As filed with the Securities and Exchange Commission on October 28, 1998.
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. 23 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 (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 (650) 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 Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) 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.
Title of Securities being registered:
Shares of Common Stock:
Franklin Federal Money Fund
FRANKLIN FEDERAL MONEY FUND
CROSS REFERENCE SHEET
FORM N-1A
PART A: INFORMATION REQUIRED IN PROSPECTUS
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
1. Cover Page Cover Page
2. Synopsis "Expense Summary"
3. Condensed Financial "Financial Highlights"
Information
4. General Description of "How Is the Fund Organized?"; "How
Registrant Does the Fund Invest Its Assets?";
"What Are the Risks of Investing in
the Fund?"
5. Management of the Fund "Who Administers the Fund?"
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other "How Is the Fund Organized?";
Securities "Services to Help You Manage Your
Account"; "What Distributions Might
I Receive From the Fund?"; "How
Taxation Affects the Fund and Its
Shareholders"; "What If I Have
Questions About My Account?"
7. Purchase of Securities "How Do I Buy Shares?"; "May I
Being Offered Exchange Shares for Shares of
Another Fund?"; "Transaction
Procedures and Special
Requirements"; "Services to Help
You Manage Your Account"; "Useful
Terms and Definitions"
8. Redemption or Repurchase "May I Exchange Shares for Shares
of Another Fund?"; "How Do I Sell
Shares?"; "Transaction Procedures
and Special Requirements";
"Services to Help You Manage Your
Account"; "Useful Terms and
Definitions"
9. Pending Legal Proceedings Not Applicable
FRANKLIN FEDERAL MONEY FUND
CROSS REFERENCE SHEET
FORM N-1A
PART B: INFORMATION REQUIRED IN
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives and "How Does the Fund Invest Its
Policies Assets?"
14. Management of the Fund "Officers and Directors"
15. Control Persons and "Officers and Directors";
Principal Holders of "Investment Management and Other
Securities Services"; "Miscellaneous
Information"
16. Investment Advisory and "Investment Management and Other
Other Services Services"; "The Fund's Underwriter"
17. Brokerage Allocation "How Does the Portfolio Buy
Securities for Its Portfolio?"
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Shares?"; "How Are Fund Shares
Being Offered Valued?"; "Financial Statements"
20. Tax Status "Additional Information on
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Performance Data "How Does the Fund Measure
Performance?"
23. Financial Statements "Financial Statements"
PROSPECTUS & APPLICATION
FRANKLIN
FEDERAL
MONEY FUND
INVESTMENT STRATEGY
INCOME
NOVEMBER 1, 1998
Please read this prospectus before investing, and keep it for future
reference. It contains important information, including how the fund invests
and the services available to shareholders.
To learn more about the fund and its policies, you may request a copy of the
fund's Statement of Additional Information ("SAI"), dated November 1, 1998,
which we may amend from time to time. We have filed the SAI with the SEC and
have incorporated it by reference into this prospectus. For a free copy of
the SAI or a larger print version of this prospectus, contact your investment
representative or call 1-800/DIAL BEN.
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 $1 SHARE PRICE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. MUTUAL FUND SHARES INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
FRANKLIN FEDERAL MONEY FUND
Unlike most funds that invest directly in securities, the fund seeks to
achieve its investment goal by investing all of its assets in shares of The
U.S. Government Securities Money Market Portfolio (the "Portfolio"). The
Portfolio is a series of The Money Market Portfolios ("Money Market"). Its
investment goal is the same as the fund's.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary .................................................. 2
Financial Highlights ............................................. 3
How Does the Fund Invest Its Assets? ............................. 4
What Are the Risks of Investing in the Fund? ..................... 7
Who Administers the Fund? ........................................ 7
How Taxation Affects the Fund and Its Shareholders ............... 8
How Is the Fund Organized? ....................................... 10
ABOUT YOUR ACCOUNT
How Do I Buy Shares? ............................................. 10
May I Exchange Shares for Shares of Another Fund? ................ 13
How Do I Sell Shares? ............................................ 16
What Distributions Might I Receive From the Fund? ................ 18
Transaction Procedures and Special Requirements .................. 19
Services to Help You Manage Your Account ......................... 23
What If I Have Questions About My Account? ....................... 26
GLOSSARY
Useful Terms and Definitions ..................................... 26
FRANKLIN
FEDERAL
MONEY FUND
November 1, 1998
When reading this prospectus, you will see certain terms beginning with
capital letters. This means the term is explained in our glossary section.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo
CA 94403-7777
1-800/DIAL BEN(R)
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
fund. It is based on the fund's historical expenses, including its
proportionate share of the Portfolio's expenses, for the fiscal year ended
June 30, 1998. The fund's actual expenses may vary.
A. SHAREHOLDER TRANSACTION EXPENSES+
Exchange Fee (per transaction) None*
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management and Administration Fees 0.58%**
Other Expenses of the Fund and the Portfolio 0.25%
Total Fund Operating Expenses 0.83%**
C. EXAMPLE
Assume the fund's annual return is 5%, operating expenses are as
described above, and you sell your shares after the number of years
shown. These are the projected expenses for each $1,000 that you invest
in the fund.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
$8 $26 $46 $103
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES
OR RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE
SHOWN. The fund pays its operating expenses. The effects of these
expenses are reflected in its Net Asset Value or dividends and are not
directly charged to your account.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
*There is a $5.00 fee for exchanges by Market Timers.
**For the period shown, Advisers had agreed in advance to limit its
management fees. With this reduction, management fees of the Portfolio were
0.14% and administration fees of the fund were 0.43%. Total operating
expenses were 0.82%.
FINANCIAL HIGHLIGHTS
This table summarizes the fund's financial history. The information has been
audited by PricewaterhouseCoopers LLP, the fund's independent auditor. The
audit report covering each of the most recent five years appears in the
fund's Annual Report to Shareholders for the fiscal year ended June 30, 1998.
The Annual Report to Shareholders also includes more information about the
fund's performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, YEAR ENDED NOVEMBER 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995** 1994 1993 1992 1991 1990 1989
PER SHARE OPERATING
performance (for a share
outstanding throughout
the year)
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from
investment operations -
net investment income .047 .045 .047 .029 .031 .022 .029 .053 .074 .081
Less distributions from
net investment income (.047) (.045)(.047)(.029) (.031) (.022) (.029) (.053) (.074) (.081)
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return** 4.85% 4.62% 4.80% 2.92% 3.15% 2.22% 2.97% 5.42% 7.69% 8.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
year (millions) $135 $121 $128 $139 $169 $121 $135 $211 $197 $131
Ratio to average net assets:
Expenses+ .82% .85% .84% .87%* .98% .90% .85% .79% .81% .88%
Expenses excluding
waiver and payments
by affiliate+ .83% .86% .86% .88%* .99% - - - - -
Net investment income 4.73% 4.54% 4.71% 4.93%* 3.15% 2.20% 2.95% 5.26% 7.33% 8.24%
</TABLE>
*Annualized
**Total return is not annualized.
***For the period December 1, 1994 to June 30, 1995.
+The expense ratio includes the fund's share of the Portfolio's allocated
expenses.
HOW DOES THE FUND INVEST ITS ASSETS?
WHAT IS THE FUND'S GOAL?
The investment goal of the fund is to obtain as high a level of current
income as is consistent with capital preservation and liquidity. This goal is
fundamental, which means that it may not be changed without shareholder
approval. The fund also tries to maintain a stable Net Asset Value of $1 per
share.
THE FUND'S INVESTMENT IN THE PORTFOLIO
The fund seeks to achieve its investment goal by investing all of its assets
in the Portfolio. The Portfolio has the same investment goal as the fund and,
it too, is fundamental. The fund's investment policies are also substantially
similar to the Portfolio's except the fund may pursue its policies by
investing in an open-end management investment company with the same
investment goal and substantially similar policies and restrictions as the
fund. The fund buys shares of the Portfolio at Net Asset Value. An investment
in the fund is an indirect investment in the Portfolio.
It is possible that the fund may have to withdraw its investment in the
Portfolio and subsequently invest in another open-end management investment
company with the same investment goal and substantially similar policies.
This could happen if the Portfolio changes its investment goal or if the
Board, at any time, considers it in the fund's best interest.
The fund's structure, where it invests all of its assets in the Portfolio, is
sometimes called a "Master/Feeder" structure. You will find more detailed
information about this structure and the potential risks associated with it
in the SAI.
WHAT KINDS OF SECURITIES DOES THE PORTFOLIO BUY?
QUALITY, DIVERSIFICATION AND MATURITY STANDARDS. The Portfolio follows SEC
guidelines on the quality, maturity and diversification of its investments.
These guidelines are designed to help maintain a stable $1 share price.
Generally, they require the Portfolio to maintain a dollar-weighted average
portfolio maturity of 90 days or less and to limit its investments to U.S.
dollar denominated instruments that:
o the Board of Trustees of Money Market determines present minimal credit
risks;
o are rated by nationally recognized rating services in one of the two
highest short-term rating categories, or are unrated but are considered to
be comparable in quality to securities that have been rated in one of the
two highest short-term rating categories; and
o have remaining maturities of 397 calendar days or less.
U S. GOVERNMENT SECURITIES. The Portfolio may invest primarily in marketable
securities issued or guaranteed by the U.S. government, its agencies, or by
various instrumentalities that have been established or sponsored by the U.S.
government or in repurchase agreements (as described below) collateralized by
these 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. government are included within this
fundamental policy.
At the present time, it is the Portfolio's policy to limit its 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.
STRIPPED SECURITIES are the separate income and principal components of a
debt security. Once the securities have been stripped they are referred to as
zero coupon securities. Their risks are similar to those of other money
market securities although they may be more volatile. Stripped securities do
not make periodic payments of interest prior to maturity and the stripping of
the interest coupons causes them to be offered at a discount from their face
amount. This results in the securities being subject to greater fluctuations
in response to changing interest rates than interest-paying securities of
similar maturities.
The Portfolio only intends to buy stripped securities that are issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government.
WHAT ARE SOME OF THE PORTFOLIO'S OTHER INVESTMENT STRATEGIES AND PRACTICES?
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 Advisers 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.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio buys U.S.
government securities from a bank or broker-dealer at one price and agrees to
sell them back to the bank or broker-dealer at a higher price on a specified
date. The securities subject to resale are held on behalf of the Portfolio by
a custodian bank approved by Money Market's Board of Trustees. The bank or
broker-dealer must transfer to the custodian securities with an initial
market value of at least 102% of the repurchase price to help secure the
obligation to repurchase the securities at a later date. The securities are
then marked-to-market daily to maintain coverage of at least 100%. If the
bank or broker-dealer does not repurchase the securities as agreed, the
Portfolio may experience a loss or delay in the liquidation of the securities
underlying the repurchase agreement and may also incur liquidation costs. The
Portfolio, however, intends to enter into repurchase agreements only with
banks or broker-dealers that are considered creditworthy by Advisers.
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.
BORROWING. 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.
OTHER POLICIES AND RESTRICTIONS. The fund and the Portfolio have a number of
additional investment policies and restrictions that govern their activities.
Those that are identified as "fundamental" may only be changed with
shareholder approval. The others may be changed by the Board or the Board of
Trustees of Money Market alone. For a list of these restrictions and more
information about the fund's and the Portfolio's investment policies,
including those described above, please see "How Does the Fund Invest Its
Assets?" and "Investment Restrictions" in the SAI.
Generally, the policies and restrictions discussed in this prospectus and in
the SAI apply when the fund or the Portfolio makes an investment. In most
cases, the fund and the Portfolio are not required to sell a security because
circumstances change and the security no longer meets one or more of the
fund's or the Portfolio's policies or restrictions.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
There is no assurance that the fund will meet its investment goal.
CREDIT, MARKET AND INTEREST RATE RISK. Credit risk is a function of the
ability of an issuer of a security to make timely interest payments and to
pay the principal of a security upon maturity. It is generally reflected in a
security's underlying credit rating and its stated interest rate (normally
the coupon rate). A change in the credit risk associated with a security may
cause a corresponding change in the security's price. Market risk is the risk
of price fluctuation of a security caused by changes in general economic and
interest rate conditions that affect the market as a whole. A security's
maturity length also affects its price. In addition, changes in interest
rates may affect the value of a security. Generally, when interest rates rise
the value of a security falls, and vice versa. Interest rates have increased
and decreased in the past. These changes are unpredictable. The short
duration and high credit quality of the securities in which the Portfolio,
and thus the fund, invests may generally reduce these risks.
WHO ADMINISTERS THE FUND?
THE BOARD. The Board oversees the management of the fund and elects its
officers. The officers are responsible for the fund's day-to-day operations.
The Board, with approval of all disinterested and interested Board members,
has adopted written procedures designed to deal with potential conflicts of
interest that may arise from the fund and Money Market having substantially
the same boards. These procedures call for an annual review of the fund's
relationship with the Portfolio. If a conflict exists, the boards may take
action, which may include the establishment of a new board. The Board has
determined that there are no conflicts of interest at the present time. For
more information, please see "Summary of Procedures to Monitor Conflicts of
Interest" and "Officers and Directors" in the SAI.
INVESTMENT MANAGER AND ADMINISTRATOR. Advisers manages the Portfolio's assets
and makes its investment decisions. Advisers also performs similar services
for other funds. It is wholly owned by Resources, a publicly owned company
engaged in the financial services industry through its subsidiaries. Charles
B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Resources. Together, Advisers and its affiliates manage over $207 billion in
assets. Advisers is also the administrator of the fund. Please see
"Investment Management and Other Services" and "Miscellaneous Information" in
the SAI for information on securities transactions and a summary of the
fund's Code of Ethics.
MANAGEMENT FEES. You will bear a portion of the Portfolio's operating
expenses, including its management fees, to the extent that the fund, as a
shareholder of the Portfolio, bears these expenses. The portion of the
Portfolio's expenses borne by the fund depends on the fund's proportionate
share of the Portfolio's net assets.
During the fiscal year ended June 30, 1998, the fund's proportionate share of
the Portfolio's management fees, before any advance waiver, totaled 0.15% of
the average daily net assets of the fund. The fund's administration fees
totaled 0.43%. Total operating expenses, including fees paid to Advisers
before any advance waiver, were 0.83%. Under an agreement by Advisers to
limit its fees, the fund paid a proportionate share of the Portfolio's
management fees totaling 0.14%. The fund paid administration fees totaling
0.43%. Total expenses of the fund were 0.82%. Advisers may end this
arrangement at any time upon notice to the Board.
PORTFOLIO TRANSACTIONS. Advisers tries to obtain the best execution on all
transactions. If Advisers believes more than one broker or dealer can provide
the best execution, it may consider research and related services and the
sale of fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How
Does the Portfolio Buy Securities for Its Portfolio?" in the SAI for more
information.
YEAR 2000 ISSUE. Like other mutual funds, the fund could be adversely
affected if the computer systems used by Advisers and other service providers
do not properly process date-related information on or after January 1, 2000
("Year 2000 Issue"). The Year 2000 Issue could affect portfolio and
operational areas including securities trade processing, interest and
dividend payments, securities pricing, shareholder account services,
reporting, custody functions, and others. While there can be no assurance
that the fund will not be adversely affected, Advisers and its affiliated
service providers are taking steps that they believe are reasonably designed
to address the Year 2000 Issue, including seeking reasonable assurances from
the fund's other major service providers.
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
TAXATION OF THE FUND. As a regulated investment company, the fund generally
pays no federal income tax on the income and gains that it distributes to you.
DISTRIBUTIONS. Distributions from the fund, whether you receive them in cash
or in additional shares, are generally subject to income tax. The fund will
send you a statement in January of each year that reflects the amount of
ordinary dividends you received from the fund in the prior year. This
statement will include distributions declared in December and paid to you in
January of the following year, but which are taxable as if paid on December
31 of the prior year. The IRS requires you to report these amounts on your
income tax return for the prior year.
DISTRIBUTIONS TO RETIREMENT PLANS. Fund distributions received by your
qualified retirement plan, such as a section 401(k) plan or IRA, are
generally tax-deferred; this means that you are not required to report fund
distributions on your income tax return when paid to your plan, but, rather,
when your plan makes payments to you. Special rules apply to payouts from
Roth and Education IRAs.
DIVIDENDS-RECEIVED DEDUCTION. It is anticipated that no portion of the fund's
distributions will qualify for the corporate dividends-received deduction.
REDEMPTIONS AND EXCHANGES. Because the fund expects to maintain a $1.00 Net
Asset Value per share, you should not have any gain or loss on the redemption
or exchange of fund shares.
NON-U.S. INVESTORS. Ordinary dividends generally will be subject to U.S.
income tax withholding. Your home country may also tax ordinary dividends.
Fund shares held by the estate of a non-U.S. investor may be subject to U.S.
estate tax. You may wish to contact your tax advisor to determine the U.S.
and non-U.S. tax consequences of your investment in the fund.
STATE TAXES. Ordinary dividends that you receive from the fund will generally
be subject to state and local income tax. It is anticipated that no portion
of the fund's distributions will qualify for exemption from state and local
income tax as dividends paid from interest earned on direct obligations of
the U.S. Government. The holding of fund shares may also be subject to state
and local intangibles taxes. You may wish to contact your tax advisor to
determine the state and local tax consequences of your investment in the fund.
BACKUP WITHHOLDING. When you open an account, IRS regulations require that
you provide your taxpayer identification number ("TIN"), certify that it is
correct, and certify that you are not subject to backup withholding under IRS
rules. If you fail to provide a correct TIN or the proper tax certifications,
the fund is required to withhold 31% of all taxable distributions (including
ordinary dividends and capital gain distributions), and redemption proceeds
paid to you. The fund is also required to begin backup withholding on your
account if the IRS instructs the fund to do so. The fund reserves the right
not to open your account, or, alternatively, to redeem your shares at the
current Net Asset Value, less any taxes withheld, if you fail to provide a
correct TIN, fail to provide the proper tax certifications, or the IRS
instructs the fund to begin backup withholding on your account.
THIS TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND. A MORE COMPLETE
DISCUSSION OF THESE RULES AND RELATED MATTERS IS CONTAINED IN THE SECTION
ENTITLED "ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES" IN THE SAI. YOU
MAY REQUEST A FREE FRANKLIN TEMPLETON TAX INFORMATION HANDBOOK BY CONTACTING
FUND INFORMATION.
HOW IS THE FUND ORGANIZED?
The fund is a no-load, diversified, open-end management investment company,
commonly called a mutual fund. It was organized as a California corporation
on April 8, 1980, and is registered with the SEC. Each share of the fund has
one vote. All shares have equal voting, participation and liquidation rights.
Shares of the fund are considered Class I shares for redemption, exchange and
other purposes.
The fund has cumulative voting rights. This gives each shareholder a number
of votes equal to the number of shares owned times the number of Board
members to be elected. You may cast all of your votes for one candidate or
distribute your votes between two or more candidates.
The fund does not intend to hold annual shareholder meetings. It may hold
special meetings, however, for matters requiring shareholder approval. A
meeting may also be called by the Board in its discretion or by shareholders
holding at least 10% of the outstanding shares. In certain circumstances, we
are required to help you communicate with other shareholders about the
removal of a Board member.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
You may buy shares of the fund without a sales charge and write redemption
drafts against your account. Redemption drafts are similar to checks and are
referred to as checks in this prospectus. When you buy shares, it does not
create a checking or other bank account relationship with the fund or any
bank.
To open your account, please follow the steps below. This will help avoid any
delays in processing your request.
1. Read this prospectus carefully.
2. Determine how much you would like to invest. The fund's minimum
investments are:
o To open a regular, non-retirement account $1,000
o To open an IRA, IRA Rollover, Roth IRA,
or Education IRA $ 250*
o To open a custodial account for a minor
(an UGMA/UTMA account) $ 100
o To open an account with an automatic
investment plan $ 50**
o To add to an account $ 50***
*For all other retirement accounts, there is no minimum investment
requirement.
**$25 for an Education IRA.
***For all retirement accounts except IRAs, IRA Rollovers, Roth IRAs,
or Education IRAs, there is no minimum to add to an account.
For purchases by broker-dealers, registered investment advisors or
certified financial planners who have entered into an agreement with
Distributors for clients participating in comprehensive fee programs,
the minimum initial investment is $250. The minimum initial investment
is $100 for officers, trustees, directors and full-time employees of
the Franklin Templeton Funds or the Franklin Templeton Group, and their
family members, consistent with our then-current policies.
We reserve the right to change the amount of these minimums from time
to time or to waive or lower these minimums for certain purchases. We
also reserve the right to refuse any order to buy shares.
3. Carefully complete and sign the enclosed shareholder application,
including the optional shareholder privileges section. By applying for
privileges now, you can avoid the delay and inconvenience of having to
send an additional application to add privileges later. It is important
that we receive a signed application since we will not be able to
process any redemptions from your account until we receive your signed
application.
4. Make your investment using the table below.
METHOD STEPS TO FOLLOW
- -------------------------------------------------------------------------------
BY MAIL For an initial investment:
Return the application to the fund with your
check, Federal Reserve draft or negotiable bank
draft made payable to the fund. Instruments drawn
on other investment companies may not be accepted.
For additional investments:
1. Send a check or use the deposit slips included
with your monthly statement or checkbook (if you
have requested one).
2. If you send a check, please include your account
number on the check.
- ------------------------------------------------------------------------------
BY WIRE 1. Call Shareholder Services or, if that number is
busy, call 1-650/312-2000 collect, to receive a
wire control number. You need a new wire control
number every time you wire money into your
account. If you do not have a currently effective
wire control number, we will return the money to
the bank, and we will not credit the purchase to
your account.
2. Wire the funds to Bank of America, ABA routing
number 121000358, for credit to Franklin Federal
Money Fund, A/C 1493-3-04779. Your name and wire
control number must be included.
3. For an initial investment you must also return
your signed shareholder application to the fund.
- ------------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------
If the fund receives your order in proper form before 3:00 p.m. Pacific time,
we will credit the purchase to your account that day. Orders received after
3:00 p.m. will be credited the following business day.
Many of the fund's investments, through the Portfolio, must be paid for in
federal funds, which are monies held by the fund's custodian bank on deposit
at the Federal Reserve Bank of San Francisco and elsewhere. The fund
generally cannot invest money received from you until it is converted into
and is available to the fund in federal funds. Therefore, your purchase order
may not be considered in proper form until the money received from you is
available in federal funds, which may take up to two days. If the fund is
able to make investments immediately (within one business day), it may accept
your order with payment in other than federal funds.
When you buy shares, if you submit a check or a draft that is returned unpaid
to the fund we may impose a $10 charge against your account for each returned
item.
The investment authority of certain investors may be restricted by law. If
you are such an investor, you should consult your legal advisor to determine
whether and to what extent shares of the fund are legal investments for you.
If you are a municipal investor considering investing proceeds of bond
offerings, you should consult with expert counsel to determine the effect, if
any, of payments by the fund on arbitrage rebate calculations.
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the fund.
Plan documents are required for all retirement plans. Trust Company can
provide the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need
an application other than the one included in this prospectus. For a
retirement plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing
a retirement plan. Your investment representative or advisor can help you
make investment decisions within your plan.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. The shares of most of these funds are
offered to the public with a sales charge. If you would like, you can move
your investment from your fund account to an existing or new account in
another Franklin Templeton Fund (an "exchange"). Because it is technically a
sale and a purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment goal
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have
different investment minimums.
METHOD STEPS TO FOLLOW
- -------------------------------------------------------------------------------
BY MAIL 1. Send us signed written instructions
2. Include any outstanding share certificates for the
shares you want to exchange
- -------------------------------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
- If you do not want the ability to exchange by phone
- -------------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- -------------------------------------------------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You will generally pay the applicable front-end sales charge of the fund you
are exchanging into, unless you acquired your fund shares under the exchange
privilege. These charges may not apply if you qualify to buy shares without a
sales charge.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You must meet the applicable minimum investment amount of the fund you
are exchanging into, or exchange 100% of your fund shares.
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange
shares from a fund account requiring two or more signatures into another
identically registered money fund account requiring only one signature for
all transactions. Please notify us in writing if you do not want this
option to be available on your account. Additional procedures may apply.
Please see "Transaction Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares
as described above. Restrictions may apply to other types of retirement
plans. Please contact Retirement Plan Services for information on
exchanges within these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the fund within two weeks of an earlier exchange request,
(ii) exchanged shares out of the fund more than twice in a calendar
quarter, or (iii) exchanged shares equal to at least $5 million, or more
than 1% of the fund's net assets. Shares under common ownership or control
are combined for these limits. If you have exchanged shares as described
in this paragraph, you will be considered a Market Timer. Each exchange by
a Market Timer, if accepted, will be charged $5.00. Some of our funds do
not allow investments by Market Timers.
Because excessive trading can hurt fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the fund
would be harmed or unable to invest effectively, or (ii) the fund receives or
anticipates simultaneous orders that may significantly affect the fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the fund, such as "Advisor Class" or "Class Z" shares. Because the
fund does not currently offer an Advisor Class, you may exchange Advisor
Class shares of any Franklin Templeton Fund for shares of the fund at Net
Asset Value. If you do so and you later decide you would like to exchange
into a fund that offers an Advisor Class, you may exchange your fund shares
for Advisor Class shares of that fund. Certain shareholders of Class Z shares
of Franklin Mutual Series Fund Inc. may also exchange their Class Z shares
for shares of the fund at Net Asset Value.
If retirement plan assets are only temporarily invested in the fund pending
final allocation or investment instructions involving Class II shares, fund
shares may be exchanged for Class II shares of another Franklin Templeton
Fund. The time the shares are held in the fund will not count, however,
towards the Contingency Period for purposes of the Contingent Deferred Sales
Charge on Class II shares. This privilege is not available to retirement plan
assets that were previously subject to a sales charge in another Franklin
Templeton Fund.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
- -------------------------------------------------------------------------------
BY CHECK 1. You may request redemption drafts (checks) free of
charge on the shareholder application or by
calling TeleFACTS(R).
(Only available
if there are no
outstanding
share certificates
for your account)
2. You may make checks payable to any person and in
any amount of $100 or more. You will continue to
earn daily income dividends until the check has
cleared. Please see "More Information About
Selling Your Shares By Check" below.
- -------------------------------------------------------------------------------
BY MAIL 1. Send us signed written instructions. If you would
like your redemption proceeds wired to a bank
account, complete the "Wire Redemption Privilege"
section of the shareholder application and send it
to us or include the following information in your
instructions:
o The name, address and telephone number of the
bank where you want the proceeds sent
o Your bank account number
o The Federal Reserve ABA routing number
o If you are using a savings and loan or credit
union, the name of the corresponding bank and
the account number
2. Include any outstanding share certificates for the
shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts may need
to send additional documents. Accounts under
court jurisdiction may have other requirements.
- -------------------------------------------------------------------------------
BY PHONE Call Shareholder Services. If you would like your
redemption proceeds wired to a bank account, other
than an escrow account, you must first sign up for
the wire feature. To sign up, complete the "Wire
Redemption Privilege" section of the shareholder
application and send it to us or send us written
instructions, with a signature guarantee. To avoid
any delay in processing, the instructions should
include the items listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less. Institutional
accounts may exceed $50,000 by completing a
separate agreement. Call Institutional Services
to receive a copy.
o If there are no share certificates issued for
the shares you want to sell or you have already
returned them to the fund
o Unless you are selling shares in a Trust Company
retirement plan account
o Unless the address on your account was changed
by phone within the last 15 days
- If you do not want the ability to redeem by phone
to apply to your account, please let us know.
- -------------------------------------------------------------------------------
THROUGH
YOUR DEALER
Call your investment representative
- -------------------------------------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the
registered owners on the account, send us written instructions signed by all
account owners, with a signature guarantee. We are not able to receive or pay
out cash in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive
your request in proper form before 3:00 p.m. Pacific time, your wire payment
will be sent the next business day. For requests received in proper form
after 3:00 p.m. Pacific time, the payment will be sent the second business
day. You may have redemption proceeds wired to an escrow account the same
day, if we receive your request in proper form before 9:00 a.m. Pacific time.
By offering this service to you, the fund is not bound to meet any redemption
request in less than the seven day period prescribed by law. Neither the fund
nor its agents shall be liable to you or any other person if, for any reason,
a redemption request by wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds until your check or draft has cleared, which may
take seven business days or more. A certified or cashier's check may clear in
less time.
Under unusual circumstances, we may suspend redemptions or postpone payment
for more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
MORE INFORMATION ABOUT SELLING YOUR SHARES BY CHECK
If you want the convenience of check access to your fund account, order your
checks from the fund, free of charge, as described above. For security
reasons and reasons related to check processing systems that require checks
to be a certain size and printed with specific encoding formats, the fund can
only accept checks ordered from the fund. The fund cannot be responsible for
any check not ordered from the fund that is returned unpaid to a payee.
The checks are drawn through Bank of America NT & SA (the "Bank"). The Bank
may terminate this service at any time upon notice to you.
When a check is presented for payment, we will redeem an equivalent number of
shares in your account to cover the amount of the check. Your shares will be
redeemed at the Net Asset Value next determined after we receive a check that
does not exceed the collected balance in your account. If a check is
presented for payment that exceeds the collected balance in your account, the
Bank may return the check unpaid. Since you will not know the exact amount in
your account on the day a check clears, you should not use a check to close
your account.
You will generally not be able to convert a check drawn on your fund account
into a certified or cashier's check by presenting it at the Bank. Because the
fund is not a bank, we cannot assure that a stop payment order written by you
will be effective. We will use our best efforts, however, to see that these
orders are carried out.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under
age 59 1/2, unless the distribution meets an exception stated in the Code. To
obtain the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
Most Franklin Templeton Funds impose a Contingent Deferred Sales Charge on
certain investments if you sell all or a part of the investment within the
Contingency Period. While the fund generally does not impose a Contingent
Deferred Sales Charge, it will do so if you sell shares that were exchanged
into the fund from another Franklin Templeton Fund and those shares would
have been assessed a Contingent Deferred Sales Charge in the other fund. The
charge is 1% of the value of the shares sold or the Net Asset Value at the
time of purchase, whichever is less. The time the shares are held in the fund
does not count towards the completion of any Contingency Period.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT,
we will redeem additional shares to cover any Contingent Deferred Sales
Charge. For requests to sell a stated NUMBER OF SHARES, we will deduct the
amount of the Contingent Deferred Sales Charge, if any, from the sale
proceeds.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The fund typically pays income dividends each day that its Net Asset Value is
calculated. Your account may begin to receive dividends on the day after we
receive your investment and will continue to receive dividends through the
day we receive a request to sell your shares.
The amount of these dividends will vary, depending on changes in the fund's
net investment income, and there is no guarantee the fund will pay dividends.
THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY AMOUNT OF DIVIDENDS OR
RETURN ON AN INVESTMENT IN ITS SHARES.
DIVIDEND OPTIONS
You may reinvest your dividends in the fund or in the same share class of
another Franklin Templeton Fund, without any sales charges. You can also have
your dividends deposited in a bank account, or mailed by check. Deposits to a
bank account may be made by electronic funds transfer. Please see "Electronic
Fund Transfers" under "Services to Help You Manage Your Account."
Please indicate on your application the dividend option you have chosen,
otherwise we will automatically reinvest your dividends in the fund. If you
choose not to reinvest your dividends in the fund, the fund will distribute
dividends paid during the month as directed on the last business day of each
month.
To change your dividend option, please notify us by mail or phone and allow
at least seven days for the new option to be processed. To send your
dividends to another person or to a bank account, please send written
instructions with a signature guarantee. For Trust Company retirement plans,
special forms are required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
You buy and sell shares at Net Asset Value. We will use the Net Asset Value
next calculated after we receive your transaction request in proper form. If
you buy or sell shares through your Securities Dealer, however, we will use
the Net Asset Value next calculated after your Securities Dealer receives
your request, which is promptly transmitted to the fund.
HOW AND WHEN SHARES ARE PRICED
The fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share at 3:00 p.m. Pacific time. To calculate Net Asset Value
per share, the fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. The fund's assets are valued as described under "How Are
Fund Shares Valued?" in the SAI.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any
delay in processing your transaction, they should include:
o Your name,
o The fund's name,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening
if preferred.
JOINT ACCOUNTS. For accounts with more than one registered owner, we accept
written instructions signed by only one owner for certain types of
transactions or account changes. These include transactions or account
changes that you could also make by phone, such as certain redemptions of
$50,000 or less, exchanges between identically registered accounts, and
changes to the address of record. For most other types of transactions or
changes, written instructions must be signed by all registered owners.
Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
accept written
instructions to exchange or redeem shares if they are signed by all
registered owners on the account.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered
owners,
3) The proceeds are not being sent to the address of record, preauthorized
bank account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential
claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should
be able to obtain a signature guarantee from a bank, broker, credit union,
savings association, clearing agency, or securities exchange or association.
A NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up
to 2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the fund if you want
to sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do
this either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions and changes to your account by phone.
Please refer to the sections of this prospectus that discuss the transaction
you would like to make or call Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. If our lines
are busy or you are otherwise unable to reach us by phone, you may wish to
ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus.
For your protection, we may delay a transaction or not implement one if we
are not reasonably satisfied that the instructions are genuine. If this
occurs, we will not be liable for any loss. We also will not be liable for
any loss if we follow instructions by phone that we reasonably believe are
genuine or if you are unable to execute a transaction by phone.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b)
retirement accounts by phone, certain restrictions may be imposed on other
retirement plans.
To obtain any required forms or more information about distribution or
transfer procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights
and ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, we cannot accept instructions to change owners on the account unless all
owners agree in writing, even if the law in your state says otherwise. If you
would like another person or owner to sign for you, please send us a current
power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this
form of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please
send us the following documents when you open your account. This will help
avoid delays in processing your transactions while we verify who may sign on
the account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ------------------------------------------------------------------------------
CORPORATION Corporate Resolution
- ------------------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership agreement
- ------------------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- ------------------------------------------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the
shares to the street or nominee name account of another Securities Dealer.
Both dealers must have an agreement with Distributors or we cannot process
the transfer. Contact your Securities Dealer to initiate the transfer. We
will process the transfer after we receive authorization in proper form from
your delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements
and other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions
directly from your dealer or representative, including instructions to
exchange or redeem your shares. Electronic instructions may be processed
through established electronic trading systems and programs used by the fund.
Telephone instructions directly from your representative will be accepted
unless you have told us that you do not want telephone privileges to apply to
your account.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $250, or less than $50
for employee accounts and custodial accounts for minors. We will only do this
if the value of your account fell below this amount because you voluntarily
sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of
your account to $1,000, or $100 for employee accounts and custodial accounts
for minors. These minimums do not apply to IRAs and other retirement accounts
or to accounts managed by the Franklin Templeton Group.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the fund.
Under the plan, you can have money transferred automatically from your
checking or savings account to the fund each month to buy additional shares.
If you are interested in this program, please refer to the automatic
investment plan application included with this prospectus or contact your
investment representative. You may discontinue the program at any time by
calling Shareholder Services.
AUTOMATIC PAYROLL DEDUCTION
You may have money transferred from your paycheck to the fund to buy
additional shares. Your investments will continue automatically until you
instruct the fund and your employer to discontinue the plan. To process your
investment, we must receive both the check and payroll deduction information
in required form. Due to different procedures used by employers to handle
payroll deductions, there may be a delay between the time of the payroll
deduction and the time we receive the money.
CUMULATIVE QUANTITY DISCOUNTS
You may include the cost or current value (whichever is higher) of your fund
shares when determining if you may buy shares of another Franklin Templeton
Fund at a discount. You may also include your fund shares towards the
completion of a Letter of Intent established in connection with the purchase
of shares of another Franklin Templeton Fund.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or
annual basis. The value of your account must be at least $5,000 and the
minimum payment amount for each withdrawal must be at least $50. For
retirement plans subject to mandatory distribution requirements, the $50
minimum will not apply.
If you would like to establish a systematic withdrawal plan, call Shareholder
Services. You may choose to direct your payments to buy the same class of
shares of another Franklin Templeton Fund or have the money sent directly to
you, to another person, or to a checking or savings account. If you choose to
have the money sent to a checking or savings account, please see "Electronic
Fund Transfers" below.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us by
mail or by phone at least seven business days before the end of the month
preceding a scheduled payment. Please see "How Do I Buy, Sell and Exchange
Shares? - Systematic Withdrawal Plan" in the SAI for more information.
ELECTRONIC FUND TRANSFERS
You may choose to have distributions or payments under a systematic
withdrawal plan sent directly to a checking or savings account. If the
account is with a bank that is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds transfer. If you
choose this option, please allow at least fifteen days for initial
processing. We will send any payments made during that time to the address of
record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton Fund;
o exchange shares (within the same class) between identically registered
Franklin Templeton Class I and Class II accounts; and
o request duplicate statements, money fund checks, and deposit slips for
Franklin Templeton accounts.
You will need the fund's code number to use TeleFACTS(R). The fund's code
number is 113.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. PLEASE
VERIFY THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the fund will be sent every six months. To reduce fund
expenses, we attempt to identify related shareholders within a household
and send only one copy of a report. Call Fund Information if you would
like an additional free copy of the fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more
information, call Institutional Services.
Special procedures have been designed for banks and other institutions that
would like to open multiple accounts in the fund. Please see the SAI for more
information.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your
shares are held by a financial institution, in a street name account, or
networked through the NSCC, the fund may not be able to offer these services
directly to you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor
Services at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California
94403-7777. The fund, Distributors and Advisers are also located at this
address. You may also contact us by phone at one of the numbers listed below.
HOURS OF OPERATION (PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- -------------------------------------------------------------------------------
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m.(Saturday)
Retirement Plan Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
Your phone call may be monitored or recorded to ensure we provide you with
high quality service. You will hear a regular beeping tone if your call is
being recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
ADVISERS - Franklin Advisers, Inc., the Portfolio's investment manager and
the fund's administrator
BOARD - The Board of Directors of the fund
CLASS I AND CLASS II - Certain funds in the Franklin Templeton Funds offer
multiple classes of shares. The different classes have proportionate
interests in the same portfolio of investment securities. They differ,
however, primarily in their sales charge structures and Rule 12b-1 plans.
Shares of the fund are considered Class I shares for redemption, exchange and
other purposes.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. The holding period begins on the day you buy
your shares. For example, if you buy shares on the 18th of the month, they
will age one month on the 18th day of the next month and each following
month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Directors."
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., and Templeton Variable
Products Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange
shares based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TELEFACTS(R) - Franklin Templeton's automated customer servicing system
TRUST COMPANY - Franklin Templeton Trust Company. Trust Company is an
affiliate of Distributors and both are wholly owned subsidiaries of Resources.
WE/OUR/US - Unless the context indicates a different meaning, these terms
refer to the fund and/or Investor Services, Distributors, or other wholly
owned subsidiaries of Resources.
FRANKLIN
FEDERAL
MONEY FUND
STATEMENT OF
ADDITIONAL INFORMATION
NOVEMBER 1, 1998
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN(R
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TABLE OF CONTENTS
How Does the Fund Invest Its Assets? ................................ 2
Investment Restrictions ............................................. 3
Officers and Directors .............................................. 4
Investment Management
and Other Services ................................................. 8
How Does the Portfolio Buy
Securities for Its Portfolio? ...................................... 9
How Do I Buy, Sell and Exchange Shares?.............................. 10
How Are Fund Shares Valued? ......................................... 11
Additional Information on
Distributions and Taxes ............................................ 12
The Fund's Underwriter .............................................. 14
How Does the Fund
Measure Performance? ............................................... 14
Miscellaneous Information ........................................... 15
Financial Statements ................................................ 16
Useful Terms and Definitions ........................................ 16
Appendix
Summary of Procedures to
Monitor Conflicts of Interest ..................................... 17
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When reading this SAI, you will see certain terms beginning with capital
letters. This means the term is explained under "Useful Terms and
Definitions."
- ------------------------------------------------------------------------------
The fund is a no-load, diversified, open-end management investment company.
The Prospectus, dated November 1, 1998, which we may amend from time to time,
contains the basic information you should know before investing in the fund.
For a free copy, call 1-800/DIAL BEN.
THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN
MORE DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE
YOU WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF
THE FUND, AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
- ------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
o ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANK;
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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HOW DOES THE FUND INVEST ITS ASSETS?
- ------------------------------------------------------------------------------
WHAT IS THE FUND'S GOAL?
The investment goal of the fund is to obtain as high a level of current
income as is consistent with capital preservation and liquidity. This goal is
fundamental, which means that it may not be changed without shareholder
approval. The fund seeks to achieve its goal by investing all of its assets
in shares of the U.S. Government Securities Money Market Portfolio (the
"Portfolio"). The Portfolio is a series of The Money Market Portfolios
("Money Market"). Its investment goal is the same as the fund's.
The following gives more detailed information about the Portfolio's
investment policies and the types of securities that it may buy. Please read
this information together with the section "How Does the Fund Invest Its
Assets?" in the Prospectus.
The fund's investment policies are substantially similar to those described
below for the Portfolio except, in all cases, the fund may pursue its
policies by investing in an open-end management investment company with the
same investment goal and substantially similar policies and restrictions as
the fund.
The achievement of the Portfolio's goal 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 U.S. government securities, there will be a
generally lower yield than if the Portfolio buys 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, goal will be achieved.
MORE INFORMATION ABOUT THE
KINDS OF SECURITIES THE PORTFOLIO BUYS
LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the
Board of Trustees of Money Market and subject to the following conditions,
the Portfolio may lend its portfolio securities to qualified securities
dealers or other institutional investors, if such loans do not exceed 10% of
the value of the Portfolio's total assets at the time of the most recent
loan. The borrower must deposit with the Portfolio's custodian bank
collateral with an initial market value of at least 102% of the initial
market value of the securities loaned, including any accrued interest, with
the value of the collateral and loaned securities marked-to-market daily to
maintain collateral coverage of at least 100%. This collateral shall consist
of cash, securities issued by the U.S. government, its agencies or
instrumentalities, or irrevocable letters of credit. The lending of
securities is a common practice in the securities industry. The Portfolio may
engage in security loan arrangements with the primary objective of increasing
the Portfolio's income either through investing cash collateral in short-term
interest bearing obligations or by receiving a loan premium from the
borrower. Under the securities loan agreement, the Portfolio continues to be
entitled to all dividends or interest on any loaned securities. As with any
extension of credit, there are risks of delay in recovery and loss of rights
in the collateral should the borrower of the security fail financially.
PORTFOLIO TURNOVER RATE. Because the Portfolio will not buy 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.
THE FUND'S MASTER/FEEDER STRUCTURE
The fund's structure, where it invests all of its assets in the Portfolio, is
sometimes known as a "Master/Feeder" structure. By investing all of its
assets in shares of the Portfolio, the fund, other mutual funds and
institutional investors can pool their assets. This may result in asset
growth and lower expenses, although there is no guarantee that this will
happen. Advisers has agreed in advance to limit expenses so that they will
not be higher than if the fund invested directly in money market securities.
Advisers may end this arrangement at any time upon notice to the Board.
If the fund, as a shareholder of the Portfolio, has to vote on a matter
relating to the Portfolio, it will hold a meeting of fund shareholders and
will cast its votes in the same proportion as the fund's shareholders voted.
There are some risks associated with the fund's Master/Feeder structure. If
other shareholders in the Portfolio sell their shares, the fund's expenses
may increase. Additionally, any economies of scale the fund has 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 also have effective voting control.
If the Portfolio changes its objective or any of its fundamental policies and
fund shareholders do not approve the same change for the fund, the fund may
be forced to withdraw its investment from the Portfolio. Likewise, if the
Board considers it to be in the best interest of the fund, the fund may
withdraw its investment in the Portfolio at any time. If either situation
occurs, the Board will decide what action to take. Possible solutions might
include investing all of the fund's assets in another pooled investment
entity with the same investment goal and substantially similar policies as
the fund, or hiring an investment advisor to manage the fund's investments.
Either circumstance could increase the fund's expenses.
INVESTMENT RESTRICTIONS
- ------------------------------------------------------------------------------
The fund has adopted the following restrictions as fundamental policies.
These restrictions may not be changed without the approval of a majority of
the outstanding voting securities of the fund. Under the 1940 Act, this means
the approval of (i) more than 50% of the outstanding shares of the fund or
(ii) 67% or more of the shares of the fund present at a shareholder meeting
if more than 50% of the outstanding shares of the fund are represented at the
meeting in person or by proxy, whichever is less. 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 objective 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
objective 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 objective 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 objective 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 is met at the time of investment, a later
increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities or the amount of assets will not be
considered a violation of any of the foregoing restrictions.
OFFICERS AND DIRECTORS
- ------------------------------------------------------------------------------
The Board has the responsibility for the overall management of the fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the fund who are responsible for
administering the fund's day-to-day operations. The affiliations of the
officers and Board members and their principal occupations for the past five
years are shown below. Members of the Board who are considered "interested
persons" of the fund under the 1940 Act are indicated by an asterisk (*).
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS WITH THE FUND DURING THE PAST FIVE YEARS
Frank H. Abbott, III (77)
1045 Sansome Street
San Francisco, CA 94111
Director
President and Director, Abbott Corporation (an investment company); director
or trustee, as the case may be, of 27 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, Director, MotherLode Gold
Mines Consolidated (gold mining) and Vacu-Dry Co. (food processing).
Harris J. Ashton (66)
191 Clapboard Ridge Road
Greenwich, CT 06830
Director
Director, RBC Holdings, Inc. (a bank holding company) and Bar-S Foods (a meat
packing company); director or trustee, as the case may be, of 49 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers).
Robert F. Carlson (70)
2120 Lambeth Way
Carmichael, CA 95608
Director
Member and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); director or trustee, as the case may
be, of nine of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, member and Chairman of the Board, Sutter Community
Hospitals, Sacramento, CA, member, Corporate Board, Blue Shield of
California, and Chief Counsel, California Department of Transportation.
S. Joseph Fortunato (66)
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 or trustee,
as the case may be, of 51 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, Director, General Host Corporation
(nursery and craft centers).
*Charles B. Johnson (65)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of
the Board
and Director
President, Chief Executive Officer and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Advisers, Inc., Franklin
Advisory Services, Inc., Franklin Investment Advisory Services, Inc. and
Franklin Templeton Distributors, Inc.; Director, Franklin/Templeton Investor
Services, Inc. and Franklin Templeton Services, Inc.; officer and/or director
or trustee, as the case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and of 50 of the investment companies in the Franklin
Templeton Group of Funds; and FORMERLY, Director, General Host Corporation
(nursery and craft centers).
*Rupert H. Johnson, Jr. (58)
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.; Senior Vice President and Director, Franklin Advisory Services, Inc.
and Franklin Investment Advisory Services, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; and officer and/or director or trustee, as the case
may be, of most of the other subsidiaries of Franklin Resources, Inc. and of
53 of the investment companies in the Franklin Templeton Group of Funds.
Frank W.T. LaHaye (69)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Director
General Partner, Miller & LaHaye, which is the General Partner of Peregrine
Ventures II (venture capital firm); Chairman of the Board and Director,
Quarterdeck Corporation (software firm); Director, Digital Transmission
Systems, Inc. (wireless communications); director or trustee, as the case may
be, of 27 of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, Director, Fischer Imaging Corporation (medical imaging
systems) and General Partner, Peregrine Associates, which was the General
Partner of Peregrine Ventures (venture capital firm).
*William J. Lippman (73)
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Director
Senior Vice President, Franklin Resources, Inc. and Franklin Management,
Inc.; President and Director, Franklin Advisory Services, Inc.; and officer
and/or director or trustee, as the case may be, of six of the investment
companies in the Franklin Templeton Group of Funds.
Gordon S. Macklin (70)
8212 Burning Tree Road
Bethesda, MD 20817
Director
Director, Fund American Enterprises Holdings, Inc., MCI Communications
Corporation, MedImmune, Inc. (biotechnology), Spacehab, Inc. (aerospace
services) and Real 3D (software); director or trustee, as the case may be, of
49 of the investment companies in the Franklin Templeton Group of Funds; and
FORMERLY, Chairman, White River Corporation (financial services) and
Hambrecht and Quist Group (investment banking), and President, National
Association of Securities Dealers, Inc.
Harmon E. Burns (53)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President and Director, Franklin Resources, Inc., Franklin
Templeton Distributors, Inc. and Franklin Templeton Services, Inc.; Executive
Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; and officer and/or director or trustee, as the case
may be, of most of the other subsidiaries of Franklin Resources, Inc. and of
53 of the investment companies in the Franklin Templeton Group of Funds.
Martin L. Flanagan (38)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
and Chief
Financial Officer
Senior Vice President and Chief Financial Officer, Franklin Resources, Inc.;
Executive Vice President and Director, Templeton Worldwide, Inc.; Executive
Vice President, Chief Operating Officer and Director, Templeton Investment
Counsel, Inc.; Executive Vice President and Chief Financial Officer, Franklin
Advisers, Inc.; Chief Financial Officer, Franklin Advisory Services, Inc. and
Franklin Investment Advisory Services, Inc.; President and Director, Franklin
Templeton Services, Inc.; Senior Vice President and Chief Financial Officer,
Franklin/Templeton Investor Services, Inc.; officer and/or director of some
of the other subsidiaries of Franklin Resources, Inc.; and officer and/or
director or trustee, as the case may be, of 53 of the investment companies in
the Franklin Templeton Group of Funds.
Deborah R. Gatzek (49)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
and Secretary
Senior Vice President and General Counsel, Franklin Resources, Inc.; Senior
Vice President, Franklin Templeton Services, Inc. and Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Vice
President, Franklin Advisory Services, Inc.; Vice President, Chief Legal
Officer and Chief Operating Officer, Franklin Investment Advisory Services,
Inc.; and officer of 53 of the investment companies in the Franklin Templeton
Group of Funds.
Diomedes Loo-Tam (59)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer
and Principal
Accounting Officer
Senior Vice President, Franklin Templeton Services, Inc.; and officer of 32
of the investment companies in the Franklin Templeton Group of Funds.
Edward V. McVey (61)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President and National Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 28 of the investment companies in the
Franklin Templeton Group of Funds.
Thomas J. Runkel (40)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Vice President, Franklin Advisers, Inc.; and officer of four of the
investment companies in the Franklin Templeton Group of Funds.
Richard C. Stoker (61)
11615 Spring Ridge Rd.
Potomac, MD 20854
Vice President
Senior Vice President, Franklin Templeton Distributors, Inc.; Vice President,
Franklin Management, Inc.; and officer of five of the investment companies in
the Franklin Templeton Group of Funds.
R. Martin Wiskemann (71)
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 and
Director, ILA Financial Services, Inc.; and officer and/or director or
trustee, as the case may be, of 15 of the investment companies in the
Franklin Templeton Group of Funds.
The officers and Board members of the fund are also officers and trustees of
Money Market, except as follows: Rupert H. Johnson, Jr. is President and
Director of the fund and Vice President and Trustee of Money Market, William
J. Lippman, director of the fund and Thomas J. Runkel and Richard C. Stoker,
officers of the fund, are not officers or directors of Money Market.
Members of Money Market's Board of Trustees who are considered "interested
persons" of Money Market under the 1940 Act are also indicated by an asterisk
(*).
The following trustee of Money Market is not an officer or director of the
fund:
POSITIONS AND OFFICES PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS WITH MONEY MARKET THE PAST FIVE YEARS
*Charles E. Johnson (42)
500 East Broward Blvd.
Fort Lauderdale, FL 33394-3091
President and
Trustee
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc.; Chairman and Director, Templeton Investment
Counsel, Inc.; Vice President, Franklin Advisers, Inc.; officer and/or
director of some of the other subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee, as the case may be, of 34 of the
investment companies in the Franklin Templeton Group of Funds.
The tables above show the officers, Board members and the trustees of Money
Market who are affiliated with Distributors and Advisers. As of June 1, 1998,
nonaffiliated members of the Board are paid $60 per month plus $50 per
meeting attended. Also as of June 1, 1998, nonaffiliated trustees of Money
Market are no longer paid any fees. As shown above, the nonaffiliated Board
members and trustees of Money Market also serve as directors or trustees of
other investment companies in the Franklin Templeton Group of Funds. They may
receive fees from these funds for their services. The fees payable to
nonaffiliated Board members by the fund are subject to reductions resulting
from fee caps limiting the amount of fees payable to Board members who serve
on other boards within the Franklin Templeton Group of Funds. The following
table provides the total fees paid to nonaffiliated Board members and
trustees of Money Market by the fund, by Money Market, and by other funds in
the Franklin Templeton Group of Funds.
<TABLE>
<CAPTION>
TOTAL FEES NUMBER OF BOARDS
RECEIVED FROM IN THE FRANKLIN
TOTAL FEES TOTAL FEES THE FRANKLIN TEMPLETON GROUP OF
RECEIVED RECEIVED FROM TEMPLETON GROUP FUNDS ON WHICH
NAME FROM THE FUND* MONEY MARKET* OF FUNDS** EACH SERVES***
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank H. Abbott, III $1,734 $1,100 $165,937 27
Harris J. Ashton 1,663 1,050 344,642 49
Robert Carlson+ 785 450 17,680 9
S. Joseph Fortunato 1,657 1,050 361,562 51
David Garbellano++ 300 200 91,317 N/A
Frank W.T. LaHaye 1,734 1,100 141,433 27
Gordon S. Macklin 1,663 1,050 337,292 49
</TABLE>
+Elected January 15, 1998.
++Deceased September 27, 1997.
*For the fiscal year ended June 30, 1998. During the period from July, 1997
through May, 1998, fees at the rate of $75 per month plus $75 per meeting
attended were in effect for the fund, and fees at the rate of $50 per month
plus $50 per meeting attended were in effect for Money Market.
**For the calendar year ended December 31, 1997.
***We base the number of boards on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the Board members and trustees of Money Market are responsible. The
Franklin Templeton Group of Funds currently includes 54 registered investment
companies, with approximately 168 U.S. based funds or series.
Nonaffiliated members of the Board and trustees of Money Market 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 or trustee. No officer or Board member or trustee of
Money Market received any other compensation, including pension or retirement
benefits, directly or indirectly from the fund, Money Market or other funds
in the Franklin Templeton Group of Funds. Certain officers or Board members
and trustees of Money Market who are shareholders of Resources may be deemed
to receive indirect remuneration by virtue of their participation, if any, in
the fees paid to its subsidiaries.
As of October 2, 1998, the officers and Board members, as a group, owned of
record and beneficially approximately 143,291 shares, or less than 1% of the
fund's total outstanding shares. Many of the Board members also own shares in
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.
INVESTMENT MANAGEMENT
AND OTHER SERVICES
- ------------------------------------------------------------------------------
INVESTMENT MANAGER AND ADMINISTRATOR AND SERVICES PROVIDED. Advisers is the
investment manager of the Portfolio and is also the administrator of the
fund. Advisers provides investment research and portfolio management
services, including the selection of securities for the Portfolio to buy,
hold or sell and the selection of brokers through whom the Portfolio's
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 Portfolio's investment activities. Advisers and its
officers, directors and employees are covered by fidelity insurance for the
protection of the fund and the Portfolio.
Advisers and its affiliates act as investment manager to numerous other
investment companies and accounts. Advisers may give advice and take action
with respect to any of the other funds it manages, or for its own account,
that may differ from action taken by Advisers on behalf of the Portfolio.
Similarly, with respect to the Portfolio, Advisers is not obligated to
recommend, buy or sell, or to refrain from recommending, buying or selling
any security that Advisers and access persons, as defined by the 1940 Act,
may buy or sell for its or their own account or for the accounts of any other
fund. Advisers is not obligated to refrain from investing in securities held
by the Portfolio or other funds that it manages. Of course, any transactions
for the accounts of Advisers and other access persons will be made in
compliance with the Portfolio's Code of Ethics. Please see "Miscellaneous
Information - Summary of Code of Ethics."
MANAGEMENT AND ADMINISTRATION FEES. Under its management agreement, the
Portfolio pays Advisers a management fee equal to an annual rate of 0.15 of
1% of the value of the Portfolio's average daily net assets. The fee is
computed at the close of business on the last business day of each month.
Advisers provides various administrative, statistical, and other services to
the fund. Under its administration agreement, the fund pays Advisers an
administration fee equal to an annual rate of 91/200 of 1% for the first $100
million of its average daily net assets; and 33/100 of 1% of its average
daily nets assets over $100 million up to and including $250 million; and
7/25 of 1% of its average daily net assets in excess of $250 million. The fee
is computed at the close of business on the last business day of each month.
For the fiscal years ended June 30, 1998, 1997 and 1996, management fees of
the Portfolio, before any advance waiver, totaled $394,321, $404,358, and
$484,382 respectively. Under an agreement by Advisers to limit its fees, the
Portfolio paid management fees totaling $367,433, $364,509, and $424,848, for
the same periods. The fund paid administration fees totaling $553,251,
$551,374, and $543,109, for the same periods.
MANAGEMENT AGREEMENT. The management agreement for the Portfolio is in effect
until February 28, 1999. It may continue in effect for successive annual
periods if its continuance is specifically approved at least annually by a
vote of the Board of Trustees of Money Market or by a vote of the holders of
a majority of the Portfolio's outstanding voting securities, and in either
event by a majority vote of the trustees of Money Market who are not parties
to the management agreement or interested persons of any such party (other
than as members of the Board of 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 Board of Trustees of Money Market or by a
vote of the holders of a majority of the Portfolio's outstanding voting
securities on 30 days' written notice to Advisers, or by Advisers on 60 days'
written notice to the fund, and will automatically terminate in the event of
its assignment, as defined in the 1940 Act.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly owned subsidiary of
Resources, is the fund's shareholder servicing agent 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. The fund may also reimburse Investor
Services for certain out-of-pocket expenses, which may include payments by
Investor Services to entities, including affiliated entities, that provide
sub-shareholder services, recordkeeping and/or transfer agency services to
beneficial owners of the fund. The amount of reimbursements for these
services per benefit plan participant fund account per year may not exceed
the per account fee payable by the fund to Investor Services in connection
with maintaining shareholder accounts.
CUSTODIAN. Investor Services, in its capacity as the transfer agent for the
Portfolio, effectively acts as the fund's custodian and holds the fund's
shares of the Portfolio on its books. Bank of New York, Mutual Funds
Division, 90 Washington Street, New York, New York 10286, acts as custodian
of the fund's cash, pending investment in shares of the Portfolio. Bank of
New York also acts as custodian of the securities and other assets of the
Portfolio. The custodian does not participate in decisions relating to the
purchase and sale of portfolio securities.
AUDITOR. PricewaterhouseCoopers LLP, 333 Market Street, San Francisco,
California 94105, is the fund's independent auditor. During the fiscal year
ended June 30, 1998, the auditor's services consisted of rendering an opinion
on the financial statements of the fund included in the fund's Annual Report
to Shareholders for the fiscal year ended June 30, 1998.
HOW DOES THE PORTFOLIO BUY
SECURITIES FOR ITS PORTFOLIO?
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The fund will not incur any brokerage or other costs in connection with its
purchase or redemption of shares of the Portfolio.
Since most purchases by the Portfolio are principal transactions at net
prices, the Portfolio incurs little or no brokerage costs. The Portfolio
deals directly with the selling or buying principal or market maker without
incurring charges for the services of a broker on its behalf, unless it is
determined that a better price or execution may be obtained by using the
services of a broker. Purchases of portfolio securities from underwriters
will include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers will include a spread between the bid
and ask prices. As a general rule, the fund does not buy bonds in
underwritings where it is given no choice, or only limited choice, in the
designation of dealers to receive the commission. The Portfolio seeks to
obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers in return for research and
statistical information, as well as for special services provided by the
dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on
the research services Advisers receives from dealers effecting transactions
in portfolio securities. The allocation of transactions in order to obtain
additional research services permits Advisers to supplement its own research
and analysis activities and to receive the views and information of
individuals and research staffs of other securities firms. As long as it is
lawful and appropriate to do so, Advisers and its affiliates may use this
research and data in their investment advisory capacities with other clients.
If the fund's officers are satisfied that the best execution is obtained, the
sale of fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, may also be considered a factor in the selection of
broker-dealers to execute the fund's portfolio transactions.
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 these 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. In some cases this
procedure could 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 may improve execution
and reduce transaction costs to the Portfolio.
Depending on Advisers' view of market conditions, the Portfolio may or may
not buy 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 before maturity to meet redemptions or as a result
of a revised management evaluation of the issuer.
During the fiscal years ended June 30, 1998, 1997 and 1996, the Portfolio
paid no brokerage commissions.
As of June 30, 1998, neither the fund nor the Portfolio owned securities of
its regular broker-dealers.
HOW DO I BUY, SELL AND EXCHANGE SHARES?
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ADDITIONAL INFORMATION ON BUYING SHARES
The fund continuously offers its shares through Securities Dealers who have
an agreement with Distributors. Banks and financial institutions that sell
shares of the fund may be required by state law to register as Securities
Dealers.
All purchases of fund shares will be credited to you, in full and fractional
shares of the fund (rounded to the nearest 1/100 of a share), in an account
maintained for you by the fund's transfer agent. No share certificates will
be issued for fractional shares at any time. No certificates will be issued
to you if you have elected to redeem shares by check or by preauthorized bank
or brokerage firm account methods. The offering of shares of the fund may be
suspended at any time and resumed at any time thereafter.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If a substantial number of shareholders should, within a short period, sell
their shares of the fund under the exchange privilege, the fund might have to
sell portfolio securities it might otherwise hold and incur the additional
costs related to such transactions.
The proceeds from the sale of shares of an investment company are generally
not available until the seventh day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange
until that seventh day. The sale of fund shares to complete an exchange will
be effected at Net Asset Value at the close of business on the day the
request for exchange is received in proper form. Please see "May I Exchange
Shares for Shares of Another Fund?" in the Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Payments under the plan will be
made from the redemption of an equivalent amount of shares in your account,
generally on the 25th day of the month in which a payment is scheduled. If
the 25th falls on a weekend or holiday, we will process the redemption on the
next business day.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust
the shares in your account if payments exceed distributions received from the
fund. If a withdrawal amount exceeds the value of your account, your account
will be closed and the remaining balance in your account will be sent to you.
Because the amount withdrawn under the plan may be more than your actual
yield or income, part of the payment may be a return of your investment.
The fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically discontinue a systematic withdrawal plan if
all shares in your account are withdrawn or if the fund receives notification
of the shareholder's death or incapacity.
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 the 90-day period. This
commitment is irrevocable without the prior approval of the SEC. In the case
of redemption requests in excess of these amounts, the Board reserves the
right to make payments in whole or in part in securities or other assets of
the fund, 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 these
circumstances, the securities distributed would be valued at the price used
to compute the fund's net assets and you may incur brokerage fees in
converting the securities to cash.
GENERAL INFORMATION
If dividend checks are returned to the fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your
dividend option to reinvest all distributions. The proceeds will be
reinvested in additional shares at Net Asset Value until we receive new
instructions.
Distribution or redemption checks sent to you do not earn interest or any
other income during the time the checks remain uncashed. Neither the fund nor
its affiliates will be liable for any loss caused by your failure to cash
such checks. The fund is not responsible for tracking down uncashed checks,
unless a check is returned as undeliverable.
In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional efforts to
find you from your account. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for its
location services.
All checks, drafts, wires and other payment mediums used to buy or sell
shares of the fund must be denominated in U.S. dollars, drawn on a U.S. bank,
and are accepted subject to collection at full face value. Checks drawn in
U.S. funds on foreign banks will not be credited to your account and
dividends will not begin accruing until the proceeds are collected, which may
take a long period of time. We may, in our sole discretion, either (a) reject
any order to buy or sell shares denominated in any other currency or (b)
honor the transaction or make adjustments to your account for the transaction
as of a date and with a foreign currency exchange factor determined by the
drawee bank.
SPECIAL SERVICES. Investor Services may pay certain financial institutions
that maintain omnibus accounts with the fund on behalf of numerous beneficial
owners for recordkeeping operations performed with respect to such owners.
For each beneficial owner in the omnibus account, the fund may reimburse
Investor Services an amount not to exceed the per account fee that the fund
normally pays Investor Services. These financial institutions may also charge
a fee for their services directly to their clients.
Investor Services may charge you separate fees, negotiated directly with you,
for providing special services in connection with your account, such as
processing a large number of checks each month. Fees for special services
will not increase the expenses borne by the fund.
Special procedures have been designed for banks and other institutions
wishing to open multiple accounts. An 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 instructions may
be provided to the fund at a later date. 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.
The fund will provide to each institution, on a quarterly basis or more
frequently if requested, a statement setting forth each sub-account's share
balance, income earned for the period, income earned for the year to date,
and total current market value.
HOW ARE FUND SHARES VALUED?
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We calculate the Net Asset Value per share as of 3:00 p.m. Pacific time, each
day that the NYSE is open for trading. As of the date of this SAI, the fund
is informed that the NYSE observes the following holidays: New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The valuation of the Portfolio's portfolio securities is based on the
amortized cost of the securities, which does not take into account unrealized
capital gains or losses. This method 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 but 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 an
investment in a fund utilizing only market values, and existing investors in
the Portfolio would receive less investment income. The opposite would be
true in a period of rising interest rates.
The Portfolio's use of amortized cost, which helps the Portfolio maintain its
Net Asset Value per share of $1, is permitted by a rule adopted by the SEC.
Under this rule, the Portfolio must adhere to certain conditions. The
Portfolio must maintain a dollar-weighted average portfolio maturity of 90
days or less and only buy instruments having remaining maturities of 397
calendar days or less. The Portfolio must also invest only in those U.S.
dollar-denominated securities that the Board of Trustees of Money Market
determines present minimal credit risks and that are rated in one of the two
highest short-term rating categories by nationally recognized rating
services, or if unrated are deemed comparable in quality, or are instruments
issued by an issuer that, with respect to an outstanding issue of short-term
debt that is comparable in priority and protection, has received a rating
within the two highest rating categories.
The Board of Trustees of Money Market has established procedures designed to
stabilize, to the extent reasonably possible, the Portfolio's price per share
at $1, as computed for the purpose of sales and redemptions. These procedures
include a review of the Portfolio's holdings by the Board of Trustees of
Money Market, at such intervals as it may deem appropriate, to determine if
the Portfolio's Net Asset Value calculated by using available market
quotations deviates from $1 per share based on amortized cost. The extent of
any deviation will be examined by the Board of Trustees of Money Market. If a
deviation exceeds 1/2 of 1%, the trustees will promptly consider what action,
if any, will be initiated. If the Board of Trustees of Money Market
determines that a deviation exists that may result in material dilution or
other unfair results to investors or existing shareholders, it will take
corrective action that it regards as necessary and appropriate, which may
include selling portfolio instruments before maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding
dividends, redeeming shares in kind, or establishing a Net Asset Value per
share by using available market quotations.
ADDITIONAL INFORMATION
ON DISTRIBUTIONS AND TAXES
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DISTRIBUTIONS
DISTRIBUTIONS OF NET INVESTMENT INCOME. The fund declares dividends for each
day that the fund's Net Asset Value is calculated. These dividends will equal
all of the fund's daily net income payable to shareholders of record as of
the close of business the preceding day. The fund's daily net income includes
its pro rata share of the Portfolio's income plus or minus any gain or loss
on the sale of Portfolio shares and changes in unrealized appreciation or
depreciation in Portfolio shares (to the extent required to maintain a
constant net asset value per share), less the estimated expenses of the fund.
The Portfolio's income consists of accrued interest and any original issue or
acquisition discount, plus or minus any gain or loss on the sale of
securities held by the Portfolio and changes in unrealized appreciation or
depreciation in securities held by the Portfolio, less the estimated expenses
of the Portfolio.
The fund earns income and gains on its investment in the Portfolio. The
Portfolio, in turn, earn income generally in the form of interest, original
issue, market and acquisition discount, and other income derived from its
investments. This income, together with the excess of any net short-term
capital gain over net long-term capital loss realized by the Portfolio, less
expenses incurred in the operation of the Portfolio, is paid to the fund as
ordinary dividend income. The ordinary dividend income received from the
Portfolio, less expenses incurred in the operation of the fund, constitutes
the fund's net investment income from which dividends may be paid to you. Any
distributions by the fund from such income will be taxable to you as ordinary
income, whether you take them in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS. The fund may receive capital gain
distributions from the Portfolio, consisting of the excess of any net
long-term capital gain over net short-term capital loss realized by the
Portfolio on the sale or disposition of its underlying portfolio securities.
The fund may also derive capital gains and losses in connection with the sale
of Portfolio shares. Distributions derived from the excess of net short-term
capital gain over net long-term capital loss will be taxable to you as
ordinary income. Distributions derived from the excess of net long-term
capital gain over net short-term capital loss, including capital gain
distributions received from the Portfolio, will be taxable to you as
long-term capital gain, regardless of how long you have held your shares in
the fund. Any net short-term or long-term capital gains realized by the fund
(net of any capital loss carryovers) generally will be distributed once each
year, and may be distributed more frequently, if necessary, in order to
reduce or eliminate federal excise or income taxes on the fund. Because the
fund is a money market fund, it does not anticipate realizing any long-term
capital gains, however.
CERTAIN DISTRIBUTIONS PAID IN JANUARY. Distributions which are declared in
October, November or December and paid to you in January of the following
year will be treated for tax purposes as if they had been received by you on
December 31 of the year in which they were declared. The fund will report
this income to you on your Form 1099-DIV for the year in which these
distributions were declared.
MAINTENANCE OF $1.00 NET ASSET VALUE. Gains and losses on the sale of
portfolio securities and unrealized appreciation or depreciation in the value
of these securities may require the fund to distribute income or make
distribution adjustments in order to maintain a $1.00 net asset value. These
procedures may result in under- or over-distributions of net investment
income.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The fund will inform you
of the amount and character of your distributions at the time they are paid,
and will advise you of the tax status for federal income tax purposes of such
distributions shortly after the close of each calendar year.
TAXES
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The fund has elected
to be treated as a regulated investment company under Subchapter M of the
Code, has qualified as such for its most recent fiscal year, and intends so
to qualify during the current fiscal year. The Board reserves the right not
to maintain the qualification of the fund as a regulated investment company
if it determines such course of action to be beneficial to its shareholders.
In such case, the fund will be subject to federal, and possibly state,
corporate taxes on its taxable income and gains, and distributions to you
will be taxed as ordinary dividend income to the extent of the fund's
available earnings and profits.
In order to qualify as a regulated investment company for tax purposes, the
fund must meet certain specific requirements, including:
o The fund must maintain a diversified portfolio of securities, wherein no
security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of the fund's total assets,
and, with respect to 50% of the fund's total assets, no investment (other
than cash and cash items, U.S. government securities and securities of
other regulated investment companies) can exceed 5% of the fund's total
assets or 10% of the outstanding voting securities of the issuer;
o The fund must derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the
sale or disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies; and
o The fund must distribute to its shareholders at least 90% of its
investment company taxable income (i.e., net investment income plus net
short-term capital gains) and net tax-exempt income for each of its fiscal
years.
EXCISE TAX DISTRIBUTION REQUIREMENTS. The Code requires the fund to
distribute at least 98% of its taxable ordinary income earned during the
calendar year and 98% of its capital gain net income earned during the twelve
month period ending October 31 (in addition to undistributed amounts from the
prior year) to you by December 31 of each year in order to avoid federal
excise taxes. The fund intends to declare and pay sufficient dividends in
December (or in January of the following year that are treated by you as
received in December of the prior year) but does not guarantee and can give
no assurances that its distributions will be sufficient to eliminate all such
taxes.
REDEMPTION OF FUND SHARES. Redemptions and exchanges of fund shares are
taxable transactions for federal and state income tax purposes. The tax law
requires that you recognize a gain or loss in an amount equal to the
difference between your tax basis and the amount you received in exchange for
your shares, subject to the rules described below. If you hold your shares as
a capital asset, the gain or loss that you realize will be capital gain or
loss, and will be long-term for federal income tax purposes if you have held
your shares for more than one year at the time of redemption or exchange. Any
loss incurred on the redemption or exchange of shares held for six months or
less will be treated as a long-term capital loss to the extent of any
long-term capital gains distributed to you by the fund on those shares.
All or a portion of any loss that you realize upon the redemption of your
fund shares will be disallowed to the extent that you purchase other shares
in the fund (through reinvestment of dividends or otherwise) within 30 days
before or after your share redemption. Any loss disallowed under these rules
will be added to your tax basis in the new shares you purchase. Because the
fund seeks to maintain a constant $1.00 per share Net Asset Value, you should
not, however, expect to realize a gain or loss upon redemption of your fund
shares.
U.S. GOVERNMENT OBLIGATIONS. Many states grant tax-free status to dividends
paid to you from interest earned on 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, bankers'
acceptances, commercial paper and repurchase agreements collateralized by
U.S. government securities do not generally qualify for tax-free treatment.
It is anticipated, however, that no portion of the fund's distributions will
qualify for exemption from state and local income tax as dividends paid from
interest earned on direct obligations of the U.S. Government. At the end of
each calendar year, the fund will provide you with the percentage of any
dividends paid that may qualify for tax-free treatment on your personal
income tax return. You should consult with your own tax advisor to determine
the application of your state and local laws to these distributions. Because
the rules on exclusion of this income are different for corporations,
corporate shareholders should consult with their corporate tax advisors about
whether any of their distributions may be exempt from corporate income or
franchise taxes.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. Because the fund's income is
derived primarily from interest rather than dividends, no portion of its
distributions will generally be eligible for the intercorporate
dividends-received deduction. None of the dividends paid by the fund for the
most recent fiscal year qualified for such deduction, and it is anticipated
that none of the current year's dividends will so qualify.
THE FUND'S UNDERWRITER
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Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering of the fund's shares. The
underwriting agreement will continue in effect for successive annual periods
if its continuance is specifically approved at least annually by a vote of
the Board 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 Board
members who are not parties to the underwriting agreement or interested
persons of any such party (other than as members of the Board), 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 the 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.
For the fiscal years ended June 30, 1998, 1997 and 1996, Distributors
received no payments in connection with redemptions or repurchases of shares
of the fund.
HOW DOES THE FUND
MEASURE PERFORMANCE?
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Performance quotations are subject to SEC rules. These rules require the use
of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the fund be accompanied
by certain standardized performance information computed as required by the
SEC. Current yield and effective yield quotations used by the fund are based
on the standardized methods of computing performance mandated by the SEC. An
explanation of these and other methods used by the fund to compute or express
performance follows. Regardless of the method used, past performance does not
guarantee future results.
YIELD
CURRENT YIELD. Current yield shows the income per share earned by the fund.
It is calculated 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. The result is then annualized by multiplying the base
period return by (365/7). The fund's current yield for the seven day period
ended June 30, 1998, was 5.24%.
EFFECTIVE YIELD. The fund's effective yield is calculated in the same manner
as its current yield, except the annualization of the return for the seven
day period reflects the results of compounding. The fund's effective yield
for the seven day period ended June 30, 1998, was 5.38%.
This figure was obtained using the following SEC formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
OTHER PERFORMANCE QUOTATIONS
The fund may include in its advertising or sales material information
relating to investment goals and performance results of funds belonging to
the Franklin Templeton Group of Funds. Resources is the parent company of the
advisors and underwriter of the Franklin Templeton Group of Funds.
COMPARISONS
To help you better evaluate how an investment in the fund may satisfy your
investment goal, advertisements and other materials about the fund may
discuss certain 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. These
comparisons may include, but are not limited to, the following examples:
a) IBC 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 that 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 that 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 -
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.
h) Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect
Morningstar's assessment of the historical risk-adjusted performance of a
fund over specified time periods relative to other funds within its category.
Advertisements or information may also compare the fund's performance to the
return on CDs or other investments. You 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 CD issued by a bank. CDs 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 comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the 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 its
performance as compared to these other averages.
MISCELLANEOUS INFORMATION
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The fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you 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
you through the steps to start a retirement savings program. Of course, an
investment in the fund cannot guarantee that these goals will be met.
The fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., 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 50 years
and now services more than 3 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, a pioneer in
international investing. The Mutual Series team, known for its value-driven
approach to domestic equity investing, became part of the organization four
years later. Together, the Franklin Templeton Group has over $207 billion in
assets under management for more than 6 million U.S. based mutual fund
shareholder and other accounts. The Franklin Templeton Group of Funds offers
117 U.S. based open-end investment companies to the public. The fund may
identify itself by its NASDAQ symbol or CUSIP number.
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. To the best knowledge of the fund, no other person holds
beneficially or of record more than 5% of the fund's outstanding shares.
In the event of disputes involving multiple claims of ownership or authority
to control your 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,
before 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 IRS in response to a
Notice of Levy.
Distributors and/or its affiliates provide financial support to various
Securities Dealers that sell shares of the Franklin Templeton Group of Funds.
This support is based primarily on the amount of sales of fund shares. The
amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a Securities Dealer's sales and marketing
efforts in the Franklin Templeton Group of Funds; a Securities Dealer's
support of, and participation in, Distributors' marketing programs; a
Securities Dealer's compensation programs for its registered representatives;
and the extent of a Securities Dealer's marketing programs relating to the
Franklin Templeton Group of Funds. Financial support to Securities Dealers
may be made by payments from Distributors' resources, from Distributors'
retention of underwriting concessions and, in the case of funds that have
Rule 12b-1 plans, from payments to Distributors under such plans. In
addition, certain Securities Dealers may receive brokerage commissions
generated by fund portfolio transactions in accordance with the NASD's rules.
SUMMARY OF CODE OF ETHICS. Employees of the Franklin Templeton Group who are
access persons under the 1940 Act are permitted to engage in personal
securities transactions subject to the following general restrictions and
procedures: (i) the trade must receive advance clearance from a compliance
officer and must be completed by the close of the business day following the
day clearance is granted; (ii) copies of all brokerage confirmations and
statements must be sent to a compliance officer; (iii) all brokerage accounts
must be disclosed on an annual basis; and (iv) access persons involved in
preparing and making investment decisions must, in addition to (i), (ii) and
(iii) above, file annual reports of their securities holdings each January
and inform the compliance officer (or other designated personnel) if they own
a security that is being considered for a fund or other client transaction or
if they are recommending a security in which they have an ownership interest
for purchase or sale by a fund or other client.
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
The audited financial statements contained in the Annual Report to
Shareholders of the fund, for the fiscal year ended June 30, 1998, including
the auditor's report, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
- ------------------------------------------------------------------------------
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the Portfolio's investment manager and
the fund's administrator
BOARD - The Board of Directors of the fund
CD - Certificate of deposit
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the fund's principal
underwriter
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NYSE - New York Stock Exchange
PROSPECTUS - The prospectus for the fund dated November 1, 1998, which we may
amend from time to time
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
WE/OUR/US - Unless a different meaning is indicated by the context, these
terms refer to the fund and/or Investor Services, Distributors, or other
wholly owned subsidiaries of Resources.
APPENDIX
- ------------------------------------------------------------------------------
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 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.
These potential conflicts of interest could include, among others: the
creation of additional feeder funds with different fee structures; the
creation of additional feeder funds that 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
that 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 of Money Market and the Board of the fund have adopted
certain procedures under 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 members of each board 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 before the
normal annual review, they will act promptly to review the potential
conflict; iii) if the independent members of each board determine that a
situation or proposal presents a potential conflict, they will request a
written analysis from the master fund management describing whether the
apparent potential conflict of interest will impede the operation of the
constituent feeder fund and the interests of the feeder fund's shareholders;
and iv) upon receipt of the analysis, the independent members of each board
shall review the analysis and present their conclusion to the full boards.
If no actual conflict is deemed to exist, the independent board members 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 independent legal
counsel issued in a written opinion. If a conflict is deemed to exist, they may
recommend one or more of the following actions: 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
investment goals and policies; iv) recommend to the full boards that a new board
be recommended to shareholders for approval; or v) recommend such other action
as may be considered appropriate.
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
(1) Audited Financial Statements incorporated herein by reference to
the Registrant's Annual Report to Shareholders dated June 30,
1998 as filed with the SEC electronically on Form Type N-30D on
September 9, 1998
Franklin Federal Money Fund
(i) Financial Highlights
(ii) Statement of Investments, June 30, 1998
(iii) Statement of Assets and Liabilities, June 30, 1998
(iv) Statement of Operations for the year ended June 30, 1998
(v) Statements of Changes in Net Assets for the years ended
June 30, 1998 and 1997
(vi) Notes to Financial Statements
(vii) Independent Auditor's Report
The Money Market Portfolios
(i) Financial Highlights
(ii) Statement of Investments, June 30, 1998
(iii) Statements of Assets and Liabilities, June 30, 1998
(iv) Statements of Operations for the year ended June 30, 1998
(v) Statements of Changes in Net Assets for the years ended
June 30, 1998 and 1997
(vi) Notes to Financial Statements
(vii) Independent Auditor's Report
b) Exhibits
The following exhibits are incorporated by reference, except exhibits
8(iv), 10(i), 11(i), 17(i), 17(ii), 17(iii), 17(iv) and 27(i) which are
attached herewith.
(1) copies of the charter as now in effect;
(i) Articles of Incorporation dated April 7, 1980
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: August 31, 1995
(ii) Certificate of Amendment to Articles of Incorporation dated
March 12, 1981
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: August 31, 1995
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: August 31, 1995
(ii) Amendment to By-Laws dated November 17, 1987
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: August 31, 1995
(3) copies of any voting trust agreement with respect to more than 5
percent of any class of equity securities of the Registrant;
Not Applicable
(4) copies of all instruments defining the rights of the holders of
the securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of
the Registrant;
Not Applicable
(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Administration Agreement between the Registrant and
Franklin Advisers, Inc., dated August 1, 1994.
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: August 31, 1995
(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 the
Registrant and Franklin/Templeton Distributors, Inc., dated
April 23, 1995
Filing: Post-Effective Amendment No. 20 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: August 31, 1995
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc., and securities dealers
Registrant: Franklin Tax-Free Trust
Filing: Post-Effective Amendment No. 22 to Registration
Statement on Form N-1A
File No. 2-94222
Filing Date: March 14, 1996
(7) copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such; any such plan that is not set forth in a formal document,
furnish a reasonably detailed description thereof;
Not Applicable
(8) copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act, with respect to securities and
similar investments of the Registrant, including the schedule of
remuneration;
(i) Master Custody Agreement between the Registrant and Bank of
New York dated February 16, 1996
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: October 29, 1996
(ii) Terminal Link Agreement between the Registrant and Bank of
New York dated February 16, 1996
Filing: Post-Effective Amendment No. 21 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: October 29, 1996
(iii) Amendment dated May 7, 1997 to the Master Custody
Agreement dated February 16, 1996 between Registrant and
Bank of New York
Filing: Post-Effective Amendment No. 22 to Registration
Statement on Form N-1A
File No. 2-67480
Filing Date: October 29, 1997
(iv) Amendment dated February 27, 1998 to Master Custody
Agreement dated February 16, 1996 between Registrant and
Bank of New York
(9) copies of all other material contracts not made in the
ordinary course of business which are to be performed in
whole or in part at or after the date of filing the
Registration Statement;
Not Applicable
(10) an opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will
when sold be legally issued, fully paid and nonassessable;
(i) Opinion and consent of counsel dated October 26, 1998
(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 Auditor
(12) all financial statements omitted from Item 23;
Not Applicable
(13) copies of any agreements or understandings made in
consideration for providing the initial capital between or
among the Registrant, the underwriter, adviser, promoter or
initial stockholders and written assurances from promoters
or initial stockholders that their purchases were made for
investment purposes without any present intention of
redeeming or reselling;
Not Applicable
(14) copies of the model plan used in the establishment of any
retirement plan in conjunction with which Registrant offers
its securities, any instructions thereto and any other
documents making up the model plan. Such form(s) should
disclose the costs and fees charged in connection therewith;
Not Applicable
(15) copies of any plan entered into by Registrant pursuant to
Rule 12b-1 under the 1940 Act, which describes all material
aspects of the financing of distribution of Registrant's
shares, and any agreements with any person relating to
implementation of such plan;
Not Applicable
(16) schedule for computation of each performance quotation
provided in the Registration Statement in response to Item
22 (which need not be audited);
Not Applicable
(17) Power of Attorney
(i) Power of Attorney for Franklin Federal Money Fund
dated May 19, 1998
(ii) Certificate of Secretary for Franklin Federal Money
Fund dated May 19, 1998
(ii) Power of Attorney for The Money Market Portfolios
dated June 16, 1998
(iv) Certificate of Secretary for The Money Market
Portfolios dated June 16, 1998
(18) copies of any plan entered into by Registrant pursuant to
Rule 18f-3 under the 1940 Act;
Not Applicable
(27) Financial Data Schedule
(i) Financial Data Schedule for Franklin Federal Money
Fund
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26 NUMBER OF HOLDERS OF SECURITIES
Not Applicable
ITEM 27 INDEMNIFICATION
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 the 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 of 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.
Please see the Articles of Incorporation, By-Laws, Administration Agreement
and Distribution Agreements previously filed as exhibits and incorporated
herein by reference.
ITEM 28 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The officers and directors of the Registrant's administrator and the Master
Fund's investment adviser, Franklin Advisers, Inc., ("Advisers") also serve
as officers and/or directors for (1) Advisers' corporate parent, Franklin
Resources, Inc., and/or (2) other investment companies in the Franklin
Templeton Group of Funds. In addition, Mr. Charles B. Johnson was formerly a
director of General Host Corporation. For additional information please see
Part B and Schedules A and D of Form ADV of Advisers (SEC File 801-26292),
incorporated herein by reference, which sets forth the officers and directors
of Advisers and information as to any business, profession, vocation or
employment of a substantial nature engaged in by those officers and directors
during the past two years.
ITEM 29 PRINCIPAL UNDERWRITERS
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of:
Franklin Asset Allocation 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 Floating Rate Trust
Franklin Gold Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, 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
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 28th day
of October, 1998.
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 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
Rupert H. Johnson, Jr. Officer
Dated: October 28, 1998
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: October 28, 1998
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: October 28, 1998
FRANK H. ABBOTT III* Director
Frank H. Abbott III Dated: October 28, 1998
HARRIS J. ASHTON* Director
Harris J. Ashton Dated: October 28, 1998
ROBERT F. CARLSON* Director
Robert F. Carlson Dated: October 28, 1998
S. JOSEPH FORTUNATO* Director
S. Joseph Fortunato Dated: October 28, 1998
CHARLES B. JOHNSON* Director
Charles B. Johnson Dated: October 28, 1998
FRANK W.T. LAHAYE* Director
Frank W.T. LaHaye Dated: October 28, 1998
WILLIAM J. LIPPMAN* Director
William J. Lippman Dated: October 28, 1998
GORDON S. MACKLIN* Director
Gordon S. Macklin Dated: October 28, 1998
*By /s/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 Registration Statement of Franklin Federal Money Fund and has
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 28th day of October, 1998.
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 Trustees and Officers of The
Money Market Portfolios in the capacities and on the dates indicated:
CHARLES E. JOHNSON* Trustee and Principal Executive Officer
Charles E. Johnson Dated: October 28, 1998
MARTIN L. FLANAGAN* Principal Financial Officer Dated:
Martin L. Flanagan October 28, 1998
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: October 28, 1998
FRANK H. ABBOTT III* Trustee
Frank H. Abbott III Dated: October 28, 1998
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: October 28, 1998
ROBERT F. CARLSON Trustee
Robert F. Carlson Dated:
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: October 28, 1998
CHARLES B. JOHNSON* Trustee
Charles B. Johnson Dated: October 28, 1998
RUPERT H. JOHNSON, JR.* Trustee
Rupert H. Johnson, Jr. Dated: October 28, 1998
FRANK W.T. LAHAYE* Trustee
Frank W.T. LaHaye Dated: October 28, 1998
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: October 28, 1998
*By /s/ Larry L. Greene - Attorney-in-Fact
(Pursuant to Power of Attorney filed herewith)
FRANKLIN FEDERAL MONEY FUND
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Articles of Incorporation dated April 7, 1980 *
EX-99.B1(ii) Certificate of Amendment to Articles of *
Incorporation dated March 12, 1981
EX-99.B2(i) By-Laws *
EX-99.B2(ii) Amendment to By-Laws dated November 17, 1987 *
EX-99.B5(i) Administration Agreement between the *
Registrant and Franklin Advisers, Inc., dated
August 1, 1994
EX-99.B6(i) Amended and Restated Distribution Agreement *
between the Registrant and Franklin/Templeton
Distributors, Inc., dated April 23, 1995
EX-99.B6(ii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors, Inc., and
Securities Dealers
EX-99.B8(i) Master Custody Agreement between the *
Registrant and Bank of New York dated February
16, 1996
EX-99.B8(ii) Terminal Link Agreement between the Registrant *
and Bank of New York dated February 16, 1996
EX-99.B8(iii) Amendment dated May 7, 1997 to the Master *
Custody Agreement dated February 16, 1996
between Registrant and Bank of New York
EX-99.B8(iv) Amendment dated February 27, 1998 to Master Attached
Custody Agreement dated February 16, 1996
between Registrant and Bank of New York
EX-99.B10(i) Opinion and consent of counsel dated October Attached
26, 1998
EX-99.B11(i) Consent of Independent Auditor Attached
EX-99.B17(i) Power of Attorney for Franklin Federal Money Attached
Fund dated May 19, 1998
EX-99.B17(ii) Certificate of Secretary for Franklin Federal Attached
Money Fund dated May 19, 1998
EX-99.B17(iii) Power of Attorney for The Money Market Attached
Portfolios dated June 16, 1998
EX-99.B17(iv) Certificate of Secretary for The Money Market Attached
Portfolios dated June 16, 1998
EX-27.B(i) Financial Data Schedule for Franklin Federal Attached
Money Fund
*Incorporated by reference
Amendment to Master Custody Agreement
Effective February 27, 1998, The Bank of New York and each of the Investment
Companies listed in the Attachment appended to this Amendment, for themselves
and each series listed in the Attachment, hereby amend the Master Custody
Agreement dated as of February 16, 1996 by:
1. Replacing Exhibit A with the attached; and
2. Only with respect to the Investment Companies and series thereof listed
in the Attachment, deleting paragraphs (a) and (b) of Subsection 3.5 and
replacing them with the following:
(a) Promptly after each purchase of Securities by the Fund, the Fund shall
deliver to the Custodian Proper Instructions specifying with respect to
each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase;
(g) the name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the broker
specified in the Proper Instructions out of the money held for the account
of such Series the total amount payable upon such purchase, provided that
the same conforms to the total amount payable as set forth in such Proper
Instructions.
(b) Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian Proper Instructions specifying with respect to
each such sale: (a) the Series to which such Securities were specifically
allocated; (b) the name of the issuer and the title of the Security; (c)
the number of shares or the principal amount sold, and accrued interest, if
any; (d) the date of sale; (e) the sale price per unit; (f) the total
amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Proper
Instructions against payment of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as
set forth in such Proper Instructions.
Investment Companies The Bank of New York
By: /S/ELIZABETH N. COHERNOUR By: /S/STEPHEN E. GRUNSTON
Name: Elizabeth N. Cohernour Stephen E. Grunston
Title: Authorized Oficer Title: Vice President
Attachment
INVESTMENT COMPANY SERIES
Franklin Mutual Series Fund Inc. Mutual Shares Fund
Mutual Qualified Fund
Mutual Beacon Fund
Mutual Financial Services
Fund
Mutual European Fund
Mutual Discovery Fund
Franklin Valuemark Funds Mutual Discovery
Securities Fund
Mutual Shares Securities
Fund
Templeton Variable Products Mutual Shares Investments Fund
Series Fund Mutual Discovery Investments Fund
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series
for which the Custodian shall serve under the Master Custody Agreement dated as
of February 16, 1996.
<TABLE>
<CAPTION>
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
Adjustable Rate Securities Portfolios Delaware Business Trust U.S. Government Adjustable Rate Mortgage Portfolio
Adjustable Rate Securities Portfolio
Franklin Asset Allocation Fund Delaware Business Trust
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Trust Franklin California Insured Tax-Free Income Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income Fund California Corporation
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business Trust
Franklin High Income Trust Delaware Business Trust AGE High Income Fund
Franklin Investors Securities Trust Massachusetts Business Trust Franklin Global Government Income Fund
Franklin Short-Intermediate U.S. Govt Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
Franklin Managed Trust Massachusetts Business Trust Franklin Corporate Qualified Dividend Fund
Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Institutional Rising Dividends Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Mutual Series Fund Inc. Maryland Corporation Mutual Shares Fund
Mutual Qualified Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual European Fund
Mutual Discovery Fund
Franklin New York Tax-Free Income Fund Delaware Business Trust
Franklin New York Tax-Free Trust Massachusetts Business Trust Franklin New York Tax-Exempt Money Fund
Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
Franklin Real Estate Securities Trust Delaware Business Trust Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio Delaware Business Trust
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin Tax-Exempt Money Fund California Corporation
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
Franklin Tax-Free Trust Massachusetts Business Trust Franklin Massachusetts Insured Tax-Free Income Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income
Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Michigan Tax-Free Income Fund
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Templeton Fund Allocator Series Delaware Business Trust Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Global Trust Delaware Business Trust Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton International Trust Delaware Business Trust Templeton Pacific Growth Fund
Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Trust Franklin Balance Sheet Investment Fund
Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Valuemark Funds Massachusetts Business Trust Money Market Fund
Growth and Income Fund
Natural Resources Securities Fund
Real Estate Securities Fund
Global Utilities Securities Fund
High Income Fund
Templeton Global Income Securities Fund
Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Rising Dividends Fund
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Valuemark Funds (cont.) Massachusetts Business Trust Templeton Pacific Growth Fund
Templeton International Equity Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Global Health Care Securities Fund
Value Securities Fund
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Trust Money Market Portfolio
Franklin U.S. Government Securities Money Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S. Government
Securities Fund
Franklin Institutional Adjustable Rate Securities Fund
Franklin U.S. Government Agency Money Market Fund
Franklin Cash Reserves Fund
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio
Templeton Variable Products Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business Trust
Franklin Principal Maturity Trust Massachusetts Business Trust
Franklin Universal Trust Massachusetts Business Trust
INTERVAL FUND
Franklin Floating Rate Trust Delaware Business Trust
- ----------------------------------------- ----------------------------------- -----------------------------------------------------
</TABLE>
Law Offices
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
October 26, 1998
Franklin Federal Money Fund
777 Mariners Island Blvd.
San Mateo, CA 94403-7777
Re: LEGAL OPINION-SECURITIES ACT OF 1933
Ladies and Gentlemen:
We have examined the Articles of Incorporation, as amended (the "Articles") of
the Franklin Federal Money Fund (the "Fund"), a series corporation organized
under the laws of the State of California on April 8, 1980, the By-Laws of the
Fund and the various pertinent corporate proceedings we deem material. We have
also examined the Notification of Registration and the Registration Statements
filed under the Investment Company Act of 1940 (the "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.
The Fund is authorized by the Articles to issue five billion (5,000,000,000)
shares of common stock without a par value and currently issues a single class
of shares designated the Franklin Federal Money Fund.
The Fund has filed with the U.S. Securities and Exchange Commission, a
registration statement under the Securities Act, which registration statement is
deemed to register an indefinite number of shares of the Fund pursuant to the
provisions of Section 24(f) of the Investment Company Act. You have further
advised us that the Fund has filed, and each year hereafter will timely file, a
Notice pursuant to Rule 24f-2 under the Investment Company Act perfecting the
registration of the shares sold by the Fund during each fiscal year during which
such registration of an indefinite number of shares remains in effect.
You have also informed us that the shares of the Fund have been, and will
continue to be, sold in accordance with the Fund's usual method of distributing
its registered shares, under which prospectuses are made available for delivery
to offerees and purchasers of such shares in accordance with Section 5(b) of the
Securities Act.
Based upon the foregoing information and examination, so long as the Fund
remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles, and
subject to compliance with Rule 24f-2, 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 and the laws of
the State of California.
We hereby consent to the use of this opinion, in lieu of any other, as an
exhibit to the Registration Statement of the Fund, along with any amendments
thereto, covering the registration of the shares of the Fund under the
Securities Act and the applications, registration statements or notice filings,
and amendments thereto, filed in accordance with the securities laws of the
several states in which shares of the Fund are offered, and we further consent
to reference in the registration statement 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, LLP
BY: /s/ Bruce G. Leto
Bruce G. Leto
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in Post-Effective Amendment No. 23
to the Registration Statement of Franklin Federal Money Fund on Form N-1A (File
No. 2-67480) of our report dated July 30, 1998 on our audit of the financial
statements and financial highlights of Franklin Federal Money Fund for the year
ended June 30, 1998 and our report dated July 30, 1998 on our audit of the
financial statements and financial highlights of The Money Market Portfolios for
the year ended June 30, 1998.
PricewaterhouseCoopers LLP
/s/PricewaterhouseCoopers LLP
San Francisco, California
October 27, 1998
POWER OF ATTORNEY
The undersigned officers and directors of FRANKLIN FEDERAL MONEY FUND (the
"Registrant"), hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R.
GATZEK, KAREN L. SKIDMORE AND LARRY L. GREENE (with full power to each of them
to act alone) his attorney-in-fact and agent, in all capacities, to execute, and
to file any of the documents referred to below relating to Post-Effective
Amendments to the Registrant's registration statement on Form N-1A under the
Investment Company Act of 1940, as amended, and under the Securities Act of 1933
covering the sale of shares by the Registrant under 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 19th day of May, 1998.
/s/ Rupert H. Johnson, Jr. /s/ Charles B. Johnson
- ---------------------------- ------------------------
Rupert H. Johnson, Jr., Principal Executive Charles B. Johnson,
Officer and Director Director
Frank H. Abbott, III /s/ Harris J. Ashton
- ----------------------- ------------------------
Frank H. Abbott, III, Harris J. Ashton,
Director Director
/s/ Robert F. Carlson /s/ S. Joseph Fortunato
- ----------------------- ------------------------
Robert F. Carlson, S. Joseph Fortunato,
Director Director
/s/ Frank W. T. LaHaye /s/ William J. Lippman
- ----------------------- ------------------------
Frank W. T. LaHaye, William J. Lippman,
Director Director
/s/ Gordon S. Macklin /s/ Martin L. Flanagan
- ----------------------- ------------------------
Gordon S. Macklin, Martin L. Flanagan,
Director Principal Financial Officer
/s/ Diomedes Loo-Tam
- -----------------------
Diomedes Loo-Tam,
Principal Accounting 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 May 19, 1998.
RESOLVED, that a Power of Attorney, substantially in the form of the Power
of Attorney presented to this Board, appointing Mark H. Plafker, Harmon E.
Burns, Deborah R. Gatzek, Karen L. Skidmore and Larry L. Greene as
attorneys-in-fact for the purpose of filing documents with the Securities
and Exchange Commission, be executed by a majority of the Directors and
designated officers.
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: May 19, 1998 Deborah R. Gatzek
Secretary
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 16th day of June 1998.
/s/ Charles E. Johnson /s/ C. B. Johnson
- ---------------------- ----------------------
Charles E. Johnson, Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/s/ R. H. Johnson, Jr. /s/ Frank H. Abbott, III
- ------------------------ --------------------------
Rupert H. Johnson, Jr., Frank H. Abbott, III,
Trustee Trustee
/s/ Harris J. Ashton
- ------------------------ --------------------------
Harris J. Ashton, Robert F. Carlson,
Trustee Trustee
/s/ S. Joseph Fortunato /s/ Frank W. T. LaHaye
- ------------------------ --------------------------
S. Joseph Fortunato, Frank W. T. LaHaye,
Trustee Trustee
/s/ Gordon S. Macklin /s/ Diomedes Loo-Tam
- ----------------------- --------------------------
Gordon S. Macklin, Diomedes Loo-Tam,
Trustee Principal Accounting Officer
/s/ Martin L. Flanagan
- -----------------------
Martin L. Flanagan,
Principal Financial Officer
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 June 16,
1998.
RESOLVED, that a Power of Attorney, substantially in the form of the Power
of Attorney presented to his 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.
Dated: June 16, 1998
/s/ DEBORAH R. GATZEK
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, 1998 ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000316403
<NAME> FRANKLIN FEDERAL MONEY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 132,065,928
<INVESTMENTS-AT-VALUE> 132,065,928
<RECEIVABLES> 3,988,084
<ASSETS-OTHER> 13,282
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 136,067,294
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,446,637
<TOTAL-LIABILITIES> 1,446,637
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 134,620,657
<SHARES-COMMON-STOCK> 134,620,657
<SHARES-COMMON-PRIOR> 121,290,842
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 134,620,657
<DIVIDEND-INCOME> 7,012,006
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (871,138)
<NET-INVESTMENT-INCOME> 6,140,868
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,140,868
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,140,868)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 328,607,294
<NUMBER-OF-SHARES-REDEEMED> (321,431,678)
<SHARES-REINVESTED> 6,154,199
<NET-CHANGE-IN-ASSETS> 13,329,815
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (553,251)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (871,138)
<AVERAGE-NET-ASSETS> 129,754,294
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.047)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .820<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>EXPENSE RATIO EXCLUDING WAIVER .83%
</FN>
</TABLE>
