As filed with the Securities and Exchange Commission on August 31, 1995.
File Nos.
2-67480
811-3052
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. 20 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 (X)
FRANKLIN FEDERAL MONEY FUND
(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
Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, Ca 94403
(Name and Address of Agent for Service of Process)
Approximate Date of Public Offering
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
X on November 1, 1995 pursuant to paragraph (a)(i) of rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendments.
The Money Market Portfolios (the master fund) has executed this registration
statement.
Calculation of Registration Fee Under the Securities Act of 1933
<TABLE>
<CAPTION>
Title of Proposed Amount
Securities Amount Maximum Proposed of
Being Being Offering Price Aggregate Offering
Registered Registered* Per Share Price* Fee*
<S> <C> <C> <C> <C>
Capital 33,648,431 $1.00 $290,000 $100
Stock shares
</TABLE>
*Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 249,680,784 shares were redeemed during the fiscal year ended June
30, 1995. 216,322,353 shares were used for reductions pursuant to Paragraph (d)
of Rule 24f-2 during the current year. 33,358,431 shares is the amount of
redeemed shares used for reduction in this amendment. Pursuant to 457(d) under
the Securities Act of 1933, the maximum public offering price of $1.00 per share
on August 23, 1995, is the price used as the basis for these calculations. The
maximum public offering price per share varies and, thus, may be higher or lower
than $1.00 in the future. While no fee is required for the 33,358,431 shares,
the registrant has elected to register, for $100, an additional $290,000 of
shares (approximately 290,000 shares at $1.00 per share).
As part of its initial registration statement, the registrant has elected to
register an indefinite number of shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and hereby continues such election.
The registrant filed the notice required by Rule 24f-2 for its most recent
fiscal year on August 29, 1995.
FRANKLIN FEDERAL MONEY FUND
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
<TABLE>
<CAPTION>
N-1A Location in
Item No. Item Registration Statement
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis "Expense Table"
3. Condensed Financial Information "Financial Highlights", "Performance"
4. General Description of "About the Fund"; "Investment Objective
Registrant and Policies of the Fund"; "General
Information"
5. Management of the Fund "Administration of the Fund"
5A. Management's Discussion of Fund Contained in Registrant's Annual Report
Performance to Shareholders
6. Capital Stock and Other "Distributions to Shareholders";
Securities "Taxation of the Fund and Its
Shareholders"; "General Information"
7. Purchase of Securities Being "How to Buy Shares of the Fund"; "Other
Offered Programs and Privileges Available to Fund
Shareholders"; "Exchange Privilege";
"Valuation of Fund Shares"
8. Redemption or Repurchase "How to Redeem Shares of the Fund";
"Valuation of Fund Shares"; "How to Get
Information Regarding an Investment in
the Fund"; "General Information";
"Exchange Privilege"; "Telephone
Transactions"
9. Pending Legal Proceedings Not Applicable
Part B: Information Required in
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents "Contents"
12. General Information and History "The Fund" (See also Prospectus "About
the Fund"); "General Information"
13. Investment Objectives and "Additional Information Regarding the
Policies Fund's Investment Objective and Policies"
(See also Prospectus "Investment
Objective and Policies of the Fund")
14. Management of the Fund "Officers and Directors"
15. Control Persons and Principal "Officers and Directors"
Holders of Securities
16. Investment Advisory and Other "Administration and Other Services" (See
Services also Prospectus "Administration of the
Fund")
17. Brokerage Allocation "Execution of Portfolio Transactions"
18. Capital Stock and Other "The Fund" (See also Prospectus "About
Securities the Fund")
19. Purchase, Redemption and "Determination of Net Asset Value" (See
Pricing of Securities Being also Prospectus "Valuation of Fund
Offered Shares"); "Additional Information
Regarding Purchases and Redemptions of
Fund Shares"
20. Tax Status "Additional Information Regarding
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Performance Data "General Information"
23. Financial Statements Financial Statements
FRANKLIN FEDERAL MONEY FUND
PROSPECTUS
NOVEMBER 1, 1995
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
Franklin Federal Money Fund (the "Fund") is a no-load, open-end, diversified
management investment company. The Fund seeks to achieve:
* HIGH CURRENT INCOME * LIQUIDITY
* CAPITAL PRESERVATION
THE FUND, UNLIKE MOST FUNDS WHICH INVEST DIRECTLY IN SECURITIES, SEEKS TO
ACHIEVE ITS OBJECTIVES BY INVESTING ALL OF ITS ASSETS IN THE SHARES OF THE U.S.
GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO (THE "PORTFOLIO"), A SEPARATE
SERIES OF THE MONEY MARKET PORTFOLIOS ("MONEY MARKET"), WHOSE INVESTMENT
OBJECTIVE IS THE SAME AS THAT OF THE FUND. AT THE PRESENT TIME, IT IS THE
PORTFOLIO'S POLICY TO LIMIT ITS PORTFOLIO INVESTMENTS TO U.S. TREASURY BILLS,
NOTES AND BONDS AND TO REPURCHASE AGREEMENTS COLLATERALIZED ONLY BY SUCH
SECURITIES. THERE CAN, OF COURSE, BE NO ASSURANCE THAT THIS OBJECTIVE WILL BE
ACHIEVED.
This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that a prospective investor should know before
investing. After reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and sale of shares and
other items which a prospective investor will find useful to have.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
A Statement of Additional Information ("SAI") concerning the Fund, dated
November 1, 1995, as may be amended from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated herein by reference. A copy is available
without charge from the Fund or the Fund's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), at the address or
telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS 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. FURTHER
INFORMATION MAY BE OBTAINED FROM THE UNDERWRITER.
CONTENTS PAGE
Expense Table
Financial Highlights
About the Fund
Investment Objective and
Policies of the Fund
Administration of the Fund
Distributions to Shareholders
Taxation of the Fund and
Its Shareholders
How to Buy Shares of the Fund
How to Sell Shares of the Fund
Other Programs and Privileges
Available to Fund Shareholders
Exchange Privilege
Telephone Transactions
Valuation of Fund Shares
How to Get Information Regarding
an Investment in the Fund
Performance
General Information
Account Registrations
Important Notice Regarding
Taxpayer IRS Certifications
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly in
connection with an investment in the Fund. These figures are based on aggregate
annualized operating expenses of the Fund and the Fund's proportionate share of
the Portfolio's expenses, before fee waivers and expense reductions for the
fiscal year ended June 30, 1995.
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee $5.00*
ANNUALIZED FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management and Administration Fees 0.57%**
Other Expenses of the Fund and the Portfolio 0.31%
-----
Total Fund Operating Expenses 0.88%**
=======
*$5.00 fee is imposed only on Timing Accounts, as described under "Exchange
Privilege." All other exchanges are processed without a fee. **This amount
includes management fees of the Portfolio equal to 0.15% and annualized
administration fees of the Fund (annualized from December 1, 1994 through June
30, 1995 to reflect a change in the Fund's fiscal year end from November 30 to
June 30) equal to 0.42%. The Portfolio's investment manager has agreed in
advance, however, to waive a portion of its management fees to ensure total
aggregate operating expenses of the Fund and the Portfolio are not higher than
if the Fund were not to invest all of its assets in the Portfolio. With this
waiver, management fees represented 0.14% of the average net assets of the Fund.
Total operating expenses of the Fund, including the Fund's proportionate share
of the Portfolio's expenses, were 0.87% of the Fund's average net assets. This
arrangement may be terminated by the Portfolio's investment manager at any time.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the expenses
that apply to a $1,000 investment in the Fund over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end of each time
period:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$9 $28 $49 $108
THIS EXAMPLE IS BASED ON THE AGGREGATE ANNUAL OPERATING EXPENSES, BEFORE FEE
WAIVERS, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. The operating
expenses are borne by the Fund and only indirectly by shareholders as a result
of their investment in the Fund. In addition, federal securities regulations
require the example to assume an annual return of 5%, but the Fund's actual
return may be more or less than 5%.
The preceding table summarizes the aggregate fees and expenses incurred by both
the Fund and the Portfolio. The Board of Directors of the Fund considered the
aggregate fees and expenses to be paid by both the Fund and the Portfolio under
the Fund's policy of investing all of its assets in shares of the Portfolio, and
such fees and expenses the Fund would pay if it continued to invest directly in
various types of money market instruments. This arrangement, whereby the Fund
invests all of its assets in shares of the Portfolio, enables various
institutional investors, including the Fund and other investment companies, to
pool their assets, which may be expected to result in the achievement of a
variety of operating economies. Accordingly, the Board of Directors concluded
that the aggregate expenses of the Fund and the Portfolio were expected to be
lower than the expenses that would be incurred by the Fund if it continued to
invest directly in various types of money market instruments. Of course, there
is no guarantee or assurance that asset growth and lower expenses will be
recognized. The Fund's administrator and the Portfolio's investment manager,
however, has agreed in advance to limit expenses so that in no event will
shareholders of the Fund incur higher expenses than if the Fund continued to
invest directly in various types of money market instruments. Further
information regarding the Fund's and the Portfolio's fees and expenses is
included under "Administration of the Fund."
FINANCIAL HIGHLIGHTS
Set forth below is a table containing financial highlights for a share
outstanding throughout the nine fiscal years ended November 30, 1994 and the
seven month period ended June 30, 1995. The information for each of the five
fiscal years in the period ended November 30, 1994 and the seven month period
ended June 30, 1995 has been audited by Coopers & Lybrand L.L.P., independent
auditors, whose audit report appears in the financial statements in the Fund's
Annual Report to Shareholders dated June 30, 1995. The remaining figures, which
are also audited, are not covered by the auditors' current report. See the
discussion "Reports to Shareholders" under "General Information."
</TABLE>
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended November 30,
June 30, 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value at
beginning of period.. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income. .029 .031 .022 .029 .053 .074 .081 .063 .054 .057
Distributions from net
investment income.... (.029) (.031) (.022) (.029) (.053) (.074) (.081) (.063) (.054) (.057)
Net asset value
at end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN**...... 2.92 3.15% 2.22% 2.97% 5.42% 7.69% 8.45% 6.50% 5.53% 5.86%
- -------------- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
RATIOS/SUPPLEMENTAL
DATA
Net assets at end of
period
(in 000's)............ $139,286 $168,530 $120,933 $134,931 $211,249 $196,535 $130,743 $156,042 $140,548 $129,997
Ratio of expenses to
average net assets++. .87%*+ .98%+ .90% .85% .79% .81% .88% .96% 1.02% 1.03%
Ratio of net investment
income
to average net assets 4.93% 3.15% 2.20% 2.95% 5.26% 7.33% 8.24% 6.27% 5.43% 5.66%
</TABLE>
*ANNUALIZED
**TOTAL RETURN MEASURES THE CHANGE IN VALUE OF AN INVESTMENT OVER THE PERIODS
INDICATED. IT ASSUMES REINVESTMENT OF DIVIDENDS AT NET ASSET VALUE AND IS NOT
ANNUALIZED. +DURING THE PERIODS INDICATED, THE INVESTMENT MANAGER OF THE
PORTFOLIO AGREED IN ADVANCE TO WAIVE A PORTION OF ITS MANAGEMENT FEES. HAD SUCH
ACTION NOT BEEN TAKEN, THE FUND'S RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD
HAVE BEEN AS FOLLOWS:
RATIO OF EXPENSES TO
AVERAGE NET ASSETS++
1994 .99%
- ---- ----
1995 .88%
- ---- ----
++EFFECTIVE WITH FISCAL YEAR 1994, THE EXPENSE RATIO INCLUDES THE FUND'S SHARE
OF THE PORTFOLIO'S ALLOCATED EXPENSES.
ABOUT THE FUND
The Fund is a no-load, open-end, diversified management investment company,
commonly called a mutual fund. The Fund was incorporated under the laws of the
state of California on April 8, 1980, and has registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Fund attempts to maintain a stable net asset value of $1.00 per share,
although there is no assurance that this will be achieved. Although a
shareholder may write redemption drafts (similar to checks) against the account,
the purchase of shares of the Fund does not create a checking or other bank
account.
Shares of the Fund may be purchased at net asset value (without a sales charge)
with an initial investment of at least $500 and subsequent investments of $25 or
more. (See "How to Buy Shares of the Fund.")
CERTAIN FUNDS IN THE FRANKLIN TEMPLETON FUNDS, AS THAT TERM IS DEFINED UNDER
"OTHER PROGRAMS AND PRIVILEGES AVAILABLE TO FUND SHAREHOLDERS - RIGHTS OF
ACCUMULATION," CURRENTLY OFFER THEIR SHARES IN TWO "CLASSES," DESIGNATED "CLASS
I" AND "CLASS II." CLASSES OF SHARES REPRESENT PROPORTIONATE INTERESTS IN THE
SAME PORTFOLIO OF INVESTMENT SECURITIES BUT WITH DIFFERENT RIGHTS, PRIVILEGES
AND ATTRIBUTES. SHARES OF THE FUND MAY BE CONSIDERED CLASS I SHARES FOR PURPOSES
OF THE PROGRAMS AND PRIVILEGES DISCUSSED IN THIS PROSPECTUS.
INVESTMENT OBJECTIVE
AND POLICIES OF THE FUND
The investment objective of the Fund is to obtain as high a level of current
income (in the context of the type of investments available to the Fund) as is
consistent with capital preservation and liquidity. The Fund pursues its
investment objective by investing all of its assets in the Portfolio, which has
the same investment objectives and substantially similar policies and
restrictions as the Fund. The Portfolio is a separate diversified series of
Money Market, an open-end management investment company. Shares of the Portfolio
are acquired by the Fund at net asset value with no sales charge. Accordingly,
an investment in the Fund is an indirect investment in the Portfolio. As with
any other investment, there is no assurance that the Fund's objective will be
attained.
SPECIAL INFORMATION REGARDING THE
FUND'S MASTER/FEEDER FUND STRUCTURE
The investment objectives of both the Fund and the Portfolio are fundamental and
may not be changed without shareholder approval. The investment policies of the
Fund, fundamental and non-fundamental, are substantially similar to those
described herein with respect to the Portfolio except that, in all cases, the
Fund is permitted to pursue such policies by investing in an open-end management
investment company with the same investment objective and substantially similar
policies and limitations as the Fund. Any additional exceptions are noted below.
Information on administration and expenses is included under "Administration of
the Fund." See the SAI for further information regarding the Fund's and the
Portfolio's investment restrictions. The Fund's investment of all its assets in
the Portfolio was previously approved by shareholders of the Fund.
An investment in the Fund may be subject to certain risks due to the Fund's
structure, such as the potential that upon redemption by other future
shareholders in the Portfolio, the Fund's expenses may increase or the economies
of scale which have been achieved as a result of the structure may be
diminished. Institutional investors in the Portfolio that have a greater pro
rata ownership interest in the Portfolio than the Fund could have effective
voting control over the operation of the Portfolio. Further, in the event that
the shareholders of the Fund do not approve a proposed future change in the
Fund's objective or fundamental policies, which has been approved for the
Portfolio, the Fund may be forced to withdraw its investment from the Portfolio
and seek another investment company with the same objective and policies. If the
Board of Directors of the Fund considers that it is in the best interest of the
Fund to do so, the Fund may withdraw its investment in the Portfolio at any
time. In that event, the Board of Directors of the Fund would consider what
action to take, including the investment of all of the assets of the Fund in
another pooled investment entity having substantially similar investment
objectives and policies as the Fund, or the hiring of an investment advisor to
manage the Fund's investments. Either circumstance may cause an increase in Fund
expenses. Further, the Fund's structure is a relatively new format which often
results in certain operational and other complexities. The Franklin
organization, however, was one of the first mutual fund complexes in the country
to implement such a structure, and the directors do not believe that the
additional complexities outweigh the potential benefits to be gained by
shareholders.
The Franklin Group of Funds(R) has another fund which invests in the
Portfolio. In the future, other funds may be created which may invest in the
Portfolio or existing funds may be restructured so that they may invest in the
Portfolio. The Fund or the Fund's administrator will forward to any interested
shareholder additional information, including a prospectus and statement of
additional information, if requested, regarding such other funds through which
they may make investments in the Portfolio. Investors interested in obtaining
information about such funds may contact the departments listed under "How to
Get Information Regarding an Investment in the Fund."
The Portfolio is a series of Money Market, a management investment company
registered under the 1940 Act. Money Market is a Delaware business trust
organized on June 16, 1992 and is authorized to issue an unlimited number of
shares of beneficial interest with a par value of $.01 per share. All shares
have one vote and, when issued, are fully paid, non-assessable, and redeemable.
Money Market currently issues shares in two separate series; however, additional
series may be added in the future by the Board of Trustees of Money Market, the
assets and liabilities of which will be separate and distinct from any other
series.
Whenever the Fund, as an investor in the Portfolio, is asked to vote on a matter
relating to the Portfolio, the Fund will hold a meeting of Fund shareholders and
will cast its votes in the same proportion as the Fund's shareholders have
voted.
QUALITY, DIVERSIFICATION AND MATURITY STANDARDS
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Portfolio limits its investments to U.S government securities (as discussed
below) or U.S. dollar-denominated instruments which the Board of Trustees of
Money Market determines present minimal credit risks and which are, as required
by the federal securities laws, rated in one of the two highest rating
categories as determined by nationally recognized statistical rating
organizations, or which are unrated and of comparable quality, with remaining
maturities of 397 calendar days or less ("Eligible Securities"). The Portfolio
maintains a dollar-weighted average maturity of the securities in its portfolio
of 90 days or less. The Portfolio will not invest more than 5% of its total
assets in Eligible Securities of a single issuer, other than U.S. government
securities, rated in the highest category by the requisite number of rating
organizations, except that the Portfolio may exceed that limit as permitted by
Rule 2a-7 for a period of up to three business days; and the Portfolio will not
invest (a) the greater of 1% of the Portfolio's total assets or $1 million in
Eligible Securities issued by a single issuer rated in the second highest
category and (b) more than 5% of its total assets in Eligible Securities of all
issuers rated in the second highest category. These procedures are a fundamental
policy of the Portfolio and the Fund, except to the extent that the Fund invests
all of its assets in another registered investment company having substantially
similar investment objectives and policies of the Fund.
Because the Portfolio limits its investments to high quality securities, its
portfolio will generally earn lower yields than if the Portfolio purchased
securities with a lower rating and correspondingly greater risk, and the yield
to shareholders in the Portfolio, and thus the Fund, is accordingly likely to be
lower.
TYPES OF SECURITIES THE FUND (OR THE PORTFOLIO) MAY PURCHASE
U S. GOVERNMENT SECURITIES. The Portfolio may invest only in marketable
securities issued or guaranteed by the U.S. government, its agencies, or by
various instrumentalities which have been established or sponsored by the U.S.
government or in repurchase agreements (as described below) collateralized by
such securities. As a fundamental policy, subject to change only by shareholder
approval, the Portfolio will invest only in obligations, including U.S. Treasury
bills, notes, bonds and securities of the Government National Mortgage
Association (popularly called "GNMAs" or "Ginnie Maes") and the Federal Housing
Administration, which are issued or guaranteed by the U.S. government or which
carry a guarantee that is supported by the full faith and credit of the U.S.
government. Repurchase agreements with respect to obligations issued or
guaranteed by the U.S. government and supported by the full faith and credit of
the U.S. are included within this fundamental policy.
At the present time, it is the Portfolio's policy to limit its portfolio
investments to U.S. Treasury bills, notes and bonds and to repurchase agreements
collateralized only by such securities. This policy may only be changed upon 30
days' written notice to shareholders and to the National Association of
Insurance Commissioners.
OTHER STRATEGIES
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase transactions, in
which the Portfolio 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 Portfolio 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 Portfolio to experience a loss or
delay in the liquidation of the collateral securing the repurchase agreement.
The Portfolio might also incur disposition costs in liquidating the collateral.
The Portfolio intends to enter into repurchase agreements only with financial
institutions such as broker-dealers and banks which are deemed creditworthy by
the Portfolio's investment manager. A repurchase agreement is deemed to be a
loan under the 1940 Act. The U.S. government security subject to resale (the
collateral) will be held on behalf of the Portfolio by a custodian approved by
Money Market's Board of Trustees and will be held pursuant to a written
agreement.
The Portfolio may not enter into a repurchase agreement with more than seven
days to maturity if, as a result, more than 10% of the market value of the
Portfolio's total assets would be invested in such repurchase agreements,
together with any other investment the Portfolio may hold for which market
quotations are not readily available. Securities subject to repurchase
agreements will be deemed to have a maturity date coincident with the date upon
which the Portfolio has agreed to resell such securities.
LOANS OF PORTFOLIO SECURITIES. As approved by of 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 25% of the value of the
Portfolio's total assets at the time of the most recent loan, and further
provided that the borrower deposits and maintains 102% collateral for the
benefit of the Portfolio. The lending of securities is a common practice in the
securities industry. The Portfolio engages in security loan arrangements with
the primary objective of increasing the Portfolio's income either through
investing the 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.
OTHER POLICIES. The Portfolio may borrow from banks, for temporary emergency
purposes only, and pledge its assets for such loans, up to 10% of the
Portfolio's total net assets. No new investments will be made by the Portfolio
while any outstanding loans exceed 5% of its total net assets.
Depending on its view of market conditions and cash requirements, the Portfolio
may or may not hold securities purchased until maturity. The yield on certain
instruments held by the Portfolio may decline if sold prior to maturity.
Whenever the Portfolio's investment manager believes market conditions are such
that yields could be increased by actively trading the portfolio securities to
take advantage of short-term market variations, the Portfolio may do so without
restriction or limitation (subject to the tax requirements for qualification as
a regulated investment company). This practice will not likely have an adverse
impact on the Portfolio's income or net asset value, as brokerage commissions
are not normally charged on the purchase or sale of money market instruments.
The Fund believes that its, and the Portfolio's, investment policies, as stated
in this Prospectus and the SAI dated November 1, 1995, as may be amended from
time to time, make the Fund a permissible investment for federal credit unions,
based on the Fund's understanding of the laws and regulations governing credit
union regulations as of September 30, 1994. CREDIT UNION INVESTORS ARE ADVISED
TO CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO WHAT EXTENT THE
SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Please see the SAI
("Additional Information Regarding the Fund's Investment Objective and Policies
N Credit Union Investment Regulations") for details.
The investment objectives and policies stated above are fundamental policies and
may not be changed without shareholder approval. The Fund and the Portfolio are
subject to a number of additional investment restrictions, some of which may be
changed only with approval of a majority of either the Fund's or the Portfolio's
outstanding voting securities. For more information concerning the policies
discussed above, please see the SAI.
ADMINISTRATION OF THE FUND
The Fund's Board of Directors (the "Board") has the primary responsibility for
the overall management of the Fund and for electing the officers of the Fund who
are responsible for administering its day-to-day operations. The Board, with all
disinterested directors as well as the interested directors voting in favor, has
adopted written procedures designed to deal with potential conflicts of interest
which may arise from the Fund and Money Market having substantially the same
boards. The procedures call for an annual review of the Fund's relationship with
the Portfolio, and in the event a conflict is deemed to exist, the boards may
take action, up to and including the establishment of a new board of directors
or board of trustees. The Board has determined that there are no conflicts of
interest presented by this arrangement at the present time. See "Summary of
Procedures to Monitor Conflicts of Interest" in the Fund's SAI for a summary of
the conflict of interest procedures and "Officers and Directors" for information
concerning the officers and directors of the Fund and the officers and trustees
of Money Market.
Franklin Advisers, Inc. ("Advisers") serves as the Fund's administrator and the
Portfolio's investment manager. Advisers is a wholly-owned subsidiary of
Franklin Resources, Inc. ("Resources"), a publicly owned holding company, the
principal shareholders of which are Charles B. Johnson and Rupert H. Johnson,
Jr., who own approximately 20% and 16%, respectively, of Resources' outstanding
shares. Resources is engaged in various aspects of the financial services
industry through its various subsidiaries (the "Franklin Templeton Group").
Advisers acts as investment manager or administrator to 34 U.S. registered
investment companies (114 separate series) with aggregate assets of over $75
billion.
Pursuant to an administration agreement, Advisers provides various
administrative, statistical, and other services to the Fund. The Fund is
responsible for its own operating expenses including, but not limited to,
Advisers' administration fee; taxes, if any; custodian, legal and auditing fees;
fees and expenses of directors who are not members of, affiliated with or
interested persons of Advisers; salaries of any personnel not affiliated with
Advisers; insurance premiums; trade association dues; expenses of obtaining
quotations for calculating the value of the Fund's net assets; printing and
other expenses relating to the Fund's operations; filing fees; brokerage fees
and commissions, if any; costs of registering and maintaining registration of
the Fund's shares under federal and state securities laws; plus any
extraordinary and non-recurring expenses.
The Portfolio has a management agreement with Advisers which provides for the
supervision and implementation of the Portfolio's investment activities and
certain administrative services and facilities which are necessary to conduct
the Portfolio's business.
Under the management agreement with Advisers, the Portfolio is obligated to pay
Advisers a fee, computed daily and payable monthly, at the annual rate of 0.15%
of the Portfolio's average daily net assets. The Portfolio is responsible for
its own operating expenses, including, but not limited to: Advisers' fee; taxes,
if any; legal and auditing fees; fees and costs of its custodian; the fees and
expenses of trustees who are not members of, affiliated with or interested
persons of Advisers; salaries of any personnel not affiliated with Advisers;
insurance premiums, trade association dues, and expenses of obtaining quotations
for calculating the value of the Portfolio's net assets; printing and other
expenses relating to the Portfolio's operations; filing fees; brokerage fees and
commissions, if any; costs of registering and maintaining registration of the
Portfolio's shares under federal and state securities laws; plus any
extraordinary and non-recurring expenses.
Fund shareholders will bear a portion of the Portfolio's operating expenses,
including its management fee, to the extent that the Fund, as a shareholder of
the Portfolio, bears such expenses. The portion of the Portfolio's expenses
borne by the Fund is dependent upon the number of other shareholders of the
Portfolio, if any.
Advisers has agreed in advance to waive a portion of its
management fees to ensure total aggregate operating expenses of the Fund and the
Portfolio are not higher than if the Fund were not to invest all of its assets
in the Portfolio. During the seven month period ended June 30,1995, the Fund's
proportionate share of the Portfolio's management fees and the Fund's
administration fees, before any advance waiver, represented an annualized amount
equal to 0.15% and 0.42%, respectively, of the average daily net assets of the
Fund. Total operating expenses, including management fees before any advance
waiver and administration fees, would have represented an annualized amount
equal to 0.88% of the average daily net assets of the Fund. Pursuant to an
agreement by Advisers to limit its management fees, the Fund's proportionate
share of the Portfolio's management fees actually paid represented 0.14%, on an
annualized basis, of the Fund's average daily net assets and the Fund's
annualized operating expenses totaled 0.87%. This arrangement may be terminated
by Advisers at any time.
It is not anticipated that the Portfolio or the Fund will incur a significant
amount of brokerage expenses because short-term money market instruments are
generally traded on a "net" basis, that is, in principal transactions without
the addition or deduction of brokerage commissions or transfer taxes. To the
extent that the Portfolio does participate in transactions involving brokerage
commissions, it is Advisers' responsibility to select brokers through which such
transactions will be effected. Advisers tries to obtain the best execution on
all such transactions. If it is felt that more than one broker is able to
provide the best execution, Advisers will consider the furnishing of quotations
and of other market services, research, statistical and other data for Advisers
and its affiliates, as well as the sale of shares of the Fund, as factors in
selecting a broker. Further information is included under "Policies Regarding
Brokers Used on Portfolio Transactions" in the SAI.
Shareholder accounting and many of the clerical functions for the Fund are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent"), in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares dividends for each day that the Fund's net asset value is
calculated, payable to shareholders of record as of the close of business the
preceding day. The amount of dividends may fluctuate from day to day and
dividends may be omitted on some days, depending on changes in the factors that
comprise the Fund's net investment income. THE FUND DOES NOT PAY "INTEREST" TO
ITS SHAREHOLDERS, NOR IS ANY AMOUNT OF DIVIDENDS OR RETURN GUARANTEED IN ANY
WAY.
Dividends are automatically reinvested daily in the form of additional shares of
the Fund at the net asset value per share at the close of business each day.
The Fund's daily dividend consists of the income dividends paid by the
Portfolio. The Portfolio's daily dividend includes accrued interest and any
original issue and market discount, plus or minus any gain or loss on the sale
of portfolio securities and changes in unrealized appreciation or depreciation
in portfolio securities (to the extent required to maintain a stable net asset
value per share), less amortization of any premium paid on the purchase of
portfolio securities and the expenses of the Portfolio.
The federal income tax treatment of dividends and distributions is the same
whether received in cash or reinvested in Fund shares.
The SAI includes a further discussion of distributions.
DIVIDENDS IN CASH
Shareholders may request to have their dividends paid out monthly in cash by
notifying Investor Services. For such shareholders, the shares reinvested and
credited to their account during the month will be redeemed as of the close of
business on the last business day of the month and the proceeds will be paid to
them in cash. By completing the "Special Payment Instructions for Dividends"
section of the Shareholder Application included with this Prospectus, a
shareholder may direct the selected distributions to another fund in the
Franklin Group of Funds(R) or the Templeton Group, to another person, or
directly to a checking account. If the bank at which the account is maintained
is a member of the Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If this last option is requested,
the shareholder should allow at least 15 days for initial processing. Dividends
which may be paid in the interim will be sent to the address of record.
Additional information regarding automated fund transfers may be obtained from
Franklin's Shareholder Services Department.
TAXATION OF THE FUND AND ITS SHAREHOLDERS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. Additional information regarding taxation
is included in the SAI.
The Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (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.
For federal income tax purposes, any income dividends which the shareholder
receives from the Fund, as well as any distributions derived from the excess of
net short-term capital gain over net long-term capital loss, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares.
The Fund will inform shareholders of the source of their dividends and
distributions at the time they are paid and will, promptly after the close of
each calendar year, advise them of the tax status for federal income tax
purposes of such dividends and distributions.
Shareholders should consult their tax advisors with respect to the applicability
of state and local intangible property or income taxes to their shares of the
Fund and to distributions and redemption proceeds received from the Fund.
Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes to distributions received by them from the
Fund and the application of foreign tax laws to such distributions.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund are continuously offered through securities dealers which
execute an agreement with Distributors, the principal underwriter of the Fund's
shares, and by the Fund directly. The use of the term "securities dealer" shall
include other financial institutions which, pursuant to an agreement with
Distributors (directly or through affiliates), handle customer orders and
accounts with the Fund. Such reference, however, is for convenience only and
does not indicate a legal conclusion of capacity. All shares of the Fund are
purchased at the net asset value, without a sales charge, next determined after
receipt of a purchase order in proper form. The minimum initial investment is
$500 and subsequent investments must be $25 or more. These minimums may be
waived when the shares are purchased through plans established by the Franklin
Templeton Group.
Purchases in proper form received by the Fund prior to 3:00 p.m. Pacific time
will be credited to the shareholder's account on that business day. If received
after 3:00 p.m., the purchase will be credited the following business day. Many
of the types of instruments in which the Fund (through the Portfolio) invests
must be paid for in federal funds, which are monies held by its custodian bank
on deposit at the Federal Reserve Bank of San Francisco and elsewhere.
Therefore, the monies paid by an investor for shares of the Fund generally
cannot be invested by the Fund until they are converted into and are available
to the Fund in federal funds, which may take up to two days. In such cases,
purchases by investors may not be considered in proper form and effective until
such conversion and availability. In the event the Fund is able to make
investments immediately (within one business day), it may accept a purchase
order with payment other than in federal funds; in such event, shares of the
Fund will be purchased at the net asset value next determined after receipt of
the order and payments.
Shares may be purchased in any of the following ways:
BY MAIL
(1) For an initial investment, include the completed Shareholder Application
contained in this Prospectus. For subsequent investments, the deposit
slips which are included with the shareholder's monthly statement or
checkbook (if one has been requested) may be used, or the shareholder
should reference the account number on the check.
(2) Make the check, Federal Reserve draft or negotiable bank draft payable to
Franklin Federal Money Fund. Instruments drawn on other investment
companies may not be accepted.
(3) Send the check, Federal Reserve draft or negotiable bank draft to
Franklin Federal Money Fund, 777 Mariners Island Blvd., P.O. Box 7777,
San Mateo, California 94403-7777.
BY WIRE
(1) Call Franklin's Shareholder Services Department at 1-800/632-2301. If
that line is busy, call 415/312-2000 collect, to advise that funds will
be wired for investment. The Fund will supply a wire control number for
the investment. It is necessary to obtain a new wire control number every
time money is wired into an account in the Fund. Wire control numbers are
effective for one transaction only and may not be used more than once.
Shareholders should contact Franklin's Shareholder Services Department at
the above telephone number to obtain a wire control number each time
funds are to be wired for investment to the Fund. Wired money which is
not properly identified with a currently effective wire control number
will be returned to the bank from which it was wired and will not be
credited to the shareholder's account.
(2) Wire funds to Bank of America, ABA routing number 121000358, for credit
to Franklin Federal Money Fund, A/C 1493-3-04779. The wire control number
and shareholder's name must be included. Wired funds received by the Bank
and reported by the Bank to the Fund by 3:00 p.m. Pacific time are
normally credited on that day. Later wires are credited the following
business day.
(3) If the purchase is not to an existing account, a completed Shareholder
Application must be sent to Franklin Federal Money Fund at 777 Mariners
Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777, to assure
proper credit for the wire.
THROUGH SECURITIES DEALERS
Investors may, if they wish, invest in the Fund by purchasing shares through a
securities dealer as noted above. Securities dealers which process orders on
behalf of their customers may charge a reasonable fee for their services.
Investments made directly, without the assistance of a securities dealer, are
without charge. In certain states, shares of the Fund may be purchased only
through registered securities dealers.
AUTOMATIC INVESTMENT PLAN
Under the Automatic Investment Plan, a shareholder may be able to arrange to
make additional purchases of shares automatically on a monthly basis by
electronic funds transfer from a checking account, if the bank which maintains
the account is a member of the Automated Clearing House, or by preauthorized
checks drawn on the shareholder's bank account. A shareholder may, of course,
terminate the program at any time. The Automatic Investment Plan Application
included with this Prospectus contains the requirements applicable to this
program.
GENERAL
The Fund and Distributors reserve the right to reject any order for the purchase
of shares of the Fund or to waive the minimum investment requirements when the
shares are being purchased through plans established by the Franklin Templeton
Group. In addition, the offering of shares of the Fund may be suspended by the
Fund at any time and resumed at any time thereafter.
The Fund may impose a $10 charge for each returned item against any shareholder
account which, in connection with the purchase of Fund shares, submits a check
or a draft which is returned unpaid to the Fund.
Securities laws of states in which the Fund's shares are offered for sale may
differ from the interpretations of federal law, and banks and financial
institutions selling Fund shares may be required to register as dealers pursuant
to state law.
If the purchase or sale of Fund shares with the assistance of certain banks were
deemed to be an impermissible activity for such bank under the Glass-Steagall
Act or other federal laws, such activities would likely be discontinued by such
bank. Investors utilizing such bank assistance would then be able to seek other
avenues to invest in Fund shares, such as securities dealers registered with the
SEC or from the Fund directly.
HOW TO SELL SHARES OF THE FUND
All or any part of a shareholder's investment may be converted into cash,
without penalty or charge, by redeeming shares in any one of the methods
discussed below on any day the New York Stock Exchange (the "Exchange") is open
for trading. Regardless of the method of redemption, payment for the
shareholder's redeemed shares will be sent within seven days after receipt of
the redemption request in proper form, except that the Fund may delay the
mailing of the redemption check, or a portion thereof, until the clearance of
the check used to purchase fund shares, which may take up to 15 days or more.
Although the use of a certified or cashier's check will generally reduce this
delay, shares purchased with such instruments will also be held pending
clearance. Shares purchased by federal funds wire are available for immediate
redemption. Shareholders are requested to provide a telephone number where they
may be reached during business hours, or in the evening if preferred. Investor
Services' ability to contact a shareholder promptly when necessary will speed
the processing of the redemption.
Retirement plan account liquidations require the completion of certain
additional forms to ensure compliance with Internal Revenue Service ("IRS")
regulations. To liquidate a retirement plan account, a shareholder or the
shareholder's securities dealer may call Franklin's Retirement Plans Department
to obtain the necessary forms. Tax penalties will generally apply to any
distribution from such plans to a participant under age 59 1U2, unless the
distribution meets one of the exceptions set forth in the Code.
Shares may be redeemed in any of the following ways:
1. BY CHECK
The Fund will supply redemption drafts (which are similar to checks and are
referred to as checks throughout this Prospectus) to shareholders who have
requested them on the Shareholder Application. The election of the check
redemption procedure does not create a checking account or other bank account
relationship between a shareholder and the Fund or any bank. These checks are
drawn through the Fund's custodian, Bank of America NT & SA (the "Custodian" or
"Bank"). Shareholders will generally not be able to convert a check drawn on the
Fund account into a certified or cashier's check by presentation at the Fund's
Custodian. The shareholder may make checks payable to the order of any person in
any amount not less than $100. There is no charge to the shareholder for this
check redemption procedure.
When such a check is presented for payment, the Fund will redeem a sufficient
number of full and fractional shares in the shareholder's account to cover the
amount of the check. This enables the shareholder to continue earning daily
income dividends until the check has cleared. Shares will be redeemed at their
net asset value next determined after receipt of a check which does not exceed
the collected balance of the account. Only shareholders having accounts in which
no share certificates have been issued will be permitted to redeem shares by
check.
Because the Fund is not a bank, no assurance can be given that stop payment
orders on checks written by shareholders will be effective. The Fund, however,
will use its best efforts to see that such orders are carried out.
Shareholders will be subject to the right of the Bank to return unpaid checks in
amounts exceeding the collected balance of their account at the time the check
is presented for payment. Checks should not be used to close a Fund account
because, when the check is written, the shareholder will not know the exact
total value of the account on the day the check clears.
The Bank reserves the right to terminate this service at any time upon notice to
shareholders.
2. BY TELEPHONE
A shareholder may redeem shares by telephoning the Fund at 1-800/632-2301.
Payment of redemption requests of $1,000 or less (once per business day) will be
sent by mail to the shareholder's address as reflected on the Fund's records.
For payments over $1,000, the shareholder must complete the "Wire Redemptions
Privilege" section of the Shareholder Application. Proceeds will then be wired
directly to the commercial bank or brokerage firm designated by the shareholder.
Wires will not be sent for redemption requests of $1,000 or less. Shareholders
may have redemption proceeds of over $1,000, up to $50,000 per day per Fund
account, subject to the Restricted Account exception noted under "Telephone
Transactions - Restricted Accounts," sent directly to their address of record by
filing a completed Franklin Templeton Telephone Redemption Authorization
Agreement (the "Agreement") included with this Prospectus. Information may also
be obtained by writing to the Fund or Investor Services at the address shown on
the cover or by calling the number above. The Fund and Investor Services will
employ reasonable procedures to confirm that instructions given by telephone are
genuine. Shareholders, however, bear the risk of loss in certain cases as
described under "Telephone Transactions - Verification Procedures."
Telephone redemption requests received before 3:00 p.m. Pacific time on any
business day will be processed that same day. The redemption check will be sent
within seven days, made payable to all the registered owners on the account, and
will be sent only to the address of record. Wire payments will be transmitted
the next business day following receipt prior to 3:00 p.m. Pacific time of a
request for redemption in proper form. Shareholders may wish to allow for longer
processing time if they want to assure that redemption proceeds will be
available at a specific time for a specific transaction. Shareholders may be
able to have redemption proceeds wired to an escrow account the same day,
provided that the request is received prior to 9:00 a.m. Pacific time.
During periods of drastic economic or market changes, it is possible that the
telephone redemption privilege may be difficult to implement. In this event,
shareholders should follow the other redemption procedures discussed in this
section.
Redemption instructions must include the shareholder's name and account number
and be called to the Fund. No shares for which share certificates have been
issued may be redeemed by telephone instructions. Redemption requests by
telephone will not be accepted within 30 days following an address change by
telephone. In that case, a shareholder should follow the other redemption
procedures set forth in this Prospectus. Institutional accounts which wish to
execute redemptions in excess of $50,000 must complete an Institutional
Telephone Privileges Agreement which is available from the Franklin Templeton
Institutional Services Department by telephoning 1-800/321-8563. The telephone
redemption privilege may be modified or discontinued by the Fund at any time
upon 60 days' notice to shareholders.
3. BY MAIL
A shareholder may redeem all or a portion of the shares owned by the shareholder
by sending a letter to Investor Services, at the address shown on the back cover
of this Prospectus, requesting redemption and surrendering share certificates if
any have been issued.
4. THROUGH SECURITIES DEALERS
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
redemption proceeds will not earn dividends or interest during the time between
receipt of the dealer's repurchase order and the date the redemption is
processed upon receipt of all documents necessary to settle the repurchase.
Thus, it is in a shareholder's best interest to have the required documentation
completed and forwarded to the Fund as soon as possible. The shareholder's
dealer may charge a fee for handling the order. The SAI contains more
information on the redemption of shares.
IMPORTANT THINGS TO REMEMBER
WHEN REDEEMING SHARES
Written requests for redemption must be signed by all registered owners.
Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered shareholders exactly as the account is
registered, with the signature(s) guaranteed as referenced below. Shareholders
are advised, for their own protection, to send the share certificate and
assignment form in separate envelopes if they are being mailed in for
redemption.
TO BE CONSIDERED IN PROPER FORM, SIGNATURES MUST BE GUARANTEED
IF THE REDEMPTION REQUEST INVOLVES ANY OF THE FOLLOWING:
(1) the proceeds of the redemption are over $50,000;
(2) the proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account;
(3) the proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, preauthorized bank account or brokerage
firm account;
(4) share certificates, if the redemption proceeds are in excess of $50,000; or
(5) the Fund or Investor Services believes that a signature guarantee would
protect against potential claims based on the transfer instructions,
including, for example, when (a) the current address of one or more joint
owners of an account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c) the Fund has
been notified of an adverse claim, (d) the instructions received by the
Fund are given by an agent, not the actual registered owner, (e) the Fund
determines that joint owners who are married to each other are separated
or may be the subject of divorce proceedings, or (f) the authority of a
representative of a corporation, partnership, association, or other entity
has not been established to the satisfaction of the Fund.
Signatures must be guaranteed by an "eligible guarantor institution" as defined
under Rule 17Ad-15 under the Securities Exchange Act of 1934. Generally,
eligible guarantor institutions include (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities dealers
which are members of a national securities exchange or a clearing agency or
which have minimum net capital of $100,000; or (4) institutions that participate
in the Securities Transfer Agent Medallion Program ("STAMP") or other recognized
signature guarantee medallion program. A notarized signature will not be
sufficient for the request to be in proper form.
Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:
Corporation - (1) Signature guaranteed letter of instruction from the authorized
officer(s) of the corporation and (2) a corporate resolution.
Partnership - (1) Signature guaranteed letter of instruction from a general
partner and (2) pertinent pages from the partnership agreement identifying the
general partners or a certification for a partnership agreement.
Trust - (1) Signature guaranteed letter of instruction from the trustee(s) and
(2) a copy of the pertinent pages of the trust document listing the trustee(s)
or a Certification for Trust if the trustee(s) are not listed on the account
registration.
Custodial (other than a retirement account) - Signature guaranteed letter of
instruction from the custodian.
Accounts under court jurisdiction - Check court documents and the applicable
state law since these accounts have varying requirements, depending upon the
state of residence.
For any information required about a proposed liquidation, a shareholder may
call Franklin's Shareholder Services Department or the securities dealer may
call Franklin's Dealer Services Department.
Written requests for redemption, all share certificates, and all certificate
assignment forms should be sent to the Fund or Investor Services at the address
shown on the back cover of this Prospectus.
Payment for written requests for redemption will be sent within seven days after
receipt of the request in proper form. Redemptions will be made in cash at the
net asset value per share next determined after receipt by the Fund of a
redemption request in proper form, including all share certificates,
assignments, signature guarantees and other documentation as may be required by
Investor Services. The amount received upon redemption may be more or less than
the shareholder's original investment. Redemptions may be suspended under
certain limited circumstances pursuant to rules adopted by the SEC.
Wiring of redemption proceeds is a special service made available to
shareholders whenever possible. The offer of this service, however, does not
bind the Fund to meet any redemption request by wire or in less than the
seven-day period prescribed by law. Neither the Fund nor its agents shall be
liable to any shareholder or other person for a redemption payment by wire which
for any reason may not be processed as described in this section.
CONTINGENT DEFERRED SALES CHARGE
The Fund does not impose either a front-end sales charge or a contingent
deferred sales charge. If, however, the shares redeemed were shares acquired by
exchange from another of the Franklin Templeton Funds, as defined under "Rights
of Accumulation", which would have assessed a contingent deferred sales charge
upon redemption, such charge will be made by the Fund, as described below. The
12-month contingency period will be tolled (or stopped) for the period such
shares are exchanged into and held in the Fund.
In certain Franklin Templeton Funds, in order to recover commissions paid to
securities dealers on investments of $1 million or more, a contingent deferred
sales charge of 1% applies to certain redemptions made by those investors within
12 months of the calendar month after such investments. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares, and is
retained by Distributors. In determining if a charge applies, shares not subject
to a contingent deferred sales charge are deemed to be redeemed first, in the
following order: (i) shares representing amounts attributable to capital
appreciation; (ii) shares purchased with reinvested dividends and capital gain
distributions; (iii) other shares held longer than 12 months; and followed by
(iv) any shares held less than 12 months, on a "first-in, first-out" basis. For
tax purposes, a contingent deferred sales charge is treated as either a
reduction in redemption proceeds or an adjustment to the cost basis of the
shares redeemed.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of a
SPECIFIC NUMBER of shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
OTHER PROGRAMS AND PRIVILEGES
AVAILABLE TO FUND SHAREHOLDERS
CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUND TO SHAREHOLDERS WHOSE SHARES ARE HELD, OF
RECORD, BY A FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT, OR NETWORKED
ACCOUNT THROUGH THE NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE THE
SECTION CAPTIONED "ACCOUNT REGISTRATIONS" IN THIS PROSPECTUS).
SHARE CERTIFICATES
Shares for an initial investment, as well as subsequent investments, including
the reinvestment of dividends and any capital gain distributions, are generally
credited to an account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss or
theft of a share certificate. A lost, stolen or destroyed certificate cannot be
replaced without obtaining a sufficient indemnity bond. The cost of such a bond,
which is generally borne by the shareholder, can be 2% or more of the value of
the lost, stolen or destroyed certificate. A certificate will be issued if
requested by the shareholder or by the shareholder's securities dealer.
CONFIRMATIONS
A confirmation statement will be sent to each shareholder monthly to reflect the
daily dividends reinvested, as well as after each transaction which affects the
shareholder's account, except a redemption effected by check. This statement
will also show the total number of Fund shares owned by the shareholder,
including the number of shares in "plan balance" for the account of the
shareholder.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan and receive regular
periodic payments from the shareholder's account, provided that the net asset
value of the shares held by the shareholder is at least $5,000. There are no
service charges for establishing or maintaining a Systematic Withdrawal Plan.
The minimum amount which the shareholder may withdraw is $50 per transaction,
although this is merely the minimum amount allowed under the plan and should not
be mistaken for recommended amounts. Retirement plans subject to mandatory
distribution requirements are not subject to the $50 minimum. The plan may be
established on a monthly, quarterly, semiannual or annual basis.
Sufficient shares of the Fund will be liquidated (generally on the first
business day of the month in which the distribution is scheduled) at net asset
value to meet the specified withdrawals with payment generally received by the
shareholder three to five days after the date of liquidation. By completing the
"Special Payment Instructions for Dividends" section of the Shareholder
Application included with this Prospectus, a shareholder may direct the selected
withdrawals to another fund in the Franklin Group of Funds or the Templeton
Group, to another person, or directly to a checking account. If the bank at
which the account is maintained is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds transfer. If this last
option is requested, the shareholder should allow at least 15 days for initial
processing. Withdrawals which may be paid in the interim will be sent to the
address of record. Liquidation of shares may deplete the investment, and
withdrawal payments cannot be considered as actual yield or income since part of
such payments may be a return of capital. If the withdrawal amount exceeds the
total plan balance, the account will be closed and the remaining balance will be
sent to the shareholder. A Systematic Withdrawal Plan may be terminated on
written notice by the shareholder or the Fund, and it will terminate
automatically if all shares are liquidated or withdrawn from the account, or
upon the Fund's receipt of notification of the death or incapacity of the
shareholder. Shareholders may change the amount (but not below the specified
minimum) and schedule of withdrawal payments, or suspend one such payment, by
giving written notice to Investor Services at least seven business days prior to
the end of the month preceding a scheduled payment. Share certificates may not
be issued while a Systematic Withdrawal Plan is in effect.
MULTIPLE ACCOUNTS FOR FIDUCIARIES
Special procedures have been designed for banks and other institutions wishing
to open multiple accounts in the Fund. Further information is included in the
Fund's SAI.
RIGHTS OF ACCUMULATION
The cost or current value (whichever is higher) of the shares in the Fund will
be included in determining the sales charge discount to which an investor may be
entitled when purchasing shares in one or more of the funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds which are sold with a sales
charge. Included for these aggregation purposes are (a) the mutual funds in the
Franklin Group of Funds except Franklin Valuemark Funds and Franklin Government
Securities Trust (the "Franklin Funds"), (b) other investment products
underwritten by Distributors or its affiliates (although certain investments may
not have the same schedule of sales charges and/or may not be subject to
reduction), and (c) the U.S. mutual funds in the Templeton Group of Funds except
Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and
Templeton Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds
and Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.")
Purchases of Fund shares will also be included toward the completion of a Letter
of Intent with respect to any of the Franklin Templeton Funds which are sold
with a sales charge.
To assist shareholders in obtaining additional information regarding these
programs, a list of telephone numbers is included under "How to Get Information
Regarding an Investment in the Fund."
RETIREMENT PLANS - TAX DEFERRED INVESTMENTS
Shares of the Fund may be used for individual or employer-sponsored retirement
plans involving tax-deferred investments. The Fund may be used as an investment
vehicle for an existing retirement plan, or Franklin Templeton Trust Company
(the "Trust Company") may provide the plan documents and serve as custodian or
trustee. A plan document must be adopted for a retirement plan to be in
existence.
The Trust Company, an affiliate of Distributors, can serve as
custodian or trustee for retirement plans. Brochures for Trust Company plans
contain important information regarding eligibility, contribution and deferral
limits and distribution requirements. Please note that an application other than
the one contained in this Prospectus must be used to establish a retirement
account with the Trust Company. To obtain a retirement plan brochure or
application, call toll free 1-800/DIAL BEN (1-800/342-5236).
Please see "How to Sell Shares of the Fund" for specific information regarding
redemptions from retirement accounts. Specific forms are required to be
completed for distributions from the Trust Company retirement plans.
Individuals and plan sponsors should consult with legal, tax or benefits and
pension plan consultants before choosing a retirement plan. In addition,
retirement plan investors should consider consulting their investment
representatives or advisers concerning investment decisions within their plans.
INSTITUTIONAL ACCOUNTS
There may be additional methods of purchasing, redeeming or exchanging shares of
the Fund available to institutional accounts. For further information, contact
the Franklin Templeton Institutional Services Department at 1-800/321-8563.
EXCHANGE PRIVILEGE
The Franklin Templeton Funds consist of a number of mutual funds with various
investment objectives and policies. The shares of most of these mutual funds are
generally offered to the public with a sales charge (which may differ in timing
and/or amount). If a shareholder's investment objective or outlook for the
securities markets changes, Fund shares may be exchanged for Class I shares of
other Franklin Templeton Funds which are eligible for sale in the shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Except as noted under "Retirement Plan
Accounts - Limited Class II Exchanges" below, no exchanges between different
classes of shares are allowed and, therefore, shares of the Fund may not be
exchanged for Class II shares of other Franklin Templeton Funds. Shareholders of
Class II Franklin Templeton Funds may, however, elect to direct their dividends
and capital gain distributions to the Fund, or to another Franklin Templeton
money market fund.
Shareholders may choose to redeem shares of the Fund and purchase Class II
shares of other Franklin Templeton Funds but such purchase will be subject to
the Class II sales charges for that fund which typically will include a
front-end sales charge and a contingent deferred sales charge for the
contingency period of 18 months.
Before making an exchange, investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to exchange into for all
specific requirements or limitations on exercising the exchange privilege, for
example, minimum holding periods or applicable sales charges. Exchanges may be
made in any of the following ways:
EXCHANGES BY MAIL
Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any outstanding
share certificates.
EXCHANGES BY TELEPHONE
Shareholders, or their investment representative of record, if any, may exchange
shares of the Fund by telephone by calling Investor Services at 1-800/632-2301
or the automated Franklin TeleFACTS(R) system (day or night) at
1-800/247-1753. If the shareholder does not wish this privilege extended to a
particular account, the Fund or Investor Services should be notified.
Except as noted under "Retirement Plan Accounts - Limited Class II Exchanges"
below, the telephone exchange privilege allows a shareholder to effect exchanges
from the Fund into an identically registered account in Class I shares of the
other available Franklin Templeton Funds. The telephone exchange privilege is
available only for uncertificated shares or those which have previously been
deposited in the shareholder's account. The Fund and Investor Services will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Please refer to "Telephone Transactions - Verification
Procedures."
During periods of drastic economic or market changes, it is possible that the
telephone exchange privilege may be difficult to implement and the
TeleFACTS(R) option may not be available. In this event, shareholders should
follow the other exchange procedures discussed in this section, including the
procedures for processing exchanges through securities dealers.
EXCHANGES THROUGH SECURITIES DEALERS
As is the case with all purchases and redemptions of the Fund's shares, Investor
Services will accept exchange orders from securities dealers who execute a
dealer or similar agreement with Distributors. See also "Exchanges by Telephone"
above. Such a dealer-ordered exchange will be effective only for uncertificated
shares on deposit in the shareholder's account or for which certificates have
previously been deposited. A securities dealer may charge a fee for handling an
exchange.
ADDITIONAL INFORMATION REGARDING EXCHANGES
Shares of the Fund acquired other than pursuant to the exchange privilege or the
reinvestment of dividends with respect to such shares, may be exchanged at the
offering price of other Class I shares of the Franklin Templeton Funds. Such
offering price includes the applicable sales charge of the fund into which the
shares are being exchanged. Exchanges will be effected at the respective net
asset values or offering prices of the funds involved at the close of business
on the day on which the request is received in proper form.
The exchange privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.
RETIREMENT PLAN ACCOUNTS
Franklin Templeton IRA and 403(b) retirement plan accounts may accomplish
exchanges directly. Certain restrictions may apply, however, to other types of
retirement plans. See "Restricted Accounts" under "Telephone Transactions."
LIMITED CLASS II EXCHANGES. In situations where assets from retirement plan
accounts are temporarily invested in the Fund while awaiting final allocation or
investment instructions, and where such final allocation or investment
instructions involve Class II shares, Fund shares may be exchanged for Class II
shares of the Franklin Templeton Funds. The time period during which the assets
were invested in the Fund will not, however, count toward the contingency period
for purpose of the contingent deferred sales charge associated with Class II
shares. Assets previously subject to a commission by the Franklin Templeton
Funds will be precluded from using this limited exchange privilege.
TIMING ACCOUNTS
Accounts which are administered by allocation or market timing services to
purchase or redeem shares based on predetermined market indicators ("Timing
Accounts") will be charged a $5.00 administrative service fee per each such
exchange. All other exchanges are without charge.
RESTRICTIONS ON EXCHANGES
In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.
The Fund reserves the right to temporarily or permanently terminate the exchange
privilege or reject any specific purchase order for any Timing Account or any
person whose transactions seem to follow a timing pattern who: (i) makes an
exchange request out of the Fund within two weeks of an earlier exchange request
out of the Fund, or (ii) makes more than two exchanges out of the Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1% of the Fund's net assets. Accounts under common
ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
The Fund reserves the right to refuse the purchase side of exchange requests by
any Timing Account, person, or group if, in Advisers' judgment, the Fund would
be unable to invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected. A shareholder's
purchase exchanges may be restricted or refused if the Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincide with a "market
timing" strategy may be disruptive to the Fund and therefore may be refused.
The Fund and Distributors also, as indicated in "How to Buy Shares of the Fund,"
reserve the right to refuse any order for the purchase of shares.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if any,
may be able to execute various transactions by calling Investor Services at
1-800/632-2301.
All shareholders will be able to execute various telephone transactions,
including to: (i) effect a change in address, (ii) change a dividend option (see
"Restricted Accounts" below), (iii) transfer Fund shares in one account to
another identically registered account in the Fund, (iv) request the issuance of
certificates to be sent to the address of record only, and (v) exchange Fund
shares as described in this Prospectus by telephone. In addition, shareholders
who complete and file an Agreement as described under "How to Sell Shares of the
Fund - By Telephone" will be able to redeem shares of the Fund.
VERIFICATION PROCEDURES
The Fund and Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the purpose
of establishing the caller's identification, and sending a confirmation
statement on redemptions to the address of record each time account activity is
initiated by telephone. So long as the Fund and Investor Services follow
instructions communicated by telephone which were reasonably believed to be
genuine at the time of their receipt, neither they nor their affiliates will be
liable for any loss to the shareholder caused by an unauthorized transaction.
The Fund and Investor Services may be liable for any losses due to unauthorized
or fraudulent instructions only if such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or Investor
Services is not reasonably satisfied that instructions received by telephone are
genuine, the requested transaction will not be executed, and neither the Fund
nor Investor Services will be liable for any losses which may occur because of a
delay in implementing a transaction.
RESTRICTED ACCOUNTS
Telephone redemptions, dividend option changes and requests for certificates may
not be accepted on Franklin Templeton retirement accounts. To assure compliance
with all applicable regulations, special forms are required for any
distribution, redemption or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement accounts,
certain restrictions may apply to other types of retirement plans. Changes to
dividend options and requests for certificates must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account shareholders may call to speak
to a Retirement Plan Specialist at 1-800/527-2020.
GENERAL
During periods of drastic economic or market changes, it is possible that the
telephone transaction privileges will be difficult to execute because of heavy
telephone volume. In such situations, shareholders may wish to contact their
investment representative for assistance, or to send written instructions to the
Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor Investor Services will be liable for any losses resulting
from the inability of a shareholder to execute a telephone transaction.
The telephone transaction privilege may be modified or discontinued by the Fund
at any time upon 60 days' written notice to shareholders.
VALUATION OF FUND SHARES
The net asset value of the shares of the Fund is determined by the Fund at 3:00
p.m. Pacific time each day that the Exchange is open for business. The net asset
value per share is calculated by adding the value of all portfolio holdings
(i.e., shares of the Portfolio) and other assets, deducting the Fund's
liabilities, and dividing the result by the number of Fund shares outstanding.
The valuation of the portfolio securities held by the Portfolio is based upon
their amortized cost value, which does not take into account unrealized capital
gain or loss. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The Portfolio's use of amortized cost, which facilitates the
maintenance of the Portfolio's and the Fund's per share net asset value of
$1.00, is permitted by Rule 2a-7. Further information is included under
"Determination of Net Asset Value" in the SAI.
HOW TO GET INFORMATION REGARDING
AN INVESTMENT IN THE FUND
Any questions or communications regarding a shareholder's account should be
directed to Investor Services at the address shown on the back cover of this
Prospectus.
From a touch-tone phone, Franklin and Templeton shareholders may access an
automated system (day or night) which offers the following features:
By calling the Franklin TeleFACTS(R) system at 1-800/247-1753, shareholders may
obtain Class I and Class II account information, current price and, if
available, yield or other performance information specific to the Fund or any
Franklin Templeton Funds. In addition, Franklin Class I shareholders may process
an exchange, within the same class, into an identically registered Franklin
account and request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips.
Fund information may be accessed by entering Fund Code 113 followed by the #
sign. The system's automated operator will prompt the caller with easy to follow
step-by-step instructions from the main menu. Other features may be added in the
future.
To assist shareholders and securities dealers wishing to speak directly with a
representative, the following is a list of the various Franklin departments,
telephone numbers and hours of operation to call. The same numbers may be used
when calling from a rotary phone:
<TABLE>
<CAPTION>
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
<S> <C> <C>
Shareholder Services 1-800/632-2301 5:30a.m. to 5:00p.m.
Dealer Services 1-800/524-4040 5:30a.m. to 5:00p.m.
Fund Information 1-800/DIAL BEN 5:30a.m. to 5:00p.m.
8:30a.m. to 5:00p.m.
(Saturday)
Retirement Plans 1-800/527-0637 5:30a.m. to 5:00p.m.
TDD (hearing impaired) 1-800/851-0637 5:30a.m. to 5:00p.m.
</TABLE>
In order to ensure that the highest quality of service is being provided,
telephone calls placed to or by representatives in Franklin's service
departments may be accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.
PERFORMANCE
Advertisements, sales literature and communications to shareholders may contain
various measures of the Fund's performance, including quotations of its current
and effective yield.
Current yield, as prescribed by the SEC, is an annualized percentage rate which
reflects the change in value of a hypothetical account based on the income
received from the Fund during a seven-day period. It is computed by determining
the net change, excluding capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period. A hypothetical charge reflecting deductions from shareholder accounts
for management fees or shareholder services fees, for example, is subtracted
from the value of the account at the end of the period, and the difference is
divided by the value of the account at the beginning of the base period to
obtain the base period return. The result is then annualized. Effective yield is
computed in the same manner except that the annualization of the return for the
seven-day period reflects the results of compounding (that is, the effect of
reinvesting dividends paid on both the original share and those acquired from
the reinvestment of such dividends).
In each case, performance figures are based upon past performance and will
reflect all recurring charges against Fund income. Such quotations will reflect
the value of any additional shares purchased with dividends from the original
share and any dividends declared on both the original share and such additional
shares. The investment results of the Fund, like all other investment companies,
will fluctuate over time; thus, performance figures should not be considered to
represent what an investment may earn in the future or what the Fund's
performance may be in any future period.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Fund's fiscal year ends June 30. Annual Reports containing audited financial
statements of the Fund, including the auditors' report, and Semi-Annual Reports
containing unaudited financial statements are automatically sent to
shareholders. To reduce the volume of mail sent to one household, as well as to
reduce Fund expenses, Investor Services, when legally permissible, will attempt
to identify related shareholders within a household, and send only one copy of
the report. Additional copies may be obtained, without charge, upon request to
the Fund at the telephone number or address set forth on the cover page of this
Prospectus.
Additional information on Fund performance is included in the Fund's Annual
Report to Shareholders and the SAI.
ORGANIZATION AND VOTING RIGHTS
The Fund was organized as a California Corporation on April 8, 1980. The Fund's
authorized capital stock consists of five billion shares of no par value. All
shares are of one class, have one vote and, when issued, are fully paid and
nonassessable. All shares have equal voting, participation and liquidation
rights, but have no subscription, preemptive or conversion rights.
Shares of the Fund have cumulative voting rights, which means that in all
elections of directors, each shareholder has the right to cast a number of votes
equal to the number of shares owned multiplied by the number of directors to be
elected at such election and each shareholder may cast the whole number of votes
for one candidate or distribute such votes among two or more candidates.
The Fund does not intend to hold annual shareholders' meetings. The Fund may,
however, hold a special meeting for such purposes as changing fundamental
investment restrictions, approving a new management agreement or any other
matters which are required to be acted on by shareholders under the 1940 Act. A
meeting may also be called by a majority of the Board of Directors or by
shareholders holding at least ten percent of the shares entitled to vote at the
meeting. Shareholders may receive assistance in communicating with other
shareholders in connection with the election or removal of directors such as
that provided in Section 16(c) of the 1940 Act. Whenever the Fund is requested
to vote on a matter relating to the Portfolio, the Fund will hold a meeting of
Fund shareholders and will cast its vote in the same proportion as the Fund's
shareholders have voted.
REDEMPTIONS BY THE FUND
The Fund reserves the right to redeem, at net asset value, shares of any
shareholder whose account has a value of less than one-half of the required
minimum investment, but only where the value of such account has been reduced by
the shareholder's prior voluntary redemption of shares and has been inactive
(except for the reinvestment of distributions) for a period of at least six
months, provided advance notice is given to the shareholder. More information is
included in the SAI.
OTHER INFORMATION
Distribution or redemption checks sent to shareholders do not earn interest or
any other income during the time such checks remain uncashed, and neither the
Fund nor its affiliates will be liable for any loss to the shareholder caused by
the shareholder's failure to cash such check(s).
"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.
Shares of the Fund may or may not constitute a legal investment for investors
whose investment authority is restricted by applicable law or regulation. SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any, of
various payments made by the Fund or its investment manager on arbitrage rebate
calculations.
ACCOUNT REGISTRATIONS
An account registration should reflect the investor's intentions as to
ownership.
Accounts should not be registered in the name of a minor, either as sole or
co-owner of the account. Transfer or redemption for such an account may require
court action to obtain release of the funds until the minor reaches the legal
age of majority. The account should be registered in the name of one "Adult" as
custodian for the benefit of the "Minor" under the Uniform Transfer or Gifts to
Minors Act.
A trust designation such as "trustee" or "in trust for" should only be used if
the account is being established pursuant to a legal, valid trust document. Use
of such a designation in the absence of a legal trust document may cause
difficulties and require court action for transfer or redemption of the funds.
Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."
Except as indicated, a shareholder may transfer an account in the Fund carried
in "street" or "nominee" name by the shareholder's securities dealer to a
comparably registered Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have executed dealer or
similar agreements on file with Distributors. Unless such agreement has been
executed and is on file with Distributors, the Fund will not process the
transfer and will so inform the shareholder's delivering securities dealer. To
effect the transfer, a shareholder should instruct the securities dealer to
transfer the account to a receiving securities dealer and sign any documents
required by the securities dealer(s) to evidence consent to the transfer. Under
current procedures, the account transfer may be processed by the delivering
securities dealer and the Fund after the Fund receives authorization in proper
form from the shareholder's delivering securities dealer. In the future it may
be possible to effect such transfers electronically through the services of the
NSCC.
The Fund may conclusively accept instructions from an owner or the
owner's nominee listed in publicly available nominee lists, regardless of
whether the account was initially registered in the name of or by the owner, the
nominee, or both. If a securities dealer or other representative is of record on
an investor's account, the investor will be deemed to have authorized the use of
electronic instructions on the account, including, without limitation, those
initiated through the services of the NSCC, to have adopted as instruction and
signature any such electronic instructions received by the Fund and the
Shareholder Services Agent and to have authorized them to execute the
instructions without further inquiry. At the present time, such services which
are available include the NSCC's "Networking," "Fund/SERV," and "ACATS" systems.
Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.
IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS
Pursuant to the Code and U.S. Treasury regulations, the Fund may be required to
report to the IRS any taxable dividend, capital gain distribution, or other
reportable payment and withhold 31% of any such payments made to individuals and
other non-exempt shareholders who have not provided a correct taxpayer
identification number ("TIN") and made certain required certifications that
appear in the Shareholder Application. A shareholder may also be subject to
backup withholding if the IRS or a securities dealer notifies the Fund that the
TIN furnished by the shareholder is incorrect or that the shareholder is subject
to backup withholding for previous under-reporting of interest or dividend
income.
The Fund reserves the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close an
account by redeeming its shares in full at the then-current net asset value upon
receipt of notice from the IRS that the TIN certified as correct by the
shareholder is in fact incorrect or upon the failure of a shareholder who has
completed an "awaiting TIN" certification to provide the Fund with a certified
TIN within 60 days after opening the account.
FRANKLIN FEDERAL MONEY FUND
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1995
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
CONTENTS PAGE
The Fund (See also Prospectus
"About the Fund")
Additional Information Regarding
the Fund's Investment Objective
and Policies (See also the Prospectus
"Investment Objective and Policies
of the Fund")
Officers and Directors
Administration and Other Services
(See also the Prospectus
"Administration of the Fund")
Policies Regarding Broker Used on
Portfolio Transactions
Determination of Net Asset Value
(See also the Prospectus
"Valuation of Fund Shares")
Additional Information Regarding
Purchases and Redemptions
of Fund Shares
Additional Information Regarding
Distributions and Taxes
The Fund's Underwriter
General Information
Summary of Procedures to
Monitor Conflicts of Interest
Financial Statements
A Prospectus for the Franklin Federal Money Fund (the "Fund"), dated November 1,
1995, as may be amended from time to time, provides the basic information an
investor should know before investing in the Fund and may be obtained without
charge from the Fund or from its principal underwriter, Franklin/Templeton
Distributors, Inc. ("Distributors"), at the address shown 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 AN INVESTOR WITH ADDITIONAL
INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND, AND SHOULD BE
READ IN CONJUNCTION WITH THE FUND'S CURRENT PROSPECTUS.
THE FUND
The Fund is an open-end, diversified management investment company and
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund, incorporated under the laws of the state of California on April
8, 1980, has only one class of capital stock of no par value. The purchase of
Fund shares does not create a checking or other bank account.
ADDITIONAL INFORMATION REGARDING THE
FUND'S INVESTMENT OBJECTIVE AND POLICIES
As stated in the Prospectus, the investment objective of the Fund is to obtain
as high a level of current income as is consistent with capital preservation and
liquidity. The Fund seeks to achieve this objective by investing all of its
assets in the U.S. Government Securities Money Market Portfolio (the
"Portfolio"). The Portfolio is a series of The Money Market Portfolios ("Money
Market"), a separate open-end management investment company. The Portfolio in
turn invests primarily in marketable securities issued or guaranteed by the U.S.
government, by various agencies of the U.S. government and by various
instrumentalities which have been established or sponsored by the U.S.
government, and repurchase agreements with respect to obligations issued or
guaranteed by the U.S. government and supported by the full faith and credit of
the U.S. government. The achievement of the Portfolio's objective will depend on
market conditions generally and on its investment manager's analytical and
portfolio management skills. It should also be noted that because the Portfolio
is limiting its investments to high quality securities, there will be a
generally lower yield than if the Portfolio purchased securities with a lower
rating and correspondingly greater risk. The value of the securities held will
fluctuate inversely with interest rates, and therefore there is no assurance
that the Portfolio's, and thus the Fund's, objective will be achieved. The
investment policies of the Fund are identical to those described herein with
respect to the Portfolio except that, in all cases, the Fund is permitted to
pursue such policies by investing in an open-end management investment company
with the same investment objective and substantially similar policies and
limitations as the Fund.
As stated in the Prospectus, the Portfolio may make loans of its portfolio
securities in accordance with guidelines adopted by Money Market's Board of
Trustees. The lending of securities is a common practice in the securities
industry. The Portfolio will 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. The Portfolio will continue 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. The Portfolio
will not lend its portfolio securities if such loans are not permitted by the
laws or regulations of any state in which its shares are qualified for sale.
Loans will be subject to termination by the Portfolio in the normal settlement
time, currently five business days after notice, or by the borrower on one day's
notice. Borrowed securities must be returned when the loan is terminated. Any
gain or loss in the market price of the borrowed securities which occurs during
the term of the loan inures to the Portfolio and its shareholders. The Portfolio
may pay reasonable finders', borrowers', administrative and custodial fees in
connection with a loan of its securities.
Because the Portfolio will not purchase any instrument with a remaining maturity
of greater than 397 calendar days, it is not expected that there will be any
reportable annual portfolio turnover rate.
CREDIT UNION INVESTMENT REGULATIONS. This section summarizes the Fund's and the
Portfolio's investment policies, under which, in the opinion of the Fund and
based on the Fund's understanding of laws and regulations governing investments
by federal credit unions on September 30, 1994, the Fund would be a permissible
investment for federal credit unions. CREDIT UNION INVESTORS ARE ADVISED TO
CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO WHAT EXTENT THE
SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
All investments of the Fund and the Portfolio will be subject to the following
limitations:
(a) The Fund and the Portfolio will invest only in (1) obligations of, or
securities guaranteed as to principal and interest by, the U.S. government or
its agencies and instrumentalities, (2) time and savings deposits in financial
institutions whose accounts are insured by the FDIC, and (3) mortgage related
securities. Mortgage-related securities are interests or participations in, or
other securities secured by, first mortgages initiated by state or federally
regulated or HUD-approved lenders, and are rated in one of the two highest
rating categories by at least one nationally recognized statistical rating
organization. As of the date of this SAI, the Fund and the Portfolio do not
intend to invest in time and savings deposits and mortgage related securities.
(b) All purchases and sales of securities will be settled on a cash basis within
30 days of the trade date. The Fund and the Portfolio, however, may agree to
settle a purchase or sale transaction on a specific date up to 120 days after
the trade date if, on the trade date, the Fund or the Portfolio has cash flow
projections evidencing its ability to complete the purchase or the Fund or the
Portfolio owns the security it has agreed to sell.
(c) Any repurchase agreements, in which the Fund or the Portfolio purchased U.S.
government securities subject to resale to a bank or dealer at an agreed-upon
price and date, would be subject to these conditions: the value of the U.S.
government securities will equal or exceed the initial price of the repurchase
agreement, plus interest, and a custodian of the Fund or the Portfolio will hold
the U.S. government securities in an account for the benefit of the Fund or the
Portfolio.
(d) Although the Fund and the Portfolio do not currently intend to invest in
reverse repurchase agreements, in the event that the Fund or the Portfolio were
to engage in such transactions, the Fund and the Portfolio would, in addition to
abiding by their fundamental policies and the regulations of the Securities and
Exchange Commission with respect to borrowing, engage in reverse repurchase
transactions involving only securities with maturity dates earlier than the
closing date of the reverse repurchase agreement.
(e) The Fund and the Portfolio will not engage in (1) futures or options
transactions; (2) short sales; or (3) purchases of zero-coupon bonds which
mature more than ten years after the purchase date.
(f) Although the Fund and the Portfolio do not intend, as of the date of this
SAI, to invest in derivative mortgage-backed securities, such as collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"), which represent non-proportional interests ("tranches" or "classes")
in pools of mortgage loans, any investments by the Fund or the Portfolio in such
securities would be subject to the following conditions. In general, the Fund
and the Portfolio may only invest in a CMO or REMIC which either: (1) based on
testing at the time of purchase and at least annually thereafter, has an average
life which would be extended or shortened by less than 6 years under modeling
scenarios where mortgage commitment rates immediately rise or fall 300 basis
points; or (2) has an adjustable rate which (i) resets at least annually, (ii)
may rise to a maximum allowable rate at least 300 basis points above the rate at
the time of purchase, and (iii) adjusts directly with (rather than inversely to
or as a multiple of) the interest rate index on which it is based. In addition,
the Fund and the Portfolio may hold derivative mortgage-backed securities which
fail these tests at the time of investment or at the time of any subsequent
test, provided that the securities are held solely to reduce interest rate risk
and that the Fund or the Portfolio confirms on a quarterly basis that the
security will reduce the Fund's or the Portfolio's interest rate risk, using a
monitoring and reporting system which enables the Fund and the Portfolio to
evaluate the actual and expected performance of the security under different
interest rate scenarios.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as additional fundamental
policies of the Fund, which means that they may not be changed without the
approval of a majority of the outstanding voting securities of the Fund. Under
the 1940 Act, a "vote of a majority of the outstanding voting securities" of the
Fund means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares of the Fund
present at a shareholders' 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 its assets, except that borrowings
(and a pledge of assets therefor) for temporary or emergency purposes may be
made from banks in any amount up to 10% of the total asset value.
2. Make loans, except (a) through the purchase of debt securities in accordance
with the investment objectives and policies of the Portfolio, (b) to the extent
the entry into a repurchase agreement is deemed to be a loan, or (c) by the loan
of its portfolio securities in accordance with the policies described above.
3. Acquire, lease or hold real estate, provided that this limitation shall not
prohibit the purchase of municipal and other debt securities secured by real
estate or interests therein.
4. Buy any securities "on margin" or sell any securities "short," except that it
may use such short- term credits as are necessary for the clearance of
transactions.
5. 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, except that it may purchase, hold, and
dispose of "obligations with puts attached" or write covered call options in
accordance with its stated investment policies.
6. Purchase securities in private placements or in other transactions, for which
there are legal or contractual restrictions on resale and which are not readily
marketable, or enter into a repurchase agreement with more than seven days to
maturity if, as a result, more than 10% of the total assets of the Fund would be
invested in such securities or repurchase agreements, except that, to the extent
this restriction is applicable, the Fund may purchase, in private placements,
shares of another registered investment company having the same investment
objectives and policies as the Fund.
7. Act as underwriter of securities issued by other persons except insofar as
the Fund may technically be deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities, except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objectives and policies
as the Fund.
8. Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition, or reorganization; provided that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objectives and policies
as the Fund.
9. Invest in any issuer for purposes of exercising control or management, except
that, to the extent this restriction is applicable, all or substantially all of
the assets of the Fund may be invested in another registered investment company
having the same investment objectives and policies as the Fund.
10. Purchase securities from or sell to the Fund's officers and directors, or
any firm of which any officer or director is a member, as principal, or retain
securities of any issuer if, to the knowledge of the Fund, one or more of the
Fund's officers, directors, or investment adviser owns beneficially more than
1/2 of 1% of the securities of such issuer and all of such officers and
directors together own beneficially more than 5% of such securities. If a
percentage restriction contained herein is adhered to at the time of investment,
a later increase or decrease in the percentage resulting from a change in the
value of portfolio securities or the amount of net assets will not be considered
a violation of any of the foregoing restrictions.
As noted in the Prospectus, Money Market's trustees have elected to value the
Portfolio's assets in accordance with Rule 2a-7 under the 1940 Act. This rule
also imposes various restrictions on the Portfolio which are, in some cases,
more restrictive than the Portfolio's other stated fundamental policies and
investment restrictions. The rule provides that any fund which holds itself out
as a money market fund must follow certain portfolio provisions of the rule
regarding the maturity and quality of each portfolio investment, and the
diversity of such investments. The restrictions imposed by Rule 2a-7 are
fundamental policies of the Portfolio and the Portfolio must comply with these
provisions unless its shareholders vote to change its policy of being a money
market fund.
OFFICERS AND DIRECTORS
The Board of Directors has the responsibility for the overall management of the
Fund, including general supervision and review of its investment activities. The
directors, 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 directors and their principal occupations for the past five years
are listed below. Directors who are deemed to be "interested persons" of the
Fund, as defined in the 1940 Act, are indicated by an asterisk (*). NAME,
AGE POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS AND ADDRESS WITH THE FUND DURING
PAST FIVE YEARS
Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111
Director
President and Director, Abbott Corporation (an investment company); and
director, trustee or managing general partner, as the case may be, of 31 of the
investment companies in the Franklin Group of Funds.
Harris J. Ashton (63)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Director
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 56 of the investment companies in the Franklin
Templeton Group of Funds.
S. Joseph Fortunato (63)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Director
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 (80)
111 New Montgomery St., #402
San Francisco, CA 94105
Director
Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
Corporation (a venture capital company); and director, trustee or managing
general partner, as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.
*Charles B. Johnson (62)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of the Board and Director
President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general partner,
as the case may be, of most other subsidiaries of Franklin Resources, Inc. and
of 57 of the investment companies in the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (55)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Director
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director, trustee or managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies
in the Franklin Templeton Group of Funds.
Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Director
General Partner, Peregrine Associates and Miller & LaHaye, which are General
Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Group of Funds.
*William J. Lippman (70)
One Parker Plaza
Fort Lee, NJ 07024
Director
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc.,
Franklin Templeton Distributors, Inc. and Franklin Management, Inc.; officer
and/or director or trustee of six of the investment companies in the Franklin
Group of Funds.
Gordon S. Macklin (67)
8212 Burning Tree Road
Bethesda, MD 20817
Director
Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, MedImmune, Inc. (biotechnology), InfoVest
Corporation (information services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general partner, as the case may
be, of 53 of the investment companies in the Franklin Templeton Group of Funds;
and formerly held the following positions: Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and president, National Association of
Securities Dealers, Inc..
Harmon E. Burns (50)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or trustee
of 43 of the investment companies in the Franklin Templeton Group of Funds.
Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case may
be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment companies
in the Franklin Group of Funds.
Martin L. Flanagan (35)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor Services,
Inc.; officer of most other subsidiaries of Franklin Resources, Inc.; and
officer of 61 of the investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (46)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc. and Franklin Templeton
Distributors, Inc.; Vice President, Franklin Advisers, Inc. and officer of 37 of
the investment companies in the Franklin Group of Funds.
Diomedes Loo-Tam (56)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
Edward V. McVey (58)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment companies in the Franklin Group of
Funds.
Thomas J. Runkel (37)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Employee of Franklin Advisers, Inc. and officer of four of the funds in the
Franklin Group of Funds.
Richard C. Stoker (58)
11615 Spring Ridge Rd.
Potomac, Maryland 20854
Vice President
Senior Vice President, Franklin Templeton Distributors, Inc.; Vice President,
Franklin Management, Inc.; and officer of five of the funds in the Franklin
Group of Funds.
R. Martin Wiskemann (68)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President, Portfolio Manager and Director, Franklin Advisers, Inc.;
Senior Vice President, Franklin Management, Inc.; Vice President, Treasurer and
Director, ILA Financial Services, Inc. and Arizona Life Insurance Company of
America; and officer and/or director, as the case may be, of 20 of the
investment companies in the Franklin Group of Funds.
The officers and directors of the Fund are also officers and trustees of Money
Market, except William J. Lippman, director of the Fund, Thomas J. Runkel and
Richard C. Stoker, officers of the Fund, are not officers or trustees of Money
Market. The following trustee of Money Market is not an officer or director of
the Fund:
NAME, AGE POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS
AND ADDRESS WITH MONEY MARKET DURING PAST FIVE YEARS
Charles E. Johnson (39)
777 Mariners Island Blvd.
San Mateo CA 94404
President and Trustee
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc. and Franklin Institutional Services Corporation;
officer and/or director, as the case may be, of some of the subsidiaries of
Franklin Resources, Inc.; and officer and/or director or trustee, as the case
may be, of 24 of the investment companies in the Franklin Templeton Group of
Funds.
The Board of Directors, with all disinterested directors as well as the
interested directors voting in favor, has adopted written procedures designed to
deal with potential conflicts of interest which may arise from the fact of
having substantially the same persons serving on the Fund's Board of Directors
and Money Market's Board of Trustees. The Board of Directors has determined that
there are no conflicts of interest presented by this arrangement at the present
time. See "Summary of Procedures to Monitor Conflicts of Interest."
Directors not affiliated with the Fund's administrator ("nonaffiliated
directors") are currently paid fees of $75 per month plus $75 per meeting
attended. As indicated above, certain of the Fund's nonaffiliated directors also
serve as directors, trustees or managing general partners of other investment
companies in the Franklin Group of Funds(R) and the Templeton Group of Funds
(the "Franklin Templeton Group of Funds") from which they may receive fees for
their services. The following table indicates the total fees paid to
nonaffiliated directors by the Fund and by other funds in the Franklin Templeton
Group of Funds.
<TABLE>
<CAPTION>
TOTAL FEES RECEIVED NUMBER OF BOARDS IN
FROM THE FRANKLIN THE FRANKLIN
TEMPLETON GROUP OF TEMPLETON GROUP ON
TOTAL FEES FUNDS** WHICH EACH SERVES***
RECEIVED FROM FUND*
NAME
<S> <C> <C> <C>
Frank H. Abbott,III $1,050 $176,870 31
Harris J. Ashton $1,050 $319,925 56
S. Joseph Fortunato $1,050 $336,065 58
David W. Garbellano $1,050 $153,300 30
Frank W.T. LaHaye $1,050 $150,817 26
Gordon S. Macklin $1,050 $303,685 53
</TABLE>
*For the seven month period ended June 30, 1995.
**For the calendar year ended December 31, 1994.
***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
directors are responsible. The Franklin Templeton Group of Funds currently
includes 61 registered investment companies, consisting of more than 162 U.S.
based mutual funds or series.
Nonaffiliated directors 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 director received any other compensation directly from
the Fund. Certain officers or directors who are shareholders of Franklin
Resources, Inc. may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its subsidiaries. For
additional information concerning director compensation and expenses, please see
the Fund's Annual Report to Shareholders.
As of August 8, 1995, the directors and officers, as a group, owned of record
and beneficially approximately 291,370 shares or less than 1% of the total
outstanding shares of the Fund. Many of the Fund's directors also own shares in
various of the other funds in the Franklin Templeton Group of Funds. Charles B.
Johnson and Rupert H. Johnson, Jr. are brothers and the father and uncle,
respectively, of Charles E. Johnson.
ADMINISTRATION AND OTHER SERVICES
The administrator of the Fund is Franklin Advisers, Inc. ("Advisers"). Advisers
is a wholly-owned subsidiary of Franklin Resources, Inc. ("Resources"), a
publicly owned holding company whose shares are listed on the New York Stock
Exchange ("Exchange"). Resources owns several other subsidiaries which are
involved in investment management and shareholder services. Advisers and other
subsidiary companies of Resources currently manage over $125 billion in assets
for more than 3.8 million shareholders.
The administration agreement with Advisers provides for various administrative,
statistical, and other services for the Fund. Pursuant to the administration
agreement, the Fund is obligated to pay Advisers (as administrator) a monthly
fee equal to an annual rate of 91/200 of 1% for the first $100 million of the
Fund's average daily net assets; 33/100 of 1% of the Fund's average daily net
assets over $100 million up to and including $250 million; and 7/25 of 1% of the
Fund's average daily net assets in excess of $250 million.
Pursuant to a separate management agreement with Money Market on behalf of the
Portfolio, Advisers provides investment research and portfolio management
services, including the selection of securities for the Portfolio to purchase,
hold or sell, and the selection of brokers or dealers through whom the
Portfolio's security transactions are executed. Advisers' activities are subject
to the review and supervision of the Board of Trustees of Money Market to whom
Advisers renders periodic reports of the investment activities of the Portfolio.
Under the terms of the management agreement, Advisers furnishes the Portfolio
with office space and office furnishings, facilities and equipment required for
managing the business affairs of the Portfolio; maintains all internal
bookkeeping, clerical, secretarial and administrative personnel and services;
and provides certain telephone and other mechanical services. Advisers is
covered by fidelity insurance on its officers, directors and employees for the
protection of the Portfolio and the Fund. The Portfolio, in which the Fund
invests all of its assets, is obligated to pay Advisers a monthly fee equal to
an annual rate of 0.15% of the Portfolio's average daily net assets.
The management agreement specifies that the management fee will be reduced to
the extent necessary to comply with the most stringent limits on the expenses
which may be borne by the Portfolio as prescribed by any state in which the
Portfolio's shares are offered for sale. The most stringent current state
restriction limits a fund's allowable aggregate operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses such as
litigation costs) in any fiscal year to 2.5% of the first $30 million of average
net assets of the fund, 2% of the next $70 million of average net assets of the
fund and 1.5% of average net assets of the fund in excess of $100 million. The
Portfolio bears all expenses related to its operation not borne by Advisers, as
discussed in the Prospectus. Expense reductions have not been necessary based on
state requirements. There is no management agreement for the Fund.
As noted in the Prospectus, under advance agreement, Advisers has agreed to
limit its management fees from the Portfolio to ensure that the total aggregate
operating expenses of the Fund and the Portfolio are not higher than what the
Fund's total operating expenses would have been under the terms of the prior
management agreement with the Fund. The contractual management fee which would
have been incurred by the Portfolio, absent a fee reduction by Advisers, for the
Portfolio's fiscal years ended June 30, 1994 and 1995 were $355,778 and
$634,994, respectively. The management fees actually paid by the Portfolio to
Advisers for the Portfolio's fiscal years ended June 30, 1994 and 1995 were
$304,633 and $581,495, respectively.
Prior to August 1, 1994, the Fund's assets were managed pursuant to a management
agreement with Advisers. Management fees for the fiscal year ended November 30,
1993 and for the eight month period ended July 31, 1994 were $764,375 and
$615,344, respectively. Administration fees for the four month period ended
November 30, 1994 and the seven month period ended June 30, 1995 were $242,157
and $347,517, respectively.
See the Statement of Operations in the financial statements included in the
Annual Report to Shareholders for details of these expenses.
The management agreement for the Portfolio is in effect until February 29, 1996.
Thereafter, it may continue in effect for successive annual periods, providing
such continuance is specifically approved at least annually by a vote of the
Money Market's Board of Trustees or by a vote of the holders of a majority of
the outstanding voting securities of the Portfolio, and in either event by a
majority vote of Money Market's trustees who are not parties to the management
agreement or interested persons of any such party (other than as trustees of
Money Market), cast in person at a meeting called for that purpose. The
management agreement may be terminated without penalty at any time by the
Portfolio on 30 days written notice or by Advisers on 60 days written notice and
will automatically terminate in the event of its assignment as defined in the
1940 Act.
Franklin/Templeton Investor Services, Inc. ("Investor Services" or "Shareholder
Services Agent"), a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for the Fund and acts as the Fund's transfer agent and
dividend-paying agent. Investor Services is compensated on the basis of a fixed
fee per account.
Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104, acts as custodian of the securities and other assets of the
Portfolio and the Fund. Citibank Delaware, One Penn's Way, New Castle, Delaware
19720, acts as custodian in connection with transfer services through bank
automated clearing houses. The custodians do not participate in decisions
relating to the purchase and sale of portfolio securities.
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
are the Fund's independent auditors. During the fiscal year ended June 30, 1995,
their auditing services consisted of rendering an opinion on the financial
statements of the Fund included in the Fund's Annual Report.
POLICIES REGARDING BROKERS USED ON PORTFOLIO TRANSACTIONS
The Fund will not incur any brokerage or other costs in connection with its
purchase or redemption of shares of the Portfolio. Under the Portfolio's
management agreement with Advisers, the selection of brokers and dealers to
execute transactions in the Portfolio's securities is made by Advisers in
accordance with criteria set forth in the management agreement and any
directions which the Board of Trustees of Money Market may give. It is not
anticipated, however, that the Portfolio will incur a significant amount of
brokerage expense because brokerage commissions are not normally incurred on
investments in short-term money market instruments, which are generally traded
on a "net" basis, that is, in principal amounts without the addition or
deduction of brokerage commissions or transfer taxes.
Advisers makes the investment decisions and arranges for the placement of buy
and sell orders and the execution of portfolio transactions for the Portfolio.
In executing portfolio transactions, Advisers seeks the most favorable prices
consistent with the best execution of the orders. So long as Advisers believes
it is obtaining the best execution, it will give consideration in placing
portfolio transactions to broker-dealers furnishing research, statistical or
factual information or wire or other services to the Portfolio or Advisers,
including appraisals or valuations of portfolio securities of the Portfolio.
While the information and services provided by broker-dealers are useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by Advisers and thus reduce its expenses, they are of
indeterminable value and will not reduce the management fee payable to Advisers
by the Portfolio.
Depending on Advisers' view of market conditions, the Portfolio may or may not
purchase securities with the expectation of holding them to maturity, although
its general policy is to hold securities to maturity. The Portfolio may,
however, sell securities prior to maturity to meet redemptions or as a result of
a revised management evaluation of the issuer.
Purchases of portfolio securities may be made directly from issuers or from
underwriters. Where possible, purchase and sale transactions will be effected
through dealers (including banks) which specialize in the types of securities
which the Portfolio will be holding, unless better executions are available
elsewhere. Dealers and underwriters usually act as principal for their own
account. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the ask price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter which has provided such research or other services as
mentioned above. No broker or dealer affiliated with the Fund, the Portfolio, or
with Advisers may purchase securities from, or sell securities to, the Fund or
the Portfolio.
If purchases or sales of securities of the Portfolio 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 Portfolio 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 Portfolio.
During the fiscal years ended June 30, 1994 and 1995, the Portfolio paid no
brokerage commissions. During the fiscal years ended November 30, 1994 and the
seven month period ended June 30, 1995, the Fund paid no brokerage commissions.
As of June 30, 1995, neither the Portfolio nor the Fund owned securities of
their regular broker-dealers.
DETERMINATION OF NET ASSET VALUE
As noted in the Prospectus, the net asset value per share for purposes of both
the purchase and redemption of shares is determined by the Fund on each day that
the Exchange is open for business. Valuation is currently made as of 3:00 p.m.
Pacific time. As of the date hereof, the Fund is informed that the Exchange
intends to close in observance of the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per share of the Fund is
calculated by adding the value of all securities and other assets in the Fund's
portfolio (i.e., shares of the Portfolio), deducting the Fund's liabilities, and
dividing by the number of shares outstanding.
The valuation of the portfolio securities of the Portfolio is based upon their
amortized cost, which does not take into account unrealized capital gains or
losses. This involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in calculation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Portfolio would receive if it sold the instrument. During periods of
declining interest rates, the daily yield on shares of the Portfolio computed as
described above may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of amortized cost by the Portfolio resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Portfolio would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors in
the Portfolio would receive less investment income. The converse would apply in
a period of rising interest rates.
The Portfolio's use of amortized cost, which facilitates the maintenance of the
Portfolio's and the Fund's per share net asset value of $1.00, is permitted by a
rule adopted by the Securities and Exchange Commission ("SEC"). Pursuant to this
rule, the Portfolio must adhere to certain conditions. The Portfolio must
maintain a dollar-weighted average portfolio maturity of 90 days or less, only
purchase instruments having remaining maturities of 397 calendar days or less,
and invest only in those United States dollar-denominated instruments that the
Board of Trustees of Money Market determines present minimal credit risks and
which are, as required by the federal securities laws, rated in one of the two
highest rating categories as determined by nationally recognized statistical
rating agencies, instruments deemed comparable in quality to such rated
instruments, or instruments, the issuers of which, with respect to an
outstanding issue of short-term debt that is comparable in priority and
protection, have received a rating within the two highest categories of
nationally recognized statistical rating agencies.
The trustees of Money Market have agreed to establish procedures designed to
stabilize, to the extent reasonably possible, the Portfolio's price per share as
computed for the purpose of sales and redemptions at $1.00. Such procedures will
include review of the Portfolio's holdings by the trustees, at such intervals as
they may deem appropriate, to determine whether the Portfolio's net asset value,
calculated by using available market quotations, deviates from $1.00 per share
based on amortized cost. The extent of any deviation will be examined by the
trustees. If such deviation exceeds 1/2 of 1%, the trustees will promptly
consider what action, if any, will be initiated. In the event the trustees
determine that a deviation exists which may result in material dilution or other
unfair results to investors or existing shareholders, they will take such
corrective action as they regard as necessary and appropriate, which may
include: the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding dividends,
redemptions of shares in kind, or establishing a net asset value per share by
using available market quotations.
ADDITIONAL INFORMATION REGARDING
PURCHASES AND REDEMPTIONS OF FUND SHARES
EFFECTIVENESS OF PURCHASE ORDERS
The purchase price for shares of the Fund is the net asset value of such shares
next determined after receipt and acceptance of a purchase order in proper form.
Once shares of the Fund are purchased, they begin earning income immediately,
and income dividends will start being credited to the investor's account on the
day following the effective date of purchase and continue through the day all
shares in the account are redeemed.
Payments transmitted by wire and received by the custodian and reported by the
custodian to the Fund prior to 3:00 p.m. Pacific time on any business day are
normally effective on the same day as received. Wire payments received or
reported by the custodian to the Fund after that time will normally be effective
on the next business day. Payments transmitted by check or other negotiable bank
draft will normally be effective within two business days for checks drawn on a
member bank of the Federal Reserve System and longer for most other checks. All
checks are accepted subject to collection at full face value in United States
funds and must be drawn in United States dollars on a United States bank. Checks
drawn in United States funds on foreign banks will not be credited to the
shareholder's account and dividends will not begin accruing until the proceeds
are collected, which can take a long period of time. The Fund reserves the
right, in its sole discretion, to either (a) reject any order for the purchase
or sale of shares denominated in any other currency, or (b) honor the
transaction or make adjustments to the shareholder's account for the transaction
as of a date and with a foreign currency exchange factor determined by the
drawee bank.
SHAREHOLDER ACCOUNTING
All purchases of Fund shares will be credited to the shareholder in full and
fractional shares of the Fund (rounded to the nearest 1/1000 of a share) in an
account maintained for the shareholder by the Fund's transfer agent. Share
certificates will not be issued unless requested in writing by the investor, and
no certificates will be issued for fractional shares at any time. No
certificates will be issued to shareholders who have elected redemption by check
or by preauthorized bank or brokerage firm account methods of withdrawing cash
from their accounts. To open an account in the name of a corporation, a
resolution of the corporation's Board of Directors will be required.
The Fund reserves the right to reject any order for the purchase of shares of
the Fund and to waive minimum investment requirements. In addition, the offering
of shares of the Fund may be suspended at any time and resumed at any time
thereafter.
SHAREHOLDER REDEMPTIONS
All requests for redemption, all share certificates and all share assignments
should be sent to the Fund, c/o Franklin/Templeton Investor Services, Inc.
("Investor Services" or "Shareholder Services Agent"), 777 Mariners Island
Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
Redemptions will be made in cash at the net asset value per share next
determined after receipt by the Fund of a redemption request in proper form,
including all share certificates, share assignments, signature guarantees, and
other documentation as may be required by the transfer agent. The amount
received upon redemption may be more or less than the shareholder's original
investment.
The Fund will make payment for all redemptions within seven days after receipt
of such redemption request in proper form. The Fund reserves the right, however,
to suspend redemptions or postpone the date of payment (1) for any periods
during which the Exchange is closed (other than for the customary weekend and
holiday closings), (2) when trading in the markets the Fund usually utilizes is
restricted or an emergency exists, as determined by the SEC, so that disposal of
the Fund's investments or the determination of the Fund's net asset value is not
reasonably practicable, or (3) for such other periods as the SEC, by order, may
permit for the protection of the Fund's shareholders.
In connection with exchanges (see "Exchange Privilege" in the Prospectus), it
should be noted that since the proceeds from the sale of shares of an investment
company generally are not available until the fifth business day following the
redemption, the funds into which Fund shareholders are seeking to exchange
reserve the right to delay issuing shares pursuant to an exchange until said
fifth business day. The redemption of shares of the Fund to complete an exchange
will be effected at the close of business on the day the request for exchange is
received in proper form at the net asset value then effective.
Use of the exchange privilege in conjunction with market timing services offered
through numerous securities dealers has become increasingly popular as a means
of capital management. In the event that a substantial portion of the Fund's
shareholders should, within a short period, elect to redeem their shares of the
Fund pursuant to the exchange privilege, the Fund might have to liquidate
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions.
REDEMPTIONS IN KIND
The Fund has committed itself to pay in cash (by check) all requests for
redemption by any shareholder of record, limited in amount, however, during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the SEC. In the case of requests for redemption in excess
of such amounts, the directors reserve the right to make payments in whole or in
part in securities or other assets of the Fund from which the shareholder is
redeeming in case of an emergency, or if the payment of such a redemption in
cash would be detrimental to the existing shareholders of the Fund. In such
circumstances, the securities distributed would be valued at the price used to
compute the Fund's net assets. Should the Fund do so, a shareholder may incur
brokerage fees in converting the securities to cash.
REDEMPTIONS BY THE FUND
Due to the relatively high cost of handling small investments, the Fund reserves
the right to redeem, involuntarily, at net asset value, the shares of any
shareholder whose account has a value of less than one-half of the initial
minimum investment required for that shareholder, but only where the value of
such account has been reduced by the shareholder's prior voluntary redemption of
shares. Until further notice, it is the present policy of the Fund not to
exercise this right with respect to any shareholder whose account has a value of
$250 or more. In any event, before the Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares in the account is less than the minimum amount and allow the
shareholder 30 days to make an additional investment in an amount which will
increase the value of the account to at least $500.
REPORTS TO SHAREHOLDERS
The Fund sends annual and semiannual reports to its shareholders regarding the
Fund's performance and its portfolio holdings. Shareholders who would like to
receive an interim quarterly report may phone Fund Information at 1-800 DIAL
BEN.
SPECIAL SERVICES
The Fund's Shareholder Services Agent may charge separate fees to shareholders,
to be negotiated directly with such shareholders, for providing special services
in connection with their accounts, such as processing a large number of checks
each month. Such fees for special services to such shareholders will not
increase the expenses borne by the Fund.
As noted in the Prospectus, special procedures have been designed for banks and
other institutions wishing to open multiple accounts in the Fund. The
institution may open a single master account by filing one application form with
the Fund, signed by personnel authorized to act for the institution. Individual
sub-accounts may be opened at the time the master account is filed by listing
them or they may be added at a later date by written advice or by filing forms
supplied by the Fund. These sub-accounts may be established by the institution
with registration either by name or number. The investment minimums applicable
to the Fund are applicable to each sub-account. The Fund will provide each
institution with a written confirmation for each transaction in a sub-account
and arrangements may be made at no additional charge for the transmittal of
duplicate confirmations to the beneficial owner of the sub-account.
Further, the Fund will provide to each institution, on a quarterly basis, or
more frequently as requested, a statement which will set forth each
sub-account's share balance, income earned for the period, income earned for the
year to date, and total current market value.
The Franklin Templeton Institutional Services Department provides specialized
services, including recordkeeping, for institutional investors of the Fund. The
cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions which maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such beneficial owners. For each beneficial
owner in the omnibus account, the Fund may reimburse Investor Services an amount
not to exceed the per account fee which the Fund normally pays Investor
Services. Such financial institutions may also charge a fee for their services
directly to their clients.
ADDITIONAL INFORMATION REGARDING
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Distributions and distribution adjustments resulting from realized gains and
losses on the sale of portfolio securities or from unrealized appreciation or
depreciation in the value of portfolio securities are required to maintain a
stable net asset value of $1.00 and may result in under or over distributions of
investment company taxable income by the Portfolio to the Fund, which may impact
distributions to the Fund's shareholders.
The Fund's daily dividend is derived from the income dividends paid by the
Portfolio. The Portfolio may derive capital gains and losses in connection with
sales or other dispositions of its portfolio securities, which are then taken
into account in determining distributions to Fund shareholders. Because the
Portfolio, however, under normal circumstances, is composed of short-term
securities, it does not expect to realize any long-term capital gains or losses.
Any net short-term or long-term capital gains which are realized by the
Portfolio (adjusted for any daily amounts of unrealized appreciation or
depreciation reported above and taking into account any capital loss carryovers)
may generally be distributed to Fund shareholders once each year and may be
distributed more frequently if necessary in order to avoid federal excise taxes.
Any distributions of capital gain to the Fund will be reinvested in the form of
additional shares of the Fund at net asset value, unless the shareholder has
previously elected on the Shareholder Application or filed written instructions
with the Fund's transfer agent to have them paid in cash.
As noted in the Prospectus, the Fund declares dividends for each day that the
Fund's net asset value is calculated equal to all of its daily income dividends
from the Portfolio, payable to shareholders of record as of the close of
business the preceding day.
Shareholders who so request may have their dividends paid out monthly in cash.
The shares reinvested and credited to their account during the month will be
redeemed as of the close of business on the last bank business day of the month
and the proceeds will be paid to them in cash. If a shareholder withdrew the
entire amount in the shareholder's account at any time during the month, all
dividends accrued with respect to such account during the month to the time of
withdrawal would be paid in the same manner and at the same time as the proceeds
of withdrawal. Each Fund shareholder will receive a monthly summary of the
shareholder's account, including information as to dividends reinvested or paid.
The Board of Directors reserves the right to revise the above dividend policy or
postpone the payment of dividends, if warranted in its judgment, due to unusual
circumstances such as a large expense, loss or unexpected fluctuation in net
assets.
Dividend checks which are returned to the Fund marked "unable to forward" by the
postal service will be deemed to be a request to change the dividend option and
the proceeds will be reinvested in additional shares until new instructions are
received.
The Fund may deduct from a shareholder's account the costs of its efforts to
locate a shareholder if the shareholder's mail is returned as undeliverable or
the Fund is otherwise unable to locate the shareholder or verify the current
mailing address. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
ADDITIONAL INFORMATION ON TAXATION
As stated in the Prospectus, the Fund and the Portfolio intend to continue to
qualify for treatment as regulated investment companies under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). The directors
reserve the right not to maintain the qualification of the Fund as a regulated
investment company if they determine such course of action to be beneficial to
the shareholders. In such case, the Fund will be subject to federal and possibly
state corporate taxes on its taxable income and gains derived from the
Portfolio, and distributions to shareholders will be ordinary dividend income to
the extent of the Fund's available earnings and profits.
The Code requires all funds to distribute at least 98% of their taxable ordinary
income earned during the calendar year and at least 98% of their capital gain
net income earned during the twelve month period ending October 31 of each year
(in addition to amounts from the prior year that were neither distributed nor
taxed to the Fund) to shareholders by December 31 of each year in order to avoid
the imposition of a federal excise tax. Under these rules, certain distributions
which are declared in December but which, for operational reasons, may not be
paid to the shareholder until the following January, will be treated for tax
purposes as if paid by the Fund and received by the shareholder on December 31
of the calendar year in which they are declared. The Fund intends as a matter of
policy to declare and pay these dividends in December to avoid the imposition of
this tax, but does not guarantee that its distributions will be sufficient to
avoid any or all federal excise taxes.
Distributions to Fund shareholders, which are derived from the Portfolio from
the excess of net long-term capital gain over net short-term capital loss, are
treated as long-term capital gain regardless of the length of time the
shareholder has owned Fund shares and regardless of whether such distributions
are received in cash or in additional shares.
Many states grant tax-free status to dividends paid to shareholders of mutual
funds from interest income earned by the fund from direct obligations of the
U.S. government, subject in some states to minimum investment requirements that
must be met by the fund. Investments in GNMA/FNMA securities and repurchase
agreements collateralized by U.S. government securities do not generally qualify
for tax-free treatment. At the end of each calendar year, the Fund will provide
shareholders with the percentage of any dividends paid which may qualify for
such tax-free treatment. Shareholders should then consult with their own tax
advisors with respect to the application of their state and local laws to these
distributions.
Since the Fund's income is derived from income dividends of the Portfolio,
rather than qualifying dividend income, no portion of the Fund's distributions
will generally be eligible for the corporate dividends-received deduction. None
of the distributions paid by the Fund for the fiscal year ended June 30, 1995
qualified for this deduction and it is not anticipated that any of the current
year's dividends will so qualify.
Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a capital gain or loss. Any loss incurred on the
redemption or exchange of the Fund's shares, held for six months or less, will
be treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares. However, since the Fund seeks to maintain
a stable net asset value of $1.00 for both purchases and redemptions,
shareholders are not expected to realize a capital gain or loss upon redemption
or exchange of Fund shares.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement in effect until February 29, 1996,
Distributors acts as principal underwriter in a continuous public offering for
shares of the Fund. The underwriting agreement will continue in effect for
successive annual periods provided that its continuance is specifically approved
at least annually by a vote of the Fund's Board of Directors or by a vote of the
holders of a majority of the Fund's outstanding voting securities, and in either
event by a majority vote of the Fund's directors who are not parties to the
underwriting agreement or interested persons of any such party (other than as
directors of the Fund), cast in person at a meeting called for that purpose. The
underwriting agreement terminates automatically in the event of its assignment
and may be terminated by either party on 90 days' written notice.
Distributors pays the expenses of distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
GENERAL INFORMATION
PERFORMANCE
As noted in the Prospectus, the Fund may, from time to time, quote various
performance figures to illustrate the Fund's past performance.
CURRENT YIELD
Current yield reflects the interest income per share earned by the Fund's
portfolio investments.
Current yield is computed by determining the net change, excluding capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then annualizing the result by multiplying the base period
return by (365/7).
The yield for the Fund for the seven-day period ended on
June 30, 1995 was 4.93%.
EFFECTIVE YIELD
Effective yield is computed in the same manner except that the annualization of
the return for the seven-day period reflects the results of compounding by
adding one to the base period return, raising the sum to a power equal to 365
divided by seven, and subtracting one from the result.
Effective yield for the Fund for the seven-day period ended on June 30, 1995 was
5.06%.
This figure was obtained using the SEC formula:
Effective Yield = [(Base Period Return + 1)365/7]-1
COMPARISONS
To help investors better evaluate how an investment in the Fund might satisfy
their investment objective, advertisements and other materials regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
Such comparisons may include, but are not limited to, the following examples:
a) IBC/Donoghue's Money Fund Report(R)- Industry averages for seven-day
annualized and compounded yields of taxable, tax-free, and government money
funds.
b) Bank Rate Monitor - A weekly publication which reports various bank
investments such as CD rates, average savings account rates and average loan
rates.
c) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed Income Fund
Performance Analysis, and Lipper - Mutual Fund Yield Survey - measure total
return and average current yield for the mutual fund industry and rank
individual mutual fund performance over specified time periods assuming
reinvestment of all distributions, exclusive of any applicable sales charges.
d) Salomon Brothers Bond Market Roundup - A weekly publication which reviews
yield spread changes in the major sectors of the money, government agency,
futures, options, mortgage, corporate, Yankee, Eurodollar, municipal, and
preferred stock markets and summarizes changes in banking statistics and reserve
aggregates.
e) Consumer Price Index (or Cost of Living Index), published by
the U.S. Bureau of Labor Statistics - a statistical measure of change, over
time, in the price of goods and services, in major expenditure groups.
f) Stocks, Bonds, Bills, and Inflation published by Ibbotson Associates - a
historical measure of yield, price, and total return for common and small
company stock, long term government bonds, Treasury bills, and inflation.
g) Financial publications: The Wall Street Journal and Business Week, Changing
Times, Financial World, Forbes, Fortune, and Money Magazines - provide
performance statistics over specified time periods.
Advertisements or information may also compare the Fund's performance to the
return on certificates of deposit or other investments. Investors should be
aware, however, that an investment in the Fund involves the risk of fluctuation
of principal value, a risk generally not present in an investment in a
certificate of deposit issued by a bank. For example, as the general level of
interest rates rise, the value of the Fund's fixed-income investments, as well
as the value of its shares which are based upon the value of such portfolio
investments, can be expected to decrease. Conversely, when interest rates
decrease, the value of the Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.
In assessing such comparisons of performance, an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to the Fund's portfolio, that the indices and averages are
generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
figures. In addition, there can be no assurance that the Fund will continue this
performance as compared to such other averages.
The Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of the advisers and
underwriter of both the Franklin Group of Funds(R) and Templeton Group of Funds.
OTHER FEATURES AND BENEFITS
The Fund may help investors achieve various investment goals, such as
accumulating money for retirement, saving for a down payment on a home, college
cost and/or other long-term goals. The Franklin College Costs Planner may assist
an investor in determining how much money must be invested on a monthly basis in
order to have a projected amount available in the future to fund a child's
college education. (Projected college cost estimates are based upon current
costs published by the College Board.) The Franklin Retirement Planning Guide
leads an investor through the steps to start a retirement savings program. Of
course, an investment in the Fund cannot guarantee that such goals will be met.
MISCELLANEOUS INFORMATION
The Fund is a member of the Franklin Templeton Group, one of the largest mutual
fund organizations in the United States and may be considered in a program for
diversification of assets. Founded in 1947, Franklin, one of the oldest mutual
fund organizations, has managed mutual funds for over 47 years and now services
more than 2.4 million shareholder accounts. In 1992, Franklin, a leader in
managing fixed-income mutual funds and an innovator in creating domestic equity
funds, joined forces with Templeton Worldwide, Inc., a pioneer in international
investing. Together, the Franklin Templeton Group has over $125 billion in
assets under management for more than 3.8 million shareholder accounts and
offers 115 U.S.-based mutual funds. The Fund may identify itself by its NASDAQ
or CUSIP number.
The Dalbar Surveys, Inc. broker/dealer survey has ranked Franklin number one in
service quality for five of the past seven years.
As of August 3, 1995, the only shareholder of the Fund known to hold
beneficially or of record more than 5% of the Fund's outstanding shares is:
SHAREHOLDER SHARE AMOUNT PERCENTAGE
Mary Nuanes & Elizabeth Tegart &
Denise Malloy & Alice Cassese,
Trustees
Harry A. Brittingham,
Revocable Trust
UDT September 13, 1989
921 Benedict Canyon
Beverly Hills, California
90210-2842 10,712,343.606 8.56%
From time to time, the number of Fund shares held in the "street name" accounts
of various securities dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding.
Access persons of the Franklin Templeton Group, as defined in Rule 17(j) under
the 1940 Act, who are employees of Resources or its subsidiaries, are permitted
to engage in personal securities transactions subject to the following general
restrictions and procedures: (1) The trade must receive advance clearance from a
compliance officer and must be completed within 24 hours after this clearance;
(2) Copies of all brokerage confirmations must be sent to the 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; (3) In
addition to items (1) and (2), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also 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.
OWNERSHIP AND AUTHORITY DISPUTES
In the event of disputes involving multiple claims of ownership or authority to
control a shareholder's account, the Fund has the right (but has no obligation)
to: (a) freeze the account and require the written agreement of all persons
deemed by the Fund to have a potential property interest in the account, prior
to executing instructions regarding the account; (b) interplead disputed funds
or accounts with a court of competent jurisdiction; or (c) surrender ownership
of all or a portion of the account to the Internal Revenue Service in response
to a Notice of Levy.
SUMMARY OF PROCEDURES TO MONITOR CONFLICTS OF INTEREST
The Board of Trustees of Money Market, on behalf of its series ("master funds"),
and the Board of Directors of the Fund ("feeder fund"), (both of which, except
in the case of one director and one trustee, are composed of the same
individuals) recognize that there is the potential for certain conflicts of
interest to arise between the master fund and the feeder fund in this format.
Such potential conflicts of interest could include, among others: the creation
of additional feeder funds with different fee structures; the creation of
additional feeder funds which could have controlling voting interests in any
pass-through voting which could affect investment and other policies; a proposal
to increase fees at the master fund level; and any consideration of changes in
fundamental policies at the master fund level which may or may not be acceptable
to a particular feeder fund.
In recognition of the potential for conflicts of interest to develop, the Board
of Trustees and the Board of Directors have adopted certain procedures, pursuant
to which i) management of the master fund and the feeder fund will, on a yearly
basis, report to each board, including the independent members of each board, on
the operation of the master/feeder fund structure; ii) the independent
trustees/directors will have ongoing responsibility for reviewing all proposals
at the master fund level to determine whether any proposal presents a potential
for a conflict of interest and to the extent any other potential conflicts arise
prior to the normal annual review, they will act promptly to review the
potential conflict; iii) if the independent trustees/directors determine that a
situation or proposal presents a potential conflict, they will request a written
analysis from the master fund management describing whether such apparent
potential conflict of interest will impede the operation of the constituent
feeder fund and the interests of the feeder fund's shareholders; and iii) upon
receipt of the analysis, such trustees/directors shall review the analysis and
present their conclusion to the full boards.
If no actual conflict is deemed to exist, the independent trustees/directors
will recommend that no further action be taken. If the analysis is inconclusive,
they may submit the matter to and be guided by the opinion of an independent
legal counsel issued in a written opinion. If a conflict is deemed to exist,
they may recommend one or more of the following courses of action: i) suggest a
course of action designed to eliminate the potential conflict of interest; ii)
if appropriate, request that the full boards submit the potential conflict to
shareholders for resolution; iii) recommend to the full boards that the affected
feeder fund no longer invest in its designated master fund and propose either a
search for a new master fund in which to invest the feeder fund's assets or the
hiring of an investment manager to manage the feeder fund's assets in accordance
with its objectives and policies; iv) recommend to the full boards that a new
group of trustees/directors be recommended to shareholders for approval; or v)
recommend such other action as may be considered appropriate.
FINANCIAL STATEMENTS
The financial statement contained in the Annual Report to Shareholders of the
Fund dated June 30, 1995 are incorporated herein by reference.
FRANKLIN FEDERAL MONEY FUND
File Nos. 2-67480
811-3052
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a) Financial Statements incorporated herein by reference to the Registrant's
Annual Report to Shareholders dated June 30, 1995 as filed with the SEC
electronically on form type N-30D on August 30, 1995.
1. Franklin Federal Money Fund
(i) Report of Independent Auditors - August 4, 1995.
(ii) Statement of Investments in Securities and Net Assets - June 30, 1995.
(iii) Statement of Assets and Liabilities - June 30, 1995.
(iv) Statements of Operations - for the seven months ended June 30, 1995.
(v) Statement of Changes in Net Assets - for the seven months ended June
30, 1995 and the year ended November 30, 1994.
(vi) Notes to Financial Statements.
2. The Money Market Portfolios
(i) Report of Independent Auditors - August 4, 1995.
(ii) Statement of Investments in Securities and Net Assets - June 30, 1995.
(iii) Statements of Assets and Liabilities - June 30, 1995.
(iv) Statements of Operations - for the year ended June 30, 1995.
(v) Statements of Changes in Net Assets - for the years ended June 30,
1995 and 1994.
(vi) Notes to Financial Statements.
b) The following exhibits are attached herewith, except exhibits 8(ii) and 14(i)
which are incorporated by reference as noted.
(1) copies of the charter as now in effect;
(i) Articles of Incorporation dated April 7, 1980.
(ii) Certificate of Amendment to Articles of Incorporation dated March
12, 1981.
(2) copies of the existing By-Laws or instruments corresponding thereto;
(i) By-Laws.
(ii) Amendment to By-Laws dated November 17, 1987.
(3) copies of any voting trust agreement with respect to more than five
percent of any class of equity securities of the Registrant;
N/A
(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;
N/A
(5) copies of all investment advisory contracts relating to the management
of the assets of the Registrant;
(i) Administration Agreement between Registrant and Franklin
Advisers, Inc. dated August 1, 1994.
(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;
(i) Amended and Restated Distribution Agreement between Registrant
and Franklin/Templeton Distributors, Inc. dated April 23, 1995.
(ii) Form of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and dealers.
(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;
N/A
(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 remuneration;
(i) Custodian Agreement between Registrant and Bank of America NT &
SA dated February 1, 1983.
(ii) Copy of Custodian Agreements between Registrant and Citibank
Delaware:
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master Agreement
3. Short Form Bank Agreement - Deposits and Disbursements of
Funds Registrant: Franklin Premier Return
Filing: Post-Effective Amendment No. 54 to Registration
Statement on Form N-1A
File No. 2-12647
Filing Date: February 27, 1995
(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;
N/A
(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.
(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 dated August 29, 1995
(12) all financial statements omitted from Item 23;
N/A
(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;
(i) Copy of model retirement plan
Registrant: AGE High Income Fund, Inc.
Filing: Post-effective Amendment No. 26 to Registration
Statement on Form
N-1A
File No. 2-30203
Filing Date: August 1, 1989
(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.
N/A
(16) schedule for computation of each performance quotation provided in the
registration statement in response to Item 22 (which need not be
audited);
(i) Schedule for computation of performance quotation
(17) Power of Attorney;
(i) Power of Attorney - Franklin Federal Money Fund dated January 17,
1995.
(ii) Power of Attorney for The Money Market Portfolios dated January
17, 1995
(iii)Certificate of Secretary - Franklin Federal Money Fund dated
January 17, 1995.
(iv) Certificate of Secretary for The Money Market Portfolios dated
January 17, 1995
(18) Copies of any plan entered into by Registrant pursuant to Rule 18f-3
under the 1940 Act.
N/A
(27) Financial Data Schedule Computation.
(i) Financial Data Schedule.
Item 25 Persons Controlled by or under Common Control with Registrant
None
Item 26 Number of Holders of Securities
As of June 30, 1995 the number of record holders of the only class of securities
of the Registrant was as follows:
Number of
Title of Class Record Holders
Capital Stock 10,252
Item 27 Indemnification
Please see Article VI of By-Laws previously filed as exhibits and incorporated
herein by reference.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, 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 director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, 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 by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Notwithstanding the provisions contained in the Registrant's By-Laws, in the
absence of authorization by the appropriate court on the merits pursuant to
Section 3 and 4 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
Section 5 of Article VI.
Item 28 Business and Other Connections of Investment Adviser
Certain of the officers and directors of the Registrant's administrator also
serve as officers and/or directors for (1) the administrator's corporate parent,
Franklin Resources, Inc., and/or (2) other investment companies in the Franklin
Group of Funds. In addition, Mr. Charles B. Johnson is a director of General
Host Corporation. For additional information please see Part B.
Item 29 Principal Underwriters
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of AGE High Income Fund, Inc., Franklin Balance
Sheet Investment Fund, Franklin California Tax-Free Income Fund, Inc., Franklin
California Tax-Free Trust, Franklin Custodian Funds, Inc., Franklin Equity Fund,
Franklin Federal Tax-Free Income Fund, Franklin Gold Fund, Franklin
International Trust, Franklin Investors Securities Trust, Franklin Managed
Trust, Franklin Money Fund, Franklin Municipal Securities Trust, Franklin New
York Tax-Free Income Fund, Inc., Franklin New York Tax-Free Trust, Franklin
Premier Return Fund, Franklin Real Estate Securities Trust, Franklin Strategic
Mortgage Portfolio, Franklin Strategic Series, Franklin Tax-Exempt Money Fund,
Franklin Tax-Advantaged High Yield Securities Fund, Franklin Tax-Advantaged
International Bond Fund, Franklin Tax-Advantaged U.S. Government Securities
Fund, Franklin Tax-Free Trust, Institutional Fiduciary Trust, Templeton American
Trust, Inc., Franklin Templeton Japan Fund, Franklin Templeton Money Fund Trust,
Templeton Capital Accumulator Fund, Inc., Templeton Developing Markets Trust,
Templeton Funds, Inc., Templeton Global Investment Trust, Templeton Global
Opportunities Trust, Templeton Growth Fund, Inc., Templeton Income Trust,
Templeton Institutional Funds, Inc., Templeton Real Estate Securities Fund,
Templeton Smaller Companies Growth Fund, Inc., Templeton Variable Products
Series Fund.
b) The information required by this Item 29 with respect to each director and
officer of Distributors is incorporated by reference to Part B of this N-1A and
Schedule A of Form BD filed by Distributors with the Securities and Exchange
Commission pursuant to the Securities Act of 1934 (SEC File No. 8-5889).
c) Not Applicable. Registrant's principal underwriter is an affiliated person of
an affiliated person of the Registrant.
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 Fund or its
shareholder services agent, Franklin/Templeton Investor Services, Inc. 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 requirements 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.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this 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 31th day of August, 1995.
FRANKLIN FEDERAL MONEY FUND
(Registrant)
By: Rupert H. Johnson, Jr.*
Rupert H. Johnson, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Rupert H. Johnson, Jr.* Director and Principal Executive Officer
Rupert H. Johnson, Jr. Dated: August 31, 1995
Martin L. Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: August 31, 1995
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: August 31, 1995
Frank H. Abbott III* Director
Frank H. Abbott III Dated: August 31, 1995
Harris J. Ashton* Director
Harris J. Ashton Dated: August 31, 1995
S. Joseph Fortunato* Director
S. Joseph Fortunato Dated: August 31, 1995
David W. Garbellano* Director
David W. Garbellano Dated: August 31, 1995
Charles B. Johnson* Director
Charles B. Johnson Dated: August 31, 1995
Frank W.T. LaHaye* Director
Frank W.T. LaHaye Dated: August 31, 1995
William J. Lippman* Director
William J. Lippman Dated: August 31, 1995
Gordon S. Macklin Director
Gordon S. Macklin Dated: August 31, 1995
*By
Larry L. Greene - Attorney-in-Fact
Pursuant to Power of Attorney filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the undersigned has duly consented to the
filing of this post-effective amendment to the Registration Statement of
Franklin Federal Money Fund to be signed by the undersigned, thereunto duly
authorized in the City of San Mateo and the State of California, on the 31th day
of August, 1995.
THE MONEY MARKET PORTFOLIOS
By: Charles E. Johnson*
Charles E. Johnson, 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:
Charles E. Johnson* Trustee and Principal Executive Officer
Charles E. Johnson Dated: August 31, 1995
Martin L Flanagan* Principal Financial Officer
Martin L. Flanagan Dated: August 31, 1995
Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: August 31, 1995
Frank H. Abbott III* Trustee
Frank H. Abbott III Dated: August 31, 1995
Harris J. Ashton* Trustee
Harris J. Ashton Dated: August 31, 1995
S. Joseph Fortunato* Trustee
S. Joseph Fortunato Dated: August 31, 1995
David W. Garbellano* Trustee
David W. Garbellano Dated: August 31, 1995
Charles B. Johnson* Trustee
Charles B. Johnson Dated: August 31, 1995
Rupert H. Johnson, Jr.* Trustee
Rupert H. Johnson, Jr. Dated: August 31, 1995
Frank W.T. LaHaye* Trustee
Frank W.T. LaHaye Dated: August 31, 1995
*By /s/ Larry L. Greene
Larry L. Greene - Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith.)
FRANKLIN FEDERAL MONEY FUND
REGISTRATION STATEMENT
EXHIBITS INDEX
PAGE NO. IN
SEQUENTIAL
NUMBERING SYSTEM
EXHIBIT NO. DESCRIPTION
EX-99.B1(i) Articles of Incorporation dated Attached
April 7, 1980
EX-99.B1(ii) Certificate of Amendment to Attached
Articles of Incorporation dated
March 12, 1981
EX-99.B2(i) By-Laws Attached
EX-99.B2(ii) Amendment to By-Laws dated November Attached
17, 1987
EX-99.B5(i) Administration Agreement between Attached
Registrant and Franklin Advisers,
Inc. dated August 1, 1994
EX-99.B6(i) Amended and Restated Distribution Attached
Agreement between Registrant and
Franklin/Templeton Distributors,
Inc. dated April 23, 1995
EX-99.B6(ii) Form of Dealer Agreements between Attached
Franklin/Templeton Distributors,
Inc. and dealers
EX-99.B8(i) Custodian Agreement between Attached
Registrant and Bank of America NT &
SA dated February 1, 1983
EX-99.B8(ii) Copy of Custodian Agreements *
between Registrant and Citibank
Delaware
EX-99.B10(i) Opinion and consent of counsel Attached
dated August 28, 1995
EX-99.B11(i) Consent of Independent Auditors Attached
dated August 29, 1995
EX-99.B14(i) Copy of model retirement plan *
EX-99.B16(i) Schedule for computation of Attached
performance quotation
EX-99.B17(i) Power of Attorney Franklin Federal Attached
Money Fund dated January 17, 1995
EX-99.B17(ii) Power of Attorney for The Money Attached
Market Portfolios dated January
17, 1995
EX-99.B17(iii) Certificate of Secretary - Franklin Attached
Federal Money Fund dated January
17, 1995
EX-99.B17(iv) Certificate of Secretary for The Attached
Money Market Portfolios dated
January 17, 1995
EX-99.B27(i) Financial Data Schedule Attached
* Incorporated by Reference
ARTICLES OF INCORPORATION
OF
FRANKLIN MONEY FUND II
I
The name of this corporation is FRANKLIN MONEY FUND II.
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business, or the
practice of a profession permitted to be incorporated by the California
Corporations Code. The business of the corporation is to be an open-end
investment company registered under the United States Investment Company Act of
1940.
III
The name and address in the State of California of this corporation's
initial agent for service of process is: HARMON E. BURNS, 155 Bovet Road, San
Mateo, California 94402.
IV
This corporation is authorized to issue only one class of shares of stock, to
wit, common stock, and the total number of shares of common stock which this
corporation is authorized to issue is Five Billion (5,000,000,000).
V
The shares of common stock of the corporation shall be subject to
redemption as hereinafter set forth:
(1) REDEMPTION BY SHAREHOLDERS:
(a) Each shareholder of this corporation at any time may redeem all
or any portion of such shareholder's shares by tendering the shares to be
redeemed in such manner as the Board of Directors of the corporation may
determine, and to receive the redemption price next determined after a proper
tender is made to the corporation. The redemption price shall be determined in
accordance with the provisions set forth in the By-Laws of the corporation, and
shall be paid in cash or in kind in such manner as the Board of Directors shall
determine.
(b) The right of redemption by the shareholders may be suspended (i)
for any periods during which the New York Stock Exchange is closed (other than
for customary weekend and holiday closings), (ii) when trading in the markets
the corporation normally utilizes is restricted or when an emergency exists as
determined by the United States Securities and Exchange Commission as a result
of which disposal of the corporation's portfolio securities or a fair
determination of the value of the corporation's net assets is not reasonably
practicable; or (iii) for such other periods as the United States Securities and
Exchange Commission by order may permit for protection of the corporation's
shareholders.
(2) REDEMPTION BY CORPORATION:
(a) At the option of the corporation, to be exercised at the
discretion of the Board of Directors, the corporation may redeem the shares
owned by a shareholder if at any time the shares of such shareholder do not have
a total value (per share net asset value times the number of shares held) of at
least $1,000. The Board of Directors shall cause written notice to be mailed to
any such shareholder at the address of such shareholder as then reflected on the
books of the corporation of the corporation's intention to exercise its option
of redemption, and, unless such shareholder within 30 days following the mailing
of such notice purchases such additional number of shares so that the value of
all such shares then owned by such shareholder is at least $1,000, the
corporation shall on the date specified in such written notice redeem all shares
owned by such shareholder at the aggregate per share redemption price next
determined as provided in the By-Laws of the corporation. Said redemption price
shall be paid in cash or in kind in such manner as the Board of Directors shall
determine.
(b) At the option of the corporation, to be exercised by the Board
of Directors, the corporation may redeem all or a portion of the shares owned by
a shareholder if at any time in the opinion of the Board of Directors ownership
of the corporation's shares has or may become concentrated to an extent which
would cause the corporation to fail to qualify for tax treatment applicable to a
"regulated investment company" under Subchapter M of the United States Internal
Revenue Code of 1954, as amended, or any successor statute. No shareholder (or
group of shareholders deemed to be a single shareholder under said Subchapter M)
holding less than 5% of the net asset value of the corporation shall be subject
to redemption under this subparagraph. Such option shall be exercised by the
Board of Directors causing written notice to be mailed to such shareholder at
the shareholder's address as then reflected on the books of the corporation of
its intention to redeem all or a portion of such shares, and the corporation
shall redeem such shares upon the date specified in such notice at the
redemption price thereof next determined as provided in the By-Laws of the
corporation.
(3) GENERAL:
Upon redemption by the shareholder or by the corporation as provided
hereunder, the shareholder shall have no further rights relative to or interest
in the shares redeemed, including without limitation the right to vote such
shares or to receive further dividends in respect thereto, other than the right
to receive payment of the redemption price on the date and in the manner
specified by the Board of Directors.
DATED: April 7, 1980.
/s/ Murray L. Simpson
Murray L. Simpson, Incorporator
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
/s/ Murray L. Simpson
Murray L. Simpson
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
FRANKLIN MONEY FUND II
CHARLES B. JOHNSON and HARMON E. BURNS certify that:
1. They are the president and secretary, respectively, of FRANKLIN
MONEY FUND II a California corporation.
2. Article I of the Articles of Incorporation of this corporation is
amended to read as follows:
"The name of this corporation is FRANKLIN FEDERAL MONEY FUND".
3. The foregoing Amendment of the Articles of Incorporation has been
duly approved by the corporation's board of directors.
4. The foregoing Amendment of the Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the Corporations Code. The total number of outstanding shares of the corporation
entitled to vote was 20,631,647 and the number of shares voting in favor of such
amendment was in excess of the vote required. The percentage vote required was a
majority of outstanding shares.
/s/ Charles B. Johnson
CHARLES B. JOHNSON
/s/ Harmon E. Burns
HARMON E. BURNS
The undersigned declare under penalty of perjury that the matters set
forth in the foregoing Certificate are true of their own knowledge.
Executed at San Mateo, California on March 12, 1981.
/s/ Charles B. Johnson
CHARLES B. JOHNSON
/s/ Harmon E. Burns
HARMON E. BURNS
BY-LAWS
OF
FRANKLIN FEDERAL MONEY FUND,
A California Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office is
located outside this state and the corporation has one or more business offices
in this state, the Board of Directors shall fix and designate a principal
business office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at any time
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of California designated by the Board of
Directors. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meeting of shareholders shall be
held each year at 11:00 a.m. on the last Wednesday of the third month following
the end of the corporation's fiscal year, or at such other date as the Board of
Directors may set by resolution. However, if this day falls on a legal holiday,
then the meeting shall be held at the same time and place on the next succeeding
full business day. At this meeting directors shall be elected and any other
proper business may be transacted.
Section 3. SPECIAL MEETING. A special meeting of the shareholders may be
called at any time by the Board of Directors or by the chairman of the board or
by the president or by one or more shareholders holding shares of the aggregate
entitled to cast not less than ten (10%) percent of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, any
vice president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of this Article II,
that a meeting shall be held at the time requested by the person or persons
calling the meeting not less than thirty-five (35) nor more than sixty (60) days
after the receipt of the request. If the notice is not given within twenty (20)
days after receipt of the request, the person or persons requesting the meeting
may give the notice. Nothing contained in this paragraph of this Section 3 shall
be construed as limiting, fixing or affecting the time when a meeting of the
shareholders called by action of the Board of Directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice shall specify the place, date and hour of the
meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted, or (ii) in the case of the annual meeting, those
matters which the Board of Directors at the time of giving the notice, intends
to present for action by the shareholders. The notice of any meeting at which
directors are to be elected shall include the name of any nominee or nominees
whom at the time of the notice management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, (ii) an amendment of the Articles of Incorporation, (iii) a
reorganization of the corporation, (iv) a voluntary dissolution of the
corporation, or (v) a distribution in dissolution other than in accordance with
the rights of outstanding preferred shares, the notice shall also state the
general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the
corporation's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal execute office of the
corporation for a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving the notice and shall be filed and
maintained in the minute book of the corporation.
Section 6. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the shares represented at that meeting, either in
person or by proxy, but in the absence of a quorum no other business may be
transacted at that meeting, except as provided in Section 6 of this Article II.
When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting at
which the adjournment is taken, unless a new record date of the adjourned
meeting is fixed or unless the adjournment is for more than forty-five (45) days
from the date set for the original meeting, in which case the Board of Directors
shall set a new record date. Notice of any such adjourned meeting shall be given
to each shareholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
Section 8. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 11
of this Article II, subject to the provisions of the Corporations Code of
California relating to voting shares held by a fiduciary in the name of a
corporation or in joint ownership. The shareholders' vote may be by voice vote
or by ballot, provided, however, that any election for directors must be by
ballot if demanded by any shareholder before the voting has begun. On any matter
other than elections of directors any shareholder may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote them
against the proposal, but if the shareholder fails to specify the number of
shares which the shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect total shares that
the shareholder is entitled to vote. If a quorum is present, the affirmative
vote of the majority of the shares represented at the meeting and entitled to
vote on any matter (other than the election of directors) shall be the act of
the shareholders, unless the vote of a greater number or voting by classes is
required by the California General Corporation Law or by the Articles of
Incorporation.
At a shareholder's meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or more
candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which that shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the candidates as
the shareholder thinks fit. The candidates receiving the highest number of votes
up to the number of directors to be elected shall be elected.
Section 9. WAIVER OF NOTICE OF CONSENT BY ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, either annual or special, however
called and noticed and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum be present either in
person or by proxy and if either before or after the meeting, each person
entitled to vote who was not present in person or by proxy signs a written
waiver of notice or a consent to a holding of the meeting or an approval of the
minutes. The waiver of notice or consent need not specify either the business to
be transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 4 of this Article II,
the waiver of notice or consent shall state the general nature of the proposal.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any annual or special meeting of shareholders may
be taken without a meeting and without prior notice if a consent in writing
setting forth the action so taken is signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares entitled to vote
on that action were present and voted. In the case of election of directors,
such a consent shall be effective only if signed by the holder of all
outstanding shares entitled to vote for the election of directors; provided
however, that a director may be elected at any time to fill a vacancy on the
Board of Directors that has not been filled by the directors by the written
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors. All such consents shall be filed with the
Secretary of the corporation and shall be maintained in the corporate records.
Any shareholder giving a written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy holders may revoke the consent by a writing received by
the Secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
This notice shall be given in the manner specified in Section 5 of this Article
II. In the case of approval of (i) contracts or transactions in which a director
has a direct or indirect financial interest, (ii) indemnification of agents of
the corporation, (iii) a reorganization of the corporation, and (iv) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to corporate action without a
meeting, the Board of Directors may fix in advance a record date which shall not
be more than sixty (60) days nor less than ten (10) days before the date of any
such meeting nor more than sixty (60) days before such action without a meeting
and in this event only shareholders of record on the date so fixed are entitled
to notice and to vote or to give consents as the case may be, notwithstanding
any transfer of any shares on the books of the corporation after the record
date, except as otherwise provided in the California General Corporation Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice
is given or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i)
when no prior action by the Board of Directors has been taken,
shall be the day on which the first written consent is given, or
(ii) when prior action of the Board of Directors has been taken,
shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating to that action or the
sixtieth day before the date of such other action, whichever is
later.
Section 12. PROXIES. Every person entitled to vote for directors or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it before the vote pursuant to that proxy by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by or attendance at the meeting and voting in person
by the person executing that proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided however, that no proxy shall be
valid after the expiration of eleven (11) months from the date of the proxy
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of the
California General Corporation Law.
Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders the
Board of Directors may appoint any persons other than nominees for office to act
as inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may and on the request of
any shareholder or a shareholder's proxy shall, appoint inspectors of election
at the meeting. The number of inspectors shall be either one (1) or three (3).
If inspectors are appointed at a meeting on the request of one or more
shareholders or proxies, the holders of a majority of shares of their proxies
present at the meeting shall determine whether one (1) or three (3) inspectors
are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, the chairman of the meeting may and on the request of
any shareholder or a shareholder's proxy, shall appoint a person to fill the
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the California General
Corporation Law and any limitations in the Articles of Incorporation and these
By-Laws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of Directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
directors shall be not less than five (5) nor more than nine (9), until changed
by a duly adopted amendment to the Articles of Incorporation or by an amendment
to this By-Law adopted by the vote or written consent of holders of a majority
of the outstanding shares entitled to vote; provided however, that an amendment
reducing the number of directors to a fixed number or a minimum number less than
five (5) cannot be adopted if the votes cast against its adoption at a meeting
or the shares not consenting in the case of action by written consent are equal
to more than sixteen and two-thirds (16 2/3%) percent of the outstanding shares
entitled to vote. The Board of Directors shall by resolution fix the exact
number of directors within the limits set forth herein.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the shareholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
Section 4. VACANCIES. Vacancies in the Board of Directors may be filled by
a majority of the remaining directors, though less than a quorum, or by a sole
remaining director, except that a vacancy created by the removal of a director
by the vote or written consent of the shareholders or by court order may be
filled only by the vote of a majority of the shares entitled to vote represented
at a duly held meeting at which a quorum is present or by the written consent of
holders of a majority of the outstanding shares entitled to vote. Each director
so elected shall hold office until the next annual meeting of the shareholders
and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in the event of the death, resignation or removal of any director, or if the
Board of Directors by resolution declares vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a felony
or if the authorized number of directors is increased or if the shareholders
fail at any meeting of shareholders at which any director or directors are
elected to elect the number of directors to be voted for at that meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote; provided, however, that any vacancy created by removal
of any director may be filled by written consent only by unanimous written
consent of all shares entitled to vote for the election of directors.
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the Board of Directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes effective.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
In the event that at any time less than a majority of the directors of the
corporation holding office at that time were so elected by the holders of the
outstanding voting securities, the Board of Directors of the corporation shall
forthwith cause to be held as promptly as possible, and in any event within
sixty (60) days, a meeting of such holders for the purpose of electing directors
to fill any existing vacancies in the Board of Directors, unless such period is
extended by order of the United States Securities and Exchange Commission.
Notwithstanding the above, whenever and for so long as the corporation is
a participant in or otherwise has in effect a Plan under which the corporation
may be deemed to bear expenses of distributing its shares as that practice is
described in Rule 12b-1 under the Investment Company Act of 1940, then the
selection and nomination of the directors who are not interested persons of the
corporation (as that term is defined in the Investment Company Act of 1940)
shall be, and is, committed to the discretion of such disinterested directors.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings
of the Board of Directors may be held at any place within or outside the State
of California that has been designated from time to time by resolution of the
board. In the absence of such a designation, regular meetings shall be held at
the principal executive office of the corporation. Special meetings of the board
shall be held at any place within or outside the State of California that has
been designated in the notice of the meeting or if not stated in the notice or
there is no notice, at the principal executive office of the corporation. Any
meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in the meeting
can hear one another and all such directors shall be deemed to be present in
person at the meeting.
Section 6. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the Board of Directors shall hold a regular meeting of the purpose
of organization, any desired election of officers, and the transaction of other
business. Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of
Directors shall be held without call at such time as shall from time to time be
fixed by the Board of Directors. Such regular meetings may be held without
notice.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two (2)
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least four (4) days before
the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or to the telegraph company, it shall be given at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting or the place if the meeting
is to be held at the principal executive office of the corporation.
Section 9. QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Directors, subject to
the provisions of the California General Corporation Law relating to approval of
contracts or transactions in which a director has a direct or indirect material
financial interest, to appointment of committee, and to indemnification of
directors. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors if any action
taken is approved by a least a majority of the required quorum for that meeting.
Section 10. WAIVER OF NOTICE. Notice of any meeting need not be given to
any director who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents and approval shall be filed with the corporate records or
made a part of the minutes of the meeting. Notice of a meeting shall also be
deemed given to any director who attends the meeting without protesting before
or at its commencement the lack of notice to that director.
Section 11. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and
place.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given unless the meeting is adjourned for more
than twenty-four (24) hours, in which case notice of the time and place shall be
given before the time of the adjourned meeting in the manner specified in
Section 8 of this Article III to the directors who were present at the time of
the adjournment.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Board of Directors may be taken without a meeting if all members of
the Board of Directors shall individually or collectively consent in writing to
that action. Such action by written consent shall have the same force and effect
as a unanimous vote of the Board of Directors. Such written consent or consents
shall be filed with the minutes of the proceedings of the Board of Directors.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Directors. This Section 14 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
ARTICLE IV
COMMITTEE
Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may by
resolution adopted by a majority of the authorized number of directors designate
one or more committees, each consisting of two (2) or more directors, to serve
at the pleasure of the board. The board may designate one or more directors as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the resolution
of the board, shall have the authority of the board, except with respect to:
(a) the approval of any action which under the California General
Corporation Law also requires shareholders' approval or approval of
the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
Board of Directors or on any committee;
(d) the amendment or repeal of By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined
by the Board of Directors; or
(g) the appointment of any other committees of the Board of Directors
or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action without
meeting), with such changes in the context of those By-Laws as are necessary to
substitute the committee and its members for the Board of Directors and its
members, except that the time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee; special meetings of committees may also be called by resolution
of the Board of Directors; and notice of special meetings of committees shall
also be given to all alternate members who shall have the right to attend all
meetings of the committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a president,
a secretary, and a chief financial officer. The corporation may also have at the
discretion of the Board of Directors, a chairman of the board, one or more vice
presidents, one or more assistant secretaries, one or more assistant treasurers,
one or more assistant financial officers and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article V. Any
number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation, except
such officers as may appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Directors, and each
shall serve at the pleasure of the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint and
may empower the president to appoint such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as the
Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board of Directors at any regular or
special meeting of the Board of Directors or except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such power or removal
may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer is elected, shall if present preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and in the
absence of the chairman of the board or if there be none, at all meetings of the
Board of Directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the president,
the vice presidents, if any, in order of their rank as fixed by the Board of
Directors or if not ranked, a vice president designated by the Board of
Directors, shall perform all the duties of the president and when so acting
shall have all powers of and be subject to all the restrictions upon the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or by the By-Laws and the president or the chairman of the
board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at the
principal executive office or such other place as the Board of Directors may
direct a book of minutes of all meetings and actions of directors, committees of
directors and shareholders with the time and place of holding, whether regular
or special, and if special, how authorized, the notice given, the names of those
present at directors' meetings or committee meetings, the number of shares
present or represented at shareholders' meetings and the proceedings.
The secretary shall keep or cause to be kept at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the Board of Directors, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Directors required by the By-Laws or by law
to be given and he shall keep the seal of the corporation if one be adopted in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain or cause to be kept and maintained adequate and correct books
and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all monies and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation and shall have other powers and perform such other duties as may be
prescribed by the Board of Directors or the By-Laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of
this Article, "agent" means any person who is or was a director, officer,
employee or other agent of this corporation or is or was serving at the request
of this corporation as a director, officer, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise
or was a director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor corporation of this corporation or of
another enterprise at the request of such predecessor corporation; "proceeding"
means any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses" includes without
limitation attorney's fees and any expenses of establishing a right to
indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY CORPORATION. This corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding (other than an action by or in the right of this corporation)
by reason of the fact that such person is or was an agent of this corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding if that person acted in
good faith and in a manner that person reasonably believed to be in the best
interests of this corporation and in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of that person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of this corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
Section 3. ACTIONS BY THE CORPORATION. This corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of this corporation
to procure a judgment in its favor by reason of the fact that that person is or
was an agent of this corporation, against expenses actually and reasonably
incurred by that person in connection with the defense or settlement of that
action if that person acted in good faith, in a manner that person believed to
be in the best interests of this corporation and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the corporation.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable in the performance of that
person's duty to this corporation, unless and only to the extent
that the court in which that action was brought shall determine
upon application that in view of all the circumstances of the
case, that person was not liable by reason of the disabling
conduct set forth in the preceding paragraph and is fairly and
reasonably entitled to indemnity for the expenses which the court
shall determine; or
(b) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action which is
settled or otherwise disposed of without court approval, unless the
required approval set forth in Section 6 of this Article is
obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this corporation has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Directors, including a majority who are disinterested, non-party directors, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article and is not prohibited from indemnification because of the disabling
conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of directors who are not
parties to the proceeding and are not interested persons of the
corporation as defined in the Investment Company Act of 1940;
(b) Approval by the affirmative vote of a majority of the shares of this
corporation entitled to vote represented at a duly held meeting at
which a quorum is present or by the written consent of holders of a
majority of the outstanding shares entitled to vote. For this
purpose the shares owned by the person to be indemnified shall not
be considered outstanding or entitled to vote thereon;
(c) The court in which the proceeding is or was pending, on application
made by this corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or
not such application by the agent, attorney or other person is
opposed by this corporation; or
(d) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this corporation before the final disposition of
the proceeding on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article, provided
the agent provides a security for his undertaking, or a majority of a quorum of
the disinterested, non-party directors, or an independent legal counsel in a
written opinion, determine that based on a review of readily available facts,
there is reason to believe that said agent ultimately will be found entitled to
indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than directors
and officers of this corporation or any subsidiary hereof may be entitled by
contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 5 or Section 6(c) in any
circumstances where it appears:
(a) That it would be inconsistent with a provision of the Articles of
Incorporation, a resolution of the shareholders or an agreement in
effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such, but only to the
extent that this corporation would have the power to indemnify the agent against
that liability under the provisions of this Article.
Section 11. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This Article
does not apply to any proceeding against any trustee, investment manager or
other fiduciary of an employee benefit plan in that person's capacity as such,
even though that person may also be an agent of the corporation as defined in
Section 1 of this Article. Nothing contained in this Article shall limit any
right to indemnification to which such a trustee, investment manager or other
fiduciary may be entitled by contract or otherwise which shall be enforceable to
the extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation
shall keep at its principal executive office or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each
shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five (5) days' prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the shareholder's names and addresses who
are entitled to vote for the election of directors and their shareholdings as of
the most recent record date for which that list has been compiled or as of a
date specified by the shareholder after the date of demand. this list shall be
made available to any such shareholder by the transfer agent on or before the
later of five (5) days after the demand is received or the date specified in the
demand as the date as of which the list is to be compiled. The record of
shareholders shall also be open to inspection on the written demand of any
shareholder or holder of a voting trust certificate at any time during usual
business hours for a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. Any inspection and
copying under this Section 1 may be made in person or by an agent or attorney of
the shareholder or holder of voting trust certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The corporation shall
keep at its principal executive office or if its principal executive office is
not in the State of California, at its principal business office in this state,
the original or a copy of the By-Laws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
California and the corporation has no principal business office in this state,
the secretary shall upon the written request of any shareholder furnish to that
shareholder a copy of the By-Laws as amended to date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Directors and any committee or committees of the Board of Directors
shall be kept at such place or places designated by the Board of Directors or in
the absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable of
being converted into written form. The minutes and accounting books and records
shall be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate at any reasonable time during usual business hours
for a purpose reasonably related to the holder's interests as a shareholder or
as the holder of a voting trust certificate. The inspection may be made in
person or by an agent or attorney and shall include the right to copy and make
extracts. These rights of inspection shall extend to the records of each
subsidiary corporation of the corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the corporation and each of its
subsidiary corporations. This inspection by a director may be made in person or
by an agent or attorney and the right of inspection includes the right to copy
and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in the California General Corporation Law is expressly
dispensed with, but nothing herein shall be interpreted as prohibiting the Board
of Directors from issuing annual or other periodic reports to the shareholders
of the corporation as they consider appropriate.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial statements
and any income statement of the corporation for each quarterly period of each
fiscal year and accompanying balance sheet of the corporation as of the end of
each such period that has been prepared by the corporation shall be kept on file
in the principal executive office of the corporation for twelve (12) months and
each such statement shall be exhibited at all reasonable times to any
shareholder demanding an examination of any such statement or a copy shall be
mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three (3) -month, six (6) -month, or nine (9) -month period of the then current
fiscal year ended more than thirty (30) days before the date of the request and
a balance sheet of the corporation as of the end of that period, the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, this report shall likewise be delivered or mailed to
the shareholder or shareholders within thirty (30) days after the request.
The corporation shall also on the written request of any shareholder mail
to the shareholder a copy of the last annual, semi-annual or quarterly income
statement which it has prepared and a balance sheet as of the end of that
period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation shall
during the month in which the anniversary of its incorporation occurs in each
year, file with the California Secretary of State on the prescribed form a
statement setting forth the authorized number of directors, the names and
complete business or residence addresses of all incumbent directors, the names
and complete business or residence addresses of the chief executive officer,
secretary and chief financial officer, the street address of its principal
executive office or principal business office in this state and the general type
of business constituting the principal business activity of the corporation,
together with a designation of the agent of the corporation for the purpose of
service of process, all in compliance with the California General Corporation
Law.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the Board of Directors may
fix in advance a record date which shall not be more than sixty (60) days before
any such action and in that case only shareholders of record on the date so
fixed are entitled to receive the dividend, distribution or allotment of rights
or to exercise the rights as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after the record date so fixed,
except as provided in the California General Corporations Law.
If the Board of Directors does not so fix a record date, the record date
for determining shareholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the applicable
resolution or the sixtieth day before the date of that action, whichever is
later.
Section 2. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable to the corporation shall be signed or endorsed
by such person or persons and in such manner as from time to time shall be
determined by resolution of the Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Directors, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation and this authority
may be general or confined to specific instances; and unless so authorized or
ratified by the Board of Directors or within the agency power of an officer, no
officer, agent, or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares if fully paid and the Board of Directors
may authorize the issuance of certificates or shares as partly paid provided
that these certificates shall state the amount of the consideration to be paid
for them and the amount paid. All certificates shall be signed in the name of
the corporation by the chairman of the board or vice chairman of the board or
the president or vice president and by the chief financial officer or an
assistant treasurer or the secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the shareholders.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue. Notwithstanding the foregoing,
the corporation may adopt and use a system of issuance, recordation and transfer
of its shares by electronic or other means as provided in the General
Corporation Law.
Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
Board of Directors may in case any share certificate or certificate for any
other security is lost, stolen, or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Board of Directors
may require, including a provision for indemnification of the corporation
secured by a bond or other adequate security sufficient to protect the
corporation against any claim that may be made against it, including any expense
or liability on account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of
the board, the president or any vice president or any other person authorized by
resolution of the Board of Directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority granted to these officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be adopted or
these By-Laws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote.
Section 2. AMENDMENT BY DIRECTORS. Subject to the right of shareholders
as provided in Section 1 of this Article IX, By-Laws may be adopted, amended,
or repealed by the Board of Directors.
ARTICLE X
REIMBURSEMENT OF EXPENSES
Section 1. DISALLOWED EXPENSES. Any payments made to or on behalf of an
officer of the corporation, such as salary, bonus, interest, rent, medical,
entertainment or travel expenses, which shall be disallowed in whole or in part
as a deductible expense to the corporation by the Internal Revenue Service,
shall be reimbursed by such officer to the corporation to the full extent of
such disallowance. It shall be the duty of the Board of Directors to enforce
payment of such amount disallowed. In lieu of payment by the officer, subject to
the determination of the Board of Directors, proportionate amounts may be
withheld from such officer's future compensation payments until the amount owed
to the corporation has been recovered.
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of Franklin Federal Money Fund (the
"Fund"), a corporation organized under the laws of the State of California, do
hereby certify that the following resolution was adopted by a majority of the
directors present at a meeting held at the offices of the Fund at 777 Mariners
Island Boulevard, San Mateo, California, on November 17, 1987.
RESOLVED, that Section 2, Article II of the By-Laws of the Fund, be
amended to read as follows:
"Section 2. ANNUAL MEETINGS. The annual meeting of shareholders
shall be held on a date and at a time as the Board of Directors
shall determine, provided that annual meetings of shareholders
need not be held in any year in which such is not required by the
Investment Company Act of 1940."
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: 11/17/87 Deborah R. Gatzek
Secretary
FRANKLIN FEDERAL MONEY FUND
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made between FRANKLIN FEDERAL MONEY FUND
(the "Fund"), and FRANKLIN ADVISERS, INC., a California Corporation, hereinafter
called the "Administrator."
WHEREAS, the Fund has been organized and operates as an investment company
registered under the Investment Company Act of 1940 for the purpose of investing
and reinvesting its assets in securities, as set forth in its Articles of
Incorporation, its By-Laws and its Registration Statements under the Investment
Company Act of 1940 and the Securities Act of 1933, all as heretofore amended
and supplemented;
WHEREAS, the Fund desires to avail itself of the services, assistance and
facilities of an administrator and to have an administrator perform various
administrative and other services for it; and,
WHEREAS, the Administrator is engaged in the business of rendering
administrative services to investment companies, and desires to provide these
services to the Fund;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADMINISTRATOR. The Fund hereby employs the
Administrator to administer its affairs, subject to the direction of the
Board of Directors and the officers of the Fund, for the period and on the
terms hereinafter set forth. The Administrator hereby accepts such
employment and agrees during such period to render the services and to
assume the obligations herein set forth for the compensation herein
provided. The Administrator shall for all purposes herein be deemed to be
an independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE ADMINISTRATOR.
The Administrator undertakes to provide the services hereinafter set
forth and to assume the following obligations:
A. OFFICE SPACE, FURNISHINGS, FACILITIES, EQUIPMENT, AND PERSONNEL.
The Administrator shall furnish to the Fund adequate (i) office
space, which may be space within the offices of the Administrator or
in such other place as may be agreed upon from time to time, and
(ii) office furnishings, facilities and equipment as may be
reasonably required for managing the affairs and conducting the
business of the Fund, including complying with the securities
reporting requirements of the United States and the various states
in which the Fund does business, conducting correspondence and other
communications with the shareholders of the Fund, maintaining all
internal bookkeeping, accounting, auditing services and records in
connection with the Fund's investment and business activities, and
computing its net asset value. The Administrator shall employ or
provide and compensate the executive, secretarial and clerical
personnel necessary to provide such services. The Administrator
shall also compensate all officers and employees of the Fund who are
officers or employees of the Administrator.
B. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF SECURITIES
REGISTRATION STATEMENTS, AMENDMENTS AND OTHER Materials. The
Administrator, its officers and employees will make available and
provide accounting and statistical information required by the Fund
or its Underwriter in the preparation of registration statements,
reports and other documents required by Federal and state securities
laws and with such information as the Fund or its Underwriter may
reasonably request for use in the preparation of such documents or
of other materials necessary or helpful for the underwriting and
distribution of the Fund's shares.
C. OTHER OBLIGATIONS AND SERVICES. The Administrator shall
make available its officers and employees to the Board of
Directors and officers of the Fund for consultation and
discussions regarding the administration of the Fund and its
activities.
3. EXPENSES OF THE FUND. It is understood that the Fund will pay all of
its own expenses other than those expressly assumed by the Administrator
herein, which expenses payable by the Fund shall include:
A. Fees to the Administrator as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services;
D. Expenses, if any, of obtaining quotations for calculating
the value of the Fund's net assets;
E. Salaries and other compensation of any of its executive
officers who are not officers, directors, stockholders or
employees of the Administrator;
F. Taxes levied against the Fund;
G. Costs, including the interest expense, of borrowing money;
H. Costs incident to meetings of the Board of Directors,
reports to the Fund's shareholders, the filing of reports
with regulatory bodies and the maintenance of the Fund's
legal existence;
I. Legal fees, including the legal fees related to the
registration and continued qualification of the Fund's
shares for sale;
J. Directors' fees and expenses to directors who are not
directors, officers, employees or stockholders of the
Administrator or any of its affiliates;
K. Costs and expense of registering and maintaining the
registration of the Fund and its shares under federal and
any applicable state laws, including the printing and
mailing of prospectuses to its shareholders;
L. Trade association dues; and
M. The Fund's pro rata portion of the fidelity bond insurance
premium and directors and officers errors and omissions
insurance premium.
4. COMPENSATION OF THE ADMINISTRATOR. The Fund shall pay a monthly
administration fee in cash to the Administrator based upon a percentage of
the value of the Fund's net assets, calculated as set forth below, on the
first business day of each month in each year as compensation for the
services rendered and obligations assumed by the Administrator during the
preceding month. The initial administration 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 the Fund relating to the previous month.
A. For purposes of calculating such fee, the value of the net assets
of the Fund shall be the average daily net assets during the month
for which the payment is being made, determined in the same manner
as the Fund uses to compute the value of its net assets in
connection with the determination of the daily net asset value of
its shares, all as set forth more fully in the Fund's current
prospectus. The annual rate of the administration fee payable by the
Fund shall be 91/200 of 1% for the first $100 million of its net
assets; and 33/100 of 1% of its net assets over $100 million up to
and including $250 million; and 7/25 of 1% of its net assets in
excess of $250 million.
B. If this Agreement is terminated prior to the end of any
month, the accrued administration fee for the Fund shall be paid
to the date of termination.
5. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator to
the Fund hereunder are not to be deemed exclusive, and the Administrator
and any of its affiliates shall be free to render similar services to
others. Subject to and in accordance with the Articles of Incorporation
and By-Laws of the Fund and to Section 10(a) of the Investment Company Act
of 1940, it is understood that directors, officers, agents and
shareholders of the Fund are or may be interested in the Administrator or
its affiliates as trustees, directors, officers, agents or stockholders
and that trustees, directors, officers, agents or stockholders of the
Administrator or its affiliates are or may be interested in the Fund as
directors, officers, agents, shareholders or otherwise; and that the
effect of any such interests shall be governed by said Articles of
Incorporation, the By-Laws and the Investment Company Act of 1940.
6. LIABILITIES OF THE ADMINISTRATOR.
A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligation or duties hereunder
on the part of the Administrator, the Administrator shall not be
subject to liability to the Fund or to any shareholder of the Fund
for any act or omission in the course of, or connected with,
rendering services hereunder.
B. Notwithstanding the foregoing, the Administrator agrees to
reimburse the Fund for any and all costs, expenses, and counsel and
directors' fees reasonably incurred by the Fund in the preparation,
printing and distribution of proxy statements, amendments to its
Registration Statement, holdings of meetings of its shareholders or
directors, the conduct of factual investigations, any legal or
administrative proceedings (including any applications for
exemptions or determinations by the Securities and Exchange
Commission) which the Fund incurs as the result of action or
inaction of the Administrator or any of its affiliates or any of
their officers, directors, employees or shareholders where the
action or inaction necessitating such expenditures (i) is directly
or indirectly related to any transactions or proposed transaction in
the shares or control of the Administrator or its affiliates (or
litigation related to any pending or proposed or future transaction
in such shares or control); or, (ii) is within the control of the
Administrator or any of its affiliates or any of their officers,
directors, employees or shareholders. The Administrator shall not be
obligated, pursuant to the provisions of this Subsection 6(B), to
reimburse the Fund for any expenditures related to the institution
of an administrative proceeding or civil litigation by the Fund or a
shareholder seeking to recover all or a portion of the proceeds
derived by any shareholder of the Administrator or any of its
affiliates from the sale of shares of the Administrator, or similar
matters. So long as this Agreement is in effect, the Administrator
shall pay to the Fund the amount due for expenses subject to
Subsection 6(B) of this Agreement within 30 days after a bill or
statement has been received by the Administrator therefor. This
provision shall not be deemed to be a waiver of any claim the Fund
may have or may assert against the Administrator or others for
costs, expenses or damages heretofore incurred by the Fund or for
costs, expenses or damages the Fund may hereafter incur which are
not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to protect any
director or officer of the Fund, or director or officer of the
Administrator, from liability in violation of Sections 17(h) and (i)
of the Investment Company Act of 1940.
7. DURATION AND TERMINATION.
A. This Agreement shall become effective on the date written below
and shall continue in effect until terminated by the Fund or the
Administrator on 60 days written notice to the other.
B. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed post-paid, to the other party at
any office of such party.
8. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the state of California.
10. LIMITATION OF LIABILITY. The Administrator acknowledges that it has
received notice of and accepts the limitations of the Fund's liability as
set forth in its Articles of Incorporation. The Administrator agrees that
the Fund's obligations hereunder shall be limited to the assets of the
Fund, and that the Administrator shall not seek satisfaction of any such
obligation from any shareholders of the Fund nor from any director,
officer, employee or agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 1st day of August, 1994.
FRANKLIN FEDERAL MONEY FUND
By /s/ Rupert H. Johnson, Jr.
FRANKLIN ADVISERS, INC.
By /s/ Harmon E. Burns
FRANKLIN FEDERAL MONEY FUND
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as an open-end
management investment company or "mutual fund", which is registered under the
Investment Company Act of 1940 (the "1940 Act") and whose shares are registered
under the Securities Act of 1933 (the "1933 Act"). We desire to issue one or
more series or classes of our authorized but unissued shares of capital stock or
beneficial interest (the "Shares") to authorized persons in accordance with
applicable Federal and State securities laws. The Fund's Shares may be made
available in one or more separate series, each of which may have one or more
classes.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company is a
member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor for
the Shares. We have been authorized to execute and deliver this Distribution
Agreement ("Agreement") to you by a resolution of our Board of Directors or
Trustees ("Board") passed at a meeting at which a majority of Board members,
including a majority who are not otherwise interested persons of the Fund and
who are not interested persons of our investment adviser, its related
organizations or with you or your related organizations, were present and voted
in favor of the said resolution approving this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement and in
consideration of the agreements on your part herein expressed and upon the terms
and conditions set forth herein, we hereby appoint you as the exclusive sales
agent for our Shares and agree that we will deliver such Shares as you may sell.
You agree to use your best efforts to promote the sale of Shares, but are not
obligated to sell any specific number of Shares.
However, the Fund and each series retain the right to make direct sales of
its Shares without sales charges consistent with the terms of the then current
prospectus and applicable law, and to engage in other legally authorized
transactions in its Shares which do not involve the sale of Shares to the
general public. Such other transactions may include, without limitation,
transactions between the Fund or any series or class and its shareholders only,
transactions involving the reorganization of the Fund or any series, and
transactions involving the merger or combination of the Fund or any series with
another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind us by your actions, conduct or contracts except
that you are authorized to promote the sale of Shares. You may appoint
sub-agents or distribute through dealers or otherwise as you may determine from
time to time, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase on our behalf or
otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price equivalent
to the net asset value per share of that series and class plus any applicable
percentage of the public offering price as sales commission or as otherwise set
forth in our then current prospectus. On each business day on which the New York
Stock Exchange is open for business, we will furnish you with the net asset
value of the Shares of each available series and class which shall be determined
in accordance with our then effective prospectus. All Shares will be sold in the
manner set forth in our then effective prospectus and statement of additional
information, and in compliance with applicable law.
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge a sales
commission on the sale or redemption, as appropriate, of each series and class
of each Fund's Shares in the amount of any initial, deferred or contingent
deferred sales charge as set forth in our then effective prospectus. You may
allow any sub-agents or dealers such commissions or discounts from and not
exceeding the total sales commission as you shall deem advisable, so long as any
such commissions or discounts are set forth in our current prospectus to the
extent required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources, subject to
the following conditions: (a) any such payments shall not create any obligation
for or recourse against the Fund or any series or class, and (b) the terms and
conditions of any such payments are consistent with our prospectus and
applicable federal and state securities laws and are disclosed in our prospectus
or statement of additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled to
compensation for your services as provided in any Distribution Plan adopted
as to any series and class of any Fund's Shares pursuant to Rule 12b-1 under
the 1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for sale only in
those jurisdictions where they have been properly registered or are exempt from
registration, and only to those groups of people which the Board may from time
to time determine to be eligible to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be directed to
the Fund's shareholder services agent, for acceptance on behalf of the Fund. At
or prior to the time of delivery of any of our Shares you will pay or cause to
be paid to the custodian of the Fund's assets, for our account, an amount in
cash equal to the net asset value of such Shares. Sales of Shares shall be
deemed to be made when and where accepted by the Fund's shareholder services
agent. The Fund's custodian and shareholder services agent shall be identified
in its prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase our Shares for
your own account for purposes of resale to the public, but you may purchase
Shares for your own investment account upon your written assurance that the
purchase is for investment purposes and that the Shares will not be resold
except through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at net asset
value to certain of your and our affiliated persons pursuant to the applicable
provisions of the federal securities statutes and rules or regulations
thereunder (the "Rules and Regulations"), including Rule 22d-1 under the 1940
Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any Post-Effective
Amendments ("Amendments") to our Registration Statement under
the 1933 Act or 1940 Act, including the prospectus and
statement of additional information included therein;
(b) Of the preparation, including legal fees, and printing of
all Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the
prospectuses included in the Amendments and the first 10
copies of the definitive prospectuses or supplements
thereto, other than those necessitated by your (including
your "Parent's") activities or Rules and Regulations
related to your activities where such Amendments or
supplements result in expenses which we would not otherwise
have incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our existing
shareholders; and
(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our
Shares.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any supplements
thereto and statements of additional information which are
necessary to continue to offer our Shares;
(b) Of the preparation, excluding legal fees, and printing of all
Amendments and supplements to our prospectuses and statements
of additional information if the Amendment or supplement
arises from your (including your "Parent's") activities or
Rules and Regulations related to your activities and those
expenses would not otherwise have been incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we have
prepared for distribution to our existing shareholders; and
(d) Incurred by you in advertising, promoting and selling our
Shares.
10. FURNISHING OF INFORMATION. We will furnish to you such information
with respect to each series and class of Shares, in such form and signed by such
of our officers as you may reasonably request, and we warrant that the
statements therein contained, when so signed, will be true and correct. We will
also furnish you with such information and will take such action as you may
reasonably request in order to qualify our Shares for sale to the public under
the Blue Sky Laws of jurisdictions in which you may wish to offer them. We will
furnish you with annual audited financial statements of our books and accounts
certified by independent public accountants, with semi-annual financial
statements prepared by us, with registration statements and, from time to time,
with such additional information regarding our financial condition as you may
reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently effective prospectus,
you will not issue any sales material or statements except literature or
advertising which conforms to the requirements of Federal and State securities
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish us with copies of all such
materials prior to their use and no such material shall be published if we shall
reasonably and promptly object.
You shall comply with the applicable Federal and State laws and
regulations where our Shares are offered for sale and conduct your affairs with
us and with dealers, brokers or investors in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If Shares are tendered to
us for redemption or repurchase by us within seven business days after your
acceptance of the original purchase order for such Shares, you will immediately
refund to us the full sales commission (net of allowances to dealers or brokers)
allowed to you on the original sale, and will promptly, upon receipt thereof,
pay to us any refunds from dealers or brokers of the balance of sales
commissions reallowed by you. We shall notify you of such tender for redemption
within 10 days of the day on which notice of such tender for redemption is
received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the date
of its execution, and shall remain in effect for a period of two (2) years. The
Agreement is renewable annually thereafter, with respect to the Fund or, if the
Fund has more than one series, with respect to each series, for successive
periods not to exceed one year (i) by a vote of (a) a majority of the
outstanding voting securities of the Fund or, if the Fund has more than one
series, of each series, or (b) by a vote of the Board, AND (ii) by a vote of a
majority of the members of the Board who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as members of the
Board), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund or by any
series without the payment of any penalty, (i) either by vote of the Board or by
vote of a majority of the outstanding voting securities of the Fund or any
series on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund and
each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of Shares upon two days' written notice
to you.
16. MISCELLANEOUS. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Fund as an open-end investment company. This Agreement
shall supersede all Distribution Agreements and Amendments previously in effect
between the parties. As used herein, the terms "Net Asset Value," "Offering
Price," "Investment Company," "Open-End Investment Company," "Assignment,"
"Principal Underwriter," "Interested Person," "Parent," "Affiliated Person," and
"Majority of the Outstanding Voting Securities" shall have the meanings set
forth in the 1933 Act or the 1940 Act and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or to
our securities holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance by
signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
FRANKLIN FEDERAL MONEY FUND
By: /s/ Deborah R. Gatzek
Accepted:
Franklin/Templeton Distributors, Inc.
By: /s/ Gregory E. Johnson
DATED: April 23, 1995
DEALER AGREEMENT
Effective: May 1, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to participate
in the distribution of shares of the Franklin and Templeton mutual funds (the
"Funds") for which we now or in the future serve as principal underwriter,
subject to the terms of this Agreement. We will notify you from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement supersedes any prior dealer agreements
between us, as stated in paragraph 18, below.
1. Licensing.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed to
the extent necessary by the appropriate regulatory agency of each state in which
you will offer and sell shares of the Funds. You agree that termination or
suspension of such membership with the NASD, or of your license to do business
by any state or federal regulatory agency, at any time shall terminate or
suspend this Agreement forthwith and shall require you to notify us in writing
of such action. If you are not a member of the NASD but are a dealer subject to
the laws of a foreign country, you agree to conform to the rules of fair
practice of such association. This Agreement is in all respects subject to Rule
26 of the Rules of Fair Practice of the NASD which shall control any provision
to the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection Corporation
("SIPC").
2. Sales of Fund Shares. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. Duties of Dealer: In General. You agree:
(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in paragraph 4 hereof.
You shall not have any authority to act as agent for the issuer (the Funds), for
the Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already received
from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made
through you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as
to profit yourself as a result of such withholding or place orders for shares in
amounts just below the point at which sales charges are reduced so as to benefit
from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession
allowed to you on such orders. We shall forthwith pay to the appropriate Fund
our share, if any, of the "charge" on the original sale and shall also pay to
such Fund the refund from you as herein provided. We shall notify you of such
repurchase or redemption within a reasonable time after settlement. Termination
or cancellation of this Agreement shall not relieve you or us from the
requirements of this subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled forthwith without any responsibility or liability on our part or on the
part of the Funds, or at our option, we may sell the shares which you ordered
back to the Funds, in which latter case we may hold you responsible for any loss
to the Funds or loss of profit suffered by us resulting from your failure to
make payment as aforesaid. We shall have no liability for any check or other
item returned unpaid to you after you have paid us on behalf of a purchaser. We
may refuse to liquidate the investment unless we receive the purchaser's signed
authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds caused
by a correction made subsequent to trade date, provided such correction was not
based on any error, omission or negligence on our part, and that you will
immediately pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates, are not received within the time
customary or the time required by law, the redemption may be canceled forthwith
without any responsibility or liability on our part or on the part of any Fund,
or at our option, we may buy the shares redeemed on behalf of the Fund, in which
latter case we may hold you responsible for any loss to the Fund or loss of
profit suffered by us resulting from your failure to settle the redemption.
4. Duties of Dealer: Retirement Accounts. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan. You agree to
indemnify us and Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting from incorrect
investment instructions received from you which cause a tax liability or other
tax penalty.
5. Conditional Orders; Certificates. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates for shares
purchased shall be made by the Funds only against constructive receipt of the
purchase price, subject to deduction for your concession and our portion of the
sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. Dealer Compensation.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws. Such
sales charges and dealer concessions are subject to reductions under a variety
of circumstances as described in the Funds' prospectuses. For an investor to
obtain these reductions, we must be notified at the time of the sale that the
sale qualifies for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts necessary to
reimburse any investor for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates may,
but are not obligated to, make payments to dealers from our own resources as
compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If you
notify us of a Qualifying Sale, we may make a contingent advance payment up to
the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, we shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation we may owe to you or by making demand upon you for repayment
in cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from such
dealer. In addition, dealers will generally be required to enter into a
supplemental agreement with us with respect to such compensation and the
repayment obligation prior to receiving any payments.
7. Redemptions. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. Exchanges. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. Transaction Processing. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. dollars. Orders payable by check must be drawn payable in U.S. dollars on a
U.S. bank, for the full amount of the investment.
10. Multiple Classes. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares with different sales charges and distribution-related
operating expenses. In addition, you will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
11. Rule 12b-1 Plans. You are also invited to participate in all Plans
adopted by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940
Act.
To the extent you provide administrative and other services, including, but not
limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably be
requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar as
they relate to Plans, shall control over the provisions of this Agreement in the
event of any inconsistency.
12. Registration of Shares. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. Additional Registrations. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares of
any Funds, it will be your responsibility to arrange for and to pay the costs of
such registration or qualification; prior to any such registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such
registration or qualification without the written consent of the Funds and of
ourselves.
14. Fund Information. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. Indemnification. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by you of shares of the Funds pursuant to this Agreement (except to the
extent that our negligence or failure to follow correct instructions received
from you is the cause of such loss, claim, liability or expense), (2) any
redemption or exchange pursuant to telephone instructions received from you or
your agent or employees, or (3) the breach by you of any of the terms and
conditions of this Agreement.
16. Termination; Succession; Amendment. Each party to this Agreement may cancel
its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon each
party's successors or assigns. This Agreement may be amended by us at any time
by written notice to you and your placing of an order or acceptance of payments
of any kind after the effective date and receipt of notice of any such Amendment
shall constitute your acceptance of such Amendment.
17. Setoff; Dispute Resolution. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed from any other
account you have with us, without notice or demand to you. In the event of a
dispute concerning any provision of this Agreement, either party may require the
dispute to be submitted to binding arbitration under the commercial arbitration
rules of the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. Acceptance; Cumulative Effect. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after receipt of
this Agreement, as it may be amended pursuant to paragraph 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only) 415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628 813/823-8712
Dealer: If you have NOT previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
DEALER NAME
By:
(Signature)
Name:
Title:
Address:
Telephone:
NASD CRD #
Franklin Templeton Dealer #
(Internal Use Only)
95.89/104 (05/95)
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
Effective: July 1, 1995
1. INTRODUCTION
The parties to this Agreement are a bank or trust company ("Bank") and
Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets forth the
terms and conditions under which FTDI will execute purchases and redemptions of
shares of the Franklin or Templeton mutual funds for which FTDI now or in the
future serves as principal underwriter ("Funds"), at the request of the Bank
upon the order and for the account of Bank's customers ("Customers"). In this
Agreement, "Customer" shall include the beneficial owners of an account and any
agent or attorney-in-fact duly authorized or appointed to act on the owners'
behalf with respect to the account. FTDI will notify Bank from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement is not exclusive, and either party may
enter into similar agreements with third parties. This Agreement supersedes any
prior agreements between the parties, as stated in paragraph 6(j), below.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in Section 3(a)(6) of the Securities and
Exchange Act of 1934, as amended (the "34 Act"):
"The term 'bank' means (A) a banking institution organized under the laws
of the United States, (B) a member bank of the Federal Reserve System, (C) any
other banking institution, whether incorporated or not, doing business under the
law of any State or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising a fiduciary power similar
to those permitted to national banks under the authority of the Comptroller of
the Currency pursuant to the first section of Public Law 87-722 (12 U.S.C. 92a),
and which is supervised and examined by State or Federal authority having
supervision over banks, and which is not operated for the purpose of evading the
provisions of this title, and (D) a receiver, conservator, or other liquidating
agent of any institution or firm included in clauses (A), (B) or (C) of this
paragraph."
b) Bank is authorized to enter into this Agreement, and Bank's performance of
its obligations and receipt of consideration under this Agreement will not
violate any law, regulation, charter, agreement, or regulatory restriction to
which Bank is subject.
c) Bank has received all regulatory agency approvals and taken all legal and
other steps necessary for offering the services Bank will provide to Customers
in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the '34 Act.
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
For each Transaction under this Agreement, Bank will:
a) be authorized to engage in the Transaction;
b) act as agent for the Customer;
c) act solely at the request of and for the account of the Customer;
d) not submit an order unless Bank has already received the order from the
Customer;
e) not submit a purchase order unless Bank has already delivered to the
Customer a copy of the then current prospectus for the Fund(s) whose shares
are to be purchased;
f) not withhold placing any Customer's order for the purpose of profiting
from the delay;
g) have no beneficial ownership of the securities in any purchase Transaction
(the Customer will have the full beneficial ownership), unless Bank is the
Customer (in which case, Bank will not engage in the Transaction unless the
Transaction is legally permissible for Bank); and
h) not accept or withhold any Fee otherwise allowed under Sections 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement Income Security Act
("ERISA") or trust or similar laws to which Bank is subject, in the case of
purchases or redemptions (hereinafter, "Transactions") of Fund shares involving
retirement plans, trusts, or similar accounts.
i) maintain records of all sales and redemptions of shares made through
Bank and to furnish FTDI with copies of such records on request.
j) distribute prospectuses, statements of additional information and reports to
Bank's customers in compliance with applicable legal requirements, except to the
extent that FTDI expressly undertakes to do so on behalf of Bank.
While this Agreement is in effect, Bank will:
k) not purchase any shares from any person at a price lower than the
redemption price then quoted by the applicable Fund;
l) repay FTDI the full Fee received by Bank under Sections 5(d) and (e) of this
Agreement, for any shares purchased under this Agreement which are repurchased
by the Fund within 7 business days after the purchase; in turn, FTDI shall pay
to the Fund the amount repaid by Bank and will notify Bank of any such
repurchase within a reasonable time;
m) in connection with orders for the purchase of shares on behalf of an
Individual Retirement Account, Self-Employed Retirement Plan or other retirement
accounts, by mail, telephone, or wire, Bank shall act as agent for the custodian
or trustee of such plans (solely with respect to the time of receipt of the
application and payments) and shall not place such an order until Bank has
received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a plan, the completed documents
necessary to establish the plan. Bank agrees to indemnify FTDI and Franklin
Templeton Trust Company and/or Templeton Funds Trust Company as applicable for
any claim, loss, or liability resulting from incorrect investment instructions
received from Bank which cause a tax liability or other tax penalty.
n) be responsible for compliance with all laws and regulations, including
those of the applicable federal and state bank regulatory authorities, with
regard to Bank and Bank's Customers; and
o) immediately notify FTDI in writing at the address given below, should
Bank cease to be a bank as set forth in Section 2(a) of this Agreement.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Transaction orders received from Bank will be accepted only at the public
offering price and in compliance with procedures applicable to each order as set
forth in the then current prospectus and statement of additional information
(hereinafter, collectively, "prospectus") for the applicable Fund. All orders
must be accompanied by payment in U.S. dollars. Orders payable by check must be
drawn payable in U.S. dollars on a U.S. bank, for the full amount of the
investment. All sales are made subject to receipt of shares by FTDI from the
Funds. FTDI reserves the right in its discretion, without notice, to suspend the
sale of shares or withdraw the offering of shares entirely.
b) Orders and Confirmations
All purchase orders are subject to acceptance or rejection by FTDI and by
the Fund or its transfer agent at their sole discretion, and become effective
only upon confirmation by FTDI. Transaction orders shall be made using the
procedures and forms required by FTDI from time to time. Orders received on any
business day after the time for calculating the price of Fund shares as set
forth in each Fund's current prospectus will be effected at the price determined
on the next business day. A written confirming statement will be sent to Bank
and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines or
standards relating to the sale or distribution of Funds offering multiple
classes of shares with different sales charges and distribution-related
operating expenses. In addition, Bank will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Section 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for each Fund, a charge, concession, or
fee ("Fee") may be paid to Bank, related to services provided by Bank in
connection with Transactions. The amount of the Fee, if any, is set by the
relevant prospectus. Adjustments in the Fee are available for certain purchases,
and Bank is solely responsible for notifying FTDI when any purchase order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any investor for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may, but
are not obligated to, make payments from their own resources to banks or dealers
as compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If Bank
notifies FTDI of a Qualifying Sale, FTDI may make a contingent advance payment
up to the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, FTDI shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation FTDI may owe to Bank or by making demand upon Bank for
repayment in cash. FTDI reserves the right to withhold advances to any bank or
dealer, if for any reason it believes that it may not be able to recover
unearned advances from such bank or dealer. In addition, banks and dealers will
generally be required to enter into a supplemental agreement with FTDI with
respect to such compensation and the repayment obligation prior to receiving any
payments.
f) Rule 12b-1 Plans
Bank is also invited to participate in all Plans adopted by the Funds (the
"Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Bank's customers who own shares of a Plan Fund, answering routine inquiries
regarding a Fund, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank Rule 12b-1 fees. All Rule 12b-1 fees shall be based on the value of shares
attributable to customers of Bank and eligible for such payment, and shall be
calculated on the basis and at the rates set forth in the compensation schedule
then in effect. Without prior approval by a majority of the outstanding shares
of a Fund, the aggregate annual fees paid to Bank pursuant to each Plan shall
not exceed the amounts stated as the "annual maximums" in each Fund's
prospectus, which amount shall be a specified percent of the value of the Fund's
net assets held in Bank's customers' accounts which are eligible for payment
pursuant to this Agreement (determined in the same manner as each Fund uses to
compute its net assets as set forth in its effective Prospectus).
Bank shall furnish FTDI and each Fund with such information as shall
reasonably be requested by the Board of Directors, Trustees or Managing General
Partners (hereinafter referred to as "Directors") of such Funds with respect to
the fees paid to Bank pursuant to the Schedule. FTDI shall furnish to the Boards
of Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between FTDI and the Plan Funds, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Plan Funds. In the event of the termination of the
Plans for any reason, the provisions of this Agreement relating to the Plans
will also terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination, the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
Bank agrees to waive payment of any amounts payable to Bank by FTDI under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as FTDI is in
receipt of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and FTDI,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services in
connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by the Fund
conditional upon receipt of the purchase price, subject to deduction of any Fee.
No certificates will be issued unless specifically requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, the unpaid shares may be
sold back to the Fund, and Bank shall be liable for any resulting loss to FTDI
or to the Fund(s). FTDI shall have no liability for any check or other item
returned unpaid to Bank after Bank has paid FTDI on behalf of a purchaser. FTDI
may refuse to liquidate the investment unless it receives the purchaser's signed
authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value of
such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. As agent, Bank may sell shares for
the account of the record owner to the Funds at the repurchase price then
currently in effect for such shares and may charge the owner a fair fee for
handling the transaction. If on a redemption which Bank has ordered,
instructions in proper form, including outstanding certificates, are not
received within the time customary or the time required by law, the redemption
may be canceled forthwith without any responsibility or liability on the part of
FTDI or any Fund, or at its option FTDI may buy the shares redeemed on behalf of
the Fund, in which latter case it may hold Bank responsible for any loss to the
Fund or loss of profit suffered by FTDI resulting from Bank's failure to settle
the redemption.
l) Exchanges
Telephone exchange orders will be effective only for shares in plan balance
(uncertificated shares) or for which share certificates have been previously
deposited and may be subject to any fees or other restrictions set forth in the
applicable prospectuses. Bank may charge the shareholder a fair fee for handling
an exchange transaction. Exchanges from a Fund sold with no sales charge to a
Fund which carries a sales charge, and exchanges from a Fund sold with a sales
charge to a Fund which carries a higher sales charge may be subject to a sales
charge in accordance with the terms of each Fund's prospectus. Bank will be
obligated to comply with any additional exchange policies described in each
Fund's prospectus, including without limitation any policy restricting or
prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently registered or qualified for sale to
the public. FTDI shall have no obligation to register or qualify, or to maintain
registration or qualification of, Fund shares in any state or other
jurisdiction. FTDI shall have no responsibility, under the laws regulating the
sale of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Fund shares or for the manner of sale of Fund shares.
Except as stated in this paragraph, FTDI shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
shares or for any matter in connection therewith, and no obligation not
expressly assumed by FTDI in this Agreement shall be implied. If it is necessary
to register or qualify shares of any Fund in any foreign jurisdictions in which
Bank intends to offer such shares, it will be Bank's responsibility to arrange
for and to pay the costs of such registration or qualification; prior to any
such registration or qualification Bank will notify FTDI of its intent and of
any limitations that might be imposed on the Funds and Bank agrees not to
proceed with such registration or qualification without the written consent of
the Funds and of FTDI.
Bank further agrees to indemnify, defend and hold harmless the Principal
Underwriter, the Funds, their officers, directors and employees from any and all
losses, claims, liabilities and expenses, arising out of (1) any alleged
violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by Bank of shares of the Funds pursuant to this Agreement (except to
the extent that FTDI's negligence or failure to follow correct instructions
received from Bank is the cause of such loss, claim, liability or expense), (2)
any redemption or exchange pursuant to telephone instructions received from Bank
or its agents or employees, or (3) the breach by Bank of any of the terms and
conditions of this Agreement.
However, nothing in this Agreement shall be deemed to be a condition,
stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, or of the rules and
regulations of the Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of 1933.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any representations
concerning shares of any Fund except those contained in the Fund's current
prospectus or in materials issued by FTDI as information supplemental to such
prospectus. FTDI will supply prospectuses, reasonable quantities of supplemental
sale literature, sales bulletins, and additional information as issued. Bank
agrees not to use other advertising or sales material relating to the Funds
except that which (a) conforms to the requirements of any applicable laws or
regulations of any government or authorized agency in the U.S. or any other
country, having jurisdiction over the offering or sale of shares of the Funds,
and (b) is approved in writing by FTDI in advance of such use. Such approval may
be withdrawn by FTDI in whole or in part upon notice to Bank, and Bank shall,
upon receipt of such notice, immediately discontinue the use of such sales
literature, sales material and advertising. Bank is not authorized to modify or
translate any such materials without the prior written consent of FTDI.
o) Customer Information
(1) Definition. For purposes of this paragraph 5(h)(iv), 'Customer
Information' means customer names and other identifying information pertaining
to Bank's mutual fund customers which is furnished by Bank to FTDI in the
ordinary course of business under this Agreement. Customer Information shall not
include any information obtained from other sources.
(2) Permitted Uses. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements between the Funds
and FTDI, the Funds' prospectuses, or other duties imposed by law. In addition,
FTDI or its affiliates may use Customer Information in communications to
shareholders to market the Funds or other investment products or services,
including without limitation variable annuities, variable life insurance, and
retirement plans and related services. FTDI may also use Customer Information if
it obtains Bank's prior written consent.
(3) Prohibited Uses. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer Information in
connection with any advertising, marketing or solicitation of any products or
services, provided that Bank offers or soon expect to offer comparable products
or services to mutual fund customers and have so notified FTDI.
(4) Survival; Termination. The agreements described in this paragraph
5(h)(iv) shall survive the termination of this Agreement, but shall terminate as
to any account upon FTDI's receipt of valid notification of either the
termination of that account with Bank or the transfer of that account to another
bank or dealer.
6. GENERAL
a) Successors and Assignments
This Agreement binds Bank and FTDI and their respective heirs, successors
and assigns. Bank may not assign its right and duties under this Agreement
without the advance, written authorization of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the State
of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should any of Bank's concession accounts with FTDI have a debit balance,
FTDI may offset and recover the amount owed from any other account Bank has with
FTDI, without notice or demand to Bank. Either party may submit any dispute
under this Agreement to binding arbitration under the commercial arbitration
rules of the American Arbitration Association. Judgment upon any arbitration
award may be entered by any state or federal court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice of
the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated. FTDI or Bank may
terminate this Agreement at any time by written notice to the other, but such
termination shall not affect the payment or repayment of Fees on Transactions
prior to the termination date. Termination also will not affect the indemnities
given under this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 6(h), above, shall constitute Bank's acceptance
of the terms of this Agreement. Otherwise, Bank's signature below shall
constitute Bank's acceptance of these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only)
415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628
813/823-8712
To the Bank or Trust Company: If you have not previously signed an agreement
with us for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK or TRUST COMPANY
(Firm's name)
By:
(Signature)
Name:
Title:Address:
Telephone:
AGREEMENT
AGREEMENT, made as of February 1, 1983, between Franklin Federal Money
Fund a California corporation (hereinafter called the "Fund") and Bank of
America NT & SA, a national banking association (hereinafter called the
"Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end management company and desires that its securities and cash shall be
held and administered by the Custodian pursuant to the terms of this Agreement;
and
WHEREAS, the Custodian has an aggregate capital, surplus, and undivided profits
in excess of Two Million Dollars ($2,000,000), and has its functions and
physical facilities supervised by federal authority and is ready and willing to
serve pursuant to and subject to the terms of this Agreement:
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund, and Custodian agree as follows:
Sec. 1. Definitions:
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages and other obligations and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The term "proper instructions" shall mean a request or direction by
telephone or any other communication device from an authorized Fund designee to
be followed by a certification in writing signed in the name of the Fund by any
two of the following persons: the Chairman of the Executive Committee, the
President, a Vice-President, the Secretary and Treasurer of the Corporation, or
any other persons duly authorized to sign by the Board of Directors of the Fund
and for whom authorization has been communicated in writing to the Custodian.
The term "proper officers" shall mean the officers authorized above to give
proper instructions.
Sec. 2. Names, Titles and Signatures of Authorized Signers:
An officer of the Corporation will certify to Custodian the names and
signatures of those persons authorized to sign in accordance with Sec. 1 hereof,
and on a timely basis, of any changes which thereafter may occur.
Sec. 3. Receipt and Disbursement of Money:
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement, ("Direct Demand Deposit Account").
Custodian shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the accounts of the Fund. This shall
include, without limitation, the proceeds from the sale of shares of the capital
stock of the Fund which shall be received along with proper instructions from
the Fund. All such payments received by Custodian shall be converted to Federal
Funds no later than the day after receipt and deposited to such Direct Demand
Deposit Account.
B. Custodian shall make payments of cash to, or for the account of, the
Fund from such cash or Direct Demand Deposit Account only (a) for the purchase
of securities for the portfolio of the Fund upon the delivery of such securities
to Custodian registered in the name of the Custodian or of the nominee or
nominees thereof, in the proper form for transfer, (b) for the redemption of
shares of the capital stock of the Fund, (c) for the payment of interest,
dividends, taxes, management or supervisory fees or any operating expenses
(including, without limitations thereto, fees for legal, accounting and auditing
services), (d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to be
delivered to Custodian; or (e) for other proper corporate purposes. Before
making any such payment Custodian shall receive and may rely upon, proper
instructions requesting such payment and setting forth the purposes of such
payment.
Custodian is hereby authorized to endorse and collect for the account
of the Fund all checks, drafts or other orders for the payment of money received
by Custodian for the account of the Fund.
Sec. 4. Holding of Securities:
Custodian shall hold all securities received by it for the account of
the Fund, pursuant to the provisions hereof, in accordance with the provisions
of Section 17(f) of the Investment Company Act of 1940 and the regulations
thereunder. All such securities are to be held or disposed of by the Custodian
for, and subject at all times to the proper instructions of, the Fund, pursuant
to the terms of this Agreement. The Custodian shall have no power of authority
to assign, hypothecate, pledge or otherwise dispose of any such securities and
investments, except pursuant to the proper instructions of the Fund and only for
the account of the Fund as set forth in Sec. 5 of this Agreement.
Sec. 5. Transfer, Exchange or Delivery, of Securities:
Custodian shall have sole power to release or to deliver any securities
of the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange, or deliver securities held by it hereunder only (a) for the sales of
such securities for the account of the Fund upon receipt by Custodian of payment
therefor, (b) when such securities are called, redeemed or retired or otherwise
become payable, (c) for examination by any broker selling any such securities in
accordance with "street delivery" custom, (d) in exchange for or upon conversion
into other securities alone or other securities and cash whether pursuant to any
plan or merger, consolidation, reorganization, recapitalization or readjustment,
or otherwise, (e) upon conversion of such securities pursuant to their terms
into other securities, (f) upon exercise of subscription, purchase or other
similar rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h) for the
purpose of redeeming in kind shares of capital stock of the Fund upon delivery
thereof to Custodian, or (i) for other proper corporate purposes. Any securities
or cash receivable in exchange for such deliveries made by Custodian, shall be
deliverable to Custodian. Before making any such transfer, exchange or delivery,
the Custodian shall receive, and may rely upon, proper instructions authorizing
such transfer, exchange or delivery and setting forth the purpose thereof.
Sec. 6. Other Actions of Custodians:
(a) The Custodian shall collect, receive and deposit income
dividends, interest and other payments or distribution of cash or property of
whatever kind with respect to the securities held hereunder; receive and collect
securities received as a distribution upon portfolio securities as a result of a
stock dividend, share split-up, reorganization, recapitalization, consolidation,
merger, readjustment, distribution of rights and other items of like nature, or
otherwise, and execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with the collection of coupons upon
corporate securities, setting forth in any such certificate or affidavit the
name of the Fund as owner of such securities; and do all other things necessary
or proper in connection with the collection, receipt and deposit of such income
and securities, including without limiting the generality of the foregoing,
presenting for payment all coupons and other income items requiring presentation
and presenting for payment all securities which may be called, redeemed, retired
or otherwise become payable. Amounts to be collected hereunder shall be credited
to the account of the Fund according to the following formula:
(1) Periodic interest payments and final payments on maturities of
Federal instruments such as U.S. Treasury bills, bonds and notes; interest
payments and final payments on maturities of other money market instruments
including tax-exempt money market instruments payable in federal or depository
funds; and payments on final maturities of GNMA instruments, shall be credited
to the account of the Fund on payable or maturity date.
(2) Dividends on equity securities and interest payments, and
payments on final maturities of municipal bonds (except called bonds) shall be
credited to the account of the Fund on payable or maturity date plus one.
(3) Payments for the redemption of called bonds, including called
municipal bonds shall be credited to the account of the Fund on the payable date
except that called municipal bonds paid in other than Federal or depository
funds shall be credited on payable date plus one.
(4) Periodic payments of interest and/or of partial principal on
GNMA instruments (other than payments on final maturity) shall be credited to
the account of the Fund on payable date plus three.
(5) Should the Custodian fail to credit the account of the Fund on
the date specified in paragraphs (1) - (4) above, the Fund may at its option,
require compensation from the Custodian of foregone interest (at the rate of
prime plus one) and for damages, if any.
(b) Payments to be received or to be paid in connection with
purchase and sale transactions shall be debited or credited to the account of
the Fund on the contract settlement date with the exception of "when-issued"
municipal bonds. Payments to be made for purchase by the Fund of when-issued
municipal bonds shall be debited to the account of the Fund on actual settlement
date.
(1) In the event a payment is wrongfully debited to the account of
the Fund due to an error by the Custodian, the Custodian will promptly credit
such amount to the Fund, plus interest (prime plus one) and damages, if any.
(2) In the event a payment is credited to the account of the Fund
and the Custodian is unable to deliver securities being sold due to an error on
the part of the Fund, such payment shall be debited to the account of the Fund,
and an appropriate charge for costs of the transaction may be sent by the
Custodian to the Fund.
Sec. 7. Reports by Custodian:
Custodian shall each business day furnish the Fund with a statement
summarizing all transactions and entries for the account of the Fund for the
preceding day. At the end of every month Custodian shall furnish the Fund with a
list of the portfolio securities showing the quantity of each issue owned, the
cost of each issue and the market value of each issue at the end of each month.
Such monthly report shall also contain separate listings of (a) unsettled trades
and (b) when-issued securities. Custodian shall furnish such other reports as
may be mutually agreed upon from time-to-time.
Sec. 8. Compensation:
Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time-to-time be agreed upon in
writing between the two parties.
Sec. 9. Liabilities and Indemnifications:
(a) Custodian shall not be liable for any action taken in good faith
upon any proper instructions herein described or certified copy of any
resolution of, the Board of Directors, and may rely on the genuineness of any
such document which it may in good faith believe to have been validly executed.
(b) The Fund agrees to indemnify and hold harmless the Custodian and
its nominee from all taxes, charges, expenses assessments, claims and
liabilities (including counsel fees) incurred or assigned against it or its
nominee in connection with the performance of this Agreement, except such as may
arise from negligent action, negligent failure to act or willful misconduct of
Custodian or its nominee.
Sec. 10. Records:
The Custodian hereby acknowledges that all of the records it shall
prepare and maintain pursuant to this Agreement shall be the property of the
Fund and, if and to the extent applicable, of the principal underwriter of the
shares of the Fund, and that upon proper instructions of the Fund or such
principal underwriter, if any, or both, it shall:
(a) Deliver said records to the Fund, principal underwriter or a
successor custodian, as appropriate:
(b) Provide the auditors of the Fund or principal underwriter or any
securities regulatory agency with a copy of such records without charge; and
provide the Fund and successor custodian with a reasonable number of reports and
copies of such records at a mutually agreed upon charge appropriate to the
circumstances.
(c) Permit any securities regulatory agency to inspect or copy
during normal business hours of the Custodian any such records.
Sec. 11. Appointment of Agents:
(a) The Custodian shall have the authority, in its discretion, to
appoint an agent or agents to do and perform any acts or things for and on
behalf of the Custodian, pursuant at all times to its instructions, as the
Custodian is permitted to do under this Agreement.
(b) Any agent or agents appointed to have physical custody of
securities held under this Agreement or any part thereof must be: (1) a bank or
banks, as that term is defined in Section 2(a)(5) of the 1940 Act, having an
aggregate, surplus and individual profits of not less than $2,000,000 (or such
greater sum as may then be required by applicable laws), or (2) a securities
depository, (the "Depository") as that term is defined in Rule 17f-4 under the
1940 Act, upon proper instructions from the Fund and subject to any applicable
regulations, or (3) the book-entry system of the U.S. Treasury Department and
Federal Reserve Board, (the "System") upon proper instructions and subject to
any applicable regulations.
(c) With respect to portfolio securities deposited or held in the
System or the Depository, Custodian shall:
1) hold such securities in a nonproprietary account which shall
not include securities owned by Custodian;
2) on each day on which there is a transfer to or from the Fund
in such portfolio securities, send a written confirmation
to the Fund;
3) upon receipt by Custodian, send promptly to Fund(i) a copy of
any reports Custodian receives from the System or the
Depository concerning internal accounting controls, and (ii) a
copy of such reports on Custodian's systems of internal
accounting controls as Fund may reasonably request.
(d) The delegation of any responsibilities or activities by the
Custodian to any agent or agents shall not relieve the Custodian from any
liability which would exist if there were no such delegation.
Sec. 12. Assignment and Termination:
(a) This Agreement may not be assigned by the Fund or the Custodian
without written consent of the other party.
(b) Either the Custodian or the Fund may terminate this Agreement
without payment of any penalty, at any time upon one hundred twenty (120) days
written notice thereof delivered by the one to the other, and upon the
expiration of said one hundred twenty (120) days, this Agreement shall
terminate; provided, however, that this Agreement shall continue thereafter for
such period as may be necessary for the complete divestiture of all assets held
hereinunder, as next herein provided. In the event of such termination, the
Custodian will immediately upon the receipt or transmittal of such notice, as
the case may be, commence and prosecute diligently to completion the transfer of
all cash and the delivery of all portfolio securities, duly endorsed, to the
successor of the Custodian when appointed by the Fund. The Fund shall select
such successor custodian within sixty (60) days after the giving of such notice
of termination, and the obligation of the Custodian named herein to deliver and
transfer over said assets directly to such successor custodian shall commence as
soon as such successor is appointed and shall continue until completed, as
aforesaid. At any time after termination hereof the Fund may have access to the
records of the administration of this custodianship whenever the same may be
necessary.
(c) If, after termination of the services of the Custodian, no
successor custodian has been appointed within the period above provided, the
Custodian may deliver the cash and securities owned by the Fund to a bank or
trust company of its own selection having an aggregate capital, surplus and
undivided profits of not less than Two Million Dollars ($2,000,000) (or such
greater sum as may then be required by the laws and regulations governing the
conduct by the Fund of its business as an investment company) and having its
functions and physical facilities supervised by federal or state authority, to
be held as the property of the Fund under the terms similar to those on which
they were held by the retiring Custodian, whereupon such bank or trust company
so selected by the Custodian shall become the successor custodian with the same
effect as though selected by the Board of Directors of the Fund.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement.
FRANKLIN FEDERAL MONEY FUND
By: /s/ Harmon E. Burns
Attest:
/s/ illegible
Bank of America, NT & SA
By: /s/ Paul Fitzpatrick
Attest:
/s/ illegible
Stradley Ronon Stevens & Young
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
Direct Dial:
(215) 564-8101
August 28, 1995
Franklin Federal Money Fund
777 Mariners Island Boulevard
San Mateo, CA 94404
Re: Franklin Federal Money Fund
Gentlemen:
We have examined the Articles of Incorporation of Franklin
Federal Money Fund (the "Fund"), a corporation organized under California law,
the Bylaws of the Fund, and its form of Share Certificate, all as amended to
date, and the various pertinent corporate documents and proceedings we deem
material. We have also examined the Notification of Registration and the
Registration Statements filed under the Investment Company Act of 1940
("Investment Company Act") and the Securities Act of 1933 (the "Securities
Act"), all as amended to date, as well as other items we deem material to this
opinion.
You have indicated that, pursuant to Section 24(e)(1) of the
Investment Company Act, the Fund intends to file Post-Effective Amendment No. 20
to its registration statement under the Securities Act to register 33,648,431
additional shares for sale pursuant to its currently effective registration
statement under the Securities Act.
Based upon the foregoing information and examination, it is our opinion
that the Fund is a valid and subsisting corporation organized under the laws of
the State of California and that the proposed registration of the 33,648,431
shares is proper and such shares, when issued for a consideration deemed by the
Board of Directors to be consistent with the Articles of Incorporation, and as
described in the Fund's prospectus contained in its Securities Act registration
statement, will be legally outstanding, fully-paid and non-assessable shares,
and the holders of such shares will have all the rights provided for with
respect to such holding by the Articles of Incorporation as amended and the laws
of the State of California.
We hereby consent to the use of this opinion as an exhibit to
Post-Effective Amendment No. 20 to be filed by the Fund, covering the
registration of the said shares under the Securities Act and the applications
and registration statements, and amendments thereto, filed in accordance with
the securities offered, and we further consent to reference in the Prospectus
and Statement of Additional Information of the Fund to the fact that this
opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG
By:/s/ Audrey C. Talley
Audrey C. Talley
ACT/lad
136866.1
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Trustees of
Franklin Federal Money Fund
The Money Market Portfolios
We consent to the incorporation by reference in Post-Effective Amendment No. 20
to the Registration Statement of Franklin Federal Money Fund on Form N-1A (File
No. 2-67480 & 811-3052) of our report dated August 4, 1995 on our audit of the
financial statements and financial highlights of Franklin Federal Money Fund for
the seven months ended June 30, 1995 and our report dated August 4, 1995 on our
audit of the financial statements and financial highlights of The Money Market
Portfolios (File No. 811-7038) for the year ended June 30, 1995.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 29, 1995
BASE PERIOD RETURN = Ending value - beginning value
------------------------------
Beginning value
= 1,000829 - 1.00
------------------------------
1.00
= 0.000829
= 0.0829%
CURRENT YIELD = Base period return x 365/7
= 0.000829 X 52.1428571
= 0.04322643
= 4.3226%
EFFECTIVE YIELD = (Base period return + 1) -1
------------------------------
365/7
= 0.000829 +1 -1
------------------------------
365/7
= 1.000829 -1
------------------------------
365/7
= 1.04415560 -1
= 0.04415560
= 4.42%
POWER OF ATTORNEY
The undersigned officers and directors of FRANKLIN FEDERAL MONEY FUND (the
"Registrant") hereby appoint HARMON E. BURNS, DEBORAH R. GATZEK, KAREN SKIDMORE,
LARRY L. GREENE and MARK H. PLAFKER (with full power to each of them to act
alone) his attorney-in-fact and agent, in all capacities, to execute, and to
file any of the documents referred to below relating to Post-Effective
Amendments to the Registrant's registration statement on Form N-1A under the
Investment Company Act of 1940, as amended, and under the Securities Act of 1933
covering the sale of shares by the Registrant under prospectuses becoming
effective after this date, including any amendment or amendments increasing or
decreasing the amount of securities for which registration is being sought, with
all exhibits and any and all documents required to be filed with respect thereto
with any regulatory authority. Each of the undersigned grants to each of said
attorneys, full authority to do every act necessary to be done in order to
effectuate the same as fully, to all intents and purposes as he could do if
personally present, thereby ratifying all that said attorneys-in-fact and
agents, may lawfully do or cause to be done by virtue hereof.
The undersigned officers and Directors hereby execute this Power of
Attorney as of this 17th day of January, 1995.
/s/ Rupert H. Johnson, Jr. /s/ Charles B. Johnson
Rupert H. Johnson, Jr. Charles B. Johnson
Principal Executive Director
Officer and Director
/s/ Frank H. Abbott, III, /s/ Frank W. T. LaHaye
Frank H. Abbott, III, Director Frank W. T. LaHaye, Director
/s/ Harris J. Ashton /s/ William J. Lippman
Harris J. Ashton, Director William J. Lippman, Director
/s/ S. Joseph Fortunato /s/ Gordon S. Macklin
S. Joseph Fortunato, Director Gordon S. Macklin, Director
/s/ David W. Garbellano /s/ Martin L. Flanagan
David W. Garbellano, Director Martin L. Flanagan, Director
/s/ Diomedes Loo-Tam
Diomedes Loo-Tam,
Principal Accounting Officer
POWER OF ATTORNEY
The undersigned officers and trustees of THE MONEY MARKET PORTFOLIOS
(the "Registrant") hereby appoint HARMON E. BURNS, DEBORAH R. GATZEK, KAREN L.
SKIDMORE, LARRY L. GREENE, and MARK H. PLAFKER (with full power to each of them
to act alone) as their attorney-in-fact and agent, in all capacities, to
execute, and to file any of the documents referred to below relating to
Post-Effective Amendments to the Registrant's registration statement, or the
registration statements of other funds investing all or substantially all of
their assets in shares issued by the Registrant, on Form N-1A under the
Investment Company Act of 1940, as amended, and, in the case of a fund investing
all or substantially all of its assets in shares issued by the Registrant, the
Securities Act of 1933, covering the sale of shares of beneficial interest by
the Registrant or such other fund under prospectuses becoming effective after
the date hereof, including any amendment or amendments filed for the purpose of
updating the prospectus/or SAI, registering securities to be issued in
transactions permitted under the federal securities laws or increasing or
decreasing the amount of securities for which registration is being sought, with
all exhibits and any and all documents required to be filed with respect thereto
with any regulatory authority. Each of the undersigned grants to each of said
attorneys full authority to do every act necessary to be done in order to
effectuate the same as fully, to all intents and purposes as he could do if
personally present, thereby ratifying all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue hereof.
The undersigned officers and trustees hereby execute this Power of
Attorney as of this 17th day of January 1995.
/s/ Charles E. Johnson /s/ Charles B. Johnson
Charles E. Johnson, Charles B. Johnson, Trustee
Principal Executive Officer
and Trustee
/s/ Rupert H. Johnson, Jr. /s/ Frank H. Abbott, III
Rupert H. Johnson, Jr., Frank H. Abbott, III, Trustee
Trustee
/s/ Harris J. Ashton /s/ S. Joseph Fortunato
Harris J. Ashton, Trustee S. Joseph Fortunato, Trustee
/s/ David W. Garbellano /s/ Frank W. T. LaHaye
David W. Garbellano, Trustee Frank W. T. LaHaye, Trustee
/s/ Diomedes Loo-Tam /s/ Martin L. Flanagan
Diomedes Loo-Tam, Martin L. Flanagan, Principal
Principal Accounting Officer Financial Officer
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of Franklin Federal
Money Fund (the "Fund").
As Secretary of the Fund, I further certify that the following resolution
was adopted by a majority of the Directors of the Fund present at a meeting held
at 777 Mariners Island Boulevard, San Mateo, California, on January 17, 1995.
RESOLVED, that a Power of Attorney, substantially in the form of
the Power of Attorney presented to this Board, appointing Harmon
E. Burns, Deborah R. Gatzek, Karen L. Skidmore, Larry L. Greene
and Mark H. Plafker as attorneys-in-fact for the purpose of
filing documents with the Securities and Exchange Commission, be
executed by each Director and designated officer.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/S/ DEBORAH R. GATZEK
Deborah R. Gatzek
Secretary
Dated: January 17, 1995
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of The Money Market
Portfolios (the "Trust").
As Secretary of the Trust, I further certify that the following resolution was
adopted by a majority of the Trustees of the Trust present at a meeting held at
777 Mariners Island Boulevard, San Mateo, California, on January 17, 1995.
RESOLVED, that a Power of Attorney, substantially in the form of the
Power of Attorney presented to this Board, appointing Harmon E. Burns,
Deborah R. Gatzek, Karen L. Skidmore, Larry L. Greene and Mark H.
Plafker as attorneys-in-fact for the purpose of filing documents with
the Securities and Exchange Commission, be executed by each Trustee
and designated officer.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: January 17, 1995 Deborah R. Gatzek
Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN FEDERAL MONEY FUND JUNE 30, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 139,823,974
<INVESTMENTS-AT-VALUE> 139,823,974
<RECEIVABLES> 367,691
<ASSETS-OTHER> 5,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140,196,665
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 910,605
<TOTAL-LIABILITIES> 910,605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 139,286,060
<SHARES-COMMON-STOCK> 139,286,060
<SHARES-COMMON-PRIOR> 168,529,855
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 139,286,060
<DIVIDEND-INCOME> 4,730,257
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (601,435)
<NET-INVESTMENT-INCOME> 4,128,822
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,128,822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,128,822)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 216,322,353
<NUMBER-OF-SHARES-REDEEMED> (249,680,784)
<SHARES-REINVESTED> 4,114,636
<NET-CHANGE-IN-ASSETS> (29,243,795)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 347,517
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 601,435
<AVERAGE-NET-ASSETS> 143,502,060
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.029
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.029)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.870
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
