File Nos. 333-70503
AS FILED MAY 10, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
X Post-Effective Amendment No. 1
(Check appropriate box or boxes)
FRANKLIN INVESTORS SECURITIES TRUST
(Exact Name of Registrant as Specified in Charter)
(650) 312-2000
(Area Code and Telephone Number)
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94403-7777
(Address of Principal Executive Offices
Number, Street, City, State, Zip Code)
HARMON E. BURNS
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94403-7777
(Name and Address of Agent for Service,
Number, Street, City, State, Zip Code)
Copies to:
BRUCE G. LETO, ESQUIRE
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 ONE COMMERCE SQUARE
PHILADELPHIA, PA 19103
NO FILING FEE IS REQUIRED BECAUSE AN INDEFINITE NUMBER OF SHARES HAVE
PREVIOUSLY BEEN REGISTERED PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT
COMPANY ACT OF 1940. A RULE 24F-2 NOTICE FOR THE REGISTRANT'S FISCAL YEAR
ENDED OCTOBER 31, 1998 WAS FILED ON SEPTEMBER 24, 1998.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE IMMEDIATELY PURSUANT TO
RULE 485(B).
FORM N-14
PART C. OTHER INFORMATION
Item 15. INDEMNIFICATION
Please see the Agreement and Declaration of Trust, By-Laws, Management,
and Distribution Agreements, previously filed as exhibits and incorporated
herein by reference. Notwithstanding the provisions contained in the
Registrant's By-Laws, in the absence of authorization by the appropriate
court on the merits pursuant to said By-Laws, any indemnification under said
By-Laws shall be made by Registrant only if authorized in the manner provided
by such By-Laws.
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 the 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 16. EXHIBITS (Incorporated by reference to the filings as noted).
The following exhibits are incorporated herein by reference, except
exhibits 4(i), 4(ii), and 12(i) which are attached.
(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 27, 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) The Agreement and Plan of Reorganization is included in this
Registration Statement as Exhibit A to the Prospectus/Proxy
Statement.
(i) Plan of Reorganization dated February 18, 1999
(ii) Amendment dated April 27, 1999 to the Plan of
Reorganization dated February 18, 1999
(5) 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
(6) 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 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 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., and
Templeton Investment Counsel, Inc., providing for service
to Franklin Investors Securities Trust on behalf of
Franklin Global Government Income Fund 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 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
(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 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
(7) 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 Agreement between
Franklin/Templeton Distributors, Inc. and securities dealers
Registrant: Franklin Tax-Free Trust
Filing: Post-Effective Amendment No. 22 to
Registration Statement on Form N-1A
File No. 2-94222
Filing Date: March 14, 1996
(8) Copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors 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
(9) 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) 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 27, 1998
(iv) Amendment dated October 15, 1997 to Exhibit A in the 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 27, 1998
(v) 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
(10) 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 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 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 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 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 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 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 on behalf
of Franklin Global Government Income Fund 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 on
behalf of Franklin Convertible Securities Fund 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 on behalf
of Franklin Equity Income Fund 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
(11) An opinion and consent of counsel as to the legality of the
securities being registered
Legal opinion of Stradley, Ronon, Stevens & Young LLP,
counsel to the Registrant, as to the legality of the
securities being registered, is incorporated herein by
reference to Post-Effective Amendment No. 26 to
Registrant's Registration Statement on Form N-1A (File Nos.
33-11444,
811-4986) as filed electronically with the Commission on
December 30, 1998.
(12) An opinion, and consent to its use, of counsel, supporting the
tax matters and consequences to shareholders discussed in the
prospectus.
(i) Opinion and Consent of Counsel dated May 6, 1999
(13) 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:
Not Applicable
(14) Copies of any other opinions, appraisals or rulings, and consents
to their use relied on in preparing the registration statement
and required by Section 7 of the 1933 Act.
Not Applicable
(15) All financial statements omitted from Item 14(a)(1):
Not Applicable
(16) (i) Power of Attorney for Franklin Investors Securities Trust
dated February 16, 1995
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 Secretary for Franklin Investors Securities
Trust dated February 16, 1995
Filing: Post-Effective Amendment No. 15 to Registration
Statement on Form N-1A
File No. 33-11444
Filing Date: April 24, 1995
(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
(v) Power of Attorney for Franklin Investors Securities Trust.
Filing: Registration Statement on Form N-14
File No. 333-70503
Filing Date: January 12, 1999
(vi) Certificate of Secretary for Franklin Investors Securities
Trust.
Filing: Registration Statement on Form N-14
File No. 333-70503
Filing Date: January 12, 1999
(vii) Power of Attorney for Adjustable Rate Securities Portfolios.
Filing: Registration Statement on Form N-14
File No. 333-70503
Filing Date: January 12, 1999
(viii)Certificate of Secretary for Adjustable Rate Securities
Portfolios.
Filing: Registration Statement on Form N-14
File No. 333-70503
Filing Date: January 12, 1999
(27) Any additional exhibits which the Registrant may wish to file:
None
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a part
of an amendment to the registration statement and will not be
used until the amendment is effective, and that, in determining
any liability under the 1933 Act, each Post-Effective Amendment
shall be deemed to be a new Registration Statement for the
securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering
for them.
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, 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, in the City of San Mateo, and the State of California, on the 7th
day of May, 1999.
Franklin Investors Securities Trust
(Registrant)
By: EDWARD B. JAMIESON
Edward B. Jamieson,
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
EDWARD B. JAMIESON* Trustee and Principal
Edward B. Jamieson Executive Officer
Dated: May 7, 1999
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: May 7, 1999
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: May 7, 1999
FRANK H. ABBOTT* Trustee
Frank H. Abbott III Dated: May 7, 1999
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: May 7, 1999
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: May 7, 1999
CHARLES B. JOHNSON* Trustee
Charles B. Johnson Dated: May 7, 1999
RUPERT H. JOHNSON, JR.* Trustee
Rupert H. Johnson, Jr. Dated: May 7, 1999
FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: May 7, 1999
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: May 7, 1999
*By:/S/ KAREN L. SKIDMORE
Karen L. Skidmore
Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,the undersigned
has duly consented to the filing of this Registration Statement of Franklin
Investors Securities Trust and has 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 7th day of May, 1999.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
(Registrant)
By: CHARLES E. JOHNSON*
Charles E. Johnson,
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following Trustees and Officers of
Adjustable Rate Securities Portfolios in the capacities and on the dates
indicated:
CHARLES E. JOHNSON* Trustee and Principal
Charles E. Johnson Executive Officer
Dated: May 7, 1999
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: May 7, 1999
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: May 7, 1999
FRANK H. ABBOTT, III Trustee
Frank H. Abbott III Dated: May 7, 1999
HARRIS J. ASHTON Trustee
Harris J. Ashton Dated: May 7, 1999
S. JOSEPH FORTUNATO Trustee
S. Joseph Fortunato Dated: May 7, 1999
CHARLES B. JOHNSON Trustee
Charles B. Johnson Dated: May 7, 1999
RUPERT H. JOHNSON, JR.* Trustee
Rupert H. Johnson, Jr. Dated: May 7, 1999
FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: May 7, 1999
WILLIAM J. LIPPMAN* Trustee
William J. Lippman Dated: May 7, 1999
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: May 7, 1999
*By:/S/ KAREN L. SKIDMORE
Karen L. Skidmore
Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith)
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
EX-99.4(i) Plan of Reorganization dated February 18, 1999
EX-99.4(ii) Amendment dated April 27, 1999 to the Plan of
Reorganization dated February 18, 1999
EX-99.12(i) Opinion and Consent of Counsel dated May 6, 1999
PLAN OF REORGANIZATION
PLAN OF REORGANIZATION (the "Plan"), made by Franklin Investors
Securities Trust (the "Trust") as of this 18th day of February, 1999, on
behalf of its series FRANKLIN ADJUSTABLE RATE SECURITIES FUND ("Adjustable
Rate Fund") and FRANKLIN ADJUSTABLE U.S. GOVERNMENT FUND ("Adjustable USG
Fund") (collectively, the "Funds"), with principal place of business at 777
Mariners Island Boulevard, San Mateo, California 94404.
The Plan will consist of (i) the acquisition by Adjustable USG Fund of
substantially all of the property, assets and goodwill of Adjustable Rate
Fund in exchange solely for shares of beneficial interest, par value $0.01
per share, of Adjustable USG Fund ("Adjustable USG Fund Shares"); (ii) the
distribution of Adjustable USG Fund Shares to the shareholders of Adjustable
Rate Fund according to their respective interests; and (iii) the subsequent
dissolution of Adjustable Rate Fund as soon as practicable after the closing
(as defined in Section 3, hereinafter called the "Closing"), all upon and
subject to the terms and conditions of this Plan hereinafter set forth.
PLAN
In order to consummate the Plan, the following actions shall be taken
by the Trust on behalf of the Funds.
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF ADJUSTABLE
RATE FUND.
(a) Subject to the terms and conditions of this Plan, the Trust on
behalf of the Adjustable Rate Fund shall convey, transfer and deliver to
Adjustable USG Fund at the Closing all of Adjustable Rate Fund's then
existing assets, free and clear of all liens, encumbrances, and claims
whatsoever (other than shareholders' rights of redemption), except for cash,
bank deposits, or cash equivalent securities in an estimated amount necessary
to (i) pay the costs and expenses of carrying out this Plan (including, but
not limited to, fees of counsel and accountants, and expenses of its
liquidation and dissolution contemplated hereunder), which costs and expenses
shall be established on Adjustable Rate Fund's books as liability reserves;
(ii) discharge its unpaid liabilities on its books at the closing date (as
defined in Section 3, hereinafter called the "Closing Date"), including, but
not limited to, its income dividends and capital gains distributions, if any,
payable for the period prior to, and through, the Closing Date; and (iii) pay
such contingent liabilities as the Board of Trustees shall reasonably deem to
exist against Adjustable Rate Fund, if any, at the Closing Date, for which
contingent and other appropriate liabilities reserves shall be established on
Adjustable Rate Fund's books (hereinafter "Net Assets"). Adjustable Rate
Fund shall also retain any and all rights that it may have over and against
any person that may have accrued up to and including the close of business on
the Closing Date.
(b) Subject to the terms and conditions of this Plan, the Trust on
behalf of Adjustable USG Fund shall at the Closing deliver to Adjustable Rate
Fund the number of Adjustable USG Fund Shares, determined by dividing the
aggregate Net Assets of Adjustable Rate Fund on the Closing Date by the net
asset value per share of Adjustable USG Fund Shares, as of 1:00 P.M. Pacific
time on the Closing Date. All such values shall be determined in the manner
and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, the Trust shall dissolve the
Adjustable Rate Fund and distribute pro rata to the shareholders of
Adjustable Rate Fund of record as of the close of business on the Closing
Date, the Adjustable USG Fund Shares to be delivered to Adjustable Rate Fund
pursuant to this Section 1. Such liquidation and distribution shall be
accomplished by the establishment of accounts on the share records of the
Trust relating to Adjustable USG Fund and noting in such accounts the type
and amounts of such Adjustable USG Fund Shares which such former Adjustable
Rate Fund shareholders are due based on their respective holdings of
Adjustable Rate Fund Shares as of the close of business on the Closing Date.
Fractional Adjustable USG Fund Shares shall be carried to the third decimal
place. As promptly as practicable after the Closing, each holder of any
outstanding certificate or certificates representing shares of beneficial
interest Adjustable Rate Fund shall be entitled to surrender the same to the
transfer agent for the Adjustable USG Fund in exchange for the number of
Adjustable USG Fund Shares into which the shares of the Adjustable Rate Fund
theretofore represented by the certificate or certificates so surrendered
shall have been converted. Certificates for Adjustable USG Fund Shares shall
not be issued, unless specifically requested by the shareholders. Until so
surrendered, each outstanding certificate which, prior to the Closing,
represented shares of beneficial interest of the Adjustable Rate Fund shall
be deemed for all the Adjustable USG Fund's purposes to evidence ownership of
the number of Adjustable USG Fund's Shares into which the shares of
beneficial interest of the Adjustable Rate Fund (which prior to the Closing
were represented thereby) have been converted.
2. VALUATION.
(a) The value of Adjustable Rate Fund's Net Assets to be transferred
to Adjustable USG Fund hereunder shall be computed as of 1:00 P.M. Pacific
time on the Closing Date using the valuation procedures set forth in
Adjustable Rate Fund's currently effective prospectus.
(b) The net asset value of a share of Adjustable USG Fund shall be
determined to the nearest full cent as of 1:00 P.M. Pacific time on the
Closing Date using the valuation procedures set forth in Adjustable USG
Fund's currently effective prospectus.
(c) The net asset value of a share of Adjustable Rate Fund shall be
determined to the nearest full cent as of 1:00 P.M. Pacific time on the
Closing Date using the valuation procedures set forth in Adjustable Rate
Fund's currently effective prospectus.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be May 6, 1999, or such later date as determined
by the Trust's officers. The Closing shall take place at the principal
office of the Trust at 2:00 P.M. Pacific time on the Closing Date. The Trust
on behalf of the Adjustable Rate Fund shall have provided for delivery as of
the Closing of those Net Assets to be transferred to the Trust's Custodian,
Bank of New York, Mutual Funds Division, 90 Washington Street, New York, NY
10286. Also, the Trust on behalf of Adjustable Rate Fund shall produce at
the Closing a list of names and addresses of the shareholders of record of
its shares and the number of shares owned by each such shareholder,
indicating thereon which such shares are represented by outstanding
certificates and which by book-entry accounts, all as of 1:00 P.M. Pacific
time on the Closing Date, certified by its transfer agent or by its President
to the best of its or his knowledge and belief. The Trust on behalf of
Adjustable USG Fund shall issue and deliver a certificate or certificates
evidencing the shares of the Adjustable USG Fund to be delivered to said
transfer agent registered in such manner as the Trust on behalf of Adjustable
Rate Fund may request, or provide evidence satisfactory to Adjustable Rate
Fund that such Adjustable USG Fund Shares have been registered in an account
on the books of Adjustable USG Fund in such manner as the Trust on behalf of
Adjustable Rate Fund may request.
4. REPRESENTATIONS AND WARRANTIES BY THE TRUST ON BEHALF OF ADJUSTABLE
RATE FUND.
The Trust makes the following representations and warranties about
Adjustable Rate Fund:
(a) Adjustable Rate Fund is a series of the Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts on December 22,
1986 and validly existing and in good standing under the laws of that
commonwealth. The Trust is duly registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified, open-end, management
investment company and all its shares sold were sold pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended
(the "1933 Act"), except for those shares sold pursuant to the private
offering exemption for the purpose of raising the required initial capital.
(b) The Trust is authorized to issue an unlimited number of shares of
Adjustable Rate Fund, par value $0.01 per share, each outstanding share of
which is fully paid, non-assessable, fully transferable and has full voting
rights.
(c) The financial statements appearing in the Trust's Annual Report
to Shareholders for the fiscal year ended October 31, 1998, audited by
PricewaterhouseCoopers LLP, fairly present the financial position of
Adjustable Rate Fund as of such date and the results of its operations for
the periods indicated in conformity with generally accepted accounting
principles applied on a consistent basis.
(d) The Trust has the necessary power and authority to conduct
Adjustable Rate Fund's business as such business is now being conducted.
(e) The Trust on behalf of Adjustable Rate Fund is not a party to or
obligated under any provision of the Trust's Agreement and Declaration of
Trust, By-Laws, or any contract or any other commitment or obligation, and is
not subject to any order or decree that would be violated by its execution of
or performance under this Plan.
(f) The Trust has elected to treat Adjustable Rate Fund as a
regulated investment company ("RIC") for federal income tax purposes under
Part I of Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), Adjustable Rate Fund has qualified as a RIC for each taxable year
since its inception, and will qualify as a RIC as of the Closing Date.
5. REPRESENTATIONS AND WARRANTIES BY THE TRUST ON BEHALF OF ADJUSTABLE USG
FUND.
The Trust makes the following representations and warranties about
Adjustable USG Fund:
(a) Adjustable USG Fund is a series of the Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts on December 22,
1986, and is validly existing and in good standing under the laws of that
state. The Trust is duly registered under the 1940 Act as a diversified,
open-end, management investment company and all its shares sold have been
sold pursuant to an effective registration statement filed under the 1933
Act, except for those shares sold pursuant to the private offering exemption
for the purpose of raising the required initial capital.
(b) The Trust is authorized to issue an unlimited number of shares of
Adjustable USG Fund, par value $.01 per share, each outstanding share of
which is fully paid, non-assessable, fully transferable, and has full voting
rights. Adjustable USG Fund Shares to be issued pursuant to this Plan will
be fully paid, non-assessable, freely transferable and have full voting
rights.
(c) At the Closing, Adjustable USG Fund Shares will be eligible for
offering to the public in those states of the United States and jurisdictions
in which the shares of Adjustable Rate Fund are presently eligible for
offering to the public, and there are a sufficient number of Adjustable USG
Fund Shares registered under the 1933 Act to permit the transfers
contemplated by this Plan to be consummated.
(d) The financial statements appearing in the Trust's Annual Report
to Shareholders for the fiscal year ended October 31, 1998, audited by
PricewaterhouseCoopers LLP, fairly present the financial position of
Adjustable USG Fund as of such date and the results of its operations for the
periods indicated in conformity with generally accepted accounting principles
applied on a consistent basis.
(e) The Trust the necessary power and authority to conduct Adjustable
USG Fund's business as such business is now being conducted.
(f) The Trust on behalf of Adjustable USG Fund is not a party to or
obligated under any provision of the Trust's Agreement and Declaration of
Trust, By-Laws, or any contract or any other commitment or obligation, and is
not subject to any order or decree, that would be violated by its execution
of or performance under this Plan.
(g) The Trust has elected to treat Adjustable USG Fund as a RIC for
federal income tax purposes under Part I of Subchapter M of the Code,
Adjustable USG Fund has qualified as a RIC for each taxable year since its
inception, and will qualify as a RIC as of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES BY THE TRUST ON BEHALF OF THE FUNDS.
The Trust makes the following representations and warranties about both
Adjustable Rate Fund and Adjustable USG Fund:
(a) The statement of assets and liabilities to be created by the
Trust for each of the Funds as of 1:00 P.M. Pacific time on the Closing Date
for the purpose of determining the number of Adjustable USG Fund Shares to be
issued pursuant to Section 1 of this Plan will accurately reflect the Net
Assets in the case of Adjustable Rate Fund and the net assets in the case of
Adjustable USG Fund, and outstanding shares, as of such date, in conformity
with generally accepted accounting principles applied on a consistent basis.
(b) At the Closing, the Funds will have good and marketable title to
all of the securities and other assets shown on the statement of assets and
liabilities referred to in "(a)" above, free and clear of all liens or
encumbrances of any nature whatsoever, except such imperfections of title or
encumbrances as do not materially detract from the value or use of the assets
subject thereto, or materially affect title thereto.
(c) Except as disclosed in the Trust's current effective prospectus
relating to Adjustable Rate Fund and Adjustable USG Fund, there is no
material suit, judicial action, or legal or administrative proceeding pending
or threatened against the Funds.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by the Funds.
(e) It anticipates that consummation of this Plan will not cause
either of the Funds to fail to conform to the requirements of Subchapter M of
the Code for Federal income taxation as a RIC at the end of each of the
fiscal year.
7. INTENTIONS OF THE TRUST ON BEHALF OF THE FUNDS.
(a) The Trust intends to operate each Fund's respective business as
presently conducted between the date hereof and the Closing.
(b) The Trust intends that the Adjustable Rate Fund will not acquire
the Adjustable USG Fund Shares for the purpose of making distributions
thereof to anyone other than Adjustable Rate Fund's shareholders.
(c) The Trust intends that, by the Closing, all of the Funds' Federal
and other tax returns and reports required by law to be filed on or before
such date shall have been filed, and all Federal and other taxes shown as due
on said returns shall have either been paid or adequate liability reserves
shall have been provided for the payment of such taxes.
(d) The Trust intends to mail to each shareholder of record of
Adjustable Rate Fund entitled to vote at the meeting of its shareholders at
which action on this Plan is to be considered, in sufficient time to comply
with requirements as to notice thereof, a Combined Proxy Statement and
Prospectus that complies in all material respects with the applicable
provisions of Section 14(a) of the Securities Exchange Act of 1934, as
amended, and Section 20(a) of the 1940 Act, and the rules and regulations,
respectively, thereunder.
(e) The Trust intends to file with the U.S. Securities and Exchange
Commission a registration statement on Form N-14 under the 1933 Act relating
to the Adjustable USG Fund Shares issuable hereunder ("Registration
Statement"), and will use its best efforts to provide that the Registration
Statement becomes effective as promptly as practicable. At the time it
becomes effective, the Registration Statement will: (i) comply in all
material respects with the applicable provisions of the 1933 Act, and the
rules and regulations promulgated thereunder; and (ii) not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
At the time the Registration Statement becomes effective, at the time of
Adjustable Rate Fund's shareholders' meeting, and at the Closing Date, the
prospectus and statement of additional information included in the
Registration Statement will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY THE TRUST ON BEHALF OF THE
FUNDS.
The consummation of the Plan shall be subject to the following
conditions:
(a) That: (i) all the representations and warranties contained
herein shall be true and correct as of the Closing with the same effect as
though made as of and at such date; (ii) performance of all obligations
required by this Plan to be performed by the Trust and the Funds shall occur
prior to the Closing; and (iii) the Trust shall execute a certificate signed
by the President and by the Secretary or equivalent officer to the foregoing
effect.
(b) That the U.S. Securities and Exchange Commission shall not have
issued an unfavorable management report under Section 25(b) of the 1940 Act
or instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Plan under Section 25(c) of the 1940 Act. And, further,
no other legal, administrative or other proceeding shall have been instituted
or threatened that would materially affect the financial condition of either
party or would prohibit the transactions contemplated hereby.
(c) That this Plan contemplated hereby shall have been adopted and
approved by the appropriate action of the shareholders of Adjustable Rate
Fund at an annual or special meeting or any adjournment thereof.
(d) That a distribution or distributions shall have been declared for
both parties, prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to shareholders of each
party (i) all net investment income and all net realized capital gains, if
any, for the period from the close of its last fiscal year to 1:00 P.M.
Pacific time on the Closing Date; and (ii) any undistributed net investment
income and net realized capital gains from any period to the extent not
otherwise declared for distribution.
(e) That there shall be delivered to the Trust on behalf of
Adjustable Rate Fund and Adjustable USG Fund an opinion from Messrs.
Stradley, Ronon, Stevens & Young, LLP, counsel to the Trust, to the effect
that, provided the acquisition contemplated hereby is carried out in
accordance with this Plan and based upon certificates of the officers of the
Trust with regard to matters of fact:
(1) The acquisition by Adjustable USG Fund of substantially all
the assets of Adjustable Rate Fund as provided for herein in exchange for
Adjustable USG Fund Shares will qualify as a reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and Adjustable Rate Fund and
Adjustable USG Fund will each be a party to the respective reorganization
within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Adjustable Rate Fund
upon the transfer of substantially all of its assets to Adjustable USG Fund
in exchange solely for voting shares of Adjustable USG Fund (Sections 361(a)
and 357(a)). No opinion, however, will be expressed as to whether any
accrued market discount will be required to be recognized as ordinary income
pursuant to Section 1276 of the Code;
(3) No gain or loss will be recognized by Adjustable USG Fund
upon the receipt of substantially all of the assets of Adjustable Rate Fund
in exchange solely for voting shares of Adjustable USG Fund (Section 1032(a));
(4) The basis of the assets of Adjustable Rate Fund received by
Adjustable USG Fund will be the same as the basis of such assets to
Adjustable Rate Fund immediately prior to the exchange (Section 362(b));
(5) The holding period of the assets of Adjustable Rate Fund
received by Adjustable USG Fund will include the period during which such
assets were held by Adjustable Rate Fund (Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of
Adjustable Rate Fund upon the exchange of their shares in Adjustable Rate
Fund for voting shares of Adjustable USG Fund (Section 354(a));
(7) The basis of the Adjustable USG Fund Shares received by
Adjustable Rate Fund's shareholders shall be the same as the basis of the
shares of Adjustable Rate Fund exchanged therefor (Section 358(a)(1));
(8) The holding period of Adjustable USG Fund Shares received
by Adjustable Rate Fund's shareholders (including fractional shares to which
they may be entitled) will include the holding period of Adjustable Rate
Fund's shares surrendered in exchange therefor, provided that Adjustable Rate
Fund's shares were held as a capital asset on the date of the exchange
(Section 1223(1)); and
(9) Adjustable USG Fund will succeed to and take into account
as of the date of the proposed transfer (as defined in Section 1.381(b)-1(b)
of the Income Tax Regulations) the items of Adjustable Rate Fund described in
Section 381(c) of the Code (as defined in Section 1.381(b)-1(b) of the Income
Tax Regulations), subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code and the Income Tax
Regulations thereunder.
(f) That there shall be delivered to the Trust on behalf of the
Adjustable USG Fund an opinion in form and substance satisfactory to it from
Messrs. Stradley Ronon Stevens & Young, LLP, counsel to the Trust, to the
effect that, subject in all respects to the effects of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws
now or hereafter affecting generally the enforcement of creditors' rights:
(1) Adjustable Rate Fund is a series of the Trust, which was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on December 22, 1986, and is validly existing and in good
standing under the laws of that state;
(2) The Trust is authorized to issue an unlimited number of
shares of Adjustable Rate Fund, par value, $0.01 per share. Assuming that
the initial shares of Adjustable Rate Fund were issued in accordance with the
1940 Act and the Agreement and Declaration of Trust and By-Laws of the Trust,
and that all other outstanding shares of Adjustable Rate Fund were sold,
issued and paid for in accordance with the terms of Adjustable Rate Fund's
prospectus in effect at the time of such sales, each such outstanding share
is fully paid, non-assessable, fully transferable and has full voting rights;
(3) The Trust is an open-end, diversified investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Adjustable Rate Fund's currently
effective prospectus, such counsel does not know of any material suit,
action, or legal or administrative proceeding pending or threatened against
Adjustable Rate Fund, the unfavorable outcome of which would materially and
adversely affect Adjustable Rate Fund;
(5) All corporate actions required to be taken by the Trust
and/or Adjustable Rate Fund to authorize and effect the Plan contemplated
hereby have been duly authorized by all necessary corporate action on the
part of the Trust and Adjustable Rate Fund; and
(6) Neither the execution, delivery nor performance of this
Plan by the Trust and/or Adjustable Rate Fund violates any provision of the
Trust's Agreement and Declaration of Trust, its By-Laws, or the provisions of
any agreement or other instrument known to such counsel to which the Trust is
a party or by which Adjustable Rate Fund is otherwise bound; this Plan is the
legal, valid and binding obligation of the Trust and Adjustable Rate Fund and
is enforceable against the Trust and/or Adjustable Rate Fund in accordance
with its terms.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of the Trust with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of the Trust and Adjustable Rate
Fund.
(g) That there shall be delivered to the Trust on behalf of the
Adjustable Rate Fund an opinion in form and substance satisfactory to it from
Messrs. Stradley, Ronon, Stevens & Young, LLP, counsel to the Trust, to the
effect that, subject in all respects to the effects of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other laws
now or hereafter affecting generally the enforcement of creditors' rights:
(1) Adjustable USG Fund is a series of the Trust, organized as
a business trust under the laws of the Commonwealth of Massachusetts on
December 22, 1986, and is validly existing and in good standing under the
laws of that state;
(2) The Trust is authorized to issue an unlimited number of
shares of Adjustable USG Fund, par value $0.01 per share. Assuming that the
initial capital shares of Adjustable USG Fund were issued in accordance with
the 1940 Act, and the Agreement and Declaration of Trust and By-Laws of the
Trust, and that all other outstanding shares of Adjustable USG Fund were
sold, issued and paid for in accordance with the terms of Adjustable USG
Fund's prospectus in effect at the time of such sales, each such outstanding
share of Adjustable USG Fund is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) The Trust is an open-end, diversified investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Adjustable USG Fund's currently
effective prospectus, such counsel does not know of any material suit,
action, or legal or administrative proceeding pending or threatened against
Adjustable USG Fund, the unfavorable outcome of which would materially and
adversely affect Adjustable USG Fund;
(5) Adjustable USG Fund Shares to be issued pursuant to the
terms of this Plan have been duly authorized and, when issued and delivered
as provided in this Plan, will have been validly issued and fully paid and
will be non-assessable by Adjustable USG Fund;
(6) All corporate actions required to be taken by the Trust
and/or Adjustable USG Fund to authorize the Plan contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Adjustable USG Fund;
(7) Neither the execution, delivery nor performance of this
Plan by the Trust and/or Adjustable USG Fund violates any provision of the
Trust's Agreement and Declaration of Trust, its By-Laws, or the provisions of
any agreement or other instrument known to such counsel to which the Trust is
a party or by which Adjustable USG Fund is otherwise bound; this Plan is the
legal, valid and binding obligation of the Trust and Adjustable USG Fund and
is enforceable against the Trust and/or Adjustable USG Fund in accordance
with its terms; and
(8) The Trust's registration statement of which the prospectus,
dated March 1, 1998, as supplemented, of Adjustable USG Fund is a part (the
"Prospectus") is, at the time of the signing of this Plan, effective under
the 1933 Act, and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of such registration statement has been issued,
and no proceedings for such purpose have been instituted or are pending
before or threatened by the U.S. Securities and Exchange Commission under the
1933 Act, and nothing has come to counsel's attention that causes it to
believe that, at the time the Prospectus became effective, or at the time of
the signing of this Plan, or at the Closing, such Prospectus (except for the
financial statements and other financial and statistical data included
therein, as to which counsel need not express an opinion), contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and such counsel knows of no legal or government proceedings
required to be described in the Prospectus, or of any contract or document of
a character required to be described in the Prospectus that is not described
as required.
In giving the opinions set forth above, counsel may state that it is
relying on certificates of the officers of the Trust with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of the Trust and Adjustable USG
Fund.
(h) That the Trust's Registration Statement with respect to the
Adjustable USG Fund Shares to be delivered to the Adjustable Rate Fund's
shareholders in accordance with this Plan shall have become effective, and no
stop order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto, shall have been issued prior to the Closing
Date or shall be in effect at Closing, and no proceedings for the issuance of
such an order shall be pending or threatened on that date.
(i) That the Adjustable USG Fund Shares to be delivered hereunder
shall be eligible for sale by Adjustable USG Fund with each state commission
or agency with which such eligibility is required in order to permit the
Adjustable USG Fund Shares lawfully to be delivered to each Adjustable Rate
Fund shareholder.
(j) That, at the Closing, there shall be transferred to Adjustable
USG Fund aggregate Net Assets of Adjustable Rate Fund comprising at least 90%
in fair market value of the total net assets and 70% of the fair market value
of the total gross assets recorded on the books of Adjustable Rate Fund on
the Closing Date.
9. BROKERAGE FEES AND EXPENSES.
The expenses of entering into and carrying out the provisions of
this Plan shall be borne one quarter by Adjustable Rate Fund, one quarter by
Adjustable USG Fund, and one half by Franklin Advisers, Inc.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Plan to the contrary notwithstanding,
this Plan may be terminated and abandoned at any time (whether before or
after approval thereof by the shareholders of Adjustable Rate Fund) prior to
the Closing or the Closing may be postponed by the Trust on behalf of either
party by resolution of the Board of Trustees, if circumstances develop that,
in the opinion of the Board, make proceeding with the Plan inadmissible.
(b) If the transactions contemplated by this Plan have not been
consummated by September 30, 1999, the Plan shall automatically terminate on
that date, unless a later date is agreed to by the Trust on behalf of
Adjustable USG Fund and Adjustable Rate Fund.
(c) In the event of termination of this Plan pursuant to the
provisions hereof, the same shall become void and have no further effect, and
neither the Trust, Adjustable Rate Fund nor Adjustable USG Fund, nor their
trustees, officers, agents or shareholders shall have any liability in
respect of this Plan.
(d) At any time prior to the Closing, any of the terms or conditions
of this Plan may be waived by the party who is entitled to the benefit
thereof by action taken by the Trust's Board of Trustees if, in the judgment
of such Board of Trustees, such action or waiver will not have a material
adverse effect on the benefits intended under this Plan to its shareholders,
on behalf of whom such action is taken.
(e) If any order or orders of the U.S. Securities and Exchange
Commission with respect to this Plan shall be issued prior to the Closing and
shall impose any terms or conditions that are determined by action of the
Board of Trustees of the Trust on behalf of the Adjustable Rate Fund or
Adjustable USG Fund to be acceptable, such terms and conditions shall be
binding as if a part of this Plan without further vote or approval of the
shareholders of Adjustable Rate Fund, unless such terms and conditions shall
result in a change in the method of computing the number of Adjustable USG
Fund Shares to be issued to Adjustable Rate Fund in which event, unless such
terms and conditions shall have been included in the proxy solicitation
material furnished to the shareholders of Adjustable Rate Fund prior to the
meeting at which the transactions contemplated by this Plan shall have been
approved, this Plan shall not be consummated and shall terminate unless the
Trust on behalf of Adjustable Rate Fund shall promptly call a special meeting
of shareholders at which such conditions so imposed shall be submitted for
approval.
11. ENTIRE PLAN AND AMENDMENTS.
This Plan embodies the entire plan of the Trust on behalf of the
parties and there are no agreements, understandings, restrictions, or
warranties between the parties other than those set forth herein or herein
provided for. This Plan may be amended only by mutual consent of the parties
in writing. Neither this Plan nor any interest herein may be assigned
without the prior written consent of the other party.
12. NOTICES.
Any notice, report, or demand required or permitted by any provision of
this Plan shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to the Trust at
777 Mariners Island Boulevard, P. O. Box 7777, San Mateo, CA 94403-7777,
Attention: Secretary.
13. GOVERNING LAW.
This Plan shall be governed by and carried out in accordance with the
laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Franklin Investors Securities Trust, on behalf of
Adjustable USG Fund and Franklin Adjustable Rate Fund has executed this Plan
by its duly authorized officer, all as of the date and year first-above
written.
FRANKLIN INVESTORS SECURITIES
TRUST, ON BEHALF OF
FRANKLIN ADJUSTABLE RATE
SECURITIES FUND
Attest:
/s/ Larry L. Greene By: /s/ Deborah R. Gatzek
Assistant Secretary Deborah R. Gatzek
Vice President and Secretary
FRANKLIN INVESTORS SECURITIES
TRUST, ON BEHALF OF FRANKLIN
ADJUSTABLE U.S. GOVERNMENT FUND
Attest:
/s/ Larry L. Greene By: /s/ Deborah R. Gatzek
Assistant Secretary Deborah R. Gatzek
Vice President and Secretary
AMENDMENT TO THE
PLAN OF REORGANIZATION
WHEREAS, Franklin Investors Securities Trust (the "Trust"), a
business Trust organized under the laws of the Commonwealth of Massachusetts
in 1986, with its principal place of business at 777 Mariners Island
Boulevard, San Mateo, California 94404 has made on behalf of its series
Franklin Adjustable Rate Securities Fund ("Adjustable Rate Fund") and
Franklin Adjustable U.S. Government Securities Fund ("Adjustable USG Fund") a
Plan of Reorganization dated February 18, 1999; and
WHEREAS, the Trust, on behalf of Adjustable Rate Fund and
Adjustable USG Fund, desires to amend the Plan of Reorganization and the
Board of the Trust has authorized the appropriate officers to prepare and
execute amendments to the Plan of Reorganization.
NOW THEREFORE, BE IT RESOLVED, that the Plan of Reorganization is
hereby amended to read as follows:
1. In Paragraph 2(c), entitled "Valuation," the following shall
be deleted:
"(c) The net asset value of a share of Adjustable
Rate Fund shall be determined to the nearest full
cent as of 1:00 p.m. Pacific time on the Closing Date
using the valuation procedures set forth in
Adjustable Rate Fund's currently effective
prospectus."
and replaced with the following:
"(c) The net asset value of a share of Adjustable
Rate Fund shall be determined to the fourth decimal
place as of 1:00 p.m. Pacific time on the Closing
Date, using the valuation procedures set forth in
Adjustable Rate Fund's currently effective
prospectus."
2. Nothing in this Amendment shall be deemed to modify or in any
way affect the Plan of Reorganization except to the extent herein expressly
provided.
IN WITNESS WHEREOF, the Trust has caused this
Amendment to the Plan of Reorganization to be executed on behalf of
Adjustable USG Fund and Adjustable Rate Fund by its duly authorized officers,
on this 27th day of April, 1999.
FRANKLIN INVESTORS SECURITIES
TRUST, on behalf of
FRANKLIN ADJUSTABLE RATE
SECURITIES FUND
Attest:
/s/ Leiann Nuzum By: /s/ Deborah R. Gatzek
Assistant Secretary Deborah R. Gatzek
Vice President and Secretary
FRANKLIN INVESTORS SECURITIES
TRUST, on behalf of
FRANKLIN ADJUSTABLE U.S.
GOVERNMENT FUND
Attest:
/s/ Leiann Nuzum By: /s/ Deborah R. Gatzek
Assistant Secretary Deborah R. Gatzek
Vice President and Secretary
Law Offices
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
May 6, 1999
Board of Trustees
Franklin Investors Securities Trust
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: PLAN OF REORGANIZATION, DATED AS OF THE 18TH DAY OF
FEBRUARY, 1999 AS AMENDED APRIL 27, 1999 (THE "PLAN"), BY
FRANKLIN INVESTORS SECURITIES TRUST, A MASSACHUSETTS BUSINESS
TRUST, ON BEHALF OF FRANKLIN ADJUSTABLE RATE SECURITIES FUND
("ACQUIRED FUND") AND FRANKLIN ADJUSTABLE U.S. GOVERNMENT
SECURITIES FUND ("ACQUIRING FUND")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of Acquired Fund which will consist of (i)
the acquisition by the Acquiring Fund of substantially all of the property,
assets and goodwill of the Acquired Fund in exchange solely for shares of
beneficial interest, with par value of $0.01 per share, of the Acquiring Fund
("Acquiring Fund Shares"), (ii) the distribution of Acquiring Fund Shares to
the shareholders of the Acquired Fund, and (iii) the subsequent dissolution
of the Acquired Fund as soon as practicable after the closing (the
"Reorganization"), all upon and subject to the terms and conditions of the
Plan.
In rendering our opinion, we have reviewed and relied upon (a)
the Plan of Reorganization, dated as of the 18th day of February, 1999, as
amended April 27, 1999, by the Trust on behalf of the Acquiring Fund and the
Acquired Fund, (b) the proxy materials provided to stockholders of the
Acquired Fund in connection with the Special Meeting of Stockholders of the
Acquired Fund held on April 9, 1999, (c) certain representations concerning
the Reorganization made to us by the Trust on behalf of the Acquiring Fund
and the Acquired Fund in a letter dated May 6, 1999 (the "Representation
Letter"), (d) all other documents, financial and other reports and corporate
minutes which we deemed relevant or appropriate, and (e) such statutes,
regulations, rulings and decisions as we deemed material to the rendition of
this opinion. All terms used herein, unless otherwise defined, are used as
defined in the Plan.
For purposes of this opinion, we have assumed that the Acquired
Fund on the effective date of the Reorganization satisfies, and following the
Reorganization, the Acquiring Fund will continue to satisfy, the requirements
of subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury
under Section 1276(d) of the Code, certain transfers of market discount bonds
will be excepted from the requirement that accrued market discount be
recognized on disposition of a market discount bond under Section 1276(a) of
the Code. Such regulations are to provide, in part, that accrued market
discount will not be included in income if no gain is recognized under
Section 361(a) of the Code where a bond is transferred in an exchange
qualifying as a tax-free reorganization. As of the date hereof, the
Secretary has not issued any regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried
out in accordance with the applicable laws of the State of Massachusetts, the
Plan and the Representation Letter, it is our opinion that:
1. The Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
Acquired Fund and Acquiring Fund will each be a party to the reorganization
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by Acquired Fund upon
the transfer of all of its assets to Acquiring Fund in exchange solely for
Acquiring Fund Shares pursuant to Section 361(a) and Section 357(a) of the
Code. We express no opinion as to whether any accrued market discount will
be required to be recognized as ordinary income pursuant to Section 1276 of
the Code.
3. No gain or loss will be recognized by Acquiring Fund upon
the receipt by it of all of the assets of Acquired Fund in exchange solely
for Acquiring Fund Shares pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of such assets to Acquired Fund
immediately prior to the exchange pursuant to Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund received
by Acquiring Fund will include the period during which such assets were held
by Acquired Fund pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of
Acquired Fund upon the exchange of their Acquired Fund Shares for Acquiring
Fund Shares (including fractional shares to which they may be entitled),
pursuant to Section 354(a) of the Code.
7. The basis of the Acquiring Fund Shares received by the
stockholders of Acquired Fund (including fractional shares to which they may
be entitled) will be the same as the basis of the Acquired Fund Shares
exchanged therefor pursuant to Section 358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares received by
the stockholders of Acquired Fund (including fractional shares to which they
may be entitled) will include the holding period of the Acquired Fund Shares
surrendered in exchange therefor, provided that the Acquired Fund Shares were
held as a capital asset on the effective date of the Reorganization, pursuant
to Section 1223(1) of the Code.
9. Acquiring Fund will succeed to and take into account as of
the date of the proposed transfer (as defined in Section 1.381(b)-1(b) of the
Income Tax Regulations) the items of Acquired Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code and the Income Tax
Regulations thereunder.
Our opinion is based upon the Code, the applicable Treasury
Regulations promulgated thereunder, the present position of the Internal
Revenue Service as set forth in published revenue rulings and revenue
procedures, present administrative positions of the Internal Revenue Service,
and existing judicial decisions, all of which are subject to change either
prospectively or retroactively. We do not undertake to make any continuing
analysis of the facts or relevant law following the date of this letter.
Our opinion is conditioned upon the performance by Acquiring Fund
and Acquired Fund of their undertakings in the Plan and the Representation
Letter.
This opinion is being rendered to Acquiring Fund and Acquired
Fund and may be relied upon only by such funds and the stockholders of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: /S/ WILLIAM P. ZIMMERMAN
William P. Zimmerman, a Partner
