As filed with the Securities and Exchange Commission on April 23, 1997.
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. 9 ( X )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 ( 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)
[X]on May 1, 1997 pursuant to paragraph (b)
[ ]60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ]75 days after filing pursuant to paragraph (a)(ii)
[ ]on (date), pursuant to paragraph (a)(ii) of Rule 485
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 26, 1997.
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
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 currently 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 contains information that investors should know before investing
in the Fund. Investors should retain it for future reference.
The Fund has a Statement of Additional Information ("SAI"), dated May 1, 1997,
which may be amended from time to time. It includes more information about the
procedures and policies of the Fund. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated by reference in this prospectus.
For a free copy, call or write the Fund at the telephone number or address 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 of
the U.S. government. Shares of the Fund involve investment risks, including the
possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES, OR INSURANCE COMMISSION NOR HAS THE SEC 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, jurisdiction or country in which the offering is not authorized. No sales
representative, dealer or other person is authorized to give any information or
make any representations other than those contained in this prospectus.
Prospectus
May 1, 1997
CONTENTS
Page
Financial Highlights 3
About the Fund 4
Investment Objectives And Policies of the Fund 4
Management of the Fund 5
Distributions 6
Tax Considerations 6
How to Buy Shares of the Fund 6
How to Sell Shares of the Fund 7
Valuation of Fund Shares 7
General Information 7
Useful Terms and Definitions 8
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by Coopers & Lybrand L.L.P., the Fund's independent auditors. Their
audit report covering each of the most recent five years appears in the
financial statements in the Fund's SAI. The remaining figures, which are also
audited, are not covered by the auditors' report. For a free copy please call
1-800-DIAL BEN.
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance**
Net asset value,
beginning of year $13.35 $12.05 $13.30 $13.26 $13.01 $11.72 $10.89 $10.00
Net investment income 0.84 0.67 0.85 0.65 0.80 0.61 0.58 0.36
Net realized and unrealized
gain (loss) (.3396) 1.4216 (1.3463) .3385 .1602 1.1939 .5068 .5300
Total from investment operations 0.5004 2.0916 (.4963) .9885 .9602 1.8039 1.0868 .8900
Less Distributions:
Dividends from undistributed
net investment income (0.6904) (0.7916) (.7537) (.7459) (.7102) (.5139) (.2560) --
Distributions from
net capital gains. -- -- -- (.2026) -- -- (.0008) --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.6904) (0.7916) (.7537) (.9485) (.7102) (.5139) (.2568) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $13.16 $13.35 $12.05 $13.30 $13.26 $13.01 $11.72 $10.89
- ---------------------------------------------------------------------------------------------------------------------------
Total return*** 4.07% 17.70% (3.75%) 7.59% 7.66% 15.87% 10.23% 8.90%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
Net assets, end of year in (000) $23,365 $22,491 $15,242 $16,568 $11,815 $8,641 $3,922 $1,294
Ratio of expenses to
average net assets+ 0.70% 0.62% 0.63% 0.62% 0.29% 0% 0% 0%
Ratio of net income to
average net assets 6.66% 6.78% 6.85% 6.68% 7.75% 8.74% 9.17% 8.63%++
Portfolio turnover rate 10.25% 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 is not annualized. It assumes reinvestment of dividends and
capital gains, if any, at net asset value. Total return figures do not include
charges applied under the Contracts. Inclusion of such figures would reduce the
total return figures for all periods shown. +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
1996 .70
++Annualized
ABOUT THE FUND
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")
INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
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. The 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. 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 currently
intended to be invested solely in obligations ("GNMA", or "Ginnie Maes") of the
Government National Mortgage Association (the "Association").
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 Risks. 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.
Interest Rate Risk. Changes in interest rates will affect the value of the
Fund's portfolio and its share price. Rising interest rates, which often occur
during times of inflation or a growing economy, are likely to have a negative
effect on the value of the Fund's shares. Interest rates have increased and
decreased in the past. These changes are unpredictable and may happen again in
the future.
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. In TBA and
delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to do so may cause the Fund to miss price or
yield considered advantageous. Securities purchased on a TBA or "delayed
delivery" basis do not generally earn interest until their scheduled delivery
date. 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.
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 Fund's investment 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 "Investment Objectives and
Policies of the Fund" and "Investment Restrictions" in the SAI.
MANAGEMENT OF THE FUND
The Board. The Board overseas the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations.
Investment Manager. Franklin Advisers, Inc. ("Advisers"), manages the Fund's
assets and makes its investment decisions. Advisers also performs similar
services for other Funds. It is wholly owned by Resources, a publicly owned
company engaged in the financial services industry through its subsidiaries.
Charles B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Resources. Together, Advisers and its affiliates manage over $184 billion in
assets. 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.
Management Team. 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.
Management Fees. During the fiscal year ended December 31, 1996, management
fees, before any advance waiver, totaled 0.63% of the average daily net assets
of the Fund. Total operating expenses, including fees paid to Advisers, before
any advance waiver, totaled 0.70% of the average daily net assets of the Fund.
The fee waiver did not reduce the total expenses paid as a percentage of net
assets. This arrangement may be terminated at any time upon notice to the Board.
Portfolio Transactions. Advisers tries to obtain the best execution on all
transactions. If Advisers believes more than one broker or dealer can provide
the best execution, consistent with internal policies, it may consider research
and related services and the sale of Fund shares, as well as shares of other
Funds in the Franklin Templeton Group of Funds, when selecting a broker or
dealer. Please see "How Does the Fund Purchase Securities For Its Portfolio?" in
the SAI.
Administrative Services. 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 Contract Holder
administrative services in connection with the operation of the Fund.
Under an agreement with Advisers, FT Services provides certain administrative
services and facilities for the Fund. Please see "Investment Management and
Other Services" in the SAI for more information.
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 distributing all of its income and
meeting certain other requirements relating to the sources of its income and
diversification of its assets, the Fund will not be liable for federal income or
excise taxes. 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 to the Fund by the Contract Holders or Participants. Shares are
purchased by the Separate Account at the net asset value next determined after
the Fund receives the purchase payment in good order and are credited in the
form of full and fractional shares (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 Exchange is open) and are
effected at the Fund's net asset value next determined after the Fund receives a
redemption request in acceptable form.
Payment for redeemed shares will be made within seven days after receipt of the
redemption in proper form. 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.
VALUATION OF FUND SHARES
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 Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the trustees. If this happens,
holders of the remaining shares voting will not be able to elect any Trustees.
The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting, however, for matters requiring shareholder approval 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
or "Rule 12b-1" plan ("Plan"). However, no payments are to be made by the Fund
as a result of the Plan. The Fund does not make payments 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. To
the extent any of the foregoing are nevertheless 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, such
payments shall be deemed to have been made pursuant to the plan. 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, 1996. (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
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.
FT Services - Franklin Templeton Services, Inc. the Fund's administrator.
Net asset value (NAV) - the value of the 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.
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, 1997
Contents Page
How Does the Fund Invest Its Assets? B-2
Investment Restrictions B-2
Officers and Trustees B-3
Investment Advisory and Other Services B-5
How Does the Fund Purchase Securities For Its Portfolio? B-6
How Are Fund Shares Valued? B-7
Redemption of Fund Shares B-7
General B-7
Financial Statements B-9
A Prospectus for the Franklin Government Securities Trust ("Trust" or "Fund")
dated May 1, 1997, as may be amended from time to time, contains 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 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 obligations of the U.S.
government or its agencies or instrumentalities.
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, 1995 and December 31, 1996, the Fund's
portfolio turnover rates were 7.50% and 10.25% 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 Principal Occupations
Name, Address, and Age Offices with the Trust During Past Five Years
- --------------------------------------------------------------------------------
Frank H. Abbott, III (76) Trustee
1045 Sansome St.
San Francisco, CA 94111
President and Director, Abbott
Corporation (an investment
company); and director, trustee or
managing general partner, as the
case may be, of 32 of the
investment companies in the
Franklin Templeton Group of Funds.
- --------------------------------------------------------------------------------
Harris J. Ashton (64) Trustee
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
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 (a meat packing
company); 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 (52) Vice President
777 Mariners Island Blvd. and Trustee
San Mateo, CA 94404
Executive Vice President, Secretary
and Director, Franklin Resources,
Inc.; Executive Vice President and
Director, Franklin Templeton
Distributors, Inc.; Executive Vice
President, Franklin Advisers, Inc.
and Franklin Templeton Services,
Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer
and/or director, as the case may
be, of most of the other
subsidiaries of Franklin Resources,
Inc.; and officer and/or director
or trustee of 61 of the investment
companies in the Franklin Templeton
Group of Funds.
- --------------------------------------------------------------------------------
S. Joseph Fortunato (64)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
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 (82) Trustee
111 New Montgomery St., #402
San Francisco, CA 94105
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 31 of the investment
companies in the Franklin Templeton
Group of Funds.
- --------------------------------------------------------------------------------
* Charles B. Johnson (64) Chairman of
777 Mariners Island Blvd. the Board
San Mateo, CA 94404 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. (56) President
777 Mariners Island Blvd. and Trustee
San Mateo, CA 94404
Executive Vice President and
Director, Franklin Resources, Inc.
and Franklin Templeton
Distributors, Inc.; President and
Director, Franklin Advisers, Inc.;
Senior Vice President and Director,
Franklin Advisory Services, Inc.
and Franklin Investment Advisory
Services, Inc.; Director,
Franklin/Templeton Investor
Services, Inc.; and officer and/or
director, trustee or managing
general partner, as the case may
be, of most of the other
subsidiaries of Franklin Resources,
Inc. and of 61 of the investment
companies in the Franklin Templeton
Group of Funds.
- --------------------------------------------------------------------------------
Frank W. T. LaHaye (68) Trustee
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
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. (software firm);
Director, FischerImaging
Corporation (medical imaging
systems); and director or trustee,
as the case may be, of 27 of the
investment companies in the
Franklin Templeton Group of Funds.
- --------------------------------------------------------------------------------
Gordon S. Macklin (68) Trustee
8212 Burning Tree Road
Bethesda, MD 20817
Chairman, White River Corporation
(information and financial
services); Director, Fund American
Enterprises Holdings, Inc.
(financial services), MCI
Communications Corporation, CCC
Information Services Group, Inc.
(information services), MedImmune,
Inc. (biotechnology), Source One
Mortgage Services Corporation
(financial services), Shoppers
Express (home shopping), Spacehab,
Inc. (aerospace services); 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; formerly Chairman,
Hambrecht and Quist Group (venture
capital and investment banking);
Director, H & Q Healthcare
Investors (investment trust); and
President, National Association of
Securities Dealers, Inc.
- --------------------------------------------------------------------------------
Martin L. Flanagan (36) Vice President
777 Mariners Island Blvd. and Chief
San Mateo, CA 94404 Financial Officer
Senior Vice President, Chief
Financial Officer and Treasurer,
Franklin Resources, Inc.;
President, Franklin Templeton
Services, 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.; Treasurer,
Franklin Advisory Services, Inc.
and Franklin Investment Advisory
Services, Inc.; officer of most of
the other subsidiaries of Franklin
Resources, Inc.; and officer,
director and/or trustee of 61 of
the investment companies in the
Franklin Templeton Group of Funds.
- --------------------------------------------------------------------------------
Deborah R. Gatzek (48) Vice President
777 Mariners Island Blvd. and Secretary
San Mateo, CA 94404
Senior Vice President and General
Counsel, Franklin Resources, Inc.;
Senior Vice President, Franklin
Templeton Services, Inc.and
Franklin Templeton Distributors,
Inc.; Vice President, Franklin
Advisers, Inc., Franklin Advisory
Services, Inc., Franklin Investment
Advisory Services, Inc., and
officer of 61 of the investment
companies in the Franklin Templeton
Group of Funds.
- --------------------------------------------------------------------------------
Diomedes Loo-Tam (58) Treasurer and
777 Mariners Island Blvd. Principal
San Mateo, CA 94404 Accounting Officer
Employee of Franklin Advisers,
Inc.; and officer of 38 of the
investment companies in the
Franklin Templeton 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
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
Total Fees in the Franklin
Received from the Templeton Group
Franklin Templeton of Funds on Which
Name Group of Funds* Each Serves**
- ------------------------------------------------------------------
Frank Abbott...................... $165,236 32
Harris Ashton .................... $224,316 56
Joseph S. Fortunato .............. $241,136 58
David Garbellano ................. $148,916 31
Frank LaHaye ..................... $139,233 27
Gordon Macklin ................... $216,266 53
*For the calendar year ended December 31, 1996.
**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 62
registered investment companies, consisting of approximately 170 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, including
pension or retirement benefits, directly or indirectly from the Fund or other
Funds in the Franklin Templeton Group of Funds. Certain officers or trustees who
are shareholders of 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
Investment Manager and Services Provided. The Fund's investment manager is
Franklin Advisers, Inc. ("Advisers"). Advisers provides investment research and
portfolio management services, including the selection of securities for the
Fund to buy, 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. Advisers is covered by fidelity insurance on
its officers, directors and employees for the protection of the Fund.
Advisers and its affiliates act as investment manager 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, that may differ from action
taken by Advisers on behalf of the Fund. Similarly, with respect to the Fund,
Advisers is not obligated to recommend, buy 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 that it manages. 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. See "General - Summary of Code of Ethics."
Management Fee. 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, 1994, 1995 and 1996, management fees, before any
advance waiver, were $99,092 $114,871, and $148,596, respectively. Management
fees paid by the Fund for the same periods were $74,896, $90,126 and $ 147,559
respectively. Total operating expenses, including management fees, would have
been $123,335, $139,365, and $166,712 for 1994, 1995, and 1996, respectively.
For the fiscal years ended December 31, 1994, 1995, and 1996 the Fund paid total
operating expenses, including management fees, equal to .63%, .62%, and .70%
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 or the vote of
the holders of a majority 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.
Administrative Services. Under an agreement with Advisers, FT Services, provides
certain administrative services and facilities to the Fund. These include
preparing and maintaining books, records, and tax and financial reports, and
monitoring compliance with regulatory requirements. FT Services is a wholly
owned subsidiary of Resources and is compensated on the basis of a fixed fee per
account.
Under its administration agreement, Advisers pays FT Services a monthly
administration fee equal to an annual rate of 0.15% of the Fund's average daily
net assets up to $200 million, 0.135% of average daily net assets over $200
million up to $700 million, 0.10% of average daily net assets over $700 million
up to $1.2 billion, and 0.075% of average daily net assets over $1.2 billion.
The fee is paid by Advisers. It is not a separate expense of the Fund.
Custodians. 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. The Custodian does not participate in decisions relating to the
purchase and sale of portfolio securities.
Auditors. 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, 1996, their auditing services consisted of rendering an opinion on
the financial statements of the Trust included in the Trust's Annual Report for
the fiscal year ended December 31, 1996.
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, 1996, 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 Aetna Separate Account, to which all shares of the Fund are
currently sold, as explained in the Prospectus, 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
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 Aetna 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.
Summary of Code of Ethics. Employees of the Franklin Templeton Group who are
access persons under the 1940 Act are permitted to engage in personal securities
transactions subject to the following general restrictions and procedures: (i)
the trade must receive advance clearance from a compliance officer and must be
completed within 24 hours after clearance; (ii) copies of all brokerage
confirmations must be sent to a compliance officer and, within 10 days after the
end of each calendar quarter, a report of all securities transactions must be
provided to the compliance officer; and (iii) access persons involved in
preparing and making investment decisions must, in addition to (i) and (ii)
above, file annual reports of their securities holdings each January and inform
the compliance officer (or other designated personnel) if they own a security
that is being considered for a fund or other client transaction or if they are
recommending a security in which they have an ownership interest for purchase or
sale by a fund or other client.
Financial Statements
Franklin Government Securities Trust
Statement of Investments in Securities and Net Assets, December 31, 1996
Face Value
Amount (Note 1)
------- ---------
Long Term Investments 97.0%
Government National Mortgage Association
(GNMA)
$ 897,636 GNMA I, SF, 6.00%, 11/15/23 $ 834,241
2,502,899 GNMA I, SF, 6.50%, 10/15/23 - 03/15/24 2,391,055
2,979,823 GNMA II, SF, 6.50%, 05/20/24 - 03/20/26 2,828,042
2,942,168 GNMA I, SF, 7.00%, 10/15/22 - 10/15/23 2,882,410
2,362,556 GNMA II, SF, 7.00%, 09/20/25 - 02/20/26 2,299,804
2,492,540 GNMA I, SF, 7.50%, 06/15/17 - 04/15/24 2,497,221
1,859,633 GNMA II, SF, 7.50%, 07/20/23 - 07/20/26 1,851,499
2,763,743 GNMA I, SF, 8.00%, 02/15/17 - 11/15/24 2,822,481
298,328 GNMA II, SF, 8.00%, 10/20/16 - 08/20/26 302,431
396,337 GNMA I, SF, 8.25%, 04/15/25 407,857
1,054,135 GNMA I, SF, 8.50%, 03/15/20 - 07/15/22 1,093,008
302,736 GNMA I, SF, 9.00%, 06/15/16 - 11/15/21 319,387
600,795 GNMA I, SF, 9.50%, 10/15/09 - 10/15/21 649,803
222,800 GNMA II, SF, 9.50%, 04/20/25 238,744
967,357 GNMA I, SF, 10.00%, 03/15/16 - 08/15/21 1,061,977
63,826 GNMA II, SF, 10.00%, 12/20/18 - 08/20/20 69,434
108,952 GNMA II, SF, 10.50%, 09/20/15 - 02/20/21 119,545
Total Long Term Investments
(Cost $22,901,998) 22,668,939
aReceivables from Repurchase Agreements 2.3%
513,024 Joint Repurchase Agreement, 6.59%, 01/02/97
(Maturity Value $522,108) (Cost $521,917)
Aubrey G. Lanston & Co., Inc.,
(Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 6.00% - 8.625%,
08/15/97 - 09/30/98
Bear, Stearns & Co., Inc., (Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%,
10/15/97 - 06/30/01
CIBC Wood Gundy Securities Corp.,
(Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 5.75% - 6.25%,
07/31/98 - 12/31/98
Daiwa Securities America, Inc.,
(Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 6.00% - 9.125%,
05/15/97 - 08/15/01
Donaldson, Lufkin & Jenrette Securities Corp.,
(Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 6.00% - 8.875%,
11/15/97 - 11/15/01
SBC Warburg, Inc., (Maturity Value $64,105)
Collateral: U.S. Treasury Notes, 6.25% - 7.875%,
01/15/98 - 04/30/01
The Nikko Securities Co. International, Inc.,
(Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 6.25% - 8.75%,
08/15/00 - 04/30/01
UBS Securities, L.L.C., (Maturity Value $65,429)
Collateral: U.S. Treasury Notes, 6.25% - 8.50%,
06/30/98 - 05/31/01 521,917
Total Investments
(Cost $23,423,915) 99.3% 23,190,856
Other Assets and Liabilities,
Net 0.7% 173,691
Net Assets 100.0% $23,364,547
At December 31, 1996, the net unrealized depreciation
based on the cost of investments for income tax
purposes of $23,423,915 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of
value over tax cost $ 192,884
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value (425,943)
Net unrealized depreciation $ (233,059)
PORTFOLIO ABBREVIATIONS:
L.L.C. - Limited Liability Corp.
SF - Single Family
aFace amount for repurchase agreements is for the underlying collateral. See
Note 1(e) regarding repurchase agreement.
The accompanying notes are an integral part of these financial statements.
Franklin Government Securities Trust
Statement of Assets and Liabilities
December 31, 1996
ASSETS:
Investments in securities, at value
(identified cost $22,901,998) $22,668,939
Receivables from repurchase
agreements, at value and cost 521,917
Cash 63,588
Interest Receivable 141,275
Total assets 23,395,719
LIABILITIES:
Payables:
Management fees 14,545
Accrued expenses and other liabilities 16,627
Total liabilities 31,172
NET ASSETS, at value $23,364,547
Net assets consist of:
Undistributed net investment income $ 1,578,168
Net unrealized depreciation on investments (233,059)
Accumulated net realized loss (190,015)
Capital shares 22,209,453
Net assets, at value $23,364,547
Shares outstanding 1,775,096
NET ASSET VALUE per share ($23,364,547 / 1,775,096) $13.16
Statement of Operations
for the year ended December 31, 1996
INVESTMENT INCOME:
Interest $1,743,912
EXPENSES:
Management fees (Note 5) $148,596
Professional fees 15,326
Custodian fees 489
Reports to shareholders 1,067
Other 1,234
Management fees waived by manager (Note 5). (1,037)
Total expenses 165,675
Net investment income 1,578,237
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss (60,516)
Net unrealized depreciation (555,519)
Net realized and unrealized loss on investments (616,035)
Net increase in net assets resulting from operations $ 962,202
Statements of Changes in Net Assets
for the years ended December 31, 1996 and 1995
1996 1995
--------- ---------
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 1,578,237 $ 1,246,624
Net realized loss from
security transactions (60,516) (21,303)
Net unrealized appreciation
(depreciation) on
investments (555,519) 1,661,836
--------- ---------
Net increase in net assets resulting from
operations 962,202 2,887,157
Distributions to shareholders from
undistributed net investment income (1,246,655) (1,086,914)
Increase in net assets from capital share
transactions (Note 2) 1,157,887 5,448,492
--------- ---------
Net increase in net assets 873,434 7,248,735
NET ASSETS:
Beginning of year 22,491,113 15,242,378
--------- ---------
End of year (including undistributed net
investment income of
$1,578,168 - 1996 and
$1,246,586 - 1995) $23,364,547 $22,491,113
--------- ---------
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 Trust seeks to earn income in
obligations of the U.S. government or its agencies or instrumentalities.
The following is a summary of significant accounting policies consistently
followed by the Trust 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 Trust 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: Distributions to shareholders
are recorded on the ex-dividend date. Interest income and estimated expenses are
accrued daily.
e. Repurchase Agreements: The Trust may enter into a joint repurchase agreement
whereby its uninvested cash Fbalance 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 Trust based on its pro-rata interest. A
repurchase agreement is accounted for as a loan by the Trust to the seller,
collateralized by underlying U.S. government securities, which are delivered to
the Trust'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 Trust, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At December 31, 1996, all
outstanding repurchase agreements held by the Trust had been entered into on
that date.
f. Accounting Estimates: The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expense during the reporting period. Actual results could differ from those
estimates.
2. Trust Shares
At December 31, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in the Trust's shares were as
follows:
1996 1995
-------------------- --------------------
Shares Amount Shares Amount
------- --------- ------- ---------
Shares sold 369,844 $4,839,840 550,647 $7,098,487
Shares issued
in reinvest-
ment of dis-
tributions 100,618 1,246,655 85,651 1,086,914
Shares
redeemed (380,636) (4,928,608) (215,498) (2,736,909)
------- --------- ------- ---------
Net increase 89,826 $1,157,887 420,800 $5,448,492
======= ========= ======= =========
3. Capital Loss Carryovers
At December 31, 1996, for tax purposes, the Trust had capital loss carryovers as
follows:
Expiring in: 2001 $ 49,613
2002 58,583
2003 21,303
2004 53,398
-------
$182,897
=======
In addition, from November 1, 1996 through December 31, 1996 the Fund incurred
approximately $7,118 of net realized capital losses. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
having arisen in the year ended December 31, 1997.
For tax purposes, the aggregate cost of securities and unrealized depreciation
of the Trust are the same as for financial statement purposes at December 31,
1996.
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, 1996 aggregated $4,622,639 and
$2,320,021, respectively.
5. Transactions with Affiliates and Related Parties
a. Management Agreement: Under the terms of a management agreement, Franklin
Advisers, Inc. (Advisers) provides investment advice, administrative services,
office space and facilities to the Trust and receives fees computed monthly on
the daily average net assets of the Trust as follows:
Annualized
Fee Rate Average Daily Net Assets
--------- ---------------------------------------
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% Over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion. Advisers agreed in
advance to waive a portion of its management fees, as noted in the Statement of
Operations.
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Fund. The fee
is paid by Advisers and computed monthly based on the average daily net assets.
It is not a separate expense of the Fund.
b. Distribution Plans: 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, 1996.
6. Financial Highlights
Selected data for each share of beneficial interest outstanding throughout the
period are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value at beginning of period $13.35 $12.05 $13.30 $13.26 $13.01
----------- -------- -------- -------- --------
Net investment income 0.84 0.67 0.85 0.65 0.80
Net realized & unrealized gain (loss) on securities (0.3396) 1.4216 (1.3463) 0.3385 0.1602
----------- -------- -------- -------- --------
Total from investment operations 0.5004 2.0916 (0.4963) 0.9885 0.9602
----------- -------- -------- -------- --------
Less distributions from:
Net investment income (0.6904) (0.7916) (0.7537) (0.7459) (0.7102)
Capital gains -- -- -- (0.2026) --
----------- -------- -------- -------- --------
Total distributions (0.6904) (0.7916) (0.7537) (0.9485) (0.7102)
----------- -------- -------- -------- --------
Net asset value at end of period $13.16 $13.35 $12.05 $13.30 $13.26
=========== ======== ======== ======== ========
Total Return+ 4.07% 17.70% (3.75)% 7.59% 7.66%
Ratios/Supplemental Data
Net assets at end of period (in 000's) $23,365 $22,491 $15,242 $16,568 $11,815
Ratio of expenses to average net assets 0.70% 0.62% 0.63% 0.62% 0.29%
Ratio of expenses to average net assets (excluding waiver by
Manager) - Note 5 0.70% 0.76% 0.78% 0.83% 0.92%
Ratio of net investment income to average net assets 6.66% 6.78% 6.85% 6.68% 7.75%
Portfolio turnover rate 10.25% 7.50% 13.97% 39.02% 49.71%
</TABLE>
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.
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, 1996, 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
periods presented. 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, 1996 by correspondence with the custodian. 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, 1996, 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 periods presented, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
February 4, 1997
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 4, 1997
(ii) Statement of Investment in Securities and Net Assets,
December 31, 1996
(iii) Statement of Assets and Liabilities, December 31, 1996
(iv) Statement of Operations for the year ended December 31, 1996
(v) Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995
(vi) Notes to Financial Statements
(b) Exhibits:
The following exhibits were applicable, are herewith incorporated by
reference to the filings as noted with the exception of Exhibit 11(i),
which is attached.
(1) copies of the charter as now in effect;
(i) Agreement and Declaration of Trust
dated October 21, 1988
Filing: Registration Statement of Registrant on
Form N-1A
File no. 33-26051
Filing Date: December 13, 1988
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws dated October 21, 1988
Filing: Registration Statement of Registrant on
Form N-1A
File no. 33-26051
Filing Date: December 13, 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
Filing: Registration Statement of Registrant on
Form N-1A
File no. 33-26051
Filing Date: December 13, 1988
(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) 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
(ii) Master Custodian Agreement between Registrant and
Bank of New York dated February 16, 1996
Filing: Post Effective Amendment No. 8 on Form N-1A
File no. 33-26051
Filing Date: February 29, 1996
(iii)Terminal Link Agreement between Registrant and Bank
of New York dated February 16, 1996
Filing: Post Effective Amendment No. 8 on Form N-1A
File no. 33-26051
Filing Date: February 29, 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
Filing: Post Effective Amendment No. 1 on Form N-1A
File no. 33-26051
Filing Date: February 2, 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 23th day of April 1997.
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 Officers and Trustee
Rupert H. Johnson, Jr. Dated: April 23, 1997
Martin L. Flanagan* Principal Financial Officer
(Martin L. Flanagan) Dated: April 23, 1997
Diomedes Loo-Tam* Principal Accounting Officer
(Diomedes Loo-Tam) Dated: April 23, 1997
Frank H. Abbott III* Trustee
Frank H. Abbott III Dated: April 23, 1997
Harris J. Ashton* Trustee
Harris J. Ashton Dated: April 23, 1997
Harmon E. Burns* Trustee
Harmon E. Burns Dated: April 23, 1997
S. Joseph Fortunato* Dated: April 23, 1997
S. Joseph Fortunato
David W. Garbellano* Trustee
David W. Garbellano Dated: April 23, 1997
Charles B. Johnson* Trustee
Charles B. Johnson Dated: April 23, 1997
Frank W.T. LaHaye* Trustee
Frank W.T. LaHaye Dated: April 23, 1997
Gordon S. Macklin* Trustee
Gordon S. Macklin Dated: April 23, 1997
*By /s/ Karen L. Skidmore
(Pursuant to Powers of Attorney filed herewith)
FRANKLIN GOVERNMENT SECURITIES TRUST
REGISTRATION STATEMENT
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.A (i) Financial Statements Attached
EX-99.B1(i) Agreement and Declaration of Trust *
dated October 21, 1988
EX-99.B2(i) By-Laws *
EX-99.B5(i) Management Agreement between *
Registrant and Franklin Advisers,
Inc. dated February 15, 1989
EX-99.B8(i) Custodian Agreements between *
Registrant and Citibank Delaware
EX-99.B8(ii) Master Custodian Agreement between *
Registrant and Bank of New York
dated February 16, 1996
EX-99.B8(iii) Terminal Link Agreement between *
Registrant and Bank of New York,
dated February 16, 1996
EX-99.B10(i) Opinion and consent of counsel *
dated January 31, 1989
EX-99.B11(i) Consent of Independent Accountants Attached
EX-99.B15(i) Rule 12b-1 Plan included in *
Management Agreement Ex-99.5(i)
EX-99.B17(i) Power of Attorney dated February *
16, 1996
EX-99.B17(ii) Certificate of Secretary dated *
February 16, 1996
EX-99.B27(i) Financial data Schedule *
* Incorporated by Reference
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in Post-Effective Amendment No. 9 to the
Registration Statement of Franklin Government Securities Trust Fund on Form N-1A
(File No. 33-26051) of our report dated February 4, 1997 on our audit of the
financial statements and financial highlights of the Fund.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
April 21, 1997
