Prospectus
FRANKLIN
FEDERAL
MONEY FUND
INVESTMENT STRATEGY
INCOME
NOVEMBER 1, 1998 AS AMENDED MAY 3, 1999
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 ......... 9
How Is the Fund Organized? ................................. 10
ABOUT YOUR ACCOUNT
How Do I Buy Shares? ....................................... 11
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? ................. 25
GLOSSARY
Useful Terms and Definitions ............................... 26
FRANKLIN
FEDERAL
MONEY
FUND
November 1, 1998
as amended May 3, 1999
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)..........................$5.00*
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.
*This fee is only for 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 period)
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.
YEAR 2000. When evaluating current and potential portfolio positions, Year
2000 is one of the factors Advisers considers.
Advisers will rely upon public filings and other statements made by issuers
about their Year 2000 readiness. Advisers, of course, cannot audit each
issuer and its major suppliers to verify their Year 2000 readiness.
If an issuer in which the fund or the Portfolio is invested is adversely
affected by Year 2000 problems, it is likely that the price of its securities
will also be adversely affected. A decrease in the value of one or more of
the Portfolio's or the fund's portfolio holdings will have a similar impact
on the price of the fund's shares. Please see "Year 2000 Problem" under "Who
Administers the Fund?" for more information.
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 $211 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 PROBLEM. The fund's business operations depend on a worldwide
network of computer systems that contain date fields, including securities
trading systems, securities transfer agent operations and stock market links.
Many of the systems currently use a two digit date field to represent the
date, and unless these systems are changed or modified, they may not be able
to distinguish the Year 1900 from the Year 2000 (commonly referred to as the
Year 2000 problem). In addition, the fact that the Year 2000 is a leap year
may create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected
if the computer systems used by Advisers, its service providers and other
third parties it does business with are not Year 2000 ready. For example, the
fund's portfolio and operational areas could be impacted, including
securities trade processing, interest and dividend payments, securities
pricing, shareholder account services, reporting, custody functions and
others.
Advisers and its affiliated service providers are making a concerted effort
to take steps they believe are reasonably designed to address their Year 2000
problems. Of course, the fund's ability to reduce the effects of the Year
2000 problem is also very much dependent upon the efforts of third parties
over which the fund and Advisers may have no control.
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 you 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 A 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. These plans require separate applications and their policies
and procedures may be different than those described in this prospectus. For
more information, including a free retirement plan brochure or application,
please 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
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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
to apply to your account, please let us know.
- ------------------------------------------------------------------------------
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 Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature
guarantee. You may, however, exchange shares from a fund account
requiring two or more signatures into an 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 C shares, fund
shares may be exchanged for Class C 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 C 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
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BY CHECK
(Only available if there are no outstanding share certificates for your
account)
1. You may request redemption drafts (checks) free of
charge on the shareholder application or by
calling TeleFACTS(R).
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 $100,000 or less.
Institutional accounts may exceed $100,000 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 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 591/2, 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, the fund
accepts written instructions signed by only one owner for transactions and
account changes that could otherwise be made by phone. For all other
transactions and changes, all registered owners must sign the instructions.
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 $100,000 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.
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 A, B or C 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 A AND CLASS C - 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 A shares for redemption, exchange and
other purposes.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class A shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class C 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.
