SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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(section)240-14a-12
Franklin Tax-Advantaged U.S. Government Securities Fund
(Name of Registrant as Specified In its Charter)
Franklin Tax-Advantaged U.S. Government Securities Fund
(Name of Person(s) Filing Proxy Statement)
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Franklin Templeton Group
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
415/312-3000
FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
FRANKLIN TAX-ADVANTAGED U. S. GOVERNMENT SECURITIES FUND
A LETTER FROM THE MANAGING GENERAL PARTNERS
Dear Partner:
Enclosed is a notice and proxy statement from the Boards of Managing General
Partners (each referred to as the "BOARD") of the FRANKLIN TAX-ADVANTAGED HIGH
YIELD SECURITIES FUND, the FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND, and
the FRANKLIN TAX-ADVANTAGED U. S. GOVERNMENT SECURITIES FUND (each of which is
referred to in this proxy statement as the "FUND"), California limited
partnerships, calling a special meeting of each Fund to be held on April 18,
1997 (the "MEETING"). The proxy statement includes explanatory notes (in
italics) that provide you with a simpler and more concise explanation of certain
issues. While much of the information in the proxy statement is technical and is
required by the various regulations that govern the Fund, we hope that the use
of this format will be helpful to you.
The purpose of the Meeting is to consider a proposal that relates to your
ownership of shares in the Fund. On January 14, 1997, the Board of each Fund
approved a Plan of Dissolution and Complete Liquidation (the "PLAN") for the
Fund, and recommended the adoption of the Plan by the Fund. The Plan, as more
fully described in the attached proxy statement, was approved by the Board in
order to adjust to changes in U.S. tax laws which are anticipated to take effect
as to the Fund at the end of 1997.
The Plan sets forth a series of steps to liquidate the Fund and distribute the
assets to you, the Fund's owners (the "PARTNERS"). For Partners outside the
U.S., the Plan provides that Chase Bank and Trust Company (C. & I.) Limited, as
your Liquidating Trustee, will receive and place your proceeds as provided in
the Plan. An offshore investment vehicle will be available for the reinvestment
of your liquidation proceeds under the Plan. This proxy statement describes the
Plan, the reasons for the Plan, the effect on each Partner of the approval of
the Plan, and the procedures which will be followed to implement the Plan and
complete the distribution of assets under the Plan.
Please read the enclosed proxy statement carefully. It discusses this proposal
in greater detail, and explains the reasons why your Managing General Partners
recommend a vote FOR the proposal. The Fund is using Shareholder Communications
Corporation ("SCC"), a professional proxy solicitation firm, to assist Partners
in the voting process. As the date of the meeting approaches, if you haven't
already voted, you may receive a telephone call from SCC reminding you to
exercise your right to vote.
The Board asks that you take a moment to sign and return the proxy card in the
enclosed envelope on which the postage has been prepaid if mailed in the U.S. or
from some foreign countries. Your prompt attention in this matter benefits all
Partners. The vote of each Partner is important to the Fund. On behalf of the
Board, I thank you. I am confident you will give to these issues as you read the
proxy statement and execute your proxy card.
Sincerely,
/s/Charles B. Johnson
for the Managing General Partners
Special Note: If you hold partnership interests in more than one Partners Fund,
or through more than one account, you will receive a separate proxy card for
each. Please be sure to sign and return each proxy card regardless of how many
you receive.
TABLE OF CONTENTS
Notice of Special Meeting of Partners
The Proxy Statement.......................................... 1
Proposal - To approve or disapprove a Plan of Dissolution
and Complete Liquidation to distribute the assets of the
Fund and liquidate its business............................. 3
Other Information............................................ 8
Exhibit A - Plan of Dissolution and Complete Liquidation.... 10
Exhibit B - Liquidating Trust Agreement..................... 13
Exhibit C - Partner Alternatives............................ 18
IMPORTANT INFORMATION FOR PARTNERS OF
THE FRANKLIN PARTNERS FUNDS(R)
FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
This package includes a proxy statement, including exhibits, and your proxy card
for a partners' meeting of each of the three Partners Funds listed above. The
meetings have been called for April 18, 1997. The proxy card serves as your
ballot, allowing you to vote on certain matters affecting your Fund. Please fill
out and sign the proxy card, and return it in the enclosed envelope on which the
postage has been prepaid if mailed in the U.S. or from some foreign countries.
The persons named to cast your votes at the meeting will do so as you instruct
on the card. If you simply sign and return the proxy card, your votes will be
cast as described under "What are Partners being asked to vote on?"
By completing and signing the proxy card, and mailing it to your Fund, you
reduce the possibility that the Fund will need to spend money to conduct
additional or follow-up solicitations of Partners, which can be time-consuming
and expensive for the Fund.
The Fund is requesting your vote on just one specific matter, relating to the
liquidation of the Fund, which is recommended for the reasons described in the
proxy statement.
* * *
Each of the three funds listed above (the "PARTNERS FUNDS") is organized as a
California limited partnership under partnership agreements which are identical
in all material respects. The same form of a Plan of Dissolution and Complete
Liquidation, and a Liquidating Trust Agreement are being submitted to the
Partners of each Partners Fund. UNLESS SPECIFICALLY NOTED, DESCRIPTIONS OF THE
PROPOSALS AND THE FORMS OF DOCUMENTS SET FORTH IN THIS PROXY STATEMENT APPLY
SEPARATELY, BUT IDENTICALLY, TO EACH FUND.
THE NOTICE BELOW IS THE FORMAL ANNOUNCEMENT OF A SPECIAL MEETING OF THE
PARTNERS, AND SETS THE TIME AND LOCATION OF THE MEETING. IT ALSO SPECIFIES THE
BUSINESS TO BE PRESENTED TO THE PARTNERS AT THE MEETING.
FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
FRANKLIN TAX-ADVANTAGED U. S. GOVERNMENT SECURITIES FUND
NOTICE OF A SPECIAL MEETING OF PARTNERS TO BE HELD APRIL 18, 1997
To the Partners of Franklin Tax-Advantaged High Yield Securities Fund, Franklin
Tax-Advantaged International Bond Fund and Franklin Tax-Advantaged U.S.
Government Securities Fund:
Notice is hereby given that a special meeting (the "MEETING") of Partners (the
"PARTNERS") of each of the Franklin Tax-Advantaged funds listed above (each
referred to as the "FUND") will be held at the offices of the Fund, 777 Mariners
Island Blvd., San Mateo, California 94404, on April 18, 1997, at 1:00 p.m.
Pacific time for the following purposes:
1. To approve or disapprove the adoption of a Plan of Dissolution and
Complete Liquidation (the "PLAN") for the Fund, all as set forth in this
proxy statement.
2. To consider and act upon any other business (none being known to the
Board as of the date of this Notice) which may legally come before the
Meeting or any adjournment thereof.
Pursuant to the Fund's Agreement of Limited Partnership, the Board of Managing
General Partners has fixed the close of business on February 18, 1997 as the
record date for the determination of Partners entitled to notice of and to vote
at the Meeting. Partners of record at that time will be entitled to vote at the
Meeting or any adjournment thereof.
By Order of the Board of Managing General Partners
DEBORAH R. GATZEK
Secretary
San Mateo, California
Dated: March 5, 1997
All Partners are cordially invited to attend the Meeting in person. If you do
not expect to attend the Meeting, please indicate your voting instructions on
the proxy card, which is included with these materials. Please date and sign it,
and return it in the envelope provided, which is addressed for your convenience
and needs no postage if mailed in the United States ("U.S.") or from some
foreign countries. In order to avoid the additional expense to the Fund of
further solicitation, please mail in your executed proxy promptly.
THIS PROXY STATEMENT EXPLAINS THE BUSINESS WHICH IS EXPECTED TO BE CONSIDERED AT
THE MEETING OF THE PARTNERS. IT DESCRIBES THE PURPOSE OF THE PROPOSAL AND THE
REASONS FOR THE BOARD'S RECOMMENDATION. IT IS DESIGNED TO FURNISH PARTNERS WITH
INFORMATION NECESSARY TO VOTE ON THE PROPOSAL.
FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
("HIGH YIELD FUND")
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
("INTERNATIONAL BOND FUND")
FRANKLIN TAX-ADVANTAGED U. S. GOVERNMENT SECURITIES FUND
("GOVERNMENT SECURITIES FUND")
777 MARINERS ISLAND BLVD.
P.O. BOX 7777
SAN MATEO, CA 94403-7777
(415) 312-3000
PROXY STATEMENT
SPECIAL MEETING OF PARTNERS
TO BE HELD APRIL 18, 1997
o WHO IS ASKING FOR MY VOTE?
The Managing General Partners of the Partners Funds listed above (together or
separately referred to hereafter as the "FUND" in this proxy statement) are
responsible for overseeing the business of the Fund. They are asking you to vote
on a proposal to liquidate the Fund and distribute its assets to you. The formal
vote will be taken at a Special Meeting of Partners to be held at the offices of
the Fund at 777 Mariners Island Blvd., San Mateo, California 94404 on April 18,
1997 at 1:00 p.m. Pacific time (the "MEETING") and at any or all adjournments
thereof. It is expected that this proxy statement will be mailed to Partners on
or about March 5, 1997.
o HOW DO I CAST MY VOTE?
You may vote in person at the Meeting, or by returning the enclosed proxy card
in advance of the Meeting. You may revoke your previously granted proxy at any
time before it is voted (1) by delivering a written notice to the Fund expressly
revoking your proxy, (2) by signing and forwarding to the Fund a later-dated
proxy, or (3) by attending the Meeting and casting your vote in person. If you
have more than one account in the Fund, you will receive a separate proxy for
each account, and you should complete and return each proxy you receive.
The Fund requests that broker-dealer firms, custodians, nominees and fiduciaries
forward proxy material to the beneficial owners of the shares held of record for
such persons. The Fund will reimburse such broker-dealer firms, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with such proxy solicitation. The cost of soliciting these proxies will be borne
by the Fund. In addition to solicitations by mail, some of the officers and
employees of the Fund, the Fund's investment adviser, Franklin Advisers, Inc.,
and its affiliates, without any extra compensation, may conduct additional
solicitations by telephone, telegraph or personal interviews. In addition, the
investment adviser may bear costs of, or pay fees to, its affiliates or others
in connection with delivery of this soliciting material to certain Partners
located outside the United States ("U.S."). The Fund has engaged Shareholder
Communications Corporation to solicit proxies from brokers, banks, other
institutional holders and individual shareholders for an approximate fee,
including out-of-pocket expenses, ranging between $5,918 and $10,440 for the
High Yield Fund, $4,460 and $7,895 for the International Bond Fund, and $19,239
and $33,945 for the Government Securities Fund.
o HOW ARE PROXIES TO BE VOTED?
The proxyholders will vote all proxies received in accordance with the
directions on each proxy. It is anticipated that, absent contrary instructions,
the enclosed proxy will be voted FOR the approval of the Plan of Dissolution and
Complete Liquidation. Proxy holders may also vote on such other business (none
is known at this date) as may legally come before the Meeting.
Under relevant state law and the Fund's charter documents, abstentions and
broker non-votes will be counted to determine whether a quorum is present at the
Meeting, but will not be counted for purposes of determining whether matters to
be voted upon at the Meeting have been approved.
Approval as to each Fund of Proposal 1 in this proxy statement requires the vote
of a majority of the outstanding Shares of each Fund. If Partners holding less
than a majority of the Shares of the Fund vote for the Plan of Dissolution and
Complete Liquidation, it will not be approved. The Board will then determine
what action, if any, to recommend to the Partners.
o WHO IS ELIGIBLE TO VOTE?
Only Partners of record at the close of business on February 18, 1997, are
entitled to vote at the Meeting or any adjournment thereof. On that date, the
number of partnership interests ("SHARES") were:
FUND SHARES
High Yield Fund.................... 40,565,425.081
International Bond Fund............ 2,599,755.282
Government Securities Fund......... 30,329,477.188
As of February 18, 1997, the principal shareholder of the High Yield Fund and
the International Bond Fund, beneficial or of record, was First Commercial Bank,
30 Chung King South Rd., SEC Taipai, Taiwan who owned 203,228.313 Shares or
7.82% of the International Bond Fund and 8,551,400.626 Shares or 21.08% of the
High Yield Fund.
To the best knowledge of the Fund, no other person holds beneficially or of
record more than 5% of the outstanding Shares of the Fund.
PROPOSAL 1: TO APPROVE OR DISAPPROVE A PLAN OF DISSOLUTION AND COMPLETE
LIQUIDATION FOR THE FUND (INCLUDING APPROVAL OF THE ACTIONS REQUIRED TO
IMPLEMENT THE PLAN AND EFFECT ITS PURPOSE)
O WHAT IS THE PURPOSE OF THIS PROPOSAL?
SUMMARY
Due to certain changes in U.S. tax laws, the Board recommends that Partners
approve the liquidation of the Fund, and the distribution of the proceeds of the
liquidation to the Partners. Partners who are U.S. citizens, or who are
otherwise subject to U.S. taxation ("U.S. PARTNERS") may exchange their Shares
into other Franklin Templeton Funds, however U.S. Partners who hold Shares at
the effective date of the liquidation will be paid the cash value of their
Shares.
The interests of all other Partners will be delivered, unless subject to some
restriction, to a bank trustee outside the U.S. (the "LIQUIDATING TRUSTEE").
Absent other instructions from a Partner, the Liquidating Trustee will deliver
non-U.S. investors' assets to a pooled investment vehicle outside the U.S. which
will be selected in accordance with the plan of liquidation, though each Partner
may elect to be paid the cash value of that Partner's assets held by the
Liquidating Trustee. The pooled investment vehicles will have investment and tax
characteristics which are similar to the Funds.
The Fund is a limited partnership organized under California law. As a
partnership, the Fund is not subject to U.S. federal income tax, and its income
is attributed directly to Partners. While partners of a partnership are subject
to income taxation on such income, under U.S. income tax laws as presently in
effect, a Partner who is not a citizen or legal resident of the U.S. and who
does not conduct a trade or business in the U.S. (a "NON-U.S. INVESTOR")
generally is not subject to U.S. federal income taxation or withholding
requirements. Federal tax legislation which takes effect as to the Fund after
1997 subjects publicly traded partnerships, such as the Fund, to taxation as a
corporation. To be relieved of taxation at the corporate level, the Fund would
have to qualify as a traditional U.S. mutual fund. Dividends paid by the Fund
would then be subject to withholding. As a result, the income received by
Non-U.S. Investors will be affected, for the first time, by U.S.
income taxation.
The Managing General Partners of the Fund believe that this result is
inconsistent with the purpose of the Fund and the intentions of the Partners.
They have therefore considered what steps might be taken by the Fund to avoid
these unintended results. The Board has concluded that liquidation of the Fund,
and transfer out of the U.S. of assets owned by Non-U.S. Investors, would
provide the fairest result for the Non-U.S. Investors. U.S. Partners, whose tax
situation is not affected by this change in the tax laws, may exchange their
Shares for shares of another Franklin Templeton Fund. While Non-U.S. Partners
also have the right to exchange their Shares into another Franklin Templeton
Fund, management of the Fund believes that an exchange into a fund with U.S. tax
consequences is inconsistent with the nature of the investment choice made by
Non-U.S. Partners who selected a fund organized as a partnership so that it
would be free of such effects. Nevertheless, investors should consider any other
investment factors which they deem to be significant to them.
To implement its decision, the Board has approved a Plan of Dissolution and
Complete Liquidation (the "PLAN"). This Plan will distribute the assets of the
Fund to the Partners and conclude the business of the Fund. The Plan seeks to
safeguard the assets of each Partner, and to minimize the disruption of the
investment plans of each Partner, by permitting the Partner to see to the
reinvestment of such assets with a minimum of delay and expense.
o WHAT HAPPENS IF THE PROPOSAL IS APPROVED?
SUMMARY
If approved by the Partners, the Plan will authorize the Board to liquidate the
Fund. This will be accomplished by delivering cash or securities which represent
the Partners' proportionate share of the assets of the Fund. Following the
distribution of all the assets, completion of the business of the Fund, and the
discharge of all financial obligations of the Fund, the Managing General
Partners will dissolve the Fund.
The value of a U.S. Partner's account will be sent to the Partner by the Fund
promptly after the effective date set under the Plan. The assets of Non-U.S.
Investors will be delivered on that date to a Liquidating Trustee outside of the
U.S. appointed to act on behalf of, and as agent for, the Non-U.S. Investors.
Except as directed by a specific Non-U.S. Investor, the Liquidating Trustee,
acting on behalf of Non-U.S. Investors ("NON-U.S. PARTNERS"), will cause all
assets delivered to it to be placed in a pooled investment vehicle selected in
accordance with the Plan, with very similar investment and tax characteristics
as the Funds, and in accordance with the recommendation of an independent
investment adviser appointed under the Plan.
If approved by the Partners, the Plan will authorize the Board to execute and
implement the liquidation of the Fund. It is presently expected that the actual
liquidation of the Fund (the "LIQUIDATION DATE") will occur approximately 60
days after the Partners approve the Plan. In the period between approval of the
plan and the actual distribution of assets from the Fund, the Board will
finalize the arrangements to close up the Fund. Provision will be made to
appoint the Liquidating Trustee and other agents required to safely conduct the
liquidation, and the Fund and the Liquidating Trustee will identify the cash and
other assets to be delivered to Partners.
The actual liquidation on the Liquidation Date will be accomplished by delivery
of cash or securities which represent the Partners' proportionate share of the
assets of the Fund. Following the distribution of all the assets, completion of
the business of the Fund, and the discharge of all financial obligations of the
Fund, the Managing General Partners will dissolve the Fund. Cash representing
the interest of a U.S. Partner will be sent to the Partner by the Fund promptly
after the effective date of the liquidation set under the Plan. The assets of
Non-U.S. Partners will be delivered on that date to a Liquidating Trustee
outside of the U.S. appointed to act on behalf of, and as agent for, the
Non-U.S. Partners.
The Plan authorizes the Board to appoint the trustee to act as an agent of each
Non-U.S. Partner to receive, protect, and transmit the assets of the Non-U.S.
Partners. Under the terms of the Plan, the Board will execute, on behalf of the
Fund and its Partners, a Liquidating Trust Agreement (the "TRUST AGREEMENT")
appointing a qualified bank outside the U.S. to serve as the Liquidating
Trustee. The Trust Agreement also authorizes the Liquidating Trustee to appoint
an investment counsel to advise the Liquidating Trustee with respect to the
proper disposition, from an investment perspective of the assets of Non-U.S.
Partners which are delivered to the trustee, and to recommend pooled investment
vehicles with similar investment and tax characteristics.
Upon approval of the Plan, the Board proposes to execute the Trust Agreement
with The Chase Bank and Trust Company (C. & I.) Limited, a bank organized and
existing under the laws of the State of New York. The Liquidating Trustee will
hold such assets outside the U.S. in the English Channel Island of Jersey. The
Liquidating Trustee has indicated its intention to act under the Trust Agreement
to appoint as its independent investment adviser the firm of Broker Financial
Services PLC (the "INDEPENDENT ADVISER") an adviser organized and existing under
the laws of the United Kingdom.
O WHAT WILL I RECEIVE WHEN THE FUND IS LIQUIDATED?
SUMMARY
The Plan provides that each U.S. Partner holding shares of the Fund on the
Liquidation Date will be paid the value of the shares in cash by the Fund. Other
shareholders (Non-U.S. Partners) who do not elect to receive cash will have the
value of their account placed with a pooled investment vehicle with similar
investment and tax characteristics. A description of the procedures for, and
effects of, the liquidation is included in a "Question and Answer" format in
Exhibit C to this proxy statement.
U.S. Partners
Due to limitations under U.S. securities laws, U.S. Partners generally are not
eligible to acquire shares of pooled investment vehicles which operate outside
the U.S. and are available to non-U.S. investors. In addition, such investments
would not offer to U.S. Partners any tax benefit under U.S. tax laws.
Thus, a Partner subject to U.S. tax and securities laws should consider whether
an exchange into another Franklin Templeton Fund in the U.S. would serve to
advance the investment goals of the Partner. If so, an exchange can be arranged
prior to the Liquidation Date. The Board has arranged with the Boards of
Directors/Trustees of the other Franklin Templeton Funds to permit net asset
value exchanges from the Fund into such other funds so that Partners will not
incur any sales charge or exchange fee for the transfer of the Partner's assets
from the Fund.
Non-U.S. Partners
The terms of the Plan and the Trust Agreement provide that, in the absence of
instructions to the contrary from a Non-U.S. Partner, the Liquidating Trustee
will deliver the assets to a suitable pooled investment vehicle with objectives,
policies, and other relevant factors similar to those of the Fund. The
Liquidating Trustee will obtain advice from the Independent Adviser as to the
appropriate investment vehicle to accomplish the goal set by the Plan.
Upon receipt of the advice of the Independent Adviser, the Liquidating Trustee
will notify each affected Non-U.S. Partner of the proposed disposition of the
assets of those Partners. Except as directed by a specific Non-U.S. Partner, the
Liquidating Trustee will cause assets delivered to it to be placed in the pooled
investment vehicle selected in accordance with the Plan and the recommendation
of the Independent Adviser.
The Fund may seek to minimize the cost to the Fund of selling portfolio
securities to raise cash for delivery to the Liquidating Trustee. To this end,
the Liquidating Trustee will determine whether, and to what extent, a pooled
investment vehicle will accept "in kind" purchases. An "in kind" purchase is one
in which the Liquidating Trustee would acquire shares of another investment
vehicle in exchange for securities instead of cash. If a pooled investment
selected by the Independent Adviser has an investment objective and portfolio
similar to the Fund, it may save on the cost of acquiring portfolio securities
by accepting securities it would otherwise acquire. If an "in kind" purchase is
possible, the Fund will deliver to the Liquidating Trustee portfolio securities
with an aggregate value equal to the value of the assets allocable to the
Partners participating in such investment. The Liquidating Trustee would then
deliver those securities to the pooled investment vehicle in payment for the
shares of that vehicle being acquired by the Non-U.S.
Partners owning such assets.
Restricted Accounts
Assets held in certain shareholder accounts in the Fund which are restricted by
controls under applicable laws, orders, or contractual obligations may not be
permitted to be transferred out of the U.S. Assets held in such accounts will be
treated in accordance with the laws applicable to the account. In order to
assure that the account benefits from investment supervision pending its
disposition, the Fund will deliver such assets by exchange to a U.S. money
market fund. No fee or charges will be assessed in connection with that
exchange, but the investment will be subject to the normal expenses connected
with the operation of the money market fund, and will remain subject to any
applicable U.S. tax laws. See Exhibit C for additional details concerning the
treatment of restricted accounts.
O WHAT IS THE TAX CONSEQUENCE OF THE LIQUIDATION?
SUMMARY
EACH PARTNER SHOULD CONSULT A TAX ADVISOR FOR SPECIFIC ADVICE RELATING TO THE
EFFECT OF THE TRANSACTION ON THAT PARTNER.
The liquidation of the Fund, and payment to a U.S. Partner of the cash value of
Shares, is a taxable event which may result in gain or loss to the Partner under
U.S. tax laws. The disposition of Shares in the Fund by a Non-U.S. Partner as
part of the Plan, though not subject to taxation under U.S. tax laws, may
constitute a disposition of Shares of the Fund for tax purposes under other tax
laws to which the Non-U.S. Partner is subject. The Fund has obtained a ruling
from the U.S. Internal Revenue Service concerning the treatment of the
transaction with respect to certain excise tax provisions under U.S. tax laws.
Each Partner may wish to obtain independent advice regarding the tax
consequences to the Partner under applicable tax laws of disposing of the Shares
of the Fund based on the Partner's own particular circumstances.
On a recent day, the International Bond Fund had net unrealized appreciation of
about $872,000, the High Yield Fund had net unrealized appreciation of about
$19,000,000 and the Government Securities Fund had net unrealized depreciation
of about $4,000,000. However, because the value of each Fund's portfolio
securities fluctuates, we are unable to predict the future amount of
appreciation or depreciation to be realized by each Fund, or the resultant gain
or loss to be distributed to Partners, on the date of liquidation.
O WHEN WILL I RECEIVE INFORMATION ABOUT THE POOLED INVESTMENT?
SUMMARY
THE PLAN PROVIDES THAT EACH NON-U.S. PARTNER WHO DOES NOT ELECT TO RECEIVE CASH
WILL RECEIVE SHARES OF A POOLED INVESTMENT ENTITY WITH VERY SIMILAR INVESTMENT
AND TAX CHARACTERISTICS ON THE LIQUIDATION DATE. INFORMATION ABOUT THAT ENTITY
WILL BE SENT TO EACH AFFECTED NON-U.S. PARTNER WHEN A DETERMINATION HAS BEEN
MADE BY THE LIQUIDATING TRUSTEE AND THE INDEPENDENT ADVISER.
Upon approval of the Plan by the Partners, the Board will appoint the
Liquidating Trustee, which will then retain the Independent Adviser. As soon as
possible, the Liquidating Trustee will make a report to Non-U.S. Partners on the
Independent Adviser's decision. The Board has authorized the Liquidating Trustee
to consider, among other investment choices, investment vehicles advised by
affiliates of the Fund's adviser. These include a series of the Templeton Global
Strategy Funds, an investment vehicle organized as a "SICAV" under the laws of
the Grand-Duchy of Luxembourg, which has an investment objective similar to the
Fund and uses investment techniques which are also comparable.
O WHY DID THE BOARD APPROVE THE PROPOSAL?
SUMMARY
THE PLAN WILL LEAD TO LIQUIDATION OF THE FUND. THIS WAS DETERMINED BY THE BOARD
TO BE THE MOST APPROPRIATE WAY TO ASSURE THAT THE ORIGINAL PURPOSES OF THE
PARTNERS IN INVESTING IN THE FUND WERE ACCOMPLISHED.
Board Consideration
In approving the Plan, the Managing General Partners determined, in the exercise
of their business judgment and in light of their fiduciary duties under relevant
state law and the Investment Company Act of 1940 (the "1940 ACT") that, based
upon the material considered by them, the consequences of the changes in U.S.
tax laws could be significant to the Fund and its Partners, and the Plan is
reasonably likely to benefit the Fund and its Partners. The Managing General
Partners considered various factors relevant to the situation, including: the
nature of the changes in U.S. tax laws, the original investment intent of
Non-U.S. Partners who invested in the Fund, and other factors which make
implementation of the Plan necessary and appropriate. The Board also considered
the way in which the Plan would address those circumstances, including the
nature and potential amount of the expenditures; the relationship of such
expenditures to the overall benefits to the Partners; the nature of the
anticipated benefits to Partners; the merits of possible alternative plans; and
the history of the Fund. The Board of Managing General Partners also placed
importance on the fact that the Liquidating Trustee and the Independent Adviser
would be able to safeguard the assets of the Partners and act in accordance with
instructions from Partners.
OTHER MATTERS
The Board does not intend to bring any matters before the Meeting other than
Proposal 1 and is not aware of any other matter to be brought before the Meeting
by others. If any other matters do legally come before the Meeting, the
proxyholders will use their best judgment in voting on such matters.
In the event that sufficient votes in favor of the proposal set forth in the
Notice of the Meeting are not received by the date of the Meeting, the proxy
holders may propose one or more adjournments of the Meeting for a period or
periods of not more than 45 days in the aggregate. This will permit further
solicitation of proxies, even though a quorum is present. Any adjournment will
require the affirmative vote of a majority of the votes cast on the question, in
person or by proxy, at the session of the Meeting to be adjourned. Proxies
voting in opposition to Proposal 1 will be voted against such an adjournment.
The costs of any such additional solicitation and of any adjourned session are
paid by the Fund.
OTHER INFORMATION
The Manager
Franklin Advisers, Inc. ("ADVISERS"), whose principal address is 777 Mariners
Island Blvd., San Mateo, California 94404, has served as the investment manager
of the International Bond Fund under a management agreement dated June 9, 1990,
and of the Government Securities Fund and the High Yield Fund under separate
management agreements dated May 4, 1987, (the "MANAGEMENT AGREEMENTS"). The
Management Agreements were last reviewed and approved for continuance by the
Managing General Partners, including a majority of the Managing General Partners
who are not interested persons (as defined in the 1940 Act), at a meeting called
for such purpose on February 18, 1997. Advisers is registered as an investment
adviser under the Investment Advisers Act of 1940 and is a wholly-owned
subsidiary of Franklin Resources, Inc. ("RESOURCES"), a publicly owned holding
company, whose principal address is 777 Mariners Island Blvd., San Mateo,
California 94404. Advisers and its affiliates act as investment manager or
administrator to 62 U.S. registered investment companies (171 separate series)
with aggregate assets of over $179.6 billion.
Charles B. Johnson is Chairman of the Board of Advisers and Rupert H. Johnson,
Jr. is President and Director of Advisers. Charles B. Johnson and Rupert H.
Johnson, Jr. beneficially own approximately 19% and 15%, respectively, of
Resources' outstanding voting securities, whose shares are traded on the New
York Stock Exchange. The business address of each officer and director of
Advisers is the office of Advisers stated above.
The Subadvisor
Under an agreement with Advisers, Templeton Investment Counsel, Inc. ("TICI"),
Broward Financial Centre, Suite 2100, Fort Lauderdale, Florida 33394, acts as
subadvisor to the International Bond Fund. TICI is an indirect wholly-owned
subsidiary of Resources.
The Administrator
Under an agreement with Advisers, Franklin Templeton Services, Inc. ("FT
SERVICES"), whose principal address is also 777 Mariners Island Blvd., San
Mateo, California 94404, provides certain administrative services and facilities
for the Funds. FT Services is a wholly-owned subsidiary of Resources.
The Principal Underwriter
Franklin/Templeton Distributors, Inc. ("FTDI"), whose principal address is also
777 Mariners Island Blvd., San Mateo, California 94404, is the Fund's principal
underwriter and a wholly-owned subsidiary of Resources. FTDI is a member of the
National Association of Securities Dealers, Inc. and as such, may be able to
obtain certain fees when the Fund tenders portfolio securities pursuant to a
tender-offer solicitation. As a means of recapturing brokerage for the benefit
of the Fund, any portfolio security tendered by the Fund will be tendered
through FTDI if it is legally permissible to do so. In turn, the next management
fee payments to Advisers under the Management Agreements will be reduced by the
amount of any fees received by FTDI in cash, less any costs and expenses
incurred in connection therewith.
Partner Proposals
The Meeting is a special meeting of Partners. The Fund is not required to, nor
does it intend to, hold regular annual meetings of its Partners. If the proposal
to liquidate the Fund is not approved or implemented, any Partner who wishes to
submit a proposal for consideration at the next meeting of Partners, when and if
such a meeting is called, should submit such proposal promptly to the Fund.
Reports to Partners and Financial Statements
The Annual Report to Partners of the Fund, including financial statements of the
Fund for the fiscal year ended December 31, 1996 will be mailed to all Partners.
PARTNERS MAY OBTAIN A COPY OF THE ANNUAL REPORT FREE OF CHARGE BY WRITING THE
FUND AT THE ADDRESS ABOVE, OR BY CALLING 1-800/DIAL BEN.
Respectfully Submitted,
DEBORAH R. GATZEK
Secretary
Dated: March 5, 1997
San Mateo, California
PARTNERS WHO ARE UNABLE TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO FILL
IN, DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED PREPAID
ENVELOPE.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE AS SUCH. WHERE SHARES ARE HELD JOINTLY, ALL SIGNATURES ARE
REQUIRED.
EXHIBIT A
The same form of a PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION is being
submitted to the Partners of each Partners Fund. EXCEPT AS TO FUND NAME AND THE
DATE OF THE PARTNERSHIP AGREEMENT, THE FORM OF THE DOCUMENT SET FORTH BELOW IS
IDENTICAL FOR EACH FUND. The liquidating trust agreement referred to in this
Plan appears as Exhibit B to this proxy statement.
FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
PLAN OF DISSOLUTION AND COMPLETE LIQUIDATION
l. Upon the adoption of this Plan of Dissolution and Complete Liquidation
(hereinafter, the "Plan"), Franklin Tax-Advantaged U.S. Government Securities
Fund, a California limited partnership (hereinafter, the "Partnership"), shall
suspend sale of its shares and shall proceed to wind up its affairs. On the
Liquidation Date (as hereinafter defined), the Partnership will cease the active
trading of its investment portfolio and will distribute in complete liquidation
all of its assets as herein provided, less a reserve deemed necessary by the
Managing General Partners to be set aside for payment and discharge of all of
the Partnership's debts and liabilities and the estimated expenses of the
Partnership arising hereunder (hereinafter, the "Reserve"). The Liquidation Date
shall mean that date on or about , _______________, 1997, as determined by the
Managing General Partners. Any reference to Partners herein shall mean those
Partners of record of the Partnership on the Liquidation Date. Terms not defined
herein shall have the same meaning as used in the Franklin Tax-Advantaged U.S.
Government Securities Fund Limited Partnership Agreement, dated May 1, 1987, as
amended (hereinafter, the "Partnership Agreement").
2. The Managing General Partners of the Partnership are authorized and
directed to apply the assets of the Partnership in complete liquidation and, in
furtherance thereof, shall:
(a) As soon as practicable following the adoption of this Plan, and prior
to the Liquidation Date, enter into an agreement of trust to be known as the
"Franklin Tax-Advantaged U.S. Government Securities Fund Liquidating Trust
Agreement" (hereinafter, the "Liquidating Trust Agreement") with Chase Bank &
Trust Company (C. & I.) Limited, a corporation organized under the laws of the
State of New York, (hereinafter called the "Liquidating Trustee"), in the form
attached hereto as Exhibit A, the trust thereby established to be referred to
herein as the "Liquidating Trust." The Liquidating Trust shall be established
for the sole purpose of facilitating the dissolution and complete liquidation of
the Partnership in such a manner as to permit the Partners, other than Partners
who are U.S. citizens, residents, corporations, partnerships, estates or trusts
("Non-U.S. Partners") to receive or apply their interests in the Partnership in
accordance with the designated options or instructions of each Non-U.S. Partner,
as set forth in paragraph 3, below.
(b) To the extent necessary, consummate from time-to-time sales of the
Partnership's assets to effectuate this Plan in the manner herein provided.
(c) On the Liquidation Date, distribute all of the assets of the
Partnership, less the Reserve, to the Partners in complete liquidation of their
respective interests in the Partnership, as follows: (i) cash to all Partners
other than Non-U.S. Partners, and (ii) in-kind to the Non-U.S. Partners by
delivery of the remaining assets of the Partnership, less the Reserve, to the
Liquidating Trustee.
(d) Pay and discharge or make provisions for all of the debts and
liabilities of the Partnership and estimated expenses of the Partnership arising
hereunder in connection with the dissolution and complete liquidation of the
Partnership.
3. Promptly following the establishment of the Liquidating Trust, the
Liquidating Trustee is directed under the terms of the Liquidating Trust to
prepare and forward to each Non-U.S. Partner, by mail or other appropriate
delivery service, a letter stating that each Non-U.S. Partner has approximately
60 days to deliver to the Liquidating Trustee such Non-U.S. Partner's
designation of one of the following options for receiving his, her or its
proportionate share of the Liquidating Trust's assets:
(I) interests in or shares of a pooled investment entity acquired by an
in-kind purchase with a net asset value equivalent to the value of the Non-U.S.
Partner's interest in the Liquidating Trust; or
(II) all cash.
A Non-U.S. Partner who fails to timely designate his, her or its option to the
Liquidating Trustee in the manner specified in the Liquidating Trustee's letter
will be deemed to have selected the option of receiving interests in or shares
of a pooled investment entity through an in-kind purchase thereof (option I).
4. The Partnership Agreement shall be deemed to be amended to the extent
necessary to permit the dissolution and complete liquidation of the Partnership
and the distribution of its assets to its Partners to proceed in the manner set
forth in this Plan.
5. The Managing General Partners, acting by a majority vote or consent, are
authorized, empowered and directed to appoint a successor Liquidating Trustee
upon the liquidation, dissolution, termination, resignation, or inability to act
of the Liquidating Trustee.
6. The Managing General Partners shall timely file, or cause to be filed, any
U.S. federal, state or local income tax return or other information returns and
reports that are required to be filed.
7. The Managing General Partners of the Partnership are authorized,
empowered, and directed to execute and file all such other documents and take
such other actions which they deem necessary or advisable to carry out the
purposes and intentions of the Plan and to comply with all applicable laws and
regulations in connection therewith, including without limitations the
termination of any registrations of the Partnership under federal or state
securities laws.
8. This Plan and all liquidating distributions to Partners incident thereto
shall be completed by no later than December 31, 1997.
9. Upon the completion of the distribution of the Partnership's assets and
the termination of the Partnership, the Managing General Partners shall cause
the Certificate of Limited Partnership of the Partnership to be canceled and
take such other actions as may be necessary to legally terminate the
Partnership.
CERTIFICATE
The undersigned hereby certifies that he/she is a Managing General Partner
of the Franklin Tax-Advantaged U.S. Government Securities Fund, a California
limited partnership; that the foregoing is a full, true and correct copy of the
Plan of Dissolution and Complete Liquidation approved and adopted by the general
and limited Partners of Franklin Tax-Advantaged U.S. Government Securities Fund,
on _______________, 1997, which Plan has not been amended and is in full force
and effect as of the date hereof.
Dated:__________________ _____________________________
signature
EXHIBIT B
The same form of LIQUIDATING TRUST AGREEMENT is being submitted to each Partners
Fund. EXCEPT AS TO FUND NAME, THE FORM OF THE DOCUMENT SET FORTH BELOW IS
IDENTICAL FOR EACH FUND. The schedules to be attached to this agreement upon its
execution (List of Non-U.S. Partners, List of Assets, and Form of Trustee
Letter, as of such date) will be prepared in advance of the liquidation.
FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
LIQUIDATING TRUST AGREEMENT
This FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND LIQUIDATING
TRUST AGREEMENT is made this ______ day of _______________, 1997, by and among
the Franklin Tax-Advantaged U.S. Government Securities Fund, a California
Limited Partnership ("Partnership"), the partners of the Partnership identified
on Schedule "A" attached hereto (the "Non-U.S. Partners"), and the Chase Bank &
Trust Company (C. & I.) Limited, a corporation organized and existing under the
laws of the State of New York, the "Trustee" for the benefit of the Non-U.S.
Partners.
WHEREAS, on _______________, 1997, the partners of record of the
Partnership adopted, at a meeting of partners called for this purpose, a Plan of
Dissolution and Complete Liquidation (the "Plan") pursuant to Section 12.1(f) of
the Partnership's Agreement of Limited Partnership, providing for the
dissolution and distribution in complete liquidation of the assets of the
Partnership; and
WHEREAS, the Plan provides for the establishment of a liquidating trust to
be called "Franklin Tax-Advantaged U.S. Government Securities Fund Liquidating
Trust" (the "Trust") for the purposes of facilitating the complete liquidation
of the Partnership on or about _______________, 1997, (the "Liquidation Date")
in such a manner as to permit all Non-U.S. Partners to dispose of their
interests in the Partnership in a manner chosen by each Non-U.S. Partner; and
WHEREAS, the Partnership on the Liquidation Date desires to transfer to
the Trustee for the benefit of the Non U.S. Partners their pro rata share of the
assets of the Partnership, reduced by the Non U.S. Partners' pro rata share of
any reserve established by the Partnership for liabilities and estimated
expenses, which assets together with such other property that is added by the
Partnership shall be described on Schedule "B" attached hereto (collectively,
the assets described on Schedule "B" are referred to as the "Assets"); and
WHEREAS, the Trustee agrees to hold for the account of each Non-U.S.
Partner and to distribute on the Liquidation Date, or as promptly as possible
thereafter, to each such Non-U.S. Partner pursuant to that Non-U.S. Partner's
designated option his, her or its proportionate share of the assets of the
Trust, subject to the retention of a reasonable reserve as determined in the
sole discretion of the Trustee for the payment of any expenses or liabilities
associated with the administration of this Trust.
NOW, THEREFORE, in consideration of the above premises, and intending to
be legally bound, the Partnership hereby transfers to the Trustee for the
benefit of the Non-U.S. Partners the Assets listed on Schedule "B" attached
hereto, as may be added to from time to time.
It is the intention of the parties that the Trust shall acquire title to
the Assets as liquidating distributions in complete liquidation of the Non-U.S.
Partners' respective interests in the Partnership. The Non-U.S. Partners agree
that, as a matter of practical convenience, the Partnership has transferred such
Assets directly to the Trustee, rather than to the Non-U.S. Partners and then by
them to the Trustee, but that such transfer is not to be considered in substance
or legal effect a direct transfer of the Assets to the Trustee by the
Partnership, but is in substance and legal effect a transfer from the
Partnership to the Non-U.S. Partners and from them to the Trustee.
The Trustee shall hold said Assets and the proceeds thereof, together with
such other property that is added to Schedule "B" and apply the same and the net
income therefrom upon the Trust herein set forth as follows:
1. PURPOSE OF THE TRUST. This Trust is established and the Trustee hereunder
appointed in order to facilitate the dissolution and complete liquidation of the
Partnership in such a manner as to permit Non-U.S. Partners to receive or apply
their interests in the Partnership in accordance with the designated option or
instructions of each Non-U.S. Partner, as contemplated by the Plan. Anything
herein to the contrary notwithstanding, under no circumstances shall the Trust,
or the Trustee acting on behalf of the Trust, have the power to engage in any
trade or business for the Trust, nor in any other activity except as necessary
to complete the orderly distribution of the assets of the Trust.
2. DUTIES OF THE TRUSTEE. The Trustee shall:
(a) Engage a custodian bank (the "Custodian") to hold all rights, title
and interest in and to the assets of the Trust and the income thereon on behalf
of the Trust.
(b) Promptly following the adoption of the Plan, prepare and forward to
each Non-U.S. Partner, by mail or other appropriate delivery service, a Trustee
letter, in the form attached hereto as Schedule "C," stating that each Non-U.S.
Partner has approximately 60 days to deliver to the Trustee or its agent such
Non-U.S. Partner's designation of one of the following options for receiving
his, her or its proportionate share of the Trust's assets:
(i) interests in or shares of a pooled investment entity acquired by an
in-kind purchase with a net asset value equivalent to the Non-U.S. Partner's
interest in the Trust; or
(ii) all cash; or
A Non-U.S. Partner who fails to timely designate his, her or its option to the
Trustee or its agent in the manner specified in the Trustee's letter will be
deemed to have selected the option of receiving shares representing an in-kind
purchase of an interest in a pooled investment entity (option I), which shall be
registered in the name of the respective Non-U.S. Partner.
(c) Promptly following the close of the approximately 60-day period for
Non-U.S. Partners to designate to the Trustee their options for receiving their
proportionate share of the Trust's assets, convey the options designated to the
Partnership so that the Partnership can convert a sufficient amount of
Partnership securities to cash based upon the options designated.
(d) Instruct the Custodian to receive on the Liquidation Date and disburse
as directed by the Trustee the Trust's assets, reduced by any reserve
established by the Trustee for liabilities and estimated expenses, in the manner
directed by the Trustee or an agent designated by the Trustee based upon each
Non-U.S. Partner's designated option.
(e) Pay any expenses or liabilities arising hereunder in connection with
the administration of the Trust out of the assets of the Trust.
(f) Timely file, or cause to be filed, any income tax return or other
information returns and reports that are required to be filed on behalf of the
Trust.
3. POWERS OF THE TRUSTEE. Among the other powers stated or implied herein, in
connection with the administration of this Trust, the Trustee, in its fiduciary
capacity, shall have and exercise the following powers, authority and
discretion:
(a) To retain any funds or other property received as liquidating
distributions from the Partnership and income thereon, to pay any expenses of
the Trust, including its own fees and expenses incurred in connection herewith.
(b) To maintain any cash not available for distribution to Non-U.S.
Partners in demand and time deposits in banks or savings institutions, or in
short-term certificates of deposit.
(c) To keep any cash held in reserve in a bank or banks uninvested for
reasonable periods if deemed advisable.
(d) To receive, hold, maintain, grant, sell, convey, release, assign or
otherwise transfer legal title to any of the Trust's assets.
(e) To register the Trust's assets in the name of a nominee.
(f) To employ an investment counsel, agent, attorney, custodian,
administrator, or accountant if deemed advisable, and to pay out of the assets
of the Trust to such investment counsel, agent, attorney, custodian,
administrator, or accountant reasonable compensation for services rendered.
(g) To compromise, adjust, arbitrate, sue on or defend, or abandon or
otherwise deal with and settle claims in favor of or against this Trust as the
Trustee deems appropriate without the necessity of obtaining court approval.
4. DESIGNATION OF AGENTS. The Trustee may designate one or more officers,
employees, agents or other appointees to conduct the day-to-day affairs of the
Trust.
5. VALUATION OF ASSETS. In carrying out its duties hereunder, the Trustee, or
its agents and designees, shall value the assets of the Trust and any other
property as may be required in accordance with the following procedures:
(a) Assets received by the Trust from the Partnership shall be valued on
the books of the Trust at the current value of such Assets determined by the
Partnership in accordance with the terms of applicable laws and regulations, and
any provisions with respect thereto in the prospectus of the Partnership.
(b) When shares of a security are purchased by the Trustee as agent for a
beneficiary from a pooled investment entity which issues its shares at net asset
value in distribution of the value of the shareholder's interest in the Trust,
the shares purchased shall be valued by the Trustee at the net asset value per
share of such security when issued by the issuer thereof so long as such shares
are issued at a value determined in accordance with the standards for such
valuation and issuance set forth in the prospectus or offering document for such
shares.
(c) When, on behalf of a beneficiary of the Trust, the Trustee delivers
assets derived from the liquidation of the Partnership to an issuer of shares of
a pooled investment vehicle in payment for shares of such entity, then the
assets so delivered shall be valued by the Trustee:
(i) at the value of such assets as delivered by the Partnership to the
Trustee, if the Trustee delivers out such assets on the day they are received
from the Partnership, or
(ii) at a value for such assets computed by the Trustee or its agent in
the same manner and on the same basis as such assets would then be valued by the
Partnership on the valuation date if the Partnership continued to operate at
such date.
(d) Cash and cash items received or distributed by the Trust shall be
recorded on the records of the Trust at their actual monetary value.
(e) All values shall be stated and recorded in U.S. dollars determined in
accordance with applicable accounting standards.
6. TERMINATION OF THE TRUST. This Trust shall terminate upon the earlier of
(i) disbursement to, or for the account of, the Non-U.S. Partners of all of the
Trust's assets in accordance with each Non-U.S. Partner's designated option, or
(ii) December 31, 1997.
7. IRREVOCABLE TRANSFER OF ASSETS. No Asset transferred to this Trust by the
Partnership on behalf of the Non-U.S. Partners shall be transferred back to the
Partnership by the Trust under any circumstances. It is intended that the
transfers to this Trust shall constitute a complete and irrevocable divestment
of the Assets in complete liquidation of the Non-U.S. Partners' respective
interests in the Partnership.
8. ASSIGNMENT OF BENEFICIAL INTEREST IN THE TRUST. No Non-U.S. Partner
shall have any right to withdraw any portion of his, her or its share of the
Trust, or to sell, transfer or otherwise dispose of or in any way encumber his,
her or its interest in the Trust.
9. LIABILITY OF TRUSTEE. The Partnership and the Non-U.S. Partners hereby
release and discharge the Trustee and its successors of and from all liability
for any acts of omission or commission so long as the Trustee acts in good faith
unless such liability arises by virtue of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of its office. Furthermore, the
Trustee shall not be liable for any acts or omissions of any investment counsel,
agent, attorney, custodian, or accountant elected or appointed by or acting for
the Trustee if such investment counsel, agent, attorney, custodian, or
accountant is selected with reasonable care.
10. INDEMNIFICATION OF TRUSTEE. The Trustee shall be indemnified by and
receive reimbursement from the Trust's assets against and from any and all loss,
liability, expense or damage that the Trustee may incur or sustain, in the
exercise and performance of any of the powers and duties of the Trustee under
this Trust, unless such liability arises by virtue of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties of its office.
11. APPOINTMENT OF SUCCESSOR. Pursuant to the Plan, the managing general
partners of the Partnership, acting by a majority vote or consent, shall appoint
a successor Trustee upon the liquidation, dissolution, termination, resignation,
or inability to act of the Trustee. Any such successor Trustee shall execute a
written consent to act as Trustee under the terms of this Trust. Any successor
Trustee shall have all powers of the original Trustee.
12. BONDING. No bond shall be required of the Trustee herein named or any
substitute Trustee appointed in any manner herein provided.
13. GOVERNING LAW. Questions pertaining to the construction and
administration of this Trust shall be determined in accordance with substantive
laws of Jersey.
14. AMENDMENT OF TRUST. This Trust may be amended (i) prior to the
Liquidation Date by the affirmative vote of the partners then holding a majority
of interest in the assets of the Partnership held by all partners, and (ii)
following the Liquidation Date by the affirmative vote of the Non-U.S. Partners
then holding a majority of interest in the assets of the Trust; provided,
however, that the duties, powers, and liabilities of the Trustee shall not be
changed without the Trustee's prior written consent.
15. BINDING EFFECT. This Trust shall be binding upon the respective parties
hereto, their successors, heirs, executors, administrators, and assigns.
16. SEVERABLE PROVISIONS. It is the Non-U.S. Partners' and the
Partnership's intent that this Trust shall constitute a grantor trust within the
meaning of subpart E of the Internal Revenue Code of 1986, as amended. Anything
herein to the contrary notwithstanding, any provision of this Trust which causes
this Trust to fail to so qualify, shall be severed and considered null and void
and the remaining provisions of this Trust shall have full force and effect.
17. COUNTERPARTS. This Agreement may by executed in any number of
counterparts each of which shall be deemed to be an original. All signatures
need not appear on the same copy hereof.
IN WITNESS WHEREOF, the parties hereto have placed their hands and seals the
day and year first above written.
FRANKLIN TAX ADVANTAGED
U.S. GOVERNMENT SECURITIES FUND
Witness:_______________________________ By:_______________________________
The Trustee hereby accepts this Trust:
THE CHASE BANK & TRUST COMPANY (C. & I.) LIMITED
Witness:_______________________________ By:_______________________________
EXHIBIT C
FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
FRANKLIN TAX-ADVANTAGED U. S. GOVERNMENT SECURITIES FUND
PARTNER ALTERNATIVES
SUMMARY
THE PLAN WILL AFFECT PARTNERS LOCATED IN DIFFERENT COUNTRIES, OR WITH DIFFERENT
FORMS OF ACCOUNT, IN DIFFERENT WAYS. THE FOLLOWING INFORMATION HAS BEEN PREPARED
SO THAT EACH PARTNER CAN IDENTIFY THE EFFECT ON THAT PARTNER OF THE APPROVAL OF
THE PLAN. PLEASE REFER TO THE TABLE BELOW TO IDENTIFY THE ALTERNATIVES AFFECTING
YOU. IF YOU HAVE A SPECIFIC QUESTION ABOUT THE AFFECT ON YOUR SHARES OF THE
APPROVAL OF THE PLAN, OR THE ALTERNATIVES AVAILABLE TO YOU IN CONNECTION WITH
THE PLAN, THEN YOU SHOULD CONTACT THE FUND AT 1-800-632-2350, EXTENSION 56410.
COUNTRY OF RESIDENCE FOR YOUR ACCOUNT SEE QUESTION NUMBER:
U.S. Partners................................. 1
Non-U.S. Partners............................. 2
TYPE OF ACCOUNT
Uniform Gifts to Minors Accounts.............. 3
Margin Accounts............................... 4
"Transfer on Death" accounts.................. 5
Pledged or restricted accounts................ 6
Shares of Partners who do not respond before
the liquidation.............................. 7
Question number 1: How will the approval of the Plan affect me as a U.S.
Partner?
Answer: A Partner in the Fund who is a citizen or legal resident of the U.S.,
and who is subject to U.S. federal income tax laws, would not be required to
remove, or benefit from the removal of, assets out of the U.S. for delivery to a
foreign Liquidating Trustee. The full net asset value of Shares held by a U.S.
Partner on the date of Liquidation of the Fund under the Plan will be paid in
cash to the Partner. No further action will be required for you to receive this
payment of the full value of your account.
A U.S. Partner who does not wish to liquidate the Franklin account at this
time may arrange, IN ADVANCE OF THE LIQUIDATION, to have the Shares exchanged
into another Franklin Templeton Fund without the payment of any sales charge or
exchange fee. For further information about this Exchange privilege, please
contact a customer service representative at 1-800-632-2350, extension 56410.
Question number 2: How will the approval of the Plan affect me as a Non-U.S.
Partner?
Answer: A Partner in the Fund who is not a citizen or legal resident of the
U.S., and who is not subject to its tax laws, would benefit from removing
assets from the U.S. by delivery to a foreign Liquidating Trustee.
If the Plan is approved, the full net asset value of Shares held by a
Non-U.S. Partner on the date of liquidation will be delivered to the Liquidating
Trustee, and the Liquidating Trustee will receive the assets as a fiduciary for
the Partner.
The Liquidating Trustee will deliver each Partner's assets in accordance
with the Plan and the instructions of that Partner. The Liquidating Trustee will
seek to identify a pooled investment vehicle similar to the Fund, and will
invest the assets held by it in that vehicle. The Liquidating Trustee will
retain an independent investment adviser to advise it concerning the selection
of the pooled vehicle. The independent adviser will be authorized to consider
any suitable vehicle, including investment vehicles affiliated with the adviser
to the Fund, and the Fund's Adviser will provide information concerning such
affiliated vehicles to the independent adviser. The independent adviser will not
be affiliated with the Fund or the Adviser, and will not be obligated to select
any particular entity.
Except as otherwise instructed by a Partner, assets held by the Liquidating
Trustee will be delivered to the selected vehicle for registration in the name
of each Partner. A Partner may direct that the Trustee pay the value of the
Partner's account to the Partner in cash. In the absence of such a direction, no
further action will be required for the Trustee to deliver the full value of
your account to the pooled vehicle recommended by the independent adviser.
Due to certain differences between the manner in which assets are
registered in the U.S. and in other countries, certain accounts may be subject
to additional conditions required to correctly protect the rights of the
Partner. Furthermore, accounts which are subject to legal or contractual
limitations will be protected in accordance with such limitations. See questions
3 through 6 below.
Question number 3: How will the approval of the Plan affect Shares registered
under the Uniform Gifts to Minors Act (or similar statutory provisions)?
Answer: Some Shares of the Fund are registered for the benefit of minors under a
statute such as the Uniform Gifts to Minors Act (the "UGMA"). The authority to
establish such accounts, and provisions for the registration of assets under
such accounts, are based upon local statutes in the U.S. The laws regarding
holding assets for minors are generally different in other jurisdictions.
Accounts established under UGMA or other statutory provisions will be contacted
by the Fund to request information necessary to correctly establish and record
the ownership of such accounts outside the U.S.
If the Plan is approved, and Partners contacted concerning such a UGMA
account have provided to the Fund the information which is required to permit
the Liquidating Trustee to establish an account in another jurisdiction, then
the Fund will transfer such assets to the Liquidating Trustee. If a Partner does
not supply such information to the Fund, then the Fund will not be able to
transfer that account out of the U.S. In that case the Fund will transfer the
assets by an exchange into a UGMA account in a Franklin Templeton money market
fund, and the assets be held in that account under the UGMA pending further
direction from the party responsible for that account.
Question number 4: How will the approval of the Plan affect Shares held in, and
as security for, Margin Accounts?
Answer: Some Shares of the Fund may be held in a client account with a U.S.
broker, in order to serve as assets which support the "margin value" of the
account. If the terms of the account require that margin securities must be held
within the U.S., then the Fund will exchange the shares of the Fund in that
account into shares of a Franklin Templeton money market fund, and the assets be
held in such money market shares pending further direction from the party
responsible for that account.
Question number 5: How will the approval of the Plan affect Shares held in an
account which is titled to provide for its transfer to another person upon the
death of the listed Partner of record?
Answer: Some Shares of the Fund are registered in a form which provides for the
automatic transfer of the account to another person upon the death of the named
holder of the account. The authority to establish such accounts, and provisions
for the transfer of assets using such accounts in the event the record holder
dies, are based upon local statutes in the U.S. The laws regarding testamentary
disposition of assets may be different in various jurisdictions. Accounts titled
for such transfers under U.S. statutory provisions will be contacted by the Fund
to request information necessary to correctly establish and record the ownership
of such accounts outside the U.S.
If the Plan is approved, and a Partner contacted concerning a testamentary
account has provided information required to permit a Liquidating Trustee to
establish an account in another jurisdiction, then the Fund will transfer such
assets to the Liquidating Trustee. If a Partner does not supply such information
to the Fund, or if a Non-U.S. jurisdiction does not recognize such a provision,
then the Fund will not be able to transfer that account out of the U.S. In that
case the Fund will transfer the assets by an exchange into a Franklin Templeton
money market fund, and the assets will be held in that account under the present
title pending further direction from the party responsible for that account.
Question number 6: How will the approval of the Plan affect Shares which are
pledged to a lender to secure a debt to that pledgee?
Answer: Some Shares of the Fund are held in an account to secure a debt of the
account holder or another person or entity, to another person or entity. The
terms of the pledge of the assets in the account may not allow the assets to be
moved outside the U.S., or may not permit the pledged assets to be converted
into a non-U.S. security. Generally, the terms of the pledge will control this
result.
Accounts restricted as to transfers out of the U.S., or into non-U.S.
securities, will be contacted by the Fund for permission to consult with the
pledgee in order to minimize inconvenience for the Partner owning such account.
If the Plan is approved, and the Fund has been advised that conversion of
the assets to a non-U.S. security, or transfer of the assets outside the U.S.,
are permitted, then the Fund will transfer such assets to the Liquidating
Trustee. If a pledge does not allow such a transfer, then the Fund will not be
able to transfer that account out of the U.S. In that case the Fund will
transfer the assets by an exchange into a Franklin Templeton money market fund,
and the assets will be held in that account under the present title pending
further direction from the party responsible for that account.
Question number 7: What will happen to shares of Partners who do not respond
before the liquidation?
If this proxy statement, as well as any payments from the Fund or any
letter from the Liquidating Trustee do not reach a Partner before the
Liquidation Date, this account will be treated in the same way as any other
account of its type in order to protect the investment of the Partner owning
such account.
Assets of a Non-U.S. Partner will be placed in the pooled investment
vehicle selected for Non-U.S. Partners. An account subject to a restriction,
will be exchanged into a Franklin Templeton money market fund. Assets of a U.S.
Partner will be deposited in a Franklin Templeton money market fund.
PART PROXY 02/97
PROXY PROXY
155
FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
SPECIAL MEETING OF PARTNERS - APRIL 18, 1997
The undersigned hereby revokes all previous proxies for his shares and appoints
Rupert H. Johnson, Jr., Harmon E. Burns, Deborah R. Gatzek, Larry L. Greene, and
each of them, proxies of the undersigned with full power of substitution to vote
all shares of Franklin Tax-Advantaged U.S. Government Securities Fund (the
"Fund") which the undersigned is entitled to vote at the Fund's Special Meeting
to be held at 777 Mariners Island Blvd., San Mateo, California 94404 at 1:00
p.m. Pacific time on the 18th day of April, 1997, including any adjournments
thereof, upon the matters set forth below.
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S OR FROM SOME FOREIGN COUNTRIES. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF MANAGING GENERAL PARTNERS. IT WILL BE VOTED
AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED IN FAVOR OF
PROPOSAL 1 AND WITHIN THE DISCRETION OF THE PROXYHOLDERS AS TO ANY OTHER
BUSINESS WHICH MAY LEGALLY COME BEFORE THE MEETING.
Note: please sign exactly as your name appears on the proxy. If signing for
estates, trusts, or corporations, title or capacity should be stated. If
shares are held jointly, each holder must sign.
Dated:________________, 1997
- ----------------------------
Signature
- ----------------------------
Signature if held jointly
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. To approve the adoption of a Plan of
Dissolution and Complete Liquidation for the Fund.
GRANT WITHHOLD
2. To vote upon any other business which may
legally come before the meeting.
PLEASE SIGN AND DATE THE
REVERSE OF THIS CARD
