account of Customers  or by  Customers.  In  addition,  Bank may be
entitled  to a fee for  servicing  Customers  who are  shareholders  in a Trust,
subject to applicable law. Bank agrees that any repurchases of shares of a Trust
that were originally purchased as Qualifying Sales shall be subject to Paragraph
5(e) hereof.

     Bank expressly acknowledges and understands that,  notwithstanding anything
     to the contrary in this Agreement:

     a)   No Trust has a Rule 12b-1  Plan and in no event  will a Trust pay,  or
          have any obligation to pay, any compensation directly or indirectly to
          Bank.

     b)   Shares of a Trust will not be  repurchased  by either the Trust (other
          than through repurchase offers by the Trust from time to time, if any)
          or by FTDI and no secondary  market for such shares exists  currently,
          or is expected to develop.  Any  representation  as to a repurchase or
          tender  offer by the Trust,  other than that set forth in the  Trust's
          then  current  Prospectus,  notification  letters,  reports  or  other
          related material provided by the Trust, is expressly prohibited.

     c)   An early withdrawal  charge payable by shareholders of a Trust to FTDI
          may be imposed on shares  accepted  for  repurchase  by the Trust that
          have  been  held for less  than a stated  period,  as set forth in the
          Trust's then current Prospectus.

     d)   In the event a Customer cancels his or her order for shares of a Trust
          after confirmation, such shares will not be repurchased, remarketed or
          otherwise disposed of by or though FTDI.

     7. GENERAL

     a)   Successors and Assignments

     This  Agreement  shall extend to and be binding upon the parties hereto and
their  respective  successors  and assigns;  provided that this  Agreement  will
terminate  automatically in the event of its assignment by FTDI. For purposes of
the preceding sentence, the word "assignment" shall have the meaning given to it
in the 1940 Act. Bank may not assign this Agreement  without the advance written
consent of FTDI.

     b)   Paragraph Headings

     The paragraph  headings of this  Agreement are for  convenience  only,  and
shall not be deemed to define,  limit,  or describe  the scope or intent of this
Agreement.

     c)   Severability

     Should any  provision  of this  Agreement  be  determined  to be invalid or
unenforceable  under any law, rule, or regulation,  that determination shall not
affect the validity or enforceability of any other provision of this Agreement.

     d)   Waivers

     There  shall be no  waiver  of any  provision  of this  Agreement  except a
written  waiver  signed by Bank and FTDI.  No written  waiver  shall be deemed a
continuing  waiver  or a  waiver  of any  other  provision,  unless  the  waiver
expresses such intention.

     e)   Sole Agreement

     This Agreement is the entire  agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.

     f)   Governing Law

     This Agreement  shall be construed in accordance with the laws of the State
of  California,  not  including  any  provision  which would require the general
application  of the law of another  jurisdiction,  and shall be binding upon the
parties  hereto  when  signed  by FTDI and  accepted  by Bank,  either by Bank's
signature in the space  provided  below or by Bank's first trade  entered  after
receipt of this Agreement.

     g)   Arbitration

     Should  Bank  owe any sum of money to FTDI  under  or in  relation  to this
Agreement for the purchase,  sale,  redemption or repurchase of any Fund shares,
FTDI may offset and  recover  the amount  owed by Bank to FTDI or the Funds from
any amount  owed by FTDI to Bank or from any other  account  Bank has with FTDI,
without notice or demand to Bank. Either party may submit any dispute under this
Agreement to binding  arbitration under the commercial  arbitration rules of the
American  Arbitration  Association.  Judgment upon any arbitration  award may be
entered by any court having jurisdiction.

     h)   Amendments

     FTDI may amend this Agreement at any time by depositing a written notice of
the  amendment in the U.S.  mail,  first class  postage  pre-paid,  addressed to
Bank's  address  given  below.  Bank's  placement  of any  Transaction  order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.

     i)   Term and Termination

     This  Agreement  shall  continue  in  effect  until  terminated  and  shall
terminate  automatically  in the event  that  Bank  ceases to be a "bank" as set
forth in  paragraph  2(a) of this  Agreement.  FTDI or Bank may  terminate  this
Agreement at any time by written notice to the other, but such termination shall
not  affect  the  payment  or  repayment  of Fees on  Transactions  prior to the
termination  date.  Termination also will not affect the indemnities given under
this Agreement.

     j)   Acceptance; Cumulative Effect

     This Agreement is cumulative  and  supersedes  any agreement  previously in
effect.  It shall be binding  upon the  parties  hereto  when signed by FTDI and
accepted by Bank. If Bank has a current  agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this  Agreement,  as it may
be amended pursuant to paragraph 7(h), above, shall constitute Bank's acceptance
of the terms of this Agreement.

     Otherwise,  Bank's  signature below shall constitute  Bank's  acceptance of
     these terms.


                              FRANKLIN/TEMPLETON DISTRIBUTORS, INC.



                              By: /s/ Greg Johnson
                                  -----------------------
                                  Greg Johnson, President

                                  777 Mariners Island Blvd.
                                  San Mateo, CA 94404
                                  Attention: Chief Legal Officer (for legal
                                  notices only)
                                  650/312-2000

                                  100 Fountain Parkway
                                  St. Petersburg, Florida 33716
                                  813/299-8712

- --------------------------------------------------------------------------------
To the Bank or Trust  Company:  If you have not  previously  signed an agreement
with FTDI for the sale of mutual fund shares to your customers,  please complete
and sign this section and return the original to us.


                              BANK OR TRUST COMPANY:


                              ____________________________________
                              (Bank's name)



                          By: ____________________________________
                              (Signature)

                          Name:  _________________________________

                          Title: _________________________________






                     Franklin Templeton Distributors, Inc.
                         777 Mariners Island Boulevard
                            San Mateo, CA 94403-7777


May 15, 1998

Re:   Amendment of Mutual Fund Purchase and Sales Agreement for Accounts of
      Bank and Trust Company Customers - Notice Pursuant to Paragraph 7(h)

Dear Bank or Trust Company:

This letter  constitutes notice of amendment of the current Mutual Fund Purchase
and Sales  Agreement  for  Accounts  of Bank and Trust  Company  Customers  (the
"Agreement") between Franklin/Templeton Distributors, Inc. ("FTDI") and the bank
or trust company ("the Bank")  pursuant to Paragraph 7(h) of the Agreement.  The
Agreement is hereby amended as follows:

1.   Defined  terms  in this  amendment  have  the  meanings  as  stated  in the
     Agreement unless otherwise indicated.

2.   Paragraph 5(e) is modified to add the following language:

     With  respect to shares of each Trust as  described  in Paragraph 6 of this
Agreement,  the total  compensation to be paid to FTDI and selected  dealers and
their affiliates,  including the Bank and the Bank's  affiliates,  in connection
with the  distribution  of shares of a Trust will not  exceed  the  underwriting
compensation  limitation  prescribed  by  NASD  Conduct  Rule  2710.  The  total
underwriting  compensation  to be paid to FTDI and  selected  dealers  and their
affiliates,  including the Bank and the Bank's affiliates,  may include:  (i) at
the time of purchase of shares a payment to the Bank or a  securities  dealer of
1% of the dollar  amount of the purchased  shares by FTDI;  and (ii) a quarterly
payment at an annual rate of .50% to the Bank or a  securities  dealer  based on
the value of such remaining  shares sold by the Bank or such securities  dealer,
if after  twelve (12) months from the date of  purchase,  the shares sold by the
Bank or such securities dealer remain outstanding.

     The maximum  compensation shall be no more than as disclosed in the section
"Payments to Dealers" of the prospectus of the applicable Trust.

Pursuant to Paragraph 7(h) of the Agreement, the Bank's placement of an order or
acceptance  of  payments  of any kind after the  effective  date and  receipt of
notice  of  this  amendment  shall  constitute  the  Bank's  acceptance  of this
amendment.


FRANKLIN/TEMPLETON DISTRIBUTORS, INC.


By /s/ Greg Johnson
   ------------------------
   Greg Johnson, President


777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
650/312-2000

100 Fountain Parkway
St. Petersburg, FL 33716
813/299-8712







                      Amendment to Master Custody Agreement

Effective  February  27, 1998,  The Bank of New York and each of the  Investment
Companies  listed in the Attachment  appended to this Amendment,  for themselves
and each  series  listed in the  Attachment,  hereby  amend the  Master  Custody
Agreement dated as of February 16, 1996 by:

1.   Replacing Exhibit A with the attached; and

2.   Only with respect to the Investment  Companies and series thereof listed in
     the  Attachment,  deleting  paragraphs  (a) and (b) of  Subsection  3.5 and
     replacing them with the following:

     (a) Promptly  after each purchase of Securities by the Fund, the Fund shall
     deliver to the Custodian  Proper  Instructions  specifying  with respect to
     each such  purchase:  (a) the  Series to which  such  Securities  are to be
     specifically  allocated;  (b) the name of the  issuer  and the title of the
     Securities;  (c) the number of shares or the principal amount purchased and
     accrued interest, if any; (d) the date of purchase and settlement;  (e) the
     purchase  price per unit;  (f) the total amount payable upon such purchase;
     (g) the  name of the  person  from  whom or the  broker  through  whom  the
     purchase was made, and the name of the clearing broker, if any; and (h) the
     name of the broker to whom payment is to be made. The Custodian shall, upon
     receipt  of  Securities  purchased  by or for the Fund,  pay to the  broker
     specified in the Proper  Instructions out of the money held for the account
     of such Series the total amount payable upon such  purchase,  provided that
     the same  conforms to the total amount  payable as set forth in such Proper
     Instructions.

     (b)  Promptly  after each sale of  Securities  by the Fund,  the Fund shall
     deliver to the Custodian  Proper  Instructions  specifying  with respect to
     each such sale: (a) the Series to which such Securities  were  specifically
     allocated;  (b) the name of the issuer and the title of the  Security;  (c)
     the number of shares or the principal amount sold, and accrued interest, if
     any;  (d) the date of sale;  (e) the sale  price  per  unit;  (f) the total
     amount  payable  to the Fund upon  such  sale;  (g) the name of the  broker
     through  whom or the person to whom the sale was made,  and the name of the
     clearing  broker,  if any;  and (h) the  name  of the  broker  to whom  the
     Securities are to be delivered.  The Custodian shall deliver the Securities
     specifically allocated to such Series to the broker specified in the Proper
     Instructions  against  payment of the total amount payable to the Fund upon
     such sale,  provided that the same conforms to the total amount  payable as
     set forth in such Proper Instructions.


    Investment Companies                      The Bank of New York

    By:    /s/ Elizabeth N. Cohernour         By:    /s/ Stephen E. Grunston
           --------------------------                -----------------------
    Name:  Elizabeth N. Cohernour             Name:  Stephen E. Grunston
    Title: Authorized Officer                 Title: Vice President

                                          Attachment

    INVESTMENT COMPANY                        SERIES

    Franklin Mutual Series Fund Inc.           Mutual Shares Fund
                                               Mutual Qualified Fund
                                               Mutual Beacon Fund
                                               Mutual Financial Services Fund
                                               Mutual European Fund
                                               Mutual Discovery Fund

    Franklin Valuemark Funds                   Mutual Discovery Securities Fund
                                               Mutual Shares Securities Fund

    Templeton Variable Products Series Fund    Mutual Shares Investments Fund
                                               Mutual Discovery Investments Fund



<TABLE>
<CAPTION>
                                                        THE BANK OF NEW YORK
                                                      MASTER CUSTODY AGREEMENT

                                                              EXHIBIT A

The following is a list of the Investment Companies and their respective Series for which the Custodian shall serve under the Master
Custody Agreement dated as of February 16, 1996.

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
Adjustable Rate Securities Portfolios       Delaware Business Trust          U.S. Government Adjustable Rate Mortgage Portfolio
                                                                             Adjustable Rate Securities Portfolio
Franklin Asset Allocation Fund              Delaware Business Trust

Franklin California Tax-Free Income         Maryland Corporation
Fund, Inc.

Franklin California Tax-Free Trust          Massachusetts Business Trust     Franklin California Insured Tax-Free Income Fund
                                                                             Franklin California Tax-Exempt Money Fund
                                                                             Franklin California Intermediate-Term Tax-Free
                                                                              Income Fund

Franklin Custodian Funds, Inc.              Maryland Corporation             Growth Series
                                                                             Utilities Series
                                                                             Dynatech Series
                                                                             Income Series
                                                                             U.S. Government Securities Series

Franklin Equity Fund                        California Corporation

Franklin Federal Money Fund                 California Corporation

Franklin Federal Tax- Free Income Fund      California Corporation

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

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
Franklin Gold Fund                          California Corporation

Franklin Government Securities Trust        Massachusetts Business Trust

Franklin High Income Trust                  Delaware Business Trust          AGE High Income Fund

Franklin Investors Securities Trust         Massachusetts Business Trust     Franklin Global Government Income Fund
                                                                             Franklin Short-Intermediate U.S. Govt Securities Fund
                                                                             Franklin Convertible Securities Fund
                                                                             Franklin Adjustable U.S. Government Securities Fund
                                                                             Franklin Equity Income Fund
                                                                             Franklin Adjustable Rate Securities Fund

Franklin Managed Trust                      Massachusetts Business Trust     Franklin Corporate Qualified Dividend Fund
                                                                             Franklin Rising Dividends Fund
                                                                             Franklin Investment Grade Income Fund

Franklin Money Fund                         California Corporation

Franklin Municipal Securities Trust         Delaware Business Trust          Franklin Hawaii Municipal Bond Fund
                                                                             Franklin California High Yield Municipal Fund
                                                                             Franklin Washington Municipal Bond Fund
                                                                             Franklin Tennessee Municipal Bond Fund
                                                                             Franklin Arkansas Municipal Bond Fund

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

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
Franklin Mutual Series Fund Inc.            Maryland Corporation             Mutual Shares Fund
                                                                             Mutual Qualified Fund
                                                                             Mutual Beacon Fund
                                                                             Mutual Financial Services Fund
                                                                             Mutual European Fund
                                                                             Mutual Discovery Fund
Franklin New York Tax-Free Income Fund      Delaware Business Trust

Franklin New York Tax-Free Trust            Massachusetts Business Trust     Franklin New York Tax-Exempt Money Fund
                                                                             Franklin New York Intermediate-Term Tax-Free
                                                                              Income Fund
                                                                             Franklin New York Insured Tax-Free Income Fund

Franklin Real Estate Securities Trust       Delaware Business Trust          Franklin Real Estate Securities Fund

Franklin Strategic Mortgage Portfolio       Delaware Business Trust

Franklin Strategic Series                   Delaware Business Trust          Franklin California Growth Fund
                                                                             Franklin Strategic Income Fund
                                                                             Franklin MidCap Growth Fund
                                                                             Franklin Global Utilities Fund
                                                                             Franklin Small Cap Growth Fund
                                                                             Franklin Global Health Care Fund
                                                                             Franklin Natural Resources Fund
                                                                             Franklin Blue Chip Fund
                                                                             Franklin Biotechnology Discovery Fund

Franklin Tax-Exempt Money Fund              California Corporation

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

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
Franklin Tax-Free Trust                     Massachusetts Business Trust     Franklin Massachusetts Insured Tax-Free Income Fund
                                                                             Franklin Michigan Insured Tax-Free Income Fund
                                                                             Franklin Minnesota Insured Tax-Free Income Fund
                                                                             Franklin Insured Tax-Free Income Fund
                                                                             Franklin Ohio Insured Tax-Free Income Fund
                                                                             Franklin Puerto Rico Tax-Free Income Fund
                                                                             Franklin Arizona Tax-Free Income Fund
                                                                             Franklin Colorado Tax-Free Income Fund
                                                                             Franklin Georgia Tax-Free Income Fund
                                                                             Franklin Pennsylvania Tax-Free Income Fund
                                                                             Franklin High Yield Tax-Free Income Fund
                                                                             Franklin Missouri Tax-Free Income Fund
                                                                             Franklin Oregon Tax-Free Income Fund
                                                                             Franklin Texas Tax-Free Income Fund
                                                                             Franklin Virginia Tax-Free Income Fund
                                                                             Franklin Alabama Tax-Free Income Fund
                                                                             Franklin Florida Tax-Free Income Fund
                                                                             Franklin Connecticut Tax-Free Income Fund
                                                                             Franklin Indiana Tax-Free Income Fund
                                                                             Franklin Louisiana Tax-Free Income Fund
                                                                             Franklin Maryland Tax-Free Income Fund
                                                                             Franklin North Carolina Tax-Free Income Fund
                                                                             Franklin New Jersey Tax-Free Income Fund
                                                                             Franklin Kentucky Tax-Free Income Fund
                                                                             Franklin Federal Intermediate-Term Tax-Free Income
                                                                              Fund
                                                                             Franklin Arizona Insured Tax-Free Income Fund
                                                                             Franklin Florida Insured Tax-Free Income fund
                                                                             Franklin Michigan Tax-Free Income Fund

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

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
Franklin Templeton Fund Allocator Series    Delaware Business Trust          Franklin Templeton Conservative Target Fund
                                                                             Franklin Templeton Moderate Target Fund
                                                                             Franklin Templeton Growth Target Fund

Franklin Templeton Global Trust             Delaware Business Trust          Franklin Templeton German Government Bond Fund
                                                                             Franklin Templeton Global Currency Fund
                                                                             Franklin Templeton Hard Currency Fund
                                                                             Franklin Templeton High Income Currency Fund

Franklin Templeton International Trust      Delaware Business Trust          Templeton Pacific Growth Fund
                                                                             Templeton Foreign Smaller Companies Fund

Franklin Templeton Money Fund Trust         Delaware Business Trust          Franklin Templeton Money Fund II

Franklin Value Investors Trust              Massachusetts Business Trust     Franklin Balance Sheet Investment Fund
                                                                             Franklin MicroCap Value Fund
                                                                             Franklin Value Fund

Franklin Valuemark Funds                    Massachusetts Business Trust     Money Market Fund
                                                                             Growth and Income Fund
                                                                             Natural Resources Securities Fund
                                                                             Real Estate Securities Fund
                                                                             Global Utilities Securities Fund
                                                                             High Income Fund
                                                                             Templeton Global Income Securities Fund
                                                                             Income Securities Fund
                                                                             U.S. Government Securities Fund
                                                                             Zero Coupon Fund - 2000
                                                                             Zero Coupon Fund - 2005
                                                                             Zero Coupon Fund - 2010
                                                                             Rising Dividends Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
Franklin Valuemark Funds  (cont.)           Massachusetts Business Trust     Templeton Pacific Growth Fund
                                                                             Templeton International Equity Fund
                                                                             Templeton Developing Markets Equity Fund
                                                                             Templeton Global Growth Fund
                                                                             Templeton Global Asset Allocation Fund
                                                                             Small Cap Fund
                                                                             Capital Growth Fund
                                                                             Templeton International Smaller Companies Fund
                                                                             Mutual Discovery Securities Fund
                                                                             Mutual Shares Securities Fund
                                                                             Global Health Care Securities Fund
                                                                             Value Securities Fund

- ------------------------------------------- -------------------------------- -------------------------------------------------------
Institutional Fiduciary Trust               Massachusetts Business Trust     Money Market Portfolio
                                                                             Franklin U.S. Government Securities Money Market
                                                                              Portfolio
                                                                             Franklin U.S. Treasury Money Market Portfolio
                                                                             Franklin Institutional Adjustable U.S. Government
                                                                              Securities Fund
                                                                             Franklin Institutional Adjustable Rate Securities Fund
                                                                             Franklin U.S. Government Agency Money Market Fund
                                                                             Franklin Cash Reserves Fund

The Money Market Portfolios                 Delaware Business Trust          The Money Market Portfolio
                                                                             The U.S. Government Securities Money Market Portfolio

Templeton Variable Products Series Fund                                      Mutual Shares Investments Fund
                                                                             Mutual Discovery Investments Fund
                                                                             Franklin Growth Investments Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------

- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY                          ORGANIZATION                     SERIES---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S>                                         <C>                              <C>
CLOSED END FUNDS:
Franklin Multi-Income Trust                 Massachusetts Business Trust

Franklin Principal Maturity Trust           Massachusetts Business Trust

Franklin Universal Trust                    Massachusetts Business Trust

INTERVAL FUND
Franklin Floating Rate Trust                Delaware Business Trust

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

</TABLE>







                        FOREIGN CUSTODY MANAGER AGREEMENT


      AGREEMENT  made as of July 30,  1998,  effective as of February 27, 1998
(the "Effective  Date"),  between Each of the Investment  Companies  Listed on
Schedule I attached hereto (each a "Fund") and The Bank of New York ("BNY").

                                 WITNESSETH:

      WHEREAS,  the Fund desires to appoint BNY as a Foreign  Custody  Manager
on the terms and conditions contained herein;

     WHEREAS,  BNY desires to serve as a Foreign  Custody  Manager and perform
the duties set forth herein on the terms and condition contained herein;

      NOW  THEREFORE,  in  consideration  of the mutual  promises  hereinafter
contained in this Agreement, the Fund and BNY hereby agree as follows:

                                  ARTICLE I
                                 DEFINITIONS

      Whenever  used in this  Agreement,  the  following  words  and  phrases,
unless the context otherwise requires, shall have the following meanings:

      1.    "BOARD"  shall mean the board of  directors  or board of trustees,
as the case may be, of the Fund.

      2.    "ELIGIBLE  FOREIGN  CUSTODIAN"  shall have the meaning provided in
            the Rule.

      3.    "MONITORING  SYSTEM"  shall  mean a system  established  by BNY to
fulfill the  Responsibilities  specified  in clauses  l(b)(i) and l(b)(ii) and
l(d) of Article III of this Agreement.

      4.    "QUALIFIED  FOREIGN  BANK" shall have the meaning  provided in the
Rule.

      5.    "RESPONSIBILITIES"  shall mean the  responsibilities  delegated to
BNY as a Foreign  Custody  Manager with respect to each Specified  Country and
each Eligible Foreign Custodian selected by BNY, as such  responsibilities are
more fully described in Article III of this Agreement.

      6.    "RULE" shall mean Rule 17f-5 under the  Investment  Company Act of
1940, as amended, as such Rule became effective on June 16, 1997.

      7.    "SECURITIES  DEPOSITORY"  shall mean any securities  depository or
clearing  agency within the meaning of Section  (a)(1)(ii) or  (a)(1)(iii)  of
the Rule.

      8.    "COMPULSORY  DEPOSITORY"  shall mean a Securities  Depository  the
use of which is mandatory by law or  regulation or because  securities  cannot
be  withdrawn  from  such  Securities   Depository,   or  because  maintaining
securities  outside the Securities  Depository  would not permit purchases and
sales of these  securities  to occur in  accordance  with  routine  settlement
timing and procedures in the relevant market.

      9.    "SPECIFIED  COUNTRY"  shall mean each country listed on Schedule 2
attached hereto and each country,  other than the United States,  constituting
the  primary  market for a security  with  respect to which the Fund has given
settlement   instructions   to  The  Bank  of  New  York  as  custodian   (the
"Custodian") under its Custody Agreement with the Fund.

                                  ARTICLE II
                    BNY AS A FOREIGN CUSTODY MANAGER

      1.    The Fund on  behalf  of its  Board  hereby  delegates  to BNY with
respect to each Specified Country the Responsibilities.

      2.    BNY  accepts  the  Board's  delegation  of  Responsibilities  with
respect   to  each   Specified   Country   and   agrees  in   performing   the
Responsibilities  as a Foreign  Custody Manager to exercise  reasonable  care,
prudence  and  diligence  such  as a  person  having  responsibility  for  the
safekeeping of the Fund's assets would exercise.

      3.    BNY shall  provide to the Board at such  times as the Board  deems
reasonable and appropriate  based on the  circumstances  of the Fund's foreign
custody  arrangements  written reports notifying the Board of the placement of
assets of the Fund  with a  particular  Eligible  Foreign  Custodian  within a
Specified  Country and of any material change in the arrangements  (including,
in the case of Qualified  Foreign Banks,  any material  change in any contract
governing such  arrangements and in the case of Securities  Depositories,  any
material change in the established  practices or procedures of such Securities
Depositories)  with  respect  to  assets  of the Fund  with any such  Eligible
Foreign Custodian.

                                 ARTICLE III
                               RESPONSIBILITIES

      1 . (a)  Subject to the  provisions  of this  Agreement,  BNY shall with
respect to each Specified  Country select an Eligible Foreign Custodian (other
than a Compulsory  Depository) which is not functioning as the Fund's Eligible
Foreign  Custodian as of the  Effective  Date. In  connection  therewith,  BNY
shall:  (i) determine  that assets of the Fund held by such  Eligible  Foreign
Custodian  will  be  subject  to  reasonable  care,  based  on  the  standards
applicable  to  custodians  in the  relevant  market  in which  such  Eligible
Foreign  Custodian  operates,  after  considering all factors  relevant to the
safekeeping of such assets, including,  without limitation, those contained in
Section (c)(1) of the Rule;  (ii)  determine  that the Fund's foreign  custody
arrangements  with  each  Qualified  Foreign  Bank are  governed  by a written
contract with the Custodian (or, in the case of a Securities  Depository other
than a Compulsory Depository,  by such a contract, by the rules or established
practices or procedures of the Securities  Depository,  or by any  combination
of the  foregoing)  which will provide  reasonable  care for the Fund's assets
based on the  standards  specified in paragraph  (c)(1) of the Rule;  and (ii)
determine  that each contract with a Qualified  Foreign Bank shall include the
provisions  specified  in paragraph  (c)(2)(i)(A)  through (F) of the Rule or,
alternatively,  in  lieu  of  any  or all of  such  (c)(2)(i)(A)  through  (F)
provisions,  such other  provisions as BNY determines  will provide,  in their
entirety,  the same or a greater level of care and  protection  for the assets
of the Fund as such specified provisions.

        (b) In addition,  subject to the  provisions  of this  Agreement,  BNY
  shall  with  respect  to  each  Eligible  Foreign  Custodian  (other  than a
  Compulsory  Depository),  regardless  of  when  and by  whom  selected,  (i)
  monitor   pursuant  to  the  Monitoring   System  the   appropriateness   of
  maintaining  the  assets  of the Fund  with a  particular  Eligible  Foreign
  Custodian  pursuant  to  paragraph  (c)(1)  of the Rule and in the case of a
  Qualified  Foreign Bank, any material change in the contract  governing such
  arrangement and in the case of a Securities Depository,  any material change
  in the established  practices or procedures of such  Securities  Depository;
  and (ii) advise the Fund whenever an arrangement (including,  in the case of
  a Qualified  Foreign  Bank,  any material  change in the contract  governing
  such  arrangement and in the case of a Securities  Depository,  any material
  change  in the  established  practices  or  procedures  of  such  Securities
  Depository)  described  in  preceding  clause  (b)(i)  no  longer  meets the
  requirements  of the Rule, it being  understood  that BNY shall provide such
  advice promptly upon learning of such noncompliance.

        (c) Subject to the provisions of this  Agreement,  after  execution of
  this Agreement  with respect to each  Compulsory  Depository  which has been
  established,  as of the  Effective  Date,  in  countries  in  which  BNY has
  appointed a  Subcustodian  and  thereafter  in  connection  with each new or
  additional  Compulsory  Depository  established  in  countries  in which BNY
  appoints,  or has appointed,  as the case may be, a Subcustodian,  BNY shall
  determine, with respect to each such Compulsory Depository, that:

        (i) the Eligible Foreign  Custodian which is utilizing the services of
        the  Compulsory  Depository  has  undertaken  to adhere to the  rules,
        practices and procedures of such Compulsory Depository;

        (ii)no regulatory  authority  with  oversight  responsibility  for the
        Compulsory  Depository  has issued a public notice that the Compulsory
        Depository is not in compliance with any material  capital,  solvency,
        insurance or other similar financial strength  requirements imposed by
        such  authority  or, in the case of such notice  having  been  issued,
        that  such   notice  has  been   withdrawn   or  the  remedy  of  such
        noncompliance   has  been   publicly   announced  by  the   Compulsory
        Depository;

        (iii)     no regulatory  authority with oversight  responsibility over
        the  Compulsory  Depository  has  issued  a  public  notice  that  the
        Compulsory  Depository is not in compliance with any material internal
        controls  requirement  imposed by such  authority or, in the case such
        notice having been issued,  that such notice has been withdrawn or the
        remedy  of such  noncompliance  has  been  publicly  announced  by the
        Compulsory Depository;

        (iv)the  Compulsory  Depository  maintains  the  assets of the  Fund's
        Eligible  Foreign  Custodian  which is  utilizing  the services of the
        Compulsory Depository under no less favorable  safekeeping  conditions
        than  those  that  apply  generally  to  other   participants  in  the
        Compulsory Depository;

        (v) the  Compulsory  Depository  maintains  records that segregate the
        Compulsory  Depository's own assets from the assets of participants in
        the Compulsory Depository;

        (vi)the  Compulsory  Depository  maintains  records that  identify the
        assets of each of its participants;

        (vii)     the Compulsory  Depository  provides periodic reports to its
        participants  with respect to the safekeeping of assets  maintained by
        the Compulsory Depository,  including, by way of example, notification
        of any transfer to or from a participant's account; and

        (viii)    the  Compulsory  Depository  is subject to periodic  review,
        such  as  audits  by   independent   accountants   or  inspections  by
        regulatory authorities.

      BNY shall make the  foregoing  determinations  (i) with  respect to each
Compulsory  Depository  which has been established as of the Effective Date in
countries in which BNY has appointed a Subcustodian  by September 30, 1998 and
(ii) with respect to each new or additional Compulsory Depository  established
in countries in which BNY appoints,  or has  appointed,  as the case may be, a
Subcustodian,  to the  extent  feasible  in  light of the  circumstances  then
prevailing  within  ninety  (90) days of the date such  Compulsory  Depository
commences  operations;  and,  in each  case,  shall  advise  the  Fund and its
investment advisor promptly after each such determination is made.

        In the event that the US Securities  and Exchange  Commission  ("SEC")
  adopts  standards  or criteria  different  from those set forth  above,  the
  above  provisions  shall be deemed to be amended to conform to the standards
  or criteria adopted by the SEC.

        (d) Subject to the provisions of this Agreement,  with respect to each
  Compulsory  Depository  in which Fund's  assets are  maintained  at any time
  during  the term of this  Agreement,  BNY  shall  monitor,  pursuant  to the
  Monitoring  System,  each such Compulsory  Depository's  compliance with the
  criteria set forth in clause l(c) of this Article III and, upon  determining
  that  any  Compulsory  Depository  is not in  compliance  with  any of  such
  criteria,  shall promptly advise the Fund and its investment advisor of such
  non-compliance.

        2.  (a) For purposes of clauses  (a)(i),  (a)(ii) and (c) of preceding
  Section  I of  this  Article,  BNY's  determination  with  respect  to  each
  Securities  Depository  will be based upon publicly  available  information,
  which may be limited,  plus any other information which is made available by
  each such Securities Depository to BNY or its Qualified Foreign Bank.

            (b)   For  purposes  of clause  (b)(i) of  preceding  Section I of
  this Article,  BNY's determination of appropriateness shall not include, nor
  be deemed to  include,  any  evaluation  of Country  Risks  associated  with
  investment in a particular  country.  For purposes  hereof,  "Country Risks"
  shall  mean  systemic  risks  of  holding  assets  in a  particular  country
  including, but not limited to, (i) the use of Compulsory Depositories,  (ii)
  such country's  financial  infrastructure,  (iii) such country's  prevailing
  custody and settlement  practices,  (iv)  nationalization,  expropriation or
  other  governmental  actions,  (v)  regulation  of the banking or securities
  industry,   (vi)   currency   controls,   restrictions,    devaluations   or
  fluctuations,   and  (vii)  market   conditions  which  affect  the  orderly
  execution of securities transactions or affect the value of securities.

                                  ARTICLE IV
                               REPRESENTATIONS

      1.    The Fund hereby  represents that: (a) this Agreement has been duly
authorized,  executed  and  delivered  by the  Fund,  constitutes  a valid and
legally  binding  obligation of the Fund  enforceable  in accordance  with its
terms, and no statute,  regulation,  rule, order, judgment or contract binding
on the Fund prohibits the Fund's  execution or performance of this  Agreement;
(b) this  Agreement  has been  approved and ratified by the Board at a meeting
duly called and at which a quorum was at all times present;  and (c) the Board
or its investment  advisor has considered  the Country Risks  associated  with
investment  in each  Specified  Country  and will have  considered  such risks
prior  to any  settlement  instructions  being  given  to the  Custodian  with
respect to any other Specified Country.

      2.    BNY  hereby  represents  that:  (a)  BNY  is  duly  organized  and
existing under the laws of the State of New York,  with full power to carry on
its  businesses  as now  conducted,  and to enter into this  Agreement  and to
perform  its  obligations   hereunder;   (b)  this  Agreement  has  been  duly
authorized,  executed and  delivered by BNY,  constitutes  a valid and legally
binding  obligation of BNY  enforceable in accordance  with its terms,  and no
statute,  regulation,  rule,  order,  judgment  or  contract  binding  on  BNY
prohibits BNY's  execution or performance of this  Agreement;  and (c) BNY has
established the Monitoring System.

                                  ARTICLE V
                                CONCERNING BNY

        1 . BNY  shall  not  be  liable  for  any  costs,  expenses,  damages,
liabilities or claims,  including  attorneys' and accountants' fees, sustained
or incurred  by, or asserted  against,  the Fund except to the extent the same
arises out of the failure of BNY to exercise the care,  prudence and diligence
required  by Section 2 of Article II hereof.  In no event  shall BNY be liable
to  the  Fund,  the  Board,  or any  third  party  for  special,  indirect  or
consequential  damages,  or for lost profits or loss of  business,  arising in
connection with this Agreement.

      2.    The  Fund  shall  indemnify  BNY and  hold it  harmless  from  and
against  any  and  all  costs,  expenses,  damages,   liabilities  or  claims,
including  attorneys'  and  accountants'  fees,  sustained  or incurred by, or
asserted against,  BNY by reason or as a result of any action or inaction,  or
arising out of BNY's performance  hereunder,  provided that the Fund shall not
indemnify BNY to the extent any such costs, expenses, damages,  liabilities or
claims arises out of BNY's failure to exercise the reasonable  care,  prudence
and diligence required by Section 2 of Article II hereof.

      3.    For its  services  hereunder,  the Fund  agrees to pay to BNY such
compensation and out-of-pocket expenses as shall be mutually agreed.

      4.    BNY  shall  have  only  such  duties  as are  expressly  set forth
herein.  In no event  shall BNY be liable  for any  Country  Risks  associated
with investments in a particular country.

                                  ARTICLE VI
                                MISCELLANEOUS

      1     This Agreement  constitutes the entire agreement  between the Fund
and BNY, and no provision  in the Custody  Agreement  between the Fund and the
Custodian shall affect the duties and obligations of BNY hereunder,  nor shall
any  provision  in this  Agreement  affect  the duties or  obligations  of the
Custodian under the Custody Agreement.

      2.    Any notice or other instrument in writing,  authorized or required
by this Agreement to be given to BNY, shall be sufficiently  given if received
by it at its offices at 90 Washington  Street, New York, New York 10286, or at
such other place as BNY may from time to time designate in writing.

      3.    Any notice or other instrument in writing,  authorized or required
by this  Agreement  to be  given to the Fund  shall be  sufficiently  given if
received by it at its  offices at  Franklin  Resources,  777  Mariners  Island
Boulevard,  San Mateo,  California,  94404, Attn:  Deborah R. Gatzek,  General
Counsel  and Senior  Vice  President,  or at such other  place as the Fund may
from time to time designate in writing.

        4.  In case any provision in or obligation  under this Agreement shall
be  invalid,  illegal or  unenforceable  in any  jurisdiction,  the  validity,
legality and  enforceability of the remaining  provisions shall not in any way
be  affected  thereby.  This  Agreement  may not be amended or modified in any
manner  except  by  a  written  agreement  executed  by  both  parties.   This
Agreement  shall extend to and shall be binding upon the parties  hereto,  and
their  respective   successors  and  assigns;   provided  however,  that  this
Agreement  shall not be assignable by either party without the written consent
of the other.

      5.    This  Agreement   shall  be  construed  in  accordance   with  the
substantive  laws of the State of New York,  without  regard to  conflicts  of
laws principles thereof

      6.    The parties  hereto  agree that in  performing  hereunder,  BNY is
acting  solely  on  behalf  of  the  Fund  and  no   contractual   or  service
relationship  shall be deemed to be  established  hereby  between  BNY and any
other person.

      7.    This  Agreement  may be  executed  in any number of  counterparts,
each of which shall be deemed to be an original,  but such counterparts shall,
together, constitute only one instrument.

      8.    This   Agreement   shall   terminate   simultaneously   with   the
termination of the Custody Agreement  between the Fund and the Custodian,  and
may  otherwise  be  terminated  by either  party  giving to the other  party a
notice in writing specifying the date of such termination,  which shall be not
less than thirty (30) days after the date of such notice.

     IN WITNESS  WHEREOF,  the Fund and BNY have caused this  Agreement  to be
executed by their respective  officers,  thereunto duly authorized,  as of the
date first above written.


                                          EACH INVESTMENT COMPANY
                                          LISTED ON SCHEDULE 1 ATTACHED
                                          HERETO.


                                          By:    /s/ Deborah R. Gatzek
                                                 ---------------------
                                                 Deborah R. Gatzek
                                          Title: Vice President
                                                 Of Each Such Investment Company

                                          THE BANK OF NEW YORK
                                          By:    /s/ Stephen E. Grunston
                                                 -----------------------
                                                 Stephen E. Grunston
                                          Title: Vice President






                                   SCHEDULE 1


<TABLE>
<CAPTION>

      INVESTMENT COMPANY                           SERIES
<S>                                                <C>

Franklin Gold Fund

Franklin Asset Allocation Fund

Franklin Equity Fund

Franklin High Income Trust                         AGE High Income Fund

Franklin Custodian Funds, Inc.                     Growth Series
                                                   Utilities Series
                                                   DynaTech Series
                                                   Income Series

Franklin Investors Securities Trust                Franklin Global Government Income Fund

Franklin Convertible Securities Fund
                                                   Franklin Equity Income Fund
                                                   Franklin Bond Fund

Franklin Value Investors Trust                     Franklin Balance Sheet Investment
                                                   Franklin MicroCap Value Fund
                                                   Franklin Value Fund

Franklin Strategic Mortgage Portfolio

Franklin Managed Trust                             Franklin Rising Dividends Fund
                                                   Franklin Investment Grade Income Fund

Franklin Strategic Series                          Franklin Strategic Income Fund
                                                   Franklin MidCap Growth Fund
                                                   Franklin Global Utilities Fund
                                                   Franklin Small Cap Growth Fund
                                                   Franklin Global Health Care Fund
                                                   Franklin Natural Resources Fund
                                                   Franklin Blue Chip Fund
                                                   Franklin Biotechnology Discovery Fund

Franklin Templeton International Trust             Templeton Pacific Growth Fund

Franklin Real Estate Securities Trust              Franklin Real Estate Securities Fund


INVESTMENT COMPANY                                           SERIES



Franklin Valuemark Funds                           Money Market Fund
                                                   Growth and Income Fund
                                                   Natural Resources Securities Fund
                                                   Real Estate Securities Fund
                                                   Global Utilities Securities Fund


                                                   High Income Fund
                                                   Templeton Global Income Securities Fund
                                                   Income Securities Fund
                                                   U.S. Government Securities Fund
                                                   Zero Coupon Fund - 2000
                                                   Zero Coupon Fund - 2005
                                                   Zero Coupon Fund - 20 1 0
                                                   Rising Dividends Fund
                                                   Templeton Pacific Growth Fund
                                                   Templeton International Equity Fund
                                                   Small Cap Fund
                                                   Capital Growth Fund
                                                   Mutual Discovery Securities Fund
                                                   Mutual Shares Securities Fund
                                                   Global Health Care Securities Fund
                                                   Value Securities Fund

Franklin Universal Trust

Franklin Multi-Income Trust

Franklin Floating Rate Trust

Franklin Templeton Fund Allocator Series           Franklin Templeton Conservative Target Fund
                                                   Franklin Templeton Moderate Target Fund
                                                   Franklin Templeton Growth Target Fund

                                                    SCHEDULE 2

- ----------------------------------------------------------- ---------------------------------------------------------
Country/                                                    Country/
Market              Subcustodian(s)                         Market            Subcustodian(s)
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
<S>                <C>                                      <C>               <C>
Argentina          BankBoston, N.A.                         Hungary           Citibank Budapest Rt.
Australia          Conunonwealth Bank of Australia/         Iceland           Landsbanki Islands
                   National Australia Bank Limited
Austria            Creditanstalt AG                         India             The Hongkong and Shanghai Banking
                                                                              Corporation Limited/Deutsche Bank AG
Bahrain            The British Bank of the Middle East      Indonesia         The Hongkong and Shanghai
                                                            Banking
Bangladesh         Standard Chartered Bank                                    Corporation Limited
Belgium            Banque Bruxelles Lambert                 Ireland           Allied Irish Banks, plc
Bermuda            Bank of Bermuda Limited                  Israel            Bank Leumi LE - Israel B.M.
                                                            Italy             Banca Commerciale Italiana/
Botswana           Stanbic Bank Botswana Limited                              Banque Paribas S.A.
Brazil             BankBoston, N.A.                         Ivory Coast       Societe Geneale de Banque en Cete d'Ivoire
Bulgaria           ING Bank-Sofia
                                                            Jamaica           CIBC Trust & Merchant Bank Jamaica Litd
Canada             Royal Bank of Canada       
Chile              BankBoston, N.A.                         Japan             The Bank of Tokyo-Mitsubishi Limited/
China              Standard Chartered Bank                                    The Fuji Bank, Limited
Colombia           Cititrust Colombia S.A.                  Jordan            The British Bank of the Middle East
Costa Rica         Banco BCT                                Kenya             Stanbic Bank Kenya Limited
Croatia            Pfivredna Banka Zagreb d.d.              Latvia            Societe Generale Riga
Cyprus             Bank of Cyprus                           Lebanon           The British Bank of the Middle East
Czech Republic     Ceskoslovenska Obchodni Banka A.S.       Lithuania         Vilniaus Bankas
Denmark            Den Danske Bank                          Luxembourg        Banque Internationale a Luxembourg
                                                            Malaysia          Hongkong Bank Malaysia Berhad
EASDAQ             Banque Bruxelles Lambert                 Malta             Mid-Med Bank Pic
Ecuador            Citibank, N.A.                           Mauritius         The Hongkong and Shanghai
Egypt              Citibank, N.A.                           Banking
Estonia            Hansabank Limited.                                         Corporation Limited
Euromarket         Cedel Bank                               Mexico            Banco Nacional de Mexico
Euromarket         Euroclear                                Morocco           Banque Commerciale du Maroc
Finland            MeTita Bank Ltd.                         Namibia           Stanbic Bank Namibia Limited
France             Banque Paribas S.A./                     Netherlands       Mees Pierson
                   Credit Commercial de France              New Zealand       Australia and New Zealand Banking Group
Germany            Dresdner Bank AG
Ghana              Merchant Bank (Ghana) Limited            Nigeria           Stanbic Merchant Bank Nigeria Limited
Greece             National Bank of Greece SA               Norway            Den norske Bank ASA
                                                            Oman              The British Bank of the Middle East
Hong Kong          The Hongkong and Shanghai Banking
                   Corporation Limited                      Pakistan          Standard Chartered Bank
Portugal           Banco Comercial Portugues/               Peru              Citibank, N.A.
                   Banco Espirito Santo                     Philippines       The Hongkong and Shanghai Banking
Romania            ING Bank Bucharest Branch                                  Corporation Limited
                                                            Poland            Bank Handlowy W Warszawie S.A
Russia             Vneshtorgbank (Min Fin Bonds only)/
                   Credit Suisse First Boston Limited/      Switzerland       Union Bank of Switzerland/
                   Unexim Bank                                                Bank Leu Ltd.
Singapore          United Overseas Bank Limited/            Taiwan            The Hongkong and Shanghai Banking
                    The Development Bank of Singapore Ltd                     Corporation Limited
Slovakia            Ceskoslovenska Obchodna Banka, a.s      Thailand          Standard Chartered Bank
Slovenia            Banka Creditsanstalt D.D., Ljubljana                      Bangkok Bank Public Company Limited
South Africa        The Standard Bank of South Africa       Tunisia           Banque Internationale Arabe de Tunisie
                    Limited
                                                            Turkey            Osmanli Bankasi A.S. (Ottoman Bank)
South Korea         Standard Chartered Bank                 Ukraine           Bank Ukraina
Spain               Banco Bilbao Vizcaya                    United Kingdom    The Bank of New York, N.A./
SriLanka            Standard Chartered Bank                                   First Chicago Clearing Center
Swaziland           Stanbic Bank Swaziland Limited          United States     The Bank of New York, N.A.
Sweden              Skandinaviska Enskilda Banken           Uruguay           BankBoston, N.A.
                                                            Venezuela         Citibank, N.A.
                                                            Zambia            Stanbic Bank Zambia Limited
                                                            Zimbabwe          Stanbic Bank Zimbabwe Limited
</TABLE>







                  SUBCONTRACT FOR FUND ADMINISTRATIVE SERVICES


          This Subcontract for Fund Administrative  Services  ("Subcontract") is
made as of  October  1, 1996  between  FRANKLIN  ADVISERS,  INC.,  a  California
corporation, hereinafter called the "Investment Manager," and FRANKLIN TEMPLETON
SERVICES, INC. (the "Administrator").

          In   consideration   of  the  mutual   agreements   herein  made,  the
Administrator and the Investment Manager understand and agree as follows:

I.   Prime Contract.

This Subcontract is made in order to assist the Investment Manager in fulfilling
certain of the Investment Manager's obligations under each investment management
and investment advisory agreement  ("Agreement")  between the Investment Manager
and each  Investment  Company  listed on Exhibit A,  ("Investment  Company") for
itself or on behalf of each of its series listed on Exhibit A (each,  a "Fund").
This  Subcontract  is  subject  to  the  terms  of  each  Agreement,   which  is
incorporated herein by reference.

II.  Subcontractual Provisions.

     (1) The Administrator agrees, during the life of this Agreement, to provide
the following services to each Fund:

          (a) providing office space,  telephone,  office equipment and supplies
for the Fund;

          (b)  providing  trading  desk  facilities  for the Fund,  unless these
facilities are provided by the Fund's investment adviser;

          (c) authorizing expenditures and approving bills for payment on behalf
of the Fund;

          (d)  supervising  preparation  of  periodic  reports to  shareholders,
notices of dividends, capital gains distributions and tax credits; and attending
to routine correspondence and other communications with individual  shareholders
when asked to do so by the Fund's shareholder servicing agent or other agents of
the Fund;

          (e) coordinating the daily pricing of the Fund's investment portfolio,
including  collecting  quotations  from  pricing  services  engaged by the Fund;
providing  fund  accounting   services,   including  preparing  and  supervising
publication of daily net asset value  quotations,  periodic earnings reports and
other financial data; and coordinating trade settlements;

          (f)  monitoring  relationships  with  organizations  serving the Fund,
including  custodians,  transfer  agents,  public  accounting  firms, law firms,
printers and other third party service providers;

          (g) supervising compliance by the Fund with recordkeeping requirements
under the  federal  securities  laws,  including  the 1940 Act and the rules and
regulations  thereunder,  and under other applicable state and federal laws; and
maintaining  books and records for the Fund (other than those  maintained by the
custodian and transfer agent);

          (h)  preparing  and filing of tax reports  including the Fund's income
tax returns,  and  monitoring  the Fund's  compliance  with  subchapter M of the
Internal   Revenue  Code,  as  amended,   and  other  applicable  tax  laws  and
regulations;

          (i) monitoring the Fund's  compliance with: 1940 Act and other federal
securities  laws, and rules and regulations  thereunder;  state and foreign laws
and regulations applicable to the operation of investment companies;  the Fund's
investment  objectives,  policies and  restrictions;  and the Code of Ethics and
other  policies  adopted  by the  Investment  Company's  Board  of  Trustees  or
Directors  ("Board") or by the Fund's  investment  adviser and applicable to the
Fund;

          (j) providing executive,  clerical and secretarial personnel needed to
carry out the above responsibilities;

          (k)  preparing  and  filing  regulatory  reports,   including  without
limitation Forms N-1A and NSAR,  proxy  statements,  information  statements and
U.S. and foreign ownership reports; and

          (l)  providing  support  services  incidental  to  carrying  out these
duties.

Nothing in this Agreement  shall obligate the Investment  Company or any Fund to
pay any compensation to the officers of the Investment Company.  Nothing in this
Agreement  shall  obligate  the  Administrator  to pay for the services of third
parties,  including attorneys,  auditors,  printers, pricing services or others,
engaged directly by the Fund to perform services on behalf of the Fund.

     (2)  The  Investment   Manager  agrees  to  pay  to  the  Administrator  as
compensation  for such  services a monthly fee equal on an annual basis to 0.15%
of the first $200  million of the  average  daily net assets of each Fund during
the month  preceding  each  payment,  reduced as follows:  on such net assets in
excess of $200  million  up to $700  million,  a monthly  fee equal on an annual
basis to  0.135%;  on such net  assets  in  excess  of $700  million  up to $1.2
billion,  a monthly fee equal on an annual basis to 0.1%; and on such net assets
in excess of $1.2 billion, a monthly fee equal on an annual basis to 0.075%.

From time to time,  the  Administrator  may  waive all or a portion  of its fees
provided  for  hereunder  and such waiver shall be treated as a reduction in the
purchase price of its services.  The Administrator  shall be contractually bound
hereunder  by the terms of any  publicly  announced  waiver  of its fee,  or any
limitation of each  affected  Fund's  expenses,  as if such waiver or limitation
were fully set forth herein.

     (3) This  Subcontract  shall become effective on the date written above and
shall continue in effect as to each Investment  Company and each Fund so long as
(1) the Agreement  applicable to the Investment Company or Fund is in effect and
(2) this  Subcontract is not terminated.  This  Subcontract will terminate as to
any Investment Company or Fund immediately upon the termination of the Agreement
applicable to the Investment  Company or Fund, and may in addition be terminated
by either party at any time,  without the payment of any penalty,  on sixty (60)
days' written notice to the other party.

     (4) In the absence of willful misfeasance, bad faith or gross negligence on
the part of the  Administrator,  or of  reckless  disregard  of its  duties  and
obligations  hereunder,  the Administrator shall not be subject to liability for
any act or  omission in the course of, or  connected  with,  rendering  services
hereunder.

     IN WITNESS  WHEREOF,  the parties hereto have caused this Subcontract to be
executed by their duly authorized officers.



FRANKLIN ADVISERS, INC.


By:      /s/ Deborah R. Gatzek
         ---------------------
         Deborah R. Gatzek
Title:   Vice President
         & Assistant Secretary



FRANKLIN TEMPLETON SERVICES, INC.


By:      /s/ Harmon E. Burns
         ---------------------
         Harmon E. Burns
Title:   Executive Vice President





TERMINATION OF AGREEMENT
- ------------------------


Franklin Advisers, Inc. and Templeton Global Investors,  Inc., hereby agree that
the Subcontracts for Administrative  Services between them dated: (1) August 28,
1996 for the  Franklin  Templeton  Global  Trust on behalf of all  series of the
Trust;  (2) July 24,  1995 for the  Franklin  Templeton  International  Trust on
behalf of its series Templeton Foreign Smaller Companies Fund (formerly known as
Franklin  International  Equity  Fund);  (3)  July  18,  1995  for the  Franklin
Templeton  International  Trust on behalf of its series Templeton Pacific Growth
Fund;  and (4) July 14,  1995 for the  Franklin  Investors  Securities  Trust on
behalf of its series  Franklin  Global  Government  Income  Fund are  terminated
effective as of the date of the  Subcontract  for Fund  Administrative  Services
above.



FRANKLIN ADVISERS, INC.


By  /s/ Harmon E. Burns
    ----------------------
    Harmon E. Burns
    Executive Vice President


Templeton Global Investors, Inc.


By  /s/ Martin L. Flanagan
    ----------------------
    Martin L. Flanagan
    President, CEO





                          AMENDMENT TO SUBCONTRACT FOR
                          FUND ADMINISTRATIVE SERVICES


          The Subcontract for Fund Administrative Services dated October 1, 1996
between FRANKLIN ADVISERS,  INC. and FRANKLIN TEMPLETON SERVICES, INC. is hereby
amended, to replace Exhibit A with the attached Exhibit A.

          IN WITNESS  WHEREOF,  the parties hereto have caused this Amendment to
be executed by their duly authorized officers.


FRANKLIN ADVISERS, INC.


By:  /s/ Deborah R. Gatzek
     ---------------------
     Deborah R. Gatzek
     Vice President & Assistant Secretary



FRANKLIN TEMPLETON SERVICES, INC.


By:  /s/ Harmon E. Burns
     ---------------------
     Harmon E. Burns
     Executive Vice President



Date:    April 30, 1998





<TABLE>
<CAPTION>
                                   SUBCONTRACT FOR FUND ADMINISTRATIVE SERVICES
                                                      BETWEEN
                                              FRANKLIN ADVISERS, INC.
                                                        AND
                                         FRANKLIN TEMPLETON SERVICES, INC.

                                                     EXHIBIT A


- ----------------------------------------------------- ---------------------------------------------------------------------
INVESTMENT COMPANY                                    SERIES ---(IF APPLICABLE)
- ----------------------------------------------------- ---------------------------------------------------------------------
<S>                                                   <C>
Franklin High Income Trust                            AGE High Income Fund

Franklin Asset Allocation Fund

Franklin California Tax-Free Income
Fund, Inc.

Franklin California Tax-Free Trust                    Franklin California Insured Tax-Free Income Fund
                                                      Franklin California Tax-Exempt Money Fund
                                                      Franklin California Intermediate-Term Tax-Free
                                                        Income Fund

Franklin Custodian Funds, Inc.                        Utilities Series
                                                      Dynatech Series
                                                      Income Series
                                                      U.S. Government Securities Series

Franklin Equity Fund

Franklin Federal Tax- Free Income Fund

Franklin Gold Fund

Franklin Investors Securities Trust                   Franklin Short-Intermediate U.S. Government Securities Fund
                                                      Franklin Convertible Securities Fund
                                                      Franklin Equity Income Fund

Franklin Municipal Securities Trust                   Franklin Hawaii Municipal Bond Fund
                                                      Franklin California High Yield Municipal Fund
                                                      Franklin Washington Municipal Bond Fund
                                                      Franklin Tennessee Municipal Bond Fund
                                                      Franklin Arkansas Municipal Bond Fund

Franklin New York Tax-Free Trust                      Franklin New York Tax-Exempt Money Fund
                                                      Franklin New York Insured Tax-Free Income Fund
                                                      Franklin New York Intermediate-Term Tax-Free
                                                       Income Fund*
- ----------------------------------------------------- ---------------------------------------------------------------------

- ----------------------------------------------------- ---------------------------------------------------------------------
INVESTMENT COMPANY                                    SERIES ---(IF APPLICABLE)
- ----------------------------------------------------- ---------------------------------------------------------------------
<S>                                                   <C>
Franklin Real Estate Securities Trust                 Franklin Real Estate Securities Fund

Franklin Strategic Mortgage Portfolio**

Franklin Strategic Series                             Franklin California Growth Fund
                                                      Franklin Strategic Income Fund
                                                      Franklin MidCap Growth Fund
                                                      Franklin Global Utilities Fund
                                                      Franklin Small Cap Growth Fund
                                                      Franklin Global Health Care Fund
                                                      Franklin Natural Resources Fund
                                                      Franklin Blue Chip Fund
Franklin Tax-Exempt Money Fund

Franklin Tax-Free Trust                               Franklin Massachusetts Insured Tax-Free Income Fund
                                                      Franklin Michigan Insured Tax-Free Income Fund
                                                      Franklin Minnesota Insured Tax-Free Income Fund
                                                      Franklin Insured Tax-Free Income Fund
                                                      Franklin Ohio Insured Tax-Free Income Fund
                                                      Franklin Puerto Rico Tax-Free Income Fund
                                                      Franklin Arizona Tax-Free Income Fund
                                                      Franklin Colorado Tax-Free Income Fund
                                                      Franklin Georgia Tax-Free Income Fund
                                                      Franklin Pennsylvania Tax-Free Income Fund
                                                      Franklin High Yield Tax-Free Income Fund
                                                      Franklin Missouri Tax-Free Income Fund
                                                      Franklin Oregon Tax-Free Income Fund
                                                      Franklin Texas Tax-Free Income Fund
                                                      Franklin Virginia Tax-Free Income Fund
                                                      Franklin Alabama Tax-Free Income Fund
                                                      Franklin Florida Tax-Free Income Fund
                                                      Franklin Indiana Tax-Free Income Fund
                                                      Franklin Louisiana Tax-Free Income Fund
                                                      Franklin Maryland Tax-Free Income Fund
                                                      Franklin North Carolina Tax-Free Income Fund
                                                      Franklin New Jersey Tax-Free Income Fund
                                                      Franklin Kentucky Tax-Free Income Fund
                                                      Franklin Federal Intermediate-Term Tax-Free Income Fund
                                                      Franklin Arizona Insured Tax-Free Income Fund
                                                      Franklin Florida Insured Tax-Free Income Fund
                                                      Franklin Michigan Tax-Free Income Fund

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

- ----------------------------------------------------- ---------------------------------------------------------------------
INVESTMENT COMPANY                                    SERIES ---(IF APPLICABLE)
- ----------------------------------------------------- ---------------------------------------------------------------------
<S>                                                   <C>
Franklin Templeton International Trust                Templeton Pacific Growth Fund
                                                      Templeton Foreign Smaller Companies Fund

Franklin Templeton Global Trust                       Franklin Templeton German Government Bond Fund
                                                      Franklin Templeton Global Currency Fund
                                                      Franklin Templeton Hard Currency Fund
                                                      Franklin Templeton High Income Currency Fund
CLOSED END FUNDS:

Franklin Multi-Income Trust

Franklin Principal Maturity Trust

Franklin Universal Trust

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




- -----------------------------------
* Effective as of March 19, 1998
**Effective as of February 26, 1998

</TABLE>







                        CONSENT OF INDEPENDENT AUDITORS



We consent to the incorporation by reference in Post-Effective  Amendment No. 25
to the  Registration  Statement of Franklin  Investors  Securities Trust on Form
N-1A (File No.  33-11444) of our reports dated  December 5, 1997 on our audit of
the  financial   statements  and  financial  highlights  of  Franklin  Investors
Securities Trust for the year ended October 31, 1997.



                                    /s/ PricewaterhouseCoopers LLP
                                    PricewaterhouseCoopers LLP


San Francisco, California
December 23, 1998







                            FRANKLIN RESOURCES, INC.
                            777 Mariners Island Blvd.
                                  P.O. Box 7777
                            San Mateo, CA 94403-7777


July 24, 1998


Franklin Investors Securities Trust
777 Mariners Island Blvd.
San Mateo, CA 94404


Gentlemen:

     We  propose  to acquire  the  initial  share of  beneficial  interest  (the
"Share") of the Franklin Bond Fund (the "Fund"),  a series of Franklin Investors
Securities Trust (the "Trust"), at a purchase price of $10.00 per share. We will
purchase the Share in a private offering prior to the  effectiveness of the Form
N-1A  registration  statement filed by the Trust on behalf of the Fund under the
Securities Act of 1933. The Share is being  purchased as the initial  advance in
connection with the operations of the Fund.

     We  consent to the  filing of this  Investment  Letter as an exhibit to the
Form N-1A registration statement of the Trust.


Sincerely,

FRANKLIN RESOURCES, INC.



By:   /s/ Harmon E. Burns
      ------------------------
      Harmon E. Burns
      Executive Vice President







                            CLASS B DISTRIBUTION PLAN

I.    Investment Company:   FRANKLIN INVESTORS SECURITIES TRUST

II.   Fund:                 FRANKLIN EQUITY INCOME FUND - CLASS B

III.  Maximum Per Annum Rule 12b-1 Fees for Class B Shares
      (as a percentage of average daily net assets of the class)

      A.    Distribution Fee:       0.75%

      B.    Service Fee:            0.25%


                      PREAMBLE TO CLASS B DISTRIBUTION PLAN

      The following  Distribution  Plan (the "Plan") has been adopted pursuant
to Rule 12b-1  under the  Investment  Company  Act of 1940 (the  "Act") by the
Investment Company named above  ("Investment  Company") for the class B shares
(the "Class") of the Fund named above  ("Fund"),  which Plan shall take effect
as of the date Class B shares are first  offered (the  "Effective  Date of the
Plan").  The Plan has been  approved by a majority of the Board of Trustees of
the  Investment  Company  (the  "Board"),  including  a majority  of the Board
members who are not interested  persons of the Investment Company and who have
no direct,  or indirect  financial  interest in the operation of the Plan (the
"non-interested  Board  members"),  cast in person at a meeting called for the
purpose of voting on such Plan.

      In reviewing the Plan,  the Board  considered the schedule and nature of
payments and terms of the Management  Agreement between the Investment Company
and  Franklin  Advisers,  Inc.  and the  terms of the  Underwriting  Agreement
between the  Investment  Company  and  Franklin/Templeton  Distributors,  Inc.
("Distributors").  The Board  concluded  that the  compensation  of  Advisers,
under the Management  Agreement,  and of Distributors,  under the Underwriting
Agreement,  was fair and not  excessive.  The approval of the Plan  included a
determination  that in the exercise of their reasonable  business judgment and
in light of their fiduciary duties, there is a reasonable  likelihood that the
Plan will benefit the Fund and its shareholders.

      The Board  recognizes that  Distributors has entered into an arrangement
with a third  party in order to finance  the  distribution  activities  of the
Class  pursuant  to which  Distributors  may  assign  its  rights  to the fees
payable  hereunder to such third party.  The Board further  recognizes that it
has an obligation  to act in good faith and in the best  interests of the Fund
and its  shareholders  when considering the continuation or termination of the
Plan and any payments to be made thereunder.

                                DISTRIBUTION PLAN

      1.    (a)   The Fund  shall pay to  Distributors  a  monthly  fee not to
exceed  the  above-stated  maximum  distribution  fee per annum of the  Class'
average  daily  net  assets  represented  by shares  of the  Class,  as may be
determined by the Board from time to time.

            (b)   In addition to the amounts  described in (a) above, the Fund
shall pay (i) to  Distributors  for  payment to  dealers  or  others,  or (ii)
directly to others,  an amount not to exceed the above-stated  maximum service
fee per annum of the Class' average daily net assets  represented by shares of
the Class,  as may be determined by the Investment  Company's  Board from time
to time,  as a service fee  pursuant to servicing  agreements  which have been
approved from time to time by the Board,  including the  non-interested  Board
members.

      2.    (a)   The monies paid to  Distributors  pursuant to Paragraph 1(a)
above shall be treated as compensation for Distributors'  distribution-related
services including  compensation for amounts advanced to securities dealers or
their  firms or  others  selling  shares of the  Class  who have  executed  an
agreement with the Investment Company,  Distributors or its affiliates,  which
form of agreement has been approved from time to time by the Board,  including
the  non-interested  Board members,  with respect to the sale of Class shares.
In  addition,  such monies may be used to  compensate  Distributors  for other
expenses  incurred to assist in the  distribution  and  promotion of shares of
the  Class.  Payments  made to  Distributors  under  the Plan may be used for,
among other things,  the printing of  prospectuses  and reports used for sales
purposes,  expenses of preparing and distributing sales literature and related
expenses,  advertisements,  and other distribution-related expenses, including
a pro-rated  portion of Distributors'  overhead  expenses  attributable to the
distribution  of Class shares,  as well as for  additional  distribution  fees
paid to  securities  dealers  or their  firms  or  others  who  have  executed
agreements with the Investment  Company,  Distributors  or its affiliates,  or
for certain  promotional  distribution  charges paid to broker-dealer firms or
others, or for participation in certain  distribution  channels.  None of such
payments are the legal obligation of Distributors or its designee.

            (b)   The  monies to be paid  pursuant  to  paragraph  1(b)  above
shall be used to pay dealers or others for,  among  other  things,  furnishing
personal  services  and  maintaining  shareholder  accounts,   which  services
include,  among  other  things,  assisting  in  establishing  and  maintaining
customer  accounts  and  records;   assisting  with  purchase  and  redemption
requests;  arranging  for bank wires;  monitoring  dividend  payments from the
Fund on behalf of customers;  forwarding  certain  shareholder  communications
from  the Fund to  customers;  receiving  and  answering  correspondence;  and
aiding in  maintaining  the  investment of their  respective  customers in the
Class.  Any amounts paid under this  paragraph  2(b) shall be paid pursuant to
a servicing  or other  agreement,  which form of agreement  has been  approved
from  time  to time  by the  Board.  None  of  such  payments  are  the  legal
obligation of Distributors or its designee.

      3.    In addition to the payments  which the Fund is  authorized to make
pursuant to paragraphs 1 and 2 hereof, to the extent that the Fund,  Advisers,
Distributors or other parties on behalf of the Fund,  Advisers or Distributors
make  payments that are deemed to be payments by the Fund for the financing of
any activity  primarily  intended to result in the sale of Class shares issued
by the Fund  within  the  context  of Rule  12b-1  under  the Act,  then  such
payments shall be deemed to have been made pursuant to the Plan.

      In no event shall the aggregate  asset-based sales charges which include
payments  specified in paragraphs 1 and 2, plus any other  payments  deemed to
be  made  pursuant  to the  Plan  under  this  paragraph,  exceed  the  amount
permitted  to be paid  pursuant to Rule  2830(d) of the  Conduct  Rules of the
National Association of Securities Dealers, Inc.

      4.    Distributors  shall  furnish to the Board,  for its  review,  on a
quarterly  basis,  a  written  report of the  monies  paid to it and to others
under the Plan,  and shall  furnish the Board with such other  information  as
the Board may  reasonably  request in connection  with the payments made under
the Plan in order to enable  the Board to make an  informed  determination  of
whether the Plan should be continued.

      5.    (a)   Distributors may assign,  transfer or pledge ("Transfer") to
one or more designees (each an "Assignee"),  its rights to all or a designated
portion of the fees to which it is  entitled  under  paragraph  1 of this Plan
from time to time  (but not  Distributors'  duties  and  obligations  pursuant
hereto or pursuant to any distribution  agreement in effect from time to time,
if any, between  Distributors and the Fund),  free and clear of any offsets or
claims  the  Fund  may  have  against   Distributors.   Each  such  Assignee's
ownership interest in a Transfer of a specific  designated portion of the fees
to which  Distributors is entitled is hereafter  referred to as an "Assignee's
12b-1  Portion." A Transfer  pursuant to this Section 5(a) shall not reduce or
extinguish any claims of the Fund against Distributors.

            (b)   Distributors  shall  promptly  notify the Fund in writing of
each such  Transfer  by  providing  the Fund with the name and address of each
such Assignee.

            (c)   Distributors  may  direct  the  Fund to pay  any  Assignee's
12b-1 Portion  directly to each Assignee.  In such event,  Distributors  shall
provide  the Fund  with a monthly  calculation  of the  amount  to which  each
Assignee is entitled  (the  "Monthly  Calculation").  In such event,  the Fund
shall, upon receipt of such notice and Monthly  Calculation from Distributors,
make all payments  required  directly to the Assignee in  accordance  with the
information  provided  in such notice and  Monthly  Calculation  upon the same
terms and conditions as if such payments were to be paid to Distributors.

            (d)   Alternatively,  in connection with a Transfer,  Distributors
may direct the Fund to pay all or a portion of the fees to which  Distributors
is entitled from time to time to a depository or collection  agent  designated
by any Assignee,  which  depository  or collection  agent may be delegated the
duty of  dividing  such fees  between  the  Assignee's  12b-1  Portion and the
balance (such balance,  when  distributed to Distributors by the depository or
collection  agent,  the  "Distributors'  12b-1  Portion"),  in which case only
Distributors'  12b-1  Portion may be subject to offsets or claims the Fund may
have against Distributors.

      6.    The Plan  shall  continue  in effect for a period of more than one
year  only so long as such  continuance  is  specifically  approved  at  least
annually by the Board,  including the  non-interested  Board members,  cast in
person  at a  meeting  called  for the  purpose  of  voting  on the  Plan.  In
determining whether there is a reasonable  likelihood that the continuation of
the Plan will  benefit the Fund and its  shareholders,  the Board may,  but is
not obligated to, consider that  Distributors  has incurred  substantial  cost
and has  entered  into an  arrangement  with a third party in order to finance
the distribution activities for the Class.

      7.    This Plan and any  agreements  entered into  pursuant to this Plan
may be terminated  with respect to the shares of the Class,  without  penalty,
at any time by vote of a majority of the  non-interested  Board members of the
Investment  Company,  or by vote of a majority of  outstanding  Shares of such
Class.  Upon  termination  of  this  Plan  with  respect  to  the  Class,  the
obligation of the Fund to make payments  pursuant to this Plan with respect to
such  Class  shall  terminate,  and the Fund  shall  not be  required  to make
payments  hereunder  beyond  such  termination  date with  respect to expenses
incurred in connection with Class shares sold prior to such termination  date,
provided,   in  each  case  that  each  of  the  requirements  of  a  Complete
Termination  of this Plan in respect of such  Class,  as  defined  below,  are
met.  For purposes of this  Section 7, a "Complete  Termination"  of this Plan
in respect of the Class  shall mean a  termination  of this Plan in respect of
such  Class,  provided  that:  (i) the  non-interested  Board  members  of the
Investment  Company  shall have acted in good faith and shall have  determined
that such  termination is in the best interest of the  Investment  Company and
the  shareholders of the Fund and the Class;  (ii) and the Investment  Company
does not alter the terms of the contingent  deferred sales charges  applicable
to Class shares outstanding at the time of such termination;  and (iii) unless
Distributors at the time of such  termination was in material breach under the
distribution  agreement in respect of the Fund, the Fund shall not, in respect
of such  Fund,  pay to any person or entity,  other than  Distributors  or its
designee,  either  the  payments  described  in  paragraph  1(a) or 1(b) or in
respect of the Class shares sold by  Distributors prior to such termination.

      8.    The Plan, and any  agreements  entered into pursuant to this Plan,
may  not be  amended  to  increase  materially  the  amount  to be  spent  for
distribution  pursuant to Paragraph 1 hereof without approval by a majority of
the outstanding voting securities of the Class of the Fund.

      9.    All material  amendments  to the Plan, or any  agreements  entered
into  pursuant to this Plan,  shall be approved  by the  non-interested  Board
members  cast in person at a meeting  called for the  purpose of voting on any
such amendment.

      10.   So long as the Plan is in effect,  the selection and nomination of
the Fund's  non-interested  Board members shall be committed to the discretion
of such non-interested Board members.

      This Plan and the terms and provisions  thereof are hereby  accepted and
agreed to by the  Investment  Company and  Distributors  as evidenced by their
execution hereof.


Date:    OCTOBER, 16, 1998


FRANKLIN INVESTORS SECURITIES TRUST


By:   _____________________________
      Deborah R. Gatzek
      Vice President & Secretary



FRANKLIN/TEMPLETON DISTRIBUTORS, INC.


By:   _____________________________
      Harmon E. Burns
      Executive Vice President







                       FRANKLIN INVESTORS SECURITIES TRUST
                         ON BEHALF OF FRANKLIN BOND FUND

                          Preamble to Distribution Plan

      The following  Distribution  Plan (the "Plan") has been adopted pursuant
to Rule  12b-1  under  the  Investment  Company  Act of 1940  (the  "Act")  by
Franklin  Investors  Securities  Trust  ("Trust")  for the use of the  Class I
shares of its series named  Franklin Bond Fund (the "Fund"),  which Plan shall
take  effect  on the  date the  shares  of the Fund  are  first  offered  (the
"Effective  Date of the  Plan").  The Plan has been  approved by a majority of
the Board of Trustees of the Trust (the "Board"),  including a majority of the
trustees  who are not  interested  persons of the Trust and who have no direct
or  indirect   financial   interest  in  the   operation   of  the  Plan  (the
"non-interested  trustees"),  cast  in  person  at a  meeting  called  for the
purpose of voting on such Plan.

      In reviewing the Plan,  the Board  considered the schedule and nature of
payments and terms of the Investment  Advisory  Agreement between the Trust on
behalf of the Fund and Franklin Advisers,  Inc.  ("Advisers") and the terms of
the  Underwriting  Agreement  between  the  Trust  on  behalf  of the Fund and
Franklin/Templeton  Distributors,  Inc. ("Distributors").  The Board concluded
that the compensation of Advisers under the Investment  Advisory Agreement was
fair and not excessive;  however,  the Board also recognized that  uncertainty
may exist from time to time with  respect to  whether  payments  to be made by
the Fund to Advisers,  Distributors,  or others or by Advisers or Distributors
to others  may be deemed to  constitute  distribution  expenses.  Accordingly,
the Board  determined  that the Plan should provide for such payments and that
adoption  of the Plan would be prudent and in the best  interests  of the Fund
and its  shareholders.  Such  approval  included a  determination  that in the
exercise  of  their  reasonable  business  judgment  and  in  light  of  their
fiduciary duties, there is a reasonable  likelihood that the Plan will benefit
the Fund and its shareholders.


                                DISTRIBUTION PLAN

1.    The Fund shall pay to  Distributors  or others for expenses  incurred by
Distributors or others in the promotion and  distribution of the shares of the
Fund, as well as for shareholder  services provided for existing  shareholders
of the Fund.  Distribution  expenses may include,  but are not limited to, the
expenses of the printing of prospectuses  and reports used for sales purposes,
preparing   and   distributing   sales   literature   and  related   expenses,
advertisements,  and other distribution-related expenses, including a prorated
portion of Distributors'  overhead  expenses  attributable to the distribution
of Fund  shares;  or for  certain  promotional  distribution  charges  paid to
broker-dealer  firms or others, or for  participation in certain  distribution
channels.  Shareholder  service expenses may include,  but are not limited to,
the expenses of assisting in establishing  and maintaining  customer  accounts
and records,  assisting with purchase and redemption  requests,  arranging for
bank  wires,   monitoring  dividend  payments  from  the  Fund  on  behalf  of
customers,  forwarding  certain  shareholder  communications  from the Fund to
customers,  receiving and answering correspondence,  and aiding in maintaining
the investment of their  respective  customers in the Fund. These expenses may
also include any  distribution  or service fees paid to securities  dealers or
their  firms  or  others.  Agreements  for the  payment  of  distribution  and
service  fees to  securities  dealers or their  firms or others  shall be in a
form which has been  approved  from time to time by the Board,  including  the
non-interested trustees.

2.    The maximum  amount which shall be paid by the Fund to  Distributors  or
others  pursuant to Paragraph 1 herein shall be 0.25% per annum of the average
daily net assets of the Fund.  Said  payment  shall be made  quarterly  by the
Fund to Distributors or others.

3.    In  addition  to the  payments  which the Fund  shall make  pursuant  to
paragraphs  1  and  2  hereof,   to  the  extent  that  the  Fund,   Advisers,
Distributors or other parties on behalf of the Fund,  Advisers or Distributors
make  payments that are deemed to be payments by the Fund for the financing of
any activity  primarily intended to result in the sale of shares issued by the
Fund within the context of Rule 12b-1 under the Act, then such payments  shall
be deemed to have been made pursuant to the Plan.

      In no event shall the aggregate  asset-based sales charges which include
payments  specified in paragraphs 1 and 2, plus any other  payments  deemed to
be  made  pursuant  to the  Plan  under  this  paragraph,  exceed  the  amount
permitted to be paid  pursuant to the Rule 2830(d) of the Conduct Rules of the
National Association of Securities Dealers, Inc.

4.    Distributors  shall furnish to the Board, for its review, on a quarterly
basis,  a written  report  of the  monies  paid to it and to others  under the
Plan,  and shall  furnish the Board with such other  information  as the Board
may reasonably  request in connection with the payments made under the Plan in
order to enable the Board to make an  informed  determination  of whether  the
Plan should be continued.

5.    The Plan  shall  continue  in effect  for a period of more than one year
only so long as such  continuance is  specifically  approved at least annually
by a vote of the Board, including the non-interested  trustees, cast in person
at a meeting called for the purpose of voting on the Plan.

6.    The Plan, and any agreements  entered into pursuant to this Plan, may be
terminated  at any  time,  without  penalty,  by  vote  of a  majority  of the
outstanding  voting  securities  of the Fund or by vote of a  majority  of the
non-interested  trustees, on not more than sixty (60) days' written notice, or
by Distributors  on not more than sixty (60) days' written  notice,  and shall
terminate   automatically  in  the  event  of  any  act  that  constitutes  an
assignment of the Investment  Advisory  Agreement  between the Trust on behalf
of the Fund and Advisers.

7.    The Plan,  and any  agreements  entered into pursuant to this Plan,  may
not be amended to increase  materially the amount to be spent for distribution
pursuant to  Paragraph 2 hereof  without  approval by a majority of the Fund's
outstanding voting securities.

8.    All material  amendments  to the Plan,  or any  agreements  entered into
pursuant  to this  Plan,  shall be  approved  by a vote of the  non-interested
trustees  cast in person at a meeting  called for the purpose of voting on any
such amendment.

9.    So long as the Plan is in effect,  the selection  and  nomination of the
Trust's  non-interested  trustees shall be committed to the discretion of such
non-interested trustees.

This Plan and the terms and provisions  thereof are hereby accepted and agreed
to by the Trust and Distributors as evidenced by their execution hereof.



FRANKLIN INVESTORS SECURITIES TRUST
on behalf of the Franklin Bond Fund


By: /s/ Deborah R. Gatzek
    --------------------------
    Deborah R. Gatzek
    Vice President & Secretary



FRANKLIN/TEMPLETON DISTRIBUTORS, INC.


By: /s/ Harmon E. Burns
    ------------------------
    Harmon E. Burns
    Executive Vice President



Dated:  July 16, 1998







                               MULTIPLE CLASS PLAN
                                  ON BEHALF OF
                           FRANKLIN EQUITY INCOME FUND


      This Multiple  Class Plan (the "Plan") has been adopted by a majority of
the Board of Trustees of FRANKLIN INVESTORS  SECURITIES TRUST (the "Investment
Company")  for its  series,  FRANKLIN  EQUITY  INCOME FUND (the  "Fund").  The
Board has determined that the Plan,  including the expense  allocation,  is in
the best interests of each class of the Fund and the  Investment  Company as a
whole.  The Plan sets forth the provisions  relating to the  establishment  of
multiple  classes of shares of the Fund, and  supersedes  any Plan  previously
adopted for the Fund.

      1.    The Fund shall  offer  three  classes  of  shares,  to be known as
Class A Shares, Class B Shares and Class C Shares.

      2.    Class A Shares shall carry a front-end  sales charge  ranging from
0% - 5.75%,  and  Class C Shares  shall  carry a  front-end  sales  charge  of
1.00%.  Class B Shares shall not be subject to any front-end sales charges.

      3.    Class A Shares  shall  not be  subject  to a  contingent  deferred
sales charge  ("CDSC"),  except in the  following  limited  circumstances.  On
investments  of $1 million or more,  a  contingent  deferred  sales  charge of
1.00% of the lesser of the  then-current  net asset value or the  original net
asset  value  at  the  time  of  purchase  applies  to  redemptions  of  those
investments  within  the  contingency  period of 12 months  from the  calendar
month following their purchase.  The CDSC is waived in certain  circumstances,
as described in the Fund's prospectus.

      Class B Shares  shall be  subject  to a CDSC  with  the  following  CDSC
schedule:  (a) Class B Shares  redeemed within 2 years of their purchase shall
be assessed a CDSC of 4% on the lesser of the  then-current net asset value or
the  original  net  asset  value at the time of  purchase;  (b) Class B Shares
redeemed  within  the  third  and  fourth  years  of their  purchase  shall be
assessed a CDSC of 3% on the  lesser of the  then-current  net asset  value or
the  original  net  asset  value at the time of  purchase;  (c) Class B Shares
redeemed  within 5 years of their  purchase  shall be assessed a CDSC of 2% on
the  lesser of the  then-current  net asset  value or the  original  net asset
value at the time of purchase;  and (d) Class B Shares redeemed within 6 years
of  their  purchase  shall  be  assessed  a CDSC  of 1% on the  lesser  of the
then-current  net asset value or the  original  net asset value at the time of
purchase.  The  CDSC is  waived  in  certain  circumstances  described  in the
Fund's prospectus.

      Class C Shares  redeemed  within 18 months  of their  purchase  shall be
assessed a CDSC of 1.00% on the lesser of the  then-current net asset value or
the original  net asset value at the time of  purchase.  The CDSC is waived in
certain circumstances as described in the Fund's prospectus.

      4.    The distribution  plan adopted by the Investment  Company pursuant
to Rule 12b-1  under the  Investment  Company Act of 1940,  as  amended,  (the
"Rule  12b-1  Plan")  associated  with  the  Class  A  Shares  may be  used to
reimburse Franklin/Templeton  Distributors, Inc. (the "Distributor") or others
for  expenses  incurred  in the  promotion  and  distribution  of the  Class A
Shares.  Such  expenses  include,  but are not  limited  to, the  printing  of
prospectuses  and reports used for sales  purposes,  expenses of preparing and
distributing sales literature and related expenses,  advertisements, and other
distribution-related   expenses,   including   a   prorated   portion  of  the
Distributor's  overhead expenses attributable to the distribution of the Class
A Shares,  as well as any  distribution  or  service  fees paid to  securities
dealers or their firms or others who have executed a servicing  agreement with
the  Investment  Company  for  the  Class A  Shares,  the  Distributor  or its
affiliates.

      The  Rule  12b-1  Plan  associated  with  the  Class  B  Shares  has two
components.  The  first  component  is  an  asset-based  sales  charge  to  be
retained by  Distributor  to compensate  Distributor  for amounts  advanced to
securities  dealers or their firms or others with respect to the sale of Class
B Shares.  In addition,  such payments may be retained by the  Distributor  to
be used in the  promotion  and  distribution  of  Class B  Shares  in a manner
similar to that described  above for Class A Shares.  The second  component is
a shareholder  servicing  fee to be paid to  securities  dealers or others who
provide personal assistance to shareholders in servicing their accounts.

      The  Rule  12b-1  Plan  associated  with  the  Class  C  Shares  has two
components.  The first  component is a shareholder  servicing  fee, to be paid
to  broker-dealers,  banks,  trust  companies and others who provide  personal
assistance to shareholders in servicing their accounts.  The second  component
is an asset-based  sales charge to be retained by the  Distributor  during the
first year after the sale of shares,  and in subsequent  years,  to be paid to
dealers  or  retained  by the  Distributor  to be  used in the  promotion  and
distribution  of Class C Shares,  in a manner similar to that described  above
for Class A Shares.

      The Rule 12b-1  Plans for the Class A, Class B and Class C Shares  shall
operate  in  accordance  with  the  Rules  of Fair  Practice  of the  National
Association of Securities Dealers, Inc., Article III, section 26(d).

      5.    The only  difference  in expenses as between  Class A, Class B and
Class C Shares shall relate to  differences  in Rule 12b-1 plan  expenses,  as
described in the applicable Rule 12b-1 Plans;  however, to the extent that the
Rule  12b-1  Plan  expenses  of one Class are the same as the Rule  12b-1 Plan
expenses of another Class, such classes shall be subject to the same expenses.

      6.    There shall be no conversion  features associated with the Class A
and  Class  C  Shares.  Each  Class  B  Share,  however,  shall  be  converted
automatically,  and  without any action or choice on the part of the holder of
the Class B Shares, into Class A Shares on the conversion date specified,  and
in  accordance  with  the  terms  and  conditions  approved  by  the  Franklin
Investors  Securities  Trust's  Board of Trustees  and as  described,  in each
fund's  prospectus  relating to the Class B Shares,  as such prospectus may be
amended from time to time;  provided,  however,  that the Class B Shares shall
be converted  automatically into Class A Shares to the extent and on the terms
permitted by the Investment  Company Act of 1940 and the rules and regulations
adopted thereunder.

      7.    Shares  of  Class  A,  Class B and  Class C may be  exchanged  for
shares of another  investment  company within the Franklin  Templeton Group of
Funds according to the terms and conditions stated in each fund's  prospectus,
as it may be  amended  from  time to  time,  to the  extent  permitted  by the
Investment  Company  Act  of  1940  and  the  rules  and  regulations  adopted
thereunder.

      8.    Each class  will vote  separately  with  respect to any Rule 12b-1
Plan related to, or which now or in the future may affect, that class.

      9.    On  an  ongoing  basis,  the  Board  members,  pursuant  to  their
fiduciary  responsibilities under the 1940 Act and otherwise, will monitor the
Fund for the  existence of any material  conflicts  between the Board  members
interests of the various  classes of shares.  The Board  members,  including a
majority  of the  independent  Board  members,  shall  take such  action as is
reasonably  necessary  to  eliminate  any  such  conflict  that  may  develop.
Franklin Advisers,  Inc. and  Franklin/Templeton  Distributors,  Inc. shall be
responsible for alerting the Board to any material conflicts that arise.

      10.   All  material  amendments  to  this  Plan  must be  approved  by a
majority of the Board  members,  including a majority of the Board members who
are not interested persons of the Investment Company.

      11.   I,  Deborah R. Gatzek,  Secretary of the Franklin  Group of Funds,
do hereby  certify  that this  Multiple  Class Plan was  adopted  by  FRANKLIN
INVESTORS  SECURITIES  TRUST,  on behalf of its series  FRANKLIN EQUITY INCOME
FUND, by a majority of the Trustees of the Trust on March 16, 1998.



                                          ---------------------
                                          Deborah R. Gatzek
                                          Secretary







                       FRANKLIN INVESTORS SECURITIES TRUST
                                  On behalf of
                               FRANKLIN BOND FUND

                               Multiple Class Plan

      This Multiple  Class Plan (the "Plan") has been adopted by a majority of
the Board of Trustees of FRANKLIN INVESTORS  SECURITIES TRUST (the "Investment
Company")  for its  series,  FRANKLIN  BOND FUND (the  "Fund").  The Board has
determined  that the Plan is in the best  interests  of each class of the Fund
and the  Investment  Company as a whole.  The Plan sets  forth the  provisions
relating to the establishment of multiple classes of shares of the Fund.

      1.    The Fund shall offer two  classes of shares,  to be known as Class
I shares, and Advisor Class shares.

      2.    Class I Shares shall carry a front-end  sales charge  ranging from
0% - 4.25%.  Advisor Class Shares shall not be subject to any front-end  sales
charges.

      3.    Class I Shares  shall  not be  subject  to a  contingent  deferred
sales  charge  ("CDSC")  except in the  following  limited  circumstances.  On
investments  of $1 million or more,  a  contingent  deferred  sales  charge of
1.00% of the lesser of the  then-current  net asset value or the  original net
asset  value  at  the  time  of  purchase  applies  to  redemptions  of  those
investments  within  the  contingency  period of 12 months  from the  calendar
month following their purchase.  The CDSC is waived in certain  circumstances,
as described in the Fund's prospectus.

      Advisor Class Shares shall not be subject to any CDSC.

      4.    The distribution  plan adopted by the Investment  Company pursuant
to Rule 12b-1  under the  Investment  Company Act of 1940,  as  amended,  (the
"Rule 12b-1  Plan")  associated  with the Class I Shares  shall be used to pay
Franklin/Templeton  Distributors,  Inc.  (the  "Distributor")  or  others  for
expenses  incurred in the  promotion and  distribution  of the Class I Shares.
Such expenses  include,  but are not limited to, the printing of  prospectuses
and reports used for sales  purposes,  expenses of preparing and  distributing
sales   literature   and   related   expenses,   advertisements,   and   other
distribution-related   expenses,   including   a   prorated   portion  of  the
Distributor's  overhead expenses attributable to the distribution of the Class
I Shares,  as well as any  distribution  or  service  fees paid to  securities
dealers or their firms or others who have executed a servicing  agreement with
the  Investment  Company  for  the  Class I  Shares,  the  Distributor  or its
affiliates.

      No Rule  12b-1  Plan has been  adopted  on behalf of the  Advisor  Class
Shares,  and  therefore,  the  Advisor  Class  Shares  shall not be subject to
deductions relating to rule 12b-1 fees.

      The Rule 12b-1 Plan for the Class I Shares shall  operate in  accordance
with  Rule  2830(d)  of the  Conduct  Rules  of the  National  Association  of
Securities Dealers, Inc.

      5.    The only  difference  in expenses  as between  Class I and Advisor
Class Shares  shall  relate to  differences  in Rule 12b-1 plan  expenses,  as
described in the applicable Rule 12b-1 Plan.

      6.    There shall be no conversion  features associated with the Class I
and Advisor Class Shares.

      7.    Shares  of each  class may be  exchanged  for  shares  of  another
investment  company within the Franklin  Templeton Group of Funds according to
the  terms  and  conditions  stated in each  fund's  prospectus,  as it may be
amended from time to time, to the extent  permitted by the Investment  Company
Act of 1940 and the  rules and  regulations  adopted  thereunder.  There is no
conversion feature applicable to Class I or Advisor Class Shares.

      8.    Each class  will vote  separately  with  respect to any Rule 12b-1
Plan related to that class.

      9.    On  an  ongoing  basis,  the  Board  members,  pursuant  to  their
fiduciary  responsibilities under the 1940 Act and otherwise, will monitor the
Fund for the existence of any material  conflicts between the interests of the
various  classes of shares.  The Board  members,  including  a majority of the
independent Board members,  shall take such action as is reasonably  necessary
to eliminate any such conflict that may develop.  Franklin Advisers,  Inc. and
Franklin/Templeton  Distributors,  Inc. shall be responsible  for alerting the
Board to any material conflicts that arise.

      10.   All  material  amendments  to  this  Plan  must be  approved  by a
majority of the Board  members,  including a majority of the Board members who
are not interested persons of the Investment Company.

      11.   I,  Deborah R. Gatzek,  Secretary of the Franklin  Group of Funds,
do hereby  certify  that this  Multiple  Class Plan was  adopted  by  FRANKLIN
INVESTORS  SECURITIES  TRUST,  on  behalf  of its  FRANKLIN  BOND  FUND,  by a
majority of the Trustees of the Trust on July 16, 1998.



                                          /s/ Deborah R. Gatzek
                                          ---------------------
                                          Deborah R. Gatzek
                                          Secretary





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