As filed with the Securities and Exchange Commission on February 29, 1996.
File Nos.
33-26051
811-5709
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 8 ( X )
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9 ( X )
-----
FRANKLIN GOVERNMENT SECURITIES TRUST
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 312-2000
Deborah R. Gatzek, 777 Mariners Island Blvd., San Mateo, CA 94404
(Name and Address of Agent for Service of Process)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ ]immediately upon filing pursuant to paragraph (b)
[ ]on (date) pursuant to paragraph (b)
[ ]60 days after filing pursuant to paragraph (a)(i)
[x] on May 1, 1996 pursuant to paragraph (a)(i)
[ ]75 days after filing pursuant to paragraph (a)(ii)
[ ]on (date), pursuant to paragraph (a)(ii) of Rule 485
Declaration Pursuant to Rule 24f-2. The issuer has registered an indefinite
number or amount of securities under the Securities Act of 1933 pursuant to Rule
24(f)(2) under the Investment Company Act of 1940. The Rule 24f-2 Notice for the
issuer's most recent fiscal year was filed on February 28, 1996.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
FRANKLIN GOVERNMENT SECURITIES TRUST
CROSS REFERENCE SHEET
FORM N-1A
N-1A
Item No. Item Location
Part A: Information Required in Prospectus
1. Cover Page Cover Page
2. Synopsis N/A
3. Condensed Financial "Financial Highlights"
Information
4. General Description of "About the Fund";"General
Registrant Information";"Useful Terms and
Definitions";" Investment
Objectives and Policies of the
Fund"
5. Management of the Fund "Management of the Fund"
5A. Management's Discussion of The response to this item is
Fund Performance contained in the Registrant's
Annual Report to Shareholders
6. Capital Stock and Other "Distributions"; "Tax
Securities Considerations"
7. Purchase of Securities Being "How to Buy Shares of the Fund";
Offered "Valuation of Fund Shares"
8. Redemption or Repurchase "How to Sell Shares of the
Fund"; "General Information"
9. Pending Legal Proceedings Not Applicable
FRANKLIN GOVERNMENT SECURITIES TRUST
Part B: Information Required in
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and "How Does the Fund Invest Its
History Assets?"
13. Investment Objectives "How Does the Fund Invest Its
Assets?"
14. Management of the Fund "Officers and Trustees"
15. Control Persons and "Officers and Trustees"
Principal Holders of
Securities
16. Investment Advisory and "Investment Advisory and Other
Other Services Services"
17. Brokerage Allocation "How Does the Fund Purchase
Securities For Its Portfolio?"
18. Capital Stock and Other "General"
Securities
19. Purchase, Redemption and "Redemption of Fund Shares"; "How
Pricing of Securities Are Fund Shares Valued?"
Being Offered
20. Tax Status "General"
21. Underwriters N/A
22. Calculation of Performance N/A
Data
23. Financial Statements "Financial Statements"
FRANKLIN GOVERNMENT
SECURITIES TRUST
Prospectus
May 1, 1996
777 MARINERS ISLAND BOULEVARD
P.O. BOX 7777
SAN MATEO, CALIFORNIA 94403-7777
1-800/DIAL BEN
Franklin Government Securities Trust ("Trust" or "Fund") is a diversified,
open-end management investment company. Its primary investment objective is to
earn income through investments in obligations of the U.S. government or its
agencies or instrumentalities. Other than investments in short-term U.S.
Treasury securities, the Fund intends to invest solely in obligations of the
Government National Mortgage Association.
Shares of the Fund are being offered only to Aetna Life Insurance and Annuity
Company ("Aetna") for allocation to certain of its separate accounts established
for the purpose of funding variable annuity contracts issued by Aetna. The Fund
may not be available in connection with a particular policy or contract or in a
particular state. Investors should read the appropriate Aetna separate account
prospectus that accompanies this trust prospectus for important information
about the Aetna variable annuity contract, including fees, expenses and any
restrictions on purchases.
This Prospectus briefly describes the information that investors should know
before investing in the Fund, including the risks and expenses of the Fund.
After reading the Prospectus, you should retain it for future reference.
A Statement of Additional Information ("SAI") concerning the Fund, dated May 1,
1996, as may be amended from time to time, provides additional and more detailed
information about the activities and operations of the Fund. It has been filed
with the Securities and Exchange Commission ("SEC") and is incorporated herein
by reference. A copy is available without charge from the Fund at the address or
telephone number shown above.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES OR INSURANCE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS UNAUTHORIZED. NO SALES REPRESENTATIVE, DEALER OR
OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
CONTENTS Page
Financial Highlights
About the Fund
Investment Objectives And Policies of the Fund
Management of the Fund
Distributions
Tax Considerations
How to Buy Shares of the Fund
How to Sell Shares of the Fund
Valuation of Fund Shares
General Information
Useful Terms and Definitions
FINANCIAL HIGHLIGHTS -
Set forth below is a table containing the financial highlights for a share of
the Fund from February 15, 1989 (the effective date of the registration
statement for the Fund) to December 31, 1989 and for the five fiscal years ended
December 31, 1990 through December 31, 1995. The information for each of the
last six fiscal years ended December 31, 1995 has been audited by Coopers &
Lybrand L.L.P., independent auditors, whose audit report appears in the
financial statements in the Fund's SAI. The remaining figures, which are also
audited, are not covered by the auditors' current report.
<TABLE>
<CAPTION>
Year Ended
1995 1994 1993 1992 1991 1990 1989*
Per Share Operating Performance**
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year 12.05 $13.30 $13.26 $13.01 $11.72 $10.89 $10.00
Net investment income .67 .8500 .6500 .8000 .6100 .5800 .3600
Net realized and unrealized gain (loss) .4216 1.3463) .3385 .1602 1.1939 .5068 .5300
Total from investment operations 2.0916 (.4963) .9885 .9602 1.8039 1.0868 .8900
Less distributions:
Dividends from undistributed net investment income (0.7916) (.7537) (.7459) (.7102) (.5139) (.2560) --
Distributions from net capital gains -- -- (.2026) -- -- (.0008) --
Total distributions (0.7916) (.7537) (.9485) (.7102) (.5139) (.2568) --
Net asset value at end of year $13.35 $12.05 $13.30 $13.26 $13.01 $11.72 $10.89
TOTAL RETURN*** 17.70% (-3.75%) 7.59% 7.66% 15.87% 10.23% 8.90%
Ratios/Supplemental Data
Net assets at end of year (in 000's) $22,491 $15,242 $16,568 $11,815 $8,641 $3,922 $1,294
Ratio of expenses to average net assets+ .62% .63% .62% .29% -- -- --
Ratio of net income to average
net assets 6.78% 6.85% 6.68% 7.75% 8.74% 9.17% 8.63%++
Portfolio turnover rate 7.50% 13.97% 39.02% 49.71% 7.00% 6.56% .87%
</TABLE>
*For the period February 15, 1989 (effective date) to December 31, 1989.
**Selected data for a share of beneficial interest outstanding throughout the
year.
***Total Return measures the change in value of an investment over the periods
indicated. It assumes reinvestment of dividends and capital gains, if any, at
net asset value.
+During the years indicated below, Franklin Advisers, Inc., ("Advisers") the
investment manager agreed in advance to reduce its management fees and
reimbursed other expenses incurred by the Fund. Had such action not been taken,
the ratios of operating expenses to average net assets would have been as
follows:
RATIO OF EXPENSES
TO AVERAGE NET ASSETS
1989* 2.36%++
1990 .95
1991 1.22
1992 .92
1993 .83
1994 .78
1995 .76
++Annualized
Further information about the performance of the Fund is contained in the Annual
Report to Shareholders, which may be obtained from the Fund without charge.
WHAT IS THE FRANKLIN GOVERNMENT SECURITIES TRUST?
The Fund is a diversified, open-end management investment company. The Fund was
organized as a Massachusetts business trust on October 21, 1988, and registered
with the SEC under the 1940 Act.
Shares of the Fund are sold only to a separate account ("Separate Account") of
Aetna Life Insurance and Annuity Company ("Aetna") to fund the benefits under
variable annuity contracts ("Contracts") issued by Aetna which qualify as
"pension plan contracts" under Section 818(a) of the Code. The Separate Account
will invest in the Fund as directed by Contract Holders or Participants, as
appropriate. (See "How to Buy Shares of the Fund")
HOW DOES THE FUND INVEST ITS ASSETS?
The investment objective of the Fund is to earn income through investments in a
portfolio limited to securities which are obligations of the U.S. government or
its agencies or instrumentalities. U.S. government securities include, but are
not limited to, U.S. Treasury Bonds, Notes and Bills, Treasury Certificates of
Indebtedness and securities issued by agencies or instrumentalities of the U.S.
government. Other than investments in short-term U.S. Treasury securities, the
assets of the Fund are intended to be invested solely in obligations, ("GNMA",
or " Ginnie Maes") of the Government National Mortgage Association (the
"Association"). The investment objective is a fundamental policy of the Fund and
may not be changed without Contract Holder approval. Of course, there is no
assurance that the Fund's objective will be achieved.
INFORMATION ABOUT GNMAS
GNMAs are mortgage-backed securities representing part ownership of a pool of
mortgage loans. GNMAs differ from other bonds in that principal may be paid back
on an unscheduled basis rather than returned in a lump sum at maturity. The Fund
will purchase GNMAs for which principal and interest are guaranteed. The Fund
also purchases "adjustable rate" GNMAs and may also purchase other types of
securities which may be issued with the Association's guarantee.
THE ASSOCIATION'S GUARANTEE OF PAYMENT OF PRINCIPAL AND INTEREST ON GNMAS IS
BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES GOVERNMENT. THE
ASSOCIATION MAY BORROW U.S. TREASURY FUNDS TO THE EXTENT NEEDED TO MAKE PAYMENTS
UNDER ITS GUARANTEE. OF COURSE, THIS GUARANTEE DOES NOT EXTEND TO THE MARKET
VALUE OR YIELD OF THE GNMAS OR THE NET ASSET VALUE OR PERFORMANCE OF THE FUND,
WHICH WILL FLUCTUATE DAILY WITH MARKET CONDITIONS.
Payments to holders of GNMAs consist of the monthly distributions of interest
and principal less the Association's and issuers' fees. The portion of the
monthly payment which represents a return of principal will be reinvested by the
Fund in securities which may bear interest at a rate higher or lower than the
obligation from which the principal payment was received.
When mortgages in the pool underlying a GNMA are prepaid by borrowers or as a
result of foreclosure, such principal payments are passed through to the GNMA
holders, such as the Fund. Accordingly, a GNMA's life is likely to be
substantially shorter than the stated maturity of the mortgages in the
underlying pool. Because of such variation in prepayment rates, it is not
possible to accurately predict the life of a particular GNMA.
GNMA yields (interest income as a percentage of price) have historically
exceeded the current yields on other types of U.S. Government securities with
comparable maturities. The effects of interest rate fluctuations and
unpredictable prepayments of principal, however, can greatly change realized
yields. As with most bonds, in a period of rising interest rates, the value of a
GNMA will generally decline. In a period of declining interest rates, however,
it is more likely that mortgages contained in GNMA pools will be prepaid, thus
reducing the effective yield. This potential for prepayment during periods of
declining interest rates may reduce the general upward price increases of GNMAs
as compared to the increases experienced by noncallable debt securities over the
same periods. Moreover, any premium paid on the purchase of a GNMA will be lost
if the obligation is prepaid. Of course, price changes of GNMAs and other
securities held by the Fund will have a direct impact on the net asset value per
share of the Fund.
The Fund's investments are continually monitored and changes are made as market
conditions warrant. However, the Fund does not engage in the trading of
securities for the purpose of realizing short-term profits.
OTHER POLICIES OF THE FUND
To-Be-Announced and Delayed Delivery Transactions. The Fund may purchase and
sell GNMA Certificates on a "To-Be-Announced" ("TBA") and "delayed delivery"
basis. These transactions are arrangements under which the Fund may purchase
securities with payment and delivery scheduled for a future time up to 60 days
after purchase. The transactions are subject to market fluctuation and the risk
that the value or yields at delivery may be more or less than the purchase price
or the yields available when the transaction was entered into. Although the Fund
will generally purchase GNMA Certificates on a TBA basis with the intention of
acquiring such securities, it may sell such securities before the settlement
date if it is deemed advisable. When the Fund is the buyer in such a
transaction, it will maintain, in a segregated account with its custodian, cash
or high-grade marketable securities having an aggregate value equal to the
amount of such purchase commitments until payment is made. To the extent the
Fund engages in TBA and "delayed delivery" transactions, it will do so for the
purpose of acquiring securities for the Fund's portfolio consistent with its
investment objective and policies and not for the purpose of investment
leverage. Securities purchased on a TBA or "delayed delivery" basis do not
generally earn interest until their scheduled delivery date.
Repurchase Agreements. The Fund may engage in repurchase transactions in which
the Fund purchases a U.S. government security subject to resale to a bank or
dealer at an agreed-upon price and date. The transaction requires the
collateralization of the seller's obligation by the transfer of securities with
an initial market value, including accrued interest, equal to at least 102% of
the dollar amount invested by the Fund in each agreement, with the value of the
underlying security marked-to-market daily to maintain coverage of at least
100%. A default by the seller might cause the Fund to experience a loss or delay
in the liquidation of the collateral securing the repurchase agreement. The Fund
might also incur disposition costs in liquidating the collateral. The Fund,
however, intends to enter into repurchase agreements only with financial
institutions such as broker-dealers and banks which are deemed creditworthy by
the Manager. A repurchase agreement is deemed to be a loan by the Fund under the
1940 Act. The U.S. government security subject to resale (the collateral) will
be held on behalf of the Fund by a custodian approved by the Board and will be
held pursuant to a written agreement.
The Fund is subject to a number of additional investment restrictions, some of
which may be changed only with the approval of shareholders which limit its
activities to some extent. For a list of these restrictions and more information
about the policies discussed herein, please see "How Does the Fund Invest Its
Assets?" and "Investment Restrictions" in the SAI.
WHO MANAGES THE FUND?
The Board of Trustees ("Board") has the primary responsibility for the overall
management of the Trust and for electing the officers of the Trust who are
responsible for administering its day-to-day operations.
Franklin Advisers, Inc., ("Advisers") serves as the Fund's investment manager.
Advisers is a wholly-owned subsidiary of Franklin Resources, Inc. ("Resources")
a publicly owned holding company, the principal shareholders of which are
Charles B. Johnson and Rupert H. Johnson, Jr., who own approximately 20% and
16%, respectively, of Resources' outstanding shares. Resources is engaged in
various aspects of the financial services industry through its subsidiaries.
Advisers acts as investment manager or administrator to 36 U.S. registered
investment companies (118 separate series) with aggregate assets of over $80
billion.
The team responsible for the day-to-day management of the Fund's portfolio is
Jack Lemein, Roger Bayston and Anthony Coffey, all of whom have managed the Fund
since inception.
Jack Lemein
Senior Vice President and Portfolio Manager
of Advisers
Mr. Lemein holds a Bachelor of Science degree in finance from the University of
Illinois. He has been in the securities industry since 1967 and with Advisers or
an affiliate since 1984. He is a member of several securities industry-related
associations.
Roger Bayston
Portfolio Manager of Advisers
Mr. Bayston is a Chartered Financial Analyst and holds a Master of Business
Administration degree from the University of California at Los Angeles. He
earned his Bachelor of Science degree from the University of Virginia. He has
been with Advisers or an affiliate since earning his MBA degree in 1991.
Anthony Coffey
Portfolio Manager of Advisers
Mr. Coffey is a Chartered Financial Analyst and holds a Master of Business
Administration degree from the University of California at Los Angeles. He
earned a Bachelor of Arts degree in applied mathematics and economics from
Harvard University. Mr. Coffey has been with Advisers or an affiliate since
1989. He is a member of several securities industry-related associations.
Pursuant to a management agreement, Advisers supervises and implements the
Fund's investment policies and provides certain administrative services and
facilities which are necessary to conduct the Fund's business. Advisers performs
similar services for other funds and there may be times when the actions taken
with respect to the Fund's portfolio will differ from those taken by the Manager
on behalf of other funds. Neither the Manager (including its affiliates) nor its
officers, directors or employees nor the officers and trustees of the Fund are
prohibited from investing in securities held by the Fund or other funds which
are managed or administered by the Manager to the extent such transactions
comply with the Fund's Code of Ethics. Please see "Investment Advisory and Other
Services" and "General Information" in the SAI for further information on
securities transactions and a summary of the Fund's Code of Ethics.
During the fiscal year ended December 31, 1995, fees totaling .62% of the
average daily net assets of the Fund would have accrued to Advisers. Total
operating expenses, including management fees, would have represented .76% of
the average daily net assets of the Fund. Pursuant to an agreement by Advisers
to limit its fees, the Fund paid management fees totaling .49% of the average
daily net assets of the Fund and operating expenses totaling .62%. This
arrangement may be terminated at any time upon notice to the Board.
It is not anticipated that the Fund will incur a significant amount of brokerage
expenses because GNMA securities are generally traded in principal transactions
that involve the receipt by the broker of a spread between the bid and ask
prices for the securities and not the receipt of commissions. In the event that
the Fund does participate in transactions involving brokerage commissions, it is
the Manager's responsibility to select brokers through whom such transactions
will be effected. Advisers would try to obtain the best execution on all such
transactions. If it is felt that more than one broker would be able to provide
the best execution, Advisers will consider the furnishing of quotations and of
other market services, research, statistical and other data for Advisers and its
affiliates, as well as the sale of shares of the Fund, as factors in selecting a
broker. Further information is included under "How Does the Fund Purchase
Securities For Its Portfolio?" in the SAI.
Advisers, out of its own resources and not as a separate expense of the Fund,
may pay Aetna a fee equal to 0.15% per annum of the average daily net assets of
the Fund, for performing certain administrative services in connection with the
operation of the Fund.
Franklin/Templeton Investor Services, Inc. ("Investor Services")a wholly owned
subsidiary of Resources, maintains the records of the Aetna separate account
shareholder account, processes purchases and redemptions of the Fund's shares,
and serves as the Fund's dividend-paying agent.
DISTRIBUTIONS
The Fund will declare and pay to the Aetna separate account (the "separate
account")shareholder once each year following the close of the calendar year (i)
all of its net investment income (which includes interest received on the Fund's
Investments less expenses incurred in the Fund's operations) and (ii) all net
realized short-term and long-term capital gains, if any, of the Fund during the
preceding calendar year.
All distributions, whether from net capital gains or net investment income, will
be paid in the form of additional shares of the Fund at net asset value. Because
the value of the Fund's shares is based directly on the amount of its net
assets, including any undistributed net income, any distribution of income or
capital gains will result in a decrease in the value of the Fund's shares equal
to the amount of the distribution. The price of the Fund's shares is quoted
ex-dividend on the record date.
TAX CONSIDERATIONS
The Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Code. By distribution all of its income and
meeting certain other requirements relating to the sources of its income and
diversification of its assets, the Fund will not be liable for federal income or
excise taxes. The Fund is exempt from and does not intend to satisfy the
additional diversification requirements of Section 817(h) of the Code because
all of its shares will be held under variable annuity contracts that qualify as
"pension plan contracts" in connection with Section 818(a) of the Code.
The Fund is not subject to any federal excise tax on undistributed income
because its shares are held exclusively by a segregated asset account of an
insurance company in connection with variable contracts.
Dividends and distributions made by the Fund to Aetna are taxable, if at all, to
Aetna; they are not taxable to variable annuity contract holders or
participants. Information on the tax aspects of variable annuity Contracts is
found in the Aetna Separate Account Prospectus.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund are sold only to a Separate Account of Aetna Life Insurance
and Annuity Company to fund the benefits under variable annuity contracts issued
by Aetna which qualify as "pension plan contracts" under the Code.
Aetna purchases shares of the Fund for the Separate Account using premiums
allocated thereto by the Contract Holders or Participants. All shares are sold
by the Fund to the Separate Account at net asset value without a sales charge.
Shares are purchased by the Separate Account at the net asset value of the Fund
next determined after Aetna receives the premium payment.
All investments in the Fund are credited to the Separate Account in the form of
full and fractional shares of the Fund (rounded to the nearest 1/1000 of a
share). The Fund does not issue share certificates. Initial and subsequent
payments allocated to the Fund are subject to the limits applicable in the
Contracts issued by Aetna.
HOW TO SELL SHARES OF THE FUND
Aetna redeems shares of the Fund to make benefit or surrender payments under the
terms of its variable annuity Contracts. Redemptions are processed on any day on
which the Fund is open for business (each day the New York Stock Exchange (the
"Exchange")is open) and are effected at the Fund's net asset value next
determined after Aetna receives a surrender request in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later than
seven days. However, the right of redemption may be suspended or the date of
payment postponed in accordance with the Rules under the 1940 Act. Redemptions
are taxable events and the amount received upon redemption of the shares of the
Fund may be more or less than the amount paid for the shares depending upon the
fluctuations in the market value of the assets owned by the Fund.
HOW ARE FUND SHARES VALUED?
The net asset value per share of the Fund is determined as of the scheduled
close of the Exchange (generally 1:00 p.m. Pacific time) each day that the
Exchange is open for trading.
The net asset value per share of the Fund is determined by deducting the
aggregate gross value of all liabilities from the aggregate gross value of all
assets, and then dividing the difference by the number of shares outstanding.
Assets in the Fund's portfolio are valued as described under "How Are Fund
Shares Valued?" in the SAI.
GENERAL INFORMATION
The Agreement and Declaration of Trust permits the trustees to issue an
unlimited number of full and fractional shares of beneficial interest, $.01 par
value, which may be issued in any number of series and classes. As of the date
of this Prospectus, only one series of the Trust had been created with only one
class of shares. Shares issued will be fully paid and non-assessable and will
have no preemptive, conversion, or sinking rights. Shares of the Trust have
equal and exclusive rights as to dividends and distributions declared by the
Trust and the net assets of the Trust upon liquidation or dissolution. The
Separate Account, as the Fund's sole shareholder, has the right to vote Fund
shares at any meeting of shareholders, however, the Separate Account will vote
Fund shares in accordance with instructions received from Contract Holders. See,
"Voting Rights" in the Separate Account Prospectus.
Voting rights are noncumulative, so that in any election of trustees, the
holders of more than 50% of the shares voting can elect all of the trustees, if
they choose to do so, and in such event the holders of the remaining shares
voting will not be able to elect any person or persons to the Board.
The Trust does not intend to hold annual shareholder meetings. The Trust may,
however, hold a special shareholders' meeting for such purposes as changing
fundamental investment restrictions, approving a new management agreement or any
other matters which are required to be acted on by shareholders under the 1940
Act. A meeting may also be called by the trustees in their discretion or by
shareholders holding at least ten percent of the outstanding shares of the
Trust. The Separate Account, as the Fund's sole shareholder, has the right to
vote Fund shares at any meeting of shareholders, however, the Separate Account
will vote Fund shares in accordance with instructions received from Contract
Holders. See, "Voting Rights" in the Separate Account Prospectus.
The management agreement between the Trust and Advisers includes a distribution
plan pursuant to Rule 12b-1 under the 1940 Act ("Plan"). However, no additional
payments are to be made by the Fund as a result of the Plan other than payments
which the Fund is otherwise obligated to make pursuant to the then effective
management agreement or as incurred in the ordinary course of its business,
which are deemed indirectly to be payments for the financing of any activity
primarily intended to result in the sale of shares issued by the Fund within the
context of Rule 12b-1. In connection with their approval of the management
agreement, the Board, including a majority of the non-interested Trustees,
determined that in the exercise of their reasonable business judgment, and in
light of their fiduciary duties, there is a reasonable likelihood that the
implementation of the Plan will benefit the Fund and the Contract Holders and
Participants whose payments have indirectly been invested in the Fund.
No payments have been made pursuant to the Plan from its adoption through the
fiscal year ended December 31, 1995. (For further details of this Plan, see the
SAI.)
Any questions or communications regarding a Contract Holder's or a Participant's
account should be directed to Aetna Life Insurance and Annuity Company at the
address shown on the cover of the product prospectus.
USEFUL TERMS AND DEFINITIONS
1940 Act - Investment Company Act of 1940, as amended.
Advisers - Franklin Advisers, Inc., the Fund's investment manager.
Board - The Board of Trustees of the Trust.
Code - Internal Revenue Code of 1986, as amended.
Exchange - New York Stock Exchange.
Investor Services - Franklin/Templeton Investor Services, Inc.
Net asset value (NAV) - the value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding. When you buy, sell or exchange shares, we will use
the NAV per share next calculated after we receive your request in proper form.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information.
SEC - Securities and Exchange Commission.
U.S. - United States.
FRANKLIN GOVERNMENT SECURITIES TRUST
777 Mariners Island Blvd.,
P. O. Box 7777
San Mateo, California 94403-7777
800/DIAL BEN
Statement of Additional Information
May 1, 1996
CONTENTS PAGE
How Does the Fund Invest Its Assets?
Investment Restrictions
Officers and Trustees
Investment Advisory and Other Services
How Does the Fund Purchase Securities For Its Portfolio?
How Are Fund Shares Valued?
Redemption of Fund Shares
General
Financial Statements
A Prospectus for the Franklin Government Securities Trust ("Trust" or "Fund")
dated May 1, 1996, as may be amended from time to time, provides the basic
information an investor should know before investing in the Fund and may be
obtained without charge from the Fund at the address listed above.
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS. IT
CONTAINS INFORMATION IN ADDITION TO AND IN MORE DETAIL THAN SET FORTH IN THE
PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU WITH ADDITIONAL INFORMATION
REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND, AND SHOULD BE READ IN
CONJUNCTION WITH THE FUND'S PROSPECTUS.
Shares of the Fund are offered only to Aetna Life Insurance and Annuity Company
("Aetna") for allocation to a separate account ("Separate Account") established
for the purpose of funding variable annuity contracts ("Contracts") issued by
Aetna which qualify as "pension plan contracts" under the Internal Revenue Code
of 1986, as amended (the "Code").
HOW DOES THE FUND INVEST ITS ASSETS?
As discussed in the Prospectus, the Fund's investment objective is to earn
income through investments in securities which are the obligation of the U.S.
government or its agencies or instrumentalities.
Borrowing. As a fundamental policy, the Fund does not borrow money or mortgage
or pledge any of its assets, except that borrowings for temporary or emergency
purposes may be made from banks in an amount up to 5% of its total asset value
and its assets may be pledged solely for such borrowings.
Illiquid Investments. It is the policy of the Fund that illiquid securities
(securities that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which the Fund has valued the
securities) may not constitute, at the time of purchase, more than 10% of the
value of the total net assets of the Fund.
Securities Lending. The Fund does not loan its securities.
Foreign Securities. The Fund does not acquire securities of foreign issuers.
PORTFOLIO TURNOVER
In the fiscal years ended December 31, 1994 and December 31, 1995, the Fund's
portfolio turnover rates were 13.97% and 7.50%, respectively.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental policies, which
means that they may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. Under the Investment Company Act of
1940, as amended (the "1940 Act"), a "vote of a majority of the outstanding
voting securities" of the Fund means the affirmative vote of the lesser of (i)
more than 50% of the outstanding shares of the Fund or (ii) 67% or more of the
shares of the Fund present at a shareholder meeting if more than 50% of the
outstanding shares of the Fund are represented at the meeting in person or by
proxy.
The Fund MAY NOT:
1. Borrow money or mortgage or pledge any of the assets of the Fund, except
that borrowings for temporary or emergency purposes, and a pledge of
assets therefor, may be made from banks in an amount up to 5% of total
asset value.
2. Buy any securities on "margin" or sell any securities "short."
3. Lend any funds or other assets, except by the purchase of bonds,
debentures, notes, to-be-announced securities or other debt securities
authorized by its investment policies.
4. Act as underwriter of securities issued by other persons except insofar as
the Fund may be technically deemed an underwriter under the federal
securities laws in connection with the disposition of portfolio
securities.
5. Invest more than 5% of the value of the total assets of the Fund in the
securities of any one issuer, but this limitation does not apply to
investments in securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities.
6. Purchase the securities of any issuer (other than U.S. government
securities) which would result in the Fund owning more than 10% of any
class of the outstanding voting securities of such issuer.
7. Purchase from or sell to its officers or trustees, or any firm of which an
officer or trustee is a member, as principal, any securities, but may deal
with such persons or firms as brokers and pay a customary brokerage
commission; retain securities of any issuer, if to the knowledge of the
Fund, one or more of its officers, trustees or investment adviser, own
beneficially more than one-half of 1% of the securities of such issuer and
all such officers and trustees together own beneficially more than 5% of
such securities.
8. Invest in commodities and commodity contracts, puts, calls, straddles,
spreads or any combination thereof, or interests in oil, gas or other
mineral exploration or development programs.
9. Invest in companies for the purpose of exercising control or management.
10. Purchase securities of other investment companies.
11. Invest its assets in a manner which does not comply with the income source
and investment diversification requirements of the Code in order to qualify
as a regulated investment company thereunder.
In addition to these fundamental policies, it is the present policy of the Fund
(which may be changed without the approval of a majority of its outstanding
shares) not to engage in joint or joint and several trading accounts in
securities, except that the Fund may participate with other investment companies
in the Franklin Templeton Funds in a joint account to engage in repurchase
transactions, and may combine orders to purchase or sell securities with orders
from other persons to obtain lower brokerage commissions.
OFFICERS AND TRUSTEES
The Board of Trustees (the "Board") has the responsibility for the overall
management of the Fund, including general supervision and review of its
investment activities. The trustees, in turn, elect the officers of the Fund who
are responsible for administering day-to-day operations of the Fund. The
affiliations of the officers and trustees and their principal occupations for
the past five years are listed below. Trustees who are deemed to be "interested
persons" of the Fund, as defined in the 1940 Act, are indicated by an asterisk
(*).
POSITIONS AND OFFICES WITH PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS THE TRUST PAST FIVE YEARS
Frank H. Abbott, III (75)
1045 Sansome St.
San Francisco, CA 94111
Trustee
President and Director, Abbott Corporation (an investment company); and
director, trustee or managing general partner, as the case may be, of 31 of the
investment companies in the Franklin Group of Funds.
Harris J. Ashton (63)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Trustee
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 56 of the investment companies in the Franklin
Templeton Group of Funds.
*Harmon E. Burns (51)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Trustee
Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or trustee
of 43 of the investment companies in the Franklin Templeton Group of Funds.
S. Joseph Fortunato (63)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General Host
Corporation; director, trustee or managing general partner, as the case may be,
of 58 of the investment companies in the Franklin Templeton Group of Funds.
David W. Garbellano (81)
111 New Montgomery St., #402
San Francisco, CA 94105
Trustee
Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
Corporation (a venture capital company); and director, trustee or managing
general partner, as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.
*Charles B. Johnson (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of the Board and Trustee
President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general partner,
as the case may be, of most other subsidiaries of Franklin Resources, Inc. and
of 57 of the investment companies in the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (55)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Trustee
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director, trustee or managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies
in the Franklin Templeton Group of Funds.
Frank W. T. LaHaye (67)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Trustee
General Partner, Peregrine Associates and Miller & LaHaye, which are General
Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Group of Funds.
Gordon S. Macklin (67)
8212 Burning Tree Road
Bethesda, MD 20817
Trustee
Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, MedImmune, Inc. (biotechnology), InfoVest
Corporation (information services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general partner, as the case may
be, of 53 of the investment companies in the Franklin Templeton Group of Funds;
and formerly held the following positions: Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President, National Association of
Securities Dealers, Inc.
Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case may
be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment companies
in the Franklin Group of Funds.
Martin L. Flanagan (35)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor Services,
Inc.; officer of most other subsidiaries of Franklin Resources, Inc.; and
officer of 61 of the investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (47)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President, General Counsel, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; Vice President, Franklin Advisers, Inc. and
officer of 37 of the investment companies in the Franklin Group of Funds.
Diomedes Loo-Tam (57)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
The preceding table also indicates those officers and trustees who are
"affiliated persons" of Distributors and the investment manager, as defined in
the 1940 Act. Trustees not affiliated with the investment manager
("nonaffiliated trustees") may be but are not currently paid fees or expenses
incurred in connection with attending meetings. As indicated above, certain of
the Trust's nonaffiliated trustees also serve as directors, trustees or managing
general partners of other investment companies in the Franklin Group of Funds(R)
and the Templeton Group of Funds (the "Franklin Templeton Group of Funds") from
which they may receive fees for their services. The following table indicates
the total fees paid to nonaffiliated trustees by other funds in the Franklin
Templeton Group of Funds.
NUMBER OF BOARDS IN
THE FRANKLIN
TOTAL FEES RECEIVED TEMPLETON GROUP OF
FROM THE FRANKLIN FUNDS ON WHICH EACH
TEMPLETON GROUP OF SERVES**
FUNDS*
NAME
Frank Abbott $162,420 31
Harris Ashton $327,925 56
Joseph S. Fortunato $344,745 58
David Garbellano $146,100 30
Frank LaHaye $143,200 26
Gordon Macklin $321,525 53
*For the calendar year ended December 31, 1995.
**The number of boards is based on the number of registered investment companies
in the Franklin Templeton Group of Funds and does not include the total number
of series or funds within each investment company for which the trustees are
responsible. The Franklin Templeton Group of Funds currently includes 61
registered investment companies, consisting of approximately 162 U.S. based
funds or series.
Nonaffiliated trustees are reimbursed for expenses incurred in connection with
attending board meetings, paid pro rata by each fund in the Franklin Templeton
Group of Funds for which they serve as director, trustee or managing general
partner. No officer or trustee received any other compensation directly from the
Fund. Certain officers or trustees who are shareholders of Franklin Resources,
Inc. ("Resources") may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its subsidiaries.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment manager of the Fund is Franklin Advisers, Inc. ("Advisers").
Advisers is a wholly-owned subsidiary of Resources, a publicly owned holding
company whose shares are listed on the New York Stock Exchange (the "Exchange").
Resources owns several other subsidiaries that are involved in investment
management and shareholder services.
Pursuant to the management agreement, Advisers provides investment research and
portfolio management services, including the selection of securities for the
Fund to purchase, hold or sell and the selection of brokers through whom the
Fund's portfolio transactions are executed. Advisers' activities are subject to
the review and supervision of the Board to whom Advisers renders periodic
reports of the Fund's investment activities. Under the terms of the management
agreement, Advisers provides office space and office furnishings, facilities and
equipment required for managing the business affairs of the Fund; maintains all
internal bookkeeping, clerical, secretarial and administrative personnel and
services; and provides certain telephone and other mechanical services. Advisers
is covered by fidelity insurance on its officers, directors and employees for
the protection of the Fund.
Advisers also provides management services to numerous other investment
companies or funds or other clients pursuant to management agreements with each
fund. Advisers may give advice and take action with respect to any of the other
funds it manages, or for its own account, which may differ from action taken by
Advisers on behalf of the Fund. Similarly, with respect to the Fund, Advisers is
not obligated to recommend, purchase or sell, or to refrain from recommending,
purchasing or selling any security that Advisers and access persons, as defined
by the 1940 Act, may purchase or sell for its or their own account or for the
accounts of any other fund. Furthermore, Advisers is not obligated to refrain
from investing in securities held by the Fund or other funds which it manages or
administers. Of course, any transactions for the accounts of Advisers and other
access persons will be made in compliance with the Fund's Code of Ethics.
The Fund is obligated to pay Advisers a monthly fee for its services based upon
the Fund's average net assets. The fee for the Fund is to be computed and
accrued daily and paid monthly at the annual rate of:
.625 of 1% of the value of average daily net assets up to and including
$100,000,000;
.50 of 1% of the value of average daily net assets over $100,000,000 up to and
including $250,000,000;
.45 of 1% of the value of average daily net assets over $250,000,000 up to and
including $10,000,000,000;
.44 of 1% of the value of average daily net assets over $10,000,000,000 up to
and including $12,500,000,000;
.42 of 1% of the value of average daily net assets over $12,500,000,000 up to
and including $15,000,000,000; and
.40 of 1% of the value of average daily net assets over $15,000,000,000.
Advisers agreed in advance to waive a portion of its management fees. For the
fiscal years ended December 31, 1993, 1994 and 1995, management fees, before any
advance waiver, were $89,237, $99,092 and $114,871, respectively. Management
fees paid by the Fund for the same periods were $59,638, $74,896 and $90,126
respectively. Total operating expenses, including management fees, would have
been $118,170, $123,335, and $139,365 for 1993, 1994, and 1995, respectively.
For the fiscal years ended December 31, 1993, 1994, and 1995 the Fund paid total
operating expenses, including management fees, equal to $88,571, $99,139, and
$114,620 respectively, of the Fund's average daily net assets.
The management agreement is in effect until February 29, 1997. Thereafter, it
may continue in effect for successive annual periods providing such continuance
is specifically approved at least annually by a vote of the Board by a vote of
the holders of a majority vote of the outstanding voting securities, and in
either event by a majority of the Trustees who are not parties to the management
agreement or interested persons of any such party (other than as Trustees of the
Trust), cast in person at a meeting called for that purpose. The management
agreement may be terminated without penalty at any time by the Board or by a
vote of the holders of a majority of the Fund's outstanding voting securities,
or by Advisers on 60 days' written notice and will automatically terminate in
the event of its assignment, as defined in the 1940 Act.
Franklin/Templeton Investor Services, Inc. ("Investor Services"), a wholly owned
subsidiary of Resources, is the shareholder servicing agent for the Fund and
acts as the Fund's transfer agent and dividend-paying agent. Investor Services
is compensated on the basis of a fixed fee per account.
Bank of New York, Mutual Funds Division, 90 Washington Street, New York, New
York, 10286 acts as custodian of the securities and other assets of the Fund.
Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104 acts as custodian for cash received in connection with the
purchase of Fund shares. The Custodians do not participate in decisions relating
to the purchase and sale of portfolio securities.
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
are the Fund's independent auditors. During the fiscal year ended December 31,
1995, their auditing services consisted of rendering an opinion on the financial
statements of the Trust included in the Trust's Annual Report and this SAI.
HOW DOES THE FUND PURCHASE SECURITIES FOR ITS PORTFOLIO?
Since most purchases by the Fund are principal transactions at net prices, the
Fund incurs little or no brokerage costs. The Fund deals directly with the
selling or purchasing principal or market maker without incurring charges for
the services of a broker on its behalf, unless it is determined that a better
price or execution may be obtained by utilizing the services of a broker.
Purchases of portfolio securities from underwriters, however, will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include a spread between the bid and ask prices. The Fund
seeks to obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers in return for research and statistical
information, as well as for special services rendered by such dealers in the
execution of orders.
It is not possible to place a dollar value on the special executions or on the
research services received by Advisers from dealers effecting transactions in
portfolio securities. The allocation of transactions in order to obtain
additional research services permits Advisers to supplement its own research and
analysis activities and to receive the views and information of individuals and
research staff of other securities firms. As long as it is lawful and
appropriate to do so, Advisers and its affiliates may use this research and data
in their investment advisory capacities with other clients. Provided that the
Fund's officers are satisfied that the best execution is obtained, the sale of
Fund shares may also be considered as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by Advisers are considered at or about the same
time, transactions in such securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by
Advisers, taking into account the respective sizes of the funds and the amount
of securities to be purchased or sold. It is recognized that in some cases this
procedure could possibly have a detrimental effect on the price or volume of the
security so far as the Fund is concerned. In other cases it is possible that the
ability to participate in volume transactions and to negotiate lower brokerage
commissions will be beneficial to the Fund.
During the past three fiscal years ended December 31, the Fund paid no brokerage
commissions.
HOW ARE FUND SHARES VALUED?
As noted in the Prospectus, the Fund calculates net asset value as of the
scheduled close of the Exchange (generally 1:00 p.m. Pacific time) each day that
the Exchange is open for trading. As of the date of this SAI, the Fund is
informed that the Exchange observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of the Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Over-the-counter
portfolio securities are valued within the range of the most recent quoted bid
and ask prices. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market as determined by Advisers.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times prior to
the scheduled close of the Exchange. The value of these securities used in
computing the net asset value of the Fund's shares is determined as of such
times. Occasionally, events affecting the values of such securities may occur
between the times at which they are determined and the scheduled close of the
Exchange which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the values of these securities occur
during such period, then the securities will be valued at their fair value as
determined in good faith by the Board.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of Board, the Fund
may utilize a pricing service, bank or securities dealer to perform any of the
above described functions.
REDEMPTION OF FUND SHARES
Payments to the Separate Account for shares of the Fund redeemed or repurchased
will be made within seven days after receipt by the Fund of a written request in
proper form, except that the Fund may suspend the right of redemption or
postpone the date of payment for the Fund during any period when (a) trading on
the Exchange is restricted as determined by the Securities and Exchange
Commission ("SEC") or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders.
All shares will be redeemed in cash. The value of shares on redemption or
repurchase may be more or less than the shareholder's cost, depending upon the
market value of the Fund's securities at the time of redemption or repurchase.
GENERAL
Advisers also provides management services to numerous other investment
companies or funds or other clients pursuant to management agreements with each
fund. Advisers may give advice and take action with respect to any of the other
funds it manages, or for its own account, which may differ from action taken by
Advisers on behalf of the Fund. Similarly, with respect to the Fund, Advisers is
not obligated to recommend, purchase or sell, or to refrain from recommending,
purchasing or selling any security that Advisers and access persons, as defined
by the 1940 Act, may purchase or sell for its or their own account or for the
accounts of any other fund. Furthermore, Advisers is not obligated to refrain
from investing in securities held by the Fund or other funds which it manages or
administers. Of course, any transactions for the accounts of Advisers and other
access persons will be made in compliance with the Fund's Code of Ethics.
Additional Tax Information. Distributions of investment company taxable income
and the excess of net short-term capital gains over net long-term capital losses
will be treated as ordinary income to Aetna. Distributions of the excess of net
long-term capital gains over net short-term capital losses are considered as
long-term capital gains to Aetna, regardless of the length of time the shares of
the Fund have been held. Losses on redemptions of shares may be disallowed or
altered in character under certain circumstances. Certain distributions of the
Fund that are declared in one calendar year and paid the following January will
be reportable by Aetna as if received in the year of declaration.
Distribution Plan. Because of the uncertainty concerning how various expenses
may be classified under the 1940 Act, the Fund has adopted a Plan of
Distribution pursuant to Rule 12b-1 ("Plan") under the 1940 Act with respect to
the distribution of the Fund's shares. However, the Plan provides that no
additional payments are to be made by the Fund as a result of the Plan other
than the payments it is otherwise obligated to make to Advisers and its
shareholder services agent, Custodian, or others pursuant to their respective
agreements in effect from time to time. To the extent, however, any payments by
the Fund, to or by Advisers or its Agents, or payments made in the ordinary
course of its business, are deemed to be payments for the financing of any
activity primarily intended to result in the sale of shares issued by the Fund
within the context of Rule 12b-1 under the 1940 Act, then such payments shall be
deemed to be made pursuant to the Plan as set forth therein. The activities
intended to be within the scope of the Plan include, but are not necessarily
limited to, the following:
(a) the costs of the preparation, printing, and mailing of all required reports
and notices to shareholders, all prospectuses, statements of additional
information, any proxy statements and proxies;
(b) all fees and expenses relating to the qualification of the Fund and/or its
shares under the securities or "Blue Sky" laws of any jurisdiction; and all
fees under the Securities Act of 1933;
(c) all costs of the preparation and mailing of confirmations of shares sold or
redeemed, and reports of share balances; and
(d) all costs of responding to telephone or mail inquiries of Contract Holders
and Participants or prospective Contract Holders and Participants.
The terms and provisions of the Plan relating to required reports, term, and
approval are as required by Rule 12b-1. No interested person or Trustee of the
Fund has a direct or indirect financial interest in the Plan or related
agreement except as indicated in connection with the discussion of the
management agreement. No amounts were spent by the Fund pursuant to the Plan
during the year ended December 31, 1995, and none are anticipated during the
forthcoming fiscal year. The Board evaluated and considered the Plan in
connection with the continuation of the current management agreement.
Miscellaneous Information. The organizational expenses of the Fund were
amortized on a straight line basis over a period of five years from the
commencement of the offering of the Fund's shares. Contract Holders and
Participants allocating payments to shares of the Fund after the effective date
of the Fund's Registration Statement under the Securities Act of 1933 bore such
expenses during the amortization period only as such charges were accrued daily
against the investment income of the Fund. (See "Note to Financial Statement.")
The Fund's initial capital was furnished by Franklin Resources, Inc. However,
the Separate Account is the sole shareholder of the Fund as of the date of this
SAI.
Contract Holders and Participants will be informed of the Fund's progress
through periodic reports. The Fund has an affirmative obligation to assist
Contract Holder or Participant communications. Financial statements certified by
independent public accountants will be available at least annually.
The shareholders of a Massachusetts business trust, could, under certain
circumstances, be held personally liable as partners for its obligations. The
Trust's Agreement and Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of the Trust. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the Trust's assets for any shareholder held personally liable
for obligations of the Trust. The Declaration of Trust provides that the Trust
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and shall satisfy any
judgment thereon. All such rights are limited to the assets of the Fund. The
Declaration of Trust further provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. Furthermore, the activities
of the Fund as an investment company, as distinguished from an operating
company, would not likely give rise to liabilities in excess of the Fund's total
assets. Thus, the risk of incurring financial loss on account of shareholder
liability is limited to the unlikely circumstances in which both inadequate
insurance exists and the Fund itself is unable to meet its obligations.
The Fund is registered with the SEC as a management investment company. Such
registration does not involve supervision of the management or policies of the
Fund by the SEC. The Prospectus and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC, copies of which may
be obtained from the SEC upon payment of the prescribed fee.
Franklin Government Securities Trust
Report of Independent Auditors
To the Shareholders and Board of Trustees
of Franklin Government Securities Trust:
We have audited the accompanying statement of assets and liabilities of Franklin
Government Securities Trust including the statement of investments in securities
and net assets, as of December 31, 1995, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Government Securities Trust as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
January 26, 1996
Franklin Government Securities Trust
Statement of Investments in Securities and Net Assets, December 31, 1995
Face Value
Amount (Note 1)
------- ---------
Government Securities 93.3%
Government National Mortgage Association (GNMA)
$ 949,379 GNMA I, SF, 6.00%, 11/15/23 $ 922,677
2,679,860 GNMA I, SF, 6.50%, 10/15/23 - 03/15/24 2,661,436
1,064,616 GNMA II, SF, 6.50%, 05/20/24 - 09/20/25 1,049,312
3,250,817 GNMA I, SF, 7.00%, 10/15/22 - 10/15/23 3,292,469
944,178 GNMA II, SF, 7.00%, 09/20/25 - 12/20/25 949,785
2,658,327 GNMA I, SF, 7.50%, 06/15/17 - 04/15/24 2,736,413
939,038 GNMA II, 7.50%, 07/20/23 - 10/20/25 960,753
3,084,555 GNMA I, SF, 8.00%, 02/15/17 - 11/15/24 3,215,648
58,576 GNMA II, 8.00%, 10/20/16 60,626
476,663 GNMA I, SF, 8.25%, 04/15/25 498,858
1,263,518 GNMA I, SF, 8.50%, 03/15/20 - 07/15/22 1,327,485
353,468 GNMA I, SF, 9.00%, 06/15/16 - 11/15/21 374,788
761,269 GNMA I, SF, 9.50%, 10/15/09 - 10/15/21 817,651
420,000 cGNMA II, 9.50%, 04/20/25 443,757
1,290,540 GNMA I, SF, 10.00%, 03/15/16 - 08/15/21 1,418,787
79,974 GNMA II, SF, 10.00%, 12/20/18 - 08/20/20 86,272
152,048 GNMA II, 10.50%, 09/20/15 - 02/20/21 165,639
------------
Total Government National Mortgage
Association (GNMA)
(Cost $20,659,896) 20,982,356
------------
Short Term Investments
a,bReceivables from Repurchase Agreements7.0%
1,514,841 Joint Repurchase Agreement, 5.75%, 01/02/96
(Cost $1,576,650)
Bear Stearns & Co., Inc. (Maturity Value $240,140)
Collateral: U.S. Treasury Notes, 5.75% - 8.875%,
2/29/96 - 08/31/00
Daiwa Securities America, Inc.
(Maturity Value $136,816)
Collateral: U.S. Treasury Bills, 08/22/96
U.S. Treasury Notes, 5.125% -
6.25%, 08/31/96 - 06/30/98
Donaldson, Lufkin & Jenrette
(Maturity Value $240,140)
Collateral: U.S. Treasury Notes, 5.125% -
8.75%, 03/31/97 - 11/30/99
Fuji Government Securities
(Maturity Value $240,140)
Collateral: U.S. Treasury Notes, 7.50%,
12/31/96 - 10/31/99
Lehman Government Securities, Inc
(Maturity Value $240,140)
Collateral: U.S. Treasury Notes, 5.75% -
8.75%, 09/30/97 - 09/30/00
Swiss Bank Corp. (Maturity Value $240,140)
Collateral: U.S. Treasury Notes,
7.50%, 10/31/99
UBS Securities, Inc. (Maturity Value $240,140)
Collateral: U.S. Treasury Notes, 6.75% -
7.75%, 04/30/97 - 01/31/00
Total Short Term Investments 1,576,650
------------
Total Investments
(Cost $22,236,546) 100.3% 22,559,006
Liabilities in Excess of
Other Assets, Net (0.3)% (67,893)
------------
Net Assets 100.0% $22,491,113
------------
At December 31, 1995, the net unrealized
appreciation based on the cost of investments
for income tax purposes of $22,236,546
was as follows:
Aggregate gross unrealized appreciation for
all investments in which there was an excess
of value over tax cost $ 397,575
Aggregate gross unrealized depreciation for
all investments in which there was an excess
of tax cost over value (75,115)
------------
Net unrealized appreciation $ 322,460
------------
PORTFOLIO ABBREVIATION:
SF - Single Family
aFace amount for repurchase agreements is for the underlying collateral.
bSee Note 1 (e) regarding Joint Repurchase Agreement.
cSee Note 1 (f) regarding securities purchased on a delayed delivery basis
The accompanying notes are an integral part of these financial statements.
Franklin Government Securities Trust
Statement of Assets and Liabilities
December 31, 1995
ASSETS:
Investments in securities, at value
(identified cost $20,659,896) $20,982,356
Receivables from repurchase
agreements, at value and cost 1,576,650
Cash 4,579
Receivables:
Interest 129,143
Investment securities sold 14,215
Capital shares sold 259,539
------------
Total assets 22,966,482
------------
LIABILITIES:
Payables:
Investment securities purchased - delayed delivery 444,730
Management fees 10,824
Accrued expenses and other liabilities 19,815
------------
Total liabilities 475,369
------------
NET ASSETS, at value $22,491,113
------------
Net assets consist of:
Undistributed net investment income $ 1,246,586
Net unrealized appreciation on investments 322,460
Accumulated net realized loss (129,499)
Capital shares 16,853
Additional paid-in capital 21,034,713
------------
Net assets, at value $22,491,113
------------
Shares outstanding 1,685,270
------------
NET ASSET VALUE per share ($22,491,113 / 1,685,270) $13.35
------------
Statement of Operations
for the year ended December 31, 1995
INVESTMENTINCOME:
Interest $1,361,244
------------
Expenses:
Management fees (Note 5) $114,871
Professional fees 21,756
Custodian fees 1,612
Reports to shareholders 277
Other 849
Payments from Manager (Note 5) (24,745)
------------
Total expenses 114,620
------------
Net investment income 1,246,624
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss (21,303)
Net unrealized appreciation during the year 1,661,836
------------
Net realized and unrealized gain on investments 1,640,533
------------
Net increase in net assets resulting from operations $2,887,157
------------
Statements of Changes in Net Assets
for the years ended December 31, 1995 and 1994
1995 1994
-------- --------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 1,246,624 $ 1,086,914
Net realized loss on investments (21,303) (58,583)
Net unrealized appreciation (depreciation)
on investments 1,661,836 (1,667,828)
-------- --------
Net increase (decrease) in net assets
resulting from operations 2,887,157 (639,497)
Distributions to shareholders:
From undistributed net investment income (1,086,914) (953,810)
Increase in net assets from capital share
transactions (Note 2) 5,448,492 267,789
-------- --------
Net increase (decrease) in net assets 7,248,735 (1,325,518)
Net assets:
Beginning of year 15,242,378 16,567,896
-------- --------
End of year (including undistributed net
investment income of $1,246,586 - 1995;
and $1,086,876 - 1994) $22,491,113 $15,242,378
-------- --------
The accompanying notes are an integral part of these financial statements.
Franklin Government Securities Trust
Notes to Financial Statements
1. Significant Accounting Policies
Franklin Government Securities Trust (the Trust) is an open-end, diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended. Shares of the Trust are sold only to a separate
account of Aetna Life Insurance and Annuity Company (Aetna) to fund the benefits
of variable annuity contracts issued by Aetna.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:Portfolio securities listed on a securities exchange
or on the NASDAQ for which market quotations are readily available are valued at
the last sale price or, if there is no sale price, within the range of the most
recent quoted bid and asked prices. Other securities are valued based on a
variety of factors, including yield, risk, maturity, trade activity and recent
developments related to the securities. The Fund may utilize a pricing service,
bank or broker/dealer experienced in such matters to perform any of the pricing
functions, under procedures approved by the Board of Trustees (the Board).
Securities for which market quotations are not available are valued in
accordance with procedures established by the Board.
b. Income Taxes:The Trust intends to continue to qualify for the tax
treatment applicable to regulated investment companies under the Internal
Revenue Code and to make the requisite distributions to its shareholders which
will be sufficient to relieve it from income and excise taxes.
c. Security Transactions:Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Realized gains and
losses on security transactions are determined on the basis of specific
identification.
d. Investment Income, Expenses and Distributions:Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily.
e. Repurchase Agreements:The Fund may enter into a joint repurchase
agreement whereby its uninvested cash balance is deposited into a joint cash
account to be used to invest in one or more repurchase agreements with
government securities dealers recognized by the Federal Reserve Board and/or
member banks of the Federal Reserve System. The value and face amount of the
joint repurchase agreement are allocated to the Fund based on its pro-rata
interest. A repurchase agreement is accounted for as a loan by the Fund to the
seller, collateralized by underlying U.S. government securities, which are
delivered to the Fund's custodian. The market value, including accrued interest,
of the initial collateralization is required to be at least 102% of the dollar
amount invested by the Fund, with the value of the underlying securities marked
to market daily to maintain coverage of at least 100%. At December 31, 1995, all
outstanding repurchase agreements held by the Fund had been entered into on
December 29, 1995.
f. Securities Purchased on a When-Issued or Delayed Delivery:The Fund may
trade securities on a when-issued or delayed delivery basis, with payment and
delivery scheduled for a future date. These transactions are subject to market
fluctuations and are subject to the risk that the value at delivery may be more
or less than the trade date purchase price. Although the Fund will generally
purchase these securities with the intention of holding the securities, it may
sell the securities before the settlement date. These securities are identified
on the accompanying Statement of Investments in Securities and Net Assets. The
Fund has set aside sufficient investment securities as collateral for these
purchase commitments.
2. Trust Shares
At December 31, 1995, there was an unlimited number of $.01 par value shares
authorized. Transactions in the Trust's shares for the years ended December 31,
1995 and 1994 were as follows:
Year Ended December 31,
--------------------------------------
1995 1994
-------------------- --------------------
Shares Amount Shares Amount
------- --------- ------- ---------
Shares sold 550,647 $7,098,487 482,593 $ 6,053,218
Shares issued
in reinvest-
ment of dis-
tributions 85,651 1,086,914 78,827 953,810
Shares
redeemed (215,498) (2,736,909) (542,950) (6,739,239)
------- --------- ------- ---------
Net increase 420,800 $5,448,492 18,470 $ 267,789
======= ========= ======= =========
3. Capital Loss Carryovers
At December 31, 1995, for tax purposes, the Trust had capital loss carryovers as
follows:
Expiring in: 2001 $ 49,613
2002 58,583
2003 21,303
-------
$129,499
=======
The aggregate cost of securities and unrealized appreciation of the Trust are
the same for tax purposes as for financial statement purposes at December 31,
1995.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended December 31, 1995 aggregated $6,626,682 and
$1,293,165, respectively.
5. Transactions with Affiliates and Related Parties
Franklin Advisers, Inc., (Advisers) under the terms of a management agreement,
provides investment advice, administrative services, office space and facilities
to the Trust, and receives fees computed daily at an annualized rate of 5/8 of
1% of the first $100 million of net assets of the Fund; 1/2 of 1% of the net
assets in excess of $100 million up to $250 million, 45/100 of 1% of net assets
in excess of $250 million up to $10 billion, 44/100 of 1% of net assets in
excess of $10 billion up to $12.5 billion, 42/100 of 1% of net assets in excess
of $12.5 billion up to $15 billion and 40/100 of 1% of net assets in excess of
$15 billion.
The terms of the management agreement provide that annual aggregate
expenses of the Trust be limited to the extent necessary to comply with the
limitations set forth in the laws, regulations and administrative
interpretations of the states in which the Trust's shares are registered. For
the year ended December 31, 1995, the Trust's expenses did not exceed these
limitations; however, Advisers agreed in advance to waive $24,745 of the
management fees.
The management agreement between the Trust and Advisers includes a
distribution plan pursuant to Rule 12b-1 under the Investment Company Act of
1940. However, no payments were made by the Trust as a result of the plan for
the year ended December 31, 1995.
6. Financial Highlights
Selected data for each share of beneficial interest outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Period Ended December 31,
---------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $12.05 $13.30 $13.26 $13.01 $11.72
-------- -------- -------- -------- --------
Net investment income 0.67 0.85 0.65 0.80 0.61
Net realized & unrealized gain (loss)
on securities 1.4216 (1.3463) 0.3385 0.1602 1.1939
-------- -------- -------- -------- --------
Total from investment operations 2.0916 (0.4963) 0.9885 0.9602 1.8039
-------- -------- -------- -------- --------
Less distributions:
Dividends from undistributed net
investment income (0.7916) (0.7537) (0.7459) (0.7102) (0.5139)
Distributions from net capital gains -- -- (0.2026) -- --
-------- -------- -------- -------- --------
Total distributions (0.7916) (0.7537) (0.9485) (0.7102) (0.5139)
-------- -------- -------- -------- --------
Net asset value at end of period $13.35 $12.05 $13.30 $13.26 $13.01
======== ======== ======== ======== ========
Total Return* 17.70% -3.75% 7.59% 7.66% 15.87%
Ratios/Supplemental Data
Net assets at end of period (in 000's) $22,491 $15,242 $16,568 $11,815 $8,641
Ratio of expenses to average net assets 0.62% 0.63% 0.62% 0.29% --%
Ratio of expenses to average net assets
(excluding waiver and payments by
Manager) - Note 5 0.76% 0.78% 0.83% 0.92% 1.22%
Ratio of net investment income to
average net assets 6.78% 6.85% 6.68% 7.75% 8.74%
Portfolio turnover rate 7.50% 13.97% 39.02% 49.71% 7.00%
</TABLE>
*Total return measures the change in value of an investment over the periods
indicated. It assumes reinvestment of dividends and capital gains, if any, at
net asset value.
FRANKLIN GOVERNMENT SECURITIES TRUST
File Nos. 33-26051
811-5709
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a) Financial Statements filed in Part B.
(i) Report of Independent Auditors - February 1, 1996
(ii) Statement of Investment in Securities and Net Assets,
December 31, 1995
(iii) Statement of Assets and Liabilities, December 31, 1995
(iv) Statement of Operations for the year ended December 31, 1995
(v) Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
(vi) Notes to Financial Statements
(b) Exhibits:
The following exhibits are attached, except 8(ii), which
is incorporated by reference to the filing as noted:
(1) copies of the charter as now in effect;
(i) Agreement and Declaration of Trust
dated October 21, 1988
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws dated October 21, 1988
(3) copies of any voting trust agreement with respect to more
than five percent of any class of equity securities of the
Registrant;
Not Applicable
(4) specimens or copies of each security issued by the
Registrant, including copies of all constituent
instruments, defining the rights of the holders of such
securities, and copies of each security being registered;
Not Applicable
(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Management Agreement between Registrant and Franklin
Advisers, Inc. dated February 15, 1989
(6) copies of each underwriting or distribution contract between
the Registrant and a principal underwriter, and specimens
or copies of all agreements between principal underwriters
and dealers;
Not Applicable
(7) 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
(8) copies of all custodian agreements and depository contracts
under Section 17(f) of the 1940 Act, with respect to
securities and similar investments of the Registrant,
including the schedule of renumeration;
(i) Custodian Agreement between Registrant and Bank of
America NT & SA dated February 15, 1989
(ii) Copy of Custodian Agreements between Registrant and
Citibank Delaware:
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master Agreement
3. Short Form Bank Agreement - Deposits and
Disbursements of Funds
Incorporated herein by reference to:
Registrant: Franklin Premier Return Fund
Filing: Post Effective Amendment No. 54 to
Registration on Form N-1A
File No. 2-12647
Filing Date: February 27, 1995
(iii)Amendment to Custodian Agreement between Registrant
and Bank of America NT & SA dated April 12, 1995
(iv) Master Custodian Agreement between Registrant and
Bank of New York dated February 16, 1996
(v) Terminal Link Agreement between Registrant and Bank of
New York dated February 16, 1996
(9) copies of all other material contracts not made in the
ordinary course of business which are to be performed in
whole or in part at or after the date of filing the
Registration Statement;
Not Applicable
(10) an opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will
when sold be legally issued, fully paid and nonassessable;
(i) Opinion and Consent of Counsel dated January 31, 1989
(11) copies of any other opinions, appraisals or rulings and
consents to the use thereof relied on in the preparation of
this registration statement and required by Section 7 of
the 1933 Act;
(i) Consent of Independent Auditors
(12) all financial statements omitted from Item 23;
Not Applicable
(13) copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Registrant, the underwriter, adviser, promoter or
initial stockholders and written assurances from promoters
or initial stockholders that their purchases were made for
investment purposes without any present intention of
redeeming or reselling;
N/A
(14) copies of the model plan used in the establishment of any
retirement plan in conjunction with which Registrant offers
its securities, any instructions thereto and any other
documents making up the model plan. Such form(s) should
disclose the costs and fees charged in connection therewith;
Not Applicable
(15) copies of any plan entered into by Registrant pursuant to
Rule 12b-1 under the 1940 Act, which describes all material
aspects of the financing of distribution of Registrant's
shares, and any agreements with any person relating to
implementation of such plan.
(i) Rule 12b-1 Plan (included in Management Agreement -
Exhibit 5(i))
(16) schedule for computation of each performance quotation
provided in the registration statement in response to Item
22 (which need not be audited).
Not Applicable
(17) Power of Attorney
(i) Power of Attorney dated February 16, 1995
(ii) Certificate of Secretary dated February 16, 1995
(27) Financial Data Schedule
(i) Financial Data Schedule
Item 25 Persons Controlled by or under Common Control with Registrant
As of the date of this Post-Effective Amendment, the Separate Account of
Aetna Life Insurance and Annuity Company owned 100% of the issued and
outstanding shares of the Registrant.
Item 26 Number of Holders of Securities
As of the date of this Post-Effective Amendment, there is one shareholder of
record of Registrant's shares.
Item 27 Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court or 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.
Not withstanding the provisions contained in the Registrant's By-Laws, in the
absence of authorization by the appropriate court on the merits pursuant to
Sections 4 and 5 of Article VI of said By-Laws, any indemnification under
said Article shall be made by Registrant only if authorized in the manner
provided in either subsection (a) or (b) or Section 6 of Article VI.
Item 28 Business and Other Connections of Investment Adviser
The officers and directors of the Registrant's investment adviser, Franklin
Advisers, Inc., also serve as officers and/or directors or trustees for (1)
the adviser's corporate parent, Franklin Resources, Inc., and/or (2) other
investment companies in the Franklin Group of Funds.. For additional
information, please see Part B and Schedule A and D of Form ADV of Franklin
Advisers, Inc. (The SEC File No. 801-26292) incorporated herein by reference.
Item 29 Principal Underwriters
Not applicable. Registrant does not have a principal underwriter.
Item 30 Location of Accounts and Records
The accounts, books or other documents required to be maintained by Section
31 (a) of the Investment Company Act of 1940 are kept by the Registrant or
its shareholder services agent, Franklin/Templeton Investor Services, Inc.,
at their respective principal business offices, both of whose address is 777
Mariners Island Blvd., San Mateo, CA. 94404.
Item 31 Management Services
There are no management-related service contracts not discussed in Part A or
Part B.
Item 32 Undertakings
The Registrant hereby undertakes to comply with the information requirement
in Item 5A of the Form N-1A by including the required information in the
Fund's annual report and to furnish each person to whom a prospectus is
delivered a copy of the annual report upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of San Mateo and the State of California, on the 28th day of February
1996.
FRANKLIN GOVERNMENT SECURITIES TRUST
(Registrant)
By: Rupert H. Johnson, Jr.*
Rupert H. Johnson, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Rupert H. Johnson, Jr.* Chief Executive Officer and Trustee
Rupert H. Johnson, Jr. Dated: February 28, 1996
Martin L. Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: February 28, 1996
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: February 28, 1996
Frank H. Abbott III* Trustee
Frank H. Abbott III Dated: February 28, 1996
Harris J. Ashton* Trustee
Harris J. Ashton Dated: February 28, 1996
Harmon E. Burns* Trustee
Harmon E. Burns Dated: February 28, 1996
S. Joseph Fortunato* Dated: February 28, 1996
S. Joseph Fortunato
David W. Garbellano* Trustee
David W. Garbellano Dated: February 28, 1996
Charles B. Johnson* Trustee
Charles B. Johnson Dated: February 28, 1996
Frank W.T. LaHaye* Trustee
Frank W.T. LaHaye Dated: February 28, 1996
Gordon S. Macklin* Trustee
Gordon S. Macklin Dated: February 28, 1996
*By /s/Karen L. Skidmore
(Attorney-in-Fact pursuant to Power of Attorney filed herewith)
FRANKLIN GOVERNMENT SECURITIES TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Agreement and Declaration of Trust Attached
dated October 21, 1988
EX-99.B2(i) By-Laws Attached
EX-99.B5(i) Management Agreement between Attached
Registrant and Franklin Advisers,
Inc. dated February 15, 1989
EX-99.B8(i) Custodian Agreement between Attached
Registrant and Bank of America NT &
SA dated February 15, 1989
EX-99.B8(ii) Custodian Agreements between *
Registrant and Citibank Delaware
EX-99.B8(iii) Amendment to Custodian Agreement Attached
between Registrant and Bank of
America NT and SA, dated April 12,
1995
EX-99.B8(iv) Master Custodian Agreement between Attached
Registrant and Bank of New York
dated February 16, 1996
EX-99.B8(v) Terminal Link Agreement between Attached
Registrant and Bank of New York,
dated February 16, 1996
EX-99.B10(i) Opinion and consent of counsel Attached
dated January 31, 1989
EX-99.B11(i) Consent of Independent Auditors Attached
EX-99.B15(i) Rule 12b-1 Plan included in Attached
Management Agreement Ex-99.5(i)
EX-99.B17(i) Power of Attorney dated February Attached
16, 1995
EX-99.B17(ii) Certificate of Secretary dated Attached
February 16, 1995
EX-99.B27(i) Financial Data Schedule Attached
* Incorporated by Reference
AGREEMENT AND DECLARATION OF TRUST
Of
FRANKLIN GOVERNMENT SECURITIES TRUST
a Massachusetts Business Trust
Dated: October 21, 1988
TABLE OF CONTENTS
FRANKLIN GOVERNMENT SECURITIES TRUST
AGREEMENT AND DECLARATION OF TRUST
ARTICLE I Name and Definitions
1. Name
2. Definitions
(a) Trust
(b) Trust Property
(c) Trustees
(d) Shares
(e) Shareholder
(f) Person
(g) 1940 Act
(h) Commission and Principal Underwriter
(i) Declaration of Trust
(j) By-Laws
(k) Interested Person
(1) Investment Manager
(m) Series Company
(n) Series
ARTICLE II Purpose of Trust
ARTICLE III Shares
1. Division of Beneficial Interest
2. Ownership of Shares
3. Investments in the Trust
4. Status of Shares and Limitation of Personal Liability
5. Power of Board of Trustees to Change Provisions Relating to Shares
6. Establishment and resignation
(a) Assets Belonging to Series
(b) Liabilities Belonging to Series
(c) Dividends, Distributions, Redemptions, and Repurchases
(d) Voting
(e) Equality
(f) Fractions
(g) Exchange Privilege
(h) Combination of Series
(i) Elimination of Series
7. Indemnification of Shareholders
ARTICLE IV The Trustees
1. Number, Election and Tenure
2. Effect of Death, Resignation, etc. of a Trustee
3. Powers
4. Payment of Expenses by the Trust
5. Payment of Expenses by Shareholders
6. Ownership of Assets of the Trust
7. Service Contracts
ARTICLE V Shareholders' Voting Powers and Meetings
1. Voting Powers
2. Voting Power and Meetings
3. Quorum and Required Vote
4. Action by Written Consent
5. Record Dates
6. Additional Provisions
ARTICLE VI Net Asset Value, Distributions, and Redemptions
1. Determination of Net Asset Value, Net Income and Distributions
2. Redemptions and Repurchases
3. Redemptions at the Option of Trust
ARTICLE VII Compensation and Limitation of
Liability of Trustees
1. Compensation
2. Limitation of Liability
3. Indemnification
ARTICLE VIII Miscellaneous
1. Trustees, Shareholders, etc. Not Personally Liable; Notice
2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety
3. Liability of Third Persons Dealing with Trustees
4. Termination of Trust or Series
5. Merger and Consolidation
6. Filing of Copies, References, Headings
7. Applicable Law
8. Provisions in Conflict with Law or Regulations
9. Amendments
10.Trust Only
11.Use of the Name "Franklin"
AGREEMENT AND DECLARATION OF TRUST
OF
FRANKLIN GOVERNMENT SECURITIES TRUST
THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as of
this 21st day of October, 1988 by the Trustees named hereunder.
WHEREAS the Trustees desire and have agreed to manage all property coming
into their hands as trustees of a Massachusetts business trust in accordance
with the provisions hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that this Agreement and
Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and do hereby declare that they will hold all cash, securities and
other assets, which they may from time to time acquire in any manner as Trustees
hereunder, IN TRUST, and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares in this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as the FRANKLIN GOVERNMENT
SECURITIES TRUST and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(c) "Trustees" refers to the persons who have signed this Agreement and
Declaration of Trust, so long as they continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly elected or
appointed to serve on the Board of Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in their capacity as trustees hereunder;
(d) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;
(e) "Shareholder" means a record owner of outstanding Shares;
(f) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof,
whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(h) The terms "Commission" and "Principal Underwriter" shall have the
meanings given them in the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time;
(k) The term "Interested Person" has the meaning given it in Section
2(a)(19) of the 1940 Act.
(1) "Investment Manager" means a party furnishing services to the Trust
pursuant to any contract described in Article IV, Section 7(a) hereof.
(m) "Series Company" refers to the form of registered open-end investment
company described in Section 18(f)(2) of the 1940 Act or in any successor
statutory provision; and
(n) "Series" refers to each Series of Shares established and designated
under or in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the business
of a managed investment company registered under the 1940 Act through one or
more portfolios invested primarily in securities.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into an unlimited number of Shares, with a
par value of $ .01 per Share. The Trustees may authorize the division of Shares
into separate Series, and the different Series shall be established and
designated, and the variations in the relative rights and preferences as between
the different Series shall be fixed and determined, by the Trustees. If no
Series shall be established, the Shares shall have the rights and preferences
provided for herein or in Article III, Section 6 hereof to the extent relevant
and not otherwise provided for herein.
Subject to the provisions of Section 6 of this Article III, each Share
shall have voting rights as provided in Article V hereof, and holders of the
Shares of any Series shall be entitled to receive dividends, when and as
declared with respect thereto in the manner provided in Article VI, Section 1
hereof. No Shares shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon termination of
the Trust or of such Series made pursuant to Article VIII, Section 4 hereof. All
dividends and distributions shall be made ratably among all Shareholders of a
particular Series from the assets belonging to such Series according to the
number of Shares of such Series held of record by such Shareholder on the record
date for any dividend or distribution or on the date of termination, as the case
may be. Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust or any Series. The
Trustees may from time to time divide or combine the Shares of any particular
Series into a greater or lesser number of Shares of that Series without thereby
changing the proportionate beneficial interest of the Shares of that Series in
the assets belonging to that Series or in any way affecting the rights of Shares
of any other Series.
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series. No
certificates certifying the ownership of Shares shall be issued except as the
Board of Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the transfer of Shares of each
Series and similar matters. The record books of the Trust as kept by the Trust
or any transfer or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders of each Series and as to the number of Shares of each
Series held from time to time by each.
Section 3. Investments in the Trust. The Trustees may accept
investments in the Trust from such Persons, at such times, on such terms, and
for such consideration as they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the existence of the
Trust shall not operate to terminate the Trust, nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but entitles such representative
only to the rights of said deceased Shareholder under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust Property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders as partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholders, nor, except as specifically provided herein, to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
Section 5. Power of Board of Trustees to Change Provisions Relating to
Shares. Notwithstanding any other provision of this Declaration of Trust and
without limiting the power of the Board of Trustees to amend the Declaration of
Trust as provided elsewhere herein, the Board of Trustees shall have the power
to amend this Declaration of Trust, at any time and from time to time, in such
manner as the Board of Trustees may determine in their sole discretion, without
the need for Shareholder action, so as to add to, delete, replace or otherwise
modify any provisions relating to the Shares contained in this Declaration of
Trust, provided that before adopting any such amendment without Shareholder
approval the Board of Trustees shall determine that it is consistent with the
fair and equitable treatment of all Shareholders or that Shareholder approval is
not otherwise required by the 1940 Act or other applicable law.
Without limiting the generality of the foregoing, the Board of Trustees
may, for the above-stated purposes, amend the Declaration of Trust to amend any
of the provisions set forth in paragraphs (a) through (i) of Section 6 of this
Article III.
Section 6. Establishment and Designation of Series. The establishment and
designation of any Series of Shares shall be effective upon the resolution by a
majority of the then Trustees, setting forth such establishment and designation
and the relative rights and preferences of such Series, or as otherwise provided
in such resolution.
Shares of each Series established pursuant to this Section 6, unless
otherwise provided in the resolution establishing such Series, shall have the
following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as they, in their
sole discretion, deem fair and equitable, and any General Asset so allocated to
a particular Series shall belong to that Series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust in respect
to that Series and all expenses, costs, charges and reserves attributable to
that Series, and any general liabilities of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges, and reserves so charged to
a Series are herein referred to as "liabilities belonging to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for all purposes.
Under no circumstances shall the assets allocated or belonging to any particular
Series be charged with liabilities attributable to any other Series. All Persons
who have extended credit which has been allocated to a particular Series, or who
have a claim or contract which has been allocated to any particular Series,
shall look only to the assets of that particular Series for payment of such
credit, claim, or contract.
(c) Dividends, Distributions, Redemptions, and
Repurchases. Notwithstanding any other provisions of this
Declaration of Trust, including, without limitation, Article VI, no dividend or
distribution (including, without limitation, any distribution paid upon
termination of the Trust or of any Series) with respect to, nor any redemption
or repurchase of, the Shares of any Series shall be effected by the Trust other
than from the assets belonging to such Series, nor, except as specifically
provided in Section 7 of this Article III, shall any Shareholder of any
particular Series otherwise have any right or claim against the assets belonging
to any other Series except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a matter shall
vote separately by Series. That is, the Shareholders of each Series shall have
the right to approve or disapprove matters affecting the Trust and each
respective Series as if the Series were separate companies. There are, however,
two exceptions to voting by separate Series. First, if the 1940 Act requires all
Shares of the Trust to be voted in the aggregate without differentiation between
the separate Series, then all the Trust's Shares shall be entitled to vote on a
one-vote-per-Share basis. Second, if any matter affects only the interests of
some but not all Series, then only the Shareholders of such affected Series
shall be entitled to vote on the matter.
(e) Equality. All the Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to provide
that the holders of Shares of any Series shall have the right to exchange said
Shares for Shares of one or more other Series of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
(h) Combination of Series. The Trustees shall have the authority, without
the approval of the Shareholders of any Series unless otherwise required by
applicable law, to combine the assets and liabilities belonging to any two or
more Series into assets and liabilities belonging to a single Series.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may by resolution of a majority of the then Trustees abolish that
Series and rescind the establishment and designation thereof.
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his or her heirs, executors, administrators, or other legal representatives or
in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the Trust to be held harmless
from and indemnified against all loss and expense arising from such liability.
ARTICLE IV
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a written
instrument signed or by resolution approved at a duly constituted meeting by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one nor more than 15. The Board of
Trustees, by action of a majority of the then Trustees at a duly constituted
meeting, may fill vacancies in the Board of Trustees or remove Trustees with or
without cause. Each Trustee shall serve during the continued lifetime of the
Trust until he dies, resigns, is declared bankrupt or incompetent by a court of
appropriate jurisdiction, or is removed, or, if sooner, until the next meeting
of Shareholders called for the purpose of electing Trustees and until the
election and qualification of his successor. Any Trustee may resign at any time
by written instrument signed by him and delivered to any officer of the Trust or
to a meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee resigning
and no Trustee removed shall have any right to any compensation for any period
following his resignation or removal, or any right to damages on account of such
removal. The Shareholders may fix the number of Trustees and elect Trustees at
any meeting of Shareholders called by the Trustees for that purpose.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of one or more
Trustees, or all of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled as provided in Article IV, Section 1, the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.
As conclusive evidence of such vacancy, a written instrument certifying the
existence of such vacancy may be executed by an officer of the Trust or by a
majority of the Board of Trustees. In the event of the death, declination,
resignation, retirement, removal, or incapacity of all the then Trustees within
a short period of time and without the opportunity for at least one Trustee
being able to appoint additional Trustees to fill vacancies, the Trust's
investment adviser or investment advisers jointly, if there is more than one,
are empowered to appoint new Trustees subject to the provisions of Section i6(a)
of the 1940 Act.
Section 3. Powers. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Board of Trustees, and such
Board shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in securities transactions of all
kinds on behalf of the Trust. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
regulation and management of the affairs of the Trust and may amend and repeal
them to the extent that such By-Laws do not reserve that right to the
Shareholders; fill vacancies in or remove from their number, and may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees consisting of two or more Trustees which may exercise the powers
and authority of the Board of Trustees to the extent that the Trustees
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing
agent, or both; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; set record dates for
the determination of Shareholders with respect to various matters; declare and
pay dividends and distributions to Shareholders of each Series from the assets
of such Series; and in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian, transfer or
shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees.
Without limiting the foregoing, the Board of Trustees shall have power and
authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to subscribe
for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge,
sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons, to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust;
(c) To vote, or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and right of subscription or otherwise which in any
manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in its own name or
in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depository, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depository or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depository or trustee as the Trustees shall deem
proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(j) To borrow funds or other property in the name of the Trust exclusively
for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other obligations
of any Person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof;
(1) To purchase and pay for entirely out of Trust Property such insurance
as they may deem necessary or appropriate for the conduct of the business,
including, without limitation, insurance policies insuring the assets of the
Trust or payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, principal underwriters, or independent contractors
Of the Trust, individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any such
Person as Trustee, officer, employee, agent, investment adviser, principal
underwriter, or independent contractor, including any action taken or omitted
that may be determined to constitute negligence, whether or not the Trust would
have the power to indemnify such Person against liability; and
(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trustees shall not in any way be bound or limited by any present or future law
or custom in regard to investment by fiduciaries. The Trustees shall not be
required to obtain any court order to deal with any assets of the Trust or take
shy other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are authorized
to pay or cause to be paid out of the principal or income of the Trust, or
partly out of the principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditors, counsel, custodian, transfer agent, Shareholder
servicing agent, and such other agents or independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer, Shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees as joint
tenants except that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the Trustees, or
in the name of the Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who may
hereafter become a Trustee. Upon the resignation, removal or death of a Trustee
he shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set forth in
the By-Laws, the Trustees may, at any time and from time to time, contract for
exclusive or nonexclusive advisory, management and/or administrative services
for the Trust or for any Series with any corporation, trust, association or
other organization; and any such contract may contain such other terms as the
Trustees may determine, including without limitation, authority for the
Investment Manager, Investment Adviser or Administrator to determine from time
to time without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be delegated to such
party.
(b) The Trustees may also, at any time and from time to time, contract
with any corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or Principal Underwriter for the Shares of
one or more of the Series. Every such contract shall comply with such
requirements and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to time, to
contract with any corporations, trusts, associations or other organizations,
appointing it or them the custodian, transfer agent and/or shareholder servicing
agent for the Trust or one or more of its Series. Every such contract shall
comply with such requirements and restrictions as may be set forth in the
By-Laws or stipulated by resolution of the Trustees.
(d) The Trustees are further empowered, at any time and from time to time,
to contract with any entity to provide such other services to the Trust or one
or more of the Series, as the Trustees determine to be in the best interests of
the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter, distributor, or affiliate or agent of or
for any corporation, trust, association, or other organization, or for any
parent or affiliate of any organization with which an advisory, management
or administration contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other type of service
contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder or has
an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory, management or administration contract or principal
underwriter's or distributor's contract, or transfer, shareholder
servicing or other type of service contract may have been or may hereafter
be made also has an advisory, management or administration contract, or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other service contract with one or more other
corporations, trust, associations, or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article III,
Section 6(d), the Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article IV, Section 1, (ii) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, (iii) with respect to the termination of the Trust or any Series
to the extent and as provided in Article VIII, Section 4, and (iv) with respect
to such additional matters relating to the Trust as may be required by this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held is the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. At any time when no Shares of a
Series are outstanding, the Trustees may exercise all rights of Shareholders of
that Series with respect to matters affecting that Series, take any action
required by law, this Declaration of Trust or the By-Laws, to be taken by the
Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may be
called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven (7) days
before such meeting, postage prepaid, stating the time and place of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
forty percent (40%) of the Shares entitled to vote shall constitute a quorum at
a Shareholders' meeting. When any one or more Series is to vote as a single
class separate from any other Shares which are to vote on the same matters as a
separate class or classes, forty percent (40%) of the Shares of each such Series
entitled to vote shall constitute a quorum at a Shareholder's meeting of that
Series. Any meeting of Shareholders may be adjourned from time to time by a
majority of the votes properly cast upon the question of adjourning a meeting to
another date and time, whether or not a quorum is present, and the meeting may
be held as adjourned within a reasonable time after the date set for the
original meeting without further notice. Subject to the provisions of Article
III, Section 6(d), when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality shall elect a Trustee,
except when a larger vote is required by any provision of this Declaration of
Trust or the By-Laws or by applicable law.
Section 4. Action by, Written Consent. Any action taken by Shareholders
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the
By-Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series entitled to vote separately on the matter consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the Shareholders
of any Series who are entitled to vote or act at any meeting or any adjournment
thereof, the Trustees may from time to time fix a time, which shall be not more
than ninety (90) days before the date of any meeting of Shareholders, as the
record date for determining the Shareholders of such Series having the right to
notice of and to vote at such meeting and any adjournment thereof, and in such
case only Shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after the
record date. For the purpose of determining the Shareholders of any Series who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a date, which shall be before the date
for the payment of such dividend or such other payment, as the record date for
determining the Shareholders of such Series having the right to receive such
dividend or distribution. Without fixing a record date the Trustees may for
voting and/or distribution purposes close the register or transfer books for one
or more Series for all or any part of the period between a record date and a
meeting of Shareholders or the payment of a distribution. Nothing in this
Section shall be construed as precluding the Trustees from setting different
record dates for different Series.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions, and Redemptions
Section 1. Determination of Net Asset Value, Net Income, and
Distributions. Subject to Article III, Section 6 hereof, the Trustees, in their
absolute discretion, may prescribe and shall set forth in the By-laws or in a
duly adopted vote of the Trustees such bases and time for determining the per
Share or net asset value of the Shares of any Series or net income attributable
to the Shares of any Series, or the declaration and payment of dividends and
distributions on the Shares of any Series, as they may deem necessary or
desirable.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or a Person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, in accordance with the By-Laws and applicable law. Payment for said
Shares shall be made by the Trust to the Shareholder within seven days after
the. date on which the request is made in proper form. The obligation set forth
in this Section 2 is subject to the provision that in the event that any time
the New York Stock Exchange is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets belonging to such Series or during any other
period permitted by order of the Commission for the protection of investors,
such obligations may be suspended or postponed by the Trustees.
The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Series-for which the Shares are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any corporation or other Person
in transferring securities selected for delivery as all or part of any payment
in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i) if
at such time such Shareholder owns Shares of any Series having an aggregate net
asset value of less than an amount determined from time to time by the Trustees
prior to the acquisition of said Shares; or (ii) to the extent that such
Shareholder owns Shares of a particular Series equal to or in excess of a
percentage of the outstanding Shares of that Series determined from time to time
by the Trustees; or (iii) to the extent that such Shareholder owns Shares equal
to or in excess of a percentage, determined from time to time by the Trustees,
of the outstanding Shares of the Trust or of any Series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as. such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be responsible
or liable in any event for any neglect or wrong-doing of any officer, agent,
employee, manager or Principal Underwriter of the Trust, nor shall any Trustee
be responsible for the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which he would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
Section 3. Indemnification. The Trustees shall be entitled and empowered
to the fullest extent permitted by law to purchase with Trust assets insurance
for and to provide by resolution or in the By-Laws for indemnification out of
Trust assets for liability and for all expenses reasonably incurred or paid or
expected to be paid by a Trustee or officer in connection with any claim,
action, suit or proceeding in which he becomes involved by virtue of his
capacity or former capacity with the Trust. The provisions, including any
exceptions and limitations concerning indemnification, may be set forth in
detail in the By-Laws or in a resolution of the Board of Trustees.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice. All
Persons extending credit to, contracting with or having any claim against the
Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Trust by the Board of Trustees, by any officers or
officer or otherwise may include a notice that this Declaration of Trust is on
file with the Secretary of The Commonwealth of Massachusetts and may recite that
the note, bond, contract, instrument, certificate, or undertaking was executed
or made by or on behalf of the Trust or by them as Trustee or Trustees or as
officers or officer or otherwise and not individually and that the obligations
of such instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the Trust or
upon the assets belonging to the Series for the benefit of which the Trustees
have caused the note, bond, contract, instrument, certificate or undertaking to
be made or issued, and may contain such further recital as he or they may deem
appropriate, but the omission of any such recital shall not operate to bind any
Trustee or Trustees or officer or officers or Shareholders or any other person
individually.
Section 2. Trustee's Good Faith Action, Expert Advice, .No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable solely for his own
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and shall not be liable
for errors of judgment or mistakes of fact or law. The Trustees may take advice
of counsel or other experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act or omission in
accordance with such advice nor for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.
Section 3. Liability of Third Persons Dealing with Trustees. No Person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust or Series. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may be
terminated at any time by vote of at least two-thirds (66-2/3%) of the Shares of
each Series entitled to vote, voting .separately by Series, or by the Trustees
by written notice to the Shareholders. Any Series may be terminated at any time
by vote of at least two-thirds (66-2/3%) of the Shares of that Series or by the
Trustees by written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be), after
paying or otherwise providing for all charges, taxes, expenses and liabilities
belonging, severally, to each Series (or the applicable Series, as the case may
be), whether due or accrued or anticipated as may be determined by the Trustees,
the Trust shall, in accordance with such procedures as the Trustees consider
appropriate, reduce the remaining assets belonging, severally, to each Series
(or the applicable Series, as the case may be), to distributable form in cash or
shares or other securities, or any combination thereof, and distribute the
proceeds belonging to each Series (or the applicable Series, as the case may
be), to the Shareholders of that Series, as a Series, ratably according to the
number of Shares of that Series held by the several Shareholders on the date of
termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust or
one or more of its Series to be merged into or consolidated with another Trust
or company or the Shares exchanged under or pursuant to any state or Federal
statute, if any, or otherwise to the extent permitted by law. Such merger or
consolidation or Share exchange must be authorized by vote of a majority of the
outstanding Shares of the Trust, as a whole, or any affected Series, as may be
applicable; provided that in all respects not governed by statute or applicable
law, the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation.
Section 6. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made and as to any matters in connection with
the Trust hereunder; and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder", shall be deemed to refer to this instrument as amended
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. Whenever the singular
number is used herein, the same shall include the plural; and the neuter,
masculine and feminine genders shall include each other, as applicable. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
Section. 7. Applicable Law. This Agreement and Declaration of Trust is
created under and is to be governed by and construed and administered according
to the laws of The Commonwealth of Massachusetts. The Trust shall be of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Section 8. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration of Trust; provided, however, that such determination
shall not affect any of the remaining provisions of the Declaration of Trust or
render invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision Of the Declaration of Trust in any jurisdiction.
Section 9. Amendments. This Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the then Trustees.
Section 10. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment, or any form of legal relationship other than a trust.
Nothing in this Agreement and Declaration of Trust shall be construed to make
the Shareholders, either by themselves or with the Trustees, partners or members
of a joint stock association.
Section 11. Use of the Name "Franklin." Franklin Advisers, Inc., as the
proposed Manager of the Trust's assets, has consented to the use by the Trust of
the identifying word "Franklin" as part of the name of the Trust and in the name
of any Series of Shares. Such consent is conditioned upon the employment of the
Manager, or an affiliate of said Company, as Manager of the Trust and said
Series. The name or identifying words "Franklin" or any variation thereof may be
used from time to time in other connections and for other purposes by the
Manager or affiliated entities. The Manager has the right to require the Trust
to cease using "Franklin" in the name of the Trust and in the names of its
Series if the Trust and said Series cease to employ, for any reason, the
Manager, or an affiliate of said Company, as the Manager or adviser of the Trust
or such Series. Future names adopted by the Trust for itself and its Series
shall be the property of the Manager and its affiliates, and the use of such
names shall be subject to the same conditions set forth in this Section insofar
as such name or identifying words require the consent of the Manager.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the Trustees named below do hereby set their hands as
of the 21st day of October, 1988.
/s/ Frank H. Abbott, III /s/ Samuel G. Hanson
FRANK H. ABBOTT, III SAMUEL G. HANSON
/s/ Harris J. Ashton /s/ Henry L. Jamieson
HARRIS J. ASHTON HENRY L. JAMIESON
/s/ Jeremiah J. Bresnahan, Jr. /s/ Charles B. Johnson
JEREMIAH J. BRESNAHAN, JR. CHARLES B. JOHNSON
/s/ Zadoc W. Brown /s/ Rupert H. Johnson, Jr.
ZADOC W. BROWN RUPERT H. JOHNSON, JR.
/s/ David W. Garbellano /s/ Frank W.T. LaHaye
DAVID W. GARBELLANO FRANK W.T. LAHAYE
BY-LAWS
for the regulation, except as
otherwise provided by statute or
the Agreement and Declaration of Trust of
FRANKLIN GOVERNMENT SECURITIES TRUST
a Massachusetts Business Trust
Dated: October 21, 1988
TABLE OF CONTENTS
BY-LAWS
FRANKLIN GOVERNMENT SECURITIES TRUST
ARTICLE I Offices
1. Principal Office
2. Other Offices
ARTICLE II Meetings of Shareholders
1. Place of Meetings
2. Call of Meeting
3. Notice of Shareholders' Meeting
4. Manner of Giving Notice; Affidavit of Notice
5. Adjourned Meeting; Notice
6. Voting
7. Waiver of Notice of Consent of Absent Shareholders
8. Shareholder Action by Written Consent without a Meeting
9. Record Date for Shareholder Notice, Voting and Giving Consents
10.Proxies
11.Inspectors of Election
ARTICLE III Trustees
1. Powers
2. Number and qualification of Trustees
3. Vacancies
4. Place of Meetings and Meetings by Telephone
5. Regular Meetings
6. Special Meetings
7. Quorum
8. waiver of Notice
9. Adjournment
10.Notice of Adjournment
11.Action Without a Meeting
12.Fees and Compensation of Trustees
13.Delegation of Power to Other Trustees
ARTICLE IV Committees
1. Committees of Trustees
2. Meetings and Action of Committees
ARTICLE V Officers
1. Officers
2. Election of Officers
3. Subordinate Officers
4. Removal and Resignation of Officers
5. Vacancies in Offices
6. Chairman of the Board
7. President
8. Vice Presidents
9. Secretary
10.Treasurer
ARTICLE VI Indemnification of Trustees, Officers
Employees and Other Agents
1. Agents, Proceedings and Expenses
2. Actions Other than by Trust
3. Actions by the Trust
4. Exclusion of Indemnification
5. Successful Defense by Agent
6. Required Approval
7. Advance of Expenses
8. Other Contractual Rights
9. Limitations
10.Insurance
11.Fiduciaries of Employee Benefit Plan
ARTICLE VII Records and Reports
1. Maintenance and Inspection of Share Register
2. Maintenance and Inspection of By-laws
3. Maintenance and Inspection of Other Records
4. Inspection by Trustees
5. Financial Statements
ARTICLE VIII General Matters
1. Checks, Drafts, Evidence of Indebtedness
2. Contracts and Instruments; How Executed
3. Certificates for Shares
4. Lost Certificates
5. Representation of Shares of Other Entities Held by Trust
6. Fiscal Year
ARTICLE IX Amendments
1. Amendment by Shareholder
2. Amendment by Trustees
BY-LAWS OF
FRANKLIN GOVERNMENT SECURITIES TRUST
A Massachusetts Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from
time to time, may change the location of the principal executive office of the
Trust at any place within or outside The Commonwealth of Massachusetts.
Section 2. OTHER OFFICES. The Board of Trustees may at any time establish
branch or subordinate offices at any place or places where the Trust intends to
do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside The Commonwealth of Massachusetts designated by the
Board of Trustees. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called at
any time by the Board of Trustees or by the chairman of the Board or by the
president.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a trustee has a direct or indirect financial
interest, (ii) an amendment of the Declaration of Trust, (iii) a reorganization
of the Trust, or (iv) a voluntary dissolution of the Trust, the notice shall
also state the general nature of that proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the shareholder at that address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written demand of the
shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, whether
or not a quorum is present, may be adjourned from time to time by the vote of
the majority of the shares represented at that meeting, either in person or by
proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 3 and 4 of this Article II. At any adjourned meeting, the Trust may
transact any business which might have been transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot, provided, however, that any election for trustees
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of trustees, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted. All such consents shall be filed with the Secretary of
the Trust and shall be maintained in the Trust's records. Any shareholder giving
a written consent or the shareholder's proxy holders or a transferee of the
shares or a personal representative of the shareholder or their respective proxy
holders may revoke the consent by a writing received by the Secretary of the
Trust before written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a trustee has a
direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a meeting or its adjournment. If no inspectors of election are
so appointed, the chairman of the meeting may and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more shareholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may and on the request of any
shareholder or a shareholder's proxy, shall appoint a person to fill the
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the Declaration
of Trust and these By-Laws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and affairs of the Trust
shall be managed and all powers shall be exercised by or under the direction of
the Board of Trustees.
Section 2. NUMBER AND QUALIFICATION OF TRUSTEES. The exact number of
trustees shall be set forth in the Agreement and Declaration of Trust, until
changed by a duly adopted amendment to the Declaration of Trust.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled by
a majority of the remaining trustees, though less than a quorum, or by a sole
remaining trustee, unless the Board of Trustees calls a meeting of shareholders
for the purposes of electing trustees. In the event that at any time less than a
majority of the trustees holding office at that time were so elected by the
holders of the outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any event
within period not exceeding six (6) months at any one time to any other Trustee
or Trustees; provided that in no case shall fewer than two (2) Trustees
personally exercise the powers granted to the Trustees under this Declaration of
Trust except as otherwise expressly provided herein or by resolution of the
Board of Trustees.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by resolution
adopted by a majority of the authorized number of trustees designate one or more
committees, each consisting of two (2) or more trustees, to serve at the
pleasure of the Board. The Board may designate one or more trustees as alternate
members of any committee who may replace any absent member at any meeting of the
committee. Any committee to the extent provided in the resolution of the Board,
shall have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also requires
shareholders' approval or approval of the outstanding shares, or requires
approval by a majority of the entire Board or certain members of said Board;
(b) the filling of vacancies on the Board of Trustees or in any committee;
(c) the fixing of compensation of the trustees for serving on the Board of
Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the By-Laws
or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of Trustees
which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the Trust, except at a rate or in
a periodic amount or within a designated range determined by the Board of
Trustees; or
(g) the appointment of any other committees of the Board of Trustees or the
members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees, and notice of special meetings of
committees shall also be given to all alternate members who shall have the right
to attend all meetings of the committee. The Board of Trustees may adopt rules
for the government of any committee not inconsistent with the provisions of
these By-Laws.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not parties
to the proceeding and are not interested persons of the Trust (as defined in the
Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided the
agent provides a security for his undertaking, or a majority of a quorum of the
disinterested, non-party trustees, or an independent legal counsel in a written
opinion, determine that based on a review of readily available facts, there is
reason to believe that said agent ultimately will be found entitled to
indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) That it would be inconsistent with a provision of the Declaration of
Trust, a resolution of the shareholders, or an agreement in effect at the time
of accrual of the alleged cause of action asserted in the proceeding in which
the expenses were incurred or other amounts were paid which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust shall
keep at its principal executive office or at the office of its transfer agent or
registrar, if either be appointed and as determined by resolution of the Board
of Trustees, a record of its shareholders, giving the names and addresses of all
shareholders and the number and series of shares held by each shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep at
its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Trustees and any committee or committees of the Board of Trustees
shall be kept at such place or places designated by the Board of Trustees or in
the absence of such designation, at the principal executive office of the Trust.
The minutes shall be kept in written form and the accounting books and records
shall be kept either in written form or in any other form capable of being
converted into written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder or holder of a
voting trust certificate at any reasonable time during usual business hours for
a purpose reasonably related to the holder's interests as a shareholder or as
the holder of a voting trust certificate. The inspection may be made in person
or by an agent or attorney and shall include the right to copy and make
extracts.
Section 4. INSPECTION BY TRUSTEES. Every trustee shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the Trust. This inspection by a
trustee may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial statements and
any income statement of the Trust for each quarterly period of each fiscal year
and accompanying balance sheet of the Trust as of the end of each such period
that has been prepared by the Trust shall be kept on file in the principal
executive office of the Trust for at least twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
ARTICLE VIII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable to the Trust shall be signed or endorsed by
such person or persons and in such manner as from time to time shall be
determined by resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of Trustees,
except as otherwise provided in these By-Laws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Trust and this authority may be general or
confined to specific instances; and unless so authorized or ratified by the
Board of Trustees or within the agency power of an officer, no officer, agent,
or employee shall have any power or authority to bind the Trust by any contract
or engagement or to pledge its credit or to render it liable for any purpose or
for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the chairman of the board or the
president or vice president and by the treasurer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the series of shares owned by the shareholders. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be that officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the Trust with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the Trust may adopt and use a
system of issuance, recordation and transfer of its shares by electronic or
other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered to the Trust and cancelled at the same time. The Board of
Trustees may in case any share certificate or certificate for any other security
is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST. The
chairman of the board, the president or any vice president or any other person
authorized by resolution of the Board of Trustees or by any of the foregoing
designated officers, is authorized to vote or represent on behalf of the Trust
any and all shares of any corporation, partnership, trusts, or other entities,
foreign or domestic, standing in the name of the Trust. The authority granted
may be exercised in person or by a proxy duly executed by such designated
person.
Section 6. FISCAL YEAR. The fiscal year of the Trust shall be fixed and
refixed or changed from time to time by resolution of the Trustees. The fiscal
year of the Trust shall be the taxable year of each Series of the Trust.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or
repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Declaration of Trust or these By-Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders as
provided in Section 1 of this Article to adopt, amend or repeal By-Laws, and
except as otherwise provided by applicable law or by the Declaration of Trust,
these By-Laws may be adopted, amended, or repealed by the Board of Trustees.
FRANKLIN GOVERNMENT SECURITIES TRUST
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN GOVERNMENT SECURITIES
TRUST, a Massachusetts Business Trust, hereinafter called the "Trust", and
FRANKLIN ADVISERS, INC., a California corporation, hereinafter called the
"Manager."
WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"Act") for the purpose of investing and reinvesting its assets in securities, as
set forth in its Agreement and Declaration of Trust, its By-Laws and its
Registration Statements under the Act and the Securities Act of 1933, all as
heretofore and hereafter amended and supplemented; and the Trust desires to
avail itself of the services, information, advice, assistance and facilities of
an investment manager and to have an investment manager perform various
management, statistical, research, investment advisory and other services for
the Trust and any separate series of the Trust of the Trust hereafter organized;
and,
WHEREAS, the Manager is registered as. an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering
management, investment advisory, counselling and supervisory services to
investment companies and other investment counselling clients, and desires to
provide these services to the Trust.
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is mutually agreed as follows:
1. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of the Trust's assets and to administer
its affairs, subject to the direction of the Board of Trustees and the officers
of the Trust, for the period and on the terms hereinafter set forth. The Manager
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Manager shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust.
2. Obligations of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Administrative Services. The Manager shall furnish to the Trust
adequate (i) office space, which may be space within the offices of the Manager
or in such other place as may be agreed upon from time to time, and (ii) office
furnishings, facilities and equipment as may be reasonably required for managing
the affairs and conducting the business of the Trust, including conducting
correspondence and other communications with the shareholders of or Contract
Holders investing in the Trust, maintaining all internal bookkeeping, accounting
and auditing services and records in connection with the Trust's investment and
business activities. The Manager shall employ or provide and compensate the
executive, secretarial and clerical personnel necessary to provide such
services. The Manager shall also compensate all officers and employees of the
Trust who are officers or employees of the Manager or its affiliates.
B. Investment Management Services.
(a) The Manager shall manage the Trust's assets subject to and
in accordance with the investment objectives and policies of the Trust and any
directions which the Trust's Board of Trustees may issue from time to time. In
pursuance of the foregoing, the Manager shall make all determinations with
respect to the investment of the Trust's assets and the purchase and sale of
their investment securities, and shall take such steps as may be necessary to
implement the same. Such determinations and services shall include determining
the manner in which any voting rights, rights to consent to corporate action and
any other rights pertaining to the Trust's investment securities shall be
exercised. The Manager shall render regular reports to the Trust, at regular
meetings of its Board of Trustees and at such other times as may be reasonably
requested by the Trust's Board of Trustees, of (i) the decisions which it has
made with respect to the investment of the Trust's assets and the purchase and
sale of their investment securities, (ii) the reasons for such decisions and
(iii) the extent to which those decisions have been implemented.
(b) The Manager, subject to and in accordance with any
directions which the Trust's Board of Trustees may issue from time to time,
shall place, orders for the execution of the Trust's securities transactions.
When placing such orders the Manager shall seek to obtain the best net price and
execution for the Trust, but this requirement shall not be deemed to obligate
the Manager to place any order solely on the basis of obtaining the lowest
commission rate if the other standards set forth in this section have been
satisfied. The parties recognize that there are likely to be many cases in which
different brokers are equally able to provide such best price and execution and
that, in selecting among such brokers with respect to particular trades, it is
desirable to choose those brokers who furnish research, statistical, quotations
and other information to the Trust and the Manager in accord with the standards
set forth below. Moreover, to the extent that it continues to be lawful to do so
and so long as the Board of Trustees determines that the Trust will benefit,
directly or indirectly, by doing so, the Manager may place orders with a broker
who charges a commission for that transaction which is in excess of the amount
of commission that another broker would have charged for effecting that
transaction, provided that the excess commission is reasonable in relation to
the value of "brokerage and research services" (as defined in Section 28(e)(3)
of the Securities Exchange Act of 1934) provided by that broker. Accordingly,
the Trust and the Manager agree that the Manager shall select brokers for the
execution of the Trust's transactions from among:
(i) Those brokers and dealers who provide quotations
and other services to the Trust, specifically
including the quotations necessary to determine
the Trust's net assets, in such amount of total
brokerage as may reasonably be required in light
of such services; and
(ii) Those brokers and dealers who supply research,
statistical and other data to the Manager or its
affiliates which the Manager or its affiliates may
lawfully and appropriately use in their investment
advisory capacities, which relate directly to
securities, actual or potential, of the Trust, or
which place the Manager in a better position to
make decisions in connection with the management
of the Trust's assets and securities, whether or
not such data may also be useful to the Manager
and its affiliates in managing other portfolios or
advising other clients, in such amount of total
brokerage as may reasonably be required.
(c) When the Manager has determined that the Trust should
tender securities pursuant to a "tender offer solicitation," the Manager shall
designate Franklin Distributors, Inc. ("Distributors") as the "tendering dealer"
so long as it is legally permissible for the Manager to do so, and act in such
capacity under the Federal securities laws and rules thereunder and the rules of
any securities exchange or association of which Distributors may be a member.
Distributors shall not be obligated to make any additional commitments of
capital, expense or personnel beyond that already committed (other than normal
periodic fees or payments necessary to maintain its corporate existence and
membership in the National Association of Securities Dealers, Inc.) as of the
date of this Agreement. This Agreement shall not obligate the Manager or
Distributors (i) to act pursuant to the foregoing requirement under any
circumstances in which they might reasonably believe that liability might be
imposed upon them as a result of so acting, or (ii) to institute legal or other
proceedings to collect fees which may be considered to be due from others to it
as a result of such a tender, unless the Trust shall enter into an agreement
with the Manager and/or Distributors to reimburse them for all such expenses
connected with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect such fees.
(d) The Manager shall render regular reports to the Trust, not
more frequently than quarterly, of how much total brokerage business has been
placed by the Manager with brokers falling into each of the categories referred
to above and the manner in which the allocation has been accomplished.
(e) The Manager agrees that no investment decision will be
made or influenced by a desire to provide brokerage for allocation in accordance
with the foregoing, and that the right to make such allocation of brokerage
shall not interfere with the Manager's paramount duty to obtain the best net
price and execution for the Trust.
C. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials. The Manager, its
officers and employees will make available and provide accounting and
statistical information required by the Trust in the preparation of registration
statements, reports and other documents required by Federal and state securities
laws and with such information as the Trust may reasonably request for use in
the preparation of such documents or of other materials necessary or helpful for
the offering of the Trust's shares.
D. Other Obligations and Services. The Manager shall make its officers and
employees available to the Board of Trustees and officers of the Trust for
consultation and discussions regarding the administration and management of the
Trust and their investment activities.
3. Expenses of the Trust. It is understood that the Trust will pay all of
its own expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Trust shall include:
A. Fees and expenses paid to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services, including the expenses
of issue, repurchase or redemption of their shares;
D. Expenses of obtaining quotations for calculating the value of
the Trust's net assets;
E. Salaries and other compensations of executive officers of the
Trust who are not officers, directors, stockholders or employees of the Manager
or its affiliates;
F. Taxes levied against the Trust;
G. Brokerage fees and commissions in connection with the purchase
and sale of securities for the Trust;.
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to meetings of Board of Trustees and
shareholders of the Trust, reports to the Trust's shareholders or Contract
Holders investing in the Trust, the filing of reports with regulatory bodies
and the maintenance of the Trust's legal existence;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
K. Trustees' fees and expenses to trustees who are not directors,
officers, employees or stockholders of the Manager or any of its affiliates;
L. Costs and expense of registering and maintaining the
registration of the Trust and their shares under Federal and any applicable
state laws; including the printing and mailing of prospectuses to its
shareholders or Contract Holders investing in the Trust;
M. Trade association dues; and
N. The Trust's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.
4. Compensation of the Manager. The Trust shall pay a management fee in
cash to the Manager based upon a percentage of the value of the Trust's net
assets, calculated as set forth below, as compensation for the services rendered
and obligations assumed by the Manager, payable monthly at the request of the
Manager.
A. For purposes of calculating such fee, the value of the net assets
of the Trust shall be determined in the same manner as that the Trust uses to
compute the value of its net assets in connection with the determination of the
net asset value of its shares, all as set forth more fully in the Trust's
current prospectus and statement of additional information. The rate of the
management fee payable by the Trust shall be calculated daily at the following
annual rates:
.625 of 1% of the value of net assets up to and including
$100,000,000;
.50 of 1% of the value of net assets over $100,000,000 up to
and including $250,000,000; and
.45 of 1% of the value of net assets over
$250,000,000 up to and including $10,000,000,000; and
.44 of 1% of the value of net assets over $10,000,000,000 up
to and including $12,500,000,000; and
.42 of 1% of the value of net assets over $12,500,000,000 up
to and including $15,000,000,000; and
.40 of 1% of the value of net assets over $15,000,000,000.
B. The Management fee payable by the Trust shall be reduced or
eliminated to the extent that Distributors has actually received cash payments
of tender offer solicitation fees less certain costs and expenses incurred in
connection therewith as set forth in paragraph 2.B.(c) of this Agreement. The
Manager may, from time to time, voluntarily reduce or waive any management fee
due to it hereunder.
5. Activities of the Manager. The services of the Manager to the Trust
hereunder are not to be deemed exclusive, and the Manager and any of its
affiliates shall be free to render similar services to others. Subject to and in
accordance with the Agreement and Declaration of Trust and By-Laws of the Trust
and Section 10(a) of the Act, it is understood that trustees, officers, agents
and shareholders of the Trust are or may be interested in the Manager or its
affiliates as directors, officers, agents or stockholders; that directors,
officers, agents or stockholders of the Manager or its affiliates are or may be
interested in the Trust as trustees, officers, agents, shareholders or
otherwise; that the Manager or its affiliates may be interested in the Trust as
shareholders or otherwise; and that the effect of any such interests shall be
governed by said Agreement and Declaration of Trust, By-Laws and the Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Manager, the Manager shall not be subject to liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Trust.
B. Notwithstanding the foregoing, the Manager agrees to reimburse
the Trust for any and all costs, expenses, and counsel and trustees' fees
reasonably incurred by the Trust in the preparation, printing and distribution
of proxy statements, amendments to its Registration Statement, holdings of
meetings of its shareholders or trustees, the conduct of factual investigations,
any legal or administrative proceedings (including any applications for
exemptions or determinations by the Securities and Exchange Commission) which
the Trust incurs as the result of action or inaction of the Manager or any of
its affiliates or any of their officers, directors, employees or stockholders
where the action or inaction necessitating such expenditures (i) is directly or
indirectly related to any transactions or proposed transaction in the stock or
control of the Manager or its affiliates (or litigation related to any pending
or proposed or future transaction in such shares or control) which shall have
been undertaken without the prior, express approval of the Trust's Board of
Trustees; or, (ii) is within the control of the Manager or any of its affiliates
or any of their officers, directors, employees or stockholders. The Manager
shall not be obligated pursuant to the provisions of this Subparagraph 6(B), to
reimburse the Trust for any expenditures related to the institution of an
administrative proceeding or civil litigation by the Trust or a shareholder or
policyholder investing in the Trust seeking to recover all or a portion of the
proceeds derived by any stockholder of the Manager or any of its affiliates from
the sale of his shares of the Manager, or similar matters. So long as this
Agreement is in effect, the Manager shall pay to the Trust the amount due for
expenses subject to this Subparagraph 6(B) within 30 days after a bill or
statement has been received by the Manager therefor. This provision shall not be
deemed to be a waiver of any claim the Trust may have or may assert against the
Manager or others for costs, expenses or damages heretofore incurred by the
Trust or for costs, expenses or damages the Trust may hereafter incur which are
not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to protect any
trustee or officer of the Trust, or director or officer of the Manager, from
liability in violation of Sections 17(h) and (i) of the Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date written below
and shall continue in effect for one (1) year. The Agreement is renewable
annually thereafter for successive periods not to exceed one (1) year (i) by a
vote of a majority of the outstanding voting securities of the Trust or by a
vote of the Board of Trustees of the Trust, and (ii) by a vote of a majority of
the Trustees of the Trust who are not parties to the Agreement (other than as
Trustees of the Trust), cast in person at a meeting called for the purpose of
voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the payment of any penalty
either by vote of the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Trust seeking to terminate the
Agreement, on 60 days' written notice to the Manager;
(ii) shall immediately terminate with respect to the Trust in the
event of its assignment; and
(iii) may be terminated by the Manager on 60 days' written notice to
the Trust.
C. As used in this Paragraph the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the meanings set forth for any such terms in the Act.
D. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed post-paid, to the other party at any office
of such party.
8. Distribution Plan.
A. The provisions set forth in this paragraph 8 (hereinafter
referred to as the "Plan") have been adopted pursuant to Rule 12b-1 under the
Act by the Trust, having been approved by a majority of the Trust's Board of
Trustees, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan (the "non-interested Trustees'), cast in person at a meeting called
for the purpose of voting on such Plan. The Board of Trustees concluded that the
rate of compensation to be paid to the Manager by the Trust was fair and not
excessive, but that due solely to the uncertainty that may exist from time to
time with respect to whether payments made by the Trust to the Manager or to
other firms may nevertheless be deemed to constitute distribution expenses, it
was determined that adoption of the Plan would be prudent and in the best
interests of the Trust and its shareholders or Contract Holders having an
interest in the Trust. The Trustees' approval included a determination that in
the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Trust and its shareholders or Contract Holders investing in the Trust.
B. No additional payments are to be made by the Trust as a result of
the Plan other than the payments the Trust are otherwise obligated to make (i)
to the Manager pursuant to paragraph 4 of this Agreement, (ii) to its Transfer
and Dividend Paying Agents or Custodian, pursuant to its respective Agreements
as in effect at any time, and (iii) in payment of any expenses by the Trust in
the ordinary course of its respective business that may be deemed primarily
intended to result in the sale of shares issued by the Trust. However, to the
extent any of such other payments by the Trust, to or by the Manager, or to the
Trust's Agents, are nevertheless deemed to be payments for the financing of any
activity primarily intended to result in the sale of shares issued by the Trust
within the context of Rule 12b-1 under the Act, then such payments shall be
deemed to have been made pursuant to the Plan as set forth herein. The costs and
activities, the payment of which are intended to be within the scope of the
Plan, shall include, but not necessarily be limited to, the following:
(a) The costs of the preparation, printing and mailing of all
required reports and notices to shareholders or Contract Holders
investing in the Trust;
(b) the costs of the preparation, printing and mailing of all
prospectuses and statements of additional information;
(c) the costs of preparation, printing and mailing of any proxy
statements and proxies;
(d) all legal and accounting fees relating to the preparation of any
such reports, prospectuses, proxies and proxy statements;
(e) all fees and expenses relating to the qualification of the Trust
and/or its shares under the securities or "Blue Sky" laws of any
jurisdiction;
(f) all fees under the Securities Act of 1933 and the Act, including
fees in connection with any application for exemption relating to
or directed toward the sale of the Trust's shares;
(g) all fees and assessments of the Investment Company Institute or
any successor organization, irrespective of whether some of its
activities are designed to provide sales assistance;
(h) all costs of the preparation and mailing of confirmations of
shares sold or redeemed, and reports of share balances;
(i) all costs of responding to telephone or mail inquiries of
investors or prospective investors; and
(j) payments to dealers, financial institutions, advisers, or other
firms, any one of whom may receive monies in respect of the
Trust's shares held in accounts for Contract Holders for whom
such firm is the dealer of record or holder of record, or with
whom such firm has a servicing relationship. Servicing may
include, among other things: (i) answering client inquiries
regarding the Trust; (ii) assisting clients in changing account
designations and addresses; (iii) performing sub-accounting; (iv)
establishing and maintaining shareholder or Contract Holder
accounts and records; (v) processing purchase and redemption
transactions; (vi) providing periodic statements showing a
client's account balance and integrating such statements with
those of other transactions and balances in the client's other
accounts serviced by such firm; (vii) arranging for bank wires;
and (viii) such other services as the Trust may request, to the
extent such are permitted by applicable statute, rule or
regulation.
C. The terms and provisions of the Plan are as follows:
(a) The Manager shall report to the Board of Trustees of the
Trust at least quarterly on payments for any of the activities in subparagraph B
of this paragraph 8, and shall furnish the Board of Trustees of the Trust with
such other information as the Board may reasonably request in connection with
such payments in order to enable the Board to make an informed determination of
whether the Plan should be continued.
(b) The Plan shall continue in effect for a period of more
than one year from the date written below only so long as such continuance is
specifically approved at least annually (from the date below) by the Trust's
Board of Trustees, including the non-interested Trustees, cast in person at a
meeting called for the purpose of voting on the Plan.
(c) The Plan may be terminated at any time by vote of a
majority of non-interested Trustees or by vote of a majority of the Trust's
outstanding voting securities on not more than sixty (60) days' written notice
to any other party to the Plan, and the Plan shall terminate automatically in
the event of any act that constitutes an assignment of this Management
Agreement.
(d) The Plan may not be amended to increase materially the
amount deemed to be spent for distribution without approval by a majority of the
Trust's outstanding shares (as defined by the Act and all material amendments to
the Plan shall be approved by the non-interested Trustees cast in person at a
meeting called for the purpose of voting on such amendment.
(e) So long as the Plan is in effect, the selection and
nomination of the Trust's non-interested Trustees shall be committed to the
discretion of such non-interested Trustees.
(f) Any termination of the Plan shall not terminate this
Management Agreement or affect the validity of any of the provisions of this
Agreement other than this paragraph 8.
9. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
11. Limitation of Liability. The Manager acknowledges that it has
received notice of and accepts the limitations of the Trust's liability as set
forth in Article VIII of its Agreement and Declaration of Trust. The Manager
agrees that the Trust's obligations hereunder shall be limited to the assets of
the Trust, and that the Manager shall not seek satisfaction of any such
obligation from any shareholders of the Trust nor from any trustee, officer,
employee or agent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and effective on the 15th day of February, 1989.
FRANKLIN GOVERNMENT SECURITIES TRUST
By: /s/ Deborah R. Gatzek, Secretary
FRANKLIN ADVISERS, INC.
By: /s/ Harmon E. Burns
AGREEMENT
AGREEMENT made as of February 15, 1989 between Franklin Government
Securities Trust, a Massachusetts Business Trust (hereinafter called the "Fund")
and Bank of America NT & SA, a national banking association (hereinafter called
the "Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end management company and desires that its securities and cash shall be
held and administered by the Custodian pursuant to the terms of this Agreement;
and
WHEREAS, the Custodian has an aggregate capital, surplus, and undivided
profits in excess of Two Million Dollars ($2,000,000), and has its functions and
physical facilities supervised by federal authority and is ready and willing to
serve pursuant to and subject to the terms of this Agreement:
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund, and Custodian agree as follows:
Sec. 1. Definitions:
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages and other obligations and any certificates,
receipts, warrants or other instruments representing rights-to receive,
purchase, or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The term "proper instructions" shall mean a request or direction by
telephone or any other communication device from an authorized Fund designee to
be followed by a certification in writing signed in the name of the Fund by any
two of the following persons: the Chairman of the Executive Committee, the
President, a Vice-President, the Secretary and Treasurer of the Fund, or any
other persons duly authorized to sign by the Board of Trustees of the Fund and
for whom authorization has been communicated in writing to the Custodian. The
term "proper officers" shall mean the officers authorized above to give proper
instructions.
Sec. 2. Names, Titles and Signatures of Authorized Signers:
An officer of the Fund will certify to Custodian the names and signatures
of those persons authorized to sign in accordance with Sec. 1 hereof, and on a
timely basis, of any changes which thereafter may occur.
Sec. 3. Receipt and Disbursement of Money:
A. Custodian shall open and maintain a separate account or accounts in the
name of the Fund, subject only to draft or order by Custodian acting pursuant to
the terms of this Agreement, ("Direct Demand Deposit Account"). Custodian shall
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the accounts of the Fund. This shall include, without
limitation, the proceeds from the sale of shares of the capital stock of the
Fund which shall be received along with proper instructions from the Fund. All
such payments received by Custodian shall be converted to Federal Funds no later
than the day after receipt and deposited to such Direct Demand Deposit Account.
B. Custodian shall make payments of cash to, or for the account of, the
Fund from such cash or Direct Demand Deposit Account only (a) for the purchase
of securities for the portfolio of the Fund upon the delivery of such securities
to Custodian registered in the name of the Custodian or of the nominee or
nominees thereof, in the proper form for transfer, (b) for the redemption of
shares of the capital stock of the Fund, (c) for the payment of interest,
dividends, taxes, management or supervisory fees or any operating expenses
(including, without limitations thereto, fees for legal, accounting and auditing
services), (d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to be
delivered to Custodian; or (e) for other proper corporate purposes. Before
making any such payment Custodian shall receive and may rely upon, proper
instructions requesting such payment and setting forth the purposes of such
payment.
Custodian is hereby authorized to endorse and collect for the account of
the Fund all checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
Sec. 4. Holding of Securities:
Custodian shall hold all securities received by it for the account of the
Fund, pursuant to the provisions hereof, in accordance with the provisions of
Section 17(f) of the Investment Company Act of 1940 and the regulations
thereunder. All such securities are to be held or disposed of by the Custodian
for, and subject at all times to the proper instructions of, the Fund, pursuant
to the terms of this Agreement. The Custodian shall have no power of authority
to assign, hypothecate, pledge or otherwise dispose of any such securities and
investments, except pursuant to the proper instructions of the Fund and only for
the account of the Fund as set forth in Sec. 5 of this Agreement.
Sec. 5. Transfer, Exchange or Delivery, of Securities:
Custodian shall have sole power to release or to deliver any securities of
the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange, or deliver securities held by it hereunder only (a) for the sales of
such securities for the account of the Fund upon receipt by Custodian of payment
therefor, (b) when such securities are called, redeemed or retired or otherwise
become payable, (c) for examination by any broker selling any such securities in
accordance with "street delivery" custom, (d) in exchange for or upon conversion
into other securities alone or other securities and cash whether pursuant to any
plan or merger, consolidation, reorganization, recapitalization or readjustment,
or otherwise, (e) upon conversion of such securities pursuant to their terms
into other securities, (f) upon exercise of subscription, purchase or other
similar rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h) for the
purpose of redeeming in kind shares of capital stock of the Fund upon delivery
thereof to Custodian, or (i) for other proper corporate purposes. Any securities
or cash receivable in exchange for such deliveries made by Custodian, shall be
deliverable to Custodian. Before making any such transfer, exchange or delivery,
the Custodian shall receive, and may rely upon, proper instructions authorizing
such transfer, exchange or delivery and setting forth the purpose thereof.
Sec. 6. Other Actions of Custodians:
(a) The Custodian shall collect, receive and deposit income dividends,
interest and other payments or distribution of cash or property of whatever kind
with respect to the securities held hereunder; receive and collect securities
received as a distribution upon portfolio securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, consolidation,
merger, readjustment, distribution of rights and other items of like nature, or
otherwise, and execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with the collection of coupons upon
corporate securities, setting forth in any such certificate or affidavit the
name of the Fund as owner of such securities; and do all other things necessary
or proper in connection with the collection, receipt and deposit of such income
and securities, including without limiting the generality of the foregoing,
presenting for payment all coupons and other income items requiring presentation
and presenting for payment all securities which may be called, redeemed, retired
or otherwise become payable. Amounts to be collected hereunder shall be credited
to the account of the Fund according to the following formula:
(1) Periodic interest payments and final-payments on maturities of Federal
instruments such as U.S. Treasury bills, bonds and notes; interest payments and
final payments on maturities of other money market instruments including
tax-exempt money market instruments payable in federal or depository funds; and
payments on final maturities of GNMA instruments, shall be credited to the
account of the Fund on payable or maturity date.
(2) Dividends on equity securities and interest payments, and payments on
final maturities of municipal bonds (except called bonds) shall be credited to
the account of the Fund on payable or maturity date plus one.
(3) Payments for the redemption of called bonds, including called
municipal bonds shall be credited to the account of the Fund on the payable date
except that called municipal bonds paid in other than Federal or depository
funds shall be credited on payable date plus one.
(4) Periodic payments of interest and/or of partial principal on GNMA
instruments (other than payments on final maturity) shall be credited to the
account of the Fund on payable date plus three.
(5) Should the Custodian fail to credit the account of the Fund on the
date specified in paragraphs (1) - (4) above, the Fund may at its option,
require compensation from the Custodian of foregone interest (at the rate of
prime plus one) and for damages, if any.
(b) Payments to be received or to be paid in connection with purchase and
sale transactions shall be debited or credited to the account of the Fund on the
contract settlement date with the exception of "when-issued" municipal bonds.
Payments to be made for purchase by the Fund of when-issued municipal bonds
shall be debited to the account of the Fund on actual settlement date.
(1) In the event a payment is wrongfully debited to the account of the
Fund due to an error by the Custodian, the Custodian will promptly credit such
amount to the Fund, plus interest (prime plus one) and damages, if any.
(2) In the event a payment is credited to the account of the Fund and the
Custodian is unable to deliver securities being sold due to an error on the part
of the Fund, such payment shall be debited to the account of the Fund, and an
appropriate charge for costs of the transaction may be sent by the Custodian to
the Fund.
Sec. 7. Reports by Custodian:
Custodian shall each business day furnish the Fund with a statement
summarizing all transactions and entries for the account of the Fund for the
preceding day. At the end of every month Custodian shall furnish the Fund with a
list of the portfolio securities showing the quantity of each issue owned, the
cost of each issue and the market value of each issue at the end of each month.
Such monthly report shall also contain separate listings of (a) unsettled trades
and (b) when-issued securities. Custodian shall furnish such other reports as
may be mutually agreed upon from time-to-time.
Sec. 8. Compensation:
Custodian shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time-to-time be agreed upon in writing
between the two parties.
Sec. 9. Liabilities and Indemnifications:
(a) Custodian shall not be liable for any action taken in good faith upon
any proper instructions herein described or certified copy of any resolution of,
the Board of Directors, and may rely on the genuineness of any such document
which it may in good faith believe to have been validly executed.
(b) The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assigned against it or its nominee in
connection with the performance of this Agreement, except such as may arise from
negligent action, negligent failure to act or willful misconduct of Custodian or
its nominee.
Sec. 10. Records:
The Custodian hereby acknowledges that all of the records it shall prepare
and maintain pursuant to this Agreement shall be the property of the Fund and,
if and to the extent applicable, of the principal underwriter of the shares of
the Fund, and that upon proper instructions of the Fund or each principal
underwriter, if any, or both, it shall:
(a) Deliver said records to the Fund, principal underwriter or a successor
custodian, as appropriate:
(b) Provide the auditors of the Fund or principal underwriter or any
securities regulatory agency with a copy of such records without charge; and
provide the Fund and successor custodian with a reasonable number of reports and
copies of such records at a mutually agreed upon charge appropriate to the
circumstances.
(c) Permit any securities regulatory agency to inspect or copy during
normal business hours of the. Custodian any such records.
Sec. 11. Appointment of Agents:
(a) The Custodian shall have the authority, in its discretion, to appoint
an agent or agents to do and perform any acts or things for and on behalf of the
Custodian, pursuant at all times to its instructions, as the Custodian is
permitted to do under this Agreement.
(b) Any agent or agents appointed to have physical custody of securities
held under this Agreement or any part thereof must be: (1) a bank, or banks, as
that term is defined in Section 2(a)(5) of the 1940 Act, having an aggregate,
surplus and individual profits of not less than $2,000,000 (or such greater sum
as may then be required by applicable laws), or (2) a securities depository,
(the "Depository") as that term is defined in Rule 17f-4 under the 1940 Act,
upon proper instructions from the Fund and subject to any applicable
regulations, or (3) the book-entry system of the U.S. Treasury Department and
Federal Reserve Board, (the "System") upon proper instructions and subject to
any applicable regulations.
(c) With respect to portfolio securities deposited or held in the System
or the Depository, Custodian shall:
1) hold such securities in a nonproprietary account which shall not
include securities owned by Custodian;
2) on each day on which there is a transfer to or from the Fund in such
portfolio securities, send a written confirmation to the Fund;
3) upon receipt by Custodian, send promptly to Fund (i) a copy of any
reports Custodian receives from the System or the Depository
concerning internal accounting controls, and (ii) a copy of such
reports on Custodian's systems of internal accounting controls as
Fund may reasonably request.
(d) The delegation of any responsibilities or activities by the Custodian
to any agent or agents shall not relieve the Custodian from any liability which
would exist if there were no such delegation.
Sec. 12. Assignment and Termination:
(a) This Agreement may not be assigned by the Fund or the Custodian
without written consent of the other party.
(b) Either the Custodian or the Fund may terminate this Agreement without
payment of any penalty-, at any time upon one hundred twenty (120) days written
notice thereof delivered by the one to the other, and upon the expiration of
said one hundred twenty (120) days, this Agreement shall terminate; provided,
however, that this Agreement shall continue thereafter for such period as may be
necessary for the complete divestiture of all assets held hereinunder, as next
herein provided. In the event of such termination, the Custodian will
immediately upon the receipt or transmittal of such notice, as the case may be,
commence and prosecute diligently to completion the transfer of all cash and the
delivery of all portfolio securities, duly endorsed, to the successor of the
Custodian when appointed by the Fund. The Fund shall select such successor
custodian within sixty (60) days after the giving of such notice of termination,
and the obligation of the Custodian named herein to deliver and transfer over
said assets directly to such successor custodian shall commence as soon as such
successor is appointed and shall continue until completed, as aforesaid. At any
time after termination hereof the Fund may have access to the records of the
administration of this custodianship whenever the same may be necessary.
(c) If, after termination of the services of the Custodian, no successor
custodian has been appointed within the period above provided, the Custodian may
deliver the cash and securities owned by the Fund to a bank or trust company of
its own selection having an aggregate capital, surplus and undivided profits of
not less than Two Million Dollars ($2,000,000) (or such greater sum as may then
be required by the laws and regulations governing the conduct by the Fund of its
business as an investment company) and having its functions and physical
facilities supervised by federal or state authority, to be held as the property
of the Fund under the terms similar to those on which they were held by the
retiring Custodian, whereupon such bank or trust company so selected by the
Custodian shall become the successor custodian with the same effect as though
selected by the Board of Directors of the Fund.
Sec. 13. California Department of Insurance 7
Should the California Department of Insurance (the "Department") succeed
to control of the Fund's assets in the event of the insolvency of the Fund, the
Custodian shall, upon; notice of such succession in writing to the Custodian by
the Department, recognize the Department's succession to the Trust's rights and
obligations under this Agreement and, accordingly, will cease to accept
instructions from all proper officers of the Fund and shall accept instructions
hereunder from those persons identified to the custodian in writing by the
Department.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement.
Franklin Government Securities Trust
By: /s/ Deborah R. Gatzek
Deborah R. Gatzek
Title: Secretary
Bank of America, NT & SA
By: /s/ illegible
Title: Vice President
Attest:
(Franklin logo)
FRANKLIN
RESOURCES, INC.
777 Mariners Island Blvd.
San Mateo, CA 94404
415/312-5818
FAX 415/312-3528
Martin L. Flanagan CPA, CFA
Senior Vice President
Chief Financial Officer
April 12, 1995
Mr. Stephen H. Kilbuck
Vice President Corporate Banking
Bank of America, NT & SA
555 California Street, 41st Floor
San Francisco, CA 94104
Dear Steve:
Various Franklin Funds/Portfolios (the "Funds") and Bank of America,
National Trust and Savings Association ("Bank") are parties to custody
agreements (the "Agreements") as well as separate cash management and deposit
services arrangements.
By this Letter Agreement, each of the Funds and Bank desire to establish
the cash compensation to be paid by each Fund for services rendered to it by
Bank.
Effective April 1, 1995, commencing with the first statement prepared
thereafter each Fund will pay to Bank a monthly fee in cash equal to an annual
rate of 87.5/100 ths. (.875) basis points of the net asset value of each such
Funds domestic portfolios held in custody by Bank and nine and three-tenths
(9.3) basis points of the net asset value of each such Funds international
portfolios held in custody by Bank or held by foreign sub-custodians calculated
as of the last business day of the month. For purposes of calculating the
monthly fee, 000007291 will be used as the monthly factor for the domestic
portfolio and .0000775 will be used as the monthly factor for the international
portfolio. The obligation of each Fund is separate from the obligation of any
other Fund.
The purpose of this Letter of Agreement is to provide for a fair level of
compensation to Bank for its service. The fee is based on the assumption that
each Fund will continue to use services of a type and volume comparable to the
services currently used. The parties agree that any party may initiate
discussions concerning revisions to the terms of this Letter Agreement at any
time it believes the level of compensation to be inappropriate. The parties
further agree that any party may, upon at least sixty (60) days' written notice,
terminate this Letter Agreement with respect to that party. Upon its
termination, if the parties have not agreed to a substitute fee arrangement, any
party may also terminate all or some of the service provided by Bank upon
additional sixty (60) days' written notice.
On an ongoing basis, Bank will continue to prepare the monthly corporate
account analysis statements on behalf of each Fund, which estimates all revenues
and expenses for the parties' relationship. From time to time, Bank and any
Fund(s) may renegotiate the estimated "prices" used in the account analysis
process. The account analysis statement will provide a basis for any
negotiations between the parties on the appropriateness of the fee agreement as
embodied in this Letter Agreement. However, no payment of any kind shall be due
on account of any shortfall on the account analysis statement.
Sincerely,
Authorized Officer for Each Trust/Franklin
Fund Portfolio (List Attached)
By /s/ Martin L. Flanagan
Martin L. Flanagan
Executive Financial Officer
ACCEPTED AND AGREED TO BY:
BANK OF AMERICA, NT & SA
By /s/ Stephen H. Kilbuck
Title: Vice President
FRANKLIN GROUP OF FUNDS
FUND # FUND INIT NAME OF FUND
022 FUT FRANKLIN UNIVERSAL TRUST - (closed-end)
033 FPMT FRANKLIN PRINCIPAL MATURITY TRUST - (closed-end)
024 FMIT FRANKLIN MULTI-INCOME TRUST - (closed-end)
101 FGF FRANKLIN GOLD FUND
102 FPRF FRANKLIN PREMIER RETURN FUND
(Franklin Option Fund until April 30, 1991)
103 FEF FRANKLIN EQUITY FUND
105 AGE AGE HIGH INCOME FUND, INC.
FCF FRANKLIN CUSTODIAN FUNDS, INC.
106 GROWTH SERIES
107 UTILITIES SERIES
108 DYNATECH SERIES
109 INCOME SERIES
110 U.S. GOVERNMENT SECURITIES SERIES
111* FMF FRANKLIN MONEY FUND (MMP feeder as of 8/1/94)
112 FCTFIF FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
113* FFMF FRANKLIN FEDERAL MONEY FUND (USGSMMP feeder as of 8/1/94)
114 FTEMF FRANKLIN TAX-EXEMPT MONEY FUND
115 FNYTFIF FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
116 FFTFIF FRANKLIN FEDERAL TAX-FREE INCOME FUND
FTFT FRANKLIN TAX-FREE TRUST
118 FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
119 FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
120 FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
121 FRANKLIN INSURED TAX-FREE INCOME FUND
122 FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
123 FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
126 FRANKLIN ARIZONA TAX-FREE INCOME FUND
127 FRANKLIN COLORADO TAX-FREE INCOME FUND
128 FRANKLIN GEORGIA TAX-FREE INCOME FUND
129 FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
130 FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
160 FRANKLIN MISSOURI TAX-FREE INCOME FUND
161 FRANKLIN OREGON TAX-FREE INCOME FUND
162 FRANKLIN TEXAS TAX-FREE INCOME FUND
163 FRANKLIN VIRGINIA TAX-FREE INCOME FUND
164 FRANKLIN ALABAMA TAX-FREE INCOME FUND
165 FRANKLIN FLORIDA TAX-FREE INCOME FUND
166 FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
167 FRANKLIN INDIANA TAX-FREE INCOME FUND
168 FRANKLIN LOUISIANA TAX-FREE INCOME FUND
169 FRANKLIN MARYLAND TAX-FREE INCOME FUND
170 FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
171 FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
172 FRANKLIN KENTUCKY TAX-FREE INCOME FUND
174 FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
177 FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
178 FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
FCTFT FRANKLIN CALIFORNIA TAX-FREE TRUST
124 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
125 FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
152 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME
FUND
FNYTFT FRANKLIN NEW YORK TAX-FREE TRUST
(Franklin New York-Tax Exempt Money Fund until 1/91)
131 FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND
153 FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND
181 FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND
FIST FRANKLIN INVESTORS SECURITIES TRUST
135 FRANKLIN GLOBAL GOVERNMENT INCOME FUND
(formerly Franklin Global Opportunity Income Fund)
136 FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT
SECURITIES FUND
137 FRANKLIN CONVERTIBLE SECURITIES FUND
138* FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
(formerly Franklin Adjustable Rate Mortgage Fund)
(USGARMP feeder)
139 FRANKLIN EQUITY INCOME FUND
(Franklin Special Equity Income Fund until 8/17/93)
151* FRANKLIN ADJUSTABLE RATE SECURITIES FUND
(ARSP retail feeder)
IFT INSTITUTIONAL FIDUCIARY TRUST
140* MONEY MARKET PORTFOLIO (MMP feeder)
141* FRANKLIN LATE DAY MONEY MARKET PORTFOLIO
(Franklin Government Investors Money Market
Portfolio until 6/15/93)
142* FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET
PORTFOLIO (USGSMMP feeder)
143* FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO
144* FRANKLIN INSTITUTIONAL ADJUSTABLE U.S. GOVERNMENT
SECURITIES FUND (USGARMP feeder)
145* FRANKLIN INSTITUTIONAL ADJUSTABLE RATE SECURITIES FUND
(ARSP feeder)
146* FRANKLIN U.S. GOVERNMENT AGENCY MONEY MARKET FUND
147* AEA CASH MANAGEMENT FUND (MMP feeder)
(formerly Franklin Star MOney Market Portfolio)
149* FRANKLIN CASH RESERVES FUND (MMP feeder)
150 FBSIF FRANKLIN BALANCE SHEET INVESTMENT FUND
154 FTAIBF FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
155 FTAUSGSF FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
156 FTAHYSF FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FMT FRANKLIN MANAGED TRUST
117 FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
(Franklin Corporate Cash Portfolio until 5/31/91)
158 FRANKLIN RISING DIVIDENDS FUND
159 FRANKLIN INVESTMENT GRADE INCOME FUND
- ---- FRANKLIN INSTITUTIONAL RISING DIVIDENDS FUND (PT feeder)
(not yet filed)
157 FSMP FRANKLIN STRATEGIC MORTGAGE PORTFOLIO (effective 2/1/93)
FMST FRANKLIN MUNICIPAL SECURITIES TRUST
173 FRANKLIN HAWAII MUNICIPAL BOND FUND
175 FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
176 FRANKLIN WASHINGTON MUNICIPAL BOND FUND
220 FRANKLIN TENNESSEE MUNICIPAL BOND FUND
221 FRANKLIN ARKANSAS MUNICIPAL BOND FUND
FSS FRANKLIN STRATEGIC SERIES (changed from Cal 250)
194 FRANKLIN STRATEGIC INCOME FUND
195 FRANKLIN MIDCAP GROWTH FUND (filed - not yet being sold)
196 FRANKLIN INSTITUTIONAL MIDCAP GROWTH FUND
(formerly FISCO MidCap Growth Fund)
197 FRANKLIN GLOBAL UTILITIES FUND
198 FRANKLIN SMALL CAP GROWTH FUND
199 FRANKLIN GLOBAL HEALTH CARE FUND
ARSP ADJUSTABLE RATE SECURITIES PORTFOLIOS (THE PARENT)
182 U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO
(master fund)
183 ADJUSTABLE RATE SECURITIES PORTFOLIO (filed under 1940
Act Only) (master fund)
MMP THE MONEY MARKET PORTFOLIOS (master fund parent)
(filed under 1940 Act only)
184* THE MONEY MARKET PORTFOLIO (master fund)
186* THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
(master fund)
187 MGP MIDCAP GROWTH PORTFOLIO (master fund) (1940 Act filing only
- not yet being sold)
PT THE PORTFOLIOS TRUST (master fund parent) (1940 Act filing
only - not yet being sold)
188 THE RISING DIVIDENDS PORTFOLIO (master fund)
FIT FRANKLIN INTERNATIONAL TRUST
190 FRANKLIN PACIFIC GROWTH FUND
191 FRANKLIN INTERNATIONAL EQUITY FUND
FREST FRANKLIN REAL ESTATE SECURITIES TRUST
192 FRANKLIN REAL ESTATE SECURITIES FUND
FTGT FRANKLIN TEMPLETON GLOBAL TRUST (formerly Huntington Funds)
210* FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
211* FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
212* FRANKLIN TEMPLETON HARD CURRENCY FUND
213* FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
FVF FRANKLIN VALUEMARK FUNDS (ALLIANZ)
821 MONEY MARKET FUND
822 EQUITY GROWTH FUND
823 PRECIOUS METALS FUND
824 REAL ESTATE SECURITIES FUND
825 UTILITY EQUITY FUND
826 HIGH INCOME FUND
827 GLOBAL INCOME FUND
828 INVESTMENT GRADE INTERMEDIATE BOND FUND
829 INCOME SECURITIES FUND
830 U.S. GOVERNMENT SECURITIES FUND
831 ZERO COUPON FUND - 1995
832 ZERO COUPON FUND - 2000
833 ZERO COUPON FUND - 2005
834 ZERO COUPON FUND - 2010
835 ADJUSTABLE U.S. GOVERNMENT FUND
836 RISING DIVIDENDS FUND
837 TEMPLETON PACIFIC GROWTH FUND (Pacific Growth Fund
until 10/15/93)
838 TEMPLETON INTERNATIONAL EQUITY FUND (International
Equity Fund until 10/15/93)
839 TEMPLETON DEVELOPING MARKETS EQUITY FUND
840 TEMPLETON GLOBAL GROWTH FUND
841 TEMPLETON WORLDWIDE ASSET ALLOCATION FUND
(not yet effective)
891 FGST FRANKLIN GOVERNMENT SECURITIES TRUST (AETNA)
193 FRANKLIN STABLE VALUE FUND
511 FRANKLIN TEMPLETON MONEY FUND II (expected effective
date: 05/01/95)
MASTER CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as of
February 16, 1996, by and between each Investment Company listed on Exhibit A,
for itself and for each of its Series listed on Exhibit A, and BANK OF NEW YORK,
a New York corporation authorized to do a banking business (the "Custodian").
RECITALS
A. Each Investment Company is an investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act")
that invests and reinvests, for itself or on behalf of its Series, in Domestic
Securities and Foreign Securities.
B. The Custodian is, and has represented to each Investment Company
that the Custodian is, a "bank" as that term is defined in Section 2(a)(5) of
the Investment Company Act of 1940, as amended, and is eligible to receive and
maintain custody of investment company assets pursuant to Section 17(f) and Rule
17f-2 thereunder.
C. The Custodian and each Investment Company, for itself and for
each of its Series, desire to provide for the retention of the Custodian as a
custodian of the assets of each Investment Company and each Series, on the terms
and subject to the provisions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
Section 1.0 FORM OF AGREEMENT
Although the parties have executed this Agreement in the form of a
Master Custody Agreement for administrative convenience, this Agreement shall
create a separate custody agreement for each Investment Company and for each
Series designated on Exhibit A, as though each Investment Company had separately
executed an identical custody agreement for itself and for each of its Series.
No rights, responsibilities or liabilities of any Investment Company or Series
shall be attributed to any other Investment Company or Series.
Section 1.1 DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings specified below:
"Agreement" shall mean this Custody Agreement.
"Board" shall mean the Board of Trustees, Directors or Managing
General Partners, as applicable, of an Investment Company.
"Business Day" with respect to any Domestic Security means any day,
other than a Saturday or Sunday, that is not a day on which banking institutions
are authorized or required by law to be closed in The City of New York and, with
respect to Foreign Securities, a London Business Day. "London Business Day"
shall mean any day on which dealings and deposits in U.S. dollars are transacted
in the London interbank market.
"Custodian" shall mean Bank of New York.
"Domestic Securities" shall have the meaning provided in Subsection
2.1 hereof.
"Executive Committee" shall mean the executive committee of a Board.
"Foreign Custodian" shall have the meaning provided in Section 4.1
hereof.
"Foreign Securities" shall have the meaning provided in Section 2.1
hereof.
"Foreign Securities Depository" shall have the meaning provided in
Section 4.1 hereof.
"Fund" shall mean an entity identified on Exhibit A as an Investment
Company, if the Investment Company has no series, or a Series.
"Investment Company" shall mean an entity identified on Exhibit A
under the heading "Investment Company."
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"Securities" shall have the meaning provided in Section 2.1 hereof.
"Securities System" shall have the meaning provided in Section 3.1
hereof.
"Securities System Account" shall have the meaning provided in
Subsection 3.8(a) hereof.
"Series" shall mean a series of an Investment Company which is
identified as such on Exhibit A.
"Shares" shall mean shares of beneficial interest of the Investment
Company.
"Subcustodian" shall have the meaning provided in Subsection 3.7
hereof, but shall not include any Foreign Custodian.
"Transfer Agent" shall mean the duly appointed and acting transfer
agent for each Investment Company.
"Writing" shall mean a communication in writing, a communication by
telex, facsimile transmission, bankwire or other teleprocess or electronic
instruction system acceptable to the Custodian.
Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS
2.1 Appointment of Custodian. Each Investment Company hereby
appoints and designates the Custodian as a custodian of the assets of each Fund,
including cash denominated in U.S. dollars or foreign currency ("cash"),
securities the Fund desires to be held within the United States ("Domestic
Securities") and securities it desires to be held outside the United States
("Foreign Securities"). Domestic Securities and Foreign Securities are sometimes
referred to herein, collectively, as "Securities." The Custodian hereby accepts
such appointment and designation and agrees that it shall maintain custody of
the assets of each Fund delivered to it hereunder in the manner provided for
herein.
2.2 Delivery of Assets. Each Investment Company may deliver to the
Custodian Securities and cash owned by the Funds, payments of income, principal
or capital distributions received by the Funds with respect to Securities owned
by the Funds from time to time, and the consideration received by the Funds for
such Shares or other securities of the Funds as may be issued and sold from time
to time. The Custodian shall have no responsibility whatsoever for any property
or assets of the Funds held or received by the Funds and not delivered to the
Custodian pursuant to and in accordance with the terms hereof. All Securities
accepted by the Custodian on behalf of the Funds under the terms of this
Agreement shall be in "street name" or other good delivery form as determined by
the Custodian.
2.3 Subcustodians. The Custodian may appoint BNY Western Trust
Company as a Subcustodian to hold assets of the Funds in accordance with the
provisions of this Agreement. In addition, upon receipt of Proper Instructions
and a certified copy of a resolution of the Board or of the Executive Committee,
and certified by the Secretary or an Assistant Secretary, of an Investment
Company, the Custodian may from time to time appoint one or more other
Subcustodians or Foreign Custodians to hold assets of the affected Funds in
accordance with the provisions of this Agreement.
2.4 No Duty to Manage. The Custodian, a Subcustodian or a Foreign
Custodian shall not have any duty or responsibility to manage or recommend
investments of the assets of any Fund held by them or to initiate any purchase,
sale or other investment transaction in the absence of Proper Instructions or
except as otherwise specifically provided herein.
Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE FUNDS HELD
BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and physically
segregate from any property owned by the Custodian, for the account of each
Fund, all non-cash property delivered by each Fund to the Custodian hereunder
other than Securities which, pursuant to Subsection 3.8 hereof, are held through
a registered clearing agency, a registered securities depository, the Federal
Reserve's book-entry securities system (referred to herein, individually, as a
"Securities System"), or held by a Subcustodian, Foreign Custodian or in a
Foreign Securities Depository.
3.2 Delivery of Securities. Except as otherwise provided in
Subsection 3.5 hereof, the Custodian, upon receipt of Proper Instructions, shall
release and deliver Securities owned by a Fund and held by the Custodian in the
following cases or as otherwise directed in Proper Instructions:
(a) except as otherwise provided herein, upon sale of such
Securities for the account of the Fund and receipt by the Custodian, a
Subcustodian or a Foreign Custodian of payment therefor;
(b) upon the receipt of payment by the Custodian, a
Subcustodian or a Foreign Custodian in connection with any repurchase agreement
related to such Securities entered into by the Fund;
(c) in the case of a sale effected through a Securities
System, in accordance with the provisions of Subsection 3.8 hereof;
(d) to a tender agent or other authorized agent in connection
with (i) a tender or other similar offer for Securities owned by the Fund, or
(ii) a tender offer or repurchase by the Fund of its own Shares;
(e) to the issuer thereof or its agent when such Securities
are called, redeemed, retired or otherwise become payable; provided, that in any
such case, the cash or other consideration is to be delivered to the Custodian,
a Subcustodian or a Foreign Custodian;
(f) to the issuer thereof, or its agent, for transfer into the
name or nominee name of the Fund, the name or nominee name of the Custodian, the
name or nominee name of any Subcustodian or Foreign Custodian; or for exchange
for a different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to the Custodian, a Subcustodian or
Foreign Custodian;
(g) to the broker selling the same for examination in
accordance with the "street delivery" custom;
(h) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, or reorganization of the issuer of such
Securities, or pursuant to a conversion of such Securities; provided that, in
any such case, the new Securities and cash, if any, are to be delivered to the
Custodian or a Subcustodian;
(i) in the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such warrants, rights or
similar Securities or the surrender of interim receipts or temporary Securities
for definitive Securities; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian, a subcustodian or a
Foreign Custodian;
(j) for delivery in connection with any loans of Securities
made by the Fund, but only against receipt by the Custodian, a Subcustodian or a
Foreign Custodian of adequate collateral as determined by the Fund (and
identified in Proper Instructions communicated to the Custodian), which may be
in the form of cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any loans for
which collateral is to be credited to the account of the Custodian, a
Subcustodian or a Foreign Custodian in the Federal Reserve's book-entry
securities system, the Custodian will not be held liable or responsible for the
delivery of Securities owned by the Fund prior to the receipt of such
collateral;
(k) for delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but only against receipt
by the Custodian, a Subcustodian or a Foreign Custodian of amounts borrowed;
(l) for delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, a Subcustodian or a Foreign Custodian
and a broker-dealer relating to compliance with the rules of registered clearing
corporations and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
(m) for delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, a Subcustodian or a Foreign Custodian
and a futures commission merchant, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund;
(n) upon the receipt of instructions from the Transfer Agent
for delivery to the Transfer Agent or to the holders of Shares in connection
with distributions in kind in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(o) for any other proper purpose, but only upon receipt of
Proper Instructions, and a certified copy of a resolution of the Board or of the
Executive Committee certified by the Secretary or an Assistant Secretary of the
Fund, specifying the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom delivery of such securities
shall be made.
3.3 Registration of Securities. Securities held by the Custodian, a
Subcustodian or a Foreign Custodian (other than bearer Securities) shall be
registered in the name or nominee name of the appropriate Fund, in the name or
nominee name of the Custodian or in the name or nominee name of any Subcustodian
or Foreign Custodian. Each Fund agrees to hold the Custodian, any such nominee,
Subcustodian or Foreign Custodian harmless from any liability as a holder of
record of such Securities.
3.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts for each Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
hereunder from or for the account of each Fund, other than cash maintained by a
Fund in a bank account established and used in accordance with Rule 17f-3 under
the Fund Act. Funds held by the Custodian for a Fund may be deposited by it to
its credit as Custodian in the banking departments of the Custodian, a
Subcustodian or a Foreign Custodian. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity. In the event a Fund's account for any reason
becomes overdrawn, or in the event an action requested in Proper Instructions
would cause such an account to become overdrawn, the Custodian shall immediately
notify the affected Fund.
3.5 Collection of Income; Trade Settlement; Crediting of Accounts.
The Custodian shall collect income payable with respect to Securities owned by
each Fund, settle Securities trades for the account of each Fund and credit and
debit each Fund's account with the Custodian in connection therewith as stated
in this Subsection 3.5. This Subsection shall not apply to repurchase
agreements, which are treated in Subsection 3.2(b), above.
(a) Upon receipt of Proper Instructions, the Custodian shall
effect the purchase of a Security by charging the account of the Fund on the
contractual settlement date, and by making payment against delivery. If the
seller or selling broker fails to deliver the Security within a reasonable
period of time, the Custodian shall notify the Fund and credit the transaction
amount to the account of the Fund, but the Custodian shall have no further
liability or responsibility for the transaction.
(b) Upon receipt of Proper Instructions, the Custodian shall
effect the sale of a Security by withdrawing a certificate or other indicia of
ownership from the account of the Fund and by making delivery against payment,
and shall credit the account of the Fund with the amount of such proceeds on the
contractual settlement date. If the purchaser or the purchasing broker fails to
make payment within a reasonable period of time, the Custodian shall notify the
Fund, debit the Fund's account for any amounts previously credited to it by the
Custodian as proceeds of the transaction and, if delivery has not been made,
redeposit the Security into the account of the Fund.
(c) The Fund is responsible for ensuring that the Custodian
receives timely and accurate Proper Instructions to enable the Custodian to
effect settlement of any purchase or sale. If the Custodian does not receive
such instructions within the required time period, the Custodian shall have no
liability of any kind to any person, including the Fund, for failing to effect
settlement on the contractual settlement date. However, the Custodian shall use
its best reasonable efforts to effect settlement as soon as possible after
receipt of Proper Instructions.
(d) The Custodian shall credit the account of the Fund with
interest income payable on interest bearing Securities on payable date.
Dividends and other amounts payable with respect to Domestic Securities and
Foreign Securities shall be credited to the account of the Fund when received by
the Custodian. The Custodian shall not be required to commence suit or
collection proceedings or resort to any extraordinary means to collect such
income and other amounts payable with respect to Securities owned by the Fund.
The collection of income due the Fund on Domestic Securities loaned pursuant to
the provisions of Subsection 3.2(j) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is entitled. The Custodian shall have no liability to
any person, including the Fund, if the Custodian credits the account of the Fund
with such income or other amounts payable with respect to Securities owned by
the Fund (other than Securities loaned by the Fund pursuant to Subsection 3.2(j)
hereof) and the Custodian subsequently is unable to collect such income or other
amounts from the payors thereof within a reasonable time period, as determined
by the Custodian in its sole discretion. In such event, the Custodian shall be
entitled to reimbursement of the amount so credited to the account of the Fund.
3.6 Payment of Fund Monies. Upon receipt of Proper Instructions
the Custodian shall pay out monies of a Fund in the following cases or as
otherwise directed in Proper Instructions:
(a) upon the purchase of Securities, futures contracts or
options on futures contracts for the account of the Fund but only, except as
otherwise provided herein, (i) against the delivery of such securities, or
evidence of title to futures contracts or options on futures contracts, to the
Custodian or a Subcustodian registered pursuant to Subsection 3.3 hereof or in
proper form for transfer; (ii) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in Subsection 3.8
hereof; or (iii) in the case of repurchase agreements entered into between the
Fund and the Custodian, another bank or a broker-dealer (A) against delivery of
the Securities either in certificated form to the Custodian or a Subcustodian or
through an entry crediting the Custodian's account at the appropriate Federal
Reserve Bank with such Securities or (B) against delivery of the confirmation
evidencing purchase by the Fund of Securities owned by the Custodian or such
broker-dealer or other bank along with written evidence of the agreement by the
Custodian or such broker-dealer or other bank to repurchase such Securities from
the Fund;
(b) in connection with conversion, exchange or surrender of
Securities owned by the Fund
as set forth in Subsection 3.2 hereof;
(c) for the redemption or repurchase of Shares issued by the
Fund;
(d) for the payment of any expense or liability incurred by
the Fund, including but not limited to the following payments for the account of
the Fund: custodian fees, interest, taxes, management, accounting, transfer
agent and legal fees and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred expenses;
and
(e) for the payment of any dividends or distributions
declared by the Board with respect to the Shares.
3.7 Appointment of Subcustodians. The Custodian may appoint BNY
Western Trust Company or, upon receipt of Proper Instructions, another bank or
trust company, which is itself qualified under the Investment Company Act to act
as a custodian (a "Subcustodian"), as the agent of the Custodian to carry out
such of the duties of the Custodian hereunder as a Custodian may from time to
time direct; provided, however, that the appointment of any Subcustodian shall
not relieve the Custodian of its responsibilities or liabilities hereunder.
3.8 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain Domestic Securities owned by a Fund in a Securities
System in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
(a) the Custodian may hold Domestic Securities of the Fund in
the Depository Trust Company or the Federal Reserve's book entry system or, upon
receipt of Proper Instructions, in another Securities System provided that such
securities are held in an account of the Custodian in the Securities System
("Securities System Account") which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or otherwise for
customers;
(b) the records of the Custodian with respect to Domestic
Securities of the Fund which are maintained in a Securities System shall
identify by book-entry those Domestic Securities belonging to the Fund;
(c) the Custodian shall pay for Domestic Securities purchased
for the account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Securities System
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The Custodian
shall transfer Domestic Securities sold for the account of the Fund upon (A)
receipt of advice from the Securities System that payment for such securities
has been transferred to the Securities System Account, and (B) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from the Securities System of
transfers of Domestic Securities for the account of the Fund shall be maintained
for the Fund by the Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund confirmation of the transfer to or
from the account of the Fund in the form of a written advice or notice; and
(d) upon request, the Custodian shall provide the Fund with
any report obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding domestic
securities deposited in the Securities System.
3.9 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of a Fund, into which account or accounts may be transferred cash and/or
Securities, including Securities maintained in an account by the Custodian
pursuant to Section 3.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer or futures
commission merchant, relating to compliance with the rules of registered
clearing corporations and of any national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of segregating cash
or securities in connection with options purchased, sold or written by the Fund
or commodity futures contracts or options thereon purchased or sold by the Fund,
and (iii) for other proper corporate purposes, but only, in the case of this
clause (iii), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board or of the Executive Committee certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate
purposes.
3.10 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Fund held by it and in connection with
transfers of such securities.
3.11 Proxies. The Custodian shall, with respect to the Securities
held hereunder, promptly deliver to each Fund all proxies, all proxy soliciting
materials and all notices relating to such Securities. If the Securities are
registered otherwise than in the name of a Fund or a nominee of a Fund, the
Custodian shall use its best reasonable efforts, consistent with applicable law,
to cause all proxies to be promptly executed by the registered holder of such
Securities in accordance with Proper Instructions.
3.12 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to each Fund all written information
(including, without limitation, pendency of calls and maturities of Securities
and expirations of rights in connection therewith and notices of exercise of put
and call options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers of
Securities being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to each Fund all written information
received by the Custodian from issuers of the Securities whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer. If a Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three Business Days prior to the date of which the
Custodian is to take such action.
3.13 Reports by Custodian. The Custodian shall each business day
furnish each Fund with a statement summarizing all transactions and entries for
the account of the Fund for the preceding day. At the end of every month, the
Custodian shall furnish each Fund with a list of the cash and portfolio
securities showing the quantity of the issue owned, the cost of each issue and
the market value of each issue at the end of each month. Such monthly report
shall also contain separate listings of (a) unsettled trades and (b) when-issued
securities. The Custodian shall furnish such other reports as may be mutually
agreed upon from time-to-time.
Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE
FUNDS HELD OUTSIDE THE UNITED STATES
4.1 Custody Outside the United States. Each Fund authorizes the
Custodian to hold Foreign Securities and cash in custody accounts which have
been established by the Custodian with (i) its foreign branches, (ii) foreign
banking institutions, foreign branches of United States banks and subsidiaries
of United States banks or bank holding companies (each a "Foreign Custodian")
and (iii) Foreign Securities depositories or clearing agencies (each a "Foreign
Securities Depository"); provided, however, that the appropriate Board or
Executive Committee has approved in advance the use of each such Foreign
Custodian and Foreign Securities Depository and the contract between the
Custodian and each Foreign Custodian and that such approval is set forth in
Proper Instructions and a certified copy of a resolution of the Board or of the
Executive Committee certified by the Secretary or an Assistant Secretary of the
appropriate Investment Company. Unless expressly provided to the contrary in
this Section 4, custody of Foreign Securities and assets held outside the United
States by the Custodian, a Foreign Custodian or through a Foreign Securities
Depository shall be governed by this Agreement, including Section 3 hereof.
4.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of its foreign branches, Foreign
Custodians and Foreign Securities Depositories to: (i) "foreign securities", as
defined in paragraph (c) (1) of Rule 17f-5 under the Fund Act, and (ii) cash and
cash equivalents in such amounts as the Custodian or an affected Fund may
determine to be reasonably necessary to effect the Fund's Foreign Securities
transactions.
4.3 Omitted.
4.4 Segregation of Securities. The Custodian shall identify on its
books and records as belonging to the appropriate Fund, the Foreign Securities
of each Fund held by each Foreign Custodian.
4.5 Agreements with Foreign Custodians. Each agreement between the
Custodian and a Foreign Custodian shall be substantially in the form as
delivered to the Investment Companies for their Boards' review, and shall not be
amended in a way that materially adversely affects any Fund without the prior
written consent of the Fund. Upon request, the Custodian shall certify to the
Funds that an agreement between the Custodian and a Foreign Custodian meets the
requirements of Rule 17f-5 under the 1940 Act.
4.6 Access of Independent Accountants of the Funds. Upon request of
a Fund, the Custodian will use its best reasonable efforts to arrange for the
independent accountants or auditors of the Fund to be afforded access to the
books and records of any Foreign Custodian insofar as such books and records
relate to the custody by any such Foreign Custodian of assets of the Fund.
4.7 Transactions in Foreign Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall instruct the appropriate Foreign Custodian to
transfer, exchange or deliver Foreign Securities owned by a Fund, but, except to
the extent explicitly provided herein, only in any of the cases specified in
Subsection 3.2. Upon receipt of Proper Instructions, the Custodian shall pay out
or instruct the appropriate Foreign Custodian to pay out monies of a Fund in any
of the cases specified in Subsection 3.6. Notwithstanding anything herein to the
contrary, settlement and payment for Foreign Securities received for the account
of a Fund and delivery of Foreign Securities maintained for the account of a
Fund may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser or dealer.
Foreign Securities maintained in the custody of a Foreign Custodian may be
maintained in the name of such entity or its nominee name to the same extent as
set forth in Section 3.3 of this Agreement and each Fund agrees to hold any
Foreign Custodian and its nominee harmless from any liability as a holder of
record of such securities.
4.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a Foreign Custodian shall, unless otherwise mutually agreed to by
the Custodian and a Fund, require the Foreign Custodian to exercise reasonable
care or, alternatively, impose a contractual liability for breach of contract
without an exception based upon a standard of care in the performance of its
duties and to indemnify and hold harmless the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Custodian's performance of such obligations, excepting,
however, Citibank, N.A., and its subsidiaries and branches, where the
indemnification is limited to direct money damages and requires that the claim
be promptly asserted. At the election of a Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims against a
Foreign Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made whole
for any such loss, damage, cost, expense, liability or claim, unless such
subrogation is prohibited by local law.
4.9 Monitoring Responsibilities.
(a) The Custodian will promptly inform each Fund in the event
that the Custodian learns of a material adverse change in the financial
condition of a Foreign Custodian or learns that a Foreign Custodian's financial
condition has declined or is likely to decline below the minimum levels required
by Rule 17f-5 of the 1940 Act.
(b) The custodian will furnish such information as may be
reasonably necessary to assist each Investment Company's Board in its annual
review and approval of the continuance of all contracts or arrangements with
Foreign Subcustodians.
Section 5. PROPER INSTRUCTIONS
As used in this Agreement, the term "Proper Instructions" means
instructions of a Fund received by the Custodian via telephone or in Writing
which the Custodian believes in good faith to have been given by Authorized
Persons (as defined below) or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Custodian may specify.
Any Proper Instructions delivered to the Custodian by telephone shall promptly
thereafter be confirmed in accordance with procedures, and limited in subject
matter, as mutually agreed upon by the parties. Unless otherwise expressly
provided, all Proper Instructions shall continue in full force and effect until
canceled or superseded. If the Custodian requires test arrangements,
authentication methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Funds thereafter shall
be given and processed in accordance with such terms and conditions for the use
of such arrangements, methods or devices as the Custodian may put into effect
and modify from time to time. The Funds shall safeguard any testkeys,
identification codes or other security devices which the Custodian shall make
available to them. The Custodian may electronically record any Proper
Instructions given by telephone, and any other telephone discussions, with
respect to its activities hereunder. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of a Fund as have been
properly appointed pursuant to a resolution of the appropriate Board or
Executive Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Fund under this Agreement. Each of such
persons shall continue to be an Authorized Person until such time as the
Custodian receives Proper Instructions that any such officer or agent is no
longer an Authorized Person.
Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from
a Fund:
(a) make payments to itself or others for minor expenses of
handling Securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the Fund;
(b) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
(c) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the Securities and property of the Fund except as otherwise
provided in Proper Instructions.
Section 7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions
(conveyed by telephone or in Writing), notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have been properly
given or executed by or on behalf of a Fund. The Custodian may receive and
accept a certified copy of a resolution of a Board or Executive Committee as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by the Board or
Executive Committee as described in such resolution, and such resolution may be
considered as in full force and effect until receipt by the Custodian of written
notice by an Authorized Person to the contrary.
Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION
The Custodian shall cooperate with and supply necessary information
in its possession (to the extent permissible under applicable law) to the entity
or entities appointed by the appropriate Board to keep the books of account of a
Fund and/or compute the net asset value per Share of the outstanding Shares of a
Fund.
Section 9. RECORDS
The Custodian shall create and maintain all records relating to its
activities under this Agreement which are required with respect to such
activities under Section 31 of the Investment Company Act and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the appropriate
Investment Company and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Investment Company and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at a Fund's request, supply the Fund
with a tabulation of Securities and Cash owned by the Fund and held by the
Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
Section 10. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
each Investment Company, on behalf of each Fund, and the Custodian. In addition,
should the Custodian in its discretion advance funds (to include overdrafts) to
or on behalf of a Fund pursuant to Proper Instructions, the Custodian shall be
entitled to prompt reimbursement of any amounts advanced. In the event of such
an advance, and to the extent permitted by the 1940 Act and the Fund's policies,
the Custodian shall have a continuing lien and security interest in and to the
property of the Fund in the possession or control of the Custodian or of a third
party acting in the Custodian's behalf, until the advance is reimbursed. Nothing
in this Agreement shall obligate the Custodian to advance funds to or on behalf
of a Fund, or to permit any borrowing by a Fund except for borrowings for
temporary purposes, to the extent permitted by the Fund's policies.
Section 11. RESPONSIBILITY OF CUSTODIAN
The Custodian shall be responsible for the performance of only such
duties as are set forth herein or contained in Proper Instructions and shall use
reasonable care in carrying out such duties. The Custodian shall be liable to a
Fund for any loss which shall occur as the result of the failure of a Foreign
Custodian engaged directly or indirectly by the Custodian to exercise reasonable
care with respect to the safekeeping of securities and other assets of the Fund
to the same extent that the Custodian would be liable to the Fund if the
Custodian itself were holding such securities and other assets. Nothing in this
Agreement shall be read to limit the responsibility or liability of the
Custodian or a Foreign Custodian for their failure to exercise reasonable care
with regard to any decision or recommendation made by the Custodian or
Subcustodian regarding the use or continued use of a Foreign Securities
Depository. In the event of any loss to a Fund by reason of the failure of the
Custodian or a Foreign Custodian engaged by such Foreign Custodian or the
Custodian to utilize reasonable care, the Custodian shall be liable to the Fund
to the extent of the Fund's damages, to be determined based on the market value
of the property which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or circumstances. The
Custodian shall be held to the exercise of reasonable care in carrying out this
Agreement, and shall not be liable for acts or omissions unless the same
constitute negligence or willful misconduct on the part of the Custodian or any
Foreign Custodian engaged directly or indirectly by the Custodian. Each Fund
agrees to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities (including legal
fees and expenses) incurred by the Custodian or its nominess in connection with
the performance of this Agreement with respect to such Fund, except such as may
arise from any negligent action, negligent failure to act or willful misconduct
on the part of the indemnified entity or any Foreign Custodian. The Custodian
shall be entitled to rely, and may act, on advice of counsel (who may be counsel
for a Fund) on all matters and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian need not
maintain any insurance for the benefit of any Fund.
All collections of funds or other property paid or distributed in
respect of Securities held by the Custodian, agent, Subcustodian or Foreign
Custodian hereunder shall be made at the risk of the Funds. The Custodian shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Custodian, agent, Subcustodian or by a Foreign Custodian of any
payment, redemption or other transaction regarding securities in respect of
which the Custodian has agreed to take action as provided in Section 3 hereof.
The Custodian shall not be liable for any action taken in good faith upon Proper
Instructions or upon any certified copy of any resolution of the Board and may
rely on the genuineness of any such documents which it may in good faith believe
to be validly executed. Notwithstanding the foregoing, the Custodian shall not
be liable for any loss resulting from, or caused by, the direction of a Fund to
maintain custody of any Securities or cash in a foreign country including, but
not limited to, losses resulting from nationalization, expropriation, currency
restrictions, civil disturbance, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation or other similar occurrences,
or events beyond the control of the Custodian. Finally, the Custodian shall not
be liable for any taxes, including interest and penalties with respect thereto,
that may be levied or assessed upon or in respect of any assets of any Fund held
by the Custodian.
Section 12. LIMITED LIABILITY OF EACH INVESTMENT COMPANY
The Custodian acknowledges that it has received notice of and
accepts the limitations of liability as set forth in each Investment Company's
Agreement and Declaration of Trust, Articles of Incorporation, or Agreement of
Limited Partnership. The Custodian agrees that each Fund's obligation hereunder
shall be limited to the assets of the Fund, and that the Custodian shall not
seek satisfaction of any such obligation from the shareholders of the Fund nor
from any Board Member, officer, employee, or agent of the Fund or the Investment
Company on behalf of the Fund.
Section 13. EFFECTIVE PERIOD; TERMINATION
This Agreement shall become effective as of the date of its
execution and shall continue in full force and effect until terminated as
hereinafter provided. This Agreement may be terminated by each Investment
Company, on behalf of a Fund, or by the Custodian by 90 days notice in Writing
to the other provided that any termination by an Investment Company shall be
authorized by a resolution of the Board, a certified copy of which shall
accompany such notice of termination, and provided further, that such resolution
shall specify the names of the persons to whom the Custodian shall deliver the
assets of the affected Funds held by the Custodian. If notice of termination is
given by the Custodian, the affected Investment Companies shall, within 90 days
following the giving of such notice, deliver to the Custodian a certified copy
of a resolution of the Boards specifying the names of the persons to whom the
Custodian shall deliver assets of the affected Funds held by the Custodian. In
either case the Custodian will deliver such assets to the persons so specified,
after deducting therefrom any amounts which the Custodian determines to be owed
to it hereunder (including all costs and expenses of delivery or transfer of
Fund assets to the persons so specified). If within 90 days following the giving
of a notice of termination by the Custodian, the Custodian does not receive from
the affected Investment Companies certified copies of resolutions of the Boards
specifying the names of the persons to whom the Custodian shall deliver the
assets of the Funds held by the Custodian, the Custodian, at its election, may
deliver such assets to a bank or trust company doing business in the State of
California to be held and disposed of pursuant to the provisions of this
Agreement or may continue to hold such assets until a certified copy of one or
more resolutions as aforesaid is delivered to the Custodian. The obligations of
the parties hereto regarding the use of reasonable care, indemnities and payment
of fees and expenses shall survive the termination of this Agreement.
Section 14. MISCELLANEOUS
14.1 Relationship. Nothing contained in this Agreement shall (i)
create any fiduciary, joint venture or partnership relationship between the
Custodian and any Fund or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to any Fund of
investment banking, securities dealing or brokerages services or any other
banking or financial services.
14.2 Further Assurances. Each party hereto shall furnish to the
other party hereto such instruments and other documents as such other party may
reasonably request for the purpose of carrying out or evidencing the
transactions contemplated by this Agreement.
14.3 Attorneys' Fees. If any lawsuit or other action or proceeding
relating to this Agreement is brought by a party hereto against the other party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (including allocated costs and disbursements of
in-house counsel), in addition to any other relief to which the prevailing party
may be entitled.
14.4 Notices. Except as otherwise specified herein, each notice or
other communication hereunder shall be in Writing and shall be delivered to the
intended recipient at the following address (or at such other address as the
intended recipient shall have specified in a written notice given to the other
parties hereto):
if to a Fund or Investment Company: if to the Custodian:
[Fund or Investment Company] The Bank of New York
c/o Franklin Resources, Inc. Mutual Fund Custody Manager
777 Mariners Island Blvd. BNY Western Trust Co.
San Mateo, CA 94404 550 Kearney St., Suite 60
Attention: Chief Legal Officer San Francisco, CA 94108
14.5 Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
14.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and both of which, when taken
together, shall constitute one agreement.
14.7 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of New York
(without giving effect to principles of conflict of laws).
14.8 Force Majeure. Notwithstanding the provisions of Section 11
hereof regarding the Custodian's general standard of care, no failure, delay or
default in performance of any obligation hereunder shall constitute an event of
default or a breach of this agreement, or give rise to any liability whatsoever
on the part of one party hereto to the other, to the extent that such failure to
perform, delay or default arises out of a cause beyond the control and without
negligence of the party otherwise chargeable with failure, delay or default;
including, but not limited to: action or inaction of governmental, civil or
military authority; fire; strike; lockout or other labor dispute; flood; war;
riot; theft; earthquake; natural disaster; breakdown of public or common carrier
communications facilities; computer malfunction; or act, negligence or default
of the other party. This paragraph shall in no way limit the right of either
party to this Agreement to make any claim against third parties for any damages
suffered due to such causes.
14.9 Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns, if any.
14.10 Waiver. No failure on the part of any person to exercise any
power, right, privilege or remedy hereunder, and no delay on the part of any
person in the exercise of any power, right, privilege or remedy hereunder, shall
operate as a waiver thereof; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
14.11 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of an agreement or instrument
executed on behalf of each of the parties hereto.
14.12 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
14.13 Parties in Interest. None of the provisions of this Agreement
is intended to provide any rights or remedies to any person other than the
Investment Companies, for themselves and for the Funds, and the Custodian and
their respective successors and assigns, if any.
14.14 Pre-Emption of Other Agreements. In the event of any conflict
between this Agreement, including without limitation any amendments hereto, and
any other agreement which may now or in the future exist between the parties,
the provisions of this Agreement shall prevail.
14.15 Variations of Pronouns. Whenever required by the context
hereof, the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; and the neuter
gender shall include the masculine and feminine genders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
THE BANK OF NEW YORK
By: _____________________________
Its: _____________________________
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A
By: ______________________________
Harmon E. Burns
Their: Vice President
By: ______________________________
Deborah R. Gatzek
Their: Vice President & Secretary
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series
for which the Custodian shall serve under the Master Custody Agreement dated as
of February 16, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Delaware Business Trust U.S. Government Adjustable Rate Mortgage
Portfolios Portfolio
Adjustable Rate Securities Portfolio
AGE High Income Fund, Inc. Colorado Corporation
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Franklin California Insured Tax-Free Income
Trust Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income California Corporation
Fund
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business
Trust
Franklin Templeton International Delaware Business Trust Templeton Pacific Growth Fund
Trust Franklin International Equity Fund
Franklin Investors Securities Trust Massachusetts Business Franklin Global Government Income Fund
Trust Franklin Short-Intermediate U.S. Gov't
Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities
Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Managed Trust Massachusetts Business Franklin Corporate Qualified Dividend Fund
Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Institutional Rising Dividends Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
Franklin New York Tax-Free Income New York Corporation
Fund, Inc.
Franklin New York Tax-Free Trust Massachusetts Business Franklin New York Tax-Exempt Money Fund
Trust Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Advantaged California Limited
International Bond Fund Partnership
Franklin Tax-Advantaged U.S. California Limited
Government Securities Fund Partnership
Franklin Tax-Advantaged High Yield California Limited
Securities Fund. Partnership
Franklin Premier Return Fund California Corporation
Franklin Real Estate Securities Delaware Business Trust Franklin Real Estate Securities Fund
Trust
Franklin Strategic Mortgage Delaware Business Trust
Portfolio
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Institutional MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Tax-Exempt Money Fund California Corporation
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin Massachusetts Insured Tax-Free Income Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin North Carolina Tax-Free Income Fund
(cont.) Trust Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free
Income Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Templeton Global Trust Massachusetts Business Franklin Templeton German Government Bond Fund
Trust Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Franklin Balance Sheet Investment Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Franklin Valuemark Funds Massachusetts Business Money Market Fund
Trust Growth and Income Fund
Precious Metals
Fund Real Estate
Securities Fund
Utility Equity Fund
High Income Fund
Templeton Global
Income Securities
Fund Investment
Grade Intermediate
Bond Fund Income
Securities Fund
U.S. Government
Securities Fund
Zero Coupon Fund -
2000 Zero Coupon
Fund - 2005 Zero
Coupon Fund - 2010
Adjustable U.S.
Government Fund
Rising Dividends
Fund Templeton
Pacific Growth Fund
Templeton
International
Equity Fund
Templeton
Developing Markets
Equity Fund
Templeton Global
Growth Fund
Templeton Global
Asset Allocation
Fund Small Cap Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------------------------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Money Market Portfolio
Trust Franklin Late Day Money Market Portfolio
Franklin U.S. Government Securities Money
Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S.
Government
Securities Fund
Franklin Institutional Adjustable Rate
Securities Fund
Franklin U.S. Government Agency Money Market
Fund
Franklin Cash Reserves Fund
MidCap Growth Portfolio Delaware Business Trust
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market
Portfolio
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business
Trust
Franklin Principal Maturity Trust Massachusetts Business
Trust
Franklin Universal Trust Massachusetts Business
Trust
- ------------------------------------------------------------------------------------------------------------
</TABLE>
TERMINAL LINK AGREEMENT
AGREEMENT made as of February 16, 1996 between The Bank of New York as custodian
(the "Custodian") and each Investment Company listed on Exhibit A, for itself
and for each of Series listed on Exhibit A (each, a "Fund").
WHEREAS, the parties have entered into a Master Custody Agreement dated
as of February 16, 1996;
WHEREAS, the parties desire to provide for the electronic transmission
of instructions from each Fund to the Custodian, as and to the extent permitted
by the Master Custody Agreement; and
WHEREAS, the Board of Directors, Trustees or Managing General Partners,
as applicable, of each Investment Company have previously authorized each
Investment Company to enter into the Master Custody Agreement;
NOW, THEREFORE, in consideration for the mutual promises set forth, the parties
agree as follows:
A. Except as otherwise provided herein, all terms shall have the same meaning as
in the Master Custody Agreement.
B. The term "Certificate" shall mean any Proper Instruction by a Fund to the
Custodian communicated by the Terminal Link.
C . The term "Officer" shall mean an Authorized Person as defined in section 5
of the Master Custody Agreement.
D. The term "Terminal Link" shall mean an electronic data transmission link
between a Fund, Franklin Templeton Investor Services, Inc. acting as agent for
the Fund ("FTISI"), and the Custodian requiring in connection with each use of
the Terminal Link by or on behalf of the Fund use of an authorization code
provided by the Custodian and at least two access codes established by the Fund.
Each Fund represents that FTISI will maintain a transmission line to the
Custodian and has been selected by the Fund to receive electronic data
transmissions from the Custodian or the Fund and forward the same to the Fund or
the Custodian, respectively.
E. Terminal Link
1. The Terminal Link shall be utilized by a Fund only for the purpose of the
Fund providing Certificates to the Custodian with respect to transactions
involving Securities or for the transfer of money to be applied to the payment
of dividends, distributions or redemptions of Fund Shares, and shall be utilized
by the Custodian only for the purpose of providing notices to the Fund. Such use
shall commence only after a Fund shall have established access codes and
safekeeping procedures to safeguard and protect the confidentiality and
availability of such access codes, and shall have reviewed the safekeeping
procedures established by FTISI to assure that transmissions inputted by the
Fund, and only such transmissions, are forwarded by FTISI to the Custodian
without any alteration or omission. Each use of the Terminal Link by a Fund
shall constitute a representation and warranty that the Terminal Link is being
used only for the purposes permitted hereby, that at least two Officers have
each utilized an access code, that such safekeeping procedures have been
established by the Fund, that FTISI has safekeeping procedures reviewed by the
Fund to assure that all transmissions inputted by the Fund, and only such
transmissions, are forwarded by FTISI to the Custodian without any alteration or
omission by FTISI, and that such use does not, to the Fund's knowledge,
contravene the Investment Company Act of 1940, as amended, or the rules or
regulations thereunder.
2. Each Fund shall obtain and maintain at its own cost and expense all equipment
and services, including, but not limited to communications services, necessary
for it to utilize the Terminal Link, and the Custodian shall not be responsible
for the reliability or availability of any such equipment or services.
3. Each Fund acknowledges that any data bases made available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than which are or become part of the public
domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. Each Fund shall, and shall cause others to which it discloses
the Information, including without limitation FTISI, to keep the Information
confidential, by using the same care and discretion it uses with respect to its
own confidential property and trade secrets, and shall neither make nor permit
any disclosure without the express prior written consent of the Custodian.
4. Upon termination of this Agreement for any reason, the Fund shall return to
the Custodian any and all copies of the Information which are in the Fund's
possession or under its control, or which the Fund distributed to third parties,
including without limitation FTISI. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all information whether or not copyrighted.
5. The Custodian reserves the right to modify the Terminal Link from time to
time without notice to the Funds or FTISI, except that the Custodian shall give
the Funds notice not less than 75 days in advance of any modification which
would materially adversely affect the Funds' operation. The Funds agree that
neither the Funds nor FTISI shall modify or attempt to modify the Terminal Link
without the Custodian's prior written consent. Each Fund acknowledges that any
software or procedures provided the Fund or FTISI as part of the Terminal Link
are the property of the Custodian and, accordingly, agrees that any
modifications to the Terminal Link, whether by the Fund, FTISI or the Custodian
and whether with or without the Custodian's consent, shall become the property
of the Custodian.
6. The Custodian, the Funds, FTISI and any manufacturers and suppliers utilized
by the Custodian, the Funds or FTISI in connection with the Terminal Link, make
no warranties or representations to any other party, express or implied, in fact
or in law, including but not limited to warranties of merchantability and
fitness for a particular purpose.
7. Each Fund will cause its officers and employees to treat the authorization
codes and the access codes applicable to Terminal Link with extreme care, and
irrevocably authorizes the Custodian to act in accordance with and rely on
Certificates received by it through the Terminal Link. Each Fund acknowledges
that it is its responsibility to assure that only its officers and authorized
persons of FTISI use the Terminal Link on its behalf, and that the Custodian
shall not be responsible nor liable for any action taken in good faith in
reliance upon a Certificate, nor for any alteration, omission, or failure to
promptly forward by FTISI.
8. (a) Except as otherwise specifically provided in Section 8(b) of this
Article, the Custodian shall have no liability for any losses, damages,
injuries, claims, costs or expenses arising out of or in connection with any
failure, malfunction or other problem relating to the Terminal Link except for
money damages suffered as the result of the negligence of the Custodian,
provided however, that the Custodian shall have no liability under this Section
8 if the Fund fails to comply with the provisions of section 10.
(b) The Custodian's liability for its negligence in executing or failing
to act in accordance with a Certificate received through Terminal Link shall be
only with respect to a transfer of funds or assets which is not made in
accordance with such Certificate, and shall be subject to Section 11 of this
Article and contingent upon the Fund complying with the provisions of Section 10
of this Article, and shall be limited to the extent of the Fund's damages,
without reference to any special conditions or circumstances.
9. Without limiting the generality of the foregoing, in no event shall the
Custodian or any manufacturer or supplier of its computer equipment, software or
services relating to the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which a Fund or FTISI may incur or
experience by reason of any malfunction of such equipment or software, even if
the Custodian or any manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the Terminal Link
shall the Custodian or any such manufacturer or supplier be liable for acts of
God, or with respect to the following to the extent beyond such person's
reasonable control: machine or computer breakdown or malfunction, interruption
or malfunction of communication facilities, labor difficulties or any other
similar or dissimilar cause.
10. Each Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, or (ii) the business day on which discovery should have
occurred through the exercise of reasonable care. The Custodian shall promptly
advise the Fund or FTISI whenever the Custodian learns of any errors, omissions
or interruption in, or delay or unavailability of, the Terminal Link.
11. The Custodian shall acknowledge to each affected Fund or to FTISI, by use of
the Terminal Link, receipt of each Certificate the Custodian receives through
the Terminal Link, and in the absence of such acknowledgment the Custodian shall
not be liable for any failure to act in accordance with such Certificate and the
Funds may not claim that such Certificate was received by the Custodian. Such
acknowledgment, which may occur after the Custodian has acted upon such
Certificate, shall be given on the same day on which such Certificate is
received.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers, thereunto duly authorized and their respective
seals to be hereto affixed as of the day and year first above written.
THE BANK OF NEW YORK
By: ______________________
Title: ______________________
THE INVESTMENT COMPANIES LISTED ON EXHIBIT A
By: ______________________
Harmon E. Burns
Title: Vice President
By: ______________________
Deborah R. Garzek
Title: Vice President & Secretary
<TABLE>
<CAPTION>
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series
for which the Custodian shall serve under the Master Custody Agreement dated as
of February 16, 1996.
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Portfolios Delaware Business Trust U.S. Government Adjustable Rate Mortgage Portfolio
Adjustable Rate Securities Portfolio
AGE High Income Fund, Inc. Colorado Corporation
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Franklin California Insured Tax-Free Income Fund
Trust Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income Fund California Corporation
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business
Trust
Franklin Templeton International Trust Delaware Business Trust Templeton Pacific Growth Fund
Franklin International Equity Fund
Franklin Investors Securities Trust Massachusetts Business Franklin Global Government Income Fund
Trust Franklin Short-Intermediate U.S. Gov't Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Managed Trust Massachusetts Business Franklin Corporate Qualified Dividend Fund
Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Institutional Rising Dividends Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
Franklin New York Tax-Free Income Fund, New York Corporation
Inc.
Franklin New York Tax-Free Trust Massachusetts Business Franklin New York Tax-Exempt Money Fund
Trust Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Tax-Advantaged International Bond California Limited
Fund Partnership
Franklin Tax-Advantaged U.S. Government California Limited
Securities Fund Partnership
Franklin Tax-Advantaged High Yield California Limited
Securities Fund. Partnership
Franklin Premier Return Fund California Corporation
Franklin Real Estate Securities Trust Delaware Business Trust Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio Delaware Business Trust
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Institutional MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Tax-Exempt Money Fund California Corporation
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin Massachusetts Insured Tax-Free Income Fund
Trust Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Tax-Free Trust Massachusetts Business Franklin North Carolina Tax-Free Income Fund
(cont.) Trust Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Templeton Global Trust Massachusetts Business Franklin Templeton German Government Bond Fund
Trust Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Franklin Balance Sheet Investment Fund
Trust Franklin MicroCap Value Fund
Franklin Value Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Franklin Valuemark Funds Massachusetts Business Money Market Fund
Trust Growth and Income Fund
Precious Metals Fund
Real Estate Securities Fund
Utility Equity Fund
High Income Fund
Templeton Global Income
Securities Fund Investment
Grade Intermediate Bond
Fund Income Securities
Fund U.S. Government
Securities Fund Zero
Coupon Fund -2000 Zero
Coupon Fund -2005 Zero Coupon
Fund -2010 Adjustable U.S. Government
Fund Rising Dividends Fund
Templeton Pacific Growth Fund
Templeton International Equity
Fund Templeton Developing
Markets Equity Fund Templeton
Global Growth Fund Global
Asset Allocation Fund Small
Cap Fund
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Money Market Portfolio
Trust Franklin Late Day Money Market Portfolio
Franklin U.S. Government Securities Money Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S. Government
Securities Fund
Franklin Institutional Adjustable Rate Securities Fund
Franklin U.S. Government Agency Money Market Fund
Franklin Cash Reserves Fund
MidCap Growth Portfolio Delaware Business Trust
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business
Trust
Franklin Principal Maturity Trust Massachusetts Business
Trust
Franklin Universal Trust Massachusetts Business
Trust
- -------------------------------------------- ---------------------------- ---------------------------------------------------------
</TABLE>
GASTON & SNOW
COUNSELLORS AT LAW
101 CALIFORNIA STREET, SUITE 3000
SAN FRANCISCO, CALIFORNIA 94111
415/982-5444
January 31, 1989
Franklin Government Securities Trust
777 Mariners Island Blvd.
San Mateo, California 94404
Gentlemen:
We understand that Franklin Government Securities Trust, a
Massachusetts business trust (the "Trust"), has filed with the Securities and
Exchange Commission a Registration Statement on Form N-1A under the Securities
Act of 1933 and the Investment Company Act of 1940. We also understand that
pursuant to said Registration Statement, the Trust has elected to register an
indefinite number of shares of beneficial interest pursuant to Rule 24f-2 under
the Investment Company Act of 1940.
In connection with the registration of such shares, we have examined
the Trust's Agreement and Declaration of Trust, its By-Laws, and the
Registration Statement, as amended or proposed to be amended, as well as such
other records and documents as we have deemed necessary. Based upon such
examination, we are of the opinion that:
1. The Trust has been duly organized and is validly existing
in good standing as a business trust under the laws of the commonwealth
of Massachusetts; and
2. The shares of beneficial interest in the Trust to be offered to
the public have been duly authorized for issuance and will be legally issued,
fully paid and nonassessable when said shares have been issued and sold in
accordance with the terms and in the manner set forth in the Trust's
Registration Statement, as amended.
We hereby consent to the filing of this opinion as an exhibit to the
Trust's Registration Statement and to the reference of our name in the documents
comprising said Registration Statement.
Sincerely yours,
/s/ Gaston & Snow
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Franklin Government Securities Trust
We consent to the incorporation by reference in Post-Effective Amendment No.
8 to the Registration Statement of Franklin Government Securities Trust on
Form N-1A (File No. 33-26051) of our report dated January 26, 1996 on our
audit of the financial statements and financial highlights of Franklin
Government Securities Trust, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1995 which is incorporated by
reference in the Registration Statement.
COOPERS & LYBRAND L.L.P.
San Francisco, California
February 28, 1996
POWER OF ATTORNEY
The undersigned officers and Trustees of FRANKLIN GOVERNMENT SECURITIES TRUST
(the "Registrant") hereby appoint HARMON E. BURNS, DEBORAH R. GATZEK, MARK H.
PLAFKER, KAREN L. SKIDMORE and LARRY L. GREENE (with full power to each of
them to act alone) his attorney-in-fact and agent, in all capacities, to
execute, and to file any of the documents referred to below relating to
Post-Effective Amendments to the Registrant's registration statement on Form
N-1A under the Investment Company Act of 1940, as amended, and under the
Securities Act of 1933 covering the sale of shares by the Registrant under
the prospectuses becoming effective after this date, including any amendment
or amendments increasing or decreasing the amount of securities for which
registration is being sought, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority. Each
of the undersigned grants to each of said attorneys, full authority to do
every act necessary to be done in order to effectuate the same as fully, to
all intents and purposes as he could do if personally present, thereby
ratifying all that said attorneys-in-fact and agents, may lawfully do or
cause to be done by virtue hereof.
The undersigned officers and trustees hereby execute this Power of Attorney
as of this 16th day of February 1995.
/s/ Rupert H. Johnson, Jr. /s/ Charles B. Johnson
Rupert H. Johnson, Jr., Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/s/ Frank H. Abbott, III /s/ Harris J. Ashton
Frank H. Abbott, III, Harris J. Ashton,
Trustee Trustee
/s/ Harmon E. Burns /s/ S. Joseph Fortunato
Harmon E. Burns, S. Joseph Fortunato,
Trustee Trustee
/s/ David W. Garbellano /s/ Frank W. T. LaHaye
David W. Garbellano, Frank W. T. LaHaye,
Trustee Trustee
/s/ Gordon S. Macklin /s/ Martin L. Flanagan
Gordon S. Macklin, Martin L. Flanagan,
Trustee Trustee
/s/ Diomedes Loo-Tam
Diomedes Loo-Tam,
Principal Accounting Officer
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of Franklin
Government Securities Trust (the "Trust").
As Secretary of the Trust, I further certify that the following resolution was
adopted by a majority of the Trustees of the Trust present at a meeting held at
777 Mariners Island Boulevard, San Mateo, California, on February 16, 1995.
RESOLVED, that a Power of Attorney, substantially in the form of
the Power of Attorney presented to this Board, appointing Harmon
E. Burns, Deborah R. Gatzek, Larry L. Greene, Karen L. Skidmore,
and Mark H. Plafker as attorneys-in-fact for the purpose of
filing documents with the Securities and Exchange Commission, be
executed by each Trustee and designated officer.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: February 16, 1995 Deborah R. Gatzek
Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL STATEMENT INFORMATION EXTRACTED
FROM THE FRANKLIN GOVERNMENT SECURITIES TRUST DECEMBER 31, 1995 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000844040
<NAME> FRANKLIN GOVERNMENT SECURITIES TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 20,659,896
<INVESTMENTS-AT-VALUE> 20,982,356
<RECEIVABLES> 1,979,547
<ASSETS-OTHER> 4,579
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,966,482
<PAYABLE-FOR-SECURITIES> 444,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,639
<TOTAL-LIABILITIES> 475,369
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,051,566
<SHARES-COMMON-STOCK> 1,685,270
<SHARES-COMMON-PRIOR> 1,264,470
<ACCUMULATED-NII-CURRENT> 1,246,586
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (129,499)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 322,460
<NET-ASSETS> 22,491,113
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,361,244
<OTHER-INCOME> 0
<EXPENSES-NET> (114,620)
<NET-INVESTMENT-INCOME> 1,246,624
<REALIZED-GAINS-CURRENT> (21,303)
<APPREC-INCREASE-CURRENT> 1,661,836
<NET-CHANGE-FROM-OPS> 2,887,157
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,086,914)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 550,647
<NUMBER-OF-SHARES-REDEEMED> (215,498)
<SHARES-REINVESTED> 85,651
<NET-CHANGE-IN-ASSETS> 7,248,735
<ACCUMULATED-NII-PRIOR> 1,086,876
<ACCUMULATED-GAINS-PRIOR> (108,196)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 114,871
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 139,365
<AVERAGE-NET-ASSETS> 18,379,806
<PER-SHARE-NAV-BEGIN> 12.050
<PER-SHARE-NII> .670
<PER-SHARE-GAIN-APPREC> 1.422
<PER-SHARE-DIVIDEND> (.792)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.350
<EXPENSE-RATIO> .620
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
FRANKLIN TEMPLETON GROUP OF FUNDS
777 Mariners Island Boulevard
San Mateo, California 94404
February 28, 1996
Filed Via EDGAR (CIK #0000844040)
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: FRANKLIN GOVERNMENT SECURITIES TRUST
FILE Nos. 33-26051 and 811-5709
Gentlemen:
On behalf of the above-referenced Registrant, submitted herewith under the
EDGAR system, please find Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A (the "Amendment"), which is
being filed under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended.
The filing has been made in order to bring the financial statements and other
information up to date and to make certain other changes which were deemed
appropriate.
As requested by the Division of Investment Management in a letter to
investment company registrants, dated February 25, 1994, the Trust also
states the following (applicable items are noted by an "X" mark):
If applicable, the series being filed hereby are
money market funds.
_____ of such money market funds the () Fund(s) is
(are) taxable and the () Fund(s) is (are) non-taxable.
This filing relates to a master/feeder arrangement.
The Fund(s) may be marketed through banks, savings
and loan associations, or credit unions.
The Funds operations raise novel or complex issues of
law or policy.
Pursuant to Rule 485(a), the Amendment will become effective on May 1, 1996.
Please direct any inquiries regarding this filing to the undersigned at (415)
312-2813 or the address shown above.
Sincerely yours,
FRANKLIN GOVERNMENT SECURITIES TRUST
Karen L. Skidmore
Assistant Vice President
KLS:le
cc: Stradley, Ronon, Stevens & Young
Glen Ceremony - Coopers & Lybrand L.L.P.
Jane Baggs (2)
Sharon Uriarte
Trustees
