SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO.)
Filed by the Registrant
[ ] Filed by a Party other than the Registrant
[ ] Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
FRANKLIN INVESTORS SECURITIES TRUST
-----------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
---
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:_____________
2) Aggregate number of securities to which transaction applies:________________
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FRANKLIN TOTAL RETURN FUND,
A SERIES OF FRANKLIN INVESTORS SECURITIES TRUST
IMPORTANT SHAREHOLDER INFORMATION
These materials are for a Special Meeting of Shareholders of Franklin
Total Return Fund (the "Meeting"), a series of Franklin Investors Securities
Trust (the "Fund"), scheduled for June 27, 2008 at 10:00 a.m., Pacific Time. The
enclosed materials discuss the proposal (the "Proposal") to be voted on at the
Meeting, and contain the Notice of Special Meeting, proxy statement and proxy
card. A proxy card is, in essence, a ballot. When you vote your proxy, it tells
us how you wish to vote on important issues relating to the Fund. If you specify
a vote on the Proposal, your proxy will be voted as you indicate. If you simply
sign, date and return the proxy card, but do not specify a vote on the Proposal,
your proxy will be voted "FOR" the Proposal.
WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSAL IN THE PROXY
STATEMENT. THEN, PLEASE FILL OUT AND SIGN THE PROXY CARD AND RETURN IT TO US SO
THAT WE KNOW HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THE PROXY
PROMPTLY, THE FUND AND ITS AFFILIATES MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO
CONDUCT ADDITIONAL SOLICITATIONS, INCLUDING OTHER MAILINGS.
WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION
AT 1-800/DIAL BEN (800/342-5236).
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TELEPHONE AND INTERNET VOTING
FOR YOUR CONVENIENCE, YOU MAY BE ABLE TO VOTE BY TELEPHONE OR THROUGH THE
INTERNET, 24 HOURS A DAY. IF YOUR ACCOUNT IS ELIGIBLE, SEPARATE INSTRUCTIONS ARE
ENCLOSED.
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PRELIMINARY
FRANKLIN TOTAL RETURN FUND,
A SERIES OFFRANKLIN INVESTORS SECURITIES TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders (the "Meeting") of Franklin Total Return
Fund (the "Fund"), a series of Franklin Investors Securities Trust (the
"Trust"), will be held at the Trust's offices located at One Franklin Parkway,
San Mateo, California 94403-1906 on June 27, 2008 at 10:00 a.m., Pacific Time.
During the Meeting, shareholders of the Fund will vote on the following
Proposal:
o To approve a subadvisory agreement between Franklin Advisers, Inc. and
Franklin Templeton Institutional, LLC.
By Order of the Board of Trustees,
Craig S. Tyle
VICE PRESIDENT
March 28, 2008
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PLEASE SIGN AND PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
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PROXY STATEMENT
TABLE OF CONTENTS
PAGE
Information About Voting []
Who is asking for my vote? []
Who is eligible to vote? []
On what issues am I being asked to vote? []
How does the Board of the Fund recommend that I vote? []
How do I ensure that my vote is accurately recorded? []
May I revoke my proxy? []
What if my shares are held in a brokerage account? []
Proposal: To Approve a Subadvisory Agreement []
Between Franklin Advisers, Inc. and
Franklin Templeton Institutional, LLC
Additional Information About the Fund []
Further Information About Voting and the Meeting []
EXHIBITS
Exhibit A Form of Subadvisory Agreement Between Franklin A-1
- - Advisers, Inc. and Franklin Templeton
Institutional, LLC
Exhibit B Outstanding Shares and Classes of the Fund as B-1
- - of March 28, 2008, the Record Date
Exhibit C Entities Owning Beneficially More Than 5 C-1
- - Percent of the Outstanding Shares of Any Class
of the Fund
8
FRANKLIN TOTAL RETURN FUND,
A SERIES OF FRANKLIN INVESTORS SECURITIES TRUST
PROXY STATEMENT
INFORMATION ABOUT VOTING
WHO IS ASKING FOR MY VOTE?
The Board of Trustees (the "Board") of Franklin Investors Securities Trust
(the "Trust"), on behalf of Franklin Total Return Fund (the "Fund"), in
connection with a Special Meeting of Shareholders of the Fund to be held on June
27, 2008 (the "Meeting"), has requested your vote.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on March 28, 2008, are
entitled to be present and to vote at the Meeting or any adjournment thereof.
Each share of record of the Fund is entitled to one vote (and a proportionate
fractional vote for each fractional share) on the matter presented at the
Meeting. The Notice of Special Meeting, the proxy card and the proxy statement
were first mailed to shareholders of record on or about April [14], 2008.
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
Shareholders are being asked to vote on the following Proposal:
o To approve a subadvisory agreement between Franklin Advisers, Inc.
("Advisers") and Franklin Templeton Institutional, LLC ("FT
Institutional").
HOW DOES THE BOARD OF THE FUND RECOMMEND THAT I VOTE?
The Board of the Fund unanimously recommends that you vote:
o FOR the approval of a subadvisory agreement between Advisers and FT
Institutional.
HOW DO I ENSURE THAT MY VOTE IS ACCURATELY RECORDED?
You may attend the Meeting and vote in person or you may complete and
return the enclosed proxy card. If you are eligible to vote by telephone or
through the Internet, separate instructions are enclosed.
Proxy cards that are properly signed, dated and received at or prior to
the Meeting will be voted as specified. If you specify a vote on the Proposal,
your proxy card will be voted as you indicate. If you simply sign, date and
return the proxy card, but do not specify a vote on the Proposal, your shares
will be voted FOR the Proposal.
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted by forwarding a
written revocation or a later-dated proxy to the Fund that is received by the
Fund at or prior to the Meeting, or by attending the Meeting and voting in
person.
WHAT IF MY SHARES ARE HELD IN A BROKERAGE ACCOUNT?
If your shares are held by your broker, in order to vote in person at the
Meeting, you will need to obtain a "Legal Proxy" from your broker and present it
to the Inspector of Election at the Meeting. Also, in order to revoke your
proxy, you may need to forward your written revocation or a later-dated proxy
card to your broker rather than to the Fund.
PROPOSAL: TO APPROVE A SUBADVISORY AGREEMENT BETWEEN ADVISERS AND FT
INSTITUTIONAL
BACKGROUND
Advisers, located at One Franklin Parkway, San Mateo, California
94403-1906, serves as the Fund's investment manager pursuant to an Investment
Management Agreement dated March 1, 2008, which was most recently approved by
Franklin Investors Securities Trust, a Massachusetts business trust, on February
29, 2008 as the sole shareholder of the Trust, in connection with the
redomestication of the Trust from a Massachusetts business trust to a Delaware
statutory trust. At the Trust's Board of Trustees Meeting held on February 25,
2008 (the "February Meeting"), Advisers recommended that the Board approve the
appointment of FT Institutional as a subadviser for the Fund. The principle
reason for Advisers' recommendation is so that Michael J. Materasso, Executive
Vice President of FT Institutional, can be added to the Fund's portfolio
management team. Because of Mr. Materasso's experience and background as Senior
Vice President of the Franklin Templeton Fixed Income Group and Co-Chair of the
Fixed Income Policy Committee, Advisers believes that his addition to the Fund's
portfolio management team will benefit Fund shareholders. Based upon Adviser's
recommendation and other information provided to the Trust's Board of Trustees
(the "Board"), the Board approved (i) the proposed appointment of FT
Institutional as a subadviser, including the proposed form of Subadvisory
Agreement, and (ii) as required by the Investment Company Act of 1940, as
amended (the "1940 Act"), the submission of the Subadvisory Agreement to the
Fund's shareholders for their approval.
Because the appointment of FT Institutional as the Fund's subadviser
requires shareholder approval, shareholders of the Fund are being asked to
approve the Subadvisory Agreement. The form of the Subadvisory Agreement is
included in EXHIBIT A to this proxy statement. The proposed engagement of FT
Institutional will not result in an increase in the Fund's management fees, as
Advisers will pay FT Institutional out of the investment management fees
Advisers receives from the Fund. All costs involved in connection with the
Meeting will be borne by FT Institutional and its affiliates.
INFORMATION REGARDING FT INSTITUTIONAL
FT Institutional, located at 600 Fifth Avenue, New York, New York 10020,
is registered as an investment adviser with the U.S. Securities and Exchange
Commission (the "SEC") and currently has over $30 billion in assets under
management. FT Institutional provides investment advisory services to investment
companies registered under the 1940 Act, separately managed accounts and pooled
investment vehicles that are exempt from registration under the 1940 Act,
including the selection of securities to be purchased, held or sold and the
selection of brokers through which the portfolio transactions are executed.
Mr. Materasso is currently Executive Vice President of FT Institutional in
New York and serves as portfolio manager for the Franklin Templeton Core Fixed
Income Fund ("Core Fixed Income Fund") and Franklin Templeton Core Plus Fixed
Income Fund ("Core Plus Fixed Income Fund"), two fixed income funds of Franklin
Global Trust. Mr. Materasso also serves as Senior Vice President of the Franklin
Templeton Fixed Income Group and Co-Chair of the Fixed Income Policy Committee.
Mr. Materasso joined Franklin Templeton in 1988 with 16 years of experience at
Chase Manhattan Bank, Sterling National Bank, and Glickenhaus & Co. His addition
to the Fund's portfolio management team will result in a team of five members,
including Roger Bayston, Kent Burns, Christopher Molumphy, and David Yuen.
FT Institutional is an indirect wholly-owned subsidiary of Franklin
Resources, Inc. ("Resources"), whose business address is One Franklin Parkway,
San Mateo, California 94403-1906. Certain members of the Board and officers of
the Trust are shareholders of Resources and may be deemed to receive indirect
remuneration from the Fund due to their participation in management fees and
other fees received by FT Institutional and Advisers. Resources is a publicly
owned holding company, the principal shareholders of which are Charles B.
Johnson and Rupert H. Johnson, Jr., who owned approximately 17.86% and 15.54%,
respectively, of its outstanding shares as of December 4, 2007. Resources, a
global investment management organization operating as Franklin Templeton
Investments, is primarily engaged, through various subsidiaries, in providing
investment management, share distribution, transfer agent and administrative
services to a family of investment companies. Resources is a New York Stock
Exchange, Inc. ("NYSE") listed holding company (NYSE: BEN). Charles B. Johnson,
Trustee and Chairman of the Board of the Trust, and Rupert H. Johnson, Jr.,
Trustee and Vice President of the Trust, are brothers. Craig S. Tyle is an
officer of both FT Institutional and the Trust.
Franklin Templeton Distributors, Inc., the Fund's principal underwriter,
is the sole member of FT Institutional (which is a limited liability company)
and is wholly owned by Resources. The principal executive officer of FT
Institutional is William Y. Yun, whose business address is 600 Fifth Avenue, New
York, New York 10020.
WHAT ARE THE MATERIAL TERMS OF THE SUBADVISORY AGREEMENT?
Below is a summary of some of the material terms of the proposed
Subadvisory Agreement. The following discussion is qualified in its entirety by
reference to the form of Subadvisory Agreement attached as EXHIBIT A to this
proxy statement.
SERVICES. Subject to the overall policies, control, direction and review
of the Board and to the instructions and supervision of Advisers, FT
Institutional will provide investment advisory services with respect to
securities and investments and cash equivalents in the Fund. Advisers will
continue to provide all research services in respect of the Fund and have full
responsibility for all investment advisory services provided to the Fund. Both
Advisers and FT Institutional may place purchase and sale orders on behalf of
the Fund. The placement of these orders will take place exclusively in San
Mateo, California.
MANAGEMENT FEES. Under the Subadvisory Agreement, Advisers will pay FT
Institutional a monthly fee equal to 10 percent of the investment management fee
paid to Advisers by the Fund. Advisers and FT Institutional will share equally
in any voluntary reduction or waiver by Advisers of the management fee paid by
the Fund.
PAYMENT OF EXPENSES. During the term of the Subadvisory Agreement, FT
Institutional will pay all expenses incurred by it in connection with the
services to be provided by it under the Subadvisory Agreement other than the
cost of securities (including brokerage commissions, if any) purchased by the
Fund.
CONTINUANCE. If shareholders of the Fund approve the Subadvisory
Agreement, such agreement will continue until two years from the date of its
execution, unless earlier terminated. The Subadvisory Agreement is thereafter
renewable annually for successive periods not to exceed by one year: (i) by a
vote of a majority of the outstanding voting securities of the Fund or by a vote
of the Board, and (ii) by a vote of a majority of the Trustees of the Trust who
are not parties to the Agreement or interested persons of any such party (the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on the Subadvisory Agreement.
WHY IS THE BOARD RECOMMENDING APPROVAL OF THE NEW SUBADVISORY AGREEMENT?
At the February Meeting, the Board, including a majority of the
Independent Trustees, approved the Subadvisory Agreement. In considering these
matters, the Independent Trustees received assistance and advice from, and met
separately with, independent counsel. The following sets forth some of the
primary factors relevant to the Board's decision.
The Board noted that the engagement of FT Institutional will not
result in an increase in the Fund's total investment management fees, because
Advisers will pay FT Institutional out of its current investment management fee.
Consequently, in considering the Subadvisory Agreement, primary consideration
was given by the Board to matters relating to FT Institutional and Mr.
Materasso, including his background and experience, as well as the performance
of the Core Fixed Income Fund and Core Plus Fixed Income Fund, which are both
currently managed by FT Institutional. Both the Core Fixed Income Fund and Core
Plus Fixed Income Fund have been in existence since August 2003, and at December
31, 2007 had net assets of approximately $29 million and $120 million,
respectively. The Board noted that during 2007 and since inception, the Core
Fixed Income Fund had underperformed its Lipper peer group, while the larger
Core Plus Fixed Income Fund had outperformed its Lipper Peer Group. The Board
also noted that the polices of FT Institutional as to various matters, including
brokerage allocation and proxy voting, were identical to those of Advisers and
that its employees were subject to the same Code of Ethics as applied to
employees of Advisers. In view of such facts, the Board believes that the
engagement of FT Institutional will benefit Fund shareholders due to the
addition of Mr. Materasso to the Fund's portfolio management team.
THE BOARD UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.
ADDITIONAL INFORMATION ABOUT THE FUND
THE ADMINISTRATOR. The administrator of the Fund is Franklin Templeton
Services, LLC ("FT Services"), with offices at One Franklin Parkway, San Mateo,
California 94403-1906. FT Services is an indirect, wholly-owned subsidiary of
Resources and an affiliate of Advisers and FT Institutional. Pursuant to an
administration agreement with the Fund, FT Services performs certain
administrative functions for the Fund.
FT Services will continue to act as administrator for the Fund after
approval of the Subadvisory Agreement.
THE UNDERWRITER. The principal underwriter for the Fund is Franklin
Templeton Distributors, Inc. ("Distributors"), One Franklin Parkway, San Mateo,
California 94403-1906. As principal underwriter, Distributors receives sales
loads and 12b-1 fees pursuant to a separate Rule 12b-1 plan adopted by the
Board, which fees are used for, among other things, advertising expenses and the
costs of printing sales material and prospectuses used to offer shares to the
public. For its services, Distributors received $2,042,953 with respect to the
Fund for the fiscal year ended October 31, 2007.
Distributors will continue to act as principal underwriter for the Fund
after approval of the Subadvisory Agreement.
THE TRANSFER AGENT. The transfer agent and shareholder servicing
agent for the Fund is Franklin Templeton Investor Services, LLC ("FTIS"),
located at 3344 Quality Drive, Rancho Cordova, CA 95670-7313. In connection with
its services as transfer agent and shareholder servicing agent for the Fund,
FTIS received $1,577,210 with respect to the Fund for the fiscal year ended
October 31, 2007.
FTIS will continue to act as transfer agent and shareholder servicing
agent for the Fund after approval of the Subadvisory Agreement.
THE CUSTODIAN. The custodian for the Fund is Bank of New York, Mutual
Funds Division, 100 Church Street, New York, NY 10286.
OTHER MATTERS. The Fund's audited financial statements and annual
report for its last completed fiscal year, and any subsequent semi-annual report
to shareholders, are available free of charge. To obtain a copy, please call
1-800/DIAL BEN(R) (1-800-342-5236) or forward a written request to Franklin
Templeton Investor Services, LLC, P.O. Box 33030, St. Petersburg, Florida
33733-8030.
PRINCIPAL SHAREHOLDERS. The outstanding shares and classes of the
Fund as of March 28, 2008, the Record Date, are set forth in EXHIBIT B.
From time to time, the number of shares held in "street name"
accounts of various securities dealers for the benefit of their clients may
exceed 5% of the total shares outstanding of any class of the Fund. To the
knowledge of the Fund's management, as of March 28, 2008, there were no other
entities, except as set forth in EXHIBIT C, owning beneficially more than 5% of
the outstanding shares of any class of the Fund.
In addition, to the knowledge of the Fund's management, as of March
28, 2008, no nominee or Board member of a Fund owned 1% or more of the
outstanding shares of the Fund.
CONTACTING THE BOARD. If a shareholder wishes to send a communication to
the Board of the Trust, such correspondence should be in writing and
addressed to the Board at the Trust's offices as follows: One Franklin
Parkway, San Mateo, California 94403-1906, Attention: Secretary. The
correspondence will be given to the Board for its review and consideration.
FURTHER INFORMATION ABOUT VOTING AND THE MEETING
SOLICITATION OF PROXIES. Your vote is being solicited by the Board.
The cost of soliciting proxies, including the fees of a proxy soliciting agent,
will be borne by FT Institutional or its affiliates. Brokerage firms and others
are reimbursed for their expenses in forwarding proxy material to the beneficial
owners and soliciting them to execute proxies. The Fund expects that the
solicitation will be primarily by mail. In addition to solicitation by mail,
certain officers and representatives of the Fund or its affiliates and certain
financial services firms and their representatives, who will receive no extra
compensation for their services, may solicit proxies by telephone, telegram or
personally.
The Altman Group (the "Solicitor") has been engaged to assist in the
solicitation of proxies at an estimated cost of $[__________], plus expenses. As
the date of the Meeting approaches, certain Fund shareholders may receive a
telephone call from a representative of the Solicitor if their votes have not
yet been received.
Authorization to permit the Solicitor to execute proxies may be obtained
by telephonic instructions from shareholders of the Fund. Proxies that are
obtained telephonically will be recorded in accordance with the procedures set
forth below. The Board believes that these procedures are reasonably designed to
ensure that both the identity of the shareholder casting the vote and the voting
instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Solicitor
representative is required to ask for each shareholder's full name and address
and to confirm that the shareholder has received the proxy materials in the
mail. If the shareholder is a corporation or other entity, the Solicitor
representative is required to ask for the person's title and confirmation that
the person is authorized to direct the voting of the shares. If the information
solicited agrees with the information provided to the Solicitor, then the
Solicitor may ask for the shareholder's instructions on the Proposal. Although
the Solicitor representative is permitted to answer questions about the process,
he or she is not permitted to recommend to the shareholder how to vote, other
than to read any recommendation set forth in the proxy statement. The Solicitor
will record the shareholder's instructions on the card. Within 72 hours, the
shareholder will be sent a letter or mailgram to confirm their vote and asking
the shareholder to call the Solicitor immediately if their instructions are not
correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish
to give a proxy by telephone, the shareholder may still submit the proxy card
originally sent with the proxy statement by mail, by Internet, or by telephone
instruction, or attend in person.
QUORUM. Holders of 40% of the outstanding shares of the Fund, present
in person or represented by proxy, constitutes a quorum at the Meeting for
purposes of acting upon the Proposal.
METHOD OF TABULATION. Abstentions and broker non-votes will be
treated as votes present at the Meeting, but will not be treated as votes cast,
and therefore may have the same effect as a vote "against" a proposal that
requires an affirmative majority vote of outstanding shares or of shares present
and entitled to vote at the Meeting. The Proposal requires that shareholders of
the Fund approve the Proposal by the affirmative vote of the lesser of: (i) 67%
or more of the shares present in person or represented by proxy at the Meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy; or (ii) more than 50% of the outstanding shares
of the Fund.
ADJOURNMENT. The Meeting may be adjourned from time to time for any
reason whatsoever by vote of the holders of a majority of the shares present (in
person or by proxy and entitled to vote at the Meeting), whether or not a quorum
is present. Such authority to adjourn the Meeting may be used in the event that
a quorum is not present at the Meeting, or in the event that a quorum is present
but sufficient votes have not been received to approve the Proposal, or for any
other reason consistent with applicable state law and the Fund's By-Laws,
including to allow for the further solicitation of proxies. Any adjournment may
be made with respect to any business which might have been transacted at the
Meeting, and any adjournment will not delay or otherwise affect the
effectiveness and validity of any business transacted at the Meeting prior to
adjournment. The persons designated as proxies may use their discretionary
authority to vote as instructed by management of the Fund on questions of
adjournment and on any other proposals raised at the Meeting to the extent
permitted by the SEC's proxy rules, including proposals for which management of
the Fund did not have timely notice, as set forth in the SEC's proxy rules.
SHAREHOLDER PROPOSALS. The Fund is not required and does not intend
to hold regular annual meetings of shareholders. A shareholder who wishes to
submit a proposal for consideration for inclusion in the Fund's proxy statement
for the next meeting of shareholders of the Fund should send his or her written
proposal to the Fund's offices at: One Franklin Parkway, San Mateo, California
94403-1906, Attention: Secretary. Such proposal must be received within a
reasonable time before the Fund begins to print and send its proxy materials for
such meeting in order to be included in the Fund's proxy statement and proxy
card relating to that meeting and presented at the meeting. A shareholder
proposal may be presented at a meeting of shareholders only if such proposal
concerns a matter that may be properly brought before the meeting under
applicable federal proxy rules, state law and the Fund's governing instruments.
Submission of a proposal by a shareholder does not guarantee that the
proposal will be included in the Fund's proxy statement or presented at the
meeting.
The Board is not aware of any business, other than the matter
described above, to come before the Meeting. However, should any other matter
requiring a vote of shareholders arise, including any questions as to an
adjournment or postponement of the Meeting, or of which the Board was not given
reasonable notice in advance of mailing these materials, the persons designated
as proxies named on the enclosed proxy cards will vote on such matters in
accordance with the views of management.
By Order of the Board of Trustees,
Craig S. Tyle, Vice President
March 28, 2008
A-6
EXHIBIT A
FORM OF SUBADVISORY AGREEMENT
FRANKLIN INVESTORS SECURITIES TRUST
Franklin Total Return Fund
THIS SUBADVISORY AGREEMENT made as of ____________, 2008, by and between
FRANKLIN ADVISERS, INC., a corporation organized and existing under the laws of
the State of California (hereinafter called "FAV"), and FRANKLIN TEMPLETON
INSTITUTIONAL, LLC, a Delaware limited liability company (hereinafter called "FT
Institutional").
W I T N E S S E T H
WHEREAS, FAV and FT Institutional are each registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and engaged in the business of supplying investment advice and investment
management services, as an independent contractor; and
WHEREAS, FAV has been retained to render investment management services to
Franklin Total Return Fund (the "Fund"), a series of Franklin Investors
Securities Trust (the "Trust"), an investment management company registered with
the U.S. Securities and Exchange Commission (the "SEC") pursuant to the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, FAV desires to retain FT Institutional to render investment
advisory services to the Fund pursuant to the terms and provisions of this
Agreement, and FT Institutional is interested in furnishing said services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
mutually agree as follows:
1. FAV hereby retains FT Institutional and FT Institutional hereby accepts
such engagement, to furnish investment advisory services with respect to the
assets of the Fund, as more fully set forth herein.
(a) Subject to the overall policies, control, direction and review of
the Trust's Board of Trustees (the "Board") and to the instructions and
supervision of FAV, FT Institutional agrees to provide investment advisory
services with respect to securities and investments and cash equivalents in the
Fund. FAV will continue to provide all research services in respect of the Fund
and have full responsibility for all investment advisory services provided to
the Fund. Both FAV and FT Institutional may place purchase and sale orders on
behalf of the Fund. The placement of these orders will take place exclusively in
San Mateo, California.
(b) In performing these services, FT Institutional shall adhere to
the Fund's investment goals, policies and restrictions as contained in its
Prospectus and Statement of Additional Information, and in the Trust's Agreement
and Declaration of Trust, and to the investment guidelines established from time
to time by FAV and shall comply with the provisions of the 1940 Act and the
rules and regulations of the SEC thereunder in all material respects and with
the provisions of the United States Internal Revenue Code of 1986, as amended,
which are applicable to regulated investment companies.
(c) Unless otherwise instructed by FAV or the Board, and subject to
the provisions of this Agreement and to any guidelines or limitations specified
from time to time by FAV or by the Board, FT Institutional agrees that all
transactions to be effected on behalf of the Fund will be processed through the
FAV trading desk in San Mateo, California.
(d) For the term of this Agreement, FAV shall provide the Board at
least quarterly, in advance of the regular meetings of the Board, a report of
its activities hereunder on behalf of the Fund and its proposed strategy for the
next quarter, all in such form and detail as requested by the Board. FT
Institutional shall also make an investment officer available to attend such
meetings of the Board as the Board may reasonably request.
(e) In carrying out its duties hereunder, FT Institutional shall
comply with all reasonable instructions of the Fund or FAV in connection
therewith. Such instructions may be given by letter, telex, telefax or telephone
confirmed by telex, by the Board or by any other person authorized by a
resolution of the Board, provided a certified copy of such resolution has been
supplied to FT Institutional.
2. (a) FT Institutional shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent FAV or the Fund in any
way, or in any way be deemed an agent for FAV or the Fund.
(b) It is understood that the services provided by FT Institutional
are not to be deemed exclusive. FAV acknowledges that FT Institutional may have
investment responsibilities, or render investment advice to, or perform other
investment advisory services, for individuals or entities, including other
investment companies registered pursuant to the 1940 Act, ("Clients") which may
invest in the same type of securities as the Fund. FAV agrees that FT
Institutional may give advice or exercise investment responsibility and take
such other action with respect to such Clients which may differ from advice
given or the timing or nature of action taken with respect to the Fund.
3. FT Institutional agrees to use its best efforts in performing the
services to be provided by it pursuant to this Agreement.
4. FAV has furnished or will furnish to FT Institutional as soon as
available copies properly certified or authenticated of each of the following
documents:
(a) the Trust's Certificate of Trust, as filed with the Secretary of
State of the state of Delaware on October 18, 2006, and any other organizational
documents and all amendments thereto or restatements thereof;
(b) resolutions of the Trust's Board of Trustees authorizing the
appointment of FT Institutional and approving this Agreement;
(c) the Trust's original Notification of Registration on Form N-8A
under the 1940 Act as filed with the SEC and all amendments thereto;
(d) the Trust's current Registration Statement on Form N-1A under the
Securities Act of 1933, as amended and under the 1940 Act as filed with the SEC,
and all amendments thereto, as it relates to the Fund;
(e) the Fund's most recent Prospectus and Statement of Additional
Information; and
(f) the Investment Management Agreement between the Fund and FAV.
FAV will furnish FT Institutional with copies of all amendments of or
supplements to the foregoing documents.
5. FT Institutional will treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Fund, which approval shall not be unreasonably withheld and may not be
withheld where FT Institutional may be exposed to civil or criminal contempt
proceedings for failure to comply when requested to divulge such information by
duly constituted authorities, or when so requested by the Fund.
6. (a) FAV shall pay a monthly fee in cash to FT Institutional of ten
percent (10%) of the fees FAV receives for providing investment management
services to the Fund, which fee shall be payable on the first business day of
each month in each year as compensation for the services rendered and
obligations assumed by FT Institutional during the preceding month. The advisory
fee under this Agreement shall be payable on the first business day of the first
month following the effective date of this Agreement, and shall be reduced by
the amount of any advance payments made by FAV relating to the previous month.
(b) FAV and FT Institutional shall share equally in any voluntary
reduction or waiver by FAV of the management fee due FAV under the Investment
Management Agreement between FAV and the Fund.
(c) If this Agreement is terminated prior to the end of any month,
the monthly fee shall be prorated for the portion of any month in which this
Agreement is in effect which is not a complete month according to the proportion
which the number of calendar days in the month during which the Agreement is in
effect bears to the total number of calendar days in the month, and shall be
payable within 10 days after the date of termination.
7. Nothing herein contained shall be deemed to relieve or deprive the
Board of its responsibility for and control of the conduct of the affairs of the
Fund.
8. (a) In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of its obligations or duties hereunder on the part of FT
Institutional, neither FT Institutional nor any of its directors, officers,
employees or affiliates shall be subject to liability to FAV or the Fund or to
any shareholder of the Fund for any error of judgment or mistake of law or any
other act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by the Fund.
(b) Notwithstanding paragraph 8(a), to the extent that FAV is found
by a court of competent jurisdiction, or the SEC or any other regulatory agency
to be liable to the Fund or any shareholder (a "liability"), for any acts
undertaken by FT Institutional pursuant to authority delegated as described in
Paragraph 1(a), FT Institutional shall indemnify and save FAV and each of its
affiliates, officers, directors and employees (each a "Franklin Indemnified
Party") harmless from, against, for and in respect of all losses, damages, costs
and expenses incurred by a Franklin Indemnified Party with respect to such
liability, together with all legal and other expenses reasonably incurred by any
such Franklin Indemnified Party, in connection with such liability.
(c) No provision of this Agreement shall be construed to protect any
director or officer of FAV or FT Institutional, from liability in violation of
Sections 17(h) or (i), respectively, of the 1940 Act.
9. During the term of this Agreement, FT Institutional will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund and FAV will be responsible for all of their
respective expenses and liabilities.
10. This Agreement shall be effective as of the date given above, and
shall continue in effect for two years. It is renewable annually thereafter for
successive periods not to exceed one year each (i) by a vote of the Board or by
the vote of a majority of the outstanding voting securities of the Fund, and
(ii) by the vote of a majority of the Trustees of the Trust who are not parties
to this Agreement or interested persons thereof, cast in person at a meeting
called for the purpose of voting on such approval.
11. This Agreement may be terminated at any time, without payment of any
penalty, by the Board or by vote of a majority of the outstanding voting
securities of the Fund, upon sixty (60) days' written notice to FAV and FT
Institutional, and by FAV or FT Institutional upon sixty (60) days' written
notice to the other party.
12. This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the 1940 Act, and in the event of
any act or event that terminates the Investment management Agreement between FAV
and the Fund.
13. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
FT Institutional hereby agrees that all records which it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund, or to any third party at the Fund's direction, any of such records upon
the Fund's request. FT Institutional further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
14. This Agreement may not be materially amended without the affirmative
vote or written consent of the holders of a majority of the outstanding voting
securities of the Fund to the extent required by the 1940 Act or any
interpretation thereof or exemption therefrom and may not be amended without the
written consent of FAV and FT Institutional.
15. 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.
16. The terms "majority of the outstanding voting securities" of the Fund
and "interested persons" shall have the meanings as set forth in the 1940 Act.
17. This Agreement shall be interpreted in accordance with and governed by
the laws of the State of California of the United States of America.
18. FT Institutional acknowledges that it has received notice of and
accepts the limitations of the Trust's liability as set forth in its Agreement
and Declaration of Trust. FT Institutional agrees that the Trust's obligations
hereunder shall be limited to the assets of the Fund, and that FT Institutional
shall not seek satisfaction of any such obligation from any shareholders of the
Fund nor from any trustee, officer, employee or agent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers.
FRANKLIN ADVISERS, INC.
By: ________________________
Title:
FRANKLIN TEMPLETON INSTITUTIONAL, LLC
By: _______________________
Title:
Franklin Total Return Fund hereby acknowledges and agrees to the provisions of
paragraphs 8(a) and 9 of this Agreement.
FRANKLIN INVESTORS SECURITIES TRUST on behalf of
Franklin Total Return Fund
By: __________________________
Karen L. Skidmore
Title: Vice President & Secretary
B-1
EXHIBIT B
OUTSTANDING SHARES AND CLASSES OF THE FUND AS OF MARCH 28, 2008, THE RECORD
DATE
[INSERT]
C-1
EXHIBIT C
ENTITIES OWNING BENEFICIALLY MORE THAN 5 PERCENT OF
THE OUTSTANDING SHARES OF ANY CLASS OF THE FUND
[INSERT]
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
PROXY PROXY
SPECIAL MEETING OF SHAREHOLDERS
FRANKLIN TOTAL RETURN FUND
JUNE 27, 2008
The undersigned hereby revokes all previous proxies for his/her shares of
Franklin Total Return Fund ("Total Return Fund") and appoints Craig S. Tyle,
Steven J. Gray, David P. Goss and Karen L. Skidmore, and each of them, proxies
of the undersigned with full power of substitution to vote all shares of Total
Return Fund that the undersigned is entitled to vote at Total Return Fund's
Special Meeting of Shareholders ("Meeting") to be held at One Franklin Parkway,
San Mateo, California 94403-1906 at 10:00 a.m., Pacific time on June 27, 2008,
including any postponements or adjournments thereof, upon the matter set forth
below and instructs them to vote upon any other matters that may properly be
acted upon at the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FRANKLIN INVESTORS
SECURITIES TRUST ("TRUST") ON BEHALF OF TOTAL RETURN FUND. IT WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED FOR PROPOSAL
1. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING TO BE VOTED ON, THE
PROXY HOLDERS WILL VOTE, ACT AND CONSENT ON THOSE MATTERS IN ACCORDANCE WITH THE
VIEWS OF MANAGEMENT.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL SAVE
THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
VOTE VIA THE INTERNET:
WWW.FRANKLINTEMPLETON.COM
VOTE VIA TELEPHONE: 1-800-[ ]
CONTROL NUMBER:
Note: Please sign exactly as your name appears on
the proxy. If signing for estates, trusts or
corporations, your title or capacity should be
stated. If shares are held jointly, one or more
joint owners should sign personally.
Signature
Signature
, 2008
Date
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF PROPOSAL 1.
FOR AGAINST ABSTAIN
1. To approve a new subadvisory agreement [] [] []
between Franklin Advisers, Inc. and
Franklin Templeton Institutional, LLC.
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY TODAY
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE U.S.