SUPPLEMENT DATED NOVEMBER 9, 1995
TO THE PROSPECTUS OF FRANKLIN FEDERAL MONEY FUND
DATED NOVEMBER 1, 1995
1. The paragraph subcaptioned "Loans of Portfolio Securities" under "Investment
Objective and Policies of the Fund" is replaced with the following:
LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
of Trustees of Money Market and subject to the following conditions, the
Portfolio may lend its portfolio securities to qualified securities dealers or
other institutional investors, provided that such loans do not exceed 10% of the
value of the Portfolio's total assets at the time of the most recent loan. The
borrower must deposit with the Portfolio's custodian collateral with an initial
market value of at least 102% of the initial market value of the securities
loaned, including any accrued interest, with the value of the collateral and
loaned securities marked-to-market daily to maintain collateral coverage of at
least 100%. Such collateral shall consist of cash, securities issued by the U.S.
Government, its agencies or instrumentalities, or irrevocable letters of credit.
The lending of securities is a common practice in the securities industry. The
Portfolio may engage in security loan arrangements with the primary objective of
increasing the Portfolio's income either through investing cash collateral in
short-term interest bearing obligations or by receiving a loan premium from the
borrower. Under the securities loan agreement, the Portfolio continues to be
entitled to all dividends or interest on any loaned securities. As with any
extension of credit, there are risks of delay in recovery and loss of rights in
the collateral should the borrower of the security fail financially.
2. The paragraph subcaptioned "Through Securities Dealers" under "How to Sell
Shares of the Fund" is replaced with the following:
The Fund will accept redemption orders from securities dealers who have entered
into an agreement with Distributors. This is known as a repurchase. The
documents described under "Important Things to Remember When Redeeming Shares"
below, as well as a signed letter of instruction, are required regardless of
whether the shareholder redeems shares directly or submits such shares to a
securities dealer for repurchase. A shareholder's letter should reference the
Fund, the account number, the fact that the repurchase was ordered by a dealer
and the dealer's name. Details of the dealer-ordered trade, such as trade date,
confirmation number, and the amount of shares or dollars, will help speed
processing of the redemption. The seven-day period within which the proceeds of
the shareholder's redemption will be sent will begin when the Fund receives all
documents required to complete ("settle") the repurchase in proper form. The
shareholder's dealer may charge a fee for handling the order. The SAI contains
more information on the redemption of shares.
